M&M gears up for another competitive year

Rajan Wadhera is reasonably confident that the growth momentum is back within his company’s SUV ecosystem to keep it going strong through 2018-2019.

As President of Mahindra & Mahindra’s Automotive Sector, he knows that the three new products to be launched during this period are critical in keeping the story intact. These are the S201 compact SUV, U321 multipurpose vehicle and the Y400 premium SUV.

He admits that the competitive pressures on the company’s SUV business cannot be wished away, with a host of new models like the Vitara Brezza, Jeep Compass, Tata Hexa/Nexon and Hyundai Creta going the extra mile to woo customers.

Robust sales

Wadhera then looks back at the fiscal gone by to drive home the point that the building blocks are firmly in place. He refers to the good showing of the Bolero, which grew by 23 per cent to nearly 86,000 units in 2017-2018.

“We are back with very good penetration in the rural areas. We worked very hard to increase reach and consequently we have our growth to show,” he says.

Likewise, the Scorpio saw an upgrade of the entire fuel-injection system with a 140 hp variant and six-speed gearbox. Clearly, this has worked with customers and the model, first launched over 15 years ago, saw its highest ever domestic sales at nearly 54,000 units.

With the TUV 300 and XUV 500 accounting for another 55,000 units, the year was promising from the viewpoint of a company now getting back on track with its core SUV business. Of course, the KUV 100 and Xylo have had little to show in comparison, but all in all, Wadhera believes that things are firmly in place.

As the company now readies for its new launches, the focus is on strengthening the front end, which involves building dealer capabilities and getting closer to the customer. “Bolero numbers are good because of the rural thrust and focus that we have enhanced,” reiterates Wadhera.

Product development cycle

As he explains, in product development, a company needs to reach a critical volume and market share phase beyond which the cycles of product development help out. “However, we were not ready with the new products in as many numbers as we should have been because there is a cycle. Any new product takes three years to come,” he continues.

During that time, till there is no product to offer, others are going to get the numbers. Hopefully, the new launches this fiscal will help the cause. “They were all there three years ago in the pipeline. You cannot suddenly bring a product in a year’s time, it's impossible,” reasons Wadhera. Equally, this boils down to costing economics because launching a new model every year is big money. A company will need to assure itself of good volumes over a period of time to ensure that investments are recovered. “So at a point like that, you look for markets outside or at alliances which can take a part of your investment,” he explains.

Similarly, borrowing platforms can halve costs as in the case of the new S201 platform coming from the Tivoli. “So obviously, we have not spent the full money. Any new top-body programme, as we call it, is half the cost of the original,” he says.

The other new launch on the SsangYong platform is the Y400, the high-end vehicle that will be a replacement for the Rexton. “Our investment is hardly anything, really speaking,” says Wadhera.

This becomes especially important in an era of stiff competition where volumes are not so easy to come by. The solution then is to look for synergies and acquiring or consolidating platforms rather than developing new ones. It also puts in perspective the importance of SsangYong, which M&M had acquired in 2011, as an ally.

Common platforms

“Moving forward, you would see in our three new SUVs that we have been very frugal either by acquiring or carrying over platforms,” elaborates Wadhera. In the process, the company has not spent the kind of money as it would have on a ground-up new platform development. “So that’s what gives us the financial leverage to get into the market,” he adds. From M&M’s point of view, the reality is that it is up against some global giants which have vehicle platforms that are not just designed for India but for a host of other markets. “They can subsidise and take a beating in India if the pressure is high. They need not take a beating in Brazil, Europe, Mexico, China etc,” says Wadhera.

In its turn, M&M believes it needs to strategically look at these kinds of alliances, platform sharing or finding markets as big as India. “In the last year, our strategy is to do more local CKD assembly and we have already started that in Bangladesh and Sri Lanka with plans to include other regions,” he says.

Wadhera has no illusions about the fact that the road ahead will see more competition, what with new players like Kia Motors getting set to throw their hats into the ring. Yet, it is his view that the Mahindra brand still has a ‘fun-to-drive’ quotient along with the ‘tough and rugged’ imagery.

The big job on hand is to increase the customer base, both in terms of numbers as well as the diversity in age. For instance, the TUV customer is about 25 years-old and a lot younger than other M&M brand users.

“Our new S201 customers will be the real technology geeks and in the 30+ age group. At the moment I don’t have too many because I don’t have a product for them,” says Wadhera. It’s also here that a product like the Thar can be positioned as some kind of a cult brand to appeal to a certain buyer.