India’s twenty year transition from planned economy to free market has been impressive, and nobody symbolises this story better than Anand Mahindra, managing director of Mahindra & Mahindra
, India’s fourth-largest automaker. Mark Bursa reports.
Handsome, Harvard-educated Anand Mahindra looks more like a Bollywood actor than a serious industrialist, and he enjoys a media profile almost as high as any Indian film star. It helps that his wife Anuradha edits ‘Verve’ a popular Mumbai society magazine.
But Anand’s high profile is not without justification. The 50-year-old has steered Mahindra into a powerful position as a major global player since taking day-to-day control of the company from his uncle, Mahindra patriarch Keshub Mahindra, in 1994.
Anand Mahindra had entered the business in 1991 – around the time the Indian government of Rajiv Gandhi “decided to move out of the way” of business development. Almost overnight, India’s corporate climate changed, and the natural entrepreneurial spirit of the people was allowed to bloom. “Innovation started to rise out of chaos,” he said. “It is very energising to be in India today – so much so that I feel I’m missing out on that energy when I travel.”
Now Mahindra is one of the world’s leading producers of agricultural tractors and India’s leading producer of utility vehicles with its own independent R&D capabilities. This has yielded the well-received Scorpio SUV and pick-up range, and an MPV, known as Ingenio, is under development, to be launched next year.
And now the company is entering the passenger car market through its joint venture with Renault, building up to 50,000 Logan low-cost cars in its first stage, with a major US$900m, 300,000-unit Renault-Nissan-Mahindra plant at Chennai to follow.
While these passenger car ventures are designed to serve the burgeoning Indian market, Anand Mahindra is equally focused on establishing Mahindra as a global brand. He’s very clear on where he wants the brand to be in the near future: “I want to become a global brand in the utility and SUV market – and I want the Mahindra brand to be as well known as Land Rover,” he said. “In five years time, if I ask what are the top three SUV brands in the world, I will be very disappointed if Mahindra is not one of the names mentioned.”
The focus will remain on trucks and SUVs, he said. “We will not enter the passenger car market on our own.” And remaining a niche player is no obstacle to success, he believes. “Those people who said the world car industry would be controlled by six global companies are all out of a job now,” he said.
Going global involves restarting exports from India to suitable world markets. Mahindra already sells its SUVs and pick-ups in France, Italy and Spain, and this year will launch into Portugal, with the UK next on the list. A shortlist of UK distributors has been drawn up, and Dr Pawan Goenka, president of Mahindra’s automotive sector, said a decision was expected within six to nine months. He admitted there was one “outstanding candidate” – believed to be the UK’s largest independent distributor, IM Group.
Mahindra will only launch in markets where the company believes it has a potential market. Germany is not on the launch list as it is seen as too sophisticated for the Scorpio, which is being pitched as “a cheaper alternative to a Land Rover Defender,” said Anand Mahindra.
The company will enter the USA in 2009, and the cars will be sold there as fuel-efficient alternatives to gas-guzzling US-market SUVs. There’s even an advertising slogan for the launch: “The guilt-free SUV”. Anand Mahindra believes any anti-4×4 backlash is an opportunity for his company: hybrid, fuel cell and bio-fuel versions of the Scorpio are under development as part of a working agreement with Indian Oil Corporation signed in late 2004.
Later this year, Mahindra will enter the Brazilian market as a manufacturer, building the Scorpio at a new plant at Manaus, northern Brazil. This is a joint venture with Brazilian group Bramont, and will build around 2,500 Scorpios a year, with production split 60:40 between SUVs and pick-ups. Local content will start at 20%, rising to 80% in two years.
The plant formerly assembled Romanian designed ARO vehicles, sold locally under the Crosslander name. Investment in Mahindra assembly has so far cost US$15 million, but this could rise to US$150million, split between the partners.
Around 20% of Mahindra’s automotive revenues are expected to come from export sales within two years, compared to 10-12% at present. This represents a substantial amount of money – the automotive division accounted for 42% of the group’s $4 billion revenue last year. Major volume markets are being targeted, including South Africa, Russia, Indonesia and China.
In India, Mahindra is the dominant player in the SUV market, with a sector market share of 70%. It’s the second-largest domestic vehicle manufacturer behind Tata, and sales have grown rapidly over the past five years – in 2002 Mahindra made 65,300 vehicles – last year it made 170,000. While exports have accounted for a lot of the growth, domestic sales are up 22% over the same period.
The self-developed Scorpio SUV is the vehicle that has driven this growth. “Scorpio is changing our fortunes,” said Mahindra operations voice-president Rajan Wadhera. Scorpio is built at Mahindra’s main production base in Nashik, 170km from Mumbai, one of six Mahindra factories in India.
These build a variety of vehicles ranging from scooter-based three-wheeled trucks to heavy trucks, which are assembled in partnership with International of the US. Agricultural vehicles are also a major source of revenue, accounting for 27% of group income. Mahindra is the world’s fourth-largest tractor maker in the world, with annual production of more than 100,000 units.
Nashik is also the site of the new Logan assembly line, a very clean and simple facility with a new final assembly line. This is low on automation – labour is still cheap in India; workers at Mahindra earn around 10% less than their counterparts at Dacia in Romania. But the U-shaped production flow is highly efficient, and partly explains how the project was put into operation in just 17 months from start of construction.
At the official opening of the plant, Anand Mahindra praised “the astonishing manner in which the Logan project has been brought to market ahead of time, well within its capital expenditure target and ahead of cost.” And inadvertently, the car is becoming known already as the “people’s car” – the similar word “Logon” in the Hindi language translates literally as “people”.
The Logan project also taps into the high level of vertical integration at Mahindra – so local content at launch is more than 50%, and this will rise to 60% by next year. The biggest imported parts – the engines – come from Spain and Romania, but there are plans to make the engine in India as part of the $900m Chennai development. The Logan has been tweaked for Indian conditions, with a slightly redesigned grille, and a more powerful air-conditioning system to suit India’s hot and humid conditions.
Wadhera describes Mahindra as an “art to part” operation, with 800 R&D engineers carrying out design, but also in-house foundry, die shop and stamping facilities. The impressive Nashik stamping shop has fast die changing facilities to enable Logan panels to be stamped alongside those for Scorpio and other Mahindra vehicles.
Three-shift operation of the Nashik Logan line will deliver 50,000 cars a year – volumes are below that at present while the dealer network is geared up to launch the car in India, initially through 10 major cities including Delhi, Mumbai and Bangalore, with 25 more to follow by August and full national coverage by November.
Nashik will concentrate on Logan sedan, and possibly one other body variant, the MCV wagon. Other versions – including van, pick-up and hatchback derivatives, will be built at the Chennai plant, which will open in 2009. Anand Mahindra describes this as being “like a contract manufacturing facility”, building a variety of vehicles for Renault, Nissan and Mahindra, with the actual mix yet to be decided.