Interview with Mike Hilderbrand, Vice President — Marketing & Organizational Development, Mahindra USA, Houston, Texas

lsquo;We’re here for Good’

“Mahindra & Mahindra was founded in1945 in Bombay, India, to build Willys Jeeps for the U.S. military. They started building tractors in 1963 through a joint venture with International Harvester. Our heritage is really rich with IH. There are still a lot of hard-core IH guys out there, and when they find this out, they like our tractors even better.

“By 1983 we became the number one tractor manufacturer in India and we’ve held that position for 27 years. India is the biggest tractor market in the world and we have a 41% market share there. In 2009, tractor sales were a little over 400,000 units in India alone. If you do the math, that’s about 164,000 Mahindra tractors sold in India last year.

“Mahindra is an $8 billion corporation, so we have a very strong parent. North America is a strategic market for our parent company and they have no intention of pulling out of here. Despite the economy the last 2 years, they’ve made a huge investment in expanding our business and investing in our dealer network here. We’re bringing pickup trucks and pretty soon SUVs into this market.

“We consider ourselves to be the Hyundai of the tractor business. If you look at the Hyundai of today and the Hyundai of 10 years ago, there’s no resemblance. It’s because they’ve made a lot of smart moves. They’ve done a lot of marketing, developed their dealer network and put out a fine product. Our approach is similar to what Hyundai has done. In the next 3-5 years, the Mahindra brand will become extremely well known in North America.”

Value Selling

“Without our dealers, we’re just another building in Houston. We need our dealers to be successful, and we’re doing a lot of things to help them succeed.

“We’re helping them understand value selling and how to put our tractor up against another brands to show customers the value of a heavy-duty 3-point hitch, and the advantage of steel fenders vs. plastic fenders, or how the added weight of a Mahindra tractor improves its stability.

“We’re working with our dealers to stress the difference in lifting capability and the capacity of the hydraulic system and what it means to the customer. We’re putting together sales aids and other tools that a salesman can use to help sell the product. Selling is no longer just putting the tractor out there with a low price tag. It doesn’t work. Buyers are becoming more sophisticated and are doing their homework before the visit the dealership. So we’re trying to help dealers to figure out what works in their market.

“We offer a 5-year warranty, financing options for customers and wholesale floor-planning for them. We provide them with national marketing support to make the brand move visible, hence our NASCAR and Championship Bull Riding sponsorships. We participate in a whole range of charity type activities. We’re doing national television, radio and print advertising. I’m not aware of any other tractor manufacturer in our category that advertises as much as we do on mainstream television and national radio.

“The bottom line is we want the dealer to realize is that this is a company that’s here to stay, we have a good product and there’s plenty of aftermarket and marketing support. We’re not going to leave them hanging.

“Our job is to drive business into the dealership, and our dealers are becoming expert in selling our products.”

Mike Hilderbrand, Vice President — Marketing & Organizational Development, Mahindra USA, Houston, Texas

Growing a Dealer Network

“We started bringing tractors into the U.S. in the 1980s through an independent distributor in Tomball, Texas. Business picked up to the point where we incorporated in 1994 as Mahindra U.S.A. Inc. and we’ve been selling tractors ever since through a dealer network starting in the south and Texas.

“Since then, we worked our way along the gulf and more recently up the East and West coasts and now we’re in Canada as well. Currently, we have over 300 dealer locations in 39 states.

“There are a number of reasons why we haven’t gone into the other states, which are all in the center of the country. If you look carefully at industry statistics, the 39 states where we currently sell tractors represent nearly 85% of the market. So we wouldn’t be gaining much by going into the others.. “We’re not saying that we will never go in there, but it’s just not in short-term plans.”

An Evolving Distribution Model

“Our criteria for recruiting and selecting dealers continues to evolve. There was a time when, if you had 150 feet of frontage on a state highway, you could be a dealer. Those days are gone forever.

“When we sign new dealers, we look for businesses that are up and running. They may be in the tractor business or maybe they’re into something else. But we look very carefully at capitalization, location and at service capability. Hiring a dealer that can’t service the product is a mistake. We haven’t done that very often, but we have done it.

“About half of our dealers are Mahindra-only. The other half are dealers who carry some other brand, so we would be their second or third line. We’re happy with these because they’re proven businesses. They have established clientele and know how to market tractors. There’s a lot to be said for that. We’ve even tied up with some construction equipment dealers successfully.

“Regardless of what their company profile is, it’s really dependent on what the customers are like in that area. If there’s a lot of small property owners, then a lawn and garden dealer may work. If it’s in an ag area with larger farmers buying our equipment as utility tractors, then the ag dealer will work just fine. In most cases, if the ag dealer is a full liner, he already knows how to sell compact tractors anyway and just likes ours better.”

Selling & Financing Packages

“A lot of people like to have the whole setup be the same color and the same brand. So, we also offer a wide range of Mahindra private label implements and attachments, including large mowers, brush cutters, augers.

“We encourage our dealers to sell the tractors as packages with a transport trailer. That’s really what a new owner wants, particularly starting out with nothing but a piece of property.

“When you buy the tractor and implements in a package, typically everything can be rolled into the financing on the tractor itself, so it’s pretty attractive. We offer our wholesale and retail financing through Agricredit based in Des Moines, Iowa.

“We recently signed an agreement with Agricredit to form a joint venture which will be called “Mahindra Finance USA.” It hasn’t started operations yet, but in the near future it will become a great plus for us having a captive finance company, as it evens the playing field out a lot more with the competition. It gives us a little bit more control over the financing. That is such an important piece of the purchase decision on these little tractors, so we’re trying to do everything we can to help the dealer close the sale and to help the customer get financing.

The ‘Ideal’ Dealer

“Our most successful dealers are true businessmen who operate independent businesses. We recognize their dealerships aren’t retail outlets of Mahindra. The best of them understand the importance of advertising and know how to figure out financing costs, how to manage inventory. They understand carrying costs and the interest accrued on inventory. Most importantly, they understand their market and the importance of after-sale support. I am a firm believer that service sells product.

“The best dealers also know our market is changing, and our product line is changing. In the past, we offered only a price-point tractor. Our dealers sold a pretty good tractor at a real low price. Today we have a very good tractor at a decent price. It’s a subtle difference, but it makes a big difference in the way that you have to sell.”

Expanding Product Lines

“In the U.S. today, we have about 100 employees and 3 assembly operations. The main one is in Houston, along with a 30,000 square-foot national parts depot. We have 2 contracted assembly points that are actually run by 2 of our bigger dealers: one in Chattanooga, Tenn. and one in Red Bluff, Calif.

“Mahindra has won 2 major quality awards with our tractor business; the Deming Award in 2003 and the Japan Quality Medal in 2007. Because of our low breakdown rates, we are able to offer an extended 5-year warranty on all of our tractors in 2009. In 2010, we became the number-one selling tractor in the world by virtue of volume.

“We started with tractors in the 45-65 horsepower range. Our target customer has been, since the beginning, the hobby farmer, sundowner and small property owner.

“More recently we’ve expanded in both directions and that’s widened our scope. We’re starting to touch the low end of the hay industry with our larger units, and as we’ve gone lower in horsepower, we’ve been able to hit smaller property owners and individual residences. Today, the Mahindra line includes 30 tractor models between 18-83 engine horsepower.

“We’re adding 13 new models for 2011; some are completely new and others are variants of existing models. For example, if we had a 40-horsepower tractor with a gear transmission, we’re adding an HST automatic transmission, and we’re adding an option for a power shuttle. So now, instead of one model, there are three. We’re adding 2 more cab models in 36- and 70-horsepower, and we’ve gone with a national launch on our 83-horsepower cab tractor.

‘We’re introducing ahead of the winter farm shows this year and we’re changing the way that we introduce products. Normally as soon as they’re available we put them out as individual models. What we’re trying to do is to make it a bigger event, so we have 13 new models. We introduced them to our dealers in August and September. We’ll start to ship limited quantities in the fall, but have them available nationwide for the Louisville and Tulare shows in February. We’re actually getting an early jump on next season.”