Mahindra & Mahindra, the Indian automaker that owns a 75% slice in SsangYong Motor, has hinted at giving up control of the struggling South Korean automaker as losses from COVID-19 soar, industry sources told media at the weekend.

According to the Korea Herald, Mahindra managing director Pawan Goenka reportedly told reporters "SsangYong Motor needs a new investor. We are working with the company to see if we can secure investment."

Goenka, also the chairman of the SsangYong Motor board of directors, spoke during Mahindra's report on its first quarterly loss in 19 years which, it said, was mainly due to expanded losses from overseas entities, including SsangYong Motor and GenZe, a US based electric bicycle company. 

The Indian company currently comprises 179 subsidiaries, 30 joint ventures and 28 associates.

Mahindra reported a net loss of INR19.55bn (US$258m), compared with a net profit a year ago.

"If a new investor comes on board, that automatically takes our stake down, or they may even buy our stake," Mahindra's deputy managing director Anish Shah was quoted as saying, according to the Herald

He also reportedly said Mahindra would "exit loss-making international subsidiaries and entities over the next 12 months," to focus more on its core auto and farm equipment businesses.

SsangYong Motor argued the development did not mean Mahindra was withdrawing immediately from Ssangyong.

"Mahindra is looking for a new investor, who may become the largest or the second largest [shareholder of SsangYong Motor], who knows? So it is still early to say that Mahindra is giving up on us," a SsangYong Motor official told The Korea Herald

Regarding the company's apparent plans to exit underperforming overseas entities, he said the remarks had not come directly from Goenka and lacked credibility.

The Herald noted Mahindra had, in the past few months, been minimising its direct assistance for the cash strapped Korean automaker, which just marked its 13th consecutive quarter in the red.

In April, Mahindra rejected a call for fresh funding for SsangYong Motor in the amount of KRW500bn ($404m) due to the economic downturn resulting from COVID-19. Instead, it injected KRW40bn in May.

Mahindra acquired SsangYong Motor in 2011 but the Korean automaker barely managed to turn a profit until the launch of its Tivoli compact sport utility vehicle in 2016. But the momentum did not last long.

To secure liquidity, SsangYong Motor said it would apply for the government subsidy programme established to help companies struggling to cope with the COVID-19 pandemic. 

Under the direction of the South Korean ministry of economy and finance, the Korea Development Bank will roll out KRW40 trillion worth of subsidies. 

"While detailed criteria for application are yet to be released, the company has been keeping a close eye to apply to receive the government funds," a SsangYong Motor official told The Korea Herald

But, according to the finance ministry, the situation of SsangYong Motor is was unrelated to COVID-19, as its losses were reported prior to the outbreak.

A SsangYong Motor official rebutted the statement, saying: "Mahindra made it clear in April that it is not investing in SsangYong due to difficulties caused by COVID-19."

He added the company's sales and export volume had also deteriorated due to industry uncertainty amid the COVID-19 pandemic. 

Since September 2019, the company has been following a self rescue plan, which has entailed cost cutting measures such as salary cutbacks and reduced employee benefits. 

Earlier this month, it sold an after-sales service centre located in Guro-gu, Seoul, for KRW180bn to secure capital. The total amount would be deposited by the end of June, according to the company. 

Ssangyong estimated KRW500bn would be needed over the next three years to normalise its management.