India’s Mahindra & Mahindra’s deal to sell its SsangYong Motor to South Korean automaker Edison Motors is being terminated. It is Mahindra’s unit, which is known to be its bankrupt unit. The deal is terminated as a result of Edison’s inability to deposit the amount that is bid for the termination.
Mahindra owned about 75% of SsangYong as of September end. It has been looking for a buyer for all or most of its stake. Which was bought when the South Korean automaker was on the brink of bankruptcy in 2010. SsangYong has been under court receivership since last April in an attempt to rehabilitate the carmaker after Mahindra failed to secure a buyer. This year in January, SsangYong Motor had said a consortium led by South Korean electric carmaker Edison Motors Co had agreed to buy it for 305 billion won ($254.65 million).
The deal
Debt-ridden SsangYong Motor is finally acquired by a local consortium led by South Korean electric bus and truck maker Edison Motors for 305 billion Won ($254.56 million). According to the company’s regulatory filing, it reported an operating loss of 238 billion Won from revenue of 1.8 trillion Won in January-September 2021. The acquisition money will all be spent to repay a portion of the carmakers’ debt to financial institutions, the companies said. Edison Motors hopes to rehabilitate Ssangyong by launching the brand in more markets like the US and Mexico.
In 2010, homegrown automaker Mahindra and Mahindra (M&M) acquired a controlling stake in SsangYong to expand its portfolio of premium SUVs in the Indian market and use the SsangYong brand to establish itself as a global company. But as luck would have it, losses continued for almost a decade and Mahindra was forced to look for a new buyer. SsangYong Motor eventually filed for bankruptcy with an outstanding loan of 100 billion Won in late 2020.
In January, Research Analyst at Counterpoint Research, Soumen Mandal talked about the reason behind the deal not working out. “M&M targeted utility vehicle market through this deal and also to get momentum in global markets. However, Ssangyong vehicle sales, including CBU and CKD, decreased by 21 percent year-on-year (YoY) to reach 84,596 units in 2021. COVID-19 had a negative impact on this company. Moreover, MPV sales reduced to zero from 2020. It also started to revive back by entering into the electric vehicle business. For battery development, it joined hand with BYD as well. However, it failed to revive back due to poor performance from Rexton, Korando, Tivoli, and R/Sports models,”