Opinion: The Real Reason for Mahindra’s Failure to Launch

Driven home by the official acquisition of Ssangyong this week, my personal feelings on why Mahindra is jacking around on the whole US launch deal revolves around demand in the Indian domestic market and emerging markets at large. Why? Because that is where the money is.

Emerging Markets
Demand in the Indian market started to steadily increase late in 2009. Manufacturers and suppliers started scrambling to keep up last fall. Demand has continued to rise significantly since.

Chew on this for a moment: Which exploding markets are most of the US, Asian, and European auto manufacturers trying to gain a foothold in? India, China, Eastern Europe, and the former Soviet states. Many of these markets are set to grow massively for the next several decades as their citizenry gravitate towards the middle class. This is where the money is to be made. Mahindra knows this, and they don’t want to lose any business to foreign brands coming into India if they can help it. Conversely, they definitely want to gain ground in these other evolving countries. This is a major reason why Mahindra bought Ssangyong Motor. Ssangyong’s biggest markets are Russia and Europe. Mahindra now has access to a bunch of Ssangyong’s technology, R&D, and manufacturing facilities, but more importantly they bought themselves an established brand that has some 1,300 dealers in 98 countries of these key markets.

Not to take anything away from any of these other countries or Mahindra themselves, but some of them probably have a slightly different expectation of quality, features, appearance, purpose, etc. in a vehicle. Mahindra, and particularly Ssangyong products, will be perceived differently elsewhere than they are by spoiled American car shoppers.

Worth the Effort?
So why bust your balls passing all of our stringent emissions certifications and safety requirements, and then be forced to pay the 25% chicken tax on every vehicle sold, plus a percentage to Global Vehicles USA (GV), only to potentially sell 30,000 vehicles a year in a crowded and competitive market?

I think that 5 or 6 years ago Mahindra saw the US as THE market to be in for two reasons: 1-the status of claiming to be the first Indian-built/Indian brand in the US. 2-their ego and arrogance led them to believe that the US would be a piece of cake to enter.

Once the reality of the global recession kicked in, the world started looking a lot different. Suddenly the US dollar was worth crap, and traditional auto markets (particularly the US) dried up. Emerging markets have started looking pretty good with a low cost of entry and less competition.

The US is just not the same priority for Mahindra that it was a few years ago. They have been slowly going through the motions, but it’s pretty obvious that Mahindra was hoping to either kill GV financially, or otherwise dissolve the contract with minimal financial loss in order to regroup and attack the US market when it makes better sense.

GV has attempted to order trucks several times. Mahindra claimed each time that GV did not have the finances in place to support the order. In my opinion, those truck orders were rejected purely because Mahindra never intended to build US versions at the time. Since they received federal approvals in August of this year, there has been nothing to hold Mahindra back from building trucks for the US market. If Mahindra honestly didn’t think GV had the financials in place to back up the orders they placed, then why the hell wouldn’t they back it themselves just to get the ball rolling? Especially since Mahindra so confident about their success in the US market.

Whether they like it or not, in the US, Mahindra has a legal obligation to satisfy GV and the dealers they represent. The US has many laws in place to protect dealers (GV is also technically a dealer) from unfair practices by manufacturers. Mahindra can fight this and probably buy themselves some time, but the odds are against them (in the US at least). Eventually Mahindra will have to make good with either compensation or product as promised (or re-negotiated).

US Outlook is Still Positive
Mixed in with the headlining news of the Ssangyong acquisition, there is positive speculation that completing this deal will open the door to a revitalized effort to enter the US market.

Mahindra is already making plans to quickly introduce new models as a result of the takeover as early as next year. Mahindra instantly becomes a much larger global player, and has more development and technology resources. Reports are claiming that Mahindra has the cash on hand to complete the Ssangyong deal, and even Ssangyong has been making money this year. It may not be too much to expect that the US target will now loom much larger in Mahindra’s sights. Let’s hope so.

Mahindra to Expand US Business after Ssangyong Acquisition

IndianExpress.com is reporting this morning that an undisclosed “senior official” from Mahindra’s Finance and Strategic Development Department has informed them that the US pickup and SUV market is in Mahindra’s crosshairs after the Ssangyong takeover is complete.


Due diligence and planning for the acquisition of the bankrupt South Korean automaker, Ssangyong Motor, began earlier this summer and is projected to be complete by March of 2011, with Mahindra-Ssangyong vehicles being launched in India shortly after.

"We have entered into an agreement with the ailing Ssangyong Motor in August to acquire a majority stake in the South Korean SUV-maker to expand our business in international markets. We are looking at entering the US market, once the deal is through," the article quotes the anonymous Mahindra official.

The official goes on to restate the obvious, "When the global presence of Mahindra and Ssangyong is combined, jointly we will be able to achieve more success in the global market."

No other sources are currently verifying these statements, but they do correspond with speculation provided by the president of Mahindra’s punching bag/US distributor, Global Vehicles USA. John Perez claimed in a letter to customers two weeks ago that Mahindra pickups will be available in the US sometime in the spring. The saga continues.

Source: IndianExpress.com, CarTradeIndia.com, PickupTrucks.com

GV Press Release: GV to Protect 8,300 Potential US Jobs

This just in from US Mahindra truck importer, Global Vehicles USA:

Global Vehicles Takes Steps to Protect 8,300 Potential U.S. Jobs


ALPHARETTA, Ga., Nov. 11, 2010 /PRNewswire/ -- Global Vehicles USA, Inc., announced today that it will be taking new steps to protect more than 8,300 potential U.S. jobs associated with the launch of Mahindra pickup trucks in the United States, including requesting that the states of Florida and Georgia hold administrative hearings to determine whether Mumbai, India-based Mahindra & Mahindra and its local employees are violating state motor vehicle franchise laws.

Global Vehicles has been the exclusive U.S. distributor of Mahindra vehicles since 2006, and the company has recruited a network of 347 dealers who are prepared to sell Mahindra pickups immediately, now that they have passed federal certification tests.

Mahindra threw the launch plans into disarray this summer by attempting to arbitrarily remove Global Vehicles as its distributor, and by suggesting through a spokesman that it may do business in the future with some dealers but not all of them.

Earlier this year, Mahindra said the launch was on-track for late 2010. Now the company refuses to commit to a launch date.

"We are ready to sell trucks, and that remains our goal," said John Perez, CEO of Global Vehicles. "By our calculation, Mahindra's delays and disruptions are putting more than 8,300 potential jobs at risk at our dealers, at the ports, in the trucking industry and throughout the supply base."

According to Perez, these figures count only the employment associated with the launch phase. The long-term jobs outlook is even greater because the U.S. economy is recovering, and consumers want a 30-mile-per-gallon compact truck that can haul as much as a heavy-duty pickup.

"Global Vehicle's dealers are experienced and well capitalized, and have access to more than $1 billion in credit facilities to support their facilities, order vehicles and deliver outstanding customer service," Perez said. "We believe first-year sales could reach 30,000 units, worth $750 million."

Global Vehicles has asked the Georgia Department of Revenue and the Florida Department of Safety and Motor Vehicles for hearings to determine whether Mahindra is violating state franchise laws by acting in bad faith with Global Vehicles and its dealers, who together have invested more than $100 million to bring Mahindra trucks to the United States.

Global Vehicles also has invoked the arbitration clause in its contract with Mahindra, and sued Mahindra in United States District Court for the Northern District of Georgia, Atlanta Division, to protect its contractual rights. Both cases are pending.

Global Vehicles U.S.A., Inc., based in Alpharetta, Ga., is the exclusive importer and distributor in the United States of motor vehicles produced by the automotive arm of the Mahindra Group (www.mahindra.com), a $6 billion-plus diverse conglomerate.

SOURCE Global Vehicles USA, Inc

Mahindra to Build Vehicle Plant in TN, Not the TN You Are Thinking

Indian news outlets are reporting this morning that Mahindra & Mahindra has made an agreement with the Indian state of Tamil Nadu to acquire 400 acres of land to build a new vehicle manufacturing plant to keep up with increasing domestic demand.

It is unclear which product line(s) will be built at the new facility, but it is expected that Mahindra’s total annual vehicle output in Tamil Nadu will increase from 1.3 million to 1.4 million once the plant is up and running. The new plant will be located somewhere near the city of Chennai which is home to many other Mahindra operations. Chennai is the auto manufacturing hub of India.

Reports indicate that the new factory is intended to increase domestic supply of vehicles for India. Mahindra fans in the US will be hopeful that the facility, and increased capacity, will lead to the fulfillment of John Perez’s bold statements made in an email sent to waiting Mahindra truck buyers last week which said “While I cannot give you a firm answer on timing, I can tell you in my estimation, trucks will arrive in the spring of 2011.”

Sources: PickupTrucks.com, Automotive World

W201: The Card Hidden Up Mahindra’s Sleeve

Rumors and renderings of Mahindra’s all-new “world SUV”, codenamed W201, have floated to the surface time and again throughout 2010. Educated guesses, eye-witness accounts, and complete speculation give us a decent overall understanding of the unnamed SUV/crossover despite Mahindra’s official policy to not comment on rumors about new or upcoming models (apparently they employ a similar policy regarding timelines and vehicles destined for the US market, but that is another story). As the rumored 2011 launch (2012 for US?) of the W201 approaches, here are some updates and further speculation served up for your reading pleasure:


Originally thought to be an upgraded replacement for the Scorpio SUV (the body-on-frame sibling of the US-bound Mahindra TR20 and TR40 small diesel pickups), it’s become clear that the larger W201 crossover will be a far more luxurious step above the relatively primitive (by US standards) Scorpio/TR.

The W201 is clearly a project intended to not only extend Mahindra’s global vehicle market reach, but to also stretch Mahindra’s design, engineering, and production expertise. With its unitized construction and apparently transverse engine layout, the W201 represents a significant departure from the last forty years Mahindra has spent slowly evolving the basic body-on-frame construction of the first Jeeps they were licensed to build in India. The last significant technological leap for Mahindra since adding a diesel tractor engine to the Jeep in the 1970’s, was the design of the current Scorpio platform in 2002. It’s obviously time for Mahindra to take their game to a new level.

It’s likely that Mahindra’s familiar longitudinal engine layout with a conventional transmission and part time 4WD transfer case will be dumped in favor of a more compact transverse engine layout favoring a front-wheel-drive/all-wheel-drive configuration for the W201. Mahindra is currently in the process of taking over bankrupt South Korean car maker, Ssangyong Motor. This acquisition should give Mahindra access to further expertise in unitized body design and manufacturing, as well as access to Ssangyong’s gasoline and diesel engine designs. Combine this with Mahindra’s recent acquisition of pure-electric car manufacturer, Reva, and a variety of gasoline, diesel, electric, or hybrid powertrains may eventually be offered in the W201.

In the spirit of Mahindra’s cloak and dagger operations involving the W201, heavily disguised test mules have been spotted several times on Indian roads. Sharp-eyed car guys including our friends at Indian Autos Blog have taken photos of the pre-production SUV, and artists have rendered images of what the undisguised SUV may look like. Photos and renderings reveal the W201’s exterior styling to be somewhere between a Nissan Murano and a Pathfinder which was left in the oven too long. It may not be beautiful, but all around it’s a much more modern look than that of the TR20 and TR40 which seem to pay homage to Japanese pickups of the 1970’s and 1980’s.

Some lucky civilians have gotten up close to the mules and at least one has even had some limited drive time in the W201. The interior has been described as a giant leap forward for Mahindra, but still not likely up to the high expectations of American consumers. Certainly this is something which could be fixed before production begins. Witnesses state that the W201 is loaded safety features commonly found on US-market vehicles such as a complement of air bags, traction control, and stability control. Mules have been observed with 6-speed manual transmissions, but it’s a given that automatic versions are a must for US sales of this type of vehicle.

To continue roasting the same old US launch delay chestnut, it remains to be seen where the W201 fits in with Mahindra’s master plan (or lack of plan) to launch the current generation TR20 and TR40 pickups in the US. The W201 is almost on a different planet than the rough around the edges Scorpio-based pickups. Adding fuel to the fire of controversy is Mahindra’s development of a next generation Scorpio platform also due to launch in 2011. Time will tell what their plan is for sure. In the mean time, we’ll keep on speculating.

Source: IndianAutosBlog, Team BHP, BurnYourFuel