Mahindra to make second entry into US automobile markets - GulfToday

Mahindra to make second entry into US automobile markets

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Engineers inspect ‘Roxor’ vehicles at Mahindra’s plant in Michigan, US. Reuters

A decade ago, India’s Mahindra & Mahindra (M&M) tried to break into the US automobile markets with a low-cost pickup truck. The foray ended in failure and a lawsuit from dealers demanding their franchise fees back. Now, Mahindra takes second coming in the US market with ‘India tough’ off-roader

It is the same tongue-in-cheek warning affixed to the dashboard of every off-road ‘Roxor’, the vehicle that the company assembles in a suburb north of Detroit, US.

The effort is lead by Richard Haas, a former executive at Ford Motor and Tesla.

Speed of Mahindra’s US rollout will depend not only on retail consumers but the US Postal Service, Haas said. The Postal Service is searching for its next generation of delivery vehicles and Mahindra is one of five finalists for the $6 billion project, which may be decided this year.

Haas, the automaker’s North American chief executive, says this time Mahindra has a more cautious “pay-as-you-go strategy.” Instead of starting with a truck or passenger car, it is reintroducing the brand with the Roxor, a vehicle that looks like a vintage Jeep.

Among the vehicles under consideration for the US market is the new Marazzo, a minivan designed by Mahindra’s Michigan engineers for sale in India that has scored well in international crash safety tests and features Apple CarPlay.

Instead of low prices, Mahindra plans to focus on its image of building rugged, durable vehicles for India’s roads.

“We’re India tough,” Haas said. “That’s a value that resonates with a chunk of the population here.”

Mahindra has built around 3,000 off-road Roxors and is using the model, which starts at around $15,000, to demonstrate to American consumers and dealers “acutely aware of our previous experience” here that the Indian automaker can build a reliable product before it launches mainstream models for use on American roads, Haas told Reuters.

“Getting burned makes you cautious,” Haas said.

Mahindra is one of a handful of European and Asian automakers gearing up to enter the US market in hopes of gaining sales as well as credibility that can boost their brands at home.

France’s and China’s Zotye and GAC all have outlined plans for establishing beachheads in the world’s second-largest market by sales, which offers rich pickings in segments including pickup trucks, SUVs and crossovers.

But the United States is a mature market that most industry executives say is heading for a downturn, and it is already crowded with over 40 automotive brands and 300-plus models on sale.

“There’s not a line waiting out the front door of every potential newcomer to North America of people saying ‘I cannot wait for a new car to show up here today,’” said Larry Dominique, North American head of PSA, which has also taken a cautious approach to relaunching here.

PSA announced last month the Peugeot brand will lead its US return - the same brand that crashed out of this market less than three decades ago.

Analysts and auto executives say new entrants must stand out in a crowd to crack the US market, as Tesla Inc has with electric vehicles.

Just offering a cheap car may not be enough, said Mark Wakefield, head of the North American automotive practice for consultancy AlixPartners. The higher quality of used vehicles presents a challenge, while delivering the expensive safety features American consumers and regulators demand.

“If you fail to deliver on that then you are a pariah in the market,” he said.

Prospective US entrants might look to the example of South Korean automaker Hyundai Motor, the last foreign automaker to successfully enter the US car market.

The Korean carmaker launched cheap models in the United States in 1986, as Toyota Motor and Honda Motor had done before. Hyundai scored early successes, but quality problems set the brand back, and forced a relaunch. Now, it is overhauling its US strategy, shifting from sedans to SUVs.

The problem for prospective entrants is that if they do find an untapped niche, consultants and analysts expect other automakers to rush to fill it themselves.

Mahindra’s first foray into the US auto market was a disaster, as plans to launch a low-cost pickup with high fuel efficiency never came to fruition, in part because it failed to meet federal emissions standards. Angry dealers who had signed on to sell the Scorpio pickup sued Mahindra. Mahindra regrouped. Haas set up Mahindra’s US office in 2013 with just a handful of people, and that has risen to 450.

The company decided not to go into direct competition with major automakers, but to enter the much smaller and less heavily regulated market for off-road recreational vehicles sold mainly in rural America.

Reuters

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