The one thing we learned out of COVID is just managing tier one suppliers is not good enough. Like we never realized six years back where our semiconductors were coming from because we didn't buy them directly. Our suppliers were buying semiconductors as a tier two or three, and we had no visibility. Today we've now built visibility on all our tier 2s and tier 3s.
So we've seen whenever we've made products from the heart without getting too rational about it—it's an engineering industry, so I'm not kind of saying there's no room for rationality, there is a lot, but a lot of the design has to come from the heart and has to come when the designer really wants to do something which will touch the customer. The Scorpio was done that way; the XUV500 when we first launched it in 2011 was done that way. So these were products which were like designers having the freedom to kind of, "Yeah, this is what we want to create."
Hello and welcome to yet another edition of Unscripted, where we speak to interesting people about interesting businesses and their plans. My guest today is somebody who is an auto industry veteran. He has seen the evolution of India's auto sector over the last two decades, and what an evolution it has been. It is my pleasure to welcome Rajesh Jejurikar, ED and CEO, Auto and Farm Sectors of Mahindra & Mahindra. Hi Rajesh, thank you so much for being with us for this unscripted conversation, and we'll keep it free flowing as unscripted typically is. Wanted to figure out from you: you've had a lovely journey with Mahindra right from 2000 when you joined until now, and so much is happening in the auto sector right now and has been evolving over the last so many years. So tell us a little bit about your journey, number one, and number two, how you have seen the sector evolve over these years.
Thanks for having me on this podcast, and I love the word "unscripted" because in a way that's really what life is about: you never know what's coming next. And when I got into M&M in 2000, I had no idea that in life I would ever end up in an auto company. I came from packaged goods and auto was never on my horizon or something I would do. The industry at that time was relatively small and we were a very different company too. We were mainly making what is called soft-top vehicles then, and we had one so-called hard-top product which was called Armada, and then there was Armada and Armada Grand back at that time.
So we've come a long way as a company and an industry since then. And it's been a pleasure having witnessed the evolution of the consumer, the technology, and how strong Indian automakers have become. You know, the big tech in the year 2000 was power steering, power windows, and air conditioning. I mean, that used to be considered—like when we launched the Bolero in 2000, we kind of said this is a fully loaded vehicle, and that meant it had AC, power steering, and power windows. So that's how much the auto industry has evolved since.
Today it's technology at the core of it, right? Absolutely. I mean, how much of a car today, just as a consumer and from your perspective as a producer, how much of a car today do you think is technology and then the rest of it? Because auto companies are morphing into tech companies in that sense, so in fact tech and auto have converged in a very big way. So what is your sense? How do you look at it when you think of a car or a variant? How much of tech do you start thinking about?
Yeah, there are multiple segments, so we should be mindful not to paint everything with one brush. I mean, we still sell very large volumes of Bolero. We launched it in 2000, as I said, so it's the 24th year of Bolero, the 22nd year of Scorpio. The Bolero, for example, doesn't come in with a lot of tech still, and we still sell very large volumes—close to 9,000 a month of it—which is a very significant part of our portfolio, still mainly in the rural areas. That customer is looking not necessarily at a tech-loaded vehicle; they want the simplicity of it, the handling, the space, and the reliability of it. So there is a segment of the market which is not looking necessarily for high tech.
And then on the other end of the spectrum, we have our electric vehicles, and our electric vehicles, for example, are very, very tech-loaded. There is a lot of software in it, where they're like software-defined vehicles, that we are able to give customers a huge amount of tech which makes their life easier, including even the way the suspension adapts—we have the semi-active suspension which adapts to road conditions. So there's even software going into things like suspension. Apart from a lot of tech, we've introduced just recently in the BE 6e Sport Tech, which we launched a couple of days back on the 15th of August, things like a car revive mode, which allows you a few extra kilometers when the battery is zero; complete Gemini-based conversational AI on the Google Gemini platform along with Google, where the car can actually even interpret what you're saying. So if you say like, "I'm feeling warm," the car will automatically move the air conditioning into cooler by 2 to 3 degrees. So it's even interpreting what you're saying. We call it MAIA, which is our backend architecture. MAIA stands for Mahindra AI Architecture.
So there's so much tech. Or you have the other end of the spectrum where customers don't really want that much tech. So even in 3XO, we do have a version with a lot of tech, but 60-70% of the volume is the more basic version.
It's interesting you talk about MAIA, and you also say that Bolero and Scorpio are still selling well. How much of the Bolero and Scorpio playbook can you actually use in terms of production? How much can you actually use that in today's times, given the changing customer preferences both in terms of design—I'll come to design a little later—and tech specifically, and electrification? How much of that playbook are you still using?
A lot of Bolero and the Scorpio Classic sell in semi-urban, rural India. They represent a certain brand DNA which is around tough, rugged—it's very good for those road conditions. So that playbook is in a way extended a little bit as we launched the Scorpio-N. We launched the Scorpio-N in 2022, so we are now about four years into the Scorpio-N. The Scorpio-N was on a completely different platform. It does have a lot of the tech at the high end, but that's a merger in a way of an evolving technology while still retaining the core of what the product fundamentally is, which is a tough, rugged platform, a little bigger than the Scorpio Classic. So in a way, we do extend that and start bringing out more tech versions of that. And tech is not always software as well. To the ride quality and the comfort, a lot of tech goes behind that and the way we design the chassis and the suspension as well.
We started this conversation by saying everything is unscripted, that's life and nothing really can be predicted beyond a period. Now the auto industry itself is always subject to the vagaries of the monsoon sometimes and cyclicality in that sense. And also you have tractors, which is again very subject to cyclicalities, and then you have global turmoil which is always kind of a given hanging over us these days. As a CEO, how do you sort of marry all these aspects, and then in a segment which is becoming so very competitive?
Yeah. We're seeing volatility of the kind not seen before. That may be a cliché at the moment. In a way, the real strength of any leader today is what's called antifragile: how do you make your organization be able to thrive in uncertainty? There was an era of planning cycles and an era of strategic business plans where you kind of laid out everything. Today it's an era of scenarios. At best you can kind of say, "Either this will happen or that will happen or that will happen." It is very hard to put a certainty to any one way the playbook will pan out.
So really what we try and do is, of course, we have budgets. Like it or not, that part of the world has not changed. So we do have budgets and a set of numbers that we've got to deliver. I think what leaders have to have is the flexibility to change your line items as the situation is moving. When things are relatively better, then you open up the purse. There are some things that you do in those times. Even when things are bad, there are some things you should not give up on. We've seen the current context, or we've been through 2009 and many other such cycles, and the one thing that we've learned through that is don't cut back anything which is fundamental and long-term. You've got to go over that mode because bad times don't necessarily last for very long. They are cycles, and in those cycles if you cut back anything which is strategic or long-term, then it comes to bite you.
In fact, there sometimes is the opposite theory that you need to invest in these times to be prepared when the going is good again, right?
Right. Like we've just embarked on a very large greenfield plant in Nagpur for which we've taken about 1,500 acres, and we'll start work on that right away for launches which will happen in early 2029. Now, we're not going to cut back on anything because of what's happening right now. But a few learnings that we've seen out of that, more because of the profile of our kind of market: we've seen that global waves don't affect Indian demand as much. We've seen that in 2009 when there was a major global meltdown; we've also seen that more recently. So demand continues to be robust. Our demand gets affected by some other things, and we can come to that. But what starts getting affected these days is the supply chain, because the supply chain is still very global.
Which just around last year and the year before was a huge issue when we had the supply chain disruptions.
Yeah. So today, one of our big challenges comes out of managing supply chain risk. So that's really one of the things that we've got to manage for.
And how are you doing that typically at Mahindra?
We've done a very robust dependency analysis and risk analysis on where we're getting parts. The one thing we learned out of COVID is just managing tier one suppliers is not good enough. Like we never realized six years back where our semiconductors were coming from because we didn't buy them directly. Our suppliers were buying semiconductors as a tier two or three, and we had no visibility. Today we've now built visibility on all our tier 2s and tier 3s, and we've got contingency and alternate plans for each of them so that we have better control. We have to get more granular, and we hadn't learned that honestly in the past. We would just think about how we're managing risks of our supplier gate, but not worrying about their risks. Today we do spend a lot of time worrying about their risks.
That's a very important point and that's a whole new paradigm altogether, to get into tier two and tier three and understanding where they're coming from, also building contingencies.
Correct. You also spoke about monsoons and the effect on tractors, and we've learned that a tractor is going to have cyclicity. Really it is about: is there a fundamental growth story in place and what are the drivers of that? And we believe the drivers of that are very robust as the country strangely has a labor shortage across the board.
Right. So there's a labor shortage on farms. It's not like farm labor is available, which is leading to mechanization on the farm side. And there's a labor shortage with a lot of our suppliers because of how migrant labors are moving or not moving and where they're going, to which part of the country they prefer to work in. On the one hand we may be talking about unemployment as an issue, but I think skilling right now is a very big thing. Coming back to farming, we as an industry player are very used to operating in cyclicity there. There's a cyclicity, and we have to have very responsive—
That's a known unknown, right? So you know that every three, four years there will be a little bit of a downturn, and you know how to adjust the supply chain ramp-down and ramp-up to cope with that.
Yeah, that's true. Today those are part and parcel of any CEO playbook, right? You have to figure out these variables. The other point I wanted to check with you, Rajesh, is design was one of the areas which I feel, having seen Mahindra and covered it for a while, has dramatically changed. Also there have been acquisitions on the design front which have also helped, etc. A couple of things: one is what led to this whole change? This is a mindset change. If you ask me, Mahindra is a story of mindset change at the company level and understanding what today's consumer really needs and wants. So when did this come about, and since you've spent so long at the helm and also in the auto sector itself, when did you decide that we need a real refurbishment of all the brands and all the variants?
Increasingly it is obvious two, three things. One is we've seen whenever we've made products from the heart without getting too rational about it—it's an engineering industry, so I'm not kind of saying there's no room for rationality, there is a lot, but a lot of the design has to come from the heart and has to come when the designer really wants to do something which will touch the customer. The Scorpio was done that way; the XUV500 when we first launched it in 2011 was done that way. So these were products which were like designers having the freedom to kind of say, "Yeah, this is what we want to create."
As we came closer to 2020, the one thing that we would hear a lot about is Mahindra has really leapfrogged on powertrain. Our engines had become really world-class both from a standpoint of fuel efficiency, but most importantly refinement and quietness. Sometimes when I sit between diesel and petrol cars, I can't make out the difference. Diesel has become so quiet, sometimes I think I'm in a gasoline car. Diesel engines are of course much more emission compliant and cleaner, but also much quieter. So we made a big leapfrog in the whole evolution of our powertrains and aggregates; we hadn't made that much of an evolution in our design capability.
So in 2020, when we kind of were saying how are we going to prepare ourselves for the next decade, the one pillar that we said we really have to strengthen is design. Which is when we got into someone from your area, which is Pratap Bose. We kind of reached out and started having conversations with Pratap on coming on to take on this role, and he was of course, as you know, based in the UK.
And he said, "I'm definitely not going to relocate." So we said, "Okay, then we'll create a design center for you in the UK." And that's how we ended up creating Banbury. So it was not that we had a strategic plan to go and create a design center in the UK and then we kind of brought Pratap in, but to bring Pratap in we had to create a design studio in the UK. And then in the first conversations he said, "I'll need a team." So we said, "Yeah, okay, what kind of number?" He said maybe 20-25. So we said fine, we'll create a design center, we'll have 20-25 people there. We now have 65.
Portfolio is growing, and we've significantly strengthened the design center as well. So we've got some really good people, and even in the UK we've had some of the best talent in the region from the best marquee brands. So we've kind of worked a lot to—
And including the new logo as well.
Yes. So we have the Twin Peak logo which was done, the infinite possibility logo which is on the electric vehicle. So all of that evolution has been part of how we've worked on creating the brand and design together. Both of these have been around creating products which—in fact, Pratap coined the term "heartcore design," which was around how do you create a range of products which are emotionally connected to customers.
And the BE 6e was actually a designer's brief for me. There was someone in product strategy who created the brief. We had sketched that on a tissue paper sitting in a restaurant or whatever, and that became the brief, and we said let's make this car. At that time we had no idea how to make this car, but that's where that got started. So it was really strategy evolving out of a tissue paper, as they say.
Which is the birth point of many strategies which have gone on to become big. The other thing which probably is a bit of a tongue-twister are the names of the models. I believe some work is going on on that, because that XUV with all alphabets and mixed alphanumeric numbers—are you looking at that since you've really come to the new age in the truest form?
We are helping make it easier for customers. We put a Sport Tech tag onto BE 6e, so you can call it Sport Tech. So we are doing some of these things. On 9e, we introduced part of the portfolio we called it C-Lux. So we are taking steps. But we get it that it's not very easy for customers to get the XEV, and that does also create confusion with the BE. But once you launch something and it's in the market, there's also an equity with it, right? It's not very easy to transform it without a reason. Yes, on the electric portfolio we do need a little bit of work on getting done the nomenclature.
Coming to electric, which has been the real recent massive story around Mahindra, the Born Electric breed as well as the whole electrification: how much of that is now playing out, and what is the next step in that is one part of the question. Second is: tell us the story about how this whole BE family came about.
Yeah. So we go back in 2021, and honestly at that time we didn't really have clarity on how we're going to build the electric portfolio, and electric was still non-existent. There was a lot of media which would still say, "Is Mahindra too late to the party?" when the EV penetration was 1%.
So our comment at that time was the party hasn't even started, so where's the question of being late to a party which hasn't even started? But it did get us going. The first part of the brief to Pratap then was to design our electric portfolio, and honestly we didn't have a lot of clarity in 2021 on what we wanted to create.
And then Velu at that time was the head of product development. Velu kind of took it upon himself to say, "How do we make the organization future-ready for creating an electric portfolio?" And once we had decided that's what we wanted to do, Pratap started with that one sketch and Velu started with how do we create a platform. The one thing we wanted to do differently in electric than what we had done in our other products in the past was to design a common platform strategy on which we can then create a variety of products. We hadn't done that as much in our products—we would do one product at a time. But when we were doing the EV strategy, we said one product at a time is not the way to go; we've got to design five products at the same time and commonalize the whole platform and architecture. And we ended up calling that INGLO and the MAIA backbone.
So everything that we were doing there was like: okay, we have to design for five years later. We don't know how the tech will evolve, so whatever we know, do it as futuristic as possible, back the product to be really future-ready. So everything that was an evolving tech there—
Including I think MAIA also has to keep evolving.
Yes. But the thing that we did with the EVs was we really went in with the latest and fastest chip, which was a Qualcomm chip, because we realized that if you have not provided the hardware with adequate memory or capacity, then your ability to do the rest is straight away constrained by that.
So that was one of the decisions that we took. But in that short span of, let's say, middle third quarter of 2021, within seven or eight months, we first showcased in Banbury in the UK on August 15th, 2022, a full strategy. And we for the first time put it out there to media. We've always been very mindful of not putting our strategy out there, but in this case we kind of said: okay, this is the platform, this is the battery pack, this is what we're going to give you, these are the protos of how the products are going to look.
Was it because you felt the criticism of "you came late to the party"?
That was part of it, right? But we also wanted to then say that yes, there are people who believe in it. And we also made it a separate company and brought in the first investor, which at that time was British International Investment. Temasek followed. They all bought into the vision. We had zero product sales when we brought investments in and the company got valued at $9 billion as a starting business. There was zero sales. It was all based on what we said and what we showed them by way of prototypes and the platform strategy, right? So it was them making a bet on us as well, and us making a bet on our future.
Because we had a credible path to how we would get there and we were investing to build something which was futuristic, we got people on board. And this is the fastest we went to market with. So we basically, as I said, started the concept on 2021, and on 24th November we launched the first car. And when we launched that, we were also ready with 9e, which we came one year later with, but actually it was ready. But we wanted to launch with the edgy designs first so that we stand out in the market, and then we brought in the 7e.
