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Mahindra and Mahindra Ltd’s aim to become a global maker of sport-utility vehicles (SUVs) has hit a major hurdle with the bankruptcy of SsangYong Motor Co., three people familiar with the matter said.

Mahindra acquired the South Korean SUV maker after the 2007-08 global financial crisis when several Indian and Chinese companies were vying for foreign firms to access new technologies and achieve a global footprint. It was during the same time that Tata Motors Ltd had acquired British luxury carmaker Jaguar Land Rover and Bajaj Auto Ltd invested in Austrian bike maker KTM AG.

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“The idea was to build on the success of Bolero, Scorpio and XUV500 (SUVs) and make a mark in the premium and bigger SUV segments in India while building scale for SsangYong along with entering several lucrative export markets," a senior industry executive familiar with the Mahindra-SsangYong deal and one of the three cited above said on condition of anonymity.

However, the decade-long ownership of SsangYong not only failed to deliver on its SUV promise but also became a liability for the Mumbai-based firm as Mahindra continued to make new investments without adequate returns.

Meanwhile, at home, Mahindra lost substantial market share in the SUV segment amid intensifying competition from rivals Maruti Suzuki India Ltd and Hyundai Motor India Ltd.

“Mahindra’s decade-long ownership of SsangYong should not be looked at in black and white alone. It did launch the Rexton and the Tivoli-based XUV300 SUVs in India. While SsangYong Rexton as a brand failed to create value initially, it remains unclear why M&M pulled the plug on it," the second person cited above said, requesting anonymity.

“Also, it is a disastrous strategy to sell three-wheelers and entry-level vehicles, along with the premium SUVs, under the same Mahindra brand," the person said, drawing comparisons with Maruti Suzuki’s branding and retail strategy of creating separate Arena and Nexa retail outlets to sell mass and premium models.

Executives also said Mahindra’s management bandwidth was stretched by its several automotive businesses such as electric vehicles, two-wheelers and shared mobility. “As a result, it failed to assess the competition in the SUV segment and was late to the party with its sub-4 metre compact SUV," the third person said, adding that significant R&D went into developing a range of petrol engines while readying for Bharat Stage VI emission norms.

Besides, with compact SUV Tivoli as the only successful model, SsangYong was marred by serious challenges such as gaps in its product portfolio, inefficient cost structure, limited capacity of petrol engines and delayed entry into the US.

“SsangYong and Mahindra were also in discussions to begin manufacturing SUVs in China to lower production costs and cater to the largest passenger car market. But the plan, along with the entry in US, never materialized," the third person said.

While Mahindra continued to bet on SsangYong till February 2020 when it had floated a three-year rescue plan involving fresh funding of up to 500 billion Korean won (over 3,000 crore), it is clear that the covid turbulence changed the parent’s outlook. Following Mahindra’s earnings in the quarter to March, where the Korean unit accounted for 80% of losses, M&M said it was ready to cede control of SsangYong.

Battered by covid, SsangYong has continued to post losses through the March, June and September quarters. It has accumulated operating losses of 309 billion won ( 2,100 crore) in the nine months to September despite reducing fixed costs.

M&M refused to comment for this story.

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