Mahindra & Mahindra is at an advanced stage of assessing plans to upgrade its South African plant, according to people familiar with the matter, as India’s second-largest automaker looks to capitalise on rising demand for affordable vehicles.
The company has been working with the state-owned Industrial Development Corp to assess the feasibility of setting up completely knocked-down, or CKD, production at its facility near the port city of Durban, the people said, asking not to be identified because the discussions are private.
Mahindra already assembles semi-knocked down vehicles at the plant.
The growth in South Africa’s mid-market segment has lured Chinese and Indian rivals that have eaten into the market share of companies, including Ford Motor and Mercedes-Benz Group AG.
Expanded local facilities may allow Mahindra to sidestep potential import tariffs being weighed by President Cyril Ramaphosa’s government to spur domestic auto manufacturing — the largest component of the nation’s factory output.
Representatives for the Mumbai-based company and IDC didn’t immediately respond to requests for comment.
The plan may also help Mahindra boost sales and compete with companies including Chery Automobile, as well as Suzuki Motor, which ships most of its cars from India. Toyota Motor remains the nation’s biggest seller of cars.
Chery, China’s top car exporter, earlier this year agreed to buy Nissan Motor Co’s plant in South Africa.
Mercedes is considering sharing its manufacturing plant in the nation with Great Wall Motor Co, people familiar with the matter told Bloomberg.
Mahindra, which opened its assembly plant in 2018, manufactures its Pik Up light trucks at the facility. The vehicles are popular with local farmers and are also used by police in neighbouring Mozambique.
The inclusion of CKD would represent an upgrade in local manufacturing capability and indicate deeper investment in the domestic market.
A CKD facility typically imports whole vehicles as parts and then assembles them, allowing automakers to avert tariffs on shipments of finished cars.
India’s Tata Motors Passenger Vehicles has also resumed selling cars in the country after a lengthy hiatus.
Tata ships the cars from India.
BLOOMBERG