M&M might rope in a plant at Brazil

Well its like everything is happening in the beautiful shores of Brazil! Goals being scored off, prominent teams getting knocked off from FIFA Football World Cup and now this! Reports floating in the media suggests that Mahindra and Mahindra might open a production unit in Brazil. However, the company has not made any final decision but looking at the current scenario of tax augment, Mahindra might open a manufacturing plant.

Dr Pawan Goenka, Executive Director & President, Automotive & Farm Equipment Sectors, Mahindra & Mahindra Ltd. said, “Brazil has put in some kind of a taxation on companies not doing enough local R&D and value addition. In some sense, it is a tax barrier and makes our products uncompetitive. Those who have manufacturing plants with a fair level of vertical integration are okay, but those who do not have a plant in Brazil or have a very small level of localisation are affected.” He further added, “Brazil is a good market and something we are seriously looking at. We need to look at how to work with Inovar. For this, we will have to set up local manufacturing in Brazil and we will likely look at other locations. It is not in the immediate plans yet, so there is no decision on it right now.”

Since the decision of opening the production plant is long due in future and to clarify the rumours afloat in market, Mr Goenka in a statement to the National Stock Exchange said, “That it is not in the near plans and hence there is no decision on it yet. The news was of the general nature that in order to sell in Brazil, Mahindra will have to look at local manufacturing. He further added, “It does not talk about any definitive plans to set up manufacturing in Brazil and as such this article does not have any material impact on the company."

In Brazil, the company retails its highest selling SUV Scorpio and a multi purpose vehicle pick up which are assembled by its local partner Bramont at a production plant in Manaus. Enlightening on the option available to Mahindra, Mr Goken further added,  “We are looking at our options. Right now the business model was around doing local assembly in Manaus. Manaus has it own set of problems because of its location — it is in the middle of the Amazon jungle and the markets are very far from it. In Manaus, we also do not have enough localisation to meet the requirements of the Inovar.”

Source: FE, Reuters