GROWTH DRIVERS Arun Jaura (left) chief technology officer, and Pawan Goenka, head of the automotive division (Pic by Subhabrata Das)

But easy math can make for tough marketing. Americans are not very easy customers. When Nissan wanted to enter the US market in 1958, it set itself the target of selling just 500-1,000 vehicles in the first year. It sold 83. At least one Chrysler vehicle and a Ford model have failed because they did not have enough cup holders!

Goenka says the company has set itself a target of selling 10,000 vehicles in the US in 2009 — and they will all have “holders in the front and back that can hold large cups”, laughs Arun Jaura, who has just been elevated as the chief technology officer of the group. Jaura, who built the Ford Escape hybrid in Detroit, is busy rolling out hybrid vehicles for M&M now.

M&M will also spend $50 million (Rs 200 crore) to upgrade the Scorpio for the US market as the Indian version will not meet safety norms or customer needs. For one, the company is working on Project W408, which is fitting the Scorpio with a reconfigured version of the powerful mHawk engine, a second-generation 2.2-litre common-rail system M&M developed entirely in India. This is important as Mahindra expects the Scorpio’s fuel-efficient and low-emission engine to win over customers who feel guilty about driving gas-guzzling automobiles, yet want the size and performance of an SUV.

“Fuel efficiency is more of an issue than it’s been in the past,’’ says Rebecca Lindland, research director of automotive group at Global Insight, an independent research firm. “But it’s not the only issue, nor is price. Consumers still monitor safety ratings, reliability, comfort and convenience even more than gas mileage.”

To this end, Goenka says he would offer US consumers multiple Scorpio variants — a single-cab pick-up, a double-cab pick-up and the full-size SUV. Each will “have new seats, a new four-channel ABS, dual-stage airbags, lots of electronics and everything will be T2B5 compliant”, he says. T2B5 or Tier 2 Bin 5, is the American emissions standard that automobiles have to follow. Perez has said all vehicles would come with a four-year, 60,000-km warranty.

On paper, all this would give M&M a credible position in the mid-size SUV market where the company wants to position itself as a value-for-money alternative. But it will take a lot more to actually get US consumers to want to have a vehicle wearing the M&M badge parked in their driveways, next to their neighbours’ Toyotas and Fords.

Automotive News’ Chappell believes US consumers would be hesitant about buying an unknown vehicle made in India. “It took Americans 25 years to accept that the Japanese really knew how to build cars,’’ he says. “Even Hyundai is still trying to convince shoppers that its cars are reliable and well built.” But Goenka bravely insists that M&M is not a completely unknown brand in the US because the company sells tractors there. It has sold about 10,000 tractors in the US and sales are growing at about 25 per cent annually. But in reality, “the Mahindra identity is as familiar to American car buyers as aloo palak is to a cowboy”, Chappell says.

Mahindra’s days studying filmmaking at Harvard gave him an understanding of the American psyche. To connect with American buyers, M&M is likely to badge its American pickups with a true-blue American name that invokes the ‘great outdoors’ — Mahindra Appalachian.

While many Indian companies make the mistake of falling in love with their products while shying away from investing in ‘soft’ elements such as advertising, Mahindra will spend as much — Rs 200 crore ($50 million) — on promoting his US vehicle as he will spend on developing it. Global Vehicles has hired the iconoclastic advertising firm Strawberry Frog to position its vehicles. “Our objective is to launch a car in the US in a way that has never been done before,’’ Scott Goodson, founder and chief executive of Strawberry Frog told the media on the sidelines of Goafest, an international advertising conference. “We are going to launch it in a way that people are going to say ‘Holy wow! That is cool!’ We are not going to do it in the traditional way… It’s not going to be a bunch of commercials about a guy driving a car. It is going to be a brand idea,’’ Goodson said.

M&M is also talking to a couple of assemblers in Ohio and other states to assemble knocked-down kits of their vehicles. Though this would raise costs, the company would net two benefits. It would sidestep the 25 per cent ‘chicken tax’ levied on imports. More importantly, local assembly would help overcome the average American’s resistance to foreign brands, a lesson German and Japanese automakers have learned.

Curiously, the largest financial risk M&M could face in the US is litigation and recalls. American safety laws are demanding and even small faults can result in high-cost product recalls. P.N. Shah says the company is aware of the complexities of the market and is prepared for it. He did not divulge details.

NO GAS-GUZZLER Scorpio can be a less-expensive alternative to popular SUVs, such as the Land Rover (Bloomberg)

As in Africa, it is M&M’s US dealers who will hold the key to the company’s success, Chappell says. “If dealers feel they are being rewarded by selling a car, they will overcome great obstacles to continue selling it.”

Perez himself has a reputation to salvage. About a decade ago, he had enlisted a host of dealers to sell Romanian utility vehicle Aro in the US under the name Cross Lander. However, that effort came unstuck when the plant Perez had purchased in Romania got so mired in local issues and red tape that he had to leave the country. To sell Scorpios, Perez has now enlisted many of the same dealers who had invested in Cross Lander showrooms.

In the Wake Of The Flagship
Mahindra stresses that his ambitions are eminently achievable for they are reasonable. “Our total production capacity (200,000) is a fraction of the market (US),” he says. “We are not looking to dominate it. We want to create a niche for our products.”

Mahindra wants his vehicles to compete with the best because he believes it would help the company improve its abilities and class. Having to cater to the most demanding customers automatically raises the bar. It would force M&M to become truly global, a process that began when the engine of the first Scorpio turned over.

In many ways, the US entry will also be the champion vehicle’s last lap. Though M&M is counting on its trailblazing Scorpio to lead the way into the US, it is also preparing for life after the ageing winner. The company is spending Rs 500 crore-600 crore to develop a monocoque SUV for the US market. Codenamed W201, the vehicle will be powered by the mHawk engine, albeit in a completely redesigned and reconfigured form. It will hit the US market in the next couple of years.

The Scorpio would continue to sell for many more years even though new vehicles bearing the Mahindra brand may unseat it from its lofty perch. But none of them are likely to be an avatar that would consume the company the way the Scorpio did.

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(Businessworld issue 15-21 April 2008)