Indian automaker Mahindra finds a home in Detroit

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D3---Mahindra2cut20150818Many companies outsource work to India — but a major Indian company is outsourcing key automotive engineering work to Detroit even though it does not sell vehicles in the United States.

In an interesting twist, when Mahindra & Mahindra wanted to expand its global vehicle development capabilities, it recognized there was insufficient talent in India. Executives looked at creating a technical center in Germany, Italy, England and California, among others, before deciding Detroit was the true epicenter for automotive development and testing, said Richard Haas, chief executive officer of the Mahindra North American Technical Center, now located in Troy.

Today the center has a staff of about 80, mostly engineers with plans to grow. Mahindra also has an electric scooter manufacturing plant in Ann Arbor that will launch production in November. The two facilities have a combined investment in Michigan of about $30 million.

And Mahindra is in the running for a $5-billion contract with the US postal service to supply 180,000 vehicles a year for five years.

Someday the Mumbai-based automaker could sell SUVs and pickups in the US, although past goals to do so by 2010 did not come to fruition, in part from issues with the company it selected as a distributor.


But the importance the company places on Detroit know-how is evident in the fact it established a $5-million technical center in Troy to come up with future products that might not be sold on this continent.

“Most companies locate R&D [research and development]in India. We’re doing the opposite by putting it in the US,” said Richard Ansell, vice president of marketing at the Mahindra North American Technical Center.

Analyst Stephanie Brinley of IHS Automotive said having a presence in Detroit will also help Mahindra eventually break into the US market, as well. And Mahindra specializes in trucks and SUVs, which are Detroit’s specialty.

Mahindra established 70 years ago
Mahindra started as a steel trading company in 1945 and branched out into carmaking with a license to make Willys Jeeps for the India market. Mahindra still makes the Jeeps that are sold in India as the Thar. The SUV has not changed much from the original Jeep, with a diesel engine, manual transmission and choice of two- or four-wheel drive.

Fiat Chrysler Automobiles plans to start selling Jeeps in India this year. Mahindra officials are not sure what the ramifications will be. “It’s a bit awkward,” said Haas.

Mahindra’s expertise is in rugged utility vehicles. The best-known model is the Scorpio that became the SUV of choice on India’s bad roads. The line-up also includes pickups, commercial vehicles and a growing number of car models.The flagship is the XUV 500 that was introduced in 2011 on the company’s first global platform, which is expected to yield at least three more vehicles.

The engineers are working on future vehicles, making their own parts and prototypes and validating them. They are developing the next generation of an existing Indian vehicle on a new platform, with visits from the 21-member launch team in India as the work progresses.

The US crew is also working on another platform for five new vehicles and evaluating opportunities in North and South America as well as Europe and Asia, Haas said.

Labor costs are higher in the US than India but cost per square foot of a facility is much more affordable, he said. And the expertise means products can be developed and tested faster.

Mahindra-made postal vehicles
Mahindra’s skills positions it well to make postal vehicles. “We are pursuing the contract because we have righthand-drive, rugged vehicles,” said Ansell.

Mahindra is one of 15 companies still in the bidding after the field was whittled down in April. It is a five-step process that will reduce the contenders to five or less by fall. Each will submit a prototype for evaluation. A final decision might not come until next year.

“At $25,000-$35,000 each, it is a $5-billion contract if we win,” Haas said. “We would need a facility here to make it,” he said, or form partnerships.

Haas, 56, is a Detroit native who worked for Ford in posts around the world for 28 years before joining electric carmaker Tesla in Palo Alto. He left Tesla in 2011 to work for Mahindra and ran an engineering facility in Chennai.

Mahindra’s desire for global expansion faced a challenge: India is a strong manufacturing base but it does not have a car culture or a large talent pool for vehicle development, Haas said.

“We needed to do something,” said the engineer. “We could bring in lot of experts from around the world but that would be a difficult task and could be a hard sell.” Those efforts continue, but plan B was to locate a tech center in another country.

With Detroit’s density of automakers, suppliers, test facilities, government agencies and universities, “it was easy to convince people,” said Haas who relocated to Detroit and formed a fledgling operation in 2013.

After a 140-building search, the current facility on Square Lake Road in Troy was chosen, renovated, blessed by a monk and became the new tech center in March 2014.

There is room to expand beyond the 80 employees.

“I spend most of my time recruiting from all over the world,” he said, including Europe, South America and Australia as well as the US and India.

Electric scooters on tap
Meanwhile, work continues on the GenZe electric scooter that was conceived, designed, developed and built in the US. The plant in Ann Arbor is making prototypes now in preparation for a November production start with plans to make about 20,000 a year.

While it was designed for the California market, Haas said he has had discussions with officials in Ferndale about having some electric scooters available to riders of the M-1 rail system now under construction in Detroit. Ride sharing is part of the GenZe model, where customers would unlock a scooter with a credit card.

World leader in tractors
Mahindra is best known for its tractors. The Indian company started building tractors in the 1960s and today it is the largest tractor manufacturer in the world. Its North American headquarters, Mahindra USA, is in Houston.

The diversified company also in 2011 took a controlling stake in SsangYong, the fourth-largest automaker in Korea. Mahindra also is in the resort business in India and Europe. And it has developed two “smart cities” in India that are planned communities with broad roads, amenities, water conservation, retail and residential to show cities can be made more livable. The company also provides affordable housing in India.

Mahindra is growing its IT business in both India and the US Tech Mahindra has five development centers in the US, including Silicon Valley. There is even a small aerospace presence in the US.

“This is the most interesting thing I’ve ever done in my entire career,” Haas said of working for the multifaceted company.

Mahindra & Mahindra started as a steel trading company in 1945. Today it is a $16.9-billion multinational company in 18 industries including automotive, tractors, aerospace, IT, financial services, and resorts. There are about 6,000 employees in the US. (TNS)

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