Mahindra bets big on new Chakan plant

India Infoline News Service | Mumbai |

it has opened its greenfield plant at Chakan, near Pune. The factory, spread across a sprawling 700 acres, was inaugurated 22 months after the company started building it.

With prospects for the Indian economy looking up again, India Inc. is getting ready to capitalise on the pent-up demand. One such company is Mahindra & Mahindra (M&M), which is laying the foundation of growth for the next several years. To meet growing demand for SUVs, LCVs and medium-to-large CVs, it has opened its greenfield plant at Chakan, near Pune. The factory, spread across a sprawling 700 acres, was inaugurated 22 months after the company started building it. 

With a total investment of Rs50bn in Phase 1 alone, Mahindra Chakan is touted to be one of the biggest greenfield automotive plants in the nation. It may be recalled that in March 2008, the company had envisaged an investment of Rs40bn for the Chakan factory. Half of the investment meant for Chakan Phase 1 has already been done while the balance would be poured in over the next 18 months, Dr. Pawan Goenka, President - Automotive Sector, M&M told reporters after inaugurating the plant. 

To start with, the plant will have an installed capacity of 300,000 vehicles, which can be scaled up later on depending on the demand. The Chakan facility will manufacture vehicles, ranging from the 0.75 tonne Maxximo LCV to the 49 tonne Mahindra Navistar truck. The new SUV, to be introduced some time next year, as well its new pick-up range would also be rolled out from Chakan in due course. It will also accommodate production of other models if required. But, as of now, there are no plans to start making two-wheelers or tractors at Chakan, Dr. Goenka said. 

The new plant has already started rolling out M&M’s new mini truck Maxximo while trucks from its joint venture with US-based Navistar will be launched in April. This will be followed by variants of the Xylo, and M&M’s new premium SUV, scheduled to be launched in 2011, Goenka said. "Once Phase II is also completed this plant will be enough to serve the needs of M&M group for at least 10 years," he said. The company has not taken any decision with regard to Phase 2 at Chakan, which could take 3-4 years and would raise the plant's capacity by another 250,000 units, Dr. Goenka said. 

In Phase 1, the Chakan plant, with four assembly lines, will make 50,000 trucks and the balance will comprise LCVs and SUVs. In future, the company may look at exporting 15-20% of the Mahindra Navistar range of trucks, Dr. Goenka said. Part of the new SUV will also be exported, he added. 

The Chakan project would be funded through a combination of equity and debt provided by M&M and three other units - Mahindra Navistar Automobile Ltd. and Mahindra Navistar Engine Ltd. and Mahindra & Mahindra Commercial Vehicles Ltd., Dr Goenka said. The Mahindra Chakan plant would reach full capacity in 3-4 years, he said. 

The plant is under the umbrella of Mahindra Vehicle Manufacturers, which will produce and sell vehicles to Mahindra Navistar and M&M. Trucks in the 0.5-tonne to 3.5-tonne range will be branded Mahindra while those in the 3.5-tonne to 49-tonne space will be branded Mahindra Navistar. 

Trucks exported from Chakan could be branded as Navistar, Mahindra Navistar or Mahindra, depending on which market works for which brand. Mahindra also plans to roll out buses from Chakan some time later. 

Mahindra has also allocated 71 acres for a vendor park at Chakan, Dr. Goenka said. Six large suppliers have already set up base and there is place for another four, he added. In addition to paint shops, press shops and body shops, M&M Chakan has an engine plant that can manufacture 120,000 engines for utility vehicles and 40,000 engines for trucks, Dr. Goenka said. 

Mahindra Chakan has around 1,400 employees at present. At full capacity, it will provide 5,000 direct jobs and five times as many indirect jobs, Dr Goenka said. As part of its initiatives to enhance skill sets, Mahindra recently signed a Memorandum of Understanding (MOU) with the Government of Maharashtra for the development of two Tribal Industrial Training Institutes (ITIs). These ITIs at Ghodegaon and Manikdoh, under the Public Private Partnership (PPP) scheme are approved by the Union Government. 

Built as a green facility, the highlight of Mahindra’s Chakan factory is the use of a cluster of 70 solar dishes that will tap the sun's energy for eventual use in the chillers in the paint shop. This will reduce the consumption of LPG by 1,500 tonnes and that of electricity by 1.8 lakh units a year, and lower carbon dioxide emissions by 3,500 tonnes at full volume, Dr. Goenka said. 

Recycling of waste water through reverse osmosis and multiple effect evaporation ensures that Chakan is a zero discharge plant. The plant management has also taken a conscious effort to increase the green cover in the vicinity by aiming to plant about 7,000 trees across the entire plant area. "This will be amongst the most eco-friendly auto plants in the world," Anand Mahindra, Vice-Chairman and Managing Director, Mahindra Group, said.

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