M&M Plans to Build Assembly Plant in South-East Asia

Mahindra & Mahindra, or M&M, India’s largest utility vehicle manufacturer, plans to set up an assembly plant in South-East Asia and is eyeing markets in Thailand, Indonesia and Malaysia. The new plant, which will cater to the entire South-East Asian region, is likely to come up in the next couple of years and is part of the company’s dream of being a global player. 

“SEA markets are important, big markets for M&M’s overseas growth and for expanding our global presence. We are currently in discussions with various parties and evaluating various possibilities for setting up base with appropriate business models,” said, Pravin Shah, chief executive — international operations, automotive & farm equipment sectors.

The tractor manufacturer has been prompted to eye the South-East Asia region which is largely dominated by Japanese companies — by the Asian Free Trade Agreement that has opened several opportunities for M&M to tap into the full trade block markets amid low and falling duty structure (0-5%) among member countries. 

“The company is exploring Indonesia and Thailand for the automotive business and from the tractors perspective Malaysia and Myanmar are on the radar,” said Shah. 

The South-east Asian base is likely to offer products ranging from M&M’s utility vehicles to pick-ups, Ssangyong SUVs, Mahindra tractors, along with products from Chinese tractor joint ventures Jiangling & Yeuda Tractors. 

Currently, M&M exports vehicles to Malaysia and aims to expand to other markets in ASEAN region. The market size for utility vehicles and pick-ups in key ASEAN markets is more than 7,00,000 units per annum and for tractors it is more than 55,000 units. 

Over the next four to five years, M&M sees at least 15-20% of its total export volumes coming from this region. The company aims to double overseas revenues to more than $1 billion by 2013 and looks to double volumes to100,000 units, excluding Ssangyong kitty. 

In the year ended March 2011, M&M exported 17,000 units of utility vehicles and pick-ups and around 11,000 tractors. So far this fiscal, its automotive exports have grown by 69%, while tractor exports are up 16%. M&M eventually sees almost 15-20% of its total output from exports market. 

The company has an automotive assembly plant in Brazil and Egypt and has been studying South African and Southeast Asian markets over the past few years. Southeast Asian markets have emissions norms similar to India and right hand drive vehicles, which will make it relatively easier for M&M to enter. 

These markets have been traditionally strong for SUVs, pick-ups and multi purpose vehicles (MPV) and are ideal for M&M, which has similar product portfolio. Currently, M&M’s research and development department is making products to suit to the SEA markets. “An important product requirement for these markets is gasoline engine and automatic transmission based product and we have begun development of Gasoline AT products keeping also the SEA market needs in mind,” said Shah. 

For M&M, to eye Thailand, the second largest pick-up truck market in the world, is not a surprise.