Financial Daily from THE HINDU group of publications
Tuesday, Jun 25, 2002
Scorpio pricing aggressive but not irrational, says M&M
Film star Ajay Devgan and his wife, Kajol, posing with their new `Scorpio' sports utility vehicle in Mumbai.
MUMBAI, June 24
THE "aggressive'' pricing of the new sports utility vehicle (SUV) from Mahindra & Mahindra, `Scorpio', will not hit the company's bottomline, Mr Anand Mahindra, Vice-Chairman & Managing Director, said.
"The pricing is aggressive, but not irrational,'' he said at a press briefing today, adding, M&M remained committed to delivering value to its shareholders.
It may be recalled that the Scorpio's unveiling to the media a few days ago at M&M's Nashik plant was accompanied by a pricing that positioned the SUV attractively against competition.
The Rs 550-crore Scorpio project had investments exclusively for the new SUV and facilities shared with M&M's other vehicle models.
Along with low project cost and M&M's own financial restructuring, the investment component for common facilities is projected to keep the break-even volume low. "We came in under-budget for the Scorpio,'' Mr Mahindra said.
Company officials yet again declined comment on the targeted sales figures for the Scorpio except to identify its segment as roughly 12,000 units strong every month and announce M&M's intent to raise its market share overall in hard-top utility vehicles from the current 34 per cent to 45 per cent in three years' time.
M&M's Nashik plant has the capacity to produce 30,000 units of the Scorpio. According to Dr Pawan Goenka, Executive Vice-President (Product Development), M&M, the company has plans to run the Scorpio through a formal crash test.
The vehicle has not yet gone through one, India neither having a public facility for such tests nor laws that require physical crash tests of new vehicles as a must for their market introduction.
The only crash test facility in the country is that of Tata Engineering and M&M is yet to decide on whether to use this facility or have the Scorpio sent abroad for testing. Dr Goenka pointed out alongside that in these days of computer-simulated crashes at design stage, the Scorpio's design does incorporate safety features.
For the Scorpio's planned journey overseas, a physical crash test is important depending on the export market in question,
For example, Indonesia - where the utility vehicle market is robust and M&M is no stranger - does not impose crash testing on manufacturers, but South Africa - where M&M desires to go - does.
Regarding the current arrangement with Renault for sourcing the Scorpio's petrol engines, Mr Mahindra said there were no plans for the French automobile major to pick up a small equity stake in M&M.
Until a few years ago, Peugeot of France used to have a small shareholding in M&M, by virtue of assistance offered on the engine front.
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