Debt-ridden SsangYong Motor is finally acquired by a local consortium led by South Korean electric bus and truck maker Edison Motors for 305 billion Won ($254.56 million). According to the company’s regulatory filing, it reported an operating loss of 238 billion Won from a revenue of 1.8 trillion Won in January-September 2021. The acquisition money will all be spent to repay a portion of the carmakers’ debt to financial institutions, the companies said. Edison Motors hopes to rehabilitate Ssangyong by launching the brand in more markets like the US and Mexico.
In 2010, homegrown automaker Mahindra and Mahindra (M&M) had acquired a controlling stake in SsangYong to expand its portfolio of premium SUVs in the Indian market and using the SsangYong brand to establish itself as a global company. But as luck would have it, losses continued for almost a decade and Mahindra was forced to look for a new buyer. SsangYong Motor eventually filed for bankruptcy with an outstanding loan of 100 billion Won in late 2020.
“M&M targeted utility vehicle market through this deal and also to get momentum in global markets. However, Ssanyong vehicle sales, including CBU and CKD, decreased by 21 per cent year-on-year (YoY) to reach 84,596 units in 2021. The COVID-19 had a negative impact on this company. Moreover, MPV sales reduced to zero from 2020. It also started to revive back by entering into electric vehicle business. For battery development, it joined hand with BYD as well. However, it failed to revive back due to poor performance from Rexton, Korando, Tivoli and R/Sports models,” Soumen Mandal, Research Analyst, Counterpoint Research said.
With the Mahindra-SsanYong deal, the former was betting on bigger SUVs and electric vehicles but none of that could be materialised.
“M&M was also losing SUV segment market share to Maruti Suzuki and Hyundai Motor in Indian market. The liability was increasing for M&M and it decided not to further invest in loss-making Ssangyong Motor,” Mandal added.
In India, Mahindra retailed Ssangyong Rexton but it wasn’t a sales success. Two other Mahindra models: the Alturas G4 and the Mahindra XUV300 are also based on Ssangyong Rexton and Ssangyong Tivoli respectively.
“As a successor of Bolero, Scorpio and XUV500, M&M wanted to increase market share in SUV segment through Rexton. However, it wasn’t well accepted by Indian customers. M&M failed to differentiate between premium and entry-level vehicles. Maruti Suzuki used a beautiful retail strategy and differentiated premium vehicles by creating a separate entity called Nexa. With Arena brand, Maruti Suzuki was targeting mass market vehicles. The problem in creating an appropriate brand strategy was also one of the reasons for the failure of Rexton in Indian market,” Mandal explained.
Grant Thornton’s Sridhar V. is of the opinion that Ssangyong didn’t see great traction in South Korea itself and had no brand recall in the Indian market.
“The question whether Mahindra should work independently or with a partner is a key question that will hit Anand Mahindra. If you see a pattern; trying to work with Ford didn’t work for them, unfortunately. But Mahindra as a company is still doing well in terms of diversified product portfolio. But I think they will still be exploring a partner as it makes sense in the current scenario with electric vehicles going forward,” Sridhar V., Partner, Grant Thornton Bharat LLP said.
Experts also believe that M&M should have created a separate brand strategy for both brands. Instead of that, Mandal adds, they tried to replicate success of previous models such as Bolero and Scorpio.
He points out that in the current scenario, M&M should focus on Indian market and its electric vehicle business.
“The digital retail model is also increasing and it can increase global presence through digital retail near the end of this decade,” Mandal said.
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