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Partnering for Emerging Markets Focus on India Dr. Pawan Goenka President - Automotive Sector Mahindra & Mahindra Ltd. India Mahindra : An Introduction Conglomerate with over 6.5 bn USD in revenues Strong presence in six business verticals

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partnering for emerging markets focus on india

Partnering for Emerging Markets Focus on India

Dr. Pawan Goenka

President - Automotive Sector

Mahindra & Mahindra Ltd.

India

mahindra an introduction
Mahindra : An Introduction
  • Conglomerate with over 6.5 bn USD in revenues
  • Strong presence in six business verticals
  • Leading presence in the automotive business for over 63 years
  • Lineage to the legendary Jeep
  • Sales of over 1,80,000 vehicles in FY07
  • India’s largest SUV/UV player
  • Alliances with Ford, Renault and International Truck
the india opportunity
The India Opportunity
  • 12th largest economy in terms of GDP
  • 3rd largest economy in PPP terms

Source :World Development Indicators database, World Bank, 14 September 2007

the indian automotive market
The Indian Automotive Market
  • 11th largest car market
  • 4th largest CV market
  • 2nd largest 2W market
  • Largest tractor market
  • Largest 3W market
demonstrated strong growth
Demonstrated Strong Growth

Four wheeler market

In ‘000 vehicles

13 % CAGR

18 % CAGR

Source : SIAM

Auto components

$ billions

19 % CAGR

Source : ACMA

future growth drivers
Future Growth Drivers
  • Strong GDP growth
  • Rapidly improving infrastructure
  • Rising disposable incomes
  • Favorable demographics
  • Willingness to spend
  • Easy finance availability
  • Replacement of ageing vehicles
amp 2016 a vision for automotive industry in india
AMP 2016: A Vision for Automotive Industry in India
  • Revenue 35 to 145 bn USD
  • Exports from 4 to 35 bn USD

Vision 2016

“By 2016, India will emerge as the destination of choice in Asia for the design & manufacture of automobiles and automotive components. The output of the India’s automotive sector will be US$ 145 billion by 2016, contributing to 10% of India’s Gross Domestic Product and providing employment to 25 million persons additionally.”

it s not volume growth alone
It’s Not Volume Growth Alone …
  • A global marketplace
  • Very competitive market
  • Technology upgradation
  • Stringent emission and safety regulations
  • Frequent launches of new models
  • Low cost sourcing
  • Increase in exports
8 out of top 10 global companies have india presence
8 out of top 10 global companies have India presence

They contribute 60 % of global production

but

25 % of India Production

Source : World motor vehicle production by manufacturer : World Ranking 2006 OICA July 2007 and SIAM data Apr-Mar 2007

global vs indian top 5
GM

Toyota

Ford

VW Group

Honda

Maruti Suzuki

Tata Motors

Hyundai

Mahindra

Ashok Leyland

Global vs. Indian Top 5

Source : World motor vehicle production by manufacturer : World Ranking 2006 OICA July 2007 and SIAM data Apr-Mar 2007

very competitive market
Very Competitive Market
  • From 20 models available in year 1995 to 93 available today (Not counting the variants)
  • 60 new launches planned in 2008

Source : Autocar India, The Economic Times, Dt. 26 Dec 2007

suppliers in india
Suppliers in India

MNCs

MNC-JVs

MNC Alliances

Indian

3cs of global collaboration strategy
3Cs of Global Collaboration Strategy

Cost

3Cs

Capability

Context

Source : Innovation through Global Collaboration: A New Source of Competitive Advantage, Alan MacCormack, Harvard Business School

benefits from collaboration

Strength of Indian partner

Strength of MNC

Benefits from Collaboration

Source : Innovation through Global Collaboration: A New Source of Competitive Advantage, Alan MacCormack, Harvard Business School

partnership options

Design

Engineering

Sourcing

Manufacturing

Channel

Partnership Options
  • Licensing
  • Tactical JV
    • Escort service
    • Product based
    • Asset based
  • Strategic JV
    • Comprehensive across the value chain

Automotive Value Chain

scope of collaboration m m evolution

M&M Capability

Scope of Collaboration

Scope of CollaborationM&M Evolution

Contract Mfg.

Channel

Product

Dev.

Sourcing

Design

JV Management

Contract Mfg.

Channel

Investment

Contract Mfg.

Licensing

Royalty

licensing m m case peugeot

Design

Engineering

Sourcing

Manufacturing

Channel

LicensingM&M Case : Peugeot
  • Mid ’80s
  • Technical license for engines, and transmissions
  • Deliverables
    • M&M : Aggregates and related technology
    • Peugeot : Brand building, Commercial benefits
  • Pure limited life commercial transaction
  • As M&M matured, need diminished
tactical jv m m case 1 mahindra ford 50 50 jv

Design

Engineering

Sourcing

Manufacturing

Channel

Tactical JVM&M Case 1 : Mahindra Ford (50:50 JV)
  • Mid ’90s
  • Ford Escort assembly at M&M plant
  • Deliverables
    • M&M : Market knowledge, Capacity, Relationships
    • Ford : Product engineering, Processes, Know how
  • Asset based partnership, as partners matured, need diminished
  • JV could have graduated to a higher level, but for the Scorpio development
tactical jv m m case 2 mahindra renault 51 49 jv

Design

Engineering

Sourcing

Manufacturing

Channel

Tactical JVM&M Case 2 : Mahindra Renault (51:49 JV)
  • 2005 : Product specific JV for Logan
  • Deliverables
    • M&M : India knowledge, capacity, channel, relationships, engineering support, JV management
    • Renault : Product, Engineering for India, Global processes, Purchasing organisation
  • Asset based partnership but structured to meet both partners’ differing aspirations
  • Could graduate to a different level
strategic jv m m case mahindra itec 51 49 jv

Design

Engineering

Sourcing

Manufacturing

Channel

Strategic JVM&M Case : Mahindra ITEC (51:49 JV)
  • 2005 : Comprehensive global CV tie-up
  • JV designing full range of CVs from scratch
  • Deliverables
    • M&M : Market knowledge, PD skills, LCVs, Capacity, Relationships, Sourcing and Engineering skills
    • ITEC : M&HCV experience, Engines, PD skills, Global brand, Sourcing and Engineering opportunity
  • Structured to meet both partners’ complementary aspirations
critical negotiation issues
Critical Negotiation Issues
  • Shareholding
  • Dilution
  • Termination/exit pricing
  • IPR
  • Branding
  • Management
  • Governing Law
other negotiation issues
Other Negotiation Issues
  • Non Solicitation
  • Non Compete
  • Differing return requirements
  • Negotiations of key products and services purchased from parents
  • Consensus decision items
issues in negotiation process
Issues in Negotiation Process
  • Bureaucracy in Global OEMs
    • Silo structure
    • Decision making power
  • Discipline in Indian partner teams
  • Strong influence of lawyers in Global OEMs
  • Require open mindset
why jvs fail
Why JVs Fail
  • Inability of Indian partner to invest
  • MNC does not need Indian partner any more
  • Indian partner does not need MNC any more
  • Non performance of JVs
key success factors
Key Success Factors
  • Know, appreciate and accept both partners objectives
  • Good negotiating process covering all future contentious points and scenarios
  • Build and nurture trust
key insight
Key Insight

Both partners must accept

Equal partnership

of

Un-equal partners