Team-BHP (https://www.team-bhp.com/forum/)

-   The Indian Car Scene (https://www.team-bhp.com/forum/indian-car-scene/)

-   -   Mahindra to open 4,00,000 sq.ft. assembly plant in Detroit (https://www.team-bhp.com/forum/indian-car-scene/192172-mahindra-open-4-00-000-sq-ft-assembly-plant-detroit.html)

Thanks to Ravi Nair for bringing this to our attention!



Mahindra is planning to set up a new assembly plant in Detroit, making it the first Indian manufacturer to set up such a facility in the U.S. The company is expected to make an announcement regarding the same during a press conference scheduled for November 20, 2017.

The 4,00,000 sq.ft. facility is expected to come up on Rex Road in Auburn Hills. It will be the first new automobile plant in the region for 25 years.

According to a report published in July 2017, Mahindra has invested US$ 1.5 billion to set up a new manufacturing plant in Detroit. The new facility is expected to employ 3,000 people and expected to generate US$ 2.5 billion in revenue. According to media reports, the company plans to build off-road utility vehicles at the new facility.

Mahindra's technical centre and North American headquarters is situated in Troy, Michigan. The company also has a 2,50,000 sq.ft. warehouse in Pontiac.

Mahindra has been trying to enter the U.S. passenger car market for a long time now. While the company has a large distributor base for tractors in the country, it has not launched a passenger car yet. Recently, it bagged a prototype contract for US Postal Service delivery vehicles.

Source: Automotive News

Sounds impressive but things are up in the air until they have the long term contract.

Remember - land in those areas is dirt cheap and low hassle. Add to that local grants and sops to create jobs make it pretty easy to set up. The fun will be handling unions and ensuring rules, regulations, liability etc are observed,

Its a dream come true for M and M who were struggling to get into the US market with the Scorpio Getaway, till a few years ago.

In fact while on a visit to India last fortnight ( Oct 25, 2017) Mr Rex Tillerson, the US Secretary of State had made a statement that Mahindra will be having its own assembly plant in Detriot , Michigan.

My reply is on lighter side, if Mahindra can handle labor union in India, they can handle anywhere else in the world lol:

If the new TUV300 design is anything to go by, what they really need to invest in is a new design lab. New manufacturing plants focussed on market expansion is fair but ultimately, if they do not make big strides on the design and quality front, they will not be successful.

Learn from Hyundai. Studying their America experience can be really valuable for Mahindra.

Detroit is perhaps the worst location now to open a new factory, but Mahindra hasn't chosen it for costs or productivity - it's to send a message to the Americans. Similar to how Toyota opened up a pickup truck plant in Texas!

Mahindra could have some sales potential at the bottom-end of the market, in particular with cheap pickup trucks for use on farms.

And Mahindra may get govt backing and financial support to set up the market in Detroit(dead city).

It is a bold move backed with some research and potential to build a market. They already have their plants set at cheaper cost locations and can build a hybrid model.

Serves both the American economy and their own P&L as their revenue shifts to better currency.

Yes, their farm equips have decent brand image in the US market. I know at least couple of people who own Mahindra tractors in the US.

Very bad move, IMO.

American Market: Highly competitive. Size of the market is pretty stagnant, even though the market is big. The most developed market with mature products. Does M&M have a product for this market? I am afraid not!

American Needs: I would broadly classify the market into two categories. One, which goes by legacy. Hardcore Chevy fans, Dodge fans - they don't care if they are fuel guzzlers, or if they are not refined. M&M will not be able to be part of this 'cult' culture. The other one, is the sensible group that looks for resale value, low maintenance costs, high fuel efficiency etc. such as Hondas, Toyotas, Hyundais. Does M&M fit in this category? Nope! Now, there is a new category coming up - electric. M&M is still new and does not have a decent product with considerable range.

American Regulation: US regulation is pretty strict. And penalties are huge. Will M&M be able to face any litigation due to its inherent niggles or part failures? Something like XUV500 alloy wheels giving away! If I recollect correctly, M&M had faced a litigation from one of its distributor really long ago, when they first tried to enter the market. This is the scariest part for me. American consumers wont take niggles and part failures lying down. Activist consumers will chew you, and will be supported by well established regulators.

All in all, I feel M&M is grossly under prepared to be entering the world's most advanced auto market. Risks are way too high. I wish they first concentrated on their home market India. Gain market here (they have less than 10% market share in their own market!). Then get adventurous. Otherwise you will be damaging your brand name in US - for ever!

And investors in M&M stock, please take note of this potential investment going sour.

While it would be interesting to see how they navigate the notorious Detroit union cartel, it could be potentially an export-based plant providing a base to Mexico and the Caribbean countries. I'm sure with Trump as the leader, they are going all out to protect their market and this could be a brilliant move to get building quickly with government protection.

What's interesting to see would be their revenue vs. margin. Typical labor laws compounded with high commercial insurance requirements brought almost all of the major companies to their knees. M&M has to sell like hot cakes elsewhere for the next 4-5 years to compensate for the initial burden.

One other benefit I see is the sourcing components such as transmissions / electronics from local American plants and then transferring them to other country products through internal transfers / accounting. So what may cost x if directly sourced from the US could be lower if bought in the US and then transferred to India. In other words, impex jugaad.

I think M&M would have definitely discussed those points. This might just be a PR stunt to throw some weight behind their USPS prototype contract or they might be even considering a product from Ssangyong and nothing from Mahindra's stable. Look at Hyundai/Kia, they are what they are today only because of the ultra competitive market in USA.

Mahindra USA has a press conference scheduled to take place in Detroit, later today.

They have this website https://comingsoon.mahindrausa.com

It appears they are going to launch new tractors and ab Off road Utility Vehicle.

They also published a teaser video of the Off road UV on 17th November, 2017:

https://www.youtube.com/watch?v=rEPEQY8bW8g

A screen grab of the video is below:

Mahindra sells tractor's in US. Wish Mahindra take over the discontinued Saturn brand, do production in India and global sales including India. It is a tested brand.

M&M were one of the earliest to launch EV in India. Our limited infrastructure makes little business sense. I Guess, this initiative could give them a base if they want to continue their vision for EV. This could give them access to a market that is and will be better equipped to support EV in near future.

They are going to build the Thar there. That too, around 12,000 a year.

Strangely, the press release doesn't mention anything specific related to it. It only says they will build an 'off-highway vehicle'.

However, the local media gives more details.

Detroit News says that, it will be called the Roxor. How it looks, won't be revealed till the end of this year.

Detroit Free Press says that it will be an all-terrain jeep-like vehicle, to be called the Roxor, which will be a variant of the Thar.

Now, why the 'off-highway' tag? My best guess is the strict crash norms for on-highway / on-road vehicles in the US, which the Thar wouldn't have passed.