car4.jpgDavid C. Everitt, president of Deere’s $10.5 billion agricultural division has once conceded that “M&M’s tractors sales will one day pass Deere in global unit sales”. Such is the reputation of M&M in the tractor world, what M&M wishes to make sucess in its passenger car division in a similar fashion. Mahindra wants to be a world’s greatest SUV(Sports Utility Vehicle) maker one day. North America is an aspiration for every car maker Mahindra plans to enter the United States of America next year. can an Indian company succeed in america? let’s drive into the Mahindra’s american dream
M&M’s scorpio and pick-ups for USA:
M&M plans to launch three scorpio variants — a two-door(Single-cab) pickup, a four-door(double-cab) pickup and scorpio SUV(2003 BBC World Wheels car of the year) in United States in 2009. The scorpio will be called as ‘Scorpio stateside’ and one of the pick-up will be called as ‘Appalachian’ for the American market. Mahindra, the world’s fourth-largest maker of tractors, already sells tractors for farming use in the United States and has three local assembly plants – Calhoun, Georgia, and Red Bluff, California. Its U.S. trucks and SUVs will be made in Mumbai and imported to the United States. M&M has already signed an agreement with Global Vehicles USA, based in Alpharetta, Georgia, to sell the Scorpio in the United States. More than 250 dealers have been appointed to distribute Mahindra vehicles across the U.S. Every year over 7 million SUVs and pick-ups are sold in the US and it is the largest market for SUVs with almost 50% of sales. But unlike emerging markets like India and china, United States market is heavily crowded- with manufacturers like General Motors , Ford, Dodge, Nissan, and Toyota. Due to the raising fuel price(with in the striking distance $400/barrel), large SUVs(often called as gas guzzlers) sales has hampered. However, americans are not shunning these beasts, the numbers of SUVs rose nearly 6 percent in the first quarter of 2007, and the April figures were up 25 percent from April 2006. Nowadays CUVs -Cross Utility Vehicles are preffered over SUVs since they are similar to SUVs but behaves like a car in fuel economy.
Also United States has the stringent emission norms in the world, infact all the major manufacturers of diesel passenger vehicles except Mercedes-Benz have withdrawn from the United States market because of difficulties in meeting stricter standards for the 2007 model year. Mahindra & Mahindra hopes by producing fuel efficient, T2B5 emission complyable vehicles with a low price point it can attract buyers for its scorpio and other pick-ups.
Mahindra hybrid and automatic scorpio:
“Given the growing opposition to SUVs in the United States, we have a plan to market hybrid SUVs,” Anand Mahindra said at a conference on climate change. A diesel-electric hybrid version of the Scorpio S.U.V. would follow after the launch of diesel scorpio. Similar to the Indian market,the Scorpio SUV and the pick-ups will share the powertrains in the U.S. Mahindra is working with the best technology providers to bring a clean diesel engine into the US market. The engine will be a all new 2.2-liter four-cylinder common-rail (1800 bar injection pressure) variable-geometry turbodiesel, puts out 180 horsepower and 300 pound-feet of torque. These engine will make the scorpio to comply for the stringent T2B5(Tier II bin 5) emission norms. Mahindra & Mahindra is also working on a six-speed automatic transmission specifically for the american market. M&M is developing the automatic transmission with an European technical partner. But unlike the Ford, Nissan,GM, Toyota and Honda, Mahindra’s scorpio automatic would be based on the much superior torque-convertor technology, rather than the conventional continuous variable transmission technology.
With the new 2.2L engine and 6-speed automatic transmission Mahindra will claim 39mpg(miles-per-gallon) as its fuel efficiency for the scorpio. Extremely high on any standards, (25 miles per gallon — the federal government’s average of all cars and trucks). It out-smart even the Ford escape hybrid.
United States scorpio – the Scorpio stateside:
Apart from the automatic transmission, the american scorpio will have the fully loaded and will be all the necessary features of international standard High- end features includes a four-channel anti-lock brake systems (ABS), occupants safety system, new lumber seats and air bags, four-wheel drive with electronic shift and a electronic vehicle stability system to be introduced in the Scorpio’s US variant. Mahindra is also developing a new communication and navigation system for the SUV, to be fully customised for the US. These equipements will make scorpio to meet stringent safety norms and satisfy the more demanding american customer.
Scorpio pick-up – the Applachian:
Similar to the powertrain, the pick-ups(applachian) will share the dashboard and front seats with the scorpio SUV. The two-door pickup, built on the same 120-inch wheelbase as the four door, has a 7.5-foot-long deep bed(longest bed in its class), with rolled lip edges and steel tiedown hooks on all three sides.
Marketing and target audience:
Mahindra is targeting a niche market, price conscious(prices at the pump too) and “green” customers. Also, people who have bought Mahindra tractors and Indians in the U.S. According to Businessweek Mahindra and Mahindra will follow a uncoventional marketing campaign for the U.S. market. “It will spend only about $20 million on marketing in 2009, less than 10% of what Toyota spent to launch the Tundra pickup. Almost none of this money is expected to be devoted to television or glossy print ads. Instead, it will purchase carefully selected search terms and banner ads on Web sites popular with its target consumers. These links will steer potential buyers to detailed information about Mahindra’s trucks.”
Unlike Chinese manufacturers which setted impossible targets but even failed to make an off the mark. Mahindra has set modest goals for its first few years. “Half of the global sales in S.U.V.’s and pickups is in the United States and we want to capture at least a fraction of that to start with,” said Pawan Goenka, president of the automotive division of Mahindra & Mahindra. Mahindra is planning to sell just 18,000 of scorpios in the 2nd six months of 2009, followed by 45,000 in 2010.
Price and the strategy:
Mahindra will ship its SUV as a CBU from India, but the pickup trucks will be assembled there. They will be assembled at one of three plant sites Global is scouting in the Southeast. Though it will be CBU Mahindra will price the Scorpio SUV and the pick-ups aggressively. Mahindra’s 2-door single-cab pickup truck will be offered in the low $20,000 range and its 4-door truck and 5-door SUV, which seats seven, will be in the mid-$20,000 range. A high-end version of the 4-door truck will be in the high $20,000 range. These prices are very competetive when other fully loaded SUV prices are hovering in the range of $40,000 – $50000. All the vehicles will have bumper to bumper warranty for 60000miles / 4years
Similar to hard core Indian bike enthusiast who are very much associated with Royal Enfield, Americans are extremely loyal to the their SUV makers. When Toyota and Honda entered the American market they faced stiff opposition. They employed lot of americans and invested a lot in America. Infact, they projected them as american producers and circumevent the natural oppostion to foreign makers from the american patriotist. Mahindra & Mahindra has to follow its forerunners if it wishes to be serious player in the american market.
Also, many of the yardsticks are different unlike Indian customers who are price conscious, american customers cannot be lured only by the low price point. They look for the quality, quality problems will keep the customer off the product and poor quality even can destroy the brand. Earlier Hyundai and nowadays even the mighty Toyota is facing lot of problems in the quality front. Also, unlike other international manufacturers Mahindra do not have multiple products for United States(atleast as of now) it has to solely depend on its Scorpio. Hence mahindra has to work hard to keep the number of defects to a minimum before it launches the first indian product in america. Mahindra wants to be the next Land Rover. All the best Mahindra and Mahindra!
About Mahindra and Mahindra:
Mahindra and Mahindra(M&M) which is already selling most of its product in chile, Australia and south africa is now planning to sell scorpios and bolero’s in Uruguay, Paraguay, Argentina and Brazil. Mahindra already sells scorpio as Mahindra goa in some parts of europe. M&M made a bid to acquire Ford’s Land Rover but later it withdrawn the bid on account of high valuation.