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M&M to make small engines

Global small cars may run on Mahindra & Mahindra engines. The Rs 11,670 crore Indian auto major is entering the business of designing and manufacturing low-cost car engines.

business Updated: Jun 05, 2008 20:54 IST

Global small cars may run on Mahindra & Mahindra engines. The Rs 11,670 crore Indian auto major is entering the business of designing and manufacturing low-cost car engines. Mahindra Systech, technology arm of the tractors-to-software conglomerate has acquired Engines Engineering S.p.A. (EES), an Italian engine design and manufacturing firm with expertise in the field.

With this, M&M would now be able to manufacture engines for the likes of Tata Motor’s Nano or the small car recently announced by Nissan and Bajaj.

"We are going to help others build engines for future cars with this acquisition," said Hemant Luthra, president, Mahindra Systech. He, however, did not comment on whether there are existing tie-ups with any of these players. He also did not say if the company would also acquire capacities to make larger engines.

EES, which started off designing motorcycles, would also bring in capabilities to design and manufacture 2-wheelers upwards from scratch to M&M. The top clients for the Italian company, with revenues of $12 million (Rs 51 crore) are motorcycle makers Benelli, Beta, Ducati, Gilera, Honda, LEM, Malaguti and Yamaha, all who would now be accessible to M&M.

With EES’s capabilities of designing and manufacturing small engines, M&M would be all set to enter the fray for supplying engines to global companies. Car companies all over the world are moving towards smaller, more fuel efficient and better-designed cars. Companies including Tata, Nissan, Honda and Toyota have all unveiled grand plans to bring out small, fuel-efficient family cars that cost less and have better designed, frugal engines.

Even in the US, the world’s largest car market, smaller cars like Honda Civic and Ford Focus have replaced fuel-guzzlers such as the Chevrolet Silverado, a large pick-up truck. This has thrown up a huge opportunity for engine manufacturers who have a cost advantage.

The acquisition would bring in Systech’s 4,000 Indian engineers and EES’s European technology together.

Luthra said that Systech, which is now a Rs 4,000 crore independent design company under the M&M banner, wants to develop strong capabilities to design low-cost, high-quality engines.

He, however, refused to correlate the acquisition with M&M’s reported talks with Kinetic Motors of India for a possible foray into the two-wheeler space. “If M&M firms up its motorcycle plans at some point of time in the future, or asks us for engines, we would partner with them,” Luthra told Hindustan Times.

M&M is reported to be in talks with Kinetic Engineering, makers of the Kinetic brand of scooters, for a stake in the company. Anand Mahindra, vice chairman and managing director, Mahindra Group had earlier declined to comment on the development.

About 10 per cent of Systech’s revenues come from M&M, whose businesses are making tractors and cars including Scorpio and Renault Logan. Less than 25 per cent of its revenues come from India.