Mahindra-owned SsangYong slips back into losses in 2017
SsanYong reported a loss of 65.8 billion Korean won against a profit of 58.1 billion KRW in the year before due to a stronger currency and falling exports
New Delhi: Mahindra and Mahindra Ltd-owned SsangYong Motor Co. slipped back into losses in 2017, as the Korean won strengthened and exports fell. In 2016, the company had reported its first profit since acquisition by Mahindra in 2011.
The Pyeongtaek, South Korea-based automaker reported a loss of 65.8 billion Korean won (KRW) against a profit of 58.1 billion KRW in the year before. Revenues during the period fell 3.7% to 3494.6 billion KRW. At the operating level, the company reported a loss of 65.3 billion KRW compared to an operating profit of 28 billion KRW in 2016.
According to data made available by the company, total vehicle sales in 2017 decreased by 8% to 143685 units. In the South Korean market, volumes increased by just 3% while exports fell by a whopping 29% to 37,008 units.
SsangYong recently signed a licence contract with its parent company Mahindra for assembling its sports utility vehicle Rexton in India in the second half of 2018.
“In 2017, SsangYong achieved continuous growth for eight straight years in domestic sales thanks to strong sales of the Tivoli brand and successful launch of the Rexton. In 2018, we will not only expand our global sales but also maintain domestic sales growth with the upcoming all-new pickup model.”,” said Choi Johng-sik, CEO, SsangYong Motor Co. in a statement issued on 3 January 2018.
After acquiring a majority stake in the company in 2010, Mahindra decided to invest $900 million in developing new products for SsangYong in 2013. The South Korean company launched its first compact SUV, Tivoli, at the Shanghai Auto Show in 2015 which was an instant hit.
Due the increasing popularity of the vehicle, volumes of the company in 2016 increased by 7.7% to 155844 units, the highest reported by the company since 2002.
Recently, Mahindra opened its first automobile plant in the north of Detroit as the company plans to sell its off-loader vehicles in US. Group chairman Anand Mahindra also indicated that SsangYong could enter the US as the third South Korean automobile manufacturer after Hyundai Motor Company and its subsidiary Kia Motors Corporation.
“In automotive, as you know, we own SsangYong motors and the advantage of possibly exploring an American entry through them is that the American consumer by now has developed great respect for the Korean automotive brands thanks to Hyundai and Kia,” Mahindra was quoted in a report by the Press Trust of India (PTI).
According to news agency Reuters, the parent company is working with its subsidiaries Italian firm Pininfarina and SsangYong Motors to develop electric vehicles for the markets like US and China.
“The primary reason for the lower sales is the decline in export sales, due to strengthening of Korean won against dollar and euro, and competitive conditions in key markets. This is also one of the main reasons the reason for SsangYong posting an operating loss compared to profit. In addition, the operating loss was enhanced due to increase in depreciation cost due to launch of new model during the year,” said a spokesperson of the Mahindra in response to an email query from Mint.
Mahindra and SsangYong are expected to launch their first jointly developed utility vehicle based on SsangYong’s Tivoli platform in 2019. The Mumbai-based automaker may also take the help of Ford India Pvt. Ltd in developing some of the future products of SsangYong, especially in the domain of electric and connected cars.
According analysts, though, the turnaround of SsangYong is still some time away and last year also, the company showed profit after tax due to a royalty paid by Mahindra for using the Tivoli platform.
“SsangYong is focusing on the eastern European market like Russia since other markets like China has reached a saturation point which is a concern for them. Now that Mahindra has a tie-up with Ford, it may help them launch SsangYong in US especially in the electric and hybrid segment,” said Puneet Gupta, associate director, IHS Markit.
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