After Ten Years, Mahindra Says Goodbye to SsangYong Motor

Mahindra & Mahindra’s leadership team has stated that the SsangYong acquisition represents a good opportunity for the Indian company to expand globally.

For Mahindra & Mahindra and SsangYong Motor, the battle is finally over. With the acquisition of the Korean SUV maker by a consortium led by Edison Motors, the company’s 10-year relationship with its Indian owner has come to an end.

M&M had already stated a couple of years ago that it would limit its investments in SsangYong because the returns were so low. While the losses continued to mount, sales were mediocre at best. The only way out was to find a suitor and exit, which is exactly what Edison Motors has done now.

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Mahindra and Mahindra-SsangYong have Formed a Unique Partnership

After Ten Years, Mahindra Says Goodbye to SsangYong Motor
After Ten Years, Mahindra Says Goodbye to SsangYong Motor

M&M sees the future as focusing on its core strengths of SUVs, which was, ironically, the reason it chose to end its relationship with Ford over two decades ago. It was at this point that it made the critical decision to focus on Project Scorpio rather than investing in a joint venture where it had little to offer in the automotive space.

Scorpio, of course, was a resounding success storey, and in the process, a more daring M&M emerged, eager to expand its wings into the mobility space. It entered a slew of new markets, including two-wheelers (by purchasing Kinetic’s business), trucks (via an alliance with Navistar of the United States), and a comeback in cars (via a joint venture with Renault to produce the Logan).

SsangYong, on the other hand, was unique in that it represented an expansion of the company’s core business of SUVs, and the fact that it came after a global buyout made it even more appealing. Tata Motors had done it before, with Daewoo Commercial Vehicles and a more opulent takeover of Jaguar Land Rover from Ford.

Tata Motors and M&M were both legacy Indian companies that had survived the MNC onslaught and managed to carve out a niche for themselves – the former with the Indica and the latter with the Scorpio. This was at a time when two other Indian brands, Hindustan Motors and Premier Automobiles, were on the decline. As a result, when M&M announced its acquisition of SsangYong in 2010-2011, there were high expectations.

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The company was clearly on a roll and optimistic about the prospects of its new Korean acquisition, which had seen its share of upheavals under previous owners such as Daewoo and China’s SAIC Motor Corp. Despite the fact that it was a minor player in South Korea compared to Hyundai and Kia, M&M was optimistic about developing new synergies and assisting the brand’s growth.

Focus on Strategy and Financial Viability at Mahindra & Mahindra-SsangYong

SsangYong presented a good opportunity for the Indian company to go global, according to the leadership team, though there was still a lot of work to be done. A special emphasis would be placed on issues such as strategy, long-term financial viability, and major HR initiatives. Following the buyout, M&M set a goal of attracting more talent to SsangYong and “creating a lot of excitement.”

After Ten Years, Mahindra Says Goodbye to SsangYong Motor
After Ten Years, Mahindra Says Goodbye to SsangYong Motor

Prior to the acquisition, some key people had left the Korean company when it was going through a rough patch. M&M was confident, however, that future skills would not be in short supply in the market, and that attracting people back to SsangYong could be accomplished with the right focus and direction. This confidence stemmed from the fact that the brand had suffered “no basic damage” or had become weak as a result of a variety of factors.

This writer was in Seoul in 2015 for the launch of the Tivoli, which was expected to give SsangYong Motor the scale it needed in markets such as Western Europe, allowing it to become a strong entity. M&M’s leadership at the time described seeing the product take shape as “like watching a baby grow.”

The SsangYong team’s efficient timetable for the Tivoli was also admired, given that the launch date of mid-January 2015 had been set way back in November 2011 when the project began. M&M had a fantastic learning experience thanks to this level of Korean discipline and commitment.

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The kind of information SsangYong had on product planning was truly mind-boggling to its Indian ally for a company that had been in the wilderness for many years. “It’s amazing how much it [SsangYong] has in its armour, and the logic in its product planning really impresses me,” a senior member of the leadership team said.

Common Sourcing between Mahindra and Mahindra-SsangYong

This conversation took place four years after the buyout, when the partnership was flourishing and each company had the freedom to adopt the practises of the other as long as it made financial sense. SsangYong’s Korean information technology system, for example, was a carbon copy of M&M’s, as was its human resource management model. In the product planning process, the Indian owner had a lot to learn from its Korean partner.

After Ten Years, Mahindra Says Goodbye to SsangYong Motor
After Ten Years, Mahindra Says Goodbye to SsangYong Motor

M&M also employed expatriates for a number of key functions, which aided in cross-learning and the adoption of best practises. “The most sense of close working is in purchase because it is a clear win-win where we combine the lessons of India and Korea and reduce costs for both companies,” said the senior executive.

This was due to common sourcing, in which the engine for the Tivoli, for example, was removed from the platform set up for M&M. The two engines shared nearly 30% of their sourcing, resulting in significant cost savings. He had stated, “We have kept the two companies independent, and everything we do is on a commercial basis.”

Plans for India from Mahindra & Mahindra-SsangYong

The intention was in place to build a strong SsangYong brand in India, but good numbers were required to make it a viable proposition. Furthermore, unlike Hyundai, which had already established itself as the strongest challenger to Maruti Suzuki, it was not a strong Korean entity. (And Kia, which, despite being a late entrant to India, has recently surged ahead of established Western players.)

“What our partnership will bring to SsangYong is customer confidence, and we will receive Korean quality and value from them,” the senior executive had stated. When M&M later decided to re-join forces with Ford for a new joint venture with a new set of priorities, SsangYong was included in the product synergies planned at the time.

“The advantage between M&M and Ford is that they serve nearly identical markets, whereas Korea is very different from India,” said the same executive. In terms of product synergy and platform commonalization, however, SsangYong joining M&M-Ford was “very much on the cards.”

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Furthermore, it was thought at the time that SsangYong might have a product that Ford might find appealing for its markets. “SsangYong is in a similar situation to M&M in that it has five or six excellent products but lacks a strong brand and distribution network outside of Korea,” the executive added.

If such an opportunity arose, it would have paved the way for a slew of new permutations and combinations, such as a SsangYong product sold under the Ford name and network. Naturally, M&M and Ford decided to cancel their joint venture (an announcement made on the New Year of 2021), owing to a shift in business priorities as a result of the pandemic and the need to cut costs.

Mahindra & Mahindra-SsangYong are No Longer Profitable

Even as the script was going awry and losses began piling up with no solution in sight, M&M and SsangYong were still closely involved in a slew of new initiatives. The Covid-19 outbreak did little to help matters, and M&M announced in early 2020 that it would no longer be feasible to keep SsangYong. With the Ford divorce looming, the company had made it clear that it would now be concentrating on building a strong balance sheet, and that business expansions could be postponed for the time being.

After Ten Years, Mahindra Says Goodbye to SsangYong Motor
After Ten Years, Mahindra Says Goodbye to SsangYong Motor

Pawan Goenka, the former managing director of M&M, played a key role in the SsangYong alliance, spearheading a number of initiatives. “I have no doubt that SsangYong was the right decision, even after seeing what has happened,” Goenka said in an interview with our sister publication Autocar Professional last year, just before his retirement. The SsangYong XUV300 is a successful product that was developed under licence. Another example is the Alturas, and there would have been more if we had gone on.”

According to him, a lot of technology development was done collaboratively… It wasn’t a one-way street, and Mahindra could do a lot of things that SsangYong couldn’t. “Unfortunately, a number of things went wrong at the same time. He stated, “If I had to do it all over again, I would still do it.”

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Financial performance in recent years has undoubtedly fallen short of expectations, but “a lot of things were taken care of” during this time. “I’m proud of the fact that Mahindra was able to strengthen SsangYong to the point where we were able to rehire people who had been laid off before we came in,” Goenka said. He was also forthright enough to admit that the failure of SsangYong would be his greatest regret during his time at M&M.

“It was unfortunate, and it would have meant a lot to India, because a company here had rescued a Korean company.” Mahindra was highly respected for what we did until we decided to leave SsangYong. As a result, Indian management gained a lot of respect,” Goenka said.

More importantly, this was a two-way learning process in which the partners’ skills were complementary.

Many joint projects were undertaken, and many competencies were acquired along the way. It was just unfortunate that things didn’t go as planned, and today’s M&M is focused on remaining in businesses where it makes financial sense. In the coming years, it will be clearer what SsangYong’s future holds under its new ownership structure.

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