Mahindra & Mahindra, India’s biggest sport utility vehicle maker, reportedly plans to set up its first overseas factory in Russia by the end of the year to make Scorpio SUVs and expand overseas sales.
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The announcement followed news on Monday that M&M would expand Scorpio output in India.
According to a Bloomberg News report in the Moscow Times, Mahindra will form a joint venture with a local partner to assemble kits sent from the Indian factory.
Citing M&M president Pawan Goenka, the report said Mahindra is now testing the vehicle in Russia, though he did not name the local partner.
Bloomberg News noted that Mumbai-based Mahindra is seeking to sell more vehicles in Russia, South Africa, China and Latin America as part of a plan to win 20% of its sales from overseas markets in the next three years. Indian automakers are expanding overseas as they seek to produce cheaper vehicles at home and compete as entry-level products in overseas markets.
“By having an overseas assembly, Indian companies are having the best of both worlds,” Pranav Securities analyst Dipen Sanghavi in Mumbai told the news agency. “They will have the Indian cost of production, which is cheaper, and an overseas factory that reduces import duties in many places.”
Higher import duties and taxes are the main reason the company is planning a local assembly unit, Goenka told Bloomberg News during an interview at the factory in Nashik, India, where the company makes the Scorpio.
“Russia is our next big priority,” Goenka said. “Exporting completely built-up units to Russia is not affordable because of the duty structure.”
Bloomberg News said Tata Motors, India’s second-biggest maker of cars and SUVs, plans to sell vehicles in overseas markets such as Russia, South Africa and China and is considering making engines in Zambia. Ashok Leyland, the second-biggest truckmaker in India, is planning manufacturing facilities in Southeast Asia, China and in Dubai in the United Arab Emirates, the report added.
“The Indian growth provides a phenomenal launch platform and economies of scale to become an export player,” M&M managing director Anand Mahindra told Bloomberg News in the interview.
Goenka added that Mahindra would spend INR2bn (US$45 million) to expand capacity at its factories in Haridwar in north India and at Nashik, Goenka. Capacity to make cars, SUVs, trucks and three-wheeled auto rickshaws would be raised to 900 vehicles per day from 600 units per day currently in the next three years.
The capacity expansion includes factories that the company is setting up with Renault to make [Logan] cars and with US truck maker Navistar to make heavy commercial vehicles, Bloomberg News added.
India is already an export manufacturing ‘hub’ for small Japanese and Korean cars. Suzuki affiliate Maruti exports large numbers of locally-made Altos to overseas markets including Europe while Hyundai has based export market production of its Santo Xing/Amica line there.
