Business Week: Baseball, Apple Pie... and Mahindra?
How an Indian company plans to woo America's heartland with its
fuel-efficient SUVs and pickups
Engineers from India design advanced jet engines, write some
of the world's most sophisticated software, and run massive
global computer networks. But can they make a pickup truck that
will sell in America's heartland?
Mahindra & Mahindra, a conglomerate based in Mumbai, intends
to find out. In spring, 2009, the company plans to launch two-
and four-door pickups and a sport-utility vehicle in the U.S.
This trio of diesel-powered trucks will compete against a big
pack of aggressively promoted offerings from General Motors
(GM), Ford (F), Dodge, Nissan (NSANY), and Toyota (TM). All of
these manufacturers have been warring over a domestic pickup
market that is shrinking and a SUV market that's overcrowded.
Skepticism abounds. Trucks in the U.S. are sold with imagery
of waving flags, macho companionship, and brawny workers showing
off feats of towing strength to the sound of John Mellencamp
anthems. Buyers tend to be loyal, practical traditionalists.
Considering that established players such as Toyota, Nissan, and
Honda have already had their share of trouble attracting this
crowd, some experts wonder whether a little-known company from
a country that has no history of selling vehicles to American
consumers has a prayer. They're also skeptical that buyers will
flock to diesel-a technology that many U.S. consumers associate
with belching big rigs.
"It looks like an impossible marketing play,"
says auto industry consultant Dan Gorrell
of AutoStrategem in Tustin, Calif.
But at a time of soaring gas prices, Mahindra's vehicles are
going to have one big thing in their favor: superior fuel
economy. Despite diesel's historic brown image, it is emerging
as a green technology. New low-sulfur fuel, federally mandated
in 2006, can produce mileage figures that nearly equal those
of more fashionable hybrids. Mahindra estimates that its compact
SUV, the Scorpio, and pickups, one of which will be called the
Appalachian, will get about 30 miles per gallon in the city and
as much as 37 on the highway. That compares with 30 city/34
highway for the $27,000 Ford Escape SUV hybrid and 21 city/27
highway for the gas-powered $23,000 Toyota RAV4.
Although Mahindra is unknown to most American consumers, the
company has made cars in India for more than 50 years. The $4.5
billion company also has financial services, information
technology, telecommunications, and agricultural equipment
businesses. Over the past decade, it has sold more than 50,000
tractors in the U.S.
Well aware of the image problems confronting an Indian pickup,
Mahindra has conducted extensive consumer research in America.
At a recent meeting at the Alpharetta (Ga.) offices of Global
Vehicles, the company that will distribute the brand in the
U.S., interviews with potential buyers were projected on a big
"I don't see them [Mahindra] entering the market and
immediately competing with more established brands,"
said one thirtysomething male.
"Can it really be made well if it comes from India?"
Given these attitudes, the company has made a key strategic
decision: It is not going to waste energy trying to persuade the
unpersuadables. Instead, Mahindra is going to target the three
groups it believes will be the most receptive to its
vehicles-consumers who identify themselves as "green," people
who have bought Mahindra tractors, and the close to 3 million
Indian expatriate households in the U.S. The plan is to generate
buzz with these buyers, then hope the word spreads to the
Rather than unrolling a big image-building marketing campaign,
which would be drowned out by the thunder of other truck
promotions, Mahindra plans to start small. 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. The green consumers whom the company
is courting relentlessly research the products they buy, then
frequently promote them to friends.
Mahindra has set modest sales targets for its American
operation. In the second six months of 2009, it plans to sell
just 18,000 vehicles, followed by 45,000 in 2010. Mahindra will
ship its SUV whole from India, but the pickup trucks will
be transported in pieces. They will be assembled at one of three
plant sites Global is scouting in the Southeast. Worried that
any quality problems could quickly stigmatize the Mahindra
brand, Global Vehicles CEO John A. Perez is working hard with
Mahindra to keep the number of defects to a minimum.
"We don't want to be Kia or Hyundai and have to apologize after
So far, Perez has attracted 263 dealers to distribute Mahindra
trucks. One of them is Steven Taylor, a Cadillac dealer who's
invested more than $1 million in a Mahindra franchise in Toledo
despite all of the obvious risks.
"Trucks and an SUV that get over 30 mpg is a market niche that
will get noticed,"
Mahindra & Mahindra is 63 years old and entered the car business
in 1949 by building Willys Jeeps in India. Today it's the
leading maker of SUVs in the country. The privately held company
is still controlled by the Mahindra family. In an interview with
Business India, Vice-Chairman Anand G. Mahindra said of his
global truck and SUV strategy:
"We want to be the next Land Rover."