AUBURN HILLS, Michigan--"Warning: Don't do anything stupid!" reads the sign to the right of Rick Haas' office computer. It is the same tongue-in-cheek warning affixed to the dashboard of every off-road Mahindra Roxor vehicle that Indian automaker Mahindra and Mahindra Ltd assembles in a suburb north of Detroit.
The motto might also apply to the Indian automaker's latest attempt to enter the U.S. auto market - an effort Haas, a former executive at Ford Motor Co and Tesla Inc, is leading. A decade ago, Mahindra tried to break in to the U.S. market with a low-cost pickup truck. The foray ended in failure and a lawsuit from dealers demanding their franchise fees back.
Haas, the automaker's North American chief executive, says this time Mahindra has a more cautious "pay-as-you-go strategy." Instead of starting with a truck or passenger car, Mahindra is reintroducing its brand with the Roxor, a vehicle that looks like a vintage Jeep.
Mahindra has built around 3,000 off-road Roxors and is using the model, which starts at around $15,000, to demonstrate to American consumers and dealers "acutely aware of our previous experience" here that the Indian automaker can build a reliable product before it launches mainstream models for use on American roads, Haas told Reuters. "Getting burned makes you cautious," Haas said.
Mahindra is one of a handful of European and Asian automakers gearing up to enter the U.S. market in hopes of gaining sales as well as credibility that can boost their brands at home. France's PSA and China's Zotye and GAC all have outlined plans for establishing beachheads in the world's second-largest market by sales, which offers rich pickings in segments including pickup trucks, SUVs and crossovers.
But the United States is a mature market that most industry executives say is heading for a downturn, and it is already crowded with over 40 automotive brands and 300-plus models on sale. "There's not a line waiting out the front door of every potential newcomer to North America of people saying 'I cannot wait for a new car to show up here today,'" said Larry Dominique, North American head of PSA, which has also taken a cautious approach to relaunching here.
PSA announced last month the Peugeot brand will lead its U.S. return - the same brand that crashed out of this market less than three decades ago. Analysts and auto executives say new entrants must stand out in a crowd to crack the U.S. market, as Tesla Inc has with electric vehicles.
Just offering a cheap car may not be enough, said Mark Wakefield, head of the North American automotive practice for consultancy AlixPartners. The higher quality of used vehicles presents a challenge, while delivering the expensive safety features American consumers and regulators demand. "If you fail to deliver on that then you’re a pariah in the market," he said.
Prospective U.S. entrants might look to the example of South Korean automaker Hyundai Motor Co, the last foreign automaker to successfully enter the U.S. car market. The Korean carmaker launched cheap models in the United States in 1986, as Toyota Motor Corp and Honda Motor Co Ltd had done before. Hyundai scored early successes, but quality problems set the brand back, and forced a relaunch. Now, it is overhauling its U.S. strategy, shifting from sedans to SUVs.
The problem for prospective entrants is that if they do find an untapped niche, consultants and analysts expect other automakers to rush to fill it themselves.
