Mahindra & Mahindra in South Africa

Mahindra & Mahindra Ltd. (M&M) is a manufacturing leader in the utility vehicles (UVs) segment in the Indian automotive industry. Since 2004, M&M has been exporting UVs to South Africa, the only country in the African continent with a significant middle-class population. M&M has set up a fully owned subsidiary in South Africa, which enjoyed the growth wave in the South African automotive industry up to 2007, then fell into a three-year slump, largely as a result of a recession in the global automotive industry. Now on the verge of industry renewal in 2011, the subsidiary needs to plan its next steps. The case is positioned in May 2011, when M&M’s subsidiary must choose from four alternatives. M&M can continue with its prevailing business model of importing completely built units (CBUs) from its Indian operations to meet local demand while using South Africa as a re-export hub for the burgeoning markets in sub-Saharan Africa. It can also choose to collaborate with a local vendor to assemble vehicles locally from completely knocked down (CKD) components imported from India. Alternatively, M&M may choose to set up its own manufacturing facility in South Africa, like many of its competitors. Lastly, M&M can choose to wait and watch until it notes definitive signs of revived demand. The case provides an opportunity for students to examine each alternative and make a decision on M&M’s way forward in South Africa.