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GaramChai?

New York Times: Mahindra Says Wait and See

GaramChai.com >> GaramChai.com Features Archieve

We are constantly on the lookout for articles of interest to feature on GaramChai.com. It is intersting to see Indian auto giant Mahindra & Mahindra being featured in Business Week. Mahindra is targeting Desis in Pardes!

Mahindra already markets in America:

Other GaramChai.com features on Mahindra and Mahindra

IF you go for a drive in this overstimulating, overwhelming city of 20 million, it is best to bring along courage, stamina and a very loud horn. Thankfully, the Mahindra Scorpio sport utility vehicle I recently took for a spin came equipped, at least, with a fine horn.

Jostling with city buses, challenging slow and rickety taxicabs for gaps in the teaming jumble of traffic, the Indian-built Scorpio kept me out of trouble.

For a tall and boxy truck, the Scorpio has surprisingly quick steering. Its high-set seats and large windows provide an excellent view of the road ahead, though good visibility is of minimal value when the foreigner at the wheel misses a road sign and nearly drives down the wrong side of a bustling waterfront avenue. A quick correction saved the day.

Mahindra & Mahindra Ltd. will need similarly quick reflexes but better foresight, along with a degree of luck, to make good on its promise to enter the American auto market late this year.

Mahindra says it plans to start sending two- and four-door versions of a truck — here, it is called simply the Pik-Up — to the United States by year-end. Its distribution partner is Global Vehicles U.S.A., an Atlanta-based importer. The second act is to come next year with imports of a version of the Scorpio that I tested, modified for American tastes and standards.

Though unfamiliar to many Americans, Mahindra has a history that predates India’s independence from Britain. The company was set up in 1945 as Mahindra & Mohammed to assemble Willys Jeeps for American servicemen stationed in Asia. Over the years it expanded into construction, finance and production of trucks and tractors, among other things. But it did not move into the passenger car business until 1995, when it teamed up with Ford to build the Fiesta compact car in India.

Mahindra builds the low-price Dacia Logan sedan in cooperation with Renault-Nissan, and recently introduced the eight-passenger Xylo utility wagon.

The company’s core activities, however, remain focused on tractors, trucks and large S.U.V’s. In the United States, Mahindra’s presence has been limited to building and selling tractors and farm equipment. The company also sponsors a Nascar team and a championship bull-riding series. Nonetheless, Mahindra could find cracking the hypercompetitive American market for light trucks — especially during a global recession — far harder than hawking tractors or sponsoring all-American sporting events.

John Perez, chief executive of Global Vehicles, says he thinks there is room for an affordable, utilitarian Indian pickup in a market swarming with outsize gadget-laden trucks from Detroit — not to mention those from Toyota, Nissan and others.

Mahindra’s American strategy is to offer high value and good mileage from efficient diesel engines.

One thing missing is a name. The company has yet to decide what to call its trucks in the United States — a name previously proposed, the Appalachia, was dropped. Now Global Vehicles says pickups sold in America will wear alphanumeric badges.

Global Vehicles said last week that it had signed up 336 dealers across the United States.

Mahindra could also benefit from the woes of Chrysler and General Motors, as the two companies cut costs and abandon dealerships. Together, the two bankrupt Detroit automakers have eliminated more then 3,200 dealers this year.

“Ford, G.M. and Dodge have had a lot of years to build this kind of truck, and they haven’t done it,” Casey McGraw, vice president for sales at Global Vehicles, said of the diesel-powered pickup. “And we know that the price point has to make up for lack of name recognition.”

For people willing to take a look, the Mahindra should stand out, with quirky looks, a tough-truck résumé and what Global Vehicles promises will be the best mileage of any pickup sold in America.

Bigger than the compact Ford Ranger but smaller than the midsize Dodge Dakota, the trucks’ cargo and towing capacity will beat the existing models in either category, the company says.

With a 2.2-liter 4-cylinder turbodiesel — rated at 140 horsepower and 236 pound-feet of torque — the pickup will be capable of more than 30 m.p.g. on the highway, Global Vehicles says. The truck will offer a 6-speed automatic transmission and standard safety features including antilock brakes and electronic stability control. Options are to include leather seats and a navigation system. Pricing isn’t set, but the company says a well-equipped model is likely to be in the mid-$20,000 range.

Most dealers will sell Mahindra as a sideline to more established brands. Dealers pay $195,000 for a franchise, which includes technical training for a mechanic, and are required to set aside 900 square feet of floor space including a “heritage wall” with highlights of Mahindra’s history.

“We’re not asking dealers to build $3 million facilities,” Mr. McGraw said. “It’s more like, ‘Put up a sign, and let’s go sell some trucks.’”

One dealer putting up a sign is Coleman Hoyt, owner of Acton Lincoln Mercury in Acton, Mass. Mr. Hoyt expects the pickup to attract not only contractors and landscapers, but outdoorsy, break-the-mold types who want a serious truck in a compact and economical package. Fans of diesel engines, with their reputation for mileage and durability, are another target. For now, all Mahindras destined for America will be diesel-powered.

“The potential buyer is definitely an outlier,” Mr. Hoyt said. He concedes that the brand will take time and patience to build. “We see it as a pleasant diversification,” he added. “If we can ultimately sell a few hundred a year, that would be terrific.”

Yet one potential Mahindra franchisee, a large Ford dealer in Texas, said his deal was delayed for now because of the slumping economy. This dealer, who insisted on anonymity because he is involved in continuing negotiations with Global Vehicles, said the recession would make it even harder for Mahindra to challenge established truck makers — especially since pickup owners tend to remain loyal to their brand.

“It’s an extremely capable truck, but the timing is terrible,” the dealer said. “We kept coming back to how hard it would be to launch an unknown and unproven product.” At the same time, small pickups have fallen out of fashion with Americans. Compact pickups accounted for just 2.7 percent of the overall auto market last year, according to Edmunds.com, compared with 5.1 percent in 2002.

“In the end, the car market is decided by the customer,” said Deepesh Rathore, a Global Insight automotive analyst in Gurgaon, India.

He said the success of Mahindra’s expansion plans would depend more on the quality of the finished product than on the country of origin. “Americans are very patriotic,” Mr. Rathore said. “But that doesn’t stop them from buying a Toyota.”

To counter quality concerns, Mahindra has put a fleet of vehicles through more than three million miles of testing, Global Vehicles says.

Product planners in India have taken Americans’ habits, even their snacking proclivities, into consideration. The pickup’s original cup holder was deemed too small for a nation that gulps supersize drinks. Models headed to America will hold larger cups.

The company would also have to ramp up production of left-hand-drive versions and add air bags for the American market. The vehicles will have to meet safety and emission standards. Crash tests have to be conducted and the engines will have to meet strict new federal limits on smog-causing emissions. Mahindra is installing a smog-fighting Bosch urea-injection system similar to those used by German automakers.

By NICK KURCZEWSKI, MUMBAI, India

(June 28, 2009). NYT. Lawrence Ulrich contributed reporting from New York.


Further Research on Mahindra in America

Mahindra USA : Case Study
The Challenge
Mahindra USA, a subsidiary of one of Indiaís leading business groups, marked the groupís foray into the US market for the marketing and distribution of tractors. Bristlecone had implemented various SAP applications at MUSA and was asked to provide long term functional and technical support.

The Solution
Bristlecone proposed a blended onshore-offshore support model to meet MUSA objectives. Proactive monitoring checks are carried out daily to preempt any potential system failure leading to downtime and system enhancements are provided as needed with rapid response.

The Result
High quality support with minimum downtime and prompt problem resolution. Cost effective due to a blended onshore-offshore model.

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