India-headquartered vehicle manufacturer Mahindra Group has signed a memorandum of understanding (MoU) with South African development finance institution the Industrial Development Corporation (IDC) to undertake a feasibility study on the potential establishment of a completely knocked down (CKD) vehicle assembly facility in South Africa.

Mahindra South Africa last year celebrated its twentieth year in the countryand on February 24 reached the milestone of the 25 000th locally assembled Pik Up bakkie.

It is now seeking to bolster both localisation and its production capacity in South Africa, in its third decade in the country.

Currently, the company has a semi-knockdown facility (SKD) production facility in the DubeTrade Port in KwaZulu-Natal, operated by AIH Logistics, which entails assembling already assembled component subsets, imported from India, into a completed vehicle.

Therefore, local value addition is only at about 20% to 25% and, as reported by Engineering News & Mining Weekly last year, the company has been aiming to increase this.

The feasibility study, set to take between 18 and 24 months, will examine key factors such as South Africa’s automotive industry incentives, export market potential, workforce development, and supply chain infrastructure.

Moreover, it will assess logistics and supply chain feasibility, including potential locations, to determine how Mahindra can further integrate into the country’s industrial landscape, including new energy vehicles.

Mahindra South Africa CEO Rajesh Gupta stressed that while the MoU signalled the company’s intent to explore local manufacturing opportunities, it was purely an evaluation and there was no guarantee that a CKD facility would be established.

Rather, the study will enable Mahindra South Africa and the IDC to make an informed assessment before any future decisions are taken.

The company is now at a level of scale where it can pursue increasing its manufacturing capabilities in the country, with its “robust” product pipeline for the next three years also supporting this, Mahindra automotive division president Veejay Ram Nakra told Engineering News & Mining Weekly on the sidelines of the MoU signing.

He highlighted that the company’s sustainable growth trajectory in the country over the past 20 years had seen it increase its production capacity tenfold, from an initial figure of about 1 000 vehicles a month.

IDC industry planning unit head Rian Coetzee welcomed the signing of the MoU, noting that the company’s commitment aligns with the objectives of the South African Automotive Master Plan 2035, which focuses on strengthening the competitiveness of the country as an automotive assembly location.

Meanwhile, Mahindra on February 25 also inaugurated an integrated warehouse and training centre in Gauteng, which is double the size of its previous facility, Nakra said.

The Automotive Industry Development Centre also welcomed the signing and noted that the organisation would be looking to work with Mahindra to build further skills development capacity in the country.

Mahindra South Africa is also in the process of increasing its production capacity in the country. In this vein, the company on February 24 inaugurated its bigger production facility, also in the Dube TradePort, which has the capacity to assemble close to 1 500 Pik Ups amonth.

In August 2023, Mahindra revealed its next-generation Pik Up to a global audience in South Africa, with the aim for the country to be the main target market for this, and this also underscores the country’s role in its international strategy.

Nakra highlighted that South Africa was the group’s “second home”, as the second-largest market for its automotive business after India.