Mahindra & Mahindra’s plan to take its products to the US market seems to have taken a back seat for now, according to sources in the country’s market leader in sports utility vehicles.
The city-based entity has yet to apply for a re-certification for federal emissions with the Environmental Protection Agency (EPA) of the American government. The validity of the document is to expire this year-end. M&M is also embroiled in a legal dispute with Global Vehicles Inc (GV) of Texas over distribution and sales of its vehicles in that country.
It was last year that the EPA awarded the certification to the 1945-founded automotive company, allowing it to sell its pick-ups in the US market. The certification pertained to two M&M models (TR20 and TR40) for the 2011 calendar year.
Now, the company will have to submit vehicles for federal emissions and safety testing all over again, sources said. The earlier pick-ups, powered by India-made diesel engines, were based on the Scorpio model. Pick-ups may not be that popular in India, but the US is the world’s largest market for it. Reports state the pick-up vehicles did not live up to the fuel-efficiency levels as promised by Mahindra, falling well short of its its target. Under testing, the pick-ups delivered 19 to 21 miles per gallon under city and highway driving conditions, falling short of the company’s claimed mileage of 30 miles per gallon. M&M had hoped to benefit from the absence of competition in the segment it was planning to enter.
According to M&M, no company has a presence in the compact pick-up segment, whose engines are powered by diesel. With petrol prices soaring and waning demand for compact pick-ups powered by petrol, M&M had been counting on its diesel pick-ups to regenerate demand. When contacted, the company did not elaborate on its plans for the US market.
“It is an on-going process for us,” said an M&M spokesperson. “Since the matter is under litigation, we cannot comment on it at this point of time.”
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M&M had plans to ship to the US bulk parts of the pick-up from its manufacturing plant in Chakan off Pune. Earlier, the idea was to assemble the pick-ups locally in the US -- by either setting up a greenfield plant or by acquiring a facility.
The US government levies 25 per cent tariff on imported pick-up trucks. Others such as Toyota and Nissan build such pick-ups locally. An imported route will put M&M at a huge pricing disadvantage compared to other manufacturers.
On another front, SsangYong Motor Company, a South Korean firm that Mahindra acquired, plans to enter the US market in 2016. SsangYong is one of the largest SUV-makers in its home market, and has more than 1,000 dealerships across the world.
As for M&M’s plans for the US market, an industry analyst says the company will receive boost from the technological support in vehicle and engine development from SsangYong. “True, M&M’s attempt to enter the US market has not fructified in the past four years, but the acquisition of SsangYong will allow it to be better prepared for the missio,” he adds.
Three years ago, the Scorpio-based pick-ups, engineered by M&M specifically for the US market, were set to reach North American shores. The launch dates, though, were postponed not less than three times thereafter, prompting the company’s marketing and distribution partner, Arlington-based GV, to file a lawsuit against it for the delay.
The 2003-established GV had set up a network of 347 dealers across 49 states in the US after getting on board several automotive dealers from other car brands. The company and its dealers collectively spent close to $100 million preparing for the launch.
In August this year, M&M severed its contract with GV -- three days after it received certification from America’s EPA. The company incurred an expenditure of more than Rs 200 crore in upgrading the Scorpio to suit the US customer taste and also on the development of the two- and four-door pick-up trucks. It also intended to launch an upgraded version of the Xylo in the US.