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Auto industry will completely change in next 4 years: Pawan Goenka

Business Standard:  December 18, 2017

New Delhi: Pawan Goenka, managing director, Mahindra & Mahindra (M&M), says in line with its global peers, the auto industry in India is set to witness major disruptions by the turn of the decade, in the form of electric vehicles (EVs), shared mobility, stricter emission, and safety standards. In an interview with Shally Seth Mohile, Goenka touches upon how M&M is gearing up for the disruptions, even as it battles intense competition in its core sports utility vehicle segment. Edited excerpts:

The past 12 months have been action-packed for M&M. How does 2018 look?

One thing we learned from the past 12 months is that ‘business as usual’ is not going to take you into the future. Everything is changing rapidly. Be it customer expectation, technology, business models, competitive landscape, or the geopolitical situation. We need to prepare for what we need to do in four years. At the same time, we cannot ignore what is happening today. In a way, what we have tried to do in the last 12 months is an indication of that and it will continue. So fiscal 2018-19 will not be any different. We need to do more things and we can do them differently.

How do you see the auto business changing?

In the automotive business, the scenario will completely change in the next four years, with Bharat Stage-VI and safety norms. There will be greater disruptions, with EVs becoming mainstream and taxi aggregators redefining the dynamics of the industry. We need to continue with petrol and diesel engines, while we move on to the EV journey.

The last six months have been the most exciting time for EVs, with the government sharing its intent of making India an EV market by 2032. Very strong statements are being made by ministers, secretaries, and joint secretaries about where they want to go. The Energy Efficiency Services tender is the first tangible move that shows government intent. The interest shown by Ola, Uber, and other fleet operators makes it all the more exciting for us.

What about shared mobility?

We are looking at shared mobility – both as a potential opportunity and as a hedge because we don’t know whether the profit pull will come from shared mobility or will continue to be with OEMs (original equipment manufacturers) that have partnership with shared mobility firms. We need to prepare for that as well.

What are M&M’s plans in the auto business?

Whatever we have done in the past two years is in line with that. We announced a petrol portfolio almost two years ago. Our plans for EVs are well known. We are dabbling in shared mobility right now and working on some bigger plans. We are covering all bases.

We are also working on a new product line-up. There are products that are old and need replacing. In segments where we do not have a good product, we need to introduce new ones and in segments where we have a good one, we need to protect our turf. It is a complex situation.

Your core sport utility vehicles (SUV) segment has been under pressure for some time now and investors are concerned. How are you addressing it?

The SUV segment has grown rapidly because of a lot of new players coming in and consumers’ change in taste from hatchback or sedan to SUVs. That’s the reason why market shares keep dropping. If you look at our absolute volumes in the last three to four years, it has not declined. We have not grown by a huge percentage, but we have not de-grown; our profitability has not come down either. The one number that gets talked about the most is the market share of UVs. I keep defending it by saying that because UVs are becoming the preferred vehicle, and with players coming in, the market share is dropping. Having said that, we have taken lot of measures - some tangible, still others in the offing. The most important step is the launch of KUV 100 NXT; we have also done lot work for the TUV 300. These two are important products for us.

We are now reasonably certain that it’s going to give us the desired volume ramp-up.

We will be launching two important products - the U321 and S201 – in the next nine months to a year, which will help us get higher volumes. The Bolero, Scorpio, and XUV are holding their own.

Do you think your plans of bringing an electric version of the existing range of SUVs will help in staying ahead of rivals and recoup some lost ground?

It’s not just technology. It’s not difficult to put something together with a battery, motor and converter, and launch a vehicle. What we have is experience in India, which no one else has. This will keep us ahead of any new player who enters India.

How is Mahindra SsangYong’s (Korean subsidiary) joint development of EVs shaping up?

The project has formally kicked off and there we have a lot of synergy between the two companies. A lot of work is being done by Mahindra Electric and by outside consultants for this. The first of these vehicles should be launched in the first quarter of 2020 in the home markets of both the firms.

After years of struggle, M&M’s truck business is showing some traction. Are you happy with the performance?

Yes. We are happy the volumes are growing well. Last month, we had 120 per cent growth, and we have a good growth YTD (year-to-date). Our market share is four per cent now. We are making about 700-750 trucks in a month. The only thing that is not changing is that the discounting levels are very high for the whole industry, and therefore, the break-even volumes become large. From mid-next year, we will launch a whole new series of products in the intermediate commercial vehicle that will cover from about five, six tonnes, all the way up to 16 tonnes.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.