Mahindra Navistar to see cash break-even in a year: Goenka

Mahindra Navistar to see cash break-even in a year: Goenka
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First Published: Tue, Dec 06 2011. 10 31 PM IST

Pawan Goenka
Pawan Goenka
Updated: Tue, Dec 06 2011. 10 31 PM IST
Mumbai: A year after launching heavy-duty trucks to compete with Tata Motors Ltd and Ashok Leyland Ltd, India’s top truck makers, Mahindra Navistar Automotives Ltd expects sales to pay for expenses shortly.
Mahindra Navistar, a 51:49 venture between auto maker Mahindra and Mahindra Ltd (M&M) and truck and engine manufacturer Navistar Inc., sells tractor trailers and tippers ranging between 16 tonnes and 31 tonnes to the construction sector, and heavy-duty lorries to ferry automobiles and consumer goods.
“We shall be able to (see) cash break-even in the next 12 months,” Pawan Goenka, president, automotive and farm equipment sector, Mahindra and Mahindra, told reporters at a press meet.
Pawan Goenka
The joint venture has sold 2,500 trucks, according to Nalin Mehta, managing director, Mahindra Navistar. The firm’s factory at Chakan near Pune in Maharashtra has a capacity to produce 50,000 trucks a year. It currently sells about 300 trucks a month.
India’s medium- and heavy-duty goods commercial vehicles segment grew 8.19% to 187,559 units in the April-October period compared with a year ago, according to the Society of Indian Automobile Manufacturers.
With Daimler India Commercial Vehicles’ Bharat Benz trucks set to enter the market in six months and Beiqi Foton Motor Co. Ltd’s vehicles to be launched in the next couple of years, competition in heavy trucks is expected to intensify.
Mahindra Navistar plans to launch at least two new models—a 49-tonne tractor trailer and a 25-tonne tipper for the mining sector in the second half of the 2012 fiscal year.
Along with a few more variants, these will help the company ramp up volumes and use its factory capacity fully in the next three years, Mehta said.
To be sure, transporters, particularly small operators, are sceptical of new brands in the country.
Deepak Sachdeva, proprietor of New Delhi-based Sachdeva Roadlines Pvt. Ltd that has a fleet of 80 Tata and Ashok Leyland trucks, is wary of the maintenance costs of new brands.
“Even Ashok Leyland and Eicher Motors Ltd, which have been in the market for several years, have very few mechanics in the north,” said Sachdeva.
“There’s no doubt that it’s (Mahindra) a strong brand,” said Ajay Shethiya, an analyst at Centrum Broking Pvt. Ltd. “But it’s a long haul for them before they can dent the market shares of the entrenched firms.”
Mahindra executives are aware of the challenge. Goenka conceded that Mahindra Navistar has taken longer than was expected to increase sales. “They (transporters) trust the brand, but building confidence takes time,” he said.
This, to some extent, delayed the company’s plans to introduce heavy-duty buses and trucks in export markets, Goenka said. Since the firm has established a national reach now, it will focus on the bus, currently under development, and on exporting trucks to South Africa using Navistar’s network.
Mahindra Navistar, which launched its products in October 2010, has set up 50 dealerships and 950 service stations. It plans to double the number of dealerships and increase service stations to 1,200 in 12 months.
“We aspire to do to the commercial vehicles market what Maruti Udyog Ltd did to the passenger car market in the 1980s by ending the monopoly of Hindustan Motors Ltd’s Ambassador,” Mehta said.
shally.s@livemint.com
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First Published: Tue, Dec 06 2011. 10 31 PM IST