Sports utility vehicle specialist Mahindra & Mahindra (M&M) may be looking at injecting more funds into SsangYong Motor Company (SYMC), the South Korean subsidiary, to help it return to profitability.
The Mumbai-headquartered company is said to be considering a capital injection of 500 billion Won ($430 million) in SYMC by 2022 to secure its turnaround, industry sources told Korea’s Yonhap news agency.
Moneycontrol could not independently verify the report.
Pawan Goenka, Managing Director - M&M, reportedly met employees of SYMC and said that 500 billion Won was needed to turn Ssangyong’s operations in three years. Goenka, who is also the chairman of SYMC, is believed to have met the chairman of state-run Korea Development Bank, the main creditor of SYMC.
The report further stated that M&M will make a 230 billion Won investment in SYMC after obtaining approval from its board. M&M holds nearly 75 percent stake in SYMC. The maker of Scorpio and XUV brand of vehicles has invested more than $110 million since it first acquired controlling stake in the loss-making firm nearly a decade ago.
Ssangyong has bore the brunt of the slowdown. In 2019 the car maker sold a total of 135235 units, a drop of 5.6 percent as compared to 143,308 units sold in 2018. It sold 107,789 units in the domestic market in 2019 as against 109,140 sold in 2018, as per data released by SYMC.
“We would not be offering any comments on the same,” said a spokesperson from M&M, when asked if M&M is in the process of injecting further funds into SsangYong’s operations.
Ssangyong has struggled with deteriorating earnings result since 2017, when it shifted to a net loss of 66 billion Won from a net profit of 58 billion Won the previous year. In 2018 it’s net losses continued reaching 62 billion Won, the report added.
Mahindra is currently evaluating on how to extend the cost benefits and synergies arising between itself and Ford Motor Company to SsangYong. The Indo-American partnership is working on a number of projects including electric vehicles.
Due to the geographical differences, it will be difficult for SYMC to benefit from the alliance as all of its manufacturing operations are centred in Korea. Due to lack of demand M&M scrapped the Ssangyong brand from India a year back and launched SsangYong car under its own brand.