Mahindra struggling to establish SsangYong cars in China

The world over, car manufacturers are pushing hard to increase sales in China. From Ford to Mercedes and GM to BMW, Hyundai to Volkswagen, Bugatti to Ferrari, every car maker is working overtime for the Chinese car industry. Mahindra’s SsangYong too is trying to re-establish itself in China, but new reports suggest that the South Korean car maker is finding it very difficult to get a foothold in the exponentially growing Chinese car industry.

Back in 2004, SAIC – Shanghai Automotive Industry Corporation, a Chinese automobile manufacturer bought 51% stake in SsangYong after which, SsangYong car sales in China grew. Their most famous models were the Kyron SUV and Actyon SUV. In 2009, SsangYong was put into receivership, thanks to recording a huge loss of $75.42 million.

Later in February 2011, India’s Mahindra Group bought 70% stake in SsangYong. Even though the same Kyron and Actyon are still available, they are no longer considered as a premium brand by Chinese car buyers. Price of Actyon SUV in China stands between 160,000 RMB ($25,235) to 230,000 RMB ($36,275) which hardly enters the premium segment considering the starting price of Jeep Compass at 220,000 RMB ($34,702).

Mr Pawan Goenka, Automotive and Farm Equipment Sector, President, Mahindra, said, “China is a high priority for Ssangyong, but not for Mahindra. An important hurdle we faced was the ‘ghost of the past’ at Ssangyong. They were clearly badly bitten by SAIC. It’s said that SAIC did not do justice to Ssangyong. And there’s an apprehension, a feeling, a concern that we may be a repeat of the same. To remove that concern has taken time. And I can’t say it’s gone 100 percent. That has been a little harder than we thought.

Speaking about SsangYong cars sold in China, Mr Goneka said, “The ramp-up has not been as we’d expected. If Ssangyong was a very strong brand in China, then clearly the market slowdown would not have affected us as it has. There is an action plan that includes brand building and pricing and what kind of product tinkering we do; whether there is a specific requirement of product the Chinese customer would want.”

Speaking about launching Mahindra brand into China, Mr Goenka said, “As of now we have no plans (to take Mahindra to China). We are entering China through Ssangyong. Once that is successful, then we will evaluate whether it makes sense to bring Mahindra products there. Once the volume picks up, and we reach a certain economic level, then we will look at manufacturing in China. Together we are developing next-generation transmissions, which is a fairly expensive program that neither Mahindra nor Ssangyong could justify doing on their own.”