Mahindra & Mahindra is embarking on a major expansion of its entire range of businesses in Sri Lanka, the largest vehicle export market of the group, by foraying into further diversified activities.
“We are not looking at Sri Lanka through the prism of only one business, but as an integrated part of the group.
For Mahindra, Sri Lanka is a complete strategic fit for our entire range of businesses”, Mahindra & Mahindra President (Group Strategy) and Chief Brand Officer, Mr. S.P. Shukla, told the PTI Economic Service.
M&M will now have its greater focus on the commercial vehicle segment. It currently sells a range of commercial vehicles in Sri Lanka through its exclusive distributor, Ideal Motors.
It sold 11,000 units in 2011-12, enjoying about 40 per cent share in the 30,000-35,000 units per annum market.
“We are having serious dialogues with Mahindra to have an assembly line in Sri Lanka. It is in progress. It is very much on the cards.
Technical teams from both the companies have met and discussed the possibility,” Ideal Group Chairman Nalin Welgama said.
His group is currently carrying out a feasibility study to set up the plant and is sharing the details with M&M.
Asked when a decision is likely to be taken, Welgama said: “In the next 2-3 months, we will have a clear understanding and we will take a call”.
Elaborating on M&M’s role, Mr. Welgama observed that the Indian partner would provide support through a “technology transfer agreement” to a new company to be formed by the Ideal Group for setting up the assembly line. M&M is unlikely to be an equity partner. “We are looking at producing double-cab passenger vehicles. Sri Lanka is a small market, so we will start with 400-500 units per year capacity”.
Asked about the size of investment for setting up the unit, he said it could take around $2 million.
On the assembly plant, Mr. Shukla said: “Investment in any new market can be of three types – advertising and promotional activities. Secondly establishing distributor, dealerships, spare parts and after-sales services networks. Thirdly, setting up an assembly plant if volumes and feasibility study justify the same. In all countries and markets, this step-by-step approach is followed.”
Referring to the existing CV business, Mr. Welgama disclosed that M&M is planning to sell 12,500 units of its vehicles in 2012-13 compared to 11,000 units in the last fiscal. “M&M has 40 per cent share in the sub-one tonne market, while it is 60 per cent in 1-1.5 tonne capacity.”
Sri Lanka’s sub-one tonne commercial vehicle market is estimated to be around 15,000 units annually, while it is 5,500 units annually in the 1-1.5 tonne segment.
M&M sells various products, including Maxximo, Gio and Bolero Maxi Truck, to Sri Lankan customers.