Pawan Goenka, a few days before he retired from Mahindra & Mahindra spoke to ET over a video call. He was frank, but on occasions nostalgic too about his tenure at Mahindra’s. He recounted the high points of his career, and also what didn’t work for Mahindra and him. But he left the judgment to others. “The legacy is up to others to decide,” he said.
Steering Mahindra to top of the ladder in the face of rising global competition, Goenka reflected on the string of partnerships, their shelf life and how Mahindra took bold calls of giving up on some of them and deciding to go on its own.
The recent pull out from Ssangyong Motor Company and Ford JV, Goenka said were the ‘difficult decisions’ of his career and he believed how the focus on safety and electrification will help homegrown car makers Mahindra and Tata to pose stiff resistance to global car makers.
Edited Excerpts:
What is the legacy you want to leave behind, if you could reflect on the growth of Mahindra & Mahindra under you?
The legacy is up to the others to decide. I came in here on October 19th, little more than 27 years ago – industry has transformed since and so has Mahindra – it’s like a night and day.
The most visible change in Mahindra is in the infrastructure and resources that we have to run the business. The R&D has transformed from 5 acres and 150 people to 200 acres and 3000 people. Our R&D set up is comparable to the best in the world. The product offerings today are chalk and cheese, if we didn’t have these products, we would not be able to compete in the marketplace.
The Chakan plant is our biggest investment yet. The tractor plant in Zaheerabad is amongst the biggest tractor plants under one roof, so the change is much bigger than many other companies in our sphere.
Let’s look at people’s resources – one of the things – which is very unique about Mahindra – compared to other rivals is the longevity of our talent at the senior cadres. If you look at the current leadership team at Automotive and Farm Equipment Sector, Rajesh Jejurikar Veejay Nakra, Hemant Sikka, Veluswamy, they have all been with Mahindra for over a couple of decades.
So it has not been a sudden shift, it has been a smooth transition; they have grown and groomed with the company, right from the start. At Mahindra we don’t hire Heroes, we make heroes. Each of these people I have been named, they are perhaps the best in the industry – in what they do
Our volumes, financial performance, share price – which till 2018 had the highest CAGR, they all were impressive. Mahindra is a very different company then what it was in 2000. M&M has made significant advancement in all the areas.
What according to you would be the highpoint of your tenure at the Mahindras?
The Scorpio launch and success of the product changed the face of the company. It was about bringing in the confidence that we have the resources and the ability to launch products and compete with global companies. The second most important chapter has to be the Chakan plant, till date it is the single biggest investment in one facility, Rs 8000 crore invested in the plant and the third was entry into electric vehicles. We saw the future of EVs before anyone else, unfortunately we were the only ones in the space for a long time, now there are many players coming in – which will help the segment to grow.
Because of our early presence in the market, we have more vehicles on the road than everyone else combined. We have significant real experience on the EVs. We are going to double down on EVs now, all our experience of the past will come in handy now.
And the fourth thing is the evolution of technology in our tractor business. Our Uvo – Novo tractors technologically are class apart, we are ahead of others in technology in tractors. We decided to take a step further by setting up our agriculture business in 2010-11 with an objective of helping farmers to rise with 50% of Indians dependent on farming, this space will go on to become big in the future.
Ratan Tata congratulating Mahindra & Mahindra on their success in 2012, must have been one of those highpoints..
It was a high point for me personally – It was gracious of Mr Tata to say it. In fact in our internal fireside chat – Rajeshwar Tripathi, our CHRO asked me what was my proudest moment – I reminded him of the statement from Mr Ratan Tata, it was heartening to see it coming from him and a company like Tata Motors.
When I graduated from college, for any mechanical engineer – working for Tata Motors was the number 1 job. I said the same thing internally.
However what he said that day applies to us today – we had the leadership – it has slipped away from us – the 60% is unrealistic – 20 something is the realistic plan. We have to reverse that.
Your view on the slide in market share at Mahindra?
Let’s break it into two parts – there was a time when there was hardly any competition and the SUV market was dominated by two Indian players. In 1993, there were 8 SUVs sold both by Mahindra & Mahindra and Tata Motors and the market share was shared between the two.
Now there is a huge competition and some 56 SUVs are sold in India, with about a dozen from Indian players – so about 45 of them is from the rivals – and many of them are in the guise of an SUV, but are SUV designed cars. So our share came down from 60-65% to 20% something – that a slide in share was expected with the increased competition.
Being in 20 something – is a reasonable evolution – I would have to admit our market share should be 5-7% higher than where we are today.
It is not that we had not launched the products, we are not late to the party, some of the products did not succeed as we had expected. If you look at our total volume is at about 20000 a month, if one or two products had succeeded, our share could have been 25-30%, which is a rightful place for Mahindra. I think.
We have already demonstrated that Thar as a very successful product, demand is way beyond our expectations. We have two very exciting products lined up and I am anticipating the same kind of success for original Scorpio and XUV, if these three products deliver the kind of numbers that we think we should, we would be back to 20 something in some years.
Is Mahindra looking inwards and focusing on domestic as against pushing global boundaries post Covid?
I dont think – there is any change in the aspiration of Mahindra wanting to be ‘a global company’. A lot of people are reading too much into what is happening.
We had got into a lot of different things, when you are doing well, Covid helped us to recalibrate – a time to see – what we should be doing and not doing, so we decided let’s get out of things, which we should not be doing and let us come closer to the core and get everything steady state.
On the farm side, we have not gotten out of anything – we have made many acquisitions – Mitsubishi Agriculture Machinery, Hisalar, Sampo Rosenlew. Each of these things that we are doing, there is a clear path to profitability. The performance of FES (international) subsidiaries, the losses have come down significantly, we hope to be profitable next year.
In the Farm Equipment space, Mahindra has a right to be a truly global player. We have the scale, we have the largest market – i.e. is India – we cater to and we have the largest market share in India. So we have the ability to be a truly global player and we have the K2 project we are investing in – it is the most ambitious tractor project taken up by Mahindra – where the investment is two to three times of the investment we have done in the past. The number of platforms that we are developing, that puts us into having a complete range of products upto a certain horsepower – meet all the markets requirement around the world, not just India like markets, so far we could compete against anyone. Our right to be global is very strong in FES.
On the automotive front, the first one was Mahindra North America- we decided not to pursue a US postal service tender, it would have called for huge investments and it was not our core – therefore if we had to be close to our core – then it made sense to get out of that. We are continuing with Roxor, there is no change on that. On the Automobili Pininfarina, we are continuing with the investment PF0, we said let’s see what we can achieve with PF0, before we make a significant commitment for the next project – there is no backing out there either.
The only thing we backed out was Ssangyong, saying that we have been into this for 10 years , though strategically right thing, it has not really worked out the way we had anticipated and given the significant pressure on cash flow, we questioned if it was justified to invest 300 million dollars – we had to take that decision – March, April time, the board could not justify committing that kind of money on a company that had not delivered on what it promised.
It was a very hard call we had to take – because of the covid – cash flow pressure was significant. The things were looking so bleak, no one knew where will the cash flows come from, today it has turned out better than we expected. We said, lets not go aggressive, lets slow down a bit, let’s get the financial performance in place for two years and then look at and then define the future road map
The forecasts were very bleak by experts, so said it will take five years to get back our volumes, in that scenario, you can imagine the decision one has to take. We were compelled to make a decision in order to ensure that we should not do anything that affects the core.
All kinds of extrapolations being made, there is absolutely no change in our strategy
Your take on the evolution of both homegrown carmakers – Mahindra & Mahindra and Tata Motors
When you look at the two homegrown companies, over the last two to three years, they are becoming stronger by the day. I dare say, they will give run for the money to the companies that are trying to take away market share. First is on safety- it is something that Mahindra and Tata are number 1 and 2, whichever way you rank it. The need for safer vehicles is resonating with the consumers, till a few years ago, customers didn’t want to pay for safety.
The second thing is, if you look at the product pipeline, there are different products – design and product quality is of different class then what they were before.
Mahindras and Tatas have invested the most in EVs so far, everybody is now 100% convinced that EVs are the future. There are some companies, which are still fighting that electric vehicles are not a good thing for us, we should do this or that but EVs.
However, both Mahindra and Tata have a bunch of products, market understanding and have a distinct lead in EVs. – Both companies are way ahead of everyone else, it is possible for others to bring in Evs from outside, but Tata and Mahindra are not going to roll over easily, in EVs we can match anybody and in every way.
We dont need 600 kms range, we dont need 0-100 in 2-3 secs kind of products, India needs good practical EVs, good for shared mobility and good for personal usage, not a show off vehicle. We need practical vehicles, I dont think anybody can compete with Mahindra and Tata there. Both are very strong companies, going into the future, anybody who thinks that they can be pushed over are mistaken.
I know it is a very strong statement, but I am very happy to say that both the companies have emerged strong contenders on safety and EVs.
Failed alliances or broken joint ventures, you have seen it all under your stint, could you share with us the approach and thought process adopted by Mahindra & Mahindra
My view on these alliances is somewhat different than the external view. There is a clear fact sheet to prove the decisions we took and why we took the decision that we did.
Let’s talk about Ford first, it was very clearly said at that point in time, either to put that money into Scorpio or put it into Ford JV – and we chose Scorpio, nobody should fault us for that. Just imagine if Mahindra had taken the safe bet of joining hands with Ford – where would we be today.
We had constraints – we learnt a lot from Ford JV, Ford learnt a lot about India from us, then they were able to be on their own. If it was a bitter separation, we would not have almost done the second JV again, which would have been a bigger JV.
Renault JV was about to go into a bigger partnership with a three way – with a new plant in Chennai – at that time we decided that we will be better off having our own plant – we chose to go to Chakan, it was decision between having our own Chakan plant or becoming part of 3 way partnership.
In a three way partnership, where our partners are much bigger than we are – we would lose our ability to do things the way we want to do and we invested in the Chakan plant instead. That also was a right decision, Chakan is one of the best plants in India today.
From this JV we learnt a lot – product development, product sourcing, Renault got entry into India, their R&D centre in Chennai next to ours.
As for Navistar Truck JV, the situation was not in Mahindra’s control. The company was very close to bankruptcy due to new emission norms introduction. They were in deep financial stress, and they had decided to exit every market they had JV in, it was not Mahindra who called it quits.
We have improved our products tremendously on the CV front. They were clearly deliverable to us and our partner in Truck JV too.
How do you see the recent decision on Ssangyong and Ford in that context?
These two calls – not putting any further money in Ssangyong, not going ahead with Ford – were perhaps the most difficult calls that we had to make. The exit from Ford JV, Renault JV and Navistar JV were not tough calls as they were very rational, business oriented – taken jointly – those were easy calls. These two were difficult calls, Ssangyong and Ford JV calls to a large extent; it was forced upon us by Covid.
The future turnaround profitability for Ssangyong became more difficult, the money to be put into Ssangyong, would have been difficult to generate returns.
As for Ford JV – one was the whole – outlook for industry size went down the drain. When we first signed up for JV, we were looking at 8-10% kind of growth for the market, from the time we signed the agreement, from that we arrived at a certain volume, post covid, the most of the outlook given by outsiders said it will take five years to recover the volumes. You can imagine, volumes fell to 50-60% – so you see how business plans changed significantly, from what we had worked out at the time of coming together.
Second – whether we can justify putting in so much money in the Ford JV – we were already scarce of capital.
We needed to double down on EVs, the question was where do we get that money from, so again we had to take almost the same call that we took 20 years ago. Scorpio Vs Ford JV, this time around it was Electric Vehicles versus Ford JV.
So these are decisions you have to take, what the outside world should see is the ability of Mahindra management to take such difficult calls – without being concerned about how it will look .
These are the right business decisions. These are not short term business decisions these are long term business decisions. It changes the direction of the company. Today we are convinced that we have to really invest in electric vehicles and we took the right call.
Now that things have improved, can there be a U turn on Ssangyong?
There is no going back on the Ssangyong sale – if we don’t get a buyer, it will go through the court receivership process.
There is an old anecdote that’s often recounted by Anand Mahindra that a team of young engineers at a Blue Chip conference alerted the Mahindra management to buy out Punjab Tractors or else it would have fallen in the hands of rivals who would have increased their market share. Could you reflect on that?
Yes it is a very famous anecdote, but if anyone were to believe that the interaction at the Blue Chip Conference was the only trigger? Certainly not. While the questions raised in the war room made management think, but it had to go much more beyond that.
One had to look at the business proposition that PTL brought to M&M, we had to look at the strengths and weaknesses – at that time the company was not doing well, it was losing money. We had to see whether we had the ability to turn it around. It had a fit with our portfolio, we had to take a call if we had the ability to inherit and convert it into a profitable venture. When we took them over, they had a market share of 7-8% – today it is nearly double of that, believe you me, in the tractor market the shares dont change very easily.
The tractor industry is very competitive, we now have all the global competitors – John Deere, CNH, Kubota, Yanmar – almost all the top 4-5 global companies are in India. The competition is quite intense, there are no weak players. About 7-8 years ago, we used to talk about one company having a real competition, now there are many more.
That is the reason – to stay ahead in this game, there is a lot more you have to do then just launching new products. In the next 5-7 years, the industry dynamics will be very different, the way we are doing farming will be very different, which will have an impact on the market. Precision farming could change the way we are farming. Today if you were to sit in a review in a tractor business for future products you will be boggled at the kind of things that are going to go into and Mahindra is well placed to stay strong in this race and grow global.
What next Dr Goenka?
There is no desire or inclination to work 24*7. I have done that for 42 years, I want a bit of a relaxed life, but not a retired life.
One-third of my time – I want to relax, but for the balance two-third of my time, I will be involved with the SCALE committee of the Government of India. I have been recently inducted in the high powered committee chaired by Piyush Goyal for High-tech Manufacturing, so these may take away a significant amount of my time. But it is something that I am very excited about. It will allow me to impart learnings from auto and farm sectors into other industries. The Auto and Farm industries are the most Atmanirbhar Bharat Industries, we have, if I can help other manufacturing sectors follow the same path – that will be a very fulfilling thing for me and my career.
Then I have my involvement at IIT Madras, IIT Mumbai, so I will be engaged with academia. Then there are a few board memberships I will be getting into and also the advisory roles.
