Mahindra Two Wheelers Limited (MTWL), the two-wheeler business arm of Mahindra & Mahindra (M&M) is studying the prospects of new markets for its French ally – Peugeot Motocycles (PMTC), in which it bought a stake of 51 percent in October 2014.
The Indian automaker’s intent is to grow the sales volumes and thereby PMTC’s profitability by making inroads for its two-wheelers in new markets such as the North African nations, Vietnam, China and other similar regions.
Interestingly M&M sees the Indian market too as a good opportunity not for PMTC’s entire two- wheeler portfolio but for a few undisclosed two-wheeler models. However, the company, for now, is actively focusing on Vietnam.
Speaking to the media on the sidelines of SIAM’s annual convention in New Delhi on September 2, 2015, Dr Pawan Goenka, executive director and president (automotive and farm equipment sector), M&M, said: “On a standalone basis, we see a lot of opportunities for Peugeot scooters in Europe and also in many other markets such as northern Africa. We are focusing right now on Vietnam to take the product there. If India happens, then it will be a great opportunity. China could have very good opportunity for us in the premium segment. All these things will help us increase the spread of Peugeot scooters, and we are working on growing the volumes and thereby the financial performance.”
Pricing key for Peugeot Motocycles’ India entry
In the context of a possible India entry of PMTC’s models, the senior company official disclosed that M&M is currently devising right pricing strategy for a few undisclosed PMTC models.
“Bringing Peugeot two-wheelers into India is not a challenge. But at that price, we will sell very few of those and that’s about it. May be we have to bring it at a price that the consumers are willing to pay. And you have seen that the kind of premium that you get even for a European scooter (brand) is not very high. Therefore, we have to be able to bring the price down to that level and that’s what we are working on right now. Around 2-3 scooter models can do very well in India if we get them here with the right pricing. This will take at least a year. However, I am not saying this today that we will definitely do it because right now we have to work on the business case,” said Dr Goenka.
Providing further clarity on what Mahindra is currently doing under its new two-wheeler alliance, Dr Goenka said: “On Peugeot’s side, we will do similar things that we did with SsangYong – getting the purchase price right (material costs), working on the distribution, brand and doing new product development. Almost all of these things are applying to PMTC as well.”
While Dr Goenka has repetitively mentioned in the media that M&M’s acquisition of PMTC wasn’t done with the primary purpose of bringing Peugeot scooters into India, said that the company is looking at the value PMTC offers to M&M in terms of boosting its overall 2W business.
Autocar Professional’s earlier reports mentioned that MTWL spent close to 28 milion Euro (Rs 218 crore) on its deal with PMTC. The deal also included an investment of 15 million Euro (Rs 117 crore) for financing PMTC’s global expansion. It is understood that MTWL and PMTC, both the companies are looking for new export destinations for boosting their respective global sales volumes.
Re-aligning the two-wheeler business
Dr Goenka, who is widely known for creating the Scorpio SUV (1996-97 to 2001-02) and thereby enabling M&M’s dominance in the SUV category across India, took charge of its two- wheeler business in late 2013 when the latter (two-wheeler vertical) was realigned under Mahindra’s automotive and farm equipment vertical. By doing so, M&M’s intent was clearly understood as a serious attempt to turn around its two wheeler business, one of the smallest two wheeler company in India.
Notably, Rajesh Jejurikar, who is chief executive (tractor and farm mechanisation) and president (two wheeler), M&M, also returned to the company in April 2013 after his brief stint at the media group, Zee Entertainment.
Recently (July-August 2015) the company rolled out its biggest ever advertisement campaign involving Rs 75 crore for its two-wheeler business in order to be conceived as a serious player in the two-wheeler business. “Why would we invest that much in marketing if we are not a serious two-wheeler player?” asked Goenka?
On the domestic front, as the first step to stabilise total monthly two-wheeler sales for M&M, Dr Goenka, reportedly, is aiming at achieving a consistent mark of 30,000 units through two-three high-volume products. The company has found its two high-volume products in the 106.7cc, 8.4bhp Centuro commuter motorcycle and the 110cc, 8bhp Gusto scooter model.
“I think to have two brands (referring to the Centuro and Gusto) for the company of our size is good enough. We will have the Mojo brand, which will not bring volumes for us. It will focus more on image and performance. We are launching it this month (September) and a long wait will come to an end. But to do 30,000 units per month, the Centuro and Gusto brands are enough, though we will have different displacements on offer. So we will have higher displacement models launching over the period of time both for bikes and scooters.”
Also, it can be recalled that Autocar Professional, in February 2014, broke news on MTWL developing a 160cc motorcycle platform.