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Global Comparison & Tracking Future Growth

India is the 4th largest automotive market in the world in terms of vehicle production. The population of India is the second largest in the world, only next to China, which means that there is further scope for the auto industry to grow and expand in this region beyond its current state. So much so, the industry is still majorly controlled by one company. Major automakers that rule the auto industry around the world have not been able to make it big in the Indian market.

Global Comparison of Indian Market

The Indian passenger car segment is majorly dominated by just one company, Maruti Suzuki. Call it the people’s choice or people’s loyalty to the brand or the sheer quality of vehicles produced by the company, Maruti Suzuki comprises of as much as 50% market share in the local market. That means, it produces one out of every two new cars sold in India. As per The Economic Times, the top two companies, Hyundai Motor being no. 2, keep more than 64% of the passenger vehicle market to themselves.

Maruti Suzuki logo;picture:getvectorlogo.com
Hyundai Motor India logo;picture:softwizz.in

Suzuki cars have been a hit among individuals and fleet owners alike for a long time, and with the advent of app-based cab companies, their vehicle consumption has risen over the charts. But what is Maruti Suzuki doing so well that the other automakers are not, that the combined market share of some of the world’s top automakers in India does not even make up half of that of Suzuki’s?

Maruti Suzuki's fleet in India;picture:dailyexcelsior.com

The answer lies in the lack of knowledge of the Indian market and ineffective fulfillment of local requirements. Running an idea and making it a success requires thorough market research and analysis, more so in a diverse market like India which is still on the course of development. On close scrutiny, one would comprehend that the factors affecting the Indian market relate to the very core of the business industry which disorganized their operations.

Market Knowledge

The board members of the top OEMs sitting at their HQs do not have the requisite in-depth market knowledge to be able to decide on the type and platform of cars to be launched in the Indian market. More often than not, they prefer investing in a big car/larger platform project, which might suit developed markets but not India.

Market knowledge;picture:azpiral.com

Market knowledge;picture:azpiral.com

India is predominantly a small car market and both the brands that have been able to prove their success in the country, owe it to their fleet of small cars.

Global OEMs have never been too keen on the small car segments due to weak production and distribution capabilities, and also because of low margins on such cars in India.

Consequently, one of world’s biggest automaker, General Motors, was not able to make a dent on the Indian automobile industry even after being in the market for almost two decades. As a result, after observing just over 1.3% market share during its last days in the industry, the brand terminated its operation in the country in 2017.

Small cars the most popular in India:picture:flickr.com

Dealers Endure

Dealerships across the country, as well channel partners, connected with Nissan, VW, Skoda and Renault operate at heavy losses for multiple months in a year. The OEMs record high profits owing to the cheap manufacturing and exports from India, however, Indian sales still remain low for these brands.

Empty showrooms;picture:carandbike.com

Automakers do try to occasionally compensate through incentives, which though are not sufficient to sustain the yearlong losses.

Change of course

In the recent years, top global carmakers have been trying to correct their course of actions. While the companies are using their current manufacturing plants for exports, which isn’t a sustainable model, they are also bringing a new range of models particularly made with the Indian population in mind.

Renault made a comeback in the Indian market with their small car Kwid which proved to be a big hit. It seemed like a proper car made for the Indian roads to accommodate the Indian consumers. Similarly, the Toyota Etios Liva and Etios sedan were a big hit among the people, although launched quite a while back.

Renault's successful small car Kwid;picture:autocar.co.uk

Automakers will be required to refresh their product portfolios more frequently for success, fame and profits.

Measuring Growth of the Indian market

Increase in Production

As per the data available with international organization of automobile manufacturers OICA, automobile production (passenger and commercial vehicles) in India increased 8% to 5.17 million units in 2018.

Increase in production;picture:business-standard.com.com

It came at a time when global automobile production itself declined for the first time in a decade, by 1.1% to about 95.6 million units (The Economic Times). The data clearly shows that there is a high demand of automotive products as well as services in India, carrying it towards new heights. The data also suggests that the global market leaders might be nearing saturation points in international markets, and in a situation like this India can pose as an attractive profit proposition.

Buying Behaviour

Another big difference in the Indian automotive market, as compared to the West, is the lack of impulse buying purely out of passion. Cars are treated more as a necessity than a luxury in India and traditionally people make purchases out of their needs. They rarely just buy cars because they have a soft spot for them, or out of affection for a particular carmaker or a model series, and in most cases require a solid reason to justify their buying response. This reason, however, sailed the Indian automotive industry across its bad times during the early years. A need-based product could generate more sales than admiration-based product and cars experienced exactly the same in India.

Government Backing

The government in India has showed continuous support towards aiding the industry in every way possible. New BS-6 emissions regulations were executed in April 2020, in line with the global standards. Rapid urbanization and the increase in metro cities has given rise to the population of consuming class.

Government's supportive regulations;picture:news.bitcoin.com

Government's supportive regulations;picture:news.bitcoin.com

Also, increase in urbanization and industrialization in turn will put more people in work changing their status and enabling them to make purchase decisions.

Growing Popularity

Cars such as compact hatchbacks and entry level hatchbacks have a strong point in the Indian market since its inception and are expected to dominate the future markets in India as well. However, the country has also seen massive growth in the compact sedans as well as the compact SUV segments with sales breaking record numbers.

g12;carwale.com.webp

Government's supportive regulations;picture:carwale.com

The industry is highly expectant of both these segments, among others, to continue showing growth in the future of which it can reap the benefits.

Trends shaping future of Indian market

India as a manufacturing hub

According to McKinsey, the country’s ‘Make in India’ initiative played an important role in elevating the country’s position in the World Economic Forum, where India stands at 58th position.

India as a manufacturing hub;picture:steelguru.com

The initiative has also worked well in luring global companies, including top carmakers in the world, to set up manufacturing plants leveraging India as a hub for low-cost, high-quality products. India has always been a preferred small car market, and after creating a strong value proposition there, it is gaining global recognition for compact and mid-size SUVs as well as compact sedans. Production in India will favor both domestic as well as foreign customers with low-cost of manufacturing.

Global Trends

The potential for global disruptions is expected to make way for the Indian PV market's success. Major trends such as electrification of vehicles, connected vehicles and shared mobility have just started to take off in India and haven’t been able to get ahead yet. There lies immense potential in the Indian market to flourish with the help of such trends, even without which the country’s automobile industry is one of the biggest in the world.

Autonomous and electric vehicles industry in India is puny as compared to its competitor markets such as China or the US. Sufficient investment into the industry is bound to pay off huge profits and, hopefully, make India’s name the biggest in the world in terms of automobiles.

Electric cars in India;picture:indianweb2.com

Autonomous cars in vox.com

Win here, Win Everywhere

India is one of the biggest emerging markets in the world and carmakers have been able to observe it for its worth. Even after experiencing slow sales in certain segments, certain top brands have not folded their operations in the country due to the fact that they can use India as a rewarding producing market rather than a consuming market.

Hyundai's exports from India;picture:exactviral.com

Top manufacturers such as Ford, VW and Hyundai among others export thousands of units manufactured in India to global markets every year, thereby making heavy profits.

Centre for Economical Engineering and Low Cost, High Quality Managerial Talent

India has always been commended for its stock of capable talents in both engineering as well as managerial aspects of the business, that are able to find and apply solutions for the most stringent of problems.

Indians have started to occupy major positions across industries such as consumer goods, automotive, pharmaceutical and banking, among others. For the success of their products in the medium to long run, a large number of companies thrive to open R&D centers in India or comprise of teams of expats from India. These teams and centers have been recognized to provide the best engineering and managerial solutions at a fraction of the cost.

Low cost, high quality talent in India;picture:ideas.ted.com

Digitally driven sales

As per a report by Live Mint, as much as 70% of India’s automotive sales are expected to be digitally driven in the near future. In such a scenario, marketers will be expected to shake off their traditional practices and step into new shoes to woo the consumers. Marketing mix for the entire automotive industry will have to be reimagined with more emphasis on digital marketing, as with any other business nowadays, though personal mobile devices. Dealerships will also be required to change their way of working and attracting consumers as a considerable chunk of those entering the showrooms will be pre-acquiring relevant information and a choice of brand and model.

With the evolution of customer mobility mindsets and the emergence of the next generation of mobility models, profit pools for auto manufacturers will increasingly get re-distributed. To be able to sustain in the Indian market and tap upcoming opportunities, OEMs will be required to explore new values and establish new partnerships while shifting away from their traditional operations.

Digital sales will be preferred in the future;picture:scsnissan.com

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© 2020 Autography

Autography created by Dhruv Aggarwal

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Hyundai's exports from India;picture:exactviral.com