As MG Motor India prepares to enhance capacity at its Halol plant in Gujarat to 140,000 units by end-December 2023, Rajeev Chaba, President and Managing Director, is confident of a strong foundation being in place then.
“It will help us achieve break even and profitability also. We have been losing money so far but we took a challenge that we would begin making money from the fifth year onwards,” he told Mobility Outlook in an interview during the Auto Expo.
Typically, in the auto industry, it takes 7-8 years on an average to achieve this task which is why Chaba is particularly pleased that things are happening a lot faster with MG Motor.
“I am reasonably confident that we will break even and make some profit this calendar. That will also generate some local cash and we are pushing our team to make more use of assets by enhancing capacity, localising more and more, while also taking every pricing opportunity that comes our way,” he added.
According to Chaba, the team was doing a great job in the capacity expansion exercise. When the parent company, SAIC Motor, bought the facility from General Motors in 2017, the highest number of vehicles produced was in the region of 60,000 units annually.
However, thanks to “new initiatives” coupled with addition of assembly lines, MG Motor has doubled this number to 120,000 units with enough scope to boost this capacity even further. This has come by way of improved material movement, adding new capabilities etc.
“Our plant looks new and huge investments have gone there but this is still cheaper than putting up a new facility. I am quite confident that by the end of this year, we will have 140,000 units capacity and will be good to go for a few years longer,” said a confident Chaba.
MG Motor is targeting sales of 80,000 to 100,000 units this year, nearly twice as much as what was sold in calendar 2022. The goal is to increase this to nearly 130,000 units in 2024. “We have some time in hand before the next phase of beyond 140,000 units,” he added.
What happens after that? It is no secret that MG Motor has been scouting for new locations except that the current political climate between India and China simply means that getting the go-ahead for new investments may not be so simple at this point in time. The increase in capacity at Halol will help for the next 3-4 years but new options will need to be explored.
The Road Ahead
Chaba said these were early days yet, even while finance companies have been giving informal suggestions on future funding with “some thoughts” on monetising the business. While reiterating that this was not urgent right now, it was still important to look ahead and contemplate new models like partnerships, strategic investors or even an IPO.
“If we need to do this, we need to be profitable and healthy which we are focusing on for the next 2-3 years. It could take different models but the key is maximum value and it is too early to say anything on that right now,” he explained.
The company will focus on electric vehicles (EVs) going forward even while it has a good presence right now in the internal combustion engine space. As he put it, EVs would also create more mind space among a new generation of customers with exciting opportunities in terms of partners/ collaborators.
“We want to be at the forefront here. We have partners already thanks to our first EV and it really expands our horizons to a new area. We have the early mover advantage in this space and intend to capitalise on this momentum,” said Chaba.
There are no plans to focus aggressively on exports from India at this point even though a small start has been made with despatches to Nepal. As he pointed out, exports would become priority only with more capacity and the focus, therefore, was on the domestic market right now with new products.
Catering To GenNext
SAIC has already positioned the MG brand’s growth story in parts of ASEAN and Europe, in particular, where its new energy vehicles have been on a roll. Back home in India, the company is now ready to launch an EV in a few weeks, which will cater specifically to the needs of GenNext, who are constantly on the lookout for something new and exciting.
Without getting into too many details, Chaba said this would be “pretty unique” as a retail concept, where young buyers would have something novel to look forward to. MG Motor already has some initiatives in place like the Metaverse and it is more than evident that people want their needs met online.
“Everything is on the Web and the Metaverse has just changed the way people think,” said Chaba. Customers today seek more transparency and want to go beyond the present model of buying cars from dealer stocks. As he put it, they like to track their cars and the time has come to offer alternative solutions to buyers.
While dealers will continue to stay relevant, they perhaps need to tweak their roles keeping in mind the new behavioural patterns emerging in the market. Yet, by the end of the day, there are still customers who like the idea of visiting showrooms and dealers do help out with work relating to registration, number plating etc. “There is a dealer touch required, especially for a whole lot of other jobs,” signed off Chaba.