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MG Motor to spend Rs 2,000 crore on product development, expansion

MG Motor sold 2,018 units of the Hector SUV in August

By Pritish Raj

Despite car sales falling to a multi decade low and manufacturers cutting down on future investments, new entrant MG Motor India has lined up a fresh investment of Rs 2,000 crore on developing new products and expanding its production capacity.

The company, which recently launched its maiden SUV Hector, had to temporarily stop bookings after 28,000 customers placed orders.

Rajeev Chaba, president & MD, MG Motor India said the fresh investment is to build more capacity at the Gujarat plant while part of the funds will also be used for new product programme, vendor tooling and product engineering.

"We are trying to produce 3,000 units per month now and the ultimate aim is to reach a capacity of one lakh units by end of next year," Chaba told FE. The company so far was only able to produce about 1,500 units per month.

MG Motor sold 2,018 units of the Hector SUV in August. To be sure, it was higher than models like Mahindra XUV 500, Tata Harrier, Renault Duster, Honda WR-V and Jeep Compass, which have been on sale for more than three years.

Car sales, which fell for the tenth consecutive month in August, declined 31.57% y-o-y in August, worst-ever since Society of Indian Automobile Manufacturers (Siam) started recording wholesale vehicle sales data in 1997-98, as poor retail sales due to weak consumer demand continued to leave dealers saddled with high inventory.

The slowdown in demand has prompted vehicle and component manufacturers to slash production and demand tax cuts from the government, while also reducing cutting down on their investments.

MG Motor, which has so far invested Rs 2,400 crore in India, has a different view of the slowdown.

Chaba says people will continue to buy if the product is a good value for money.

"Over and above 28,000 bookings, we have about 15,000 waitlist so the demand is huge right now. If we pull back on catering to such demand, we will fail as a company therefore right investments at right time is a must, Chaba said, adding that suppliers have been asked to cater to the incremental volumes so that the waiting time is reduced.

At a time when manufacturers have been laying off workers due to lower production and subdued demand, MG Motor, part of Chinese automaker SAIC Motor, will also hire more people at its plant.

The company plans to launch a seven seater version of Hector and will also roll out an electric car ZS EV, a competitor of Hyundai Kona.

The MG Hector is powered by a 2 litre diesel engine that offers class leading power and performance and first time features. Its 1.5 litre petrol engine comes with a 48V mild hybrid system.

Price starts at Rs 12.18 lakh and goes up to Rs 16.88 lakh.