By on October 11, 2010
I believe that, legally, I’m still their U.S. distributor. And I want trucks delivered to our dealers
Importing niche vehicles from an unknown foreign automaker has long been a fraught process for US-based entrepreneurs, and John Perez’s attempt to bring diesel-powered Mahindra pickups to the US has been no exception. For four years, Perez’s Global Vehicles distribution network waited while Mahindra sought EPA certification for its diesel pickup engine, and then six days after approval arrived, the Indian firm dumped Perez with little ceremony. Now Mahindra says it will consider giving franchisees to the dealers who paid Perez up to $200k for the right to sell Mahindras, but that it is not obliged to do so. Perez is suing Mahindra for failing to fill an order for pickups, while dealers are considering suing Perez and Mahindra is seeking to end its agreement with Perez so it can distribute pickups through independent dealers. Mahindra’s Roma Balwani tells Automotive News [sub]
The current dealers’ contract is with GV [Perez’s distribution channel, Global Vehicles] and hence they do not automatically become Mahindra dealers. However, we would be considering these dealers for our network if they are interested. We will need a new distribution network and soon we will start a dialogue with potential dealers, including the ones who are signed up with GV, if they are interested in signing up with Mahindra.
A lawyer representing several of the dealers who signed on with GV explains that several states have laws preventing a manufacturer from dissolving distribution deals that are already in place. Precedent has been set ins tates like Florida and Georgia by what are known as “Jim Moran law,” after the owner of Southeast Toyota Distributors, who successfully held off attempts to strip him of his distributorship. But, notes the lawyer for GV’s dealers
I don’t know that any of this has ever been tested in court. When you come down to it, there really aren’t too many vehicle distributors in the United States. And what few there are, I can’t say if any of them has ever been challenged by a manufacturer.
Meanwhile, the Mahindra deal is especially complicated because a number of GV’s dealers signed on for the Mahindra deal for no money down, after a previous GV attempt to import Romanian ARO SUVs fell through. Of the dealers that did spend up to $200k for the right to sell Mahindras (over 50 percent of GV’s 347 dealers fall into this category), most recognize that it was a speculative deal in the first place. One North Carolina-based dealer tells AN [sub]
I’m not going to sue anybody. What good would that do? We all knew this was a gamble when we got into it. We did it anyway. And I still believe it’s going to work out.
But that tune may change. Though Mahindra insists that
We are working diligently to bring the product to market… It will be our endeavor to not let this dispute and the changed business circumstances affect our plans to introduce our vehicle in the United States.
it has rejected a $35m order from Global Vehicles for 2,000 pickups as recently as September 24. Mahindra had previously rejected two GV orders last year, allegedly for insufficient funds, a charge Global denies. Meanwhile, Mahindra denies that it ended the relationship, pointing to a June 11 deadline for consummating the deal between GV and Mahindra, which GV refused to extend (having already done so several times). That walk-away clause was literally penciled into the contract between GV and Mahindra at the last minute, an AN [sub] claims that a

copy of the penciled-in addendum provided by Perez does not fully explain whether Mahindra had the right to unilaterally walk away after the June 11 extension. The fact that the EPA didn’t certify the Mahindra engine until after the extended deadline indicates that Mahindra may just have the law on its side.
Of course, there was one more issue, best summarized by Automotive News [sub]
Perez acknowledged that he was arguing with Mahindra over financial matters. He said Mahindra asked him to have $29 million in his bank account to cover marketing and advertising costs for the truck’s entire first year of sales. Perez balked, arguing that no such requirement was in his contract. On top of that, he argued, marketing is not funded that way in the U.S. industry. He told Mahindra that marketing funds are collected from the sale of vehicles
But even this issue isn’t simple. Mahindra now claims that disagreements over marketing strategy played a role in its dumping of GV, but back in May when the deal’s issues were first starting to hit the press, Mahindra’s Pawan Goenka agreed that GV had enough cash on hand and that a marketing deal had been hammered out:
Mahindra would pay for a pre-launch brand advertising campaign to help U.S. consumers understand what Mahindra is. Mahindra and Global together would pay for marketing during the actual launch, he said, and Global would then take over the cost of post-launch co-op dealer advertising
With certification done, cash and a marketing plan in place and dealers ready to take delivery, GV’s Perez is mystified as to why Mahindras aren’t on sale in the US yet. He says
I wonder all the time: Why is this happening? Why is this happening? I thought we were friends.
With no answers forthcoming from Mahindra, Pere and his investors look to be out some $57m, about half from dealers, and half from investors. Perez insists that all the money has been invested into the business, saying
We’re clean. Our books are audited every year. I can lay my head on my pillow at night and sleep good
But can Mahindra? Meanwhile, will we ever get those funky Indian diesel-powered pickups? Given how Mahindra has treated its US distributorship, one wonders whether its customer service is equally unrelenting. On the other hand, Perez says he’s willing to let bygones be bygones and resume the deal. Unless Mahindra has a great reason to avoid its patient distributor (in which case, it should share said reason), it should just close the deal already and start shipping pickups. More legal wrangling won’t help sales of an unknown brand in a market that’s as competitive as the US.
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16 Comments on “Inside The Collapse Of Mahindra’s US Market Plans...”


  • avatar
    Gardiner Westbound

    “It has rejected a $35m order from Global Vehicles for 2,000 pickups…”

    That’s $17,500 each. A Ford Ranger XL lists for $17,820 and sells for $14,150 freight included per Edmunds. Hmmm.

    Doubt I would buy from an automaker that treats its business associates shoddily. If they will do them, they’ll do me too.

  • avatar
    jeremie

    This crap has seriously dampened my enthusiasm for this vehicle. Mahindra, you suck.

  • avatar
    TonyJZX

    i do not know what the deal is here
    they are completely uninteresting vehicles
    they seem to be only purchased by farmers who do not care for any innovation
    by the same token i do not know why the big three do not just put in a turbo diesel into their full size trucks and shut down Mahindra

    • 0 avatar

      The fact that the Big Three haven’t bothered to drop a diesel into any of their small (or non-HD) trucks is why opportunities exist for companies like Mahindra. For instance, why didn’t Chrysler drop that very nice Mercedes V6 diesel into the Dakota instead of letting it rot inside the grossly overpriced JGC Overland? Having a small truck powered by a refined diesel would’ve been a massive market coup for Dodge.
      Remember how each of the Big Three were talking about having diesel-powered non-HD trucks in their lineups just a few years ago? WTF happened with that?

  • avatar
    mtypex

    This is the sound of me caring: zzzzzzzzzzz
     
    I’d rather see Peugeot and Citroën return to the US.

  • avatar

    I would say that before bashing anybody, this whole story needs more details to be uncovered.
    Reading the post I had a deja vu image forming in my mind. That’s, as Ed mentioned, GV’s attempt to import  the ARO vehicles from Romania. This was their lineup at the time http://bit.ly/9b8uFF. Looks similar? SUVs and pickup trucks, diesel engines, small company trying to get into the American market, ARO spending a few years to get the engines certified by EPA… The whole story ended with GV taking over ARO, followed by bk and liquidation.
    If I’m not mistaken, B&B could confirm that, GV had another attempt to import a Chinese off-road vehicle. That didn’t work either.
    Is this a pattern for GV, finding the wrong partner, or a scheme of some sort? Did Mahindra “smell” something the last minute or are they just not good at business? This will be interesting to follow.

  • avatar

    Mahindra has a deal in India to distribute International products.  I would put money on International ending as the distributor here.

  • avatar

    Man this sucks.
    Ever since toyota stopped selling their insanely amazing small trucks in the US, and replaced them with the legendary gas guzling garbage that is the 2000’s series Tacoma, there has not been real quality small trucks sold in the US.
    Ford/GM/Chrysler only make useless giant trucks that posers use to compensate for their missing Balls. —I mean have you seen what people use to tow a great big loads elsewhere… (http://www.dailymail.co.uk/news/article-1235628/G-Wiz-Man-tows-50ft-Christmas-tree-tiny-electric-car–creates-amazing-optical-illusion.html) this is what takes real balls.  F250/C2500 necessary? please.
    Anyways, Toyota used to make Bionically good little trucks, and now we need a replacement.
    The Mahindra has looked the part, and just like when toyota trucks took the US by storm in the 70’s Mahindra could do the same. its small, light, no bs truck that doesn’t need an insane engine just to drive itself.
    It would fit the bill and budget of most real truck lovers. (ones who actually by trucks to work as opposed to the vast majority who buy trucks as fashion lifestyle accessories.)
    This whole dispute sucks hard. I want my small truck. and I want it now!!!
    Why can’t these people get the stick out of their collective #sses and grow the hell up!
    arg.
    (Oh I just remembered Toyota also fucked up the FJ40 and made a giant turd FJ Cruiser instead. oh and what is up with the insanely bad industrial design they have been rocking?  in the end they because inane hubris filled GM douches. So sad.)

  • avatar

    Man this sucks.
    Ever since toyota stopped selling their insanely amazing small trucks in the US replacing them with the silly over engineered soft gas guzling garbage that is the 2000’s series Tacoma; there has not been any real quality small trucks sold in the US.
     
    Ford/GM/Chrysler only make useless giant trucks for posers to use, compensating for their missing B4lls.
    —I mean have you seen what people use to tow a great big loads elsewhere…
    (http://www.dailymail.co.uk/news/article-1235628/G-Wiz-Man-tows-50ft-Christmas-tree-tiny-electric-car–creates-amazing-optical-illusion.html)
    this is what takes real balls.
    Are F250/C2500 necessary for the general public? please, what a joke.
     
    Anyways, Toyota used to make Bionically good little trucks, and we now need a replacement.
     
    The Mahindra has looks the part, and just like when toyota trucks took the US by storm in the 70’s Mahindra is poised to do the same with the right formula.
    Its small, light, no bs truck that doesn’t need an insane engine just to drive itself.
    (I think Ford is using the transit connect to attack this market, and that thing is pretty awesome.)
    It would fit the bill and budget of most real truck lovers.
    (ones who actually by trucks to work as opposed to the vast majority who buy trucks as fashion lifestyle accessories.)
     
    This whole dispute sucks hard.
    I want my small truck and I want it now!!!
     
    Why can’t these people get the stick out of their collective #sses and grow the h3ll up!
    arg.
    This whole thing stinks of stupidity on both sides.
     
    Just a reminder to those who dont think toyota has jumped the shark… what the HELL does the FJ Cruise have to do with the most beautiful FJ40?  what is up with the insanely aweful finicky, gross industrial design of ALL of their products these days?

  • avatar
    benzaholic

    From what pictures I’ve seen, we can best describe the appearance (and some of the rest of the design) of this truck as primitive, so it is not likely to achieve the sales rates of Tacomas and Rangers, but I’m convinced there is a niche here in the US for a serious small work truck.
     
    I like the suggestion seen above about International, since that plays right in to what I see as the most effective market for these.
     
    I hope we get to hear the rest of this story some day.
     

  • avatar
    OldandSlow

    Does Mahindra even need to market these trucks here in the US?   I don’t see the wrangling going away anytime soon.

  • avatar
    Robert.Walter

    “I thought we were friends.”  How fukcing naiive… Is the idiot that made this statement the same one that added that ridiculous hand-written text?  I didn’t review the timeline, but the text seems almost an invitation to the OEM to let the distributor do all the work of lining up dealers and to then delay long enough to invoke the “void without liability” clause.  Amazingly ridiculous text.

    I sure would like to have a copy of the full contract to review…

  • avatar
    DougD

    A copy of the contract won’t tell the whole story.  Working for a company that’s done business selling machinery into India, a contract is only a preliminary step in the negotiating process.  Anything and everything is up for discussion after the contract is signed, and you never get all your money.
    When doing business with a completely different culture with a greatly differing concept of ethics and truth, you are naiive to assume anything. 
    Good luck to Mr. Perez, he’s going to need it and a lot more…

  • avatar
    Mike Czernik

    And to all those who want to see what type of company Mahindra is, please look no furhter than Satyam (NYSE symbol SAY). They had to delist recently since they could not meet the captiall and accountig requirments of the exchange. sAY has been tanking

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