M&M’s Mean Machine The Scorpio may be made in India, but its heart and soul are imported. 1 THE PRICE Ranges from Rs 5.5 lakh for the basic diesel model to Rs 6.35 lakh for Rev 116, the petrol model. 2 THE ENGINE Comes in two versions: a 2,000-cc, 116-bhp Renault petrol engine, and a 2,600-cc, 109-bhp direct injection diesel engine developed with help from AVL, Austria. 3 THE DRIVE Available with both 2-wheel and 4 wheel drive; the suspension system is from Samlip (Korea) and common to both petrol and diesel models. 4. THE AESTHETICS The seats are from Lear Corp. (US), the bumpers from Visteon (US), the air-conditioning from BEHR (Germany), and the stereo from Kenwood (Japan).

Stacks of dull grey chassis inch along efficiently on assembly lines. Machines hum as a few overall-clad men fuss around complicated looking consoles, jabbing buttons, maneouvering levers. Mechanised arms lift, poke and prod, as vehicle parts chug contendedly on conveyor belts. Piece by piece, the bare steel skeleton is adorned-grilles, bumper, tail lamps, spoilers-and at the end of it, a dandy four-wheeler rolls off the lines.

It is in this state-of-the-art Nasik factory that the Rs 3,950-crore Mahindra & Mahindra is giving shape to its most audacious automotive dream ever. Not since the Mahindra brothers-Jagdish Chandra and Kailash Chandra-first imported 75 completely knocked down (ckd) kits of Willys-Overland's Jeeps in October, 1947, has M&M had so much riding on a vehicle. Its spanking new sports utility vehicle (SUV), the Scorpio, which rolled out of the Nasik factory on June 20, 2002, is not just new metal, but a Rs 600-crore bet that the part-tractors-part-utility-vehicles manufacturer is making to prove that it may still have a future in an industry dominated by global giants. Gushes Anand Mahindra, the company's 47-year-old Vice Chairman and Managing Director: "Scorpio will make India proud. It's a world-class vehicle."

On the face of it, the Scorpio is a snazzy SUV built on a completely new platform. Its contemporary design incorporates an aerodynamic roof, side impact bars, power steering and wrap-around glass headlamps. Its engineering is even more international. The petrol engine (there's also a diesel engine made in collaboration with AVL, Austria) is from Renault; the suspension system is supplied by Samlip, Korea; the air-conditioner comes from Behr, Germany; and the shock-absorbers are from Armstrong..

Equally cutting edge are the shopfloor equipment. Press shops have been imported from Fukui, Japan; dies from Fuji; the body shop from Wooshin, Korea, and the paint shop from Durr, Germany. Not surprisingly, more than half of Project Scorpio's Rs 600-crore investment is in the hardware. Says Pawan Goenka, Vice President (Product Development), who spent 15 years with General Motors in Detroit, before returning to India in October, 1993: "The idea was to launch a vehicle for India, but with international ingredients."

Five years ago when M&M started working on the project, with some help from its then new joint venture partner, Ford Motor Co., the plan was to make a passenger car. But subsequent market research revealed that an SUV would make more sense. Working with a relatively small team of 120 engineers, Goenka looked for ways to lower the design cost. Among the innovations that Goenka introduced was computer-aided engineering and concurrent engineering.

Now that the Scorpio has been rolled out with an attractive price-tag of Rs 5.5 lakh (ex-showroom Mumbai for Euro I, 2.6 lt turbo diesel), M&M hopes to arrest its slide in the utility market. Since 1997-98, not only have its vehicle sales fallen from 68,650 to 55,920, but the marketshare has shrunk from 51.1 per cent to 47.5 per cent. The reasons are well know. Tata Engineering staged a virtual coup with its lcv-turned-uv Sumo, and when Toyota brought in its nine-seater Qualis, the market moved farther away from M&M.

A New Market?

The Scorpio is the first vehicle M&M has made from scratch in its 55-year automotive history. Sure, it has six UVS-including the Bolero and Maxx-and one LCV, Loadking. But these are built more or less on the age-old Jeep platform. Therefore, M&M today is at best perceived as a maker of out-dated, if rugged, utility vehicles that appeal primarily to trade or rural consumers, who need not so much slick wheels as a workhorse.

It's not that M&M didn't try making passenger cars. Its 1996 joint venture with Ford Motor Co. was supposed to do just that. But from day one, it was obvious that the relationship was on an unequal footing. Ford, which started off by manufacturing its maiden India-offering, the Escort, in M&M's Nasik plant, quickly moved to a Rs 1,700-crore plant near Chennai, where it produces its made-for-India car, the Ikon. Despite the Mahindras' excellent relationship with Ford honchos in Dearborn, the sheer scale of investment ensured that M&M remained a marginal partner.

With its passenger car dream turning sour and new competition stealing the thunder in utility vehicles, M&M needs a vehicle that will give it at least a fighting chance in the automotive market. Is the Scorpio it? Hard to say, but one thing is apparent. It has a lot going for it. For one, the Indian UV market is growing and relatively competition-free. More importantly for M&M, there is no SUV (differentiated from a UV by its aesthetics). Its closest direct competitor is probably the Tata Safari, which at Rs 7.35 lakh is significantly more expensive. Otherwise, the Sumo and Qualis are staid bread boxes, preferred more by fleet operators and small businesses than the average car buyer.

The most remarkable thing about the Scorpio is its price tag. At Rs 5.5 lakh-there's a cheaper Rs 5.2 lakh version in the offing-it is an affordable vehicle not just for the upgrade customers, but also for those who already own a car, but want an SUV for pleasure driving. Says Vice President of Marketing, Rajesh Jejurikar: "With its aggressive pricing, fashionable look and world-class features, we expect the Scorpio to set standards in the rapidly growing sports utility vehicle segment."

M&M's Chairman Mahindra, right, and VC Anand Mahindra: A new story

That's one big reason why CEO Mahindra expects the Scorpio to straddle both the UV and mid-sized cars markets. Yet, marketing it may have its fair share of challenges. First of all, the Scorpio is untested by Indian consumers and the fact the Mahindras are not known as a passenger car maker, adds to the challenge. Then, despite the company's best efforts, there are bound to be initial quality glitches.

That was an issue Tata Engineering faced with both Safari and Indica, its small car. However, unlike Indica, the Scorpio does not have a groundswell of popular pride. The euphoria that greeted the "Indian Car" seems to be missing in the case of the Scorpio.

Therefore, it is likely that buyers may be less tolerant of quality glitches in India's first SUV. "There are a whole lot of things that go into the making of a successful vehicle...things like ride comfort and driveability," says K.K. Swamy, Deputy Managing Director, Toyota Kirloskar Motors. "So, the overall customer perception is what matters."

THE LEAN MACHINE It cost Tata Engineering Rs 1,700 crore to make the Indica. M&M, in contrast, has spent a bare Rs 600 crore on the Scorpio. Here's why:

Scorpio: Ready to rock More than five years ago, when the idea of a new vehicle was mooted, one thing was made clear to M&M's development team: there would be no big budgets to work with. Ergo, the entire design and engineering process had to be structured innovatively. M&M turned to what it calls integrated design and manufacturing or IDAM. This process began with mapping the customer needs, and translating those into actual design. The product development team-just 120-strong-was broken up into 19 cross-functional teams, each with a leader responsible for decision-making and targets. The team built 74 vehicles for testing and validation, with vendors getting roped in early in the development process so that they could make components ready for assembly. The prototypes were put through more than 1 million kilometres of drive tests. The Nasik facility is currently rolling out 600 units per each shift, but since it is a modular factory, capacity can be increased at incremental costs.

A Different Ballgame

From M&M's own point of view, the Scorpio is unlike anything it has handled so far. To put it simply, it's a consumer product, and M&M's experience has largely been limited to institutional customers. It's probably a recognition of that fact that M&M two years ago roped in Jejurikar from FMCG major Marico Industries to devise a marketing plan for the Scorpio. And what the man has come up with is totally uncharacteristic of M&M. Consider: The dealerships-45 to start with and 80 eventually-will have specially trained salesmen, hostesses, luxury cabins for customers, customised finance schemes and even loyalty programmes. Road shows and an ambitious multimedia advertising campaign are some other things M&M is doing to present a customer-friendly face. To top it all, the Scorpio buyers will have a direct line to Alan Durante-President of the automotive group, and the Scorpio's champion within M&M-to complain about quality and service.

Eventually, though, it is the consumer's experience with the Scorpio that will determine its success. Given M&M's limited vehicle design and manufacturing skills versus its rivals, that's a hard battle to win. Toyota is believed to be working on a new version of Qualis, which will have the same engine, but more bells and whistles, and hit the road by the end of this year or early 2003. That apart, Maruti Udyog is widely expected to launch its SUV Grand Vitara later this year. General Motors India also wants to bring in a mid-sized utility vehicle, with the Isuzu Panther topping the list of candidates. More UVS in the high end from Hyundai (Terracan) and Mercedes (m-class)-Hindustan Motors has already launched the Mitsubishi Pajero-are expected. While these will not compete with the Scorpio, they will raise the quality bar for M&M.

The company won't tell what the break-even level for the Scorpio is, but some analysts put that figure at 1,000-1,200 per month. At the moment, the Nasik plant plans to roll out only 600 Scorpios a month, but by July next year, the numbers will be cranked up to 2,500 a month. The Bolero sells an average of 750-800 units per month, therefore-the argument goes-selling a thousand Scorpios a month should not be a problem. In any case, M&M is also looking at export markets, starting with Russia and going on to Indonesia and China. Says Ramesh Ramnath, an auto analyst at Taib Securities: "Given its aggressive pricing and differentiated positioning, the Scorpio should rake in volumes."

The coming months will reveal if M&M's Rs 600-crore bet throws up all aces. If it does, an automotive pygmy may have found a way to run the race with global giants. If it doesn't, the Scorpio may be M&M's most expensive snub.