July 20, 2004

By Roy Cokayne

Pretoria - The Indian invasion of the South African vehicle market is coming, with Mahindra & Mahindra, the Indian automotive giant, yesterday announcing its entry as part of its globalisation strategy.

This follows last month's announcement by diversified Indian group Tata of its entry into the local car and light commercial vehicle markets. It also gave notice of its intention to expand its power generation business into the country.

The imminent entry of the two companies follows recent talks to forge a trade alliance between South Africa, India and some South American countries.

Anand Mahindra, the firm's vice-chairman and managing director, emphasised that its entry was part of a strategy to establish a bridgehead for Africa and its other local businesses.

The company is the world's fifth-largest tractor manufacturer, has a vibrant automotive component business and is India's largest provider of rural finance. It also has an information technology unit and an infrastructure and leisure business.

Mahindra said it planned to establish a vehicle manufacturing plant but this would be feasible only when it achieved annual sales of 5 000 units.

Pravin Shah, the vice-president of overseas operations for its automotive sector, said it anticipated achieving annual sales of 4 000 units within the next two years. The manufacturing plant it was considering for South Africa would be to provide for the whole continent.

Alan Durante, the executive director and president of its automotive sector, said Mahindra & Mahindra would be launching two vehicles locally in October: the Mahindra Scorpio, a sports utility vehicle; and the Mahindra Bolero, a bakkie.

Mahindra was not prepared to disclose the pricing, but indicated that "value for money will be one of the key selling points of the vehicles". 

He stressed the entry into the local market was not speculative or opportunistic, and the company regarded South Africa as a key market in which it wanted to "put a stake in the ground".

Mahindra & Mahindra had established a company in South Africa that would import and distribute the vehicles. It would have a 51 percent shareholding in this firm, with the balance being locally held.

Ivor Ichikowitz, the head of the South African investor consortium, said an empowerment group would have a minimum of 20 percent to 25 percent shareholding and "established business interests with a history in the motor industry" the balance.

An announcement on the structure of the local Mahindra importation and distributorship company would be made within the next three weeks.

Mahindra was not prepared to comment on the size of the investment but stressed that it was not insubstantial.

Substantial portions of its investment were for promotion and working capital, and the firm was not short of resources.

Ichikowitz emphasised that the investment was "significant enough to enable Mahindra & Mahindra to compete against the major players".

Shah said the company would start business with three dealerships - in Gauteng, KwaZulu-Natal and the Western Cape - and these would be expanded.

Mahindra admitted that the firm's brief entry into the South African vehicle market about 10 years ago had been "a disaster".

But it was a completely different company today in terms of its capabilities, size, and financial and human resources, and was investing for the long term.