India’s largest utility vehicles maker Mahindra & Mahindra’s South Korean subsidiary Ssangyong is likely to fall short of its sales target for 2011 as debt woes continue to plague one of its largest markets Europe. In a bid to boost volumes in 2012, Ssangyong sees emerging markets including India, China and Russia playing a bigger role.
“With some of the key markets for Ssangyong going through difficult times and the tsunami in Japan in early part of 2011 which disrupted supply, Ssangyong will probably sell around 1,13,000 to 1,14,000 units in 2011 as against our expectations of 1,20,000 units,” Pawan Goenka, president-automotive, M&M said.
However, despite missing the target, Ssangyong is still expected to post a year-on-year volume growth of 40 percent. The company aims to sell 1,60,000 units by 2013 and 3,00,000 units by 2015-16. Goenka said it will take at least 3-4 years for the Ssangyong acquisition to break even as M&M is currently in investment mode.
He is pleased with the integration process so far. “We have made good progress so far. The biggest thing that we have done is fully align our future product development plans so that we are able to fully leverage the common platform approach. And the secondary thing is on the sourcing front, where concrete steps will be seen in the first half of 2012,” he said. Emerging markets focus will help Ssangyong de-risk slowing down developed markets exposure, experts said. “The biggest challenge for Ssangyong is slowing down developed markets, but the focus on the growing emerging markets such as India, China will provide a major cushion to Ssangyong. The targets are realistic and synergies are tremendous, but the challenge will lie in execution,” said Umesh Karne, auto analyst with BRICS Securities.
M&M-Ssangyong have finalized a combined future product portfolio strategy, which will see 3 new platforms and 4 new products coming in from both partners. The new sourcing strategy for M&M-Ssangyong is being put into place, which will see both companies sourcing an enormous $20 billion of components over the next 5 years. This huge combined sourcing will bring in economies of scale and bring down the cost.
Ssangyong’s re-entry into China and UK is likely to give additional volumes in 2012 and the plan is being currently put into place, where Ssangyong will tap into some of the key markets of M&M including Africa, Latin America and India whereas M&M will rely on Ssangyong’s stronger markets in Europe and South East Asia to enter newer markets.