Expect Ssangyong Motor To Turn Profitable By 2022, Says Pawan Goenka
Pawan Goenka, managing director, Mahindra & Mahindra. (Photographer: Dhiraj Singh/Bloomberg)

Expect Ssangyong Motor To Turn Profitable By 2022, Says Pawan Goenka

Mahindra & Mahindra Ltd. has chalked out an “aggressive” three-year plan to turn its South Korean arm profitable.

“We will be taking up a plan to reduce material costs saving as much as $75-80 million per year,” said Pawan Goenka, managing director of Mahindra & Mahindra—which holds over 74 percent stake in Ssangyong Motor Co. “We’re also looking at capex and bringing in synergy with Mahindra and Ford without compromising on our product development plans.”

Goenka, who was speaking at a conference in Mumbai today, also said the company will look to develop new overseas markets—Vietnam this year and Russia in 2021—to improve export volumes. That comes as M&M’s December quarter results were dented by impairment of investments worth Rs 600.56 crore that “primarily” emerge from the South-Korea-based firm. “From the second quarter (of 2019), things started reversing due to an overall global economic slowdown that affected volumes and Korean market shifted to petrol from diesel portfolios very rapidly.”

M&M said it required 450-500 billion won ($380-422 million) for the subsidiary’s revival, half of which it expects to raise from equity and rest through debt. Its consolidated loss as of 2019 stands at 320 billion won ($270 million).

I’m quite hopeful that we will significantly reduce losses (of Ssangyong Motor) from where we were last year and we will break-even in the third year. Obviously, when things are at the bottom globally, it takes extra effort to turnaround.
Pawan Goenka, Managing Director, Mahindra & Mahindra

Even though the weight of Ssangyong on Mahindra’s stock is very low, psychologically, it seems to have a bigger impact, Goenka told BloombergQuint on the sidelines of Davos World Economic Forum last month.

Other Highlights:

Domestic Business

  • First quarter of FY21 to remain subdued due to Bharat Stage VI sticker shock; expects turnaround from second quarter.
  • SIAM expects 2-4 percent growth in passenger vehicles sales for next financial year, with the auto industry expected to grow 3-5 percent overall.
  • Forecast growth in tractor division from fourth quarter of the current fiscal and 5 percent growth in FY21 on account of better Rabi season and water levels in reservoirs.

Coronavirus Outbreak

  • Ssangyong to re-open on Feb. 13 after being shut since Feb. 5; may take a week to achieve full capacity.
  • Don’t see any other risk impacting around 3 lakh units under the BS-VI ramp-up; hoping disruption to ease by next week.
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