Strategy: SAIC Motor Surefooted About India Strategy

Strategy November 2018 SAIC Motor MG Motor India
Strategy: SAIC Motor Surefooted About India Strategy

Last year, SAIC Motor Corporation Limited, China’s largest carmaker announced its re-entry into India through its subsidiary MG Motor India. The company is launching its first product in India – an SUV – in mid-2019, and is building up robust processes and systems to ensure it is able to make a mark for itself in the Indian market. Auto Tech Review was invited by MG Motor India on a trip to SAIC’s facilities in Shanghai, China recently. The trip, more than anything, was an eye-opener to the tremendous progress SAIC, and the Chinese industry in general, has made as vehicle makers. Read on.

The Indian automotive industry has remained one of the most promising markets in the world for automakers. Some took early advantage of this potential, and have been able to create a significant mark for themselves, while many others – despite heavy investments, redrawn strategies and product introductions – haven’t quite had a smooth run in the market.

Come 2019, the industry will see two international brands enter the market – Kia Motor and SAIC Motor, through its subsidiary MG Motor India. Interestingly, both companies have announced their foray into the market with SUVs, clearly highlighting the choice and preference of Indian consumers in current times. Although their products would be positioned differently in different categories, both these brands have been able to create a buzz in the market considering the promise and excitement they both bring in.

MG Motor India in particular is being watched very closely – by customers, analysts and the industry alike. MG, or Morris Garages, is a 94-years-old British marquee brand that was purchased by Nanjing Automobile Group in 2006. In 2008, Nanjing merged into SAIC. In these past 10 years, SAIC Motor has literally transformed the company into a modern, technologically-sound, innovative and aspirational brand.

At the same time, we must recall SAIC’s first foray into the Indian market, that time as a JV with General Motors, which planned to develop and manufacture commercial vehicles and other products for India and exports. The products it introduced then didn’t quite gel with the Indian consumers, and they withered away without much of a remembrance.

But 2019 is going to be different – manufacturers have matured, and so have products and consumers. Will SAIC Motor be able to replicate its Chinese success in India? Time will tell.

(L-R): Luis M Sanchez, Chief of Digital Design, SAIC Motor; P Balendran, ED, MG Motor India; Michael Yang, ED of International Business, SAIC Motor; Rajeev Chaba, President & MD, MG Motor India; Ying Lu, Senior Designer, SAIC Motor and Gaurav Gupta, Chief Commercial Officer, MG Motor India

THE INDIA STRATEGY

In Shanghai, Michael Yang, Executive Director of International Department, SAIC reiterated the company’s “full commitment” to the Indian market. SAIC is not just looking at selling vehicles in the country, but a mobility experience by creating an ecosystem in the country that would include electrification, ride-sharing, logistics and finance. Sometime in the future – maybe in the second phase of the company’s expansion in India – the company could also consider bringing in its commercial vehicle brand Maxus, but no such decisions are being considered at this stage, officials reiterated.

For now, two products have been announced – an SUV in the first half of 2019 followed by an electric vehicle in the following year. Thereafter, the company intends to add products to its portfolio every year. Rajeev Chaba, President and Managing Director, MG Motor India said the company can explore the large portfolio of products and platforms from MG Motor and SAIC’s joint ventures in China with Volkswagen and General Motors. It is some sort of a luxury to have that kind of flexibility, but Chaba insisted products have to be right for the time they are introduced in the market.

At the same time, Chaba clarified that MG Motor India’s first product will not compete against the Hyundai Creta (as was being speculated), and will be larger than the Hyundai Tucson and Honda CR-V. The SUV will be introduced with both petrol and diesel powertrains. Both these engines would be BS VI compliant, but the calibration would be as per the quality of fuel available at that point in time. The SUV is being designed in the UK and China, with support from Indian engineers.

The eMG6 was one of the vehicles we experienced at the Guangde Proving Grounds in Anhui

The company’s decision to introduce a full electric vehicle in India in 2020 is an interesting and somewhat bold move. The pure-electric SUV will be a breakthrough chapter in the EV space in India, being one of its kinds in the market, said Yang. Practically, this product is less than 24 months from introduction in the country. Intrigued, we asked Chaba the rationale behind this decision, considering there is no clear government policy with respect to electric mobility; neither there is an ecosystem to support EVs.

It’s a leap of faith, said Chaba. The company clearly wants to make the right statement and announce its commitment towards EVs. It is banking on the government’s ‘clear’ intention and direction. Never mind the missing enablers, Chaba believes the ecosystem would evolve when all stakeholders work together to resolve issues and roadblocks. “Either we wait for things to happen, or we work with all the stakeholders together to resolve some issues and roadblocks,” he said. For now, the company is focussed on creating a compelling value proposition for its customers.

Clearly, MG Motor India is eyeing a leadership role with EVs in India. Around 2020, the EV space is likely to heat up. Hyundai has announced the launch of its Kona electric SUV in H2 2019. Market leaders Maruti Suzuki, too, is scheduled to launch its first EV in 2020. And there are others who are hastening their EV development processes to ensure they don’t miss the bus. Chaba said any decision to launch further EVs in the country would depend on the policy and regulatory scenario in the country.

Meanwhile, the Gurgaon-headquartered company is also taking a slightly different approach to its retail strategy. It proposes to have around 45 quality dealer partners, and intends to sell the first SUV through 100 touch points in Phase 1. While the number of touch points may go up by several times, dealerships aren’t likely to go beyond 65. Chaba mentioned the company is working on developing a specific business model for selling EVs. He didn’t give us much details, but said it could be announced in the next few months.

The MG HS could possibly underpin the SUV that MG Motor India will launch in India next year
The Marvel X is a pure electric vehicle with admirable features and performance characteristics
The eRX5 is another EV from the Roewe brand that impressed on all accounts

FUTURE MOBILITY

SAIC Motor is pursuing its future mobility strategy based on four key trends – electrification intelligence & connectivity, sharing and globalisation. Vehicles globally are getting transformed with the advent of internet, artificial intelligence, big data and cloud computing, among other disruptions. MG can take advantage of this transformation, said Yang, and will use it as its key differentiator, enabling it to stand out from the crowd. Yang spoke about offering the Indian industry a mobility experience that would also include ride-sharing, logistics and finance options at some stage.

Even from a powertrain perspective, the company has an entire line-up of technologies to address future demand. Be it gasoline direct injection turbocharged engines, pure electric vehicles, plug-in hybrids or fuel cells, SAIC Motor is building a robust portfolio to address demands across the world.

On asked, Chaba agreed it is logical, at least theoretically, to take the intermediate path of hybrids before moving to EVs. In India, however, there seems to be a switch to EVs directly from ICEs, and Chaba isn’t sure what is the right route to take. The government is trying to push everyone towards affordable EVs; two-wheelers and CVs essentially. Since the country is already transitioning to BS VI emission norms, the government might be thinking about just focussing on BS VI for IC engines followed by EVs, without offering many incentives on hybrids.

The design team at SAIC Motor has created exciting work that has received global recognition

SUMMARY

Our trip to China involved a day at the Guangde Proving Grounds in the province of Anhui, roughly 400 km west of Shanghai. Opened in September 2012, the SAIC GM-Pan Asia Technical Automotive Center (PATAC) Development and Test Center (Guangde) covers an area of 5.67 sq km, with over 70 kinds of typical events and more than 60 km test roads and comprehensive support facilities. It can provide development, validation, regulatory verification, loads data collection and analysis for labs and quality control evaluation for vehicles under 7.5 tonne. This is a massive facility with a bridge that rises 50 m in height and an oval test track that is nine km long.

At this facility, we experienced a host of vehicles across the MG and Roewe brands – the MG HS, Roewe Marvel X, eMG6 and eRX5. The vehicle that could possibly underpin the upcoming Indian SUV is the MG HS, while the e-SUV could be based on the Marvel X.

What clearly stands out is the way these vehicles look, feel and drive. Fit and finish on all the vehicles we drove was top notch, and they exuded premiumness all around. There is no reason why these vehicles can’t compete with the best in business. In fact, if anyone has any doubt whatsoever about the build quality or quality of technology in Chinese vehicles, it’s time to let that go. All the vehicles we experienced, for instance, are five-star rated on the China New Car Assessment Program (CNCAP), whose crash norms are as strict as the European NCAP tests.

What we witnessed in the different R&D centres, test labs and design centre in Shanghai or at the proving grounds in Guangde are absolutely remarkable for this Chinese state-owned automaker. How the Indian subsidiary inherits that knowledge and experience to deliver on the promises of products, technology and customer service, will determine its success in this market.

The Roewe Marvel X looks premium, is powerful and offers a range of 500 km on a single charge

 

 

In conversation with RAJEEV CHABA, President & Managing Director, MG Motor India 

“We’re Talking Of A Real EV, Not An Apology Of An EV”

You’re entering India at a very critical time. There’s lot of promise, but many aren’t doing too well. Next year, we’ll have two new brands, including MG Motor India, launching their first products in the market. How do you perceive the opportunity in the market as well as the challenges?

It is for sure going to be challenging and interesting. On the one hand, I’m nervous about the reasons you just mentioned, but on the other, I’m excited about the huge opportunity. We’re starting from scratch and you have an open canvas. One thing is very clear – we need to do certain things differently; not just for the heck of it, but in being relevant and meaningful to the customers. Be it products, product assurance, or consumer experience, we want to do certain things in a different way. Execution is the key.

We’re working on building the right foundation, the right team and the right culture in the company. We want to provide that culture to our dealers, who can then take that to our customers. That’s the focus at this point. We’ve asked our dealers to take care of our customers, and we’ve ensured we’ll take care of their profitability.

We’re trying to learn from the successful companies, and also from the not so successful ones in terms of what not to do. Hopefully we don’t repeat or make those mistakes.

You’re keen to position the company as an innovative brand. Could that be the differentiator for MG Motor in India?

Innovation is definitely one pillar of our brand. Overall package has to be meaningful to the consumer. Thanks to SAIC’s strength in connected car technologies, EV technology or ICE technology, we should be able to bring them to India at affordable prices but at the right time. We can’t bring in a lot of things to India at this point in time because of the non-availability of the support system and infrastructure.

You’re making a huge commitment by announcing the introduction of an EV in India by 2020, especially in the absence of a clear government policy.

This for us is leap of faith. I think the government’s intention and direction is very clear. Some of the enabling blocks are not in place, but they’ll evolve together. Either we wait for things to happen, or we work with all the stakeholders together to resolve some issues and roadblocks. So, we decided to try to take a leadership position in that space because there’s an opportunity there. You’ve seen some of our development facilities as well as the leadership position we have in EVs. We wish to leverage that advantage. We’re talking of a real EV, not an apology of an EV.

Our challenge will be to work with people to create the right infrastructure. Luckily for us, at SAIC in China, we’ve gone through the whole process. Even back in 2011, when I was posted here, China was talking about its EV policies in 2020, and now they’re planning for 2025. So, we have the experience as a company and we will take that to India.

It’s not just the product, but the whole value system that needs to be in place, including suppliers that manufacture locally. India, unfortunately, doesn’t seem to be moving at good speed. What’s your take?

It will have its own challenges. We have to be realistic here. We’re not going to sell 1,000 EVs in the first year. It will take time. Maybe we’ll have to limit sales to a few markets depending on the infrastructure, in a much calibrated way. We need to make sure that every consumer has a charging point at his or her home. Moreover, there is the battery life issue. We haven’t cracked as to what would happen to batteries after 15 years of its life.

Some consumers may not want to buy the cars outright, and may want to buy a subscription model instead. We’re working on developing a specific business model for selling EVs, and hopefully we’ll be able to announce that in the next few months.

You also showcased the GDI turbocharged petrol engine. So, ICEs are very much a part of the group’s future strategy?

In China, which is a 30 mn market, less than five per cent is EV – which is 1.5 mn vehicles. And that’s 50 % of the overall Indian market. Globally, the entire passenger vehicle market is about 80 mn, of which only about two per cent are EVs. It’s a very small number. Even though a lot of countries have spoken about going completely electric, ICs would still continue to be very relevant.

Within ICEs, because diesel technology is getting very expensive, the share of diesels will continue to fall. In petrol, however, lightweighting, turbocharging, direct injection, will combine to give 15-20 % efficiency improvements. GDI is a great example, wherein we’re talking about the fuel efficiency of a diesel engine with the drive and performance of a petrol engine. The cost of the GDI engine will be high initially, but maybe with the second generation of the engine, costs would come down. I think all these technologies will co-exist at least until 2030-40.

Start-ups seem to be a very critical part of your strategy. How do you look at the collaboration perspective – not just with start-ups, but academia and technology companies, for instance?

This is exactly what we are investing in at this point in time. Along with innovation, start-ups are another pillar of our brand. In the last one year, we’ve done events with TiE; we’re doing a geofencing project on child safety with IIT Delhi; we’ve done hackathons in IIT Delhi and Baroda. We’re investing in a lot of collaborations because we want to be seen as a start-up. We also encourage incubators and students.

So far, we haven’t even started selling cars or even advertising about us. But we believe that being part of the academia and the intelligentsia is important. Secondly, we want to connect ourselves with the community we participate in. Take for example the safety training we’re giving to kids in 160 schools in Gurgaon, because we feel it’s our responsibility to talk about safety. In Baroda, we are talking to a lot of poor women, trying to empower them, including some girls from the slum areas – training them to produce cars on our lines. In fact, we’ve given a target to our factory to ensure 30 % workers on the lines are females. The result until now has been very good, and we may take it up to 40 % to have one of the highest gender ratios in factory shopfloors globally. This is our way of being connected to the community that we operate in. That’s again part of our foundation. Even before we launch our cars, consumers should look at us differently.

 

TEXT: Deepangshu Dev Sarmah

PHOTO: MG Motor