M&M to buy Navistar’s stake in India CV and engine joint ventures

Mumbai, December 18, 2012: Mahindra & Mahindra (M&M) plans to purchase the Navistar Group’s stake in Mahindra Navistar Automotives Ltd (MNAL) and Mahindra Navistar Engines Pvt Ltd (MNEPL). Following the purchase, both MNAL and MNEPL will become wholly owned subsidiaries of M&M, which will take complete ownership of operations and continue to sell MNEPL and MNAL products.

Navistar and Mahindra set up the MNAL JV in late 2005 to manufacture trucks and buses in India, source components and provide engineering services for the design and development of Navistar vehicle products. The MNEPL joint venture was formed in 2007 and began producing engines in 2010.

The sale, which requires regulatory approval in India, is subject to the conclusion of definitive agreements and is expected to be completed in early 2013.

The terms of the proposed transaction call for M&M to pay around Rs175 crore ($33 million), for the Navistar Group’s stake in both ventures. The agreement allows Navistar to continue sourcing components from India while M&M would continue to provide engineering services to Navistar. The Navistar Group will continue to support M&M through a license agreement and extend necessary support to MNAL and MNEPL.

“Mahindra Navistar Automotives has set up a world-class dealer and service network for trucks which, coupled with synergies with Mahindra’s dealer network, gives us a significant opportunity to grow our presence in the truck market. In addition, the product has been well accepted as is evident from our high-ranking in the TNS customer satisfaction survey,” said Dr Pawan Goenka, president, Automotive and Farm Equipment Sectors, M&M.

“While the Indian market has not expanded as we had originally expected and industry challenges there continue in the near term, we still see promise in India going forward. But given Navistar’s 2013 priorities, our capital and focus needs to be allocated to other business opportunities in the near term,” said Troy Clarke, president and chief operating officer, Navistar. “Mahindra has extensive experience and knowledge of the Indian automotive sector and they are best situated to devote the time and resources required to capitalise on future opportunities in India.”

MNAL has sold 7,904 units in the eight-month April-November 2012 period, down 6.54 percent on the 8,457 units sold in the year-ago period. The total CVs sold by the company comprise 2,482 M&HCVs (passenger carriers: 687/goods carriers: 1,795) and 5,422 LCVs (passenger carriers: 2,697/goods carriers: 2,725).

The manufacturer currently accounts for a 1.54 percent market share of the commercial vehicle market in India.