By Fakir Hassen

Johannesburg, June 9 Indian auto major Mahindra and Mahindra will likely start assembling vehicles in South Africa from early next year, according to the new chief executive of Mahindra South Africa, Ashok Thakur.

The services of a local manufacturer would be utilised for this purpose, as no South African company has ever produced at 100 percent capacity, Thakur told the Afrikaans daily Beeld here.

"There has always been extra capacity available," Thakur was quoted as saying.

Just two months ago, Thakur's predecessor Vijay Nakra had said Mahindra's plans to assemble vehicles locally, first mooted in 2006, had been delayed due to the global economic downturn that had forced many South African dealers to close shop.

Thakur said a number of companies had approached Mahindra offering production capabilities, but he was sceptical of these offers. "It's possible that they could say bye-bye when the upswing (in the economy) comes."

Any arrangement by Mahindra South Africa would be similar to those it has in Egypt and Brazil, where the cooperation was not only at the level of technical support, but also in distribution, Thakur said.

Besides the economic benefits of assembling locally, this would also give Mahindra a better gateway into Africa through reduced shipping costs.

The cost of shipping a container with three Mahindra vehicles from India to South Africa is about $1,000 and $1,500 to West Africa.

Currently, 95 percent of parts for Mahindra vehicles sold in South Africa are available locally, with some of them being manufactured here as well.

Sales of Mahindra vehicles are between 1,500 and 2,000 annually.