case scorpio

OPER/046

IBS Center for Management Research

Project Scorpio The Making of Indias First Indigenous Sports

Utility Vehicle

This case was written by Shirisha Regani, under the direction of Sanjib Dutta, IBS Center for Management Research. It was compiled from published sources, and is intended to be used as a basis for class discussion rather than to illustrate either effective or ineffective handling of a management situation.

2005, IBS Center for Management Research. All rights reserved.

To order copies, call +91-08417-236667/68 or write to IBS Center for Management Research (ICMR), IFHE Campus, Donthanapally, Sankarapally Road, Hyderabad 501 504, Andhra Pradesh, India or email: [email protected]

www.icmrindia.org

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OPER/046

Project Scorpio The Making of Indias First Indigenous Sports Utility Vehicle

Project Scorpio was not a top-down strategy nor one man's vision; it was a bottom-up programme.

-Anand Mahindra, vice chairman and managing director of M&M, in 2002.1

Scorpio was a journey towards creating a new category and a new market.

-Rajesh Jejurikar, vice president, marketing, automotive sector of M&M, in 2003.2

SCORPIO MAKES A MARK

In November 2003, Mahindra and Mahindra (M&M), a major automobile and farm equipment manufacturer, became the second auto company in India to receive the prestigious National Award for Research and Development. The award was given in recognition of its achievement in manufacturing Indias first indigenously developed Sports Utility Vehicle (SUV), Scorpio. The award was presented by the Department of Scientific and Industrial Research, under the Government of Indias Ministry of Science and Technology. Several parameters, like financial inputs, scientific and technological advancement of the project, status of in-house Research & Development, environmental consciousness, and use of imported technology, were applied in judging the winner.

The National Award was just one of the major awards that came Scorpios way since it was launched in mid-2002. Within a year of its launch, the vehicle also won the Car of the Year award from Business Standard Motoring, the Best SUV of the Year by BBC Wheels and the Best Car of the Year, also from BBC Wheels. In addition, it was also the winner of CNBC and Auto Cars Car of the Year 2003 award (generally considered to be the Oscars of the Indian automobile industry), and the Product Launch of the Year award given by the Business Standard Brand Derby. Scorpio is the result of extensive R&D, right from concept to commercial production, said Anand Mahindra (Mahindra), vice chairman and MD of M&M.3

Analysts said the main reason for Scorpios remarkable success in the Indian automobile market was that it catered to a previously neglected niche. Scorpio fell between a passenger car and an SUV. While it was designed as and looked like an SUV (with its sporty looks and sturdy design), it also offered all the comfort and elegance of a passenger car. Therefore, Scorpios target market straddled both passenger car buyers as well as SUV fans.

Another significant aspect was the adoption of an innovative and flexible manufacturing system, which allowed M&M to design and produce Scorpio according to customers preferences. M&M created a number of firsts in the making of Scorpio and ran a number of risks as well. For instance, the company used a newly developed engine in a new car design something that even the most well-established car manufacturers hesitate to do. It also kept suppliers involved throughout the life of the project, which was another manufacturing rarity.

1 Betting big, Business India, June 10, 2002.

2 Prasad Sangameshwaran, Scorpios low-cost drive, Business Standard, March 18, 2003.

3 Mahindra Scorpio wins national award for R&D, The Economic Times, November 12, 2003.


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BACKGROUND

M&M was set up in 1945 to manufacture general-purpose utility vehicles for the Indian market. The company soon diversified into the manufacture of tractors for agriculture and light commercial vehicles (LCVs). Over the decades, M&M diversified into other businesses through alliances and joint ventures with Indian as well as foreign companies, and secured a significant presence in many major business sectors in India and abroad. By the early 1990s, M&M was a global conglomerate with a presence in many sectors including automobiles, farm equipment, trade and finance related services, information technology, and infrastructure development.

In 1994, the M&M Group embarked on an organizational restructuring exercise arising from a Business Process Reengineering program. The result of this was that all the divisions of the Group were spun off as separate entities, with the exception of the Farm Equipment and Automotive Divisions, which remained with M&M.

M&Ms Farm Equipment Division made tractors and other farm implements. The Division also diversified into manufacturing industrial engines in 2003. In the same year, it became the first tractor company in the world to receive the prestigious Deming Application Prize. (Awarded by the Union of Japanese Scientists and Engineers (JUSE), this prize was considered the equivalent of the Nobel Prize in the area of Quality Management).

The Automobile Division traced its roots back to the 1950s, when the company began offering a multi utility vehicle (MUV) under the Jeep brand in India, in collaboration with Willys Overland Corporation, American Motors Corporation, and Kaiser Jeep Corporation, all based in the US. In 1965, the company began manufacturing LCVs in collaboration with Rubery Owen, UK. Although M&M received an initial impetus from its foreign collaborations, it was strongly focused on developing its own manufacturing facilities and capabilities and it began manufacturing vehicles indigenously by the end of the 1960s. (By the late 1990s, M&M had ISO-9002 certified manufacturing plants at Mumbai, Nashik and Igatpuri (all in Maharashtra) and Zaheerabad (in Andhra Pradesh).)

M&Ms Jeeps were immensely successful and the companys vehicles came to be identified with high quality, reliability, durability, ruggedness, easy maintenance, and operational economy in the Utility Vehicle (UV) market. Over the years, M&M manufactured several other UVs under different names, but most of them were variants of the basic Jeep model and used many of the same components and designs. The UV brands manufactured by M&M included Pick-up, MaXX, CL, MM, Commander, Hard Top, LCV, Voyager, Alternative Fuel, Army, Three Wheeler, and Export.

M&M became an established brand name in the UV market and enjoyed near monopoly until the early 1990s. However, this status was threatened when it began to face increased competition in the 1990s. Telco

4 introduced a new UV model in 1994 under the brand name Sumo, and the

newcomer quickly snatched market share from M&M. Sumo sold 100,000 units (one lakh) between 1994 and 1997. During the same period, M&Ms UVs sold only 26,321 units. Analysts said M&Ms image as a maker of rugged vehicles, more suitable for travel on rough terrain than on urban roads, worked against it. In contrast, Sumo, with its better looks, appealed to an urban market. Telco followed up the launch of Sumo with two other vehicles, Sierra and Safari, aimed at different segments of the UV market.

By the late 1990s, M&M realized the potential of UVs in the urban market and made a conscious decision to develop a vehicle designed for urban use. The outcome was Project Scorpio, on which work started in 1997. Scorpio was designed to be an urban UV, which combined ruggedness with

4 Tata Engineering and Locomotive Company (now Tata Motors) is one of the largest manufacturers of

commercial vehicles in the world. Established in 1945 to manufacture steam locomotives, it diversified

into automobiles in the 1950s.


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comfort and aesthetic appeal. It was to be designed on par with world class UVs like the Toyota Land Cruiser and Mitsubishi Pajero. The company also simultaneously developed Bolero, another urban UV, to combat increasing competition.

Even as M&M was working on Project Scorpio, its markets took another hit with the launch of

Toyotas Qualis5 in 2000. Qualis was thought to be even better looking than Sumo; and the Toyota tag added to its appeal. Within two years of its launch, Qualis began selling 25,000 vehicles per

year, at the cost of M&Ms brands like Armada and Armada Grand (which M&M had launched in 1993 without much success). M&M launched Bolero in 2000 and the vehicle received mixed

reactions. It was not as big a success as M&M had hoped it would be, but it did help the company

establish a stronger presence in the urban UV segment.

Despite its efforts to counter competition, M&Ms sales stagnated by the early 2000s and its share price touched an all-time low of Rs 100. It was in this scenario that M&M launched Scorpio in

June 2002. The launch proved to be the much-awaited turning point for M&M. Scorpio was an

immediate success, and its sporty looks and powerful performance appealed to a great number of

people. After Scorpio entered the market, many people who would otherwise have bought a

passenger car, chose to buy Scorpio instead. M&Ms auto sector revenue increased from Rs 18.27 billion in the financial year ended 2002 to Rs 25.11 billion in the financial year ended 2003 a spectacular growth of 37 per cent. By December 2003, M&Ms share price had zoomed to Rs 400.

In the financial year ended March 2004, M&M posted a 30 percent increase in sales income over

that of the previous financial year. (Refer Exhibit I for financials). By the end of 2004, M&M was

a market leader in the overall UV market, with a share of nearly 50 percent. (Refer Table I).

Table I

Market Share in UVS (January October 2004)

Company Sales (units) Market Share (%)

Mahindra & Mahindra Ltd 88,071 49.27

Hindustan Motors Ltd 318 0.18

Maruti Udyog Ltd 3,690 2.06

Bajaj Tempo Ltd 8,046 4.5

Telco 42,795 23.94

Toyota Kirloskar Motor Ltd 30,347 16.98

GM-Tavera 5,490 3.07

Source: www.mahindra.com

THE SCORPIO PROJECT

The Scorpio project was very important for M&M. It was banking on Scorpio to help it shed its

image as a manufacturer of vehicles for rural use and to break into the urban market. As a result, it

went all out to ensure that nothing was left to chance in making Scorpio a one-of-a-kind vehicle in

the Indian market.

5 Toyota re-entered the Indian market with the Qualis.


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M&M set up a new plant at Nashik in Maharashtra to manufacture Scorpio. The plant was set up at

an estimated cost of $120 million and had a production capacity of 40,000 units on a two-shift

basis. Three new world class lines were set up at the plant by M&Ms suppliers to manufacture components: a completely automated press shop, set up with help from Fukui of Japan with dies

imported from Fuji; an automated line for producing jigs and fixtures in the body shop developed

with Wooshin of Korea; and a state-of-the-art Trim Chassis Final (TCF) line with a world class

tester line, built in collaboration with Fori Automation, USA, for vigorous testing of various

aspects of the vehicle. There was also a paint shop set up in collaboration with Durr of Germany.

Many of the newly created facilities were also to be used for other products in the M&M range.

For instance, the assembly lines were designed to be subsequently used for Bolero. But some of

the facilities were exclusive to Scorpio. Analysts said that the sharing of the new facilities would

help M&M upgrade its entire production line.

A significant aspect in the manufacture of Scorpio was the use of Integrated Design and

Manufacturing (IDAM). IDAM, which was developed in collaboration with Lucas

Engineering6, was a dynamic manufacturing system, which allowed the manufacturer to

produce what the customer wanted in a flexible manner, through quick product development.

Flexible manufacturing also allowed a large number of variants in the product mix. The idea

behind IDAM was It is easier to make what you can sell than to sell what you have made 7. It aimed to streamline the delivery of a world class, zero defect, trouble-free product and

encompassed the entire value chain from pre-production to final sale. The entire system was

fully automated and workers were trained in continuous improvement, which ensured that the

final product was of high quality. IDAM was the foundation of the Mahindra Product

Development System (MPDS).

Pre-production

M&M conducted a thorough survey of the market and of customer preferences and perceptions

to derive inputs for the design and features of Scorpio. The traditional market for UVs was

very small in India. (In the early 2000s, the market for UVs was only about 15 percent the size

of the automobile market, while the Asian average was 40 percent.) UVs were generally used

by car rental agencies and taxi service providers for commercial purposes; very few were

bought for personal use. This changed in the early 2000s with the launch of Qualis, which

appealed to the urban buyers, and many people began to purchase Qualis for personal use.

Scorpio was designed as an exclusively personal vehicle and the company even went on record

saying that it did not intend to target the commercial UV market. The design, looks,

accessories, and interiors of Scorpio all created an image of high luxury, generally not found

in fleet cars.

The Indian automobile market was divided into various segments A segment (entry level small cars), B segment (semi luxurious cars), C segment (luxury cars) and D and E segments (super

premium cars). Of these, the B and C segments were the fastest growing in the late 1990s.

Therefore, it was decided to position Scorpio in the C segment, which covered the Rs 500,000-

800,000 price range. The company also found that it was the segment in which customers were

most likely to buy a UV instead of a car. Therefore, Scorpio competed with all the cars in the C

segment, along with other UVs in the market. To meet the expectations of car buyers as well as

SUV buyers, Scorpio was designed to fall between a passenger car and an SUV. This approach

was called car plus, as it offered all the benefits of a car plus the thrill of an SUV. (Refer Exhibit II for Scorpios specifications).

6 Later renamed Computer Sciences Corp.

7 www.mahindrascorpio.com


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The B and C segments were also thoroughly analyzed to obtain details about customer

expectations from a car and their perceptions about different features. Key buying factors were

analyzed using a Quality Function Deployment (QFD) process8. The findings of this survey were

then developed into product specifications and formed the basis of Scorpios design. The idea was to make a vehicle that was tailored to the needs of the market. M&M also benchmarked a number

of world class SUVs, including Qualis, against which Scorpio was pitted directly. Some of the

findings of the segment analysis are given in Table II.

Table II

Expectations and Perceptions of B and C Segment Buyers

* Size matters big size stands for status

* Consumers seek the latest technology

* Image is important but at affordable prices

* There is sheer thrill and passion in driving an SUV

* Power of the vehicle makes a statement

* Along with the others, luxury is a very important parameter

* International vehicles define image

* SUVs like Pajero, Land Cruiser and Prado are seen as urban vehicles for the rich and famous

* Consumers aspire to own these vehicles as the image of these vehicles has become very desirable

The Key Consumer Insight that emerged from all the consumer analysis and which was used for strategy development was Consumers want to consume premium imagery at prices affordable to them.

Source: Rajesh Jejurikar, Vijay Nakra, Project Scorpio: A Tale of Category Creation, Strategic Marketing, March-April 2004.

Supplier Involvement

Scorpio was one of the few vehicles to be built with complete supplier involvement from

beginning to end. After styling themes were prepared, the company identified the best vendors in

the field for components supply and collaborated with them on product design and development.

M&Ms supplier list included some of the top companies in the world in their respective areas. Some of Scorpios suppliers were: Fukui (Japan) for the press shop, Fuji (Japan) for the dies, Wooshin (Korea) for the body shop, Fori Automation (USA) for the tester line for final assembly,

Durr (Germany) for the paint shop, Lear (USA) for seats and interiors, Visteon (USA) for

exteriors, Samlip (Korea) for suspension, BEHR (Germany) for air-conditioning, Kenwood for

audio systems, Meritor (UK) for locking system and Bridgestone (USA) for tyres. It also

contracted with Renault of France for Scorpios petrol engines and AVL from Austria for the diesel ones.

Suppliers did not play just an ancillary role; they were partners in the Scorpio project. M&Ms internal team and external engineering consultants were only responsible for the initial styling,

body engineering, chassis and frame design and vehicle integration. All other aspects were turned

over to the suppliers.

8 QFD is a tool to translate customer requirements to engineering specifications. It is generally in the form

of a product planning matrix or house of quality and is applied in the initial stages of production to ensure that the final product reflects the needs of customers.


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Typically, when contracting with suppliers, automobile manufacturers give detailed specifications of what they expect from the component to be supplied. For instance, a company dealing with a supplier of air-conditioning, would tell the supplier that it wanted four vents of 10 square cm, which had to deliver a velocity of air flowing at five meters per second. In contrast, M&M only told suppliers that the vehicle had to be cooled from 40 degrees to 27 degrees in 13 minutes. The suppliers could decide how many vents to put in and at what velocity the air would be delivered. M&M believed that this increased Scorpios manufacturing quality and lowered the final vehicle cost by nearly 10 percent. Even if we pretended to know how to design the A/C system we would not be as efficient in it as somebody who did that for his livelihood. Only suppliers can perfectly match performance with system costs, said Pawan Goenka (Goenka), a former General Motors researcher, who was brought in to head the Scorpio project.

M&M also followed an innovative sourcing system, which made the project more efficient and lowered costs. For example, instead of sourcing all its dies from a single supplier, the company went to different sources. Critical dies like those for exterior panels were given to Japanese manufacturers, Fuji and Miyazu. The remaining were given to tier two, tier three and tier four suppliers. Fuji was then given charge of the total management of dies coming from all the suppliers. As a result, Fuji was responsible for the overall quality of all the dies supplied by all the suppliers and for this additional responsibility, it was paid an extra fee. This brought about a great degree of decentralization and resulted in better management of resources and higher quality. Analysts estimated that if the company had sourced all the dies from one supplier, it would have spent an additional Rs 400 to Rs 500 million than the Rs 1.15 billion (approximately $25 million) it actually spent.

After involving some of the best companies in the world, M&M played the role of an integrator. It stayed hands-off in areas related to component supply and gave its suppliers complete autonomy, sometimes even allowing them to employ unconventional and unproven processes, as long as they met the cost targets specified by the company. Suppliers said that the Scorpio project moved fast because M&M stuck to its hands-off policy and did not constantly change product specifications. In addition, M&M also gave its suppliers component supply contracts for other vehicles in its portfolio, so that they did not have to wait till the Scorpio project was complete to make money. This move kept suppliers more committed and involved.

M&Ms supplier relations were governed by prominent management consultant C.K. Prahalads advice that If you give right vision to your suppliers, they will invest and you don't have to.9 Many of M&Ms suppliers set up their facilities at the companys plant, resulting in a product that was developed indigenously, but without compromising on quality.

Team Scorpio

The team assigned to Project Scorpio comprised 120 people led by Goenka. The average age of the team was 27, which gave the project the necessary freshness, along with a reasonable amount of experience. Unlike the traditional departmental structure, where people were divided by function, the Scorpio team was divided cross-functionally, with each team having cross- functional strengths. One of the traditional problems in product development has been that people keep their functional blinkers on, said Goenka.10 To avoid this, M&M developed heterogeneous teams for Scorpio, with people from different areas working on one team.

A cross-functional division was required to ensure that every aspect in the making of the Scorpio was well balanced and took on a holistic view, in contrast to the narrow approach that would result from having functional teams. For instance, when the company sent auto designers to the UK to

9 Betting big, Business India, June 10, 2002.

10 Prasad Sangameshwaran, Scorpios low cost drive, Business Standard, March 18, 2003.


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work with styling consultants on the design of Scorpio, the 20-member team included even some manufacturing specialists. This ensured that whatever designs were decided on had no manufacturing difficulties, and there would be little reworking to be done after a design was finalized. Some of the teams in Project Scorpio were Design & Development, Testing & Validation, Manufacturing Vendor Development and Marketing. In all, there were 19 cross-functional teams working on Scorpio.

The teams were also given sufficient autonomy and were required to take ownership of their work.

Instead of giving centralized directions, the teams were asked to find out what customers wanted

as well as other vital information like prices of components, details of suppliers, etc. The teams

were then made responsible for delivering on all parameters of cost, quality and performance.

Each team had a leader, who was responsible for the work of the team, and there were few changes

made once a team was formed.

All the teams were given cost targets, which they then broke down to individual component levels.

This was called designed to cost. The teams knew exactly how much they could pay for any component that they required. If a team decided to purchase a higher quality component which

cost more, the purchase was approved only if it showed other areas where the cost could be made

up. Such stringent financial control ensured that Scorpio was one of the lowest priced SUVs in the

Indian market. It also allowed M&M to manufacture Scorpio at $120 million (approximately Rs

5.50 billion) just about one-fifth the amount that global automobile majors spent on a similar project. (Exhibit III for cost break-up).

Testing and Validation

Scorpio was one of the few vehicles in the Indian market that was launched only when it was

completely ready. This was in contrast to some other automobiles that were launched first and had

their problems ironed out later (such as Telcos Indica). While this delayed Scorpios launch by nearly two years, the vehicle, when it was finally launched, was complete in every way. And

M&M did not have to go to the trouble of having to recall the vehicles after they were sold to

correct problems.

Extensive testing was also required because Scorpio was a completely new vehicle with all its parts being designed exclusively for it and not being carried over from some older model. M&M

built 74 vehicles only for testing. These vehicles were tested constantly using the Simultaneous

Testing & Examination Process (STEP). At the production stage, each component and

combination was vigorously tested to ensure that only the best combination of form and function

remained. Finally the complete vehicle was put through the NOVA-C (New Overall Vehicle

Audit-Customer) system to measure the overall quality of the production process itself. The

vehicles road-worthiness was also tested for nearly two years before its launch.

THE LAUNCH AND AFTER

Scorpio was launched on June 20, 2002. Initially the company offered three models two of diesel and one of petrol. The vehicle created a lot of interest in the market. Some were fascinated by

Scorpios sporty looks; others were interested in gauging the performance of Indias first indigenous SUV. At Scorpios launch, Mahindra said, We are extremely proud of the Scorpio and are sure that it would make customers and car makers think seriously about the sports utility

vehicle segment. We at M&M have anticipated the potential of the SUV segment and believe that

the strong value proposition the Scorpio offers would make it a winner. 11

11

Tutu Dhawan, Scorpio from M&M, The Hindu, June 24, 2002.


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His expectations were fulfilled when Scorpio became the preferred SUV in the Indian automobile market. Within the first week of its launch, over 1000 units were booked. Leading automobile magazines and auto analysts in the country gave Scorpio top ratings on aspects like style, performance, power, technology, interiors, driving comfort and value for money.

Analysts said that M&Ms strategy of not positioning Scorpio as a UV was the right one, as most of Scorpios sales came from existing passenger car buyers. (A study showed that soon after its launch, 75 percent of Scorpios sales came from passenger car users, while only 25 percent came from existing UV users). Scorpios popularity had a positive effect on M&Ms performance and in fiscal ended March 2003 (the fiscal when Scorpio was launched), the companys total income rose by 22 per cent. Considering the growing demand, M&M had to increase production levels, and by late 2003, was producing 3000 vehicles a month.

Analysts also compared Scorpio favorably with its closest competitor, Qualis, on looks and appeal. They said while Qualis delivered what it promised and was generally a reliable vehicle, it did not have the powerful appeal of Scorpio nor did not bestow a feeling of pride of ownership as Scorpio did. By 2004, many Qualises were employed by fleet operators as cabs and rental cars, (as were many other SUVs in India), but Scorpio escaped that trend, being used primarily as a personal vehicle.

Auto analysts also said that Scorpio was the best looking SUV in India and that owning and driving a Scorpio improved a persons image and made him seem classy. Scorpio also had plush interiors (a rarity in SUVs) and more space than many of its competitors. Analysts said that Scorpios interiors had the looks and feel of a luxury car, which effectively differentiated it from other SUVs. (Refer Exhibit IV for Scorpios ratings vis--vis competition). Business Standard Motoring wrote If it were a human, the Scorpio would have been a handsome man in his mid thirties mature, capable, balanced and only slightly obese.12 Many also said that Scorpio was comparable to the best global SUVs. If Mitsubishis Pajero (considered to be one of the best looking SUVs in the world) and Scorpio are standing next to each other, you can be sure people will not ignore Scorpio, claimed Goenka.13

Scorpios success was supported by aggressive and ubiquitous advertising with the base line nothing else will do. The vehicle was also priced aggressively and was one of the cheapest SUVs in the Indian market. A review of customer opinions in 2004 showed that most of Scorpio buyers were happy with their purchase, and many of them had traded in their passenger cars or older SUVs to switch to it. Unlike many other cars, no unexpected manufacturing defects emerged in the Scorpio after it entered the market, and this created a positive image for M&M in the market.

The project was not without its share of criticisms though. Some criticized the amount of outsourcing that went into the making of Scorpio and the collaboration with foreign companies. They said that M&M did not have the capability to produce a vehicle in-house, and had to rely on external sources for support. However, others said that when good technology was available for a good price, there was no harm in using it, whether it was sourced from Indian companies or foreign ones. Supporters also said that vehicle integration, which was done completely by M&M, was equally critical and should not be underestimated.

One serious limitation with Scorpio was, however, that it was not crash tested. While crash testing was mandatory in many countries, it was not required by law in India, and so M&M did not subject Scorpio to crash tests. Therefore, the vehicles crash worthiness was unknown and this served to put the vehicle at a disadvantage vis--vis many of its competitors. Besides, M&M had begun exporting the Scorpio in 2003

14, and many felt that the company had the responsibility to

crash test the vehicle.

12

Bijoy Kumar, UV Race, Business Standard Motoring, July 13, 2002. 13

Betting big, Business India, June 10, 2002. 14

It was launched in Italy in December 2003. By 2004, it was sold in the Middle East as well.


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Despite its shortcomings, Scorpio proved to be a milestone for M&M and the Indian automobile

industry. One of the major manufacturing advantages that Scorpio had was that M&M did not

diverge from its original plan through the five years that it took to develop the vehicle. During that

period, many companies had launched SUVs and the perceptions of customers had undergone a

change. However, other than making minor modifications, M&M stuck to its original design.

Scorpios instant success made its competitors nervous. Sumo, the once popular SUV which had become synonymous with car fleet services, was relaunched in 2004 in a new format as Sumo

Victa, and repositioned as a personal vehicle. Toyota also announced its plan to launch a new low

cost model of its Qualis. In fiscal 2004, Qualiss share in the UV market slipped from 38 percent to 30.5 percent, while that of Scorpio grew from 15.8 percent to 22.9 percent (although in actual

numbers Qualis sold more units). In the first quarter of fiscal 2005, M&M had a 49.7 percent

market share in UVs. As Businessworld wrote, Scorpio started out as a definition of M&M's product development capability and ended up being the essence of the organizations new confidence. 15

15

Radhika Dhawan and Anuja Byothra, Play the Game, Businessworld, January 12, 2004.


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Exhibit I

Annual Financials

PROFIT AND LOSS STATEMENT (For the year ended 31st March in Rs. Million) 2004 2003

Sales & Other Income 60,012.28 45,967.92

Expenditure

Material 33,528.65 25,002.18

Excise Duty (Net) 9,437.81 7,854.91

Personnel 4,174.54 3,812.90

Interest, Commitment and Finance Charges 515.87 868.98

Depreciation - net of Rs. 6.62 mn (2000 : Rs. 6.94 mn) transferred from

Revaluation Reserve 1,651.99 1,654.37

Other expenses 6,623.30 5,538.55

46,610.88 36,872.21

Less : Cost of manufactured products capitalised 157.76 191.70

46,453.12 36,680.51

Profit before provision for contingencies and taxation 4,121.35 1,432.51

Less : provision for contingencies 34.20 38.73

Profit before exceptional items & taxation 4,087,15 1,393.78

Less : Exceptional items 294.78 576.56

Profit before taxation 4,381.93 1,970.34

Less: Provision for tax - Current tax 635.00 123.00

- Deferred tax (Net) 261.50 392.00

Profit for the year 3485.43 1,455.34

Less : Adj. pertaining to previous years (net of current and deferred tax) - -

Balance of profit for earlier years 3,485.43 1,455.34

Balance profit for earlier years 4,239.44 3,330.57

Add : Investment allowance reserve account written back 1,231,51 323.33

5,470.95 3,653.91

Total of Profit and Loss Account Balances shown above 8,956.38 5,109.25

Deduct : Debenture Redemption Reserve (Net) - -

General Reserve 350.00 150.00

Dividends paid 0.21 -

Income tax on dividends paid 0.03 -

Proposed Dividends 1,044,13 638.06

Income Tax on Proposed Dividends 133.77 81.75

Balance for 2003-04 and earlier years carried to Balance Sheet 7,428.45 4,239.43

Source: www.mahindra.com


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Exhibit II

Scorpios Specifications

Scorpio was available in five colors red, blue, silver, black, and green. Initially, it was introduced in three variants, one of petrol and two of diesel. The petrol version of the vehicle was named REV 116 while the diesel versions were called the Turbo 2.6 and Turbo 2.6 DX. The petrol version featured an electronic fuel management system that offered a torque of 18.7 kgm at 3800 rpm, with an output of 116 bhp at 5500 rpm, and allowed the vehicle to accelerate from 0 to 60 kmph in eight seconds. The vehicle could comfortably seat 7 to 8 persons. The diesel version offered a torque of 26 kgm at 1800 rpm with an output of 109 bhp at 3800 rpm. It could comfortably accommodate 7 to 9 people. Scorpios specifications are listed below:

Design & Engineering

Height 1916mm

Length 4475mm

Width 1774mm

Wheelbase 2680mm

Front track 1450mm

Rear track 1450mm

Ground clearance 180mm

Kerb weight 1910kg

Interiors, Comfort & Space

Rear seat legroom (min) 62cm

Rear seat legroom (max) 77cm

Rear seat headroom 98cm

Rear seat width 136.5cm

Engine, Gearbox & Performance

Engine displacement 2609cc

Max power 109bhp

Max torque 26.0kgm

Valve gear 2 per cyl, SOHC

Top speed 140kph

Acceleration (in seconds)

0-20kph 1.17

0-40kph 3.65

0-60kph 7.67

0-80kph 13.56

0-100kph 21.40

0-120kph 38.52


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Fuel Economy

Highway (kpl) 10.8

City (kpl) 8.0

Equipment

Exteriors

Clear lens headlamps Yes

Fog lamps No

Sideview mirrors Yes

Full wheelcaps Yes

Interiors

Power steering Yes

Power windows No

Central locking Yes

Tilt steering No

Tachometer Yes

Alloy wheels No

Electric mirrors No

Stereo with four speakers Yes

Rear seatbelts Yes

Rear wash wipe Yes

Digital clock Yes

Seat back pockets Yes

High-mounted stop lamp No

Rear split seats Yes

Warranty period 2 years or

Warranty mileage 50,000km

Price (Rs lakh ex-showroom,

Mumbai ) 6.57 (DX)

Note: Specifications may vary between versions

Adapted from www.indiacar.com


13

Exhibit III

Cost Breakup of Project Scorpio

Component Cost

Dies $25 million

Press shop $20 million

Venders for tooling and rare oases engineering $20 million

Body shop $11 million

Prototyping and testing $10 million

Model variants $10 million

Assembly line improvement and testing $8 million

Personnel overhead $6 million

Consultants $5 million

Plant infrastructure and utilities $5 million

Total spent on developing the Scorpio $120 million

Source: Wielgat, Andrea, Manufacturing the Mahindra way, Automotive Industries, October 2002, Vol. 182,

Issue 10.

Exhibit IV

How Scorpio Compared with Competition

Mahindra

Scorpio Tata Safari

Toyota

Qualis Tata Sumo

Mahindra

Bolero

Looks & Styling

Engine & Performance

Gearbox

Space & Comfort

Ride & Handling

Refinement

Fuel economy

Value for money

*One star indicates low score and five stars the highest

Source: www.indiacar.com


14

Additional Readings & References:

1. Betting big, Business India, June 10, 2002.

2. Bijoy Kumar, UV Race, Business Standard Motoring, July 13, 2002.

3. Subhadip Sircar, M&M Aims to Hike Market Share To 45% in 3 Yrs with Project Scorpio, The Financial Express, April 10, 2004.

4. C. Manmohan Reddy, Scorpion Sting, BusinessLine, June 17, 2002.

5. Bijoy Kumar, We have lift-off, Business Standard Motoring, June 22, 2002.

6. S. Muralidhar, Mahindra & Mahindra: Will Scorpio help switch gears? BusinessLine, June 23, 2002.

7. Tutu Dhawan, Scorpio from M&M, The Hindu, June 24, 2002.

8. Dilip Cherian, Tycoon Tattle, The Indian Express, June 24, 2002.

9. M&M: Scorpio lacks sting, www.equitymaster.com, June 29, 2002.

10. R.Y. Narayanan, M&M sees early break-even for Scorpio, BusinessLine, August 22, 2002.

11. C. Manmohan Reddy, M & M versus Telco, BusinessLine, August 26, 2002.

12. Andrea Wielgat, Manufacturing the Mahindra way, Automotive Industries, October 2002, Vol. 182, Issue 10.

13. Prasad Sangameshwaran, Scorpios low-cost drive, Business Standard, March 18, 2003.

14. Crash testing for dummies (and why we dont do it), Indian Express - July 20, 2003.

15. Bijoy Kumar, Whats the Score? Business Standard Motoring, August 30, 2003.

16. M&M to up Scorpio production, www.domain-b.com, September 15, 2003.

17. Gauri Shukla, Sauve Statement, Business Standard, September 30, 2003.

18. Mahindra Scorpio wins national award for R&D, The Economic Times, November 12, 2003.

19. Radhika Dhawan and Anuja Byothra, Play the Game, Businessworld, January 12, 2004.

20. Rajesh Jejurikar, Vijay Nakra, Project Scorpio: A Tale of Category Creation, Strategic Marketing, March-April 2004.

21. Subhadip Sircar, The Makeover At Mahindra, The Financial Express, April 10, 2004.

22. Parvathy Ullatil, Sports utility vehicles, anyone? Business Standard, May 13, 2004.

23. M&M: Two to tango, www.equitymaster.com, October 28, 2004.

24. www.indiacar.com.

25. www.indiainfoline.com.

26. www.mahindra.com.

case scorpio

Documents

year award

oper046 project scorpio

management research

industrial research

anand mahindra mahindra

best car

sports utility vehicle

best suv