A Rough Ride
Business Today|May 02, 2021
Once the leader in SUVs, Mahindra has lost its crown. The company is resetting its gameplan to stay clear of me-too products, replacing them with vehicles intrinsic to its DNA. Can it rise again?
SUMANT BANERJI

The new decade was barely a couple of hours old when India’s utility vehicle major Mahindra and Mahindra and US carmaker Ford decided to put off their joint-venture plans. The two companies had been trying to cobble together a wide-ranging partnership since October 2019 that would have seen Ford exit the Indian market, leaving its assets in the JV with Mahindra. For a variety of reasons it had looked like a win-win deal. Ford would have benefitted from Mahindra’s marketing pull and frugal vendor development strategy, while the latter would get access to the much-needed technology for the present (gasoline) and the future (electric). The two companies blamed the pandemic and the altered market dynamics for the parting of ways.

“It was not an easy decision but both companies were clear that given the current situation, this is the most prudent decision,” Pawan Goenka, Managing Director and CEO for Mahindra, said at a virtual press conference on January 1. “We have to move on and focus on our core businesses.”

The break-up is yet another addition to Mahindra’s long list of unsuccessful collaborations. The decision comes at a time when electrification is structurally changing the global automotive industry. Mahindra finds itself under intense pressure in the utility vehicle segment in India — an area it lorded over not long ago. Its share in the segment has nosedived from a high 55.6 percent in FY12 to just 15.2 percent so far in the current fiscal. While it got swept aside by Maruti Suzuki as the leader in the segment in 2017/18, it has now fallen to a distant third and is close to being overtaken by Kia Motors, which entered the market only in mid-2019. As a result, its share in the overall domestic passenger vehicle market has shrunk to less than 6 percent from 11.57 percent in 2011/12, the lowest in nearly two decades.

“When a competitor in only its second year overtakes you in your backyard and you can’t even fight back, it says a lot about your confidence,” says an industry veteran who has worked with Mahindra in the past. “This isn't the company I worked for. We never had the best technology, but ours was the best product for Indian roads. We were unshakeable.”

Giving Up On The Crown

It is ironic that Mahindra, which even today is synonymous with utility vehicles in India, is struggling when the craze for off-roaders is at an all-time high. Even in a pandemic-hit year like 2020, sale of SUVs and MPVs or people movers as some prefer to call it, accounted for an all-time high 37 percent of all passenger vehicles sold in the country.

Mahindra, which is the oldest in the game and has the widest product portfolio in the segment, should have been one of the biggest beneficiaries. Instead, barring the resounding success of the Thar, it finds itself out of sync with the changing taste of consumers. The advent of newage compact SUVs that have a monocoque body structure and are more car like in road manners has blurred the line between a passenger car and an SUV. (In monocoque body structure, the chassis and the shell are manufactured as one entity.) First Maruti, then Hyundai and now Kia have exploited this trend successfully. With products like Ertiga, Brezza, Creta and Venue, Maruti and Hyundai have increased their market share in the utility vehicle space from under 2 percent at the start of last decade to over 20 percent now. With the Seltos and Sonet, Kia is doing the same.

“Clearly the size and scale of the SUV segment has gone up, but a lot of it is because of crossover cars — platform based SUVs which are not really SUVs in the true sense,” says Rajesh Jejurikar, Executive Director, Automotive and Farm sectors, M&M. “If we say we are going to have a right to win in everything, which has now come to be called an SUV, I don’t think we are going to have that right.”

It isn’t that Mahindra has not tried to play the game, but the attempts have not worked. It has launched multiple products in the compact SUV space beginning with the Quanto, a derivative of the Xylo, the TUV300, the KUV100 and the XUV300, based on its South Korean subsidiary Ssangyong’s Tivoli platform. None of them have hit the bull’s eye. The other launches have not worked either. It pooled in resources from world over — design house Pininfarina in Italy and its North American technical centre — to develop the highly refined Marazzo MPV, and launched it with much expectation in the second half of 2018.

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