In Conversation: Anand Mahindra on M&M's automotive aspirations

ADIL JAL DARUKHANAWALA: Mahindra came in with its Scorpio based products in the year 2004 onwards in Europe but somehow the effort didn’t meet with the desired results. It is now poised to make the decisive leap as a manufacturer of consequence from India on European roads. I’m sure that you have learned from your first foray and are better prepared for Europe this time.

ANAND MAHINDRA:  I like to think so Adil and we would not make such a leap to use the phrase that you used without being confident that we are going to be much better at what we do this time around. First and foremost we have a superior product. We have a product that I think European consumers will be hard pressed to say it does not match up to the best they can choose from the global manufacturers. And as we have seen in India, there has been a very positive response to the feature-packed nature of the XUV. I think people are going to be very pleasantly surprised by the value that they get from the XUV here. Secondly, I believe our network is maturing here and our subsidiary in Europe has been through many transitions, has been through a steep learning curve and even though the climate right now in all of Europe can hardly be termed as a very positive and robust one, perhaps this is a sweet spot at which a very feature-packed value-for-money product will find broad acceptance.

AJD: So is this also a certain manifestation of the ‘Mahindra Rise’ philosophy for Europe?

AM: I would like to think so. Interestingly we are here as you know for meeting press all across Europe in a pre-launch kind of activity and we thought a lot about what is the right positioning and we said well, the rise positioning which is at the core of everything Mahindra does, in fact is probably the most appropriate way to strike a chord within the hearts of the consumer here. People have been very bemused, very depressed by the economic climate but I think they see hope or they want to see hope in the future and that is what ‘Rise’ is all about – it’s about never say die, it’s about phoenix, it’s about revival. So I think and I hope that will strike the right note here.

AJD: You have your own wholly owned subsidiary here in Europe and it’s striking that earlier when you went across to countries like France, Spain, everything still happened from Italy. So again to go back to the stint in World War II, the allies started their move back into Europe from Sicily onwards, so Italy is the stepping stone for you once again for Europe?

AM: Oh, that’s a nice snippet of history that you have given me and I will probably use that at some point in my discussion with journalists, but yes, you have to have a staging point. Why Italy? It becomes a little difficult to find exactly the right reason; we found the right partner here initially, the Morphetta family and they had the belief in our products. To some extent it was accidental, a good meeting of minds, accidental in the sense that the geography wasn’t chosen specifically because of market size or logistical reasons but when you find the right partner I think it means much more than the other criteria. So yes, Italy is our staging point, it is our home ground, if you will.

AJD: Will it be just a single model portfolio for Europe? Can you sustain your second thrust with just a single model? And yes I am not bringing in SsangYong into the picture here because it has its own identity and well established distribution channel in Europe.

AM: Well, you know earlier, in fact it wasn’t even the Scorpio. The Goa, as it was known in Europe, that was the real bread and butter of Mahindra Europe, it was the pick-up truck and very gradually people have begun to accept it as a part of the landscape. Constantly on twitter I am getting people who send me photographs of the pick-ups that they have seen in Europe, Italy and France and all sorts of locations. So very quietly that product has been gaining reputation as a very sturdy and reliable product. Now I think therefore the XUV will come in as an up to date modern recreational SUV which can add to the portfolio of the pick-ups we have. And as you know that there are many products of ours which now can drive global initiatives and that could be the Genio also as you know is a modern day pick-up. So I don’t think we are a one product company and as we go further yes, there are synergies with SsangYong and of course we have a strong new pipeline that is also coming up all of which will be global products.

AJD: Thinking aloud and I’m coming to the Verito, it was also in Europe that this car in its original avatar found a lot of buyers who were value conscious, but Europe being such a mature market their value proposition was lacking style completely. Do you think it will be worth to take coal back to Newcastle and get the Verito to Europe in a certainly Mahindra-ised  form?

AM: Unfortunately we will not be allowed to do that because it is still a Renault product, the underpinnings and the engines and such all come from our erstwhile partner. Of course we have localised it substantially since the JV ended and they have given us much more discretion both in the styling as well as in the localisation but at the heart of it the product is still part of the Renault IPR stable so we will not really be able to export that product except with their very specific permission.

AJD: Mahindra today is a big mobility player and it spans the gamut from the big 49-tonne juggernauts with Navistar which is really a very new avenue for you even though you were in commercial vehicles before as well, and then going right down to two-wheelers. It is quite a wide spectrum of mobility on terra firma but you also have ambitions in the air and on water - can you shed some light on that?

AM: Certainly, there is naturally and I don’t grudge that feeling but there is naturally a feeling of skepticism that is this idea of being on land, sea and air and encompassing the whole range of mobility is it simply a nice advertising slogan or is there any meat to it? And I don’t as I said grudge that skepticism, but let me assure you that the logic for us in getting into these areas was one of course, we understand mobility and second it is about engines. Engines are at the heart of all of these. That engine design and development skill is something we think gives an edge to our R&D as we spread it across this entire range.

AJD: It’s very interesting that you should mention the word engine because many a time in India, everyone talks only about overall packaging of the entire vehicle but engine is at the cornerstone of everything as Honda has always strived to project and practice.

AM: I am sure you know that Adil. You look back and ask, why you think our Commander worked; the Commander was a barebones vehicle - the reason it worked was because our engines were the best in the country. They were the most fuel efficient, the most durable and they had the highest resale value. That’s a lesson I learnt early because my first job in Mahindra was in fact running R& D and I had to develop the MDI engine which was crucial for us. It gave a common engine to both the tractor and the utility vehicle and while people might have forgotten this unit now, it was very important solely because it gave us that economy of scale which allowed us to succeed in both those areas. 

AJD: I see an edge in performance as well from your engines, where performance is as much about fuel efficiency as anything else.

AM: Performance not necessarily in speed but in terms of driving cycle, in terms of the torque, especially what matters most in India. So I have seen how knowledge of engines and probably arguably the best competence in engine design in India today rests with us that stretches across this whole goal, this whole frame. Clearly if you look at how well we have succeeded in another area which we can’t call mobility that is our Powerol diesel gensets business. From nowhere, we have become one of the major diesel genset manufacturers in the country under the brand Powerol.  

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AJD: That must be the biggest secret success story ever in this business, hardly anyone knows it!

AM: People don’t know it, it’s an over thousand crore rupee business, the brand is getting known, we are competing with the best in the industry... there what was the secret? Engines, knowledge of our engines and it was interesting Reliance Communications chose us first as an engine for their telecom towers because their analysis showed them our engines were the best in the country. So coming back to your question, this is not an advertising slogan, we have at the core, and at the heart of it all is our knowledge of engines which allows us to go into all mobility areas. We will bring that engine capability even into our sea business, into our motor business, into the boat business and I won’t say we are the newest in this; I think frankly Honda’s done this some time ago. Honda spans the same stretch, they are not in heavy trucks but otherwise apart from that they also span the entire spectrum. So this is where we are now, the second reason why apart from engines…

AJD: Speaking as you do about engines, you singularly lack petrol engines because that is a big market area where you are absent from right now.

AM: Let me put it this way; I can’t give away secrets, but in a very short while you will find that gap doesn’t exist in the Mahindra portfolio. And as you know even in, SsangYong it is also primarily a diesel-driven portfolio, but they also have a petrol product so between our entire group we now have the economies of scale to develop gasoline engines as well. And what I want to come back to apart from the engine the real advantage that I see in the mobility business is that there is a very tangible benefit in economies of scale. We are still a small company; don’t forget we are going up against people who make a million, two million cars. We get economies of scale by being in various mobility areas, whether it’s engines for tractors and for automobiles and now for trucks and also for parts sourcing, for R&D, for engineering, for logistics, for a whole variety of back end things we get huge economies of scale and we can mimic the scale that larger, more established western players have had. So to me there is a very strong left brain tangible reason for this, it is not a pretty advertising slogan.

AJD: What about two-wheelers? That is a growth area, you are the youngest entrant into the business, you have shown a lot of promise but you need to execute that in a very tangible form on the road, plus you have also gone motorcycle racing which no one dared dreamed of doing.

AM: Absolutely, we have to be different Adil. You I’m sure have advised me in the past about that and that is true that when new entrants come in you have to be different, disruptive, attempt things others won’t and we will certainly live up to that. When you do that sometimes, you have issues where you don’t meet with as much success as you like but I think with what we at Mahindra have, is the resources, the engineering know-how, and the wherewithal and the ‘Rise’ courage to ensure that we will succeed in this business. We are marathoners you know that, even with the Logan when people wrote it off as a failure, today as the new Verito it is an unqualified success. And the potential is enormous. So we have learnt that when you are humble, when you learn from your mistakes, but you don’t give up and you are determined to rise, you will succeed. And that will apply to our two-wheeler business as well.

AJD: I see a lot of humility in what Mahindra does but I also see a hunger in everything it does plus I also see, unlike many other companies where the human resource is empowered from within. Is it just a fancy aura being created or is it really the meat of the matter? Because, at the end of the day you really need the human resources!

AM: Absolutely, you know you could not have grown the way we have; sometimes I am very pleasantly surprised myself when I sit down and look at how much we have grown. We were, when I joined the company less than a billion dollars and well under a billion dollars, and today it’s just above 16 billion globally. You cannot have that kind of growth if you try and do everything yourself or if you run a one man show or if you have a hierarchical structure. You can only grow at that speed if you trust people, if you empower them. So it has to be real, it cannot be words or phrases because the proof of the pudding lies in how we have grown. And I like to think that this is a DNA of the group. Right from our founders, they’ve started as a team of people who are professionals. They hired people with great education to become part of the founding team. Everyone was equal in that team so I think that DNA right from 1945 has continued. Mr Keshub Mahindra followed the same thing. He was a hands-off chairman for many many years and so there is a legacy which is very hard to over-ride in Mahindra, which is about empowerment.

AJD: It’s very important that you also are very much focused in trying to uplift the cause of education in a land like ours. How much success have you found on that front, or you still need to go far?

AM: How do you define success? With the kind of problems we have, there will always be much much more to do.  Unfortunately philanthropy is a growth area in India, it’s a growth market, there is no shortage of demand! Mr K C Mahindra who passed away in 1964, was a great votary of education. My grandfather who put himself through VJTI in Bombay, and then saw his brother K C Mahindra through Cambridge, saw how education changed their lives. They were not landed people; they were not land owners with money resources. They were salaried people; my grandfather worked in Tata Steel. So they saw how education changed their lives. So their whole focus was on education and then it continues with me. My mother was a teacher. She taught in a college in Lucknow. So teaching and education has been at the core of how we have always wanted to give back. Clearly Mahindra gives back across a much wider spectrum today but education for these historical reasons remains at the core of what we do.

AJD: The Mahindra Group now has a global vision and you are not just there in mobility but you are also there in so many diverse other areas. Mahindra Satyam for one has been doing some great work. I think that you also took the decisive step to flex your muscles in a good manner on the global scene after you tasted success with the World Cup Football championship in South Africa. How do you see yourself building up on from there?

AM: We are very happy with the way the turnaround at Satyam has been scripted. It’s now a growth machine. There is absolutely no stigma inside the company, none of the old guard are around and none feel in any way that they are being dragged down by the past. There is growth coming, fast and furious. There is a hunger. I think what we have managed to transplant is that quality of staying lean and hungry. There wasn’t that leanness earlier because there were no accounts; people thought they were making a huge amount of money. So the essential cultural transplant or the cultural transfusion that has taken place is one of extreme cost control, ruthless focus on the financials and on the bottom line and a great hunger to grow that is beginning to have results as you have seen from the financials recently and the stock price which the market is beginning to recognise. So I remain very optimistic about our IT sector.

AJD: Coming back to mobility and one of your biggest forays ever, and I am not talking about the Mahindra XUV5OO here. I am referring to the Mahindra Research Valley; tell us something about that because this will be at the cornerstone for everything that you do in the next 20-30 years.

AM: I involuntarily smile when it comes up, because if anyone asks me, ‘what are the one or two things that at the end of your career you will be pleased about, and what were achieved at the end of your tenure’ it will be the Mahindra Research Valley. That is the future of any successful company or frankly even any successful economy. I don’t think India is going to live up to its potential and its promise unless the amount of research we do and the amount of innovation that we can boast about, goes up substantially. We are still in a little bit of emulation mode, but campuses like this, places like this build up pride, build up a sense of self esteem, and then we have the natural and human resources.

AJD: But is the Indian mindset ready for fundamental research or only product development because these are two different streams altogether?

AM: This is a very very difficult and interesting topic, and there is going to be a huge debate over what is fundamental and what is not, which country can afford it, very much like the debate on should we be going and sending probes to Mars as opposed to doing more work here. There will always have to be a balance and I do believe that the government has to play a role. In America, a lot of fundamental research has slowed, after the US government stopped funding in auto research and then quasi monopolies like the Bell Labs, which was theoretically a private sector, but it was a monopoly protected by the government and therefore they could afford to do this. Look at the research that used to come out of Bell Labs, it has gone down. I was on the CSIR (Council of Scientific and Industrial Research) of the government for a while, that really gave me an insight into what the government is actually doing. And I must report that they have not been price sensitive when it comes to fundamental research. What we need to do is make those networks more efficient, make sure that they are living up to all their potential but I do believe that the government has to play a role in fundamental research and then there has to be a public-private nexus in order to create applications that arise from that and do more practical innovation.

AJD: Coming now to the real core of the matter to end this thing. You have got a slew of launches in the short term. Very exciting stuff for you, both to see your products see the light of the day and again tremendous niche placements for these products; I am talking about the Quanto. It is path-breaking in itself - how excited are you about that?

AM: I am always excited! You understand it, you are an automobile journalist, and there is no business like the auto business. It’s a wonderfully exciting business and not because it’s got glamour or cache but because it’s a very comprehensive business. It’s like the mother of all businesses because there is no part of the process, right from finance to Research and Development which is not epitomised by this business. And launches somehow signal the end of the creative process, the fruition of a lot of hard work and a lot of hard labour from a lot of people. So it’s a wonderful amalgamation of right and left brain, the heart and the head, that’s why launches are so exciting, and not just because of the laser lights that happen. The Quanto is a very interesting attempt we are taking to fill a gap in the Indian market; obviously I cannot give you any more details - you will know them all in a very short while; the launch date has been announced. And let’s see how it goes... the thing I would always say is that we remain always anxious, which I think we should. There should be a constructive paranoia; we remain humble, as you pointed out we need to do that and we remain hungry. So I am not going to sit here saying anything euphoric about it. I’ll just say, yes, we are all biting our fingernails as we always do before any launch.

AJD: You have a good track record, the Scorpio, the Xylo, the XUV5OO, I think the trend has been set because you guys are very focused on the minutest of details and the overall packaging…

AM: I think we have learnt but we are always conscious that we can fail. That recognition of imminence of failure I think is a very positive thing to have. I hope we never, never lose that consciousness of what can go wrong and therefore we work harder to make sure we succeed.   

AJD: It’s a good thing being human, so you must have failed some time in the past. How much has it affected you and how much have you learnt from such reverses, if there were any?

AM: Well, in a sense your question has the answer in it already. You are right, we have learnt and we’ve recovered, and every time you learn and you recover it gives you enormous confidence, and therefore you become marathon men. And then you just say “we know in the long haul we’ll win”, we never say die, we never give up which is I think why the slogan ‘Rise’ applies to us so well.  

AJD: You are bringing SsangYong to India very shortly and then you are also readying your NXR – the electric car, that’s another stream you are getting into. What have you been doing on alternative energy apart from electric cars? Have you done any research? Are you doing any experimentation on that front?

AM: We are in every area of potential. You know I sit on the National Hydrogen board; Mr Tata is on that board as well. We came out with a hydrogen three-wheeler; if you remember we showed it at the Auto Expo - we conduct experiments on that. We have been in the lead in fuels like CNG for example; we don’t lack there, and we are constantly running experiments across a variety of areas. Except for Japan we were the first Asian automotive company to come out with a hybrid concept many years ago at the Delhi Expo. Both SsangYong and we continue to work on that, so on automotive alternate fuels, there is a huge amount that we are doing, and we are keeping a watch on each one of them.

Obviously with the acquisition of Reva we are putting our bets much more strongly right now on the plug-in electric. I think you will be very pleased at what you are going to see when the Reva product comes out, more not just as a product but as a new eco system that we are launching. Apart from mobility however we have made a major foray into solar energy through our private equity business. Mahindra Solar is arguably the most successful entrant into the solar business. We do both EPC as well as are operating a plant and it’s doing extremely well; the plant is functioning very well at this point in time and we bid for more. We have something like 50 megawatts now that is in our pipeline. And we are very pleased with how it’s gone. So yes, in the new goals, alternative energy will most definitely be part of the Mahindra portfolio.

AJD: Enthusiasm should wrap up this interview, and I talk about enthusiasm with your foray into the world of motorcycle racing. It’s been tough going but very exciting, and you are now going to develop your whole new motorcycle with Suter design and technology. Shed some light on that.

AM: We used some words in the last five minutes of our discussion here, about being hungry, about staying humble, about learning, coming back, all that is in the excitement of racing. It’s wonderfully unpredictable. I didn’t realise what enthusiasm there is in this, I’ll be honest. Our brand as you know is a fledgling in the two-wheeler business, and yet because we are the first to take the leap and take the risk to try and portray ourselves as players in the MotoGP area, our facebook page has over 3,50,000 fans. That’s an enormous number of fans; it’s one of the most followed facebook team pages. What does that mean? It means there is a latent demand out there which is completely unsaturated right now, so our ability to connect with tomorrow’s generation, tomorrow’s buyers of not just two-wheelers but eventually four-wheelers as well, what a platform! But we have to perform, we have to do well, we certainly don’t want to be seen as non-performers in this and that’s why the tie-up with Suter, who are amongst the best and who have a winning mentality, I think it’s going to bode well for Mahindra Racing in the future.   

AJD: So that’s it, a winning mentality should help Mahindra 'Rise' to whatever it does in the future!

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