Mahindra & Mahindra sets up Sri Lanka’s first auto assembly plant with Ideal Motors

Ideal Group Chairman Nalin Welgama (third from left), Indian High Commissioner to Sri Lanka Taranjit Singh Sandhu (fourth from left), Prime Minister Ranil Wickremesinghe (fifth from left), Mahindra & Mahindra Managing Director Dr.Pavan Goenka (sixth from left), Ideal Group Deputy Chairman Aravinda de Silva (seventh from left), MP Kumara Welgama (extreme right) and other dignitaries at the inauguration of the assembly plant
Pic by Pradeep Dilruckshana

• Global auto major invests in assembly plant in SL for first time 
• Ideal Motors to own 65% majority stake in JV; M&M to own 35%
• Plant has capacity to assemble 5, 000 units per annum 

India’s Mahindra & Mahindra( M&M) and Sri Lanka’ Ideal Motors launched their Rs.3 billion joint venture vehicle assembly plant with aspirations to set-up an automotive industrial park going forward to further boost local value additions. 

Prime Minister Ranil Wickremesinghe together with the Indian High Commissioner to Sri Lanka Taranjit Singh Sandhu inaugurated the vehicle assembly plant built by the joint venture firm, Mahindra Ideal Lanka (Pvt.) Ltd located at Welipenna in the Kalutara district last Saturday. 

Addressing the gathering at the inauguration, Ideal Motors Chairman Nalin Welgama highlighted that this venture was the first instance that a global auto major has invested in a vehicle assembly plant in Sri Lanka partnering with a local automotive firm. 

Ideal Motors has a 65 percent majority stake in the JV while M&M has the remaining 35 percent stake. The state-of-the-art manufacturing plant will initially assemble M&M’s popular mini SUV, the KUV 100 by localising production of four components—battery, tyres, seats and exhausts. 

The plant which is located on a 65-acre land has a production capacity of 5, 000 units per annum and it will provide direct and indirect employment for 200 persons over next 
two years. 

Welgama remarked that local value addition will be gradually increased from 35 percent with the establishment of the automotive industrial park.

“Unfortunately, we have many local vehicle component manufactures who don’t meet with global standards. This presents a tremendous opportunity for them to reach those 
global standards. 

“The component manufactures have already reached out to us and they are very keen to become part of this project. The M&M is working very closely with our local teams,” 
he elaborated. 

Mahindra & Mahindra Ltd. Managing Director, Dr. Pawan Goenka assured fullest support of M&M to increase local value addition by supporting local component manufactures to meet internationals standards.

 Welgama insisted that Sri Lanka needs to capitalise on Sri Lanka-India Free Trade Agreement to export vehicle components to India.  “We are few miles away from Chennai, which is the Detroit of India. Therefore, why don’t we make use of the FTA?” he asked. 

Dr. Goenka suggested that the JV plant in future will have the potential to export vehicles to South Asian countries excluding India. 
“I can see Sri Lanka potentially exporting vehicles to other regional countries. 

“In particular, if Sri Lanka inked FTAs with countries which India doesn’t have FTAs with, it again makes economic sense for us. However, we have to wait and see what the cost is and quality structure is going  to be in order to consider exports,” he said.

He further said that the JV will also look into assembling other vehicles of M&M in the premises, once the KUV-100 is established in Sri Lanka. Dr. Goenka noted that assembling the electric version of KUV-100 is also on 
the cards. “In six months, we will be launching the electric version KUV-100. Once we launch the product, we will evaluate to see the possibility of assembling it in Sri Lanka. We haven’t decided on that. It will mostly depend on the demand,” he said.  Further, he said that the double cabs and pickup trucks may also be assembled locally in future. 

With the assembling of KUV 100 locally, M&M also marks its entry to Sri Lanka’s passenger vehicle segment for the first time after dominating the commercial 
vehicle space.

Further, by assembling locally, Mahindra Ideal will also save around 70 percent in taxes. 

Welgama said that KUV 100 will be priced competitively below Rs 3.2 million.

He also requested the Prime Minister to increase the loan to value ratio up to 70 percent from the current 50 percent to support locally-manufactured vehicles.

Premier backs exports drive 

Prime Minister Ranil Wickremesinghe pledged government support for local vehicle component manufactures to break into export markets such as India. 
“In future, several vehicle components will be manufactured in Sri Lanka and will be exported,” he stressed.

He noted that local manufacturer CEAT is already exporting tyres to the Indian market.

Further, he announced that the government will allocate more funds to develop manufacturing and tourism industries as the infrastructure projects are already underway. 

He said the government will expedite the establishment of trade zones in Kandy, Bingiriya and Hambantota while medium-sized manufacturing zones will be built in areas such as Kankesanthurai.