Establishing Ssangyong in China Not a Cake-Walk for Mahindra

China’s budding economy is stealing all the lime light these days especially in the automotive sector. Car-makers like Mercedes Benz, Ford, GM, BMW, Hyundai, Bugatti, Ferrari and Volkswagen all have pulled up their socks for expansion in the car market of China. Another car maker trying set foot in the market again is the South Korean automotive giant Ssangyong owned by the Indian car giant Mahindra & Mahindra but reportedly is not finding it easy to create an impact. In 2004, a Chinese auto giant Shanghai Automotive Industry Corporation (SAIC) owned 51 percent stake in Ssangyong and made sure that the demand of these South Korean cars grew in the Chinese car market especially the Ssangyong Kyron SUV and Actyon SUV.

The scenario however changed in 2009 when the brand incurred a loss of around $75.42 million and was put into receivership by the majority stakeholder. The Indian auto maker Mahindra & Mahindra took over 70 percent stakes in the company in the month of February last year. Although the best selling models Actyon and Kyron are still available in the China, but they are not able to sell themselves again as a part of the premium segment. The probable reason could be the pricing strategy, which scarcely qualifies for the premium segment given that the Actyon SUV is tagged at a price between 160,000 RMB ($25,235) to 230,000 RMB ($36,275) against the starting price of Jeep Compass at 220,000 RMB ($34,702).

According to the President of Automotive and Farm Equipment Sector of the Mahindra group, Mr. Pawan Goenka, the car market of China might be on the hit list of Ssangyong Motors but is not the prime focus of Mahindra. He also mentioned that in the past the relations between SAIC and Ssangyong turned sour because of some unfair step taken towards Ssangyong by the SAIC. The company had been apprehensive about being struck with the same lightning bolt, which took a lot of time to fade away and still it is not 100 percent gone, he added. Regarding the cars sold under the Ssangyong brand in China, Mr. Goenka stated that the ramp-up was not up to the expectations of the company and if it was such a strong brand in China, Mahindra would not have to face as much friction and market slowdown as it did in reviving the Ssangyong brand.

He also added that the company is devising a plan of action for the pricing, brand building and product line-up for the specific requirements of the Chinese customers and car fans. Also, some queries regarding the possible entry of Mahindra in China were resolved in which it was revealed that the company has no plans of entering the Chinese car market as Mahindra. After calculating the success post the entry of Ssangyong in China, the company would decide on the feasibility and advantages of entering there. Mr. Goenka also mentioned that the company wishes to initiate the manufacturing of cars in China itself once the cars start pulling in volumes and profit. About the collaboration with Ssangyong, Mr. Goenka mentioned that the companies together are set on building expensive next-generation transmissions, which would not be either company’s cup of tea.

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