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N. Ramakrishnan

Chennai, July 12

Following a 48 per cent fall in sales, Mahindra Renault Pvt Ltd has posted a loss of Rs 490.21 crore on a gross turnover of Rs 741.17 crore during 2008-09.

The company, a 51:49 joint venture between Mahindra & Mahindra (M&M) and Renault, of France, makes the Logan entry-level sedan at M&M’s Nashik plant.

According to M&M’s 2008-09 annual report, the joint venture sold 13,423 cars during the year under review. In the previous year, the company sold 25,891 cars.

In the first three months of this financial year, sales of the Logan have fallen nearly 68 per cent to 1,478 units from 4,595 units in the corresponding period last year.

The annual report attributed the decline in Logan’s sales to increased competitive activity in its market segment.

“Industry sales in the C-segment, where Logan competes, increased 12 per cent in financial year 2009,” the annual report said.

The C-segment itself grew 12 per cent last financial year, totalling 2.46 lakh units. M&M’s share in this segment dropped from 11.8 per cent in 2007-08 to 5.5 per cent last year.

M&M manufactures light commercial vehicles for another joint venture – Mahindra Navistar Automotives Ltd – and the Logan for the joint venture with Renault, on a contract basis. It also distributes these LCVs and cars for the two joint venture companies respectively under a distribution contract for a fee.

Automobile industry experts say that Mahindra Renault Pvt Ltd will have to take a decision quickly on how long it is going to continue making the Logan.

M&M has a capacity to make 50,000 units of the Logan a year, but with falling sales that capacity will be largely unutilised, they say.

According to the annual report, the company maintained its automotive vehicles sales. It sold a total of 220,213 vehicles – 44,533 three-wheelers, 8,603 LCVs and 13,423 cars – recording a growth of 0.6 per cent over the previous year.

The company posted a consolidated profit after tax of Rs 1,405.41 crore down 10.5 per cent over the previous year. Its net revenue was up 10 per cent at Rs 26,919.8 crore.

M&M has been aggressive in overseas acquisitions in the last two-three years, particularly with regard to the auto component business. Information provided in its latest annual report shows that a number of these overseas subsidiaries, particularly in Europe in the forgings business, have reported losses.

The acquisitions completed last financial year include Engines Engineering, Italy – a two-wheeler design company; Metalcastello S.p.A., a gear manufacturing company in Italy; and, a second tractor joint venture in China. M&M formed a Systech sector, under which its overseas auto component acquisitions fall into.

In 2008-09, Mahindra & Mahindra’s Farm Equipment Sector formed a joint venture – Mahindra Yueda (Yancheng) Tractor Company Ltd – in China with Jiangsu Yueda Yancheng Tractor Manufacturing Company Ltd. M&M holds a 51 per cent stake in this joint venture. This company and an earlier tractor joint venture in China, Mahindra (China) Tractor Company Ltd, posted losses.

According to the annual report, Mahindra (China) Tractor Company was able to grow by 21 per cent over the previous year despite the stagnant industry situation. This was made possible through the launch of Mahindra branded red tractors and expansion of the product range up to 40 HP segment on the current platform. In the last financial year, the company made the change over to selling tractors under the Mahindra Feng Shou brand.

More Stories on : Financial Performance | Automobiles | Cars | Mahindra & Mahindra Ltd

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