M&M’s Korean arm SsanYong to fund investments from own kitty

The new investments are earmarked for the setting up of an assembly facility (CKD) in Brazil, development of new models (including a full model change of Korando C due in first half of 2019), new engines, development of connected car and electric vehicle technology.

Ssangyong has CKD factories in India and Iran.

M&M holds 72 percent in the Korean company, which makes seven SUVs including Rexton and Tivoli and one sedan. If Ssangyong becomes self sustainable in investments, it could go the way of Tata Motors-owned Jaguar Land Rover (JLR).

The annual 4.5-billion-pound capital expenditure of JLR is done largely by revenue generated by the company. But Tata Motors does step in to meet any funding deficit like for meeting working capital needs by raising external loans from time to time.

Ssangyong recorded profit for the first time in nine years in 2016 but slipped back into the red last year. Ssangyong Motor faced several challenges in the export markets, mainly due to a strong Won, accelerated transfer to gasoline engines in Europe, and contraction of the Iranian market resulting from the US' economic sanction.

"Considering difficulties that CBU markets have now due to the fluctuating FX and strengthened protectionism, Ssangyong Motor will expand our CKD business into the emerging markets. In addition to the CKD business which is now underway in India and Iran, SYMC is going to explore new markets including Brazil market," Johng-Sik Choi, CEO, Ssangyong Motor Company said in the last annual report.

Last year, Ssangyong recorded its highest sales in its home market in 14 years, having sold 1.06 lakh units, 3 percent more than what it sold in 2016. This pushed its market share to 17.5 percent. However, its sales in export markets declined by 29 percent to 37,008 units during the same year compared to 2016. Therefore, Ssangyong's total sales for 2017 were 8 percent lower at 1.43 lakh units.

This led to a net loss of Rs 430 crore for the company last year, compared to a Rs 340 core profit in 2016. Ssangyong's financial performance may get repeated this year as well, with the company reporting net loss of 39.6 billion Won for the first half. While sales in Korea fell 4 percent to 51,505 units, exports fell by 8 percent to 15,605 units.

Back in India, following low public acceptance, the Ssangyong brand had to be phased out by M&M by halting sales of its only model here -- the Rexton. The next generation of the car -- called G4 Rexton -- will be sold in India under the Mahindra brand (possibly XUV700).