Los Angeles / Mumbai: India’s largest maker of sport-utility vehicles,Mahindra and Mahindra Ltd (M&M), is betting its diesel pickup trucks can beat the Chinese to the US market.
Early next year, Mumbai-based M&M plans to start selling small two- and four-door pickups with a diesel engine that meets California’s strict exhaust rules. US plans for Chinese brands such as Chery Automobile Co. and Geely Automobile Holdings Ltd have yet to materialize, five years into their announcements.
“Once you establish the brand, volumes will come,” Pawan Goenka, M&M’s president in charge of the automotive business, said in a 16 June interview. “There is a hole available to us which is not populated.”
Quite confident: A file photo of M&M’s Pawan Goenka with the Scorpio in Mumbai. The company has spent between $60 million and $70 million in reworking its Scorpio SUV into a pickup for the US market. Ashesh Shah / Mint
M&M’s trucks will arrive in the US even as recession and job losses have pushed auto sales to the lowest in three decades, triggering bankruptcy filings for General Motors Corp. and Chrysler Llc. A weak economy and cheaper diesel prices may help the Indian auto maker win buyers seeking a bargain, said industry analyst Eric Noble.
“It’s not a bad time to launch a durable, value-oriented brand,” said Noble, president of Car Lab, an Orange, California-based consulting firm for auto makers. “There’s no real competition in compact trucks with a diesel powertrain.”
With a brand that’s totally unknown to US customers, an Indian auto maker will face the same challenges Hyundai Motor Co., Toyota Motor Corp. and Honda Motor Co. faced when they entered the world’s largest economy, said Puneet Gupta, a New Delhi-based analyst at CSM Worldwide Inc. In India, M&M makes Scorpio and Bolero SUVs.
“It’s a big challenge,” Gupta said. “Selling a very cheap vehicle may not work. Selling in a matured market may also spoil your reputation if your product is not up to the expectations of customers there.”
M&M’s shares have more than doubled this year in Mumbai trading. That’s the best performance in the benchmark 30-share index, the Sensex, during that period.
The vehicles will be “competitive” with similar vehicles in the range of $20,000 (Rs9,58,000) to less than $30,000, Goenka said, without giving a specific price. The company has spent between $60 million and $70 million in reworking its Scorpio SUV into a pickup for the US market. M&M has set up a network of 336 dealers throughout the country.
M&M expects the pickups to get at least 30 miles per gallon (mpg) in highway driving and carry a payload of at least 2,600 pounds. By comparison, Toyota’s petrol-engine Tacoma, the best-selling small pickup in the US, gets 26 mpg on the highway and can carry 1,570 pounds in its bed. Diesel engines are generally at least 20% more fuel efficient than petrol engines.
Key to M&M starting sales on schedule will be completing US crash and safety tests by August, said Larry Daniel, senior vice-president of sales and marketing at Global Vehicles USA Inc., M&M’s distributor. “We’re cutting it close, but are confident the trucks will do well in the tests,” Daniel said in a 12 June interview.
Plans for US models from China’s Chery, first announced in late 2004, failed because of disagreements with its US distribution partner Visionary Vehicles Llc.Chrysler also abandoned plans to sell Chery-made cars in the US. Geely, China’s biggest privately owned car maker, hasn’t met its initial goal of selling cars in the US by 2008 amid talks withFord Motor Co. on buying its Volvo Car unit.
Last month, GM agreed to a United Auto Workers request to build small cars at an unnamed US assembly plant instead of importing them from overseas. Detroit-based GM’s initial plan was to sell a US version of a car built by Chinese venture partner SAIC Motor Corp., according to the AP.
The first highway-legal Chinese car in the US may be the Coda sedan, a battery-powered model that Santa Monica, California-based Miles Electric Vehicles plans to retail in California in late 2010. The model will be supplied by China’s Hafei Motor Co.
M&M was set up in 1945 as a franchise to assemble Jeeps of Willys, according to its website. The auto maker later had a partnership with Ford Motor Co. and now makes the Logan sedan with Renault SA in India.
Tian Ying in Beijing contributed to this story.