NEWS

M&M to pump in Rs 7,500cr on capacity expansion

Wednesday, Jun 24, 2015

The $16.9 billion Mahindra Group will invest Rs 7,500 crore in its automotive and tractor businesses over the next three years.

The capex will be spread out at an average of around Rs 2,500 crore a year, a top M&M official said. The capex will cover the firm's auto and farm equipment businesses including SUVs, two wheelers, commercial vehicles and tractors.

The spend will cover brand new product platforms in several segments and a fresh product pipeline across the board.

"We have had some product gaps (which affected sales volumes across segments) but new product launches have started and these new products will pull us out," said Pawan Goenka, M&M group president, auto & farm sector.

"The Rs 7500 crore capex will include two new compact SUV platforms as well as new intermediate commercial vehicles (ICV) and medium commercial vehicles (MCV) platforms," he added.

"We will invest around Rs 300 crore on the new platform for ICV and MCV products and we will start launching new products from these platforms in calendar 2017," he said. The compact SUV platform products are expected to debut this year. The Rs 7500 crore spend "is purely capex not counting any equity investment," said Goenka.

M&M has just rolled out a new platform commercial vehicle product - the Jeeto sub-1 tonner priced at Rs 2.32 lakh ex-showroom Telangana. "We have invested Rs 300 crore on the Jeeto project including the product platform and the plant," said Goenka.

Capacity at the Zaheerabad plant, where the Jeeto is being made, can be ramped up to 90,000 units per year and M&M is looking to use the product to improve its current 16% marketshare in the mini truck, micro truck and three wheeler segment.

"The mini truck, micro truck and three wheeler segment together is nearly 2.5 lakh vehicles annually or around 20,000 units a month and our marketshare in these three segments combined is 16% or around 3000 units a month," said Goenka. "So there's a lot of room to grow even if the segment is slow right now."

Jeeto will slug it out with Tata Ace, Zip and the Piaggio APE. It can handle a payload of 600 kg and 700 kg depending on the variant. As for the segment itself, although it is still limping, growth should pick up next year, said Goenka.

"We have a good brand in this segment and strong products. With more e-commerce activity and improved agriculture growth, last mile connectivity will pick up speed. The light commercial vehicle segment saw degrowth last two years but before that for 3-4 years it grew at 40%," said Goenka.

 

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