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.