MUMBAI, India — Yet another challenge is facing the U.S. auto industry. And this time, it isn’t coming from Japan, South Korea, or Germany — or the economy.
In the next few years, Indian automakers and parts suppliers, long outcasts because of lackluster innovation and dormant technology, have ambitious plans to sell cars to American consumers and peddle parts to carmakers in the United States.
India’s anticipated foray into the already-downtrodden U.S. automotive market poses an immediate threat to Detroit’s Big Three and their domestic suppliers, already under threat of bankruptcy because of lagging sales, a tightening credit market, and competition from Asian automakers.
Indian automakers, aggressively recruiting engineers and ramping up research and development teams, are emphatic their entrance into the U.S. and global markets should be taken seriously.
For the first time, they believe they can compete globally.
“There’s a sea change,” said Pravin Shah, an executive vice president of Mahindra Motors, maker of SUVs and pickup trucks, during an interview in September in Mumbai. “People see we are getting into manufacturing that is world class.”
Mahindra Motors is setting its sights on the American SUV market, looking to place its clean diesel-powered Scorpio on U.S. roads in the near future, and taking aim at Jeep, which already is facing challenges from domestic and Asian automakers.
About the same time, Krishna Maruti, an automotive products supplier near Delhi, India’s capital, plans to begin supplying seats for Jeep. The move will take a large share of the work from Johnson Controls of Northwood, Ohio, which could mean the loss of up to 75 jobs in Ohio.
And over the next several years, Tata Motors, India’s highest-profile automaker, plans to expand its reach to include the United States. By next spring, Tata’s Nano, the world’s cheapest automobile at $2,500, will begin rolling off production lines and onto India’s roads.
“Today’s India is a very confident India,” said Debasis Ray, Tata Motors’ chief spokesman, in an interview in his office at the headquarters of Tata Group, a rapidly growing company with $600 billion in annual revenues.
For Detroit’s Big Three, India’s entry into North America will present just one more competitor in an already crowded field, said Bruce Belzowski, an associate director and assistant research scientist with the Automotive Analysis Division of the University of Michigan’s Transportation Research Institute
Mr. Belzowski said India’s automakers must have near-perfect planning before they enter the “hyper competitive” U.S. market.
“They have to be prepared with advertising, dealerships, aftermarket parts — with all of the things you need to get a brand off the ground,” Mr. Belzowski said.
OPENING THE MARKET
Until 1991, India’s government maintained strict control over the nation’s automotive industry, letting the bureaucracy determine which automakers could build which types of cars. As a result, there were few options for car buyers and little competition for carmakers, causing India’s research and development to become stagnant.
For decades, India’s passenger car market included few options other than Hindustan’s Ambassador — a basic, British-style car, often in white, and a vehicle of choice for politicians dating back to its inception in 1948 — and the Premier Padmini, often seen as black and yellow taxis dominating the rough Indian roads.
The liberalization of India’s automobile market, which began in 1991, shook the industry and ushered in massive changes that now have the nation’s largest automakers on the brink of becoming international players.
During the past 15 years, world automakers, including Ford, General Motors, and Hyundai, established themselves in India slowly cutting their way into the domestic car market and forcing Indian automakers for the first time to compete.
From his perch atop Mahindra Towers in Mumbai, Pravin Shah has a vision that would make Mahindra Motors a name known not just to Indians, but to people across the globe.
Mahindra Motors, the automotive wing of Mahindra & Mahindra, a $6 billion company and one of India’s premier business houses, already exports vehicles to 25 countries in Europe, Africa, South America, South Asia and the Middle East.
Soon, it plans to enter the U.S. market, first by selling pickups and then by rolling out its SUV.
The executive vice president for international operations of Mahindra & Mahindra’s automotive sector said his company is being cautious and deliberate in its planning, commenting that Mahindra has no plans to be a short-timer in the U.S. auto market. Instead, Mr. Shah said, his company wants to enter the market “with the intent to stay.”
Mahindra, in a partnership with Georgia-based Global Vehicles, is planning more than 320 dealerships across the United States.
“The Indians definitely are on the way here,” said Toledo car dealer Steve Taylor, who traveled to India earlier this year to meet with Mahindra and tour its facilities. “I think they have some technology — diesel and engine technology — that is going to be state of the art. It is high quality. It is going to be a less expensive kind of a car that is going to fit a bigger niche than what we see with bigger cars.”
The new automatic version of the Mahindra Scorpio sells in India for $23,800, which is comparable to the $23,640 starting price for the 2009 Jeep Liberty. It’s difficult to compare fuel efficiency as Scorpio models run on clean-burning diesel engines, getting about 19 mpg on mixed roads, and the Jeep Liberty uses a gasoline engine, reporting 22 mpg on highways. The Scorpio and Liberty have similar length and weight.
To Mr. Shah, the Scorpio is engineered unlike any SUV American consumers have seen. And before it is introduced on U.S. roads, Mr Shah expects that the Scorpio’s specifications and pricing will improve to surpass the Jeep.
“I don’t see a competitor that has a product in this size [that compares with the specifications of the Scorpio],” Mr. Shah said.
Mr. Shah said he knew nothing about rumors that Mahindra earlier this year expressed interest in buying the Jeep brand from Chrysler.
Asked why he is confident that American drivers will buy Mahindra’s SUV, Mr. Shah said: “You can’t separate the American from the SUV.”
NANO GAINS ATTENTION
When Tata Motors earlier this year introduced the Nano, the world’s cheapest passenger car, it had every intention of taking it global.
Amid much fanfare, the $2,500 Nano put Tata Motors on the automotive map and made it the symbol of Indian ingenuity when it comes to car design and forward-thinking. The Nano, which is within reach of middle-class Indians, would aim to replace the rickety three-wheelers that clog Indian roads and offer a safer alternative than motorbikes for transporting families across busy city streets.
When the Nano was unveiled Jan. 10, Tata’s Web site attracted 7.9 million hits from around the globe, giving a sense of the worldwide interest in the vehicle.
The attention directed at the Nano crystallized what has become clear to the people inside Bombay House, the longtime headquarters of the Tata Group, which boasts a portfolio of businesses in the steel, communications, information technology, chemical, and engineering fields.
Tata Motors plans for the Nano to initially be sold in India, but later in other developing countries.
“When it come to India, you look at mobility,” Mr. Ray said. “Personal mobility is a fundamental desire. But a car made affordably to transport families has never been possible.”
Mr. Ray called Tata, India’s largest carmaker, an “infant” in the realm of passenger car-making, as the company only entered the passenger vehicle segment in the 1990s, making its major foray into the market with the 1999 launch of the Tata Indica, a basic and widely popular small car built for India’s rugged roads. The company has built commercial vehicles for more than 60 years.
While India’s automakers lay out the blueprints of their entrance in the U.S. auto market, some Indian parts suppliers are already exporting to the United States.
There are hundreds of parts suppliers based in India, which historically have served Indian automakers. But as India’s reputation rises for producing quality auto parts, the demand for Indian-made components is increasing.
‘THE COST WAR IS ON’
Winning the contract to build seats for the Jeep Wrangler was a big victory for Krishna Maruti, said A.K. Bedi, the executive director of operations, as Jeep will be Krishna Maruti’s first major international venture.
Krishna Maruti, founded in 1994 as a joint venture, builds more than 600,000 seats per year, with many of them landing in Maruti Suzuki cars.
The company, which has 13 factories in India in places like Pune and Chennai, employs about 2,500, with 40 working in research and development.
Mr. Bedi said Krishna’s quality standards and approach, and “our chairman’s philosophy is the customer is god” pursuaded Chrysler to award his firm the Jeep contract.
“The quality is something we talk about, but it is the cost that the customers are looking for,” he said. “Like they say, the cost war is on.”
Steve Eder is a reporter for The Blade, sister paper of the Pittsburgh Post-Gazette. He can be reached at seder@theblade.com. or at 419-304-1680. First published on November 30, 2008 at 12:00 am
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