NEW DELHI: With a prolonged slowdown prompting most of the homegrown automakers to cut down production days in recent days, some of them are shifting the focus of their expansion plans to foreign markets.
Days after stating that it is considering setting up a new facility in the United States, utility vehicles major Mahindra & Mahindra on Saturday inaugurated its first automotive assembly plant at Welipenna near Colombo in Sri Lanka.
Christened Mahindra Ideal Lanka, the plant is a 35:65 JV, where the majority is owned by Ideal Motors.
Commercial vehicles major Ashok Leyland too, in April this year, said that it is looking to set up more assembly plants overseas, including the Commonwealth (CIS) region and African countries.
The company had said that it expects its overseas shipments to rise up to 20 per cent over the next five years from 10-12 per cent at present.
Mahindra’s assembly plant rolled out its first product, the compact SUV KUV100, and will roll out a slew of products over the next three years. Mahindra Ideal Lanka is expected to invest Rs 80-90 crore in the facility, which would provide employment to over 200 people directly and indirectly over the next two years. “I am very optimistic that this new assembly plant will not only add to industrial growth in Sri Lanka but also will generate significant employment opportunities at our plant and at the supplier’s end,” said Pawan Goenka, managing director, Mahindra & Mahindra.
The size of Sri Lanka passenger car market is in the range of 32,000-35,000 units per annum, of which new car sales account for only 25 per cent. The island nation has a high import duty for fully built imports, ranging from 100-300 per cent, based on engine size or cubic capacity.
Mahindra’s assembly unit is expected to bring down the cost of its vehicles significantly in Sri Lanka.
Last week, Mahindra said that it plans to open a plant in Flint, Michigan, to make vehicles including mail delivery trucks for the US market; the move could create 2,000 jobs. However, automakers continue to struggle in the domestic automotive market.
Almost all the automakers, including Mahindra, are cutting down production days to balance inventory levels as sales have fallen the steepest in nearly two decades. This has resulted in massive lay-offs of temporary workers.
Automobile sales decline for the ninth straight month: SIAM
According to SIAM, auto sales have dropped for the ninth consecutive month; passenger vehicle sales in April-July period has dropped by over a fifth of the number recorded in the same period last year.
Auto export during the period, however, grew by 1.17 per cent.