Mahindra and Saab – a closer look

So far the most obvious thing about Mahindra&Mahindra is the silence that surrounds them. Besides the statement that they are interested and the signing of a confidentiality agreement with the receivers not much has surfaced. Honestly I’d not expect to see much more of them until we are at a decision stage. It is their style to get things done without making too much noise. This may not mean they put less efforts in reaching their goal though.

Yesterday an report on moneycontrol.com came up that featured an interview with Pawan Goenka, the president of the automotive sector at M&M. He states that Saab could add R&D, technologies and their distribution network to M&M. To a degree this was interpreted as a confirmation of interest in parts of Saab only. I don’t think this is the case. In this piece I tried to look a bit deeper into the opportunities that Saab would gain from being purchased by Mahindra and the benefits that Mahindra would get from Saab.

Looking at the history of M&M they have a pretty good track record of finding the right partners to build up their own car brand, Mahindra. They started building Jeeps and as they worked on their own products they always gained the expertise they needed through joint ventures with, among many more, Peugeot and Mercedes. Their portfolio was originally very much designed for India, where they sell passenger cars as well as light commercial vehicles and three-wheelers. As M&M grew they took the challange to design cars for the worldwide market. But perception still is a huge hurdle. In Europe, no matter how good the product is, it will not be considered to be top level if it comes from India (well, at least a few years ago). Just remeber how long it took for the Japanese and later on the Koreans to be accepted alongside the established manufacturers.

Still, they had set their goals. In 2007, by the time their Scorpio was due to hit the UK market Anand Mahindra, the company’s vice-chairman and managing director, stated that “We want to be the next Land Rover. Why can’t an Indian company be the next Land Rover?”. Only logical that M&M was in the game when Ford put Land Rover and Jaguar on sale in 2008. In the end their neighbor Tata succeded in this bidding process. Just like Mahindra, they were looking for an entry in the global market and as we can see today, they did a good job in handling those brands.

Alongside with that M&M built up a worldwide cluster of supply companies through acquisitions as well as through joint ventures. Through this Mahindra can source most parts for their vehicles from suppliers within their own group.

While this is a big thing in itself M&M were still looking to sell their brands worldwide. A big step into that direction was made in 2011 when they acquired a controlling stake in Korean Ssangyong Motor Company. While they are respected in Korea and the region their reputation in Europe was not the best since they entered the market here some years ago. If you compare them to Hyundai and Kia, Ssangyong is on the right track but still not there.

Now we are at the point where Saab comes into place. Just as M&M got Ssangyong as an entry for the Asian market Saab can be their entry to the Market in Europe and North America. Despite all that buzz around Saab that we saw in the past years the Saab brand still has a good reputation and a rich heritage. A parent like M&M could erase uncertainties pretty fast and Saab could start to regain customers.

While the Chinese solution was the most likely we talked about the Chinese market and Saabs opportunities there. But how about India? It could almost be the same. Skoda already makes a lot of money down there, VW is entering the market, too. A car of the size of the current 9-3 is considered a big car there and if it is a sedan, we are looking at a luxury car. A 9-3 sedan designed to meet the needs of the local market at an adequate price could easily sell in numbers that we had expected from China. The price should not be a problem as the development costs for that model were paid off already a while ago.

Another interesting thing about India is that they are very much looking for technologies that save ressources. This is to a huge degree due to the increased need for energy of the fast growing Indian economy and the limited ressources within the country. India has a huge interest to minimize the dependency of energy imports. When it comes to car fuels they are at the moment mainly using CNG (more affordable than petrol for the average people) and now put lots of efforts into biodiesel. That could be an opportunity for Mahindra to get an engine like an adapted TTiD into their own vehicles.

Saab’s expertise in using alternative fuels like E85 as well as in making engines efficient (TTiD) can surely be a benefit for Mahindra. Add ePower and eXWD to that and it becomes obvious how Mahindra could benefit from Saab in terms of technology.

When it comes to company culture M&M have a good track record of successful joint ventures. Much earlier than the Chinese the Indian companies realized that the future is to acquire and develop technologies rather than just manufacturing stuff for western companies. I have spoken to a few people who worked in India and/or for Indian companies and a common statement was that they fit quite well with the European style of doing business. As we see at the moment they are pretty quiet when working but their focussed style lets them move mountains.

But how would GM react if they are approached by M&M regrding the licenses? It is hard to say if they would see them as a threat or an opportunity. But even if GM would not want to cooperate M&M would have the financial power and ressources to really push the development of the next 9-3 and further models. Due to the suppliers in their group they have the means to close the gaps in the supply chain maybe faster than any other bidder.

Many aspects in this let me think Saab would fit Mahindra&Mahindra like a glove. There is a lot to gain on both sides and I believe if M&M really want this deal they will be hard to stop.

xelav
Member
4 years 7 months ago

Just do it!

Bravada from GMI
Member
4 years 7 months ago
That’s a heartwarming assessment Till, but I wouldn’t say that: If you compare them to Hyundai and Kia, Ssangyong is on the right track but still not there. I believe they are totally incomparable to Hyundai and Kia. Daewoo was close to them before they collapsed and had to be rescued by GM, and Samsung is trying to catch up in the domestic market, while international expansion of either has been incorporated into their current parents’ respective strategies, so they will never become Hyundai or Kia. But Ssangyong has always taken a different route – they have concentrated on niche… Read more »
JasonPowell
Member
4 years 7 months ago

Wouldn’t it be fair to say though that not many people thought that Kia or Hyundai would have become what they are today. Hyundai was junk for many years and their huge warranties have won over some customers in our market as well as they are a much better car now. Ssangyong has not been under the M&M umbrella for very long so it’s hard to say where they’ll be in the next few years but I think it’s fair to say that M&M have big goals and targets for themselves and I wouldn’t bet against them.

bpsorrel
Member
4 years 7 months ago
Actually, SsangYong are doing well in Russia, which is a huge market for them, as their SUVs and “luxury” pick-ups are just right for the Russian environment. The new Korando is doing very well. I see a lot of these during my months in Russia and they are nice looking and driving cars. Also, in UK, they are beginning a marketing drive, advertising the new Korando on TV etc. At the right price, this is a very competitive car in it’s sector. I agree totally, that on the face of it, M&M would be a great fit for Saab. If… Read more »
Sergio
Member
4 years 7 months ago
Agree with the article, makes good reading. I could definitely see M&M working *with Saab* i.e. treating it as a sister company, or a very close family member and not some kind of sub brand under a massive corporate umbrella..ehem GM. They would pump a lot of money into R&D and I think there would be a lot of intervention from M&M in terms of management (not design, or production however). Mostly so that M&M will integrate the best Saab tech (there’s a lot of it) into their ‘own’ vehicles. E.g. Ssangyoung having Biodiesil, IQON, safety knowledge etc. I have… Read more »
Bravada from GMI
Member
4 years 7 months ago
In order for Saab to make sense, they have to become the cornerstone of Mahindra’s automotive division, and an integral part. To support Saab’s TDC and all the related facilities in THN, they need to be working for the entirety of Mahindra, not only Saab. I also believe Mahindra aren’t that bad at production. If they can further enhance the efficiency of Saab’s facilities, and perhaps increase utilization by adding Saangyongs and Mahindras to the mix, why not. Anything for the factory to run at reasonable capacity and cover its fixed costs. Both would help cover the imminent gap in… Read more »
davidgmills
Member
4 years 7 months ago

Dis-integration. I agree. In many ways Saab was to GM what AMG is to Mercedes, except Saab was in-house.

Rio
Member
4 years 7 months ago

GO for it ………………..:)

kochje
Member
4 years 7 months ago

+1

UWb
Member
4 years 7 months ago
I agree that M & M might be the best “parent” for SAAB. The role of expert within the company can ensure that the engineering competence will be in Sweden for many years forward. I could, as I would expect if Youngman was successful with SAAB, that gradually there would be two engineering centers with the key functions in Sweden and supporting in India. The risk is – but life is full of risks – that M & M sometime in the future find it most economical to move entirely to India (both production and development). I think the risk… Read more »
kochje
Member
4 years 7 months ago

interesting data, UWb, thanks

David-SAAB
Member
4 years 7 months ago

Great data analysis. Agree. A great fit.

saabserb
Member
4 years 7 months ago
We should be careful what we wish for! Remember the story from about 20 years ago: GM was after Jaguar, then Fort snapped Jaguar and GM got SAAB as a kind of solace. Mahindra is secretly admiring Tata for acquiring Jaguar, and there have been theories that possible SAAB acquisition is a kind of trying to parrying to Tata’s JLR. Don’t get me wrong, Mahindra is my favorite among the known bidders. They have the money, they have experience in building cars, they have experience in acquiring bankrupt car manufacturers. It would be dreams come true. But what I am… Read more »
mnztr
Member
4 years 7 months ago

Look at what TATA has done with Jaguar/Land Rover. Record profits and the Evoque is flying off lots at a feverish pace with it’s fabulous Posh Spice designed interior..

kochje
Member
4 years 7 months ago

Let us look forward and do not think anymore about what GM did to Saab.
Agree however that that was a mistake.

davidgmills
Member
4 years 7 months ago
Depends. The NG 9-5 is very upscale from where Saab was 10 years ago. Not a Jag yet, but not far behind, and not a big Merc, a big BMW or a big Audi, but again, not far behind. Which is why it would have done so well in the US had it come with the right stuff and had the right marketing. So if you are Mahindra and can get 9-5’s back on the road in numbers, you can immediately compete with Jag and Tata. I really think the 9-5 is what Mahindra wants and really needs both for… Read more »
GerritN
Member
4 years 7 months ago
Forgive my ignorance, but how is the situation Mahindra-GM different from Youngman-GM with respect to licensing GM technology? The Shanghai Automotive Industry Corporation of China (SAIC) balked at Saab hitting the Chinese market. GM has another deal with SAIC in India (Chevrolet is the 5th biggest car company in India). Why would GM agree to a license deal with Mahindra, but not with Youngman? [note to SU guys: I’m just trying to understand, not being negative, don’t zap me please 🙂 ] Personal opinion; Mahindra would be the best fit for Saab. M&M is a car maker, i.e. they are… Read more »
saabdog
Member
4 years 7 months ago

I see no difference in GM licensing to China versus India. I think the only route available is for M&M to purchase Saab without licensing & reenter the market with the new 9-3 in about 2 years. They have the resources to pull this off…hey, if BMW can do this with Mini, why can’t M&M do this with Saab?

BMW Rider
Member
4 years 7 months ago

M&M doesn’t have the distribution network that BMW has which is why they will have a very difficult time to do it and survive without producing a car for 2 years.

One of Saab’s remaining strengths at the moment is the almost turnkey dealer network, but the longer this takes the more that network will fall apart, cracks are already formed.

saabdog
Member
4 years 7 months ago

True, but if the Saab dealers were rebranded as Saab/Mahindra/Ssangyong, there could be products to sell until the 9-3 is launched. This could give M&M a dealership network instantly in north American & Europe. That is, if the Mahindra/Ssangyong vehicles can meet the US & European crash & pollution standards.

davidgmills
Member
4 years 7 months ago

Big ifs. And no one in the US has heard of Mahindra and Ssangyong so it would take tremendous marketing just to get a name established.

Angelo V.
Member
4 years 7 months ago

Mahindra already had two trucks approved by the U.S. EPA for sale here—would probably need to be recertified but could maybe be fast tracked. One was a diesel—–a compact diesel truck—-no competition in the U.S.—–they would have that market to themselves and there happens to be a demand for it. This won’t be easy, but it can happen.

davidgmills
Member
4 years 7 months ago

BMW had a great dealer network in the US and Europe. M&M doesn’t, and by the time a new 9-3 is built, the Saab network in the US and Europe will be gone.

Why is this so hard for you guys to understand. A car brand is dealers every bit as much as it is manufacturers.

Bravada from GMI
Member
4 years 7 months ago

Very right, but dealers are not that hard to acquire, much harder than acquiring a competency to design and build entire modern premium cars. It would cost money and time, but I believe the Saab dealer network would have required a solid overhaul anyway (something painfully missing in the VM period), especially if some are to sell Ssangyongs and Mahindras (not many would be good fits – can you imagine David G. Mills Saab Cadillac Mahindra Ssangyong???)

E
Member
4 years 7 months ago

While dealers may not be “that hard to acquire”, the quality ones may be. There are quite a few long term quality Saab dealers suffering out there right now. We saw Tynan’s close in Fort Collins, CO and Shaw Saab up in the New England area shutter over the past 12 months. Those were two of the “good guys.” Would they come back immediately if Saab is putting out Saabs again? Not for me to say, but probably not immediately.

saabdog
Member
4 years 7 months ago

Totally understood, David. But what are the other options here? Either Mahindra tries to build on what remains of Saab dealers or gives up and no more Saab in N. America/Europe. All I’m saying is that Mahindra could provide products for sale in existing Saab dealerships. This may be enough to keep them going until a new 9-3 is launched. Everyone knows BMW has an established dealer network, but until we even know if BMW is in the game, what else are we left with?

davidgmills
Member
4 years 7 months ago

India and China are not the best of friends. Since they are not, I would not think Chinese cars would sell that well in India. As for Chevrolet, well no one in the US considers Chevrolet and Saab to be in the same class so I doubt they would in India either. Mahindra needs a very upscale car to compete with Tata’s Jag and only the 9-5 has that ability. In fact, in India, the 9-5 four cylinder might do very well against the big thirsty Jag engines.

Bravada from GMI
Member
4 years 7 months ago

Mahindra does not need anything to compete with Jaguar, but the 9-3 is rightly regarded as a perfect “luxury” car for India, especially with XWD.

Chevrolet’s closest rival is the Cruze, but if the brand means anything to Indians (and I hope it does, given Mercedes’ sales), the Saab at slightly higher prices, with XWD, should sell well even with the current “robust” interior.

But regardless – for Mahindra, Saab is in the last place about selling Saab-branded cars in India.

ivo 71
Member
4 years 7 months ago
@ GerritN: GM have no sales worth a lot in India. They assemble and sell around 100.000 units (2010 sales figures), most of those ex-Daewoo subcompacts, compacts and older-style midsize sedans such as the Daewoo Lacetti (called Chevy Optra in India). Also Chevy-badged Daewoo models such as Avero, Cruze and such and a few Captiva’s. Used to assemble and sell Opels here but production was discontinued and replaced by the above Chevy-badged lineup. They also sell a few thousand rebadged Indonesian-built industrial utility trucks/MPV’s slightly adapted for the Indian civilian market (older model Isuzu I believe, they call it Chevrolet… Read more »
ivo 71
Member
4 years 7 months ago

Addendum: I suppose the top model of Daewoo, the Cruze, could be seen as a competitor for the 9-3 but I’m pretty sure that Saabs would be positioned well above the Chevy’s and marketed as considerably more upmarket. But I don’t really think Mahindra would launch a large-scale sales effort for Saabs in India for several year to come. They would have their hands quite full with rebuilding Saab in Sweden and re-establishing the brand in its traditional markets.

Ivo

David-SAAB
Member
4 years 7 months ago

my thoughts too.

Bravada from GMI
Member
4 years 7 months ago

Lest everybody forget – GM India is a 50/50 joint-venture between GM and SAIC 😉

saabdog
Member
4 years 7 months ago

Almost makes you think GM would actually want Saab as a brand when you look at those stats. Almost…

Bravada from GMI
Member
4 years 7 months ago

Saab and GM were perfect fits in many ways, it’s the more mind-blowing why they blew it.

peppie
Member
4 years 7 months ago

On the German blog, they are talking about a German car group which might be interested. I think this would be by far the best solution. I had to drive BMW and Mercedes before I moved over to SAAB about 15 years ago ( and more than 1.000.000 kms in Saabs later , I had the intention never to drive a German car anymore, but if the Germans would take over Saab, then I am very willing to drive a German SAAB. Go for it Germans

Angelo V.
Member
4 years 7 months ago

Wow, that’s interesting news. I think if Saab is acquired by a Chinese or Indian (or Turkish) concern, they might go downmarket a bit, which I feel they MUST DO to survive long—-lower prices, entry level model, etc. But on the other hand—-if someone like BMW purchased Saab and slotted them slightly below BMW—that would work too, and you’d have master experience.

saabdog
Member
4 years 7 months ago

Imagine if Saab were to go downmarket, they still could offer halo cars such as a Sonnett sports cars and Griffin editions for premium prices. This could still keep them nipping at the luxury car brands. Perhaps not a bad strategy.

Bravada from GMI
Member
4 years 7 months ago

The only brand for whom it works (quite) is Volkswagen (CC, Beetle, Scirocco, Touareg, Phaeton), and I believe it’s a special case. I believe Saab should stay right where they are, there is a vast underserved market between Opel/VW and Audi/BMW/Mercedes.

Just chop off the base models, they aren’t that much cheaper to build, they only serve as volume feeders for models with high break-even point.

Angelo V.
Member
4 years 7 months ago

I understand the sentiment—-but Saab hasn’t been able to make a go of it by staying right where they are. The market isn’t big enough and/or it’s not the right one for Saab to be attacking. Huyndai makes cars for 15K and cars for over 50K. They’re doing something right—-as is Kia. VW is another example.

CSD_ChineseSaabDriver
Member
4 years 7 months ago
India’s car market is too small currently, the passenger cars sales number is about 1/10 of that in China, although it will grow fast in coming years, but for Saab to make a similar sale in India compared to China, it is a dream. Indians tend to buy small cars while Chinese like big luxuary sedans. If M&M got Saab, they can not make Saab revive in sales numbers world wide, while if YM got Saab, they can at least make big sales volume in China, that THE difference btw the two. I seriously doubt M&M has placed a bid,… Read more »
CSD_ChineseSaabDriver
Member
4 years 7 months ago

And for people thinking that M&M can try to sell Saabs in China, that is a pure dream.

Bravada from GMI
Member
4 years 7 months ago

What makes you think Youngman could sell a meaningful number of Saabs in China? The mighty Geely only managed 47K units of a much broader lineup, and that’s only about 10-15% of total Volvo sales. Lofalk’s plan called for 60K China sales.

I think it’s a pipe dream for Saab to sell that many in China in the forseeable future. 10K is attainable, but I believe it’s attainable with a good importer, not necessairly a manufacturer or assembler. Renault sold twice the same importing on their own, withonly 80 dealers chinawide.

CSD_ChineseSaabDriver
Member
4 years 7 months ago

Geely sold 500,000 units, more than Volvo.

Bravada from GMI
Member
4 years 7 months ago

Geely only managed to sell 47K VOLVOs, that’s what I meant.

Mike Baughan
Member
4 years 7 months ago

As long as Mahindra can and will sell Saabs (especially in Canada, eh?) and can make it a sustainable and profitable business, I will be happy.

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