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Refreshed Portfolio Helps Mahindra Fight Stale Sales

Executive Summary

Mahindra has come to realize its products are out of sync with the compact or entry-level sedans and utility vehicles the market now demands. It plans new platforms and will launch three new compact SUVs over the next two years.

MUMBAI – Mahindra & Mahindra is scrambling to update its vehicle portfolio, as the Indian automaker experiences a double-digit decline in sales this year.

After seeing light-vehicle deliveries rise 26.4% year-on-year in 2011 and 24% in 2012, Mahindra sales slipped 4.4% in 2013 and are off 13.8% year-to-date, according to WardsAuto data. The drop-off has occurred as industrywide sales have begun to recover, improving 2.5% in July and 8.7% in August.

Mahindra has come to realize, if belatedly, that its products are out of sync with the compact or entry-level sedans and utility vehicles the market now demands. It has rapidly put together plans for new platforms and three new compact SUVs due over the next two years.

For immediate results, the automaker is facelifting its high-volume Bolero multipurpose vehicle and Scorpio SUV. The Bolero is one of India’s 10 best-selling models, with 7,909 deliveries in June, but Scorpio sales have slowed as Mahindra’s share of the SUV market year-to-date has slipped to 42% from 48% in like-2013.

Mahindra’s sudden slide largely is the result of younger buyers’ preference for contemporary MPVs such as the Ford EcoSport, Renault Duster and Honda Mobilio, or compact sedans such as the Honda Amaze and Hyundai Xcent. Even the older-generation Maruti Ertiga remains popular, thanks in part to the No.1 automaker’s extensive service network.

The Scorpio is undergoing a facelift for the festival season already under way. It will have some design and styling changes but will continue using the same body and mHawk 2.2L 4-cyl. turbodiesel engine making 120 hp and 214 lb.-ft. (290 Nm) torque.

Two new versions of the Bolero are planned, one of them a smaller compact and the other a 7-seater with a modern look similar to that of a Jeep Wrangler.

Also being updated are the XUV500, a feature-packed SUV, and the spacious, eight-passenger Xylo MPV that can seat eight persons comfortably. Both are being updated to contemporary standards. Specifics regarding design and engine changes have not been released.

More fundamentally, Mahindra is transitioning its engine portfolio from predominantly diesel to gasoline. As the price gap between less-expensive diesel and gasoline closes, Mahindra is introducing a new 1.2L gasoline engine in one of the forthcoming SUVs and a 1.6L China-made gasoline engine in another. The automaker also is developing a brand-new 1.0L gasoline engine.

Mahindra is doubling its investment in its Chakan plant to Rs80 billion ($1.3 billion) to increase capacity to 750,000 units. A separate program for investing Rs100 billion ($1.6 billion) in its various plants over a 3-year period already has started.

As it works to recover in the domestic market, Mahindra has begun planning global joint-venture strategies with Ssangyong, the Korean automaker it acquired three years ago.

A feasibility study for exporting Ssangyong models to China, other Asian countries and the U.S. is under way. Mahindra is further exploring alliances with Sweden’s Saab and France’s Peugeot to market vehicles in Russia and Chile in South America.

“If we get them, we would leapfrog into the future generations,” Mahindra President Pawan Goenka says.

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