MG Motors hiring 500 additional workers to ramp up Hector production

by Sumantra Barooah and Shahkar Abidi 14 Oct 2019

While the ongoing slowdown in the Indian automobile industry has led to record job losses, Chinese-owned British carmaker MG (Morris Garages) Motors continues to hire workers for its India expansion.

MG Motors India has begun hiring 500 additional workers as it looks to start a second shift at its manufacturing plant in Halol, Gujarat to match the growing demand for its recently launched Hector SUV . Ironically, the development comes at a time when the automobile industry in India has been witnessing massive job losses due slowdown since the past several quarters.

A senior executive at the company said, “We now have our second shift starting in November as our global supplier base has supplied and supported us and that has also helped us to attract additional employees in our workforce.”

According to Gaurav Gupta, Chief Commercial Officer, MG Motors (India)  the induction of new workers is for across-the-job profiles required for the running of the plant. The plant has the capacity to manufacture 80,000 units annually in three shifts.

MG Motors earlier had to temporarily stop accepting bookings for its Hector SUV in July following selling out of its planned quota for the year. The number of bookings for the company currently stands at 42,000 units, around 8,000 units of which came in the past 10 days since it reopened the bookings since September 29. An estimate done by the company indicates bookings to cross the 50,000-unit mark by the year-end. Production of the Hector touched around  3,000 units in September; the company plans to ramp it up to 3,500 units in the next few months.

The company plans to invest Rs 2,600 crore within the next few years, primarily to ramp up the capacity, taking MG Motors’ total investment in India to Rs 5,000 crore. The company, which has sold a total of 6,134 units in August-September 2019, expects to sell around 2,600-2,800 units in October.

‘Few partners’ strategy for retail showrooms
MG Motors insiders claim that right from the start the company has followed the strategy of having a few retailers and only those with the required bandwidth to expand when required are taken on board.

A similar strategy has been adopted by few rival original equipment manufacturers (OEM)s including Toyota and Volkswagen among others, insiders add. The prudence behind having few partners, analysts claim is that the retailers do not end up cannibalising the pie in a given market.

At present MG Motors has partnerships with 44 retailers, operating 120 outlets across India. The company plans to augment the number to about 250 outlets from mostly  the same set of retailers, as they get the first right of refusal while opening of a new outlet. About 130 outlets of the total 250 are planned to be ‘light investments’ not requiring much of capex.

Further, MG Motors has also adopted a strategy of helping the retailers in the first year of partnership by offering to provide recurring costs associated with setting up of aftersales services and maintenance. This, the executives claim, is being done because the revenue from maintenance comes only about a year of car sale. They add that this is being done due to the learning from how India behaves as dealers who had lesser volumes of brands producing 2000-3000 units, started shortchanging customers in the workshop at Rs 25,000-50,000 per service , instead of the real cost of about Rs 5,000, thereby killing  the brand subsequently. “The customers started presuming that the brand is expensive to maintain,” is what they say.

Experimenting with a subscription model
MG Motors has tied up with Miles for its subscription model though it will be able to pull it off only by December when it brings some cars into the segment. Further, the company is also said to be in talks with Zoom and Rev for the same though any partnership with them many happen at a later stage.

Also, according to a trend observed by MG Motors, most of the customers migrating to their product come from SUV models like Renault’s Duster, followed by Hyundai’s Creta and Verna, and the Honda City. Also, 10-15 percent of buyers are those who already own an Audi or a BMW and who may use the Hector as a second or third car as an  alternative to the entry model in that brand.