Post Covid-19, M&M came out with the Walk, Run, Fly strategy, could you elaborate on the same for us?
At the end of FY-20, Mahindra had charted a new course of Walk, Run and Fly. From April to August, it was a phase of walk – which was to focus on slowly ramping up production; cash management and restructure cost. We did very well on all these elements as on Q1.
Our second phase of ‘Run’ from August to March – we should start seeing the momentum – we will start doing activities around our brand especially on the automotive side. We have already unveiled Thar and it has generated a huge excitement so far. Our idea is to create a more focused SUV brand, which is more core to the Mahindra DNA – True Blood SUV.
Then in FY-22 – we get into the ‘Fly’ phase, where we hope to see two new launches on the SUV side. All three new launches will have a strong Mahindra DNA, and will be sharper and more differentiated.
The walk phase has evolved into almost a RUN, on both tractors and auto, demand is better than what we thought it to be. On the auto side, the key focus is to ramp up aggressively.
We had a very little inventory on the BS VI before lockdown, as we could not produce much during Feb-March due to Covid in countries outside India , fire at one of our vendors factory ,disrupted supply. We are in the phase of building back as much inventory as possible
What is your view on the current demand environment?
The rural demand is quite robust for XUV 500, Bolero, Scorpio, there is a good traction for the pick-up trucks too. The overall demand is much better than what we thought out to be. On the tractor side, it is getting into a new phase, which is the run phase.
We are seeing tractors demand to be very robust and to be honest; I haven’t seen this kind of demand momentum in a long time. So I think overall rural is very robust and that is obviously leading to demand for several auto products as well, which is very robust. But the reality is that, we start feeding in the pipeline and the customer we don’t know how sustainable that is, right? So you have to put stock into the system and like we said earlier, our auto pipeline is completely dry because we opened in by April, basically cleaned. Big focus is on ramping up production and securing supplies.
At what rate do you expect the market to grow for tractors?
This year one cannot give any market guidance due to so much uncertainty. See, normally uncertainty comes out of demand and not supply side. When people put out their numbers it’s the best estimate of what you think will be the demand factors. Right now the bigger uncertainty is coming out of supply. So nobody would want to predict an industry or your volume for anything unless you see how supply ramps up and then stabilizes. All we can say is that the demand will grow, how much the growth will be, we just have to wait and play it out.
M&M is trying to define a new narrative for automotive business, can you please elaborate the way ahead for the company?
There is a part of our portfolio which is very strong, there is a part of our portfolio which was launched in the recent past that has not done well as well as we would have liked.
Some brands like Bolero, Scorpio, XUV and pick ups are very endearing, enduring and strong. Despite evolutions – they remain higher selling products. They are not the same, they have evolved with time.
So what are the lessons that we have drawn out from what has worked for us and what has not worked for us.
Mahindra products stand for tough, edgy, distinct and unique. Wherever we have done that, we have been able to create success. We now need to leverage and use our three new launches (Thar, W601 and Z101) to consolidate our position.
What is important is to create a brand that is high on affinity, which is successful and gives us return on investment that we make in them.
The trend is heavily skewed in favour of soft-roaders, M&M missed this bus for too long, a specialised approach would mean lesser focus on soft-roaders? Can you explain the rationale?
The utility vehicle market has been defined by a very large number of players. The derivatives of crossovers are not really true SUV products. The way we would define SUV is a true blooded SUV – that has a road presence and performs on all terrain.
Our call is that we will not blindly chase market share. If we were going after the market share, then we would be going after segments, in which we may not have the best competitive advantage.
Our aim is to create success on two parameters – customer affinity and financial returns for capital that we are putting in, to create these products. We want our brand to be high on affinity and seen as a successful brand.
Given the new context, our intention is to be a specialist SUV player, of course a specialised brand will have volume growth and momentum, but it may not have the market share that we used to have at one point of time.
Mahindra is trying to carve its own path and focus on its core of true blooded SUVs, however the core of the utility vehicle market is shifting towards soft-roaders, what is the thought process?
They say often a good strategy is also about choosing ‘what not to do’. A great strategy is not about necessarily saying you are going to go and play in every segment and try and get every part of the pie.
We want to be distinctive, want to get people to move along that path. We want to be innovators rather than followers. If you go back in time, we created Scorpio, XUV 500 – we were the creators of the segment, we made people move in that new direction.
The question in front of us is what is the new direction? In which direction, we will make people move, by creating products, which make them move in that direction. We have to play a role of creating new categories rather than following the set envelope. We have to take our brand in a certain direction and build salience in that direction.
The XUV 300 has done very well and has a lot of potential; you will start seeing traction and momentum on that. We will be doing some stuff on the current portfolio – you will know more about in the coming weeks.
We do have successful products, they are rural focussed right now, because that is our strength, there is an opportunity for us to create our offering to be more modern, urban, youthful and that would be part of the brand transformation that we would have ahead of us.
More detailing on future brand transformation – what are the pillars of that strategy.
What about the role of exports and Ford JV?
The whole capital allocation in the automotive business has been corrected thanks to the Ford JV. The SUV business will be more efficient as we share more platforms. The scale benefits we get by creating a global product portfolio, wherein Mahindra products may be sold as Ford. Post the formation of JV, we will have two channels of international business now. One is through Ford and other is the existing Mahindra channel
Mahindra channel is strong in the South Asian market – which are the neighbouring countries and then African continent, some parts of the middle east and Chile. We have been present in many of these markets for over a decade and half and have created our own position in these markets.
What is going to drive our international growth is leveraging on the Ford alliance. We should be able to provide a stream of products – coming on Ford badge, JV and our own stable going ahead.
For the Mahindra brand, we are not looking at any new geography, but the possibility of using the Ford brand and Ford network for the international growth plans.
What is the way ahead for the tractor business?
The tractor business is moving in the right direction. We came out with two important strategies of creating 4 new platforms in partnership with Mitsubishi and second is the whole creation of farming as a service vertical, which will be critical work to our core domestic tractor business. We believe as we evolve going forward, as clear leaders, we have to go beyond selling machines to selling solutions and offering solutions. We are branding that initiative as Krish-E and third is to build the farm mechanisation business.
The four lightweight new platforms will help us cater to new segments in the Indian market like horticulture and we will also use these products from these platforms to be sold in US, Japan and South East Asia.