ETAuto is reporting that Mahindra has faced setbacks in concluding the stake sale and the revival of its South Korean company Ssangyong. The company is desperately seeking funds to stay afloat and it is unclear how it would manage in the interim for the working capital.
ETAuto‘s sources have said that it was likely valuation issues that stopped Mahindra and USA-based HAAH Automotive from making a deal. Though Mahindra was not able to agree to certain financial terms with HAAH, a source told the newspaper that negotiations are ongoing and that progress is being made. The person added that the deal is likely to see some kind of conclusion by December.
The offer HAAH made for a part of Mahindra’s SsangYong stake is lower than SsangYong Motor is willing to accept and this may prolong the discussion. The company has also put up a condition of extending the repayment schedule SsangYong’s debt, it was reported before.
HAAH offered $258 million for a large stake in SsangYong, according to a report from economictimes.indiatimes.com dated 21 September. A source had told the Indian business publication that HAAH should have made a proposal last week. The completion of the deal is subject to the agreement of some stringent conditions on SsangYong’s end, such as the delay of its debt repayment to its creditors, for instance.
After BYD & Geely, Chinese company Chery Automobile is considering buying a stake in the debt-ridden South Korean automaker SsangYong, South Korean news outlet pulsenews.co.kr reported on July 23. Chery had sent an agent for due diligence to SsangYong’s Pyeongtaek plant earlier the same month. The South Korean publication had said that the agent was a representative from a company in which Chery has made an investment and went for due diligence with Samsung Securities Co. and Rothschild & Co.’s managers. SsangYong had denied the claim, though.
On 14 September, pulsenews.co.kr reported that American company HAAH plans to make a major investment proposal to SsangYong. Investment banker sources had told the website that the California-based company is in final talks with the South Korean brand and aims to close the deal by the end of this month. The investment could touch hundreds of millions of dollars, as per the news portal’s sources. HAAH wants to begin the work necessary for commencing exports of SsangYong vehicles to North America in October. Should the deal work out, Mahindra & Mahindra may get to reduce its ownership in SsangYong from the current 74.65% to below 50%.
USA’s HAAH is into import distribution business and Chery partially owns it. The two companies created a new auto brand called ‘Vantas’ in February 2020. Together, they plan to launch models in the USA developed using the platform of Chery’s Exeed brand, and a premium SUV is first in the queue.
A report from economictimes.indiatimes.com last month said that HAAH may have only a fraction of the capital SsangYong needs, but Chery would provide the required additional capital. Reports say that Chery wants to make South Korea an overseas manufacturing hub for EVs. The Chinese company is holding discussions with the country’s optical filter manufacturer Nanos to set up a jointly owned manufacturing facility for FCEVs at the Saemangeum Industrial Complex, the nation’s largest industrial complex, it was reported.
Renault Samsung Motors had considered SsangYong ownership
In early August, Renault Samsung Motors had become the latest party interested in buying Mahindra & Mahindra’s stake in SsangYong Motor Company, as per a report from economictimes.indiatimes.com. The business publication put Ford Motor Company also in the list, but the Blue Oval formally denied the development and requested the paper to keep it out of speculation. Renault Samsung Motors didn’t comment on the matter.
Renault Samsung Motors might come as a new name to some, but it has existed for two decades now (since September 2010). Renault operates in South Korea via the JV company and owns 80.1% stake in it. Meanwhile, Samsung is considering exiting this JV company by selling off its 19.9% stake, as per a KoreaTimes.co.kr report dated 21 July 2020. Holding 111,855,108 shares (as of 31 March 2020), Mahindra has 74.65% ownership in SsangYong. Chinese automakers are also considering to buy Mahindra’s stake in SsangYong.
Geely, Vinfast & BYD evinced interest in Ssangyong
Previous reports have mentioned Vietnam’s VinFast as among those interested in acquiring Mahindra’s SsangYong stake. Even though many companies are interested, completely getting rid of SsangYong may not be that easy for Mahindra. In relation to the loss-making overseas company’s overdraft borrowings from JP Morgan, BNP PARIBAS and BOA and facility fund borrowings from JP Morgan, the Indian company is required to retain over 51% of its stake.
SsangYong Motor currently has 390 billion won ($322.4 million) in short-term loans out of which, 167 billion won are from banks such as JP Morgan, BNP Paribas and Bank of America. If new investors are brought in taking the Indian firm’s stake below 51 per cent, it would create uncertainties in refinancing those loans and Ssangyong will have to repay them earlier than the original due date, it was reported.
SsangYong is heavily burdened with debt and reported its 13th consecutive quarterly operating loss this year. Sales have been slow even prior to the Coronavirus outbreak as its SUVs Tivoli, Korando and Rexton have found it hard to crack the global market. Outside the lone bright spot South Korea, the company has low presence (exports in 2019 stood at 27,446 units) and it has not produced vehicles in the world’s biggest SUV markets USA and China though it had confirmed plans to enter these countries in a meaningful way.
Vietnam-based VinFast is developing its own electric car that has been designed by Mahindra Group’s Pininfarina and is planning to launch the car in mid-2021, aimed at the US market. The new EV will make around 300 kW in its most powerful form and is expected to offer a range of 500 km (WLTP). Vinfast could easily expand its product line as it gets access to platforms and technology from Ssangyong.
Another player reported to be interested in SsangYong, BYD, will be launching its first electric luxury sedan in the form of BYD Han in the European market. The Han will be the first car to be powered by the company’s new advanced Blade battery pack that promises a range of up to 605 km (NEDC) in a single charge.
The Blade battery packs advanced technologies to make it one of the safest in the market. BYD is also working with Toyota in a joint venture that is called BYD Toyota EV Technology Co. Ltd. to develop battery electric vehicles that are environment friendly, safe and intelligent for the Chinese market. BYD could build up a presence in South Korea with an investment in Ssangyong.
Display: Ssangyong e-SIV concept official image