M&M | Fresh Investments Lined Up For Navistar, Ssangyong

M&M | Fresh Investments Lined Up For Navistar, Ssangyong


On December 18 last year, Mahindra & Mahindra Ltd (M&M) and its American joint venture partner Navistar International Corporation announced that the Indian auto major intends to purchase Navistar Group's 49 % stake in Mahindra Navistar Automotives Ltd (MNAL) and Mahindra Navistar Engines Pvt Ltd (MNEPL) for Rs 175 crore.

The sale, subject to regulatory approval in India and conclusion of definitive agreements, is expected to be completed shortly, and would see MNAL and MNEPL would become wholly-owned subsidiaries of M&M. This would also lead to a change in branding of the products. The company has also announced fresh investment of Rs 200-250 crore over the next three years to maintain and upgrade the existing range of products it has developed with the American truck maker.

Tough economic environment globally has forced Navistar to prioritise its businesses in its core North American markets, resulting in investments freeze in countries such as India. While M&M would take complete ownership of operations and continue to sell MNEPL and MNAL products, Navistar would continue to provide technical support for developing engines. The agreement between the two companies allows Navistar to continue sourcing components from India, while Mahindra would continue to provide engineering services to Navistar.

“As far as development of CVs is concerned, we do not require any assistance,” said Dr Pawan Goenka, President – Automotive and Farm Equipment Sectors, M&M. Navistar had not been providing M&M with any support for the last one and a half years, he said.

Although the JV has incurred significant losses, M&M is committed to support operations. To begin with, Goenka admitted the company needs to plug-in a couple of critical gaps in its product range. At present, MNAL does not have any offering in the 9-16 tonne intermediate segment, and a 16 tonne bus would also help fill in the gap.

“Any decision to develop new products to plug the gap in these two categories would mean fresh investments over and above the Rs 250 crore set aside for portfolio maintenance,” Goenka added. A decision to this effect can be expected over the next two to three months.


The commercial vehicles market in India has been witness to continued slowdown over the last year or so. In December 2012, overall CV sales in India reported a ~ 40 % drop in YOY sales, while the cumulative sales in the April-December 2012 time frame dropped 10.21 %. In the heavy commercial vehicle segment, where MNAL operates, leading CV manufacturers – Tata Motors and Ashok Leyland – corner 80 % of the market, leaving the rest to the remaining players. Any HCV manufacturer keen on having a meaningful presence should have a marketshare of at least 7-8 %, said Goenka.

The company expects to sell 40,000 to 50,000 trucks over the next three to four years – a significant jump from the 8,535 units it has sold in the first nine months of FY13. Financially too, M&M had reported that both MNAL and MNEL lost Rs 370 crore in FY12 as compared to Rs 240 crore in FY11.


The largest utility vehicle manufacturer in the country, together with its South Korean subsidiary Ssangyong Motor Co, is also investing an additional $ 900 mn to develop three new platforms and six engines in the next four to five years. Addressing the media in New Delhi early January, Goenka said plans for the first platform and its engines have already been set. The project will be financed partly from external borrowings, partly from internal generation and partly from fresh equity. “That will happen over the next year and a half,” he said. The company is yet to firm up the complete investment plan, he said.

Text: Deepangshu Dev Sarmah