Davos 2019: Anand Mahindra Hopes 2019 Is When The Money Comes In
Mahindra Group boss Anand Mahindra weighs on changing consumer preference and reviving demand in auto sector.
Indian automakers may have had a tepid last six months, but Mahindra Group Chairman Anand Mahindra is confident of demand reviving in 2019.
“We're hoping that the sentiment will revive this year. I'm a great believer that there is huge pent-up demand waiting to come out,” Mahindra told BloombergQuint on the sidelines of the World Economic Forum in Davos, Switzerland. “Will it come out before the elections? I don’t know. I am a perpetual student of the Indian psyche and how it behaves.”
Mahindra said that in 2018 the festive sales belied the industry expectations. “In hindsight there are many reasons. It was the fact that there was a rate hike. The monsoon didn't turn out to be as good as we hoped. There were the state elections. At the end of it, everything translates into poor consumer sentiment.”
The new year will be about focussing on changing consumer preferences and tapping into it, Mahindra said. “A lot of businesses will be like that. It's about differentiation.”
It’s going to be more and more when you look at the millennial nature. They want brands that speak to them directly, that are meaningful to them, whatever the narrative. They want special narratives. In that sense, not just us, but the mass market companies, too, will have to find ways to segment.Anand Mahindra, Chairman, Mahindra Group
He cited the example of the relaunched Jawa Motorcycles which is being manufactured at Mahindra and Mahindra Ltd.’s two-wheeler plant in Pithampur, Madhya Pradesh. The iconic brand was launched in November but was fully sold out for the next one year in a month.
“What I'm saying is that, yes it's just one segment. But there's capacity. These are not cheap bikes. So people, when they find the right narrative, there is money,” Mahindra noted. “I hope 2019 is the year when the money comes out.”
Watch the interview here:
Here are edited excerpts from the interview:
How are you looking at the rising protectionism and economic nationalism that is threatening cross-border business?
We are in fact using it to make our businesses local. We do not know how long this protectionist, nationalist thrust may last. I personally don’t think it will be a short term phenomenon. The world is in transition, a lot of economies are in transition. Usually when people feel pain, even if that pain comes from change in jobs due to digitisation, which has nothing to do with globalisation, but when that happens the fall guy is usually the overseas business. The finger is always going to point, there will always be some pushback on companies that haven’t gone truly local.
Secondly, there is an enormous dividend in going local. For example: We finally opened an assembly plant in South Africa. The auto market grew one percent last year, we grew 26 percent. We are the fastest growing auto company there, albeit a small one. We have opened an assembly plant in Bangladesh, huge market. We are already seeing the dividends of being seen as local. So there’s huge economic logic for going local. Once you go local, this entire question of protectionism and nationalism hurting you becomes academic. May be it is an exaggeration but all I am saying is that it has driven us to recognise that we need to belong to the countries in which we do business.
How do you then expand to other countries?
Exactly the way we did. You open facilities there for assembly. They don’t necessarily mean huge capital expenditure, you can do it with partners like we have done in Banglades. There are many modalities through which you can go local. And then quite apart from the investments you make, is the kind of people you employ. You need to employ local people, get local champions and give back to community.
Our tractor business is in America and we were the first out there helping people after Hurricane Katrina. I think that has borne long term dividends for us. The culture, the texture of your recruitments and your investments in assembly or manufacturing all will define how you go local.
How many more countries are you looking to expand to?
We are already about 49 percent global on a consolidated basis. A lot of that is due to Tech Mahindra obviously. But it is also because of companies like Ssanyong. We have made acquisitions in Finland and Turkey. Unbeknownst to us, we have suddenly become more global than we had even plotted to become. Sometimes these things are serendipitous. They happen because of opportunities.
We do not have a board somewhere that says we have to be global. That’s not an objective in my opinion. We must be profitable, we must grow. Then you look at where you grow. There is an equally strong lobby in the group that says lets consolidate and not fight too many battles. So we are always having that discussion. We have to decide which countries we want to focus on. So you won’t find completely profligate expansion everywhere. You will find we are doubling down on countries where we are seeing success. I wouldn’t want to comment on that right now. We are looking to see where will we increase our bets.
Will 2019 for Indian automakers will also be one of weakness in sales?
I certainly hope not and I do not believe so. Were we disappointed last year? Yes, the entire industry was. It is old hat by now that festival sales belied our expectations. We were hoping for a very robust kicker in the festive season. I wouldn’t even go into why it happened. In hindsight there are many reasons.
It was the fact that there was a rate hike. The monsoon did not turn out to be as good as we hoped. There were the state elections. All these things are trotted out. At the end of it, everything translates into poor consumer sentiment. We are hoping that the sentiment will revive this year. I am a great believer that there is huge pent-up demand waiting to come out. Will it come out before the elections? I don’t know. I am a perpetual student of the Indian psyche and how it behaves.
But you never know. We had launched Jawa and it sold out.
A lot of businesses will be like that. It is about differentiation.
It is going to be more and more when you look at the millennial nature. They want brands that speak to them directly, that are meaningful to them, whatever the narrative. They want special narratives. In that sense, not just us, but the mass market companies too will have to find ways to segment.
What I am saying is that, yes it is just one segment. But there is capacity. These are not cheap bikes. So people, when they find the right narrative, there is money. I hope 2019 is the year when the money comes out.
Are you looking to take the Ford partnership to the next level?
We have been in a joint venture with them. What makes me very happy is that whoever we’ve been in a joint venture with, our partings have never been anything but amicable. We constantly look for ways to work together again. That the spirit in which this (Ford tie-up) was started. If you look around the world all auto companies are trying to find ways in which they could collaborate.
Pawan is driving this. My input to Pawan is that we’ve been in a joint venture before. Whatever we work on now should be very granular, very defined as to what are the objectives and what are the win-wins for both. Everything he is outlining is going step-by-step.
What are your succession plans? Will you consider a family office way of going about it?
The family office view, I think that is the way we would look at it. Whatever role my family plays in the future, it will be one to goad the professional management into preserving our wealth and enhancing it.
What is your opinion on the Modi government’s performance, should they come back to power?
I don’t get paid by shareholders to make political comments. As long as I have a job, I will not be provocative for no reason.