Mahindra & Mahindra is developing a small engine for a smaller version of its UVs and replicate the Tatas dream of a small car, a company official said.

The company is developing an engine with a capacity ranging between 650cc and 750cc, said Hemant Luthra, president, Mahindra Systech. He declined to give more details.

The Rs 28,500-crore (Rs 285-billion) group, which is partnering France's Renault to sell Logan, aims to expand presence in all the segments of the market.

The Tata group's plan to sell the world's lowest-priced car has spurred many companies, including M&M, to follow in its footsteps.

Mahindra Bolero, powered by 2.5 litre engine, is priced at Rs 5,28,000. The utility vehicle is among the largest selling vehicles in rural India. Mahindra Logan, a mid-sized sedan, is powered by 1.4 litre petrol engine which is imported from France.

Italian acquisition

Meanwhile, M&M on Thursday announced the acquisition of 100 per cent stake in Italy-based engineering and design firm, Engine Engineering Srl, for an undisclosed amount.

The company intends to utilise the Italian company's expertise in making small, yet fuel-efficient engines, suitable for small vehicles. Luthra said, "We have acquired a company, which apart from making designs for high-end motorcycles, has proficiency in optimising fuel economy from a small engine -- the size of about 700cc. There will be spin-off benefits of this expertise from which Mahindra & Mahindra stands to gain. We can use this engine in M&M vehicles."

The Italian company has been developing engines for superbikes such as Ducati and others and M&M intends to capitalise on this expertise for its range of vehicles.

For example, Tata Motors' [Get Quote] Nano will be powered by a 623cc, 2-cylinder, petrol engine, while superbikes such as Honda CBR 600RR and Yamaha YZF R-6 ride on a similar size engine.

Engines produced by M&M using the Italian technology will most probably have higher power output despite smaller engines. "Unlike outdated large size engines, these new generation engines enable higher power output even from small engine displacement," said an industry expert.

Despite being a home-grown automotive giant like Tata Motors, M&M is yet to make a mark in the low-cost vehicle market. Except for an initiative in the farm equipment  segment, where the company is understood to have been working on cheap and low-powered tractors, the company has been low on innovations.

Through the acquisition of the Italian company, M&M Systech, the components, engineering services and design arm of the group, will look to shore up its engineering services business along with better access to market, technology and management skills.

"Mahindra Engineering Services has over 1,000 engineers, which provide high-end cost-effective solutions and can support the offshore needs and technical skills of Engines Engineering," stated a company release. Mahindra Systech contributes nearly 15 per cent to M&M's overall revenue at $1 billion.

A significant portion of Systech's revenue is generated by the companies it acquired in recent years. M&M's automotive division, as a client, generates about 8-10 per cent of Systech's turnover.

This figure is expected to go up substantially in near future as the automotive division, which makes utility vehicles, trucks, 3-wheelers and tractors, will make the most of Systech's in-house technological capabilities. 

Engines Engineering, which is in the business of two-wheeler designing and developing of motorcycle prototypes, posted a turnover of $12 million. The company was originally founded in 1979 by Alberto Strazzari who also held 85 per cent in the company with three other investors holding the balance.

The company is based in Castenaso near Bologna which is also one of the leading automotive engineering and industrial manufacturing hubs in Italy.

The Italian firm carries out a full range of activities (starting from a basic idea, culminating into a finished product on the road) with latest styling trends and incorporates the most advanced technology in terms of mechanics, said a Mahindra statement.

The company has served clients, including Benelli, Beta, Ducati, Gilera, Honda, LEM, Malaguti and Yahama.