Indian motor giant Mahindra weighs sharing assembly plant in SA
Indian motor company Mahindra will consider sharing a South African assembly plant with other brands when it eventually undertakes full vehicle manufacturing in this country, international operations head Arvind Mathew says.
"There’s a lot of spare production capacity around the world," he said on Friday. "I don’t see it as a given that a company must own its own plant. I would see contract manufacturing as an option in SA."
Mathew was speaking at the opening of Mahindra’s first South African assembly plant, at the Dube TradePort next to King Shaka Airport, north of Durban. The facility reassembles bakkie kits imported from India.
Until now, Mahindra single-and double-cab bakkies have arrived fully built in SA. The company has been selling bakkies and sport utility vehicles in SA since 2004.
The plant is operated by AIH Logistics, a specialist South African vehicle contract manufacturer that manages a similar operation in Gauteng for Korean brand Hyundai.
Mahindra has invested R10m in the Dube facility, which has annual capacity to build 3,500 vehicles on a single shift. To begin with, the 25 employees are expected to build 2,400, to meet domestic demand.
Long-term, said Mathew, the intention was to use SA as a production hub for the rest of sub-Saharan Africa.
Dube operations manager Henry Grimbeek, a former Nissan SA manufacturing director, said absolute capacity at the plant was about 7,000. Anything above that would require major investment in bigger premises. The current 5,500m² facility is rented.
For now, Mahindra bakkies built at Dube will contain no South African components. However, Mahindra SA MD Rajesh Gupta said talks were under way to localise lubricants, batteries, tyres and wheel rims.
It is understood there are also plans to talk to an Indian company whose SA subsidiary produces chassis parts for the Ranger bakkie built in Tshwane by Ford Southern Africa.
Grimbeek said the aim was for SA-sourced components to contribute 10% of the value of Dube vehicles by the end of 2019, then 40% later.
Eventually, said Gupta, Mahindra SA wanted to become a manufacturer like Toyota SA or Volkswagen SA, building vehicles from scratch on a full-scale production line.
AIH CEO Corrie Konte said he expected Mahindra would then take over its own operations, but Mathew said that was not guaranteed. The idea of sharing an assembly plant run by a contract assembler had appeal. A new plant being built near Port Elizabeth for Chinese manufacturer BAIC is expected to cost R11bn. Shared costs between multiple partners could be more cost-effective for Mahindra, said Mathew.
As it happens, AIH is trying to attract newcomers to the SA market to a proposed multiple-brand assembly plant in East London, near the Mercedes-Benz SA plant.
Mathew said Mahindra would prefer something in Durban because it was the natural trade port between SA and India. "If we move away from Durban, there will be an additional cost," he said. "So we must ask ourselves if that will be offset by savings elsewhere."