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M&M remains non-committal on US launch

Swaraj Baggonkar & Sharmistha Mukherjee  |  Mumbai/ New Delhi 

With plans mired in controversy and lawsuits, Mahindra & Mahindra's dreams of launching a range of and pick-up trucks in the United States remains a distant one even as the company struggles to divulge concrete plans for the future.

The Scorpio-based pick-ups, engineered by M&M specifically for the US market, were set to reach North American shores three years ago, but launch dates were postponed more than thrice thereafter before the company's marketing and distribution partner (GV) Inc filed a lawsuit against it for the delay.

Mahindra was banking on the unique advantage of fuel-efficient diesel engines powering its vehicles since most of the other manufacturers sold compact trucks with petrol engines in the US market, which apart from being the biggest market is fast becoming fuel economy conscious.

President (automotive and farm equipment) M&M, Pawan Goenka, declined to comment on the US launch stating the matter was in court.

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.

M&M severed its contract with GV last August, three days after it received certification from the US Environmental Protection Agency (crucial for gaining entry into the US market), allowing it to sell its pick-up trucks. It has also filed a motion to dismiss the GV lawsuit.

M&M has so far 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 in the US.

Although the Mahindra brand has been in the US market for some years, with presence in the tractor segment, analysts tracking the company say that lawsuits filed by two could affect its brand value in the near term.

Recently New York-based Bannon Automotive filed a lawsuit against Mahindra's subsidiary (formerly Reva Electric Car Company) for violating an earlier agreement pertaining to sharing of technology.

However, some say that as long as quality and safety aspects are not challenged, Mahindra can sell its products freely. Moreover, as M&M was not a household name in the US the impact of any lawsuit will be minimal, say brand experts.

Abdul Majeed, leader automotive practice, PricewaterhouseCoopers said, “US is a strategic market for Mahindra. The company needs to sort out legal issues over there, quickly, to gain a footing. At present, there would not be much impact on the brand name as the issues in contention are not related to quality or safety features of specific products. These are initial hiccups the company is facing on the distribution front, but they have to be set right quickly.”

Sources say with M&M showing little interest in joining forces with again, it can team up with Navistar International Corp., the company's joint venture partner for heavy commercial vehicles in India, based in the US.

"There is always the possibility of having an alliance with Navistar in the US as we have an alliance with them in India already, but nothing has been finalised yet,” said Goenka when asked if M&M would tap into Navistar's distribution setup.

First Published: Fri, January 07 2011. 01:04 IST
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