Mahindra says to stop selling vehicles in Brazil

Company is withdrawing from Brazil's passenger vehicle sector

Mahindra & Mahindra Ltd has stopped selling pick-up trucks and sports utility vehicles in Brazil, seven years after it entered the market, due to factors including changes in local regulations, an executive said.

India's top utility vehicle maker will continue to service customers in Brazil through its local partner and will also still sell tractors in the country, Pravin Shah, CEO of the group's automotive division and international operations, told Reuters.

But Mahindra is withdrawing from Brazil's passenger vehicle sector, a major market for global automakers, due to a sluggish economy, changes in local regulation and a depreciating currency, Shah said.

"Where we don't see mid- to long-term prospects, there is no point," Shah said on Wednesday, adding Mahindra will continue to sell vehicles in the neighbouring markets of Chile, Peru and Paraguay.

Changes in regulation to promote investment in the local auto industry and a steep depreciation in the Brazilian Real over the last two years meant it did not make business sense to continue in the market, Shah said.

Another issue, says Shah, is that about 94% of cars in Brazil run on ethanol, whereas Mahindra's cars use diesel, which makes up just 6% of the market.

Mahindra, which sold its sports utility vehicles Scorpio and XUV500 and Pik-up Cabine trucks through its local partner, Bramont-Montadora Industrial e Comercial de Veiculos, retailed about 250 units a month at most, Shah said.

Some analysts said it was better for the company to exit markets like Brazil, where volumes are low, and focus on regaining ground in India where it is losing out to global car makers such as Ford Motor Co and Nissan Motor Co <7201.T>.

"Competition is going to be much stiffer than it was in the last decade," said Puneet Gupta, senior associate at Delhi-based consultant IHS Automotive.

"It is the best time to realign their energies and focus on the right thing rather than on those things that are not adding significant value to the organisation and shareholders."