Mahindra and Mahindra is in a strong position for bidding for the five-year contract for US postal vehicles
In what is looked upon as challenging move by the Indian auto manufacturing company Mahindra & Mahindra, a new plant will become operational in Detroit on Monday, November 20.
Mahindra & Mahindra (M&M) does not sell its vehicles in the US, but the lack of talents in India has been crippling the auto manufacturers for some time and the latest move is set to fill this gap.
M&M zeroed downed on Detroit after considering other cities in Germany, Italy, England and even California. Selecting Detroit for setting up the plant came following the deeper understanding that the US-state is the hub for automotive manufacturing and testing, said CEO of the Mahindra North American Technical Centre Richard Haas.
Currently, M&M has two facilities in Michigan, one located in Troy with a total staffing of about 80 engineers and another one in Ann Arbor, which will commence production of electric scooters later this month.
Mahindra North American Technical Centre is located in Troy. Combining the investment put into the two centers in Michigan, M&M has about $30 million worth operation in the US.
In addition to the investments in these two facilities, M&M has bid for a $5 billion contract with the US postal service to supply 180,000 vehicles for a period of five years.
M&M has a long unfulfilled dream of selling SUVs in the US, which has overshot its deadline for over a decade. The company has been blaming its US distributor for the long delay in making this into a reality.
It has to be also noted that the current move of M&M comes at a time when a majority of US and other multinational companies are putting their bet in developing R&D centers in India.
“Most companies locate R&D in India. We’re doing the opposite by putting it in the U.S.” said Richard Ansell, vice president of marketing at the Mahindra North American Technical Centre told Detroit Free Press.
The new facility of M&M is about a dozen miles north of Detroit and according to Wall Street Journal, it has acquired talents from established global manufacturers such as Ford Motor Co., Tesla Motors Inc. and Fiat Chrysler.
Headquartered in Mumbai, M&M is a $16.9 billion company with over 18 industries spread over several sectors such as automotive, tractors, aerospace, IT, financial services and resorts.
“That’s a major milestone where an Indian automotive company is opening up manufacturing in a resurgent Detroit. I think that’s a wonderful twist of history,” M&M chairman Anand Mahindra was quoted as saying by the ET.
It is speculated that M&M plans to manufacture off-road utility vehicles in its Detroit plant with the specialty in trucks and SUVs.
M&M is a $16.9-billion multinational company that is involved in 18 industries including automotive, tractors, aerospace, IT, financial services, and resorts. It has about 6,000 employees in the US. In Michigan, the company has a technical center in Troy and electric scooter factory in Ann Arbor.
The decision to put up a manufacturing plant in the US is an interesting turn of events in the 70-year long history of Mahindra & Mahindra as the labor cost in the US is much higher than in India.
According to M&M, even though the labor cost is high in the US, cost per square foot is much more affordable in America than in India. Adding to this the highly specialized expertise available at disposal will ensure that products be developed and tested faster.
Mahindra and Mahindra is in a strong position for bidding for the five-year contract for US postal vehicles as it is specialized in rugged vehicles. There are 15 other companies in the fray, which is a five-stage filtration process. Each company will submit a prototype and the contract will be awarded next year after close scrutiny.
If the company wins the bid, the new facility in Detroit could be used for manufacturing the postal vans at an estimated $25,000 to $35,000 each.
“This is a plant for making off-road vehicles, not SUV. These are the vehicles which are not meant for highways. These have a different requirement and a different regulation in the US,” Pawan Goenka, Managing Director, Mahindra & Mahindra said to Moneycontrol News.