Mahindra eyes Sri Lanka as growth market in global strategy, calls for consistent policy

• Until used vehicle market is constrained, Sri Lanka will never become a manufacturing hub for automobiles
• It took 25 to 30 years, but now India has become an export hub; it’s all driven by consistent policy
• Whole thing about Indian manufactured products being substandard is old news

By Darshana Abayasingha

Mahindra & Mahindra Ltd., part of the diversified Mahindra Group, recently strengthened its association with Sri Lanka with the inauguration of an automotive assembly part in the Kalutara District. The plant at Welipenna will roll out Mahindra’s petrol KUV 100 mini-SUV, and deliver customised products for local needs. 

Speaking to journalists at the office in Mumbai India, Mahindra & Mahindra’s Chief of International Operations Arvind Mathew said the plant in Welipenna would solely serve the Sri Lankan market at present, but added they would consider exports from Sri Lanka when it achieved scale and if it made financial sense. However, he added it was difficult for Sri Lanka to become a manufacturing hub for vehicles for both import and export, due to its burgeoning market and policies supporting used vehicles. 

“Until the used vehicle market is constrained, Sri Lanka will never, ever become a manufacturing hub for automobiles. Unfortunately, that’s the way the mechanics work. As long as used vehicles come in, expanding volumes of new automobiles in Sri Lanka will be very difficult. That is something the Sri Lankan Government needs to look at in terms of its industrial policy, and how it wants to incentivise manufacturers. With automobiles, I think today the mix is 80% used vehicles in the passenger segment, whereas it’s almost 100% new with commercial vehicles. If the passenger vehicle market continues to be for reconditioned vehicles; creating a manufacturing base will be very difficult as you will never get volume,” he stressed. 

Mathew also stressed the importance of consistent policy to support the growth of industry, drawing parallels to the automotive sector which entails very long development cycles, explaining it takes up to four years to develop a new car. However, he affirmed that Mahindra & Mahindra invests for the long-term considering the potential of a market and its strength, which were factored in its decision to invest in Sri Lanka as they have done with certain parts of Africa. 

“Economies of scale matter. It will come if you have the right government policy. This was India 1991, and look where it is today. It took about 25 to 30 years, but now India has become an export hub. It’s all driven by consistent policy,” he said. 

The Mahindra Group is making significant gains all over the world with electric vehicles, and are currently even sporting a successful campaign in the Formula E world championship. Having designed and exported a number of electric models, Nepal and Sri Lanka serve as key markets in the region with over 80 E20s already operating on Sri Lankan roads. A commercial vehicle, Treo, is also being tested in Colombo at present to ascertain its operations, cost of ownership and other running factors. 

Mathew averred that electric vehicles are coming and will definitely form the future of automobiles, but the pace of uptake would depend on individual government policy and the resultant costs entailed. He added that present government policy on electric vehicles does not encourage them to assemble electric versions of the KUV100 in Sri Lanka, but it could consider such in the future in the event of a change. 

Mathew also addressed questions posed on the quality of manufacturing in India over the past 20 years. 

“The KUV 100, which we manufacture in Sri Lanka, by the way is exported to Europe; it is there in Italy and Spain, it is there in Chile, Tunisia and South Africa – where quite frankly customer requirements are far more advanced than for most of us in South Asia. Also, these products we sell in Sri Lanka are new. The used vehicles coming out of Japan have no warranty. In our case, we have a service network of over 100 touch points, we have a full warranty and the fact is all these vehicles are designed to meet global requirements. India has now become a hub for manufacturing. Today many players are exporting from India. There is Hyundai, Mahindra, Ford, Jeep, Renault, Nissan, etc. – they all export from India. This whole thing about Indian manufactured products being substandard I think is old news,” Mathew stated. 

Also present was Sanjay Jadhav, Vice President and Head of International Operations – South Asia of Mahindra & Mahindra Ltd., who pointed to the success of Maruti Suzuki in Sri Lanka selling over 60,000 cars annually, adding that Sri Lankans had accepted these products and they were performing very well. He also pointed out that Mahindra was the market leader for commercial vehicles in Sri Lanka with its hugely popular Bolero pick-up range, plus, a significant presence in the tractor space and generators. 

“At the end of the day, be it commercial or passenger vehicles, the quality of the product matters. It is very important to see how it is performing. We believe Sri Lankan customers do a scan of the market and they see how we are present and perform across the globe. Also, in creating the facility at Welipenna, we followed Sri Lankan regulations meticulously. For example, there is regulation for doing local assembly where you need to have 20% localisation – local component development. We have 30% localisation. Going forward, to further our mutual interests, and to generate employment creations, we will look at having more products sourced locally,” Jadhav averred.