Petrol Stop - M&M-Ssangyong to source $4-5 bn worth of components

M&M-Ssangyong to source $4-5 bn worth of components

Tuesday, 24 August 2010

25 August 2010;business-standard.com:Swaraj Baggonkar/Mumbai: Though domestic utility vehicle market leader Mahindra & Mahindra hasn’t yet formally bought cash-strapped SUV maker Ssangyong Motor Company, it has already started to lay down a road map for the South Korean auto maker. M&M plans to source automotive components worth $4-5 billion (Rs 19,000-23,000 crore) over several years from global markets for Ssangyong and itself. A substantial portion on this would come from India, where M&M has built a network of about 200-odd component vendors. The sourcing will largely aid the joint product development plan which M&M is contemplating with Ssangyong in the areas of premium sports utility vehicles and crossovers. Besides new products, M&M also has plans of tapping into the engine options of Ssangyong, while developing new engines with Ssangyong’s strong R&D setup. “Ssangyong may not have a product line-up which is as grand as some of the global car makers but we are very optimistic about the ones which are in the pipeline. Our strength of low-cost manufacturing and component sourcing plans will change Ssangyong,” said a source from the company. M&M, which expects to complete the detailed due diligence process by September and wrap the deal by November, has made it clear that it will have to set up an assembly line for at least two of Ssangyong’s products — Korando C and Rexton — in India. Ssangyong is mainly into the SUV segment and had showcased the Korando C, a compact SUV which is also its newest offering, at the Frankfurt Motor Show. In addition, the Super Rexton, which will replace the ailing Rexton II, is the premium product in the company’s line-up. Sources say the luxury sedan, Chairman W, which is also the new version of the premium model, will be tested for the export market by M&M, something held back earlier by the previous owner. The Chairman W is powered by a 5-litre, V8 engine (Chairman W 5.0 version) that develops 306 bhp of peak power. It competes against other premium models such as Mercedes S-class, BMW 7-series and Audi A8. The multi-crore buy-out will allow M&M to get access to the advanced research and development (R&D) centre of Ssangyong, which according to industry experts is one of the finest in South Korea. “There are about 600-odd people working at the Ssangyong R&D facility. They have a very high quality centre, which is fully capable to carry out design and engineering aspects of product development, besides testing,” said an M&M source. Since the start of the year, Ssangyong vehicles have seen a substantial growth in demand. In the January-June period, sales grew nearly three-fold to 36,512 units, as compared to 13,020 units sold in the same period last year.