And aspires to be a premium brand in the SUV space across the world

February 27, 2014:

Yoo II Lee shakes his head when the topic veers around to frugal engineering. The President & CEO of SsangYong Motor Company clearly does not subscribe to this concept which has become some sort of a style statement in the automobile industry.

Frugal engineering is something I do not agree with because you cannot compete globally with this concept. Low cost from the point of savings is fine but this should not mean a low quality car, Lee told Business Line at the Delhi Auto Expo earlier this month.

As he puts it, frugal engineering may be accepted by very low-income groups. The SsangYong chief then brings up the example of China where one can only find top-end brands. Likewise, people in India are also looking for big cars like BMW and Audi. They want good performance, not cheap cars.

Origins

Frugal engineering became a fashionable term thanks to Carlos Ghosn, the charismatic CEO of Renault-Nissan. The roots perhaps go back to the time of the Tata Nano which hit the headlines nearly eight years ago with its unbelievable price tag of Rs 1-lakh. Ghosn made no bones about his admiration for this initiative and believes frugal engineering holds the key for automakers success quotient in emerging markets where price plays a big role in the buying decision.

Clearly, Lee is not on the same page and wants SsangYong to remain in a premium space with its SUVs. Its owner, Mahindra & Mahindra which acquired the company three years ago, focuses on a more realistic price spectrum since its home base, India, is one of the cost-competitive auto markets in the world.

Yet, the two have been working towards a successful partnership which saw 2013 register one of the best years for SsangYong with sales of nearly 1.5 lakh units. The target is to double this by the end of 2016 a remarkable turnaround for this Korean automaker which was literally in the dumps not-so-long ago.

Yet, there are critical gaps which need to be filled quickly if SsangYong has to emerge a lot stronger in the coming years. The one thing we do not have is auto transmission which we are buying from outside. This remains our weakest point. Mahindras should consider having its own auto transmission plant in Korea which will help SsangYong become a complete automaker, he adds.

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Why Ssangyong does not believe in frugal engineering