April 26, 2024

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[THE INVESTOR] Indian auto giant Mahindra & Mahindra said on March 30 it plans to invest 1 trillion won (US$894.04 million) in SsangYong Motor’s new car development over the next four years.

“Since our acquisition, SsangYong has invested 1.1 trillion won in current development and capacity. Most of this has happened through internal fundraising, little borrowing and little bit equity that M&M has,” said Pawan Goenka, managing director of M&M and chairman of SsangYong Motor, during a press conference at the Seoul Motor Show.

“As we move forward, for the next four years we expect to invest another 1 trillion won in current development for the various products that we have already announced and are discussing.”

 

Mahindra Chairman Anand Mahindra (left) and SsangYong Motor CEO Choi Johng-sik pose with the G4 Rexton at the Seoul Motor Show on March 30.

Goenka said SsangYong will raise the funds internally through its equity investments, but M&M, which owns more than 70 percent stake, is fully behind the automaker if it needs help with funding.

The press conference was held after the carmaker’s new large SUV G4 Rexton, previously identified with the codename Y400, made its world premiere at the auto show, with Mahindra Group Chairman Anand Mahindra in attendance.

The group chairman pinned high hopes on the G4 Rexton, saying the new premium car signals the “return of the King” in the SUV segment.

“SsangYong is in the phase of resurgence. With the launch of the G4 Rexton, we are reentering the world of luxury SUV,” Mahindra said.

Below is the full transcript to some of the key questions and answers at the press conference.

Q: SsangYong had formed a product license agreement with Saudi National Automobiles Manufacturing with plans to produce pick-up models in the country by 2020. What is the current process of the partnership and which cars will be produced in the country?

A: We have formed the license agreement with plans to produce luxury cars in Saudi Arabia. We plan to produce and sell luxury pick-up trucks that we are currently developing, by early 2020 in the country. The next step of the partnership is to develop new cars in the country. As a SUV maker, SsangYong will cooperate (with SNAM) to develop new cars in the country and bring changes in the country’s production process as well.

Q: What is SsangYong Motor’s plan for an electric vehicle? When it will be launched?

A: At the moment, we don’t have a detailed plan on the green car. But after researching different green cars, we have recently decided EV is the direction to go. We are developing (EVs) with M&M, with the goal of producing them by 2019. M&M already produces electric cars and has infrastructure to provide technology and solutions for an electric vehicle. We will fully cooperate with M&M to develop an ideal electric vehicle for SsangYong.

Q: What role would M&M play in developing EVs for SsangYong?

A: M&M will focus entirely on EVs. We have experimented with hydrogen fuel cell. We have also experimented with other alternative fuels and have looked into hybrid. The future is going to be in plug-in electric vehicles.

That is why we are also one of the first 10 teams to participate in Formula E. That participation has allowed us to explore the cutting-edge electric drive train technology and this is something we fully intend to share with SsangYong.

Our belief is that the world is very close to a tipping point. To a point where there will be a dramatic increase in the production and use of electric cars. That has to do with the lower cost of batteries. The battery plant started by Elon Musk will, in our opinion, lead to price war amongst battery suppliers, leading to significantly lower costs, and therefore much better usage of EVs.

If you look at what happened in the solar industry, the projection was very conservative for the growth of solar power plants. But when the Chinese companies started producing solar cells and competing fiercely for the market share, that is what created the tipping point in the solar industry. In India, the cost of solar power is almost at the same level as a conventional fuel plant.

Similar phenomenon, we believe, is about to happen in the electric vehicle battery industry. We believe that when the price of electric vehicle comes down, as a result of lower battery cost, all the ride sharing companies in the world, like Uber, will switch very quickly to an EV because of dramatic lower operating costs.

So M&M and SsangYong fully intend to participate in this new market which will open up both for vehicles that will serve the ride-sharing economy and we also hope to participate in the high-performance electric vehicle business through our technology with Formula E, as well as with our project with the Italian company Pininfarina. All of this will be something that we will share with SsangYong, and we hope it will be a leader in this new space.

Q: Are you planning to sell EVs in the US and China?

A: We certainly would have ambition to sell in both those markets. They are the largest auto markets in the world. We would be looking at those markets. We are already in the US, selling two-wheel EVs to a company called Mahindra GenZe, which has an office in California. We designed the vehicle, an electric scooter. We have a facility in Detroit that manufactures them. More important and more interesting, as M&M, we want to participate not only in the manufacturing of these vehicles, but also in the downstream areas which provide services. We have invested in company called Scoot, which is based in California, it is leading ride-sharing company in California. As investors, we will help it expand.

Q: How do you think the new G4 Rexton will do in the market? 

When I came here two years ago for the launch of Tivoli, I saw (Tivoli) for the first time. I was extremely enthusiastic. It was a new market for SsangYong. It was the compact SUV market and there were a lot of uncertainties. But when I saw the product, I think it truly stood out and is unique. Happily it has gone beyond the expectations, and turned out to be one of the most popular vehicles in Korea.

Honestly, I have the same feeling with G4 Rexton like Tivoli two years ago. I have seen the prototype of G4 Rexton. I have given inputs during the prototype phase. I have been more personally involved (in G4 Rexton). But I still tell you when I saw it today, I really liked it. I think it comes across as a very premium vehicle. It takes SsangYong, in my opinion, to another orbit. I have this image, If SssangYong was in a lower orbit, Tivoli took it to higher orbit, and G4 Rexton into an even higher orbit.

Q: What are the investment plans for SsangYong?

A: On the investment, since acquisition, SsangYong invested 1.1 trillion won in current development and capacity. Most of this investment had happened through internal fundraising, little borrowing, and little bit equity that Mahindra has. As we move forward, over the next four years, we expect to invest another 1 trillion won, in current development for the various products that we have already announced and are discussing. We expect just like the last five years, most of the fundraising will happen internally, through equity investment (if needed). Mahindra is fully supporting all the investment SsangYong needs.

Q: Why are you marketing G40 Rexton premium when the current trend is toward cost-effective models?

A: The word premium does not necessarily define price. It defines what we think are the quality that we are providing. The world I believe still has room for manufacturers who provide premium quality at what we will call an authentic price.

Second point, it’s extremely important for SsangYong to recover it’s image when it was first launched in Korea. (G4 Rexton) is a signal to the market, this is the return of the king. We are the SUV kings here, This is return of the king. Rex actually means king. The fact is it’s important for SsangYong to signal we are going back to the position we had.

As for the price, we haven’t announced it yet.

Q: Does M&M view SsangYong as a firm with original technology? What is SsangYong’s strong original technology?

A: The alliance between M&M and SsangYong is very important. There are strengths that M&M has in technology and those that SsangYong has in technology. Good partnership between two companies will further strengthen each other.

Both M&M and SsangYong are working jointly together to develop engines for each other. This joint development has given very good points financially for both SsangYong and Mahindra.

Second important source is (using) SsangYong platform Tivoli for M&M, when we develop new car for the M&M brand. This has been done with much integration where M&M is paying the license fee to SsangYong.

What will happen in the future is more important. We are working on common development of electric vehicles, where M&M and SsangYong will work together for EVs for the future on both the firms’ platform.

Q: Will SsangYong enter the US market?

A: The US market is very competitive. Recently, the US auto market has been focusing on autonomous and green cars. So we are still evaluating the US market, but nothing has been decided. The US, along with China, is a very important auto market. We are studying about the market with plans to launch in the future.

By Ahn Sung-mi (sahn@heraldcorp.com)