The dragon beckons

New Delhi, June 29: Mahindra & Mahindra plans to set up a joint venture plant in south China to assemble knocked-down kits of its sports utility vehicle, Scorpio.

The country’s largest maker of utility vehicles, which first launched the Scorpio in June 2002, is in talks with potential Chinese partners to form a joint venture to manufacture sports-utility-vehicles in a year’s time.

“Forming a joint venture is the way to enter the Chinese market,” P. . Shah, vice-president of the firm’s overseas operations, told The Telegraph.

“We would be supplying completely-knocked-down kits of Scorpio to the joint venture unit,” he added.

Mahindra & Mahindra, aiming to become the first Indian automaker to enter the fast-growing Chinese market, said the size of investment would depend on the Chinese partner and the nature of partnership.

“If it’s a buyer-seller relationship then the investments required would be less,” Shah explained, adding the automaker is “wide-open” on this issue.

Preliminary talks were under way with Shanghai Automobile Industry Corp, one of China’s biggest automakers, top Chinese minivan maker Chongqing Changan Automobile Co, SAIC-Chery Automobile Co Ltd and Yuejin Motor Group.

However, analysts said the automaker would like to hold a majority stake in the joint venture unit since this would give them a leverage to understand the Chinese market.

On an annualised basis, demand for utility vehicles in China totalled about 1,10,000 last year and is expected to clock 2,00,000 units this year, he said. “We expect to corner 10-15 per cent of that market.” However, he refused to comment on how this would impact the bottomline of the automaker.

In China, Scorpio would compete with Ford’s Maverick, General Motors’ Chevrolet Blazer and the Pajero, produced by Mitsubishi Motors.

The utility vehicle maker, although has a 51 per cent market share, has seen it shrink from 90 per cent due to competition from Telco which markets the Sumo and Safari brand.