Mahindra group's South Korean arm Ssangyong Motor Co will invest USD 920 million in the next three years to bring new models while it expects to break even in two years.
The company today launched its compact SUV Tivoli, its first product after being acquired by the Mahindra in 2011, is banking on the new vehicle to rev-up its turnaround strategy. It had invested USD 320 million in the Tivoli project.
"Ssangyong has invested 700 billion won since its M&A (with Mahindra) and would put one trillion won (USD 920 million) in the next three years," Ssangyong Motor Co Chairman Pawan Goenka said here at the launch.
The company is expecting to sell over 1,60,000 units in 2015, including 85,000 units of Tivoli in South Korea and the rest in its other major global markets as Russia and China. "With the incremental volumes coming in because of Tivoli, we are hopeful of achieving break-even in two years from now," said Ssangyong Motor Co (SYMC) CEO Yoo-il Lee.
Underlining the significance of Tivoli, Goenka said: "If it succeeds then we would sail through...It's a similar situation to the one we had faced at the time of launch of (Mahindra) Scorpio in early 2000."
Goenka, who is also M&M's Executive Director (Automotive and Farm Equipment sectors, said at that time Mahindra had put Rs 600 crore and the company could not have afforded to fail in the market.
Hit by the global financial crisis of 2008, loss making SYMC was on the verge of bankruptcy and is currently charting a turnaround course after Mahindra & Mahindra acquired it 2011. It came close to breaking even in 2013 and 2014 but missed it due to bonus it had to give its employees following the order of South Korean Supreme Court.
"The impact of the Supreme Court ruling led to our wages going up by almost 10-13 per cent, which will take us at least two years to recover," Lee added. Elaborating on future product plans, he said SYMC would bring a new model every year at an investment of one trillion Won (USD 920 million) in next three years.
"On average a new model costs around 300 billion Won," he added. While the overseas volumes make up for over 50-55 per cent of overall sales in 2013 and 2014, Lee wants the domestic market to contribute 60 per cent of the overall sales once new models come in.
When asked whether the SYMC is looking to form any JV in foreign country to increase its sales, Lee said: "There are various companies interested in forming a JV with us in China, but we need a certain volumes scale to consider manufacturing in China. Tivoli may offer us that boost."
Traditionally Russia and China are strong markets for Ssangyong. It also plans to enter US market and is currently doing due diligence. "China could be the largest market in the coming years for Ssangyong, but the next big frontier could be US. We have concluded one study, there are two more studies we are undertaking, if we decide to go ahead, it will take us another two to three years," said Lee
In the South Korean market SYMC has launched four versions powered by 1,597 CC petrol engine with price ranging between 16.35 million won (USD 15,000) to 23.47 million won (USD 21,500). The diesel engine based models would come in July.
Commenting on the launch, Mahindra & Mahindra group Chairman Anand Mahindra said, "The Tivoli marks a significant new milestone in the growing partnership between Mahindra and Ssangyong. "This new SUV epitomises the spirit of 'Korea Can Do' and reflects Ssangyong's rich legacy of innovation in product development. We are confident that the Tivoli is poised to drive Ssangyong's growth in the future."
He assured that the group was committed for the long-term growth of SYMC. "It is not just a portfolio investment or to acquire technology but it was a long-term investment...Ssangyong is determined to go global and it would succeed. We are here for long term. We are not quitters. We would fulfill Ssangyong's destiny," he said.
Goenka further added that Mahindra was in talks to bring in its subsidiary Mahindra Finance to South Korea in collaboration with KB Capital to finance the sales of Ssangyong vehicles. "Here in Korea, unlike India, we do not have the system to finance the vehicle purchase. We are trying to introduce the same here," Goenka said.
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