In the book, Nish Acharya uses case study of Mahindra Genze. He explains how the two-wheeler is being developed and run as a Silicon Valley startup. Instead of following their model of designing and building products in India before selling in the U.S., the company decided to tap into two expertise-based ecosystems in the U.S.—Silicon Valley and Detroit.
Excerpt
In 2014, America met the GenZe, a new two-wheeler designed by Mahindra, the $17 billion Indian conglomerate that makes everything from tractors to cars, and is one of the largest technology companies in the world.
The GenZe represents a new generation of product developed by Indian companies, but entirely in the U.S., and for American customers. It is the product of three exemplary ecosystems—that of Mahindra itself, of Silicon Valley, where it is headquartered, and of Michigan, where it is being produced. For the first time in history, Indian companies are influencing the habits of American consumers. As the U.S. looks to attract foreign direct investment, in the form of manufacturing, design, and corporate investment, Indian companies are appearing more frequently on their outreach lists.
The GenZe, in particular, also reflects the recognition by the Mahindra Group that the U.S. has ecosystems for design, production, and innovation that are unmatched in the world. Not only are American consumers an important market, but the U.S.’s capacity to innovate, produce, market, and sell products is among the best in the world–and currently underutilised by Indian companies.
The GenZe strives to redefine two-wheelers in the U.S. This electric scooter has a snazzy design, and it is practical. It has a storage bin behind the seat to hold groceries, books, or small boxes. Its strong aluminium exo-skeleton is trendy enough for today’s college hipsters. It has a computer touch screen with navigation, weather, and downloadable apps. The GenZe also has power ports for cell phones and laptops. Because it can only go up to 30 miles per hour, the rider need not purchase vehicle insurance or register it in the U.S. The GenZe drives up to 30 miles without requiring a charge—enough for the average urban dweller or college student. Its battery only weighs 18 pounds and can plug into a standard 110V outlet. The battery can be removed from the scooter and plugged in for as little as 20 minutes to return around 6 miles of added range. All of this for an estimated $3,000, which is certainly competitive with the other two-wheelers on the market.[i]
Vish Palekar, the president and CEO of Mahindra GenZe, speaks of how the GenZe is a great example of Mahindra’s desire to become a globally admired brand, and one that is developing sustainable products in and for the U.S. market. Mahindra has become a known name in the U.S. over the last few years because of the rapid growth of its tractors— the fastest-growing brand in the U.S. and third in overall market share. But the company felt that its new products in the current economy had to be more disruptive in their design, innovation, business model, and branding.
Thus was born the GenZe. While a product of a large company, it is being developed and run as a Silicon Valley startup. The company focused on a product that addressed the challenge of urban mobility in the U.S., where congestion impacts the environment and people’s productivity. But instead of following their model of designing and building products in India before selling in the U.S., the company decided to tap into two expertise-based ecosystems in the U.S.—Silicon Valley and Detroit.
Palekar feels that there are several benefits to being in Silicon Valley. It is home to the best talent in the world for innovative products like the GenZe. The IT talent has always been there, but the growth of companies like Tesla and Fisker in the Bay Area has also created a decent-sized community of automotive products engineers.
Being in Silicon Valley has forced GenZe to be innovative in several ways—it pushed the company to question its existing beliefs about the needs of the consumer and what it really means to have a memorable experience riding a two-wheeler. This, in turn, led to market research studies that were able to identify items like storage and modern touch-screens as desirable innovations for the two-wheeler market.
Next, Mahindra GenZe decided to manufacture in Ann Arbor, Michigan, which had the best ecosystem for manufacturing the GenZe. The region’s suppliers worked with GenZe to improve the product, design, the supply chain, and to get going in Michigan. Despite the decline of Detroit, the region continues to have one of the world’s largest pools of automotive professionals—now being utilized by GenZe. In May 2014, GenZe opened a 37,000 square foot manufacturing facility in Ann Arbor.[ii]
Mahindra is fully utilising the automotive ecosystem of Michigan. In 2014, it launched the Mahindra North America Technical Center in Troy, Michigan. This centre, which employs over 100 people, will develop and prototype complete vehicle designs for Mahindra worldwide. According to Anand Mahindra, Chairman of Mahindra Group, “Michigan provided us the perfect eco-system to step up our U.S. presence. We were able to draw on the terrific automotive engineering and manufacturing talent available in the state, to create industry-leading initiatives for the United States.”
This experience has been different for Mahindra in many ways. It reflects the changes underway in many industries as a result of innovation and disruption. Mahindra sells its tractors through dealers across the U.S. The GenZe will be sold directly to consumers via the Internet and through alternative sales channels. The tractor engines are built in India, while the GenZe is entirely designed and built in the U.S. Most automotive products in the U.S. are serviced by dealers and licensed mechanics. GenZe plans to have “pop up stores”, mobile fleets, and house calls for service. And the GenZe is following the California model of being “priced to scale”, rather than priced to drive up margins. To Palekar and GenZe’s leadership, these are all outcomes of their presence in Silicon Valley, and not factors that a large company like Mahindra would have traditionally considered.
GenZe is a model for manufacturing in the U.S. Detroit remains the largest and most advanced automotive ecosystem in the world. If Detroit recognises that it is no longer home to all innovation in the automotive sector, but that it can welcome innovation from elsewhere and utilise its own strengths, there will be more opportunities like GenZe. It is a product with a growing market that can only benefit from the experience and talent of the people and companies of Michigan. And while the state of Michigan did provide some tax-incentives to GenZe, they were not so large that it drove the decision to manufacture there. GenZe wanted to be in Michigan because of its talent, and the state welcomed them in any way it could.
Throughout the U.S., cities and states are developing strategic plans that reflect the industry clusters that they seek to grow or recruit. Investment by Indian companies must be part of those strategies. On their part, Indian companies must research the U.S. locations that will be best for them. Oftentimes that will not be New York or California, but another part of the country with unique expertise, skilled labour, or low cost connectivity.
Recommendations
- The U.S. must recruit more Indian companies to launch products in the U.S. and invest in American manufacturing.
- Indian companies must evaluate American cities and regions to understand the clusters of industries and professionals that will be best suited for their U.S. operations, rather than defaulting to New York/California.
The Book ‘U.S.-India: $1 trillion by 2030’ will be published by Oxford University Press in 2016. You can read an executive summary of the book,here.
Nish Acharya is a Visiting Fellow, India-U.S. Studies at Gateway House: Indian Council on Global Relations. He currently leads the Indian Diaspora Investment Initiative with the Calvert Foundation, is a Senior Fellow with the Center for American Progress, and a columnist for Forbes Media. Nish previously served in the Obama administration, where he was appointed by President Obama as the director of innovation and entrepreneurshi
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References
[i] Mahindra Genze, Order a Genze, <http://store.genze.com/category/1>
[ii] Mahindra Genze, Made in Motown, Via Silicon Valley, 2 June 2014, <http://www.genze.com/made-in-motown-via-silicon-valley/>