[Kosfactor]

Originally Posted by Nithesh_M

VW can't launch international Polo or Fabia because stupid 4m rule again and also resorting to dumbing down international platforms to make regular Joe affordable European cars somehow still barely affordable to us.

Lets assume that Sub4M does not matter - lets look at the segment above that, Vento / Jetta / Passat - its a level playing field there. Was VW able to provide value in product & after sales services? Nope!

Their Vento (others are not on sale) is not VFM in comparison to competition as a product or after sales. Now its too late to invest in this segment, its better they develop something against Creta \ Seltos - which by the way nobody is stopping them from doing, its a segment that is selling well worldwide, compact crossover SUVs.

[1.2TSI7DSG]

One of the problems now which the foreign manufacturers now face is that they can't dump the earlier generation engine (bs4 elsewhere vs bs3in india) and hence India no longer becomes a "business case". This is one of triggers of consolidation of manufacturing/partnerships like mahindra ford, Toyota Suzuki Tata GWM for indian Market.

India was essentially an extension to extract a higher ROI for their technology. Add to that development of RHD variants, complexity of technology which requires a shift from the FNG ecosystem and the lower mobility required due to Ubers, further lower mobility required due to covid.

Add to that the new meaningless and horrible speed limits (Yes Hyderabad has chalana at 45 kmph) that are being imposed don't really require a large engine which in turn makes what will I do with a 3.2 l ford engine if my speed limits don't permit me to go above 40/80/100/120. Better to go for a kitna deti hai car rather than invest into larger car.

[Neil Roy]

I voted Indian customers unique requirements unmet by foreign brands.
Fact is, the average Indian's priorities for purchasing a car are irrationally different compared to the developed market.
Safety and NCAP ratings are a joke to the vast majority of Indian buyers but giant automobile manufacturers keep that as the baseline from which they build their car. This creates a huge gap in the development cost of the car, which is why Maruti is able to shell out cheap tin cans and dominate the market. If only Indian govt mandates NCAP ratings for product launch, we might see a very different scenario.
Kwid and Triber were designed India specific with safety and NCAP thrown to the winds. They compensated that with funky design,DRLS, Electronic gizmos and viola.... sales started going up. Now we can see kwids on three bolted wheels much like our autos on break neck speeds in the highway.
Need I say more?

[Nithesh_M]

Originally Posted by Kosfactor

Now its too late to invest in this segment, its better they develop something against Creta \ Seltos - which by the way nobody is stopping them from doing, its a segment that is selling well worldwide, compact crossover SUVs.

Not the same product as the international spec model for the price. Is it a mystery why Honda struggled to localize the HRV here to match Creta/Seltos pricing? One has to cut costs structurally to match them and the non Korean,French and Chinese players have no interest in dumbing down their products for fear of repercussions on their global portfolio.

[SLK]

I think the reasons are deeper than this thread can handle!

A very short summary of what I think is actually the problem:

• If a manufacturer makes in India for India, they will be price competitive.
  
• To make in India for India, investment in the setup needs to be viable.
  
• For that investment to be viable, volume is to be almost guaranteed to return the investment.
• Volume in India for a new product of a western origin is difficult because:
  • They are more expensive than say Korean and Indian (and even Japanese), everywhere in the world.
  • They are more expensive to maintain than Korean, Japanese and Indian.
  • They often don't offer too many gizmos compared to others.
  • They are generally heavy and return lower FE
• For Indian customers (no matter how some believe that there is a lot of money in the country), most people can't afford to buy cars without taking a loan and with 10% interest rates, this is more of an investment rather than a product purchase.
• The decision making process is risk averse i.e. more 'investment mode' and 'social status symbol'.
• Things like safety which are build into the design of some of the western cars costs! and can't even be removed for the cost conscious Indian consumer.
• Due to most people not willing to buy the 'riskier' cars, these companies are never able to realise their business objective of earning what they earn everywhere else in the same investment period. (people in India do buy riskier/ expensive Phones, TVs, everything, because that level of surplus cash is easily affordable, but we haven't reached the level of economic prosperity that we can afford cars without loans (why without loans? - because our financial system can't afford 1-2% interest rate loans and 10% loans mean significant cost and then we aren't talking about buying car but a loan from a bank!)).
• And then they never invest more, which some of us as enthusiasts hate and blame.
• As a business, they have access to global markets and India due to a mixture of the economic scenario and lack of consumerism (more of investment-ism), becomes an unattractive market.
• Remember, the dealers these companies hire are Indian businesses, who, when subjected to lack of volume resort to unfair practices, making the consumer experience worse. (not every company is Amazon to be able to bully its business partners into consumer centric behavior at any cost).

I don't think the big companies are leaving India, Hyundai isn't! Kia won't!, leaving are the ones that sell expensive cars, in the non-luxury segment, which is the problem.

We are not talking about you or me here, we are talking about majority, say 70-80% of the car buying population. And it is no one's fault, not even government's it is the lack of money in general and generally low 'desire' in the market.

Not all Companies fail in their plans (they may just lose to competitors!), but it is for sure that there isn't space for all in this market.

If I was a global CFO of some of these companies, I won't have taken a very different decision. It maybe a difficult to solve deadlock, but why will a foreign company 'fund' the Indian market with its losses.

[ZenMaster]

In simple words: The reason is Misplaced Priorities

"By whom?" You may ask.

By the Government
By the Manufacturers
& by the Indian Consumers

The successful companies are the ones that were/are ready to fulfill the misplaced priorites of all the parties.

* Stratospheric Taxes for the Govt. and stupid regulations at the cost of businesses profit & customers's savings, while not ensuring any protection for the buyers.
* Companies trying to maintain their international level profit margins (by cheapening on build quality/safety)
* Consumers valuing Low running costs, Sky high Fuel Efficiency, fancy features & gizmos over quality and safety.
* Dealers trying to scam customers (from their end) during servicing or repairs.(This is because they probably can't get much from selling the low volumes of cars of Brands other than MSIL or Hyundai.)

These are just a few.

The reason we can't figure out whom to blame is because everyone is to blame.

[aaggoswami]

Voted for "High tax structure make foreign brand business difficult".

Quality in India is expensive. In my view, the biggest reason is high tax structure preventing global models from being sold in India at prices that are reasonable/competitive. Example : Kia Seltos; wont elaborate and its being discussed well elsewhere on the forum. Its different than what the North American market gets. To the best of my knowledge, for a car as large as Toyota Innova Crysta there is tax of 48% on Ex-factory price. This will further get accentuated by RTO and Insurance. I am not sure if while purchasing insurance for a new car GST is charged or not. Just imagine amount of money that one has to bleed in form of tax. Volumes are bound to be low in India then for the international products. Fuel prices further dent any prospect of good sales. Either have India specific products or leave the market is dilemma of large corporations IMO. Only domestic and Asian firms are doing well. There must be some external factor other than poor management responsible for North American and European brands not faring well. I do admit that proactiveness in powertrain will keep a brand alive and in buyers' radar.

Second contributing factor apart from High taxes is a bit of arrogance. VW didnt' proceed with recall for failing DSG gearboxes, but it did in China. Ford joins the group with K-truss deletion in India, ( cant remember but even with Figo's anti-roll bar deletion ), lost focus on solid build that made Figo a familiar name for Indian middle class families. Kia/Hyundai have threads running for critical failures. Honda just doesnt provide adjustable rear headrests for Jazz/WRV and these products are not priced low. List could be long.

Every coin as two sides. Manufacturers are here for a profit and they blame high taxes. In a country where the cars seats have lost adjustable headrest in cars (Wagon R, Santro, Xcent, grand i10, Nios, Alto, even swift Lxi gets fixed headrests), I am not hunting for quality or value provided by global products.

[Guru_GPS]

Voted for all options except the second one. My main fear is that the petty politics play a major part in disrupting even a well established business entities if they do not toe their lines [read pay hefty protection fees or donations] then new players will be wary of investing heavily and not to forget the real estate mafia that might creep in during land acquisitions. One more very critical aspect will be the changing political landscape that is very well known. One political party might prove unfriendly and reverse the policies made by the other party. The might be much more which cannot be discussed in open forums without solid evidences.

[yd_gli]

Kia & MG cannot be held as models for OEMs that got the formula right for India. They've been on the scene for barely a year or so and with a couple of products each at best. My gut says that they will feel the pain of doing business in India with the Gloster/EVs/Carnival and future launches as well. Give them a decade and then we can discuss if they were able to crack the Indian market or not.

Kia and MG are basically at the bottom most rung of the ladder on the global scene and their success in India hardly means much. What worries me is that the global engineering and tech powerhouses such as VW, Honda, GM are unable to crack to the Indian market. This is a loss for us as consumers since they have some of the best products to offer in terms of engineering and safety.

We as a population have been mostly brainwashed by Maruti Suzuki over the last 3 decades on what is important in a car and what is not. OEMs such as VW, Honda can only gimp their products to a certain extent to meet Indian consumer requirements. Beyond that it is a waste of their time and probably doesn't fit into their product quality standards either. Given that our market has miniscule numbers its probably a wise move on their part to leave. The nonsensical govt regulations and infra (sub 4m, taxation, corruption, miserable roads) only compound this conundrum for the OEMs.

[Ragavsr]

This thread is a classic example of a poor 2000$ economy wanting to be a super power . The reality is far too many foreign companies got inside what is a tiny poor market already but that over the years also added extortion level taxes on both vehicles and fuel.

The percentage of taxes we pay on fuel must be the highest anywhere in the world. Quoting examples of higher fuel tariffs elsewhere is meaningless as fuel is a negligible part of the income. A Brit or a Dutchman earning 40K euros on average can afford 2 euro a litre fuel. Expecting an average Indian earning 2000$ to pay 1.25 $ for a litre of fuel to fill in his moped is atrocious at best . Reminds me of colonial level exploitation during the East India company times.

Companies are doing the right thing pulling out. They expected China like explosive growth but what we have is organic glacial era growth.

[RaghavEvoX]

At least in the case of automobile industry, it's all about the Lackluster product development/ aftersales support.

I would have bought a Skoda or a VW if not for their terrible after sales horror stories.
Many like me with the fear of putting money in unreliable auto companies go for a safe option like Hyundai or others.
If a Kia or an MG can do it, why not GM or a Ford. It's the same government policies for everyone.
If you want to make good profits in India, then you need to earn the trust of the people.
Once that is lost, whatever they do will be waste.
Do your best in the first attempt, once an impression is created, you will never recover later.

[bhansali_hardik]

I can simply point it out to herd mentality! I don’t know how many people in each circle you guys know, but the general public doesn’t care a hoot about taxes! Every segment has a winner or two you know that! Heck, most of them do not even know that accessories need not be bought, let alone insurance and other charges slapped on to the consumers! There’s a waiting period for literally each car in each segment, you really have winners based on people’s herd mentality. What budget what people and what market is captured by a manufacturer stays afloat forever! Over priced or taxes general public just don’t care! I can be totally wrong but I’ve seen most people not knowing these things, they just see the on road price given by the dealers.

[SankalpDesai]

I personally think the OP hasn't created this post with genuine intentions or hasn't researched the topic well, to say the least. All options offered in the poll are anti-government or anti-consumer, giving a clean chit to automotive companies, as if they are all saints and can do no wrong.

I did choose one of the option (out of two) for large companies not being able to succeed in this market because of the herd mentality widely demonstrated in India, as I have personally been at the receiving end of some really weird comments for choosing a Fiat Grande Punto 90hp hatchback over some ugly looking Maruti or Hyundai 'SEDAN', despite Grande Punto being a really gorgeous and competent car - meeting all my requirements - which otherwise weren't being met by the other two leading manufacturers.

That said, I sincerely believe Fiat could have done a lot more to go mainstream in the Indian market (my second choice of option), rather than making those trips to the bank by selling India's national engine to anybody who can pay for one. The product mix lacked oomph, sales and distribution strategy was non-existent at best, shoddy and expensive after-sales and the fact that it wasn't doing well in any other international markets, didn't help its image here either. They still haven't left the country, as of this post.

Manufacturers need to be more competitive and treat the Indian market with respect. Create a few volume products, that will kepe the lights on in the factories, simultaneously developing niche products while educating the market for those products. Don't be too greedy to send royalty monies back to HQ on day-one. Take cues from how Royal Enfield has been able to diversify their portfolio, creating high-value products while constantly increasing their sales not just in India, but taking products developed in India to international markets.

[Mustang Sammy]

The roads in India are terribly designed, built and maintained. Taxes are punitively high, and incomes are still low, with not much economic growth expected in the next few years, making the car buyers market pretty small.
There is not much incentive for most of the MNCs to invest here. Hyundai/Kia are a rare exception.
China on the other hand has a massive market, amazing infrastructure and a much higher income level than India. It shows in the amount of money and time these same MNCs invest into the Chinese market, and their willingness to bear losses for a long time.

[Abhi99]

Automobiles is a tricky business; Tricky because you invest on the basis of the what the market would be and not only at what the market is now. Now - if the country is expanding at say 7-8%, to get the first movers advantage - anyone would willingly take losses
rather than sit out and wait for the market to mature.

Now the trade requires a huge investment in terms of setting up manufacturing facility, managing and creating the sales and the service network, customizing their line up to the taste of market or investing big on newer models - if they don't have anything in line with the taste of the market in their portfolio. All of this would require the massive capital infusion initially. Now the operational costs and the costs to service the initial investment (if you consider as a debt) - would mean that company would have sell some significant chunk of cars to break even.

As long as the country/ market keeps growing @ 7-8% , manufacturers would still see some light at the end of the tunnel and keep absorbing the losses, however - the day they see the future as bleak is when they would be tempted to cut their losses.

In our case - I believe that not only they see certain uncertainties associated with got policies ( which has always been there), its also the bleak future of the economy in the short term may be playing on their minds. This in itself may not be the only trigger - Automobile market itself is heading towards a massive change. Countries after countries are coming up with ambitious targets to stop using fossil fuels and switch to EV's - however there are several things to be figured out in terms of fuel cells tech/ charging infrastructure and other related issues. All of the automotive companies right now is cutting down unnecessary spending's and focusing on their primary markets. Companies like Tesla , Rivian, Lucid etc are threatening their primary market. I believe its a mix of these reasons why manufacturers are pulling out of India.