Mahindra re-thinking Ssangyong plan

NEW DELHI: Indian conglomerate Mahindra & Mahindra is re-thinking the strategy for its loss-making Korean automaker Ssangyong Motor Co, tapping the brakes on its planned push into the United States to focus instead on China.

Mahindra's Executive Director Pawan Goenka told Reuters the company was in talks with Chinese firms to enter into a contract manufacturing agreement or form a joint venture to build Ssangyong vehicles in China, where it currently exports to from Korea and sells through a local distributor.

Mahindra rescued Ssangyong from near-insolvency in 2011, acquiring a stake of just over 70 percent, but South Korea's No. 4 car maker has struggled to break even, reporting a net loss of 61.9 billion won ($51.6 million) for 2015, although it made a net profit in the final quarter.

Making cars in China would mean Ssangyong could lower its prices there, and Goenka said it made sense to focus on expanding sales in an existing market before going to the United States and building a distribution network from the ground up.

"China is easier to look at right now because Ssangyong already has a presence there. We have some traction and need to ramp up our products for local manufacturing," Goenka told Reuters.

"China is here and now, U.S. is the future. We are still deciding what it takes for us to launch in the U.S."

Boosting overseas sales has taken on a greater urgency for Ssangyong due to slumping sales in Russia, once its biggest export market contributing more than 20 percent of total shipments. Exports made up only a third of Ssangyong's total sales of144,764 vehicles in 2015, down from more than half in 2014, when it sold 141,047 vehicles, and substantially short of its target for exports of 60 percent of total sales.

Also, the Korean car maker does not currently have a vehicle that meets U.S. regulatory requirements, Goenka said.

"The U.S. is not somewhere you can go in without significant investment in product and brand development. Given the various priorities we have, the U.S. is now somewhat on the back burner, but not stopped," Goenka said.