SEOUL, June 14 (Yonhap) — SsangYong Motor Co., the South Korean unit of Indian carmaker Mahindra & Mahindra Ltd., is facing yet another stumbling block in its efforts to return to normal as its parent signals a potential exit, industry sources said Sunday.
Faced with increased losses, Mahindra & Mahindra is considering selling its stake in the Korean unit amid the coronavirus pandemic, saying SsangYong needs a new investor, according to earlier foreign media reports.
In 2011, Mahindra & Mahindra acquired a 70 percent stake in SsangYong Motor for 523 billion won. Mahindra currently owns a 74.65 percent stake in the SUV-focused carmaker.
SsangYong Motor has struggled with declining sales due to a lack of new models and its parent firm’s recent decision not to inject fresh capital into the Korean unit.
Its Indian parent Mahindra said early this year it will inject 230 billion won into SsangYong for the next three years after obtaining approval from its board.
But Mahindra’s board voted against the investment plan in April, as the spreading COVID-19 outbreak continues to affect vehicle sales in global markets.
Instead of the proposed 230 billion won, Mahindra said it would consider a “special one-time infusion” of up to 40 billion won over the next three months to help SsangYong continue operations.
SsangYong Motor is expecting financial assistance from the state-run Korea Development Bank as some 90 billion won worth of loans extended by the lender are scheduled to be due next month.
From January to April, SsangYong’s vehicle sales fell 33 percent to 30,952 units from 45,908 in the year-ago period.
SsangYong’s lineup consists of the flagship G4 Rexton sport utility vehicle, as well as the Tivoli, Korando and Rexton Sports SUVs.