Utilility vehicle manufacturer Mahindra and Mahindra has invested around $3 million (30 million South African rand) to increase stake in its South African joint venture from 51 per cent to 91 per cent.

Mahindra & Mahindra raised its stake in Mahindra South Africa, a subsidiary that imports fully built vehicles from India, over the past few months and proposes to acquire the remaining stake at an appropriate time, reports said.

The cash infusion was necessitated by the weak rand, rising costs and declining sales, Pawan Goenka, president of the vehicle unit and board member at Mahindra & Mahindra, said at the launch of the new multipurpose vehicle, the Mahindra Xylo.

Mahindra South Africa, a subsidiary of the $6.7-billion Mahindra Group, on Monday launched its new multipurpose vehicle the Xylo.

Mahindra SA, a joint venture with African Automotive Investments Corporation, was under financial pressure as the sales volumes dropped at the time when fixed costs were rising, hurting profitability.

Goenka said the volatile rand had hit Mahindra SA, since the dollar cost of imports have risen with the rand slumping from R6.50 against the dollar when the company entered the South African market in 2004 to about R10 currently. Vehicle prices have not gone up proportionately, he added.

He said the group is ready to invest more in the South African venture, although he hoped it won't be needed now.

"SA is important and strategic in our overall globalisation strategy and we are committed to this market. We have taken a number of initiatives to ensure the long-term success of our business in SA."

Mahindra South Africa has four models on offer at its 34 dealerships. It has sold more than 10,000 vehicles in SA since October 2004 with sales averaging 4,000 vehicles a year.

The Xylo is a versatile and spacious MPV and the range for the South African market consists of the luxury model, the E8, and the people mover, the E2.

Mahindra has invested more than $100 million in the development of the Xylo, which included setting up a new robotic body shop at its Nashik plant, as well as an additional trim line at the final assembly shop. Over 200 dies and more than 1,000 new parts were developed for the Xylo.

Mahindra expressed confidence in the South African auto market even as other manufacturers reported record drops in sales in the wake of the global economic downturn.