The recession grinds on. Gas and diesel prices rise. Automakers and dealers go out of business. Credit is hard to come by.
What a perfect time to introduce a brand new line of automobiles.
Who cares if they’re SUVs and trucks targeted by enviros? Or that they run on diesel? Or that they’re made in … India?
“For us,” said John Perez, who is in charge of distributing the Mahindra vehicle line nationwide, “what’s happening in the United States today is playing right into our hands.”
Perez is CEO of Global Vehicles USA Inc., an Alpharetta auto importer and distributor that holds the exclusive rights to sell the Indian SUVs and pickups. Perez has signed up roughly 330 auto dealers, including a handful in metro Atlanta, to peddle the small trucks and Land Rover-like SUVs.
By year’s end, Mahindras could be rolling down the road alongside Asian favorites Honda, Kia, Toyota and Hyundai. Or, perhaps, the Mahindra could be the 21st century version of the Yugo.
“It’s definitely a gamble,” said Dodge-Chrysler-Lincoln-Mercury dealer Don Jackson of Union City, who knows a thing or two about automobile risks. “Hopefully, it will be a niche vehicle we can sell. I’ll give it about a year.”
Mahindra’s timing, though, could be ideal. Americans, buffeted by high auto prices and rising gas prices, haven’t abandoned trucks and SUVs. But they’re buying cheaper brands with better gas mileage. Diesel, long considered a dirty, noisy big-truck fuel, is cleaner, quieter and a comparably (for now) priced alternative to gas.
President Barack Obama’s push for environmentally cleaner fuels and vehicles that get more miles-per-gallon mimics Mahindra’s marketing push. And, with the tanking of the U.S. auto industry, the car-selling future —- and consumer appetites —- are open for re-invention.
“We’re now dealing with a playing field that’s been leveled to an extent,” said Jeff Schuster, the forecasting director with research firm J.D. Power and Associates. “Everyone is suffering. Over the next two to three years, we’ll be facing a more intensely competitive market than we’ve ever seen in this country.”
Mahindra and Mahindra, a Mumbai-based industrial giant, is one of India’s biggest car manufacturers and already controls one-fourth of the U.S. tractor market. It owns a tractor factory in Calhoun, Ga.
Mahindra exports trucks and SUVs to 25 countries in Europe, Africa, the Middle East and South America. It will begin exporting two- and four-door trucks (prices start in the low-$20,000s) from India into the port in Brunswick later this year, Perez said. SUVs (mid-$20,000s on up) will debut stateside next year.
All the vehicles will be equipped with four-cylinder, four-wheel drive and turbo-charged with “clean diesel” technology. Mileage should begin at a combined city-highway 30 mpg. Perez, a former Dodge dealer in Decatur, sees Toyota Tacoma and Ford Ranger as the competition. Although Mahindra is targeting sales of 50,000 vehicles the first year, Perez says profitability comes at 20,000 trucks sold.
“Once Americans see that their next door neighbor bought a diesel pickup or SUV and gets 30 miles per gallon they’ll say, ‘Maybe I should take a look at that,’ ” he said. “I don’t think Americans want to give up trucks and SUVs.”
Andy Jones, an Augusta car dealer with an auto-mall filled with Volvos, Subarus, Hondas and other imports, ordered 14 Mahindra trucks. He paid Global $125,000 for a franchise and will spend twice as much readying a showroom.
“I’m hoping there’s a niche in the lower-end spectrum of trucks —- construction guys, farming guys, people familiar with Mahindra tractors,” he said. “It’s an inexpensive work truck with good fuel economy.”
Mahindra receives a boost from European automakers selling diesel-powered vehicles in the United States. Volkswagen, for example, is building a factory in Chattanooga that will produce passenger cars run on diesel. Diesel engine vehicles are expected to make up 10 percent of the market by 2015, up from 3 percent today.
“We are bullish on diesel technology,” J.D. Power’s Schuster said. “This isn’t the diesel of yesteryear. The new diesel is much more efficient and environmentally friendly than the bad, old diesel.”
Diesel cost on average $2.49 a gallon nationwide Friday. (Gas cost $2.62.) A year ago, it was $4.70 a gallon and prices are rising but Perez discounts a sharp price increase, saying that Mahindra’s cars and trucks “get 40 percent better gas mileage than anybody else.”
Truck and SUV sales, though, have tumbled. In 2000, according to J.D. Power, Americans bought 1.1 million midsized pickup trucks, or about 6.5 percent of all vehicles sold. This year, they’re projected to buy only 279,000 midsized trucks, or 2.8 percent of the market.
Mahindra also must overcome the perception held by many Americans that Indian products are poorly constructed, much as the Koreans and Japanese did before them.
“In general, and this applies to both the Chinese and the Indians, the level of execution —- on interiors, stampings, exteriors, finishings —- is not on the level that you see from more developed countries,” said Dave Cole, chairman of the nonprofit Center for Automotive Research. “With the competitive U.S. environment, the bar has continued to be raised, making it more and more difficult for anybody new to come inside.”
Mahindra rolls out a low-key marketing campaign this fall, sponsoring fishing, golf and volleyball tournaments while an 18-truck caravan traverses the country. Perez expects Mahindra tractor’s client list to come in handy too.
An improving economy, and consumer willingness to drive Indian, though, will ultimately determine Mahindra’s success in the United States.
“Americans are now saying, ‘We don’t want to hear bad news anymore,’ ” Perez said. ” ‘We’re ready to buy cars and boats and SUVs.’ “
