Mumbai: Mahindra & Mahindra is weighing plans to launch its sports utility vehicles Scorpio, Bolero, Xylo and pickup trucks in the Chinese market where its tractors already have a presence through Mahindra China Tractors, a joint venture company between M&M and Jiangling Motors Company.
M&M also has a 51 per cent stake in Jiangsu Yueda Yancheng Tractor Manufacturing Company, China's third largest tractor company. Although the Chinese automotive market is more than three times the size of the Indian market at close to 9 million units annually, it is a restricted market due to stringent government regulations.
Multinational automotive companies like Ford, Volkswagen, General Motors operate in China through joint ventures with local auto companies.
The auto market in China has been slowing down according to recent reports. The growth in the auto sector has slowed down to 18 per cent in the first half of this year with sales at 5.18 million units. The growth during the previous year stood above 20 per cent.
M&M has been expanding its international reach with launches in newer markets such as Africa, Europe, Latin America and North America.
M&M is currently readying to launch its SUVs in the US market and the Scorpio brand will be promoted with a $60 million advertising budget over the first year.
M &M is focusing on the mileage card to push its vehicles in the US. The major selling points of its pickup vehicles is that each will give an estimated gas mileage of 33 mpg on the highway and will be competitively priced. In the U.S., M&M trucks will be distributed by Global Vehicles USA, which currently has 325 dealerships primarily on the East and West Coasts, as well as in the South.
The $60 million ad budget will be spent on national, regional, and local advertising. The campaign will target fishermen who tow boats, landscapers, and contractors who prefer diesels for mileage and towing ability, and outdoors enthusiasts. In addition 80,000 M&M farm tractors have already been sold nationwide, and the company hopes to attract those owners as well.
M&M was early evaluating buying General Motors Hummer but withdrew its interest in the off-roader brand to focus on its own products. , which apart from SUV Scorpio include two- and four-door pickups powered by clean diesel engines.
M&M is one of the strong players in the Indian automotive segment. During the second quarter of 2008-09 M&M launched the Scorpio Automatic and the Bolero with CRD engine. M&M has also introduced a 'micro-hybrid' model of the Scorpio and the Bolero, which would increase fuel efficiency and help save costs.
The Xylo (Project Ingenio), a multi-purpose vehicle (MPV), will hit the roads in the last quarter of 2009.
Expected to be priced between the Scorpio and the Bolero, the Xylo MPV will take on Toyota's Innova. The company is also launching a sub-one-tonne vehicle similar to the Tata Ace in 2010 and a new SUV (sports utility vehicle) over the next two years.
For the April-September 2008 period, M&M's volumes in the passenger vehicles segment grew about 11 per cent. Commercial vehicle and three-wheeler volumes also grew by 20 per cent and 56 per cent respectively.
For the first half year of the current fiscal (April-September 08), net sales grew by 18 per cent to Rs 6,288 crore. Net profits dropped by about 25 per cent to Rs 355 crore, primarily due to an exchange loss of Rs 117 crore.
This includes notional loss of about Rs 97 crore on its foreign currency borrowings.
Excluding exchange losses and other exceptional items, year-on-year profits for the same period grew by 11 per cent to Rs 458 crore.
Input cost pressures, lower realisations due to higher sales of entry-level UVs such as the Bolero also saw adjusted operating margins decline to 8.7 per cent.