M&M targets 50% jump in SsangYong sales

Mumbai-based utility and tractor major Mahindra & Mahindra (M&M) is targeting sales of 121,000 SsangYong vehicles this year, an increase of 50 per cent over last year, when the brand saw sales of 81,000 units.

A substantial portion of the increased sales will come from the new sports utility vehicle (SUV) Korando C, which was recently launched, newly-appointed chairman of SsangYong Motor Company (SYMC), Pawan Goenka said.

About 45 per cent of the targeted sales or about 55,000 units, will come from Korea and the balance will be exports, including markets such as China, where, according to reports, SYMC has set up its office in Shanghai and plans to have 30-40 dealers in the next two years.

 

M&M recently completed the buy-out process of SYMC, which returned to profits last year after a gap of three years. The South Korean company posted a profit of Korean Won 8.1 billion (Rs 32 crore) last year as against KRW 346 billion (about Rs 1,377 crore) loss recorded the year before.

However, due to increased product development and other research and development expenditure, SsangYong is expected to return to the red this year. The Korean company recorded operating loss of KRW 55 billion (Rs 219 crore) last year, as against KRW 293 billion (Rs 1,100 crore) reported the year before.

“We cannot say when SYMC will become profitable, but we are sure we will reduce the loss significantly this year. We begin with a clean slate, as there is no debt on SsangYong’s books now, except for the bonds. This raises its ability to raise debt significantly,” said Goenka.

M&M paid $464 million (about Rs 2,083 crore) to buy 70 per cent stake in SsangYong, South Korea’s smallest automaker. It has further decided to spend more than Rs 960 crore towards SsangYong’s R&D and brand promotion.

M&M has also put in place a new board to oversee SsangYong’s operations, which apart from Goenka includes Bharat Doshi, Yoo-il Lee, Thierry Moulonguet, Kim Kihwan and Suk Suh Yoon. Lee, who has been appointed as president and CEO of SYMC, was formerly the legal trustee and chairman of SYMC. Moulonguet, who was the executive vice-president and CFO of Renault, is brought on board as an independent director.

Kihwan and Yoon are also appointed as independent directors after having served as Korea’s Ambassador-at-Large for Economic Affairs and the chairman of the committee for the special assessment, respectively.

In an attempt to expand SYMC’s market, M&M is lining up the launch of Rexton and Korando C SUVs in India by the end of next financial year. These vehicles, which will be priced at a premium than M&M’s own products, will be brought in through the completely knocked down route and assembled at M&M’s Chakan facility.

The engines for the two SUVs, however, will be imported from South Korea as the expected volumes do not justify a local production. As for M&M products finding its way to Korea, Goenka said, “We will, in time, find out if our products are suitable for the Korean market.”

‘Japan calamity to impact supplies’
M&M said there would be an impact on auto component supplies this month due to the calamity in Japan but it will not impact the sales of the company. “Yes, imports of some automobile components from Japan are likely to be affected this month because of the recent earthquake and tsunami in Japan. But I do not think it will have an impact on the sales of our company,” Automotive President Pawan Goenka said.