Thomas White Global Investing
Emerging Leaders

Emerging Leaders

August 2012

Anand Mahindra, chairman and managing director, Mahindra & Mahindra


In the early nineties, when India was on the cusp of its transition from an economy controlled by the heavy hand of the government to a place where entrepreneurs were more in command of their destinies, a young man with a famous surname was appointed as the deputy managing director of his family’s flagship business. Though the company was one of the larger industrial manufacturers in India with a long history, its products and technology were far from modern. Its major offerings were utility vehicles derived from the jeeps used during World War II and small farm tractors that were priced competitively for the company’s home market. In a sales arena where the government was often the largest buyer, design and product sophistication was not valued, and manufacturers could often thrive by offering the most cost-competitive product. But, with the upsurge of middle class aspirations that followed the opening up of the Indian economy, the market was about to change. To his credit, the young executive was quick to realize that the unleashing of free market forces would transform his country and his business forever.

Over the next two decades, Anand Mahindra, now chairman and managing director of Mahindra & Mahindra Limited, took advantage of all the opportunities presented by the fast growing Indian economy and increased globalization to transform the company into a budding global automobile manufacturer. Though still a small company by global standards, Mahindra & Mahindra is one of the most diversified automobile manufacturers in the world, building everything from heavy trucks to modern SUV’s and motor scooters. The company now markets its products across the globe and is the world’s largest manufacturer of small farm tractors.

The story of Mahindra & Mahindra began in pre-independence India when brothers JC Mahindra and KC Mahindra started a steel trading firm along with a partner, Ghulam Mohammed. After Mohammed migrated to newly independent Pakistan in 1947 to become that country’s first finance minister, the Mahindra brothers started diversifying into other businesses, starting with automobiles. Within the next few years, Mahindra & Mahindra started assembling the Willys Jeep, the primary light vehicle of the U.S. Army during World War II, in the country. For the next five decades, the company maintained its leadership position in utility vehicles by launching modest upgrades and different variants of the same model. In the early sixties, the Mahindra group launched its farm tractors and also started a specialty steel manufacturing business.

After returning to India in the early eighties with an MBA from Harvard, Anand started his career at the Mahindra group’s steel manufacturing arm as an executive assistant in the company’s corporate finance department. He gradually worked his way up and became the president and deputy managing director by the end of the decade. The experience of running a manufacturing unit that produced components for the automobile industry, among others, made Anand better equipped to tackle the challenges that lay ahead in his career. During this period, Anand also led the Mahindra group’s new ventures in property development and hospitality management that would eventually join the leaders in those sectors.

My aspiration is that Mahindra & Mahindra become one of the most customer-centric organizations in the world. If we focus on understanding our customers, we will be able to develop customer-centric innovations.

— Anand Mahindra, Harvard Business Review, July 2008, after accepting the
Harvard Business School Alumni Achievement Award

Attracted by the nascent market, global auto majors entered India by the mid-nineties, bringing a wider range of products to consumers. Realizing that his company lacked the technological and financial resources to develop products that would match the new entrants, Mahindra instead decided to partner with them. Mahindra & Mahindra formed a joint venture with Ford Motor Co., launching the automobile veteran’s Escort sedan in 1996. But the car was priced out of the reach of most buyers, and was also marred by quality problems. Mahindra & Mahindra gradually diluted its holdings in Ford India over the next few years, before completely exiting the joint venture in 2005.

Instead of being disheartened by this experience, Anand realized that the company would have to develop products to hold its own in a competitive market. He decided to make a major bet and committed significant financial resources to develop a new small SUV, specifically designed for the Indian market. Though designing and building a vehicle was a completely new game for Mahindra, the SUV project built on the traditional strengths of the company in manufacturing utility vehicles. However, the market for modern SUV’s was practically non-existent when Mahindra first conceived this project, and global carmakers showed little interest in developing that segment. Only Tata Motors, a larger domestic competitor, had a comparable model in India.

When the new Mahindra SUV, branded Scorpio, was launched in 2002, it was an instant success. The vehicle was attractively designed, well put together, and was available at a relatively attractive price. The Scorpio soon became the best selling SUV in India, a position it retains to this day, and was subsequently offered in other emerging markets across Asia, Europe, Africa, and Latin America. Buoyed by the success, Mahindra decided to improve the SUV and launch the vehicle in the U.S. But the move could not have come at a worse time. His lofty ambitions were stymied by the 2008 global financial crisis that led to steep decline in U.S. automobile sales. Nevertheless, the development and the subsequent market success of the SUV transformed Mahindra so much, that it later became a case study at the Harvard Business School.

Today, Mahindra is the undisputed leader in India for SUV’s and utility vehicles, with its most popular utility vehicle model selling more than 100,000 units a year. To expand its product range and gain access into added markets, in 2011 Mahindra acquired Korean manufacturer SsangYong Motor, one of the major SUV makers in that country. Mahindra has also used acquisitions to add electric cars and motor scooters to its product portfolio.

Meanwhile, Mahindra has steadily built up its farm equipment business across the world, opening assembling units in important markets such as the U.S., China, and Australia. Mahindra is now the world’s largest manufacturer of farm tractors by volume, selling more than 200,000 units in a year across all markets. What has helped Mahindra to compete against much larger manufacturers is the focus on quality, which won the company’s farm equipment division the Deming Application Prize and the Japan Quality Medal for Total Quality Management (TQM). In recent years, Mahindra has also successfully developed and launched light commercial vehicles in India. As well, the company has joined hands with Navistar International of the U.S. to expand its commercial vehicles business and to introduce Navistar’s range of medium and heavy trucks in India.

Even when other manufacturers have been struggling with a demand slowdown, Mahindra’s recent product launches have been so successful that the company is now in an intense battle with Tata Motors for the position of India’s second largest automaker, behind Japanese small car manufacturer Suzuki. Perhaps the biggest accolade for Anand’s achievements has come from Ratan Tata, chairman of Tata Motors and probably the best known businessman in India, who recently acknowledged that he has ‘great respect for what Mahindra & Mahindra has been able to do’. It is not very often that your biggest competitor showers you with praise. But Anand Mahindra has earned it and, as he has said, the accolades will only inspire him to work even harder.

 

 

 

 

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