Third Time Charm for Mahindra in India’s Car Market

MUMBAI – Mahindra & Mahindra launches its new Verito sedan built on the Logan platform the Indian auto maker inherited from its failed joint venture with Renault.

Says President Pawan Goenka, “Verito has always been a good product and fuel-efficient.” The new version has been restyled and its performance upgraded.

Mahindra sold nearly 18,000 Veritos in the fiscal year that ended in March and, adds Chief Executive Pravin Shah: “Its volumes have tripled in two years. With the refreshed car, we aim to outperform the industry in the current fiscal year.”

From 2007 to 2011, Mahindra doubled its car and light-truck sales to 348,859, according to WardsAuto data. In this year’s first six months, deliveries increased 28.3% compared with like-2011, to 206,367. But that included just 7,812 passenger cars, all of them Veritos, or 3.8% of the total.

Mahindra, primarily a utility-vehicle maker, is not immediately changing its product mix. Its most recent new-vehicle launches are the XUV500 luxury SUV, Maxximo minivan and Xylo and Mini Xylo compact multipurpose vehicles, Senior Vice President Arun Malhotra says.

The Verito marks Mahindra’s belated success in India’s car segment. Its 50-50 joint venture with Ford to launch the Escort in 1995 was a fiasco; the vehicle was dated and irrelevant to the market.

Mahindra had no more success 10 years later with the Logan, the product of a 51-49 joint venture with Renault. The low-cost small car’s popularity in Europe did not carry over to India where, like the Escort, it was not adapted to local market preferences.

But, says new Chairman Anand Mahindra, “We learned from both these failures.”

The auto maker is planning Verito derivatives, including a compact sedan using the Logan platform that would qualify for a 10% tax break on cars less than 13 ft. (4 m) in length. Mahindra also is developing three new vehicle platforms and a new family of gasoline and diesel engines with its recently acquired Ssangyong subsidiary.

The Korean utility-vehicle maker was facing bankruptcy when Mahindra purchased it for Rs26.3 billion ($474 million) last year. Its new launches were failing, banks had stopped lending, workers were on strike and losses were mounting.

Mahindra invested another Rs11.1 billion ($200 million) in Ssangyong and introduced new models. Sales and revenues are up, labor peace has been restored, loans again are available and the auto maker’s debt-equity ratio has been slashed from 180% to 97%.

This year’s scheduled production of 123,000 units is expected to reach 300,000 by 2015.

Most Ssangyong vehicles are exported, with China among its key markets.

Three new products of its collaboration with Ssangyong are forthcoming from Mahindra: the Rexton premium SUV, Korando compact SUV and Reva NXR electric hatchback. The latter was co-developed with Reva Electric Vehicles, which Mahindra took over two years ago.