Mahindra & Mahindra defers new investments to cope with slowdown in demand2 min read . Updated: 18 Aug 2019, 11:36 PM IST
- About 15-20% of capex from original plan could be deferred, says managing director Pawan Goenka
- Mahindra and Mahindra cut about 1,500 jobs of temporary workers since 1 April 2019
Mahindra & Mahindra (M&M) Ltd, one of India’s top utility vehicle and tractor makers, has deferred a portion of its new investments and shed some temporary jobs since April to cope with the sharp slowdown in demand in the domestic industry.
“About 15%-20% of capex from our original capex plan could be deferred," said M&M’s managing director Pawan Goenka. He said however that the decision won’t affect the new product development plans of M&M or “any other capex meant for bringing the right products to the customers."
M&M had in late May announced its plan to invest ₹18,000 crore over the next three years, including ₹12,000 crore towards capital expenditure and ₹6,000 crore in its subsidiaries.
“We may have cut down on about 1,500 jobs of temporary workers since 1 April 2019. We are trying not to remove more (headcount) but if the slowdown persists, we will probably be forced to," Goenka said on the sidelines of the opening of a vehicle assembly plant in Sri Lanka on Saturday.
He said that the concerns of job losses are more at auto parts suppliers and vehicle dealerships.
Sales have also been hit in other segments such as commercial vehicles and three-wheelers.
Goenka said the impact of the ongoing slowdown would multiply if there are no signs of a revival during the upcoming festival season.
“We have already seen 12 months of slowdown in the domestic market. If we miss this festive season and don’t see any turnaround, then I think you will see a fairly significant effect in terms of jobs, investments and even bankruptcies," he said, adding many suppliers may even file for bankruptcy.
M&M, India’s largest tractor maker, has also lowered its sales growth forecast for this fiscal year to 6-8% from 8-9% previously. “The floods obviously are very bad in some areas but will probably not have any huge negative impact on tractor sales. The dealers appear to be fairly positive because the rains have come and they are looking at a possibility of good tractor sales during this festive season," Goenka said.
M&M has set up a vehicle assembly unit in Sri Lanka along with Ideal Motors, its local dealer partner. The assembly plant is the first such in the island nation and it will be run by Mahindra Ideal Lanka Pvt. Ltd, a 65:35 joint venture between Ideal Motors and M&M. Situated at Welipenna, about 60km from Colombo, the 10-acre assembly unit is built on a 65-acre plot, which will also house a vendor development park in the vicinity.
The JV has earmarked 2 billion Sri Lankan rupees for the plant, which will have an installed yearly capacity of up to 5,000 units and will provide direct and indirect employment to about 200 people over the next two years.
The CKD (completely knocked down) unit will roll out several vehicles starting from M&M’s compact sport-utility vehicle KUV100 (petrol variant). The first vehicle was rolled out on Saturday. The local assembly operations include localisation of four components: tyres, batteries, exhausts and seating systems. While Ceat Ltd will supply tyres, Exide Industries would supply the batteries; both Indian companies with footprints in Sri Lanka.
“Sri Lanka is one of the top strategic markets for M&M. More than 75,000 Mahindra vehicles ply on the roads here and we have a strong network of 400 touchpoints across the country, thanks to Ideal Motors. Since there is a government push for electric vehicles in Sri Lanka, we have already planned two EVs for this market. We will bring our electric three-wheeler here," said Goenka.