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M&M sets up separate business unit for Africa focus

Sunday, May 31, 2015, 23:28
This news item was posted in Business category and has 0 Comments so far.

MUMBAI: Mahindra & Mahindra, India’s largest utility vehicle and tractor maker, has set up a new business unit to focus entirely on emerging opportunity in Africa that the group says has the potential to grow 10 times to a $1 billion (about Rs 6,400 crore) business in five-seven years. The group currently earns about $150 million (nearly Rs 960 crore) annually from Africa. The separate arm will cater exclusively to the continent in an “integrated manner”, according to the company. The initiative will be led by Ashok Sharma, who is on the group executive board and the president of the agriculture business at M&M. The new business unit will act as an internal distributor for the company, catering to the entire group’s business needs right from twowheelers to trucks, instead of each of its business verticals – utility vehicles, tractors, gensets, two-wheelers and trucks – trying to explore the potential individually. Apart from South Africa, where the company already has a local office with local people, M&M will set up three more key hubs in Egypt, Nigeria and Kenya. It chose these hubs based on volume potential, ease of doing business, political stability and the company’s current presence in the country. Sharma told ETthat the idea is to become a local company instead of having people sitting in India exploring opportunities from afar. M&M will look at specific requirement of the market, customise the product and engineer it for the needs of the local market. “The channel partners, government and the other stakeholders may not be able to understand the impact brand Mahindra can have. When we go as ‘One Mahindra’, then they will be able to see the impact we can have on the local economy,” Sharma said. These hubs will have local companies, local offices and local employees developing products for the local markets, he said. Pawan Goenka, executive director of M&M recently told ET, “We have multiple businesses in Africa. Instead of each business going independently, we are treating the African business unit as our virtual distributor.” Through the new business model, the company will have synergies in distribution, supply chain, spare parts, service, advertising and branding, helping dealers become more viable. Of the 50 countries in Africa, M&M has active presence in 20 countries, with small assembly bases in Chad and Mali for tractor market. Its business in the continent has been growing at strong double digit rates over the past four-five years. Sharma said the potential is to grow 10 times in the coming five-seven years. Mahindra currently exports about 11,000 vehicles annually to Africa, including 8,000 units from its automotive business (utility vehicles, trucks and twowheelers) and 3,000 tractors. In 2014-15, the company passenger vehicle exports grew 4.42% while overall exports declined 29.11% to 7,517 units. The company had once set itself an ambitious target of exporting 20% of its total production for exports.

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