By on May 29, 2007

scorpiohuh.jpgOnce upon a time, American stage magicians would assume Indian-sounding names, don turbans and claim to have mastered the mysteries of the Indian subcontinent. Automaker Mahindra & Mahindra (M&M) looks set to revive the country’s rep for astonishing feats. While industry pundits are busy anticipating Chinese automotive exports, M&M are about to sell their products stateside, preparing to enter America’s value-for-money, entry-level market. Will it be magic or a massacre?

Ironically enough, the brothers Mahindra got their start by adapting an American product to the Indian market. After WWII, they set up their namesake company to franchise Willys Jeep production for India’s surface-challenged roads.

Mahindra & Mahindra eventually dropped their American partner, built their own SUV and expanded into light duty trucks, three-wheelers and pickups. The company now operates eight Indian production facilities, 49 sales offices and 780 dealers.

Last year, the Indian conglomerate– including telecoms, financial services and property development– banked roughly $39b in revenues. (For comparison, BMW’s revenues for the same period were around $64b.) In recognition of their size, solidity and importance to the Indian economy, Mahindra & Mahindra is set to replace motorcycle maker Hero Honda Motors on the Bombay stock market’s 30-stock sensitive index (a.k.a. Sensex) in July.  

M&M may be a force to be reckoned with in India, but Automotive News ranks them number 34 on their list of global vehicle makers. All in, Mahindra produces fewer vehicles per year than Ford [still] sells F-150s. No wonder many auto analysts have discounted the Indian tiger’s chances of successfully cracking the world’s largest automotive market– especially when weighed against the aspirations of the Chinese dragon.

Yes but– China’s joint partnerships remain focused on the epic struggle for market share within their friendly neighborhood military dictatorship. Meanwhile, M&M is gearing-up for international expansion.

Earlier this year, Mahindra joined forces with Renault / Nissan to build India’s largest automotive production facility. The Indo – French operation is a flexible factory, looking to produce 50k vehicles this year. M&M claim the plant has sufficient capacity to increase throughput to 400k vehicles per year.  

Two weeks ago, the automaking duo released a local version of Renault’s “world car.” It’s unclear how the Logan DLE 1.5-liter dci will fare against the almost identically powered industry leader, the Ford Fiesta 1.4-liter Duratorque ZXI. But the 547,064 IDR ($13,476) Logan undercuts the popular Ford by around 90k IDR ($2217). In a country with a $979 annual per capita income, that’s a compelling difference. 

The cut-price Logan may well join Mahindra and Mahindra’s Scorpio as another value-priced product doing battle outside its home market.

Five years ago, Mahindra began selling their diesel and petrol-powered SUV to Malaysia, South Africa, Russia, Italy, France, Spain, Portugal and Western Europe (where it’s known as the Goa). Sales and reviews have been strong; the vehicle is now in its second generation, complete with a Lotus-tuned suspension. M&M believe the Scorpio and its derivatives are ready to fulfil their American ambitions.

The Indian carmaker is no stranger to the U.S. market. After severing an eight-year franchise agreement with International Harvester in 1971, Mahindra and Mahindra began building their own line of tractors. In 1994, M&M started selling farm machinery in the United States.

With US assembly facilities in Tomball, Texas and Calhoun, Georgia (and a third site under construction), the company estimates it will sell 10k tractors this year. And M&M is no cheapo tractor builder. In 2003, their U.S. ops received the Deming Application Prize for Total Quality Management; the only tractor company to achieve this honor.

To sell their automotive products stateside, Mahindra turned to Global Vehicles. The Georgia-based company is notorious for trying– and failing– to import the Romanian-built Cross Lander. Global v2 says they’ve sold 160 Mahindra dealerships for $125k apiece. They’re looking to add another 340 M&M dealers by the end of this year, with sales starting in early to mid ’08.

Last month, 500 potential M&M dealers gathered in Atlanta to see the Indian automaker’s five-model U.S. line up: a two-door pickup, two four-door trucks and two five-door SUVs. 

Mahindra’s expected to price these products in the low 20’s. Their SUV will butt heads with Hyundai’s Tuscon ($17k – $22k) and Kia’s Sportage ($16k – $22k). Unless the Indian machines bring a raft of standard features and a matching warranty to the party, it’ll be an uphill battle. M&M’s small pickup will encounter far less resistance, as American and Japanese automakers have neglected and/or abandoned the segment.

M&M’s secret weapon: diesels. All five US products will offer an optional diesel engine. Renault’s oil burners are some of one of the best in the biz: torquey, smooth and frugal. If Mahindra found a way to make their diesel powerplants U.S.-compliant, their products will find a ready audience, and establish a beachhead in the world’s most competitive automotive market. Now THAT would be some trick.

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27 Comments on “Mahindra and Mahindra Set to Tackle U.S. Market with Diesel Power...”


  • avatar
    GS650G

    It better have a great warranty and the dealer better be able to deliver on service.

  • avatar
    Paul Niedermeyer

    The small diesel-powered pickup and industrial strength SUV market has been totally abandoned by the Japanese, and is wide open. It may not be a large market, but it’s there. I know several folks (small farmers, craftsman, gardeners, etc.) very frustrated by the lack of economical utility vehicles. The rest of the world is crawling with them.

    Even the small Japanese gas powered pickups are all gone. The Toyota and Nissan were staples in a certain crowd. Its a good thing they’re so rugged; folks will keep them until there’s an alternative.

    M&M may be on to a good thing.

  • avatar
    quasimondo

    It’s all about Quality. Lack of it when Hyundai first cracked the U.S. market in the 80’s nearly sank them and almost doomed the chances for the other Korean markers to follow in their footsteps. It doesn’t have to be rock solid like a Hondayota, should they develop a reliability reputation that’s better than Detroit’s, things will be on the up and up for M & M.

  • avatar
    Orian

    Hyundai was hurt a bit by the Mitsu engines and transmissions they put in their first cars. They didn’t start the 10yr/100k mile warranty until they had their own engine/transmissions in their cars.

    Hopefully M&M will be strong right off the bat, and it sounds like they probably will be. They’re already here with tractors and you can bet they will play off that strength to help kick-start their truck and SUV operations. Diesel alternatives will be a big plus.

  • avatar

    Real quick way to work on that quality reputation:

    Give the tractor dealers first shot at the truck franchise. Don’t even worry about the urban crowd, target the rural areas, the people who have to actually haul small loads, who don’t mind cloth seats and wind up windows. Don’t worry about size of annual sales, worry about per unit profit.

    If the farmer is real happy about the performance of his M&M tractor, he’ll be real willing to look at the pickup truck. It’ll carry from there, and might even be the best way to crack the F-150 loyalists.

  • avatar
    omnivore

    I’m confused, Mr. Martineck. Are you saying that M&M is bringing their small diesels to the American market, or are you saying that that would be a smart strategy? If in fact they already have diesel plans, how are they planning to crack the 50 state compliance nut? That’s a tough problem that the high-zoot and high-buck German makers are only beginning to crack right now, with BlueTec and the like. Are they going to be able to build affordable small diesels that are 50 state compliant?

  • avatar
    Geotpf

    Um…aren’t they going to get hit by the 25% “chicken tax” tariff on imported pickups?

  • avatar

    omnivore: M&M say all their models will be available with diesel engines. As Mr. Martineck's article states, it will certainly be a coup if that means they've found a way to build 50 state compliant oil burners. Otherwise, I can only imagine they've found a way to end-run the regs (something agricultural perhaps). It's a mystery.

  • avatar
    nick2ny

    RF- From 2007 model year on, all LDV (read: passenger cars) must meet Tier 2 Bin 5 standards, no matter which state they are sold in. That's why VW wisely overproduced 2006 Jetta's. They won't have a Tier 2 Bin 5 Jetta until 2008 (or so they hope). emissions info from this site

  • avatar
    rashakor

    Remember M&M is not behind their diesel engine. That is Renault, and that is a major constructor who could have a nice ace in their sleeve.
    Nissan could also benefit greatly from this.
    Only time will tell

  • avatar
    deepster71

    As someone of Indian origin myself, I thought I should weigh in here. . .Indian carmakers like Hindustan motors and Mahindra are not years, but decades behind the American market in both technology and quality. They compete in a restricted economy where foreign carmakers have typically been required to enter into partnerships with an Indian company who has majority share. It’s also a market where Hyundai is one of the ‘premium’ brands. It’ll be interesting so see how their products are priced in comparison to Hyundai’s in the U.S.

  • avatar
    storminvormin

    Here’s an interesting review:

    http://presstalk.blogspot.com/2006/05/ks-honest-car-reviews-ii-all-new.html

    Perhaps a candidate for the TTAC India chapter.

  • avatar
    Sid Vicious

    If they are going to start selling here within a year, they would alreay have had to apply for Safety and Emissions certificaiton. Anybody know if this has been done? I just can’t believe that this timetable is for real, especially for the diesels.

    People like their tractors. These are not really large tractors that somebody farming 1000 acres would use. I believe most sold here are of the Compact Utility type – 50 HP or less. The reason most people (like me) bought a tractor from the more established companies is because they want the long history and a warm fuzzy regarding after sales service/parts.

    The same concerns apply to a car/truck – probably more so. Even is the quality/durability is there you need to be able to get it fixed in 5 years. Anybody know where I can get a transmission for my Yugo?

    I agree with comments above regarding the potential customer base. I have some land, already own a (Japanese) compact utility tractor, and have need for a small truck to haul a reasonable amount of stuff but don’t need to compensate for anything like Dodge Hemi drivers. For the time I’m loving my 81 diesel Rabbit Pickup. It would be nice to have an option for a new replacement.

  • avatar
    brettc

    If they came to the U.S. and offered an actual compact pickup with a diesel, people would be lined up to get one. The market is there, but the car companies don’t want to bother with it for whatever reason. There are a lot of people that would love to buy a brand new VW Caddy with a TDI, but in their infinite wisdom, VWoA doesn’t offer it here.

    Something interesting is that the emblem on the back of the Scorpio looks a lot like the most recent Oldsmobile emblem. You can see it close up at http://www.mahindrascorpio.com/scorpio2006/scorpio1024/Model_Specifications.aspx. Hopefully the similarity isn’t a foreshadowing of Mahindra’s future in North America!

  • avatar
    Roger Hislop

    >Five years ago, Mahindra began selling their diesel and
    >petrol-powered SUV to Malaysia, South Africa, Russia, Italy,
    >France, Spain, Portugal and Western Europe

    That’s funny– I always thought Italy, France, Spain and Portugal were, by and large, Western Europe.

    Mahindra and Tata are picking up good business here in the Third World with the unfussy farmer and builder types who have to hand the keys of a light pickup ever day to a bloke who’s going to treat their vehicle very much like they’ll treat the shovels, picks, and piles of rocks that’ll get tossed in the back.

    This type of buyer wants utility and low cost, they don’t want to lie awake at night sweating about their vehicles being kicked around. And there’s a lot of them. Build your reputation there, and the only way is up.

  • avatar
    Michael Martineck

    Roger, there’s lots more countries in Western Europe. You’ve got Lichtenstein, Andorra, Vatican City, etc. I didn’t want to overlook anyone, so I called on the group.

  • avatar
    Geotpf

    brettc-VW stopped selling diesel cars after MY 2006 because they didn’t meet new pollution standards that went into effect for MY 2007 (although the diesel Touerag is still sold-pollution standards may be weaker for large SUVs).

  • avatar
    Pch101

    If they came to the U.S. and offered an actual compact pickup with a diesel, people would be lined up to get one.

    If Americans wanted diesels, they would have been buying them a long time ago.

    Diesel for passenger cars is a niche market in the US, and nothing more. Unlike Europe, where fuel taxes in most countries push consumers toward choosing diesel (the price of diesel fuel is often much lower than is gasoline throughout the Continent), diesel offers no price advantage to American consumers.

    If Toyota, Honda, etc. could have made a profit with selling these cars in large volumes, they would have led the charge a long time ago. There’s little to no market for them, and since they are in the business of making money, they don’t bother trying to serve it. Just about the only Americans who want them are a tiny group of enthusiasts whose tastes are, in no way, indicative of the market.

  • avatar
    Orian

    Now that normal unleaded has pushed past diesel prices and has stayed there for a while, Americans DO want diesel powered autos, however the pickings are slim at the moment.

  • avatar
    BTEFan

    Sykerocker – brilliant idea. Sell it through the tractor dealers. The network is already established, the customer base already exists, and they will be the folks that will use it for its intended purposes. This isn’t going to be a Honda CRV. Its a WORK VEHICLE. What matters most is pulling power, how much it will carry, and simplicity and ease of use, not the sheen on the dashboard or the click of the switchgear.
    These vehicles have been available in India for years, and given the state of Indian roads (we were there in 2006), if it can handle those roads, North America shouldn’t be a problem.

  • avatar
    Pch101

    Now that normal unleaded has pushed past diesel prices and has stayed there for a while, Americans DO want diesel powered autos

    There’s no proof of demand at all. The drum beat for diesel is just wishful thinking from a few diehards, but most Americans drive to the beat of a different drummer.

    Americans have had diesel options for decades, and most consumers have rejected it. Most fuel stations don’t even carry the fuel because there is not enough demand to make that market worth serving.

    Again, if there was a large market for it, the automakers would have been beating each other up trying to serve it a long time ago. The automakers aren’t doing any such thing, because the market hasn’t been there.

    Diesel has always been a niche product that very few Americans want, and the proof is in the sales data, which has been this way for decades. The successful automakers aren’t stupid, and would surely cater to this market if it was sizable enough to matter.

    If the cost of diesel was a couple of dollars per gallon lower than the price of gas, then perhaps the market might materialize. But fuel taxes in the US are not high enough to create such a differentiation, as is the case abroad. No US politician is ever going to suggest a $2 per gallon gas tax, unless career suicide is on his agenda…

  • avatar
    Sid Vicious

    PCH,

    Without a doubt things have changed in the last few years. The fact that people are paying a premium for hybrids proves it. Correct – VW couldn’t give a diesel car away when gas (and diesel) was $1.50 a gallon. Now it’s a different story.

    I don’t believe that the government needs to intervene to influence fuel choice. Show an American that he can get 30% more MPG from a fuel that is historically (over a long time span) priced on par with gasoline and he’ll run you over to buy the car that burns it. Who would have an aversion to a Bluetec diesel car? What’s the downside? Or the diesel that Honda has promised that doesn’t even require the urea fillup?

    If there is minimum consumer interest in diesel, then why have Mercedes, VW, Chrysler, and Honda all confirmed that they will bring new light diesels to market in the next 2 years, and that Ford, GM, Nissan are rumored to be doing so? Are all those automakers absolutely clueless?

    And people from the coasts seem to have an impression tha diesel fuel is available at truck stops only. Round here it is available at least 50% of gas stations. So maybe it’s a chicken or the egg thing for fuel availability in some areas of the country but not the midwest.

    Maybe the Diesel Mob is larger and more rabid than you suspect.

  • avatar
    jurisb

    mahindra and mahindra is the most bitter irony of monthy python, revealing the torrichelli void in american car industry. they show how little power you need to crack up american car market. what`s next- maruti rampages us suv market? yugo zastava destroys caddilac? trabant beats crap out of big 2.5? vaz eats out gm market share? ………remember, and you were laughing at japanese just 15 years ago, saying their scale- kit cars would distill in rain.who is distilling now… even on a clear sky day.

  • avatar
    Pch101

    The fact that people are paying a premium for hybrids proves it.

    The sale of hybrids proves that there is demand for hybrids. The tech geeks and environmentalists who helped to create street credibility for the Prius will often be the very same people who would be adverse to diesel cars, due to their full-time reliance upon internal combustion. It’s not the fuel-burning component that attracts hybrid fans to the breed, it’s the electric motor.

    And people from the coasts seem to have an impression tha diesel fuel is available at truck stops only. Round here it is available at least 50% of gas stations.

    This article from USA Today reports that the Diesel Technology Forum claims that 42% of service stations carry diesel, which of course means that 58% — a majority — do not: http://www.usatoday.com/money/autos/reviews/healey/2007-01-25-mercedes-benz-diesels_x.htm When you consider that many among the 42% must be truck stops in rural locales, the figure for urban and suburban areas must be lower than that.

    And there’s no reason to be expect that suburban service stations would go out of their way to serve this market when only approximately 3% of registered passenger cars in the US operate on diesel. Not a very exciting market for a low margin business such as a gas station, which typically counts more on Coke and cigarette sales than it would on diesel for its revenues.

    If there is minimum consumer interest in diesel, then why have Mercedes, VW, Chrysler, and Honda all confirmed that they will bring new light diesels to market in the next 2 years, and that Ford, GM, Nissan are rumored to be doing so? Are all those automakers absolutely clueless?

    That’s a bit like arguing that there must be a massive market for two-seat sport cars because of the 350Z, Corvette and Acura NSX. None of these companies expects to center their entire lineups around such cars, because they have only niche appeal. (In the case of sports cars, they may inspire lust, but practicality bars them from turning all of that drool into sales.)

    No manufacturer has high expectations for diesel sales. Mercedes is aspiring to achieve 10% diesel sales in the US by 2010: http://www.autobloggreen.com/2007/03/28/mercedes-wants-10-of-their-us-sales-to-be-diesels-by-2010/

    Of course, this means that they expect 90% of their sales to be comprised of gas engined vehicles. (And let’s remember that in the scheme of things, Mercedes is itself a niche automaker, so that 10% would be a drop in the bucket of the overall car market.) That’s a rather small mob, probably not nearly enough to stage a riot…

  • avatar
    jthorner

    I’ve been saying for years that it is only a matter of time before an Indian company goes after the gaping hole in the low end of the US utility vehicle market. Not “sport utility”, just utility. There are no good cheap small pickups left, no small vans, no small flat beds.

    I hope that M&M brings a good line of such vehicles into the US and prices them under $15k.

  • avatar
    Rastus

    Just remember, people…we HAD a “M&M” …at least in spirit.

    It’s name is/was Isuzu!

    But NOOOOOOO…HELL NO….GM destroyed THAT company too!!!

    Strong, fuel-efficient, rugged-as-hell trucks!

    And lest you forget, turbo-diesels WERE their forte’.

    I have been saying for years…if I could buy a small turbo-diesel P/U which got 40mpg, I’d be on it like white on rice. What an ideal “commuter” car!

    Leave it to GM to screw the pooch on that one too.

    The destruction of Isuzu was/is a total disgrace. They did NOT try to be everything to everyone….but they sure had a pretty good following.

    But hey, they too (isuzu) will be more than happy to sell you a re-badged “Trailblazer”…or is that a Saab whatchamacallit??

    Pathetic.

  • avatar
    Martin Schwoerer

    Very interesting article!

    One thing I think deserves being pointed out. India is the world’s biggest democracy. Big difference to China! Thus, the concept of Western companies working with India, and Western consumers buying a car from India, is much more acceptable for people who care about such matters.

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