Indian carmaker has American aspirations
India's largest manufacturer of SUVs is laying the groundwork to potentially drive into the U.S. auto market.
Mumbai-based Mahindra & Mahindra Limited, known in America more for information technology services and tractors than for automobiles, is working on raising its brand awareness in the United States with a long-term goal of introducing a vehicle here.
"The U.S. is a very challenging market for any new automaker to come in," said Pawan Goenka, Mahindra's executive director and president of automotive and farm equipment. "We just need to make sure that we get everything right, rather than be in a hurry and come in and not succeed."
Mahindra's current endeavor in the U.S. essentially started about a year ago, when the company invested $4 million to open two facilities in Michigan: an engineering technical center in Troy and a small, Ann Arbor-based production facility for GenZe, an electric bicycle and scooter subsidiary.
"That is our way to test the U.S. market and see if the Mahindra brand can get established," Goenka said. He stressed the $16.5 billion multinational company has no set timeline for introducing a vehicle in the U.S., but said it's under study.
One of the discussions, he said, is whether a U.S.-destined vehicle should be branded Mahindra or Ssangyong Motor Co., a South Korean automaker the company took a controlling stake of in 2011 as part of its global growth plans.
About half of Mahindra's revenue comes from its automotive business. The company produces about 645,000 vehicles annually, including 145,000 from Ssangyong. Other sectors for the company include aerospace, defense and more than a dozen other industries.
Before any major push to the U.S., Mahindra plans to grow in areas such as Europe and China. If the company eventually can gain a "strong presence" in America, Goenka said the company "would certainly consider manufacturing in the U.S."
"We just want to make sure we do everything right in terms of product, pricing, marketing and be ready with our U.S. entry," he said. "And that's the reason we are taking our time."
Tough market to crack
Few automakers from such emerging markets as China and India have been able to successfully transition to the U.S. The most recent successes were arguably South Korea's Hyundai and Kia nearly 30 years ago; combined, they make up about 8 percent of the U.S. market.
David Cole, Center for Automotive Research chairman emeritus, said the U.S. is a tough market to crack for any automaker because of increased regulations, quality expectations and already established brands.
"The market is saturated with some really good players," he said. "It's not like there's a void."
Historically, one of the best ways to get into the U.S. was to partner with an already-established automaker. Goenka said Mahindra would be open to a partnership, but it would want to brand its own vehicles for the U.S. and not just produce another automaker's vehicles for India.
Mahindra, which employs more than 6,000 people in the U.S., has attempted joint ventures with automakers such as Ford and Renault in the past, but the partnerships fell through following lackluster results.
Part of Mahindra's growth could be through electric vehicles. While the zero-emission vehicles haven't sparked U.S. consumer interest like many thought they would a decade ago, it's a niche market that could open the door for the company.
In 2013, Mahindra started producing the all-electric e2o car through REVA Electric Vehicles, which it purchased in 2010.
The car is sold in India, but the company plans to expand sales to Europe by year's end.
Goenka said if the company did decide to introduce an electric car in the U.S., it would not be the small e2o, which has a top speed of 50 miles per hour and a 75-mile range.
Mahindra, as a way to promote itself and experiment with new technologies, is one of the inaugural sponsors of FIA Formula E racing series, an electric-car racing circuit.
For the first season, the 10 Formula E teams are using the same car — the French-built Spark-Renault SRT_01E — that they can tune themselves. The carbon fiber and aluminum race cars can hit 140 mph. In coming seasons, companies will be allowed to develop and produce their own cars — giving Mahindra experience and technology it could use to rival other performance electric-vehicle manufacturers such as Tesla Motors Inc.
Building from ground up
IHS Automotive analyst Mike Wall said going down the electric road and building its brand before diving into the U.S. market isn't a bad way to go.
"It's a reasonable strategy to really approach it," he said. "You're really about building it from the ground up and building that brand identity more than anything."
The company has ambitions to not only be an automotive company, but a mobility company, which is where GenZe's electric bikes and scooters could play a role.
GenZe (pronounced Gen Z) started selling electric bicycles in the U.S. last year, and next month plans to start production of an electric scooter in Ann Arbor that will be sold in select states.
"Our interest as a Mahindra group is clearly to be part of this landscape in the United States; to help disrupt urban mobility and be a part of the emerging mobilities of the future," said GenZe CEO and president Vish Palekar.
Having the different options for mobility is an idea Detroit automakers have played with for years.
Ford recently showcased two prototype e-bikes that can charge while folded into a Ford car or truck. The bikes were unveiled at the Mobile World Congress in Barcelona.
Palekar said the company could produce something like that in the future, but its current bikes are meant to function as normal bikes that can handle street conditions.
Wall said even if Mahindra doesn't bring a vehicle to the U.S. anytime soon, positioning itself as a global mobility company could be a smart move.
"That's a much longer strategic type of plan," he said. "The fact that they've got their eyes on that is huge. It's definitely a great strategy and a great idea."