Colombo, August 17 (newsin.asia/DailyFT): The Prime Minister of Sri Lanka, Ranil Wickremesinghe and the Indian High Commissioner Taranjit Singh Sandhu, on Saturday inaugurated Sri Lanka’s first vehicle assembly plant built by Mahindra Ideal Lanka (Pvt.) Ltd at Mathugama in Kalutara district south of Colombo.
Mahindra Ideal Lanka (Pvt.) Ltd. is a joint venture between Mahindra & Mahindra of India and Ideal Motors of Sri Lanka.
Charitha Ratwatte, Advisor to Prime Minister; Chairman, Board of Investment, Mangala Yapa; senior officials from Government of Sri Lanka; Nalin Welgama, Chairman, Ideal Group of companies; and Dr. Pavan Goenka, Managing Director, Mahindra & Mahindra Ltd and several other dignitaries attended the inaugural event
In his address Prime Minister Wickremesinghe said that substantial opportunities exist for collaboration between Indian and Sri Lankan companies given the complementarities. He also thanked the Indian leadership for continued confidence in and support for Sri Lanka.
Indian High Commissioner Taranjit Singh Sandhu said that the state-of-the-art manufacturing plant set up in Kalutara by the India-Sri Lanka joint venture is a reflection of what India and Sri Lanka can achieve together collectively.
He added that the plant symbolises the promotion of ‘Make in Sri Lanka’ alongside ‘Make in India.’ The High Commissioner pointed out that it also demonstrates the commitment of Indian companies to stand with Sri Lanka during difficult times.
The Plant primarily caters to the local market. It will create local jobs; bring in investments as well as technology innovation and skill sets. It will contribute to the overall growth of the Sri Lankan economy.
Writing in DailyFT on Thursday, Darshana Abayasingha said this is the first time a globally-acclaimed auto major is investing directly in Sri Lanka together with a local automotive company, with an investment of over LKR. 3 billion (US$ 16.9 million) at the outset.
At its plant in Mathugama, Mahindra-Ideal Lanka Ltd. will manufacture the popular mini SUV, the KUV 100, which has been earmarked by Mahindra for Sri Lanka. The plant will have a built-in capacity of about 40,000 units annually employing over 100 Sri Lankans.
Ideal Group Chairman Nalin Welgama, avers the Sri Lankan-built KUV 100 will initially be available only to the local market, but the Mahindra Group would later commence shipping them overseas to markets such as Africa and the Pacific Islands.
“Indian Prime Minister Narendra Modi begun the Make in India initiative to encourage entrepreneurs to make in India rather than import. This is the drive we need to inculcate in Sri Lanka as well. We are very good at importing everything. Someone has to come up with import substitution and this is why we have identified substantial local value addition for the vehicle we are assembling with Mahindra. The KUV 100 launched in India by Mahindra in 2016, has sold over 100,000 vehicles and it’s a tried and tested model,” Welgama says.
“So, in trying to establish local content and value addition, engineers from Mahindra visited Sri Lanka and identified four key areas. One was seat manufacturing, where they found a local seat manufacturer called Accolade, and Mahindra and Mahindra introduced them to the world’s largest seat manufacturer named Magna who have a presence in India for all known brands. Magna trained Accolade staff in India, and elevated the Accolade staff to international standard.
“Similarly, they met CEAT a local tyre manufacturer, but they didn’t have a tyre that would go into the KUV 100. So, they worked with CEAT India and enabled them to manufacture this tyre which is suitable for the KUV 100. CEAT has now come up with this tyre in Sri Lanka, and it’s a 100% local tyre that can now also be sold to other car brands in the country. That is import substitution, plus, creation of opportunities and jobs on the technical side.”
Similarly, Mahindra and Mahindra engineers had worked with Exide in Sri Lanka to develop a battery to meet the vehicle’s specifications that can also be sold to other models in the country, and identified a local manufacturer of exhausts named Modicon, who has also been enhanced with input from producers in India. As this is a Mahindra plant, the company will ensure the same standards here in Sri Lanka similar to its plants in Detroit, South Africa and India, Welgama asserts.
He adds that Sri Lanka must take better advantage of its Free Trade Agreement with India, and points out that companies such as Accolade and Modicon could now even export their products to other Indian car manufacturers based in Chennai employing the skills acquired through this partnership.
“Sri Lanka is a small market and we have to start somewhere. If you take India, their manufacture of cars was very rudimentary. Mahindra and Mahindra stated in 1945 with the Willys jeep look alike. It was in the ’90s they started the Scorpio. If you look at the Indian car manufacture scenario, the real thrust came when Manmohan Singh de-regularized the market and invited Suzuki of Japan to partner with Maruti. Then it was followed by Hyundai in 1996. They opened their doors to proper manufacturers and took advantage of the huge population. India is now exporting cars to Europe the Far East and Australia.
“India was complying with BS IV safety and emission standard, and in the United Kingdom and Japan its Euro VI. India is elevating to BS VI or Euro VI by 31 March next year. By 1 January most companies in India will be ready with BS VI. This would bring most Indian cars on par with European emission standards. In a span of 29 years they have come to the pinnacle of auto making. This is what we have to try and achieve even in a small way. We have to start somewhere and this is the start we badly need,” Welgama adds.
The Chairman of Ideal Group says that he decided to situate the factory in Mathugama as this was his home town, and was keen to give back to the community in the Kalutara district.
The Ideal Group has been in partnership with Mahindra and Mahindra for well over a decade, marketing the latter’s automobiles all over Sri Lanka and capturing 50% of market share in its category.
Welgama attributes his company’s success to the aftermarket promise and care provided by Ideal towards customers. Over 65,000 Mahindra vehicles have been sold in Sri Lanka by Ideal Group. Once complete, the KUV 100 which would be produced here will retail for around Rs. 3.2 million (US$18,065) and Welgama anticipates great interest for this Sri Lankan product.
This is a dream I had since I was very young, I was always fond of cars. Even in the UK where I was managing a firm of accountants, my heart was in motor vehicles so I set up a company and exported cars worldwide. When I met Anand Mahindra in 2010, he said Sri Lanka is a market where you could sell and register 10,000 units, at a time we were doing only 1500 to 2000 units. I thought to myself this can’t be right, but then he said if you really try you can sell 10,000. So, I took up his challenge and asked him ‘what will you give me if I do 10,000 units’ and he said ‘you name it’. Then we achieved that in 2011 and 2012 and they were thrilled about it. He visited us in 2011 and then that’s when I told him we need support from Mahindra to set up a Sri Lankan plant.
“Dr. Pavan Goenka was very positive and gave a lot of guidance and expectations, and by end 2015 we seriously started talking about the plant. This is a project of national importance. Because the suppliers of these automotive parts can now easily take the parts to India through the FTA. We have not taken any advantage of the FTA. We have to get our toe through the door, and we should salute Mahindra because post-war we have all the brands under the sun coming here, but no one has come forward to do anything for Sri Lanka. So, from that point of view this is quite laudable,” Welgama states.
Future With Electrical Vehicles
He also points out that the motor industry globally is going through a dramatic change, as the internal combustion engine will be phased out gradually to be replaced by electric vehicles. The Indian Prime Minister has given a target of 2035 to make all vehicles in India electric, and Mahindra and Mahindra is at the forefront of electric vehicle technology on the sub-continent with the KUV 100 earmarked to become all-electric next year.
Welgama enthuses that Sri Lanka too will be able to gain advantage of these technologies via its partnership with Mahindra.
“Car making goes well and beyond the realms of a business activity. It requires a lot of research and development, because a car is built around the customer. You need to have a long-standing auto major behind you who will do the research and development for you, it is only then there will be continuity. Sri Lanka is an import dependent company, everything is imported. Mahindra and Mahindra have come into Sri Lanka with a substantial investment through the BOI and they are training our staff from the plant head downwards in the factory premises.”
Training and Job Generation
“On the back of this we have started a program at Ideal Group at our technical training centre in Ratmalana, where we tied up with the skills development authority of Sri Lanka, to give an MVQ 4 training program much like the higher national diploma for youth who want skills in the automotive field. The first batch of 20 who we took in a couple of years ago they have successfully completed the course and they will be working as apprentices in the Ideal Group. ‘
“The second batch of students have already been taken in for this 18-month course. This is what we really value. Because in a country like Sri Lanka, we don’t have universities that can accommodate all the students after their exams. There are so many students who have nothing to do and some of them turn to become three-wheeler drivers, which is why we have over 1.1 million three-wheelers in the country which is alarming. So, we as entrepreneurs; we have to be stakeholders in empowering our youth.”
“That’s the whole purpose of entrepreneurship; not to just put money in my pocket – but I have to give something back to the country and that’s how a country can improve. You cannot expect or wait for a government to give everything,” Welgama says.
(The featured picture at the top shows Nalin Welgama, Indian envoy Taranjut Singh Sandhu Prime Minister Ranil Wickremesinghe and Indian envoy Taranjit Singh Sandhu, Prime Minister Ranil Wickremesinghe and Aravinda de Sliva at the inauguration)