Mahindra & Mahindra Ltd. is in the advanced stages of assessing plans to upgrade its South African plant, according to people familiar with the matter, as India’s second-largest automaker looks to take advantage of rising demand for affordable vehicles.
The company is working with the state-owned Industrial Development Corporation to assess the feasibility of setting up completely knock-down, or CKD, production at its facility near the port city of Durban, the people said, requesting anonymity because the discussions are private. Mahindra already assembles semi-knocked down vehicles at the plant.
Growth in South Africa’s mid-market segment has attracted Chinese and Indian rivals, which have eaten into the market share of companies including Ford Motor Co. and Mercedes-Benz Group AG. The expanded local facilities could allow Mahindra to skirt potential import duties being imposed by South African President Cyril Ramaphosa’s government to boost domestic auto manufacturing – the largest component of the country’s factory output.
Representatives of the Mumbai-based company and IDC did not immediately respond to requests for comment.
The plan could also help Mahindra boost sales and compete with companies including Chery Automobile Co as well as Suzuki Motor Co, which ships most of its cars from India. Toyota Motor Company remains the country’s largest car seller.
China’s top car exporter Chery earlier this year agreed to buy Nissan Motor Co’s plant in South Africa. Mercedes is considering sharing its manufacturing plant in the country with Great Wall Motor Co., people familiar with the matter told Bloomberg.
Mahindra, which opened its assembly plant in 2018, manufactures its pickup light trucks at this facility. These vehicles are popular among local farmers and are also used by police in neighboring Mozambique.
The inclusion of CKD will represent an upgrade in local manufacturing capacity and signal deeper investment in the domestic market. CKD facilities typically import entire vehicles as parts and then assemble them, allowing automakers to avoid tariffs on shipments of finished cars.
India’s Tata Motors Passenger Vehicles Limited has also resumed car sales in the country after a long gap. Tata ships cars from India.