It took long but automobile major M&M has brought its South Korean subsidiary, SsangYong, on the road to financial turnaround.
SsangYong, acquired by the Indian utility vehicle and tractor major for Rs 2,100 crore in 2010, has reported a net profit of 23 billion South Korean won (Rs 128 crore) during the nine months ended September — the first time since 2007. In 2015 (Jan-Dec), the loss was 61.9 billion won.
SsangYong posted net profits for the four consecutive previous quarters on strong sales growth. The change is helped by rising volumes, led by the Tivoli, a new SUV launched in January 2015. Total sales volume during the nine months (Jan-Sept) rose 7.5 per cent; revenue grew 8.8 per cent. It showed a continued journey towards sustainable profitability, said Pawan Goenka, managing director, M&M.
Tivoli has turned out to be the best-selling vehicle from SsangYong in its 62-year history. In 2015, this compact SUV contributed 44%to total sales of 144,764 units. A total of 63,693 Tivolis were sold in 2015, broking the record held by another, Rexton, which had sold 54,274 units in 2004. Tivoli is breaking its own record in 2016, by selling more than 76,000 units till November.
Goenka, also the chairman at SsangYong, said the focus post acquisition had been to significantly invest in new products, brand and market development, cost reduction and the ability to derive synergies with Mahindra in various aspects such as platform sharing, sourcing and R&D. “There has been significant progress in all these areas and we continue to look for more opportunities in each area,” he said.
Early this year, Goenka had said there would be an investment of $1 billion to develop new products at SsangYong over the next three-four years. “We have a fairly aggressive plan over the next four years and will work on various levers for the financial turnaround,” he said.
SsangYong, which used to export more vehicles than it sold in South Korea for years, saw a trend reversal last year when its domestic market became bigger. Exports had taken a beating due to currency challenges in the key market, Russia, where a weakening local currency reduced demand for imported vehicles. In early 2015, the company suspended exports to Russia. The focus on the domestic market increased. The firm sold 99,664 vehicles in the home market in 2015, 44%more than in 2014.
Overseas, the main challenge is in managing the foreign exchange risk in the current volatile macro-environment, building a distinctive brand and maintaining competitiveness, says Goenka. Many new markets have grown to become significant contributors to export volumes and among them, the notable markets are the UK, Europe and Iran.