[TrackDay]

I think the points can vary for each company.

For certain brands it could be that they cant introduce/design new cars for lower price brackets as that might dilute their global image/quality. I don't know how many international firms can do an alto or espresso ?

For some it is lack of updating. Sticking on to age old designs without any new updates while the competition comes out with newer generations.

There were certain more points, but with what KIA has shown us, the number of excuses have come down. Same story with how TATA too has made a solid comeback. There will always be tough days, but a real hardworking firm will weather the storm and come on the other side stronger !

[Napalm]

Originally Posted by ph03n!x

With India, the tax structure is not making it easier.
Attachment 2097252
As you can see,

• The vehicle itself costs 9.22 lakhs
• It incurs 28% GST
• There is also a 20% cess

These take the ex-showroom to 13.65 lakhs.

So the manufacturer has to consciously build cars keeping in mind the GST + Cess for each type of vehicle they are building so that on-road price is not going to chase people away, meet the quality, safety and feature expectations of yours and mine, and be profitable too!

India has one of the highest tax structures, which is ridiculous.

When the Ex-showroom price itself has 48% tax(that includes 14% GST each for central & state govt) + Cess , why does the govt need to again charge ₹2 lakhs life time road tax?

That is a total of almost 70% tax on a vehicle that costs ₹9.2 lakhs.

That’s not just ripping off OEMs but also Indian car-buying citizens, because we will still additionally end up paying HUGE amount of tax every time we fill petrol/diesel over the lifetime of the vehicle.

IMO, the government needs to rationalise the tax on (Non-luxury)cars that cost < ₹20 lakhs before tax. Lower tax rates for cars up to 4 meter length can continue, but for larger cars with < ₹20 lakhs price before tax, the total tax should be reduced to less than 40% of on-road cost. It could be staggered like the brackets in income tax, like < ₹10L, <₹15L, <₹20L etc.

Originally Posted by ph03n!x

MG is not doing too bad - but the Chinese have HUGE pockets and are willing to play the long game.

TL;DR - As a global CEO, I'll divert my investments where I get higher returns with minimal efforts - Indian automotive market is doesn't seem enticing enough right now!

First of all there is no such thing as a purely private company/entity in China. If you want to run a company in China, you have to be in cahoots with the all powerful Chinese communist Party. Otherwise you’ll be targeted like even large tech giants Alibaba and Tencent were targeted recently.

MG is owned by this very communist regime, and they would be ready to fund MG in India, even for killing the Indian auto industry itself, for Chinese geo-political purpose against India.

They had done this with Huawei, by excessively funding it to sell its telecom products in other markets at 1/4th the price of cost-price or competitors. This has been proved at WTO by many western countries too. It’s not surprising that Huawei was banned in many western countries.

If this is the case, how would other new companies like Citroën feel about entering our market with our already insanely high tax structure?

India wants to increase the safety parameters of the cars continuously, but it does not want to rationalise its taxes. It’s not surprising that some companies(like Maruti, Hyundai, Kia et cetera) are cutting corners on safety, build & quality and the ones that don’t, like Toyota end up seeming Obnoxiously pricey.

[amalji]

Originally Posted by Napalm

That is a total of almost 70% tax on a vehicle that costs ₹9.2 lakhs.

You have nailed it. This is the crux of it.

From the manufacturer's side, they have to compromise on either safety, reliability, price or features. Some brands like Hyundai and Kia compromise on safety. Brands like Toyota compromise on features. Brands like Tata compromise on reliability.

If any of these brands try to not compromise and build a proper vehicle, we'll call it over priced whereas the fact remains that a manufacturer increasing their profit by 30000 per car translates to 1 lakh per car to the customer thanks to our insane tax structure.

No wonder why out of the bunch of automobile manufacturers we have, only a handful of them are consistently profitable inspite of the insane car pricing in our country!

This greed by our governments is also the reason why car manufacturers are unable to provide safety their top most priority even in 2020! Every additional 30k they spend on safety translates to 1 lakh for the customer because our own government loots 70k from it.

[parambyte]

Indians have very poor salaries.

After paying exorbitant amounts for rent or house EMIs, expensive children’s education, high medical costs, costs of looking after ageing parents, high dining out and socialising costs, expensive clothes, planning for retirement, there is little left to indulge in cars. So we go for the cheapest possible cars we can afford.

Any manufacturer who has an existing portfolio of cheap cars will do well. (It’s not that manufacturers didn’t have great cars, some great cars didn’t do very well in their time too, because of, well, cost).

Then we have sky high costs for fuel, maintenance, spares, toll taxes (a comfortable train second class seating ticket is cheaper than Mumbai Pune Expressway toll).

We get third world salaries but first world expenses.

[Dr.Abhi]

Originally Posted by 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.

.

Third option in the poll points toward corporate/brands pitfalls.
After all the discussion and almost similar vote percentage to all the options, I think either the poll is not conclusive or all the factors are really contributive to the prevalent indian automotive condition.
Well I had voted for
Option 3- companies which once messed their after sale department are now lagging in sales. Eg. Tata, ford, skoda, volkswagen, nissan
Option 4- peoples typical requirements which all brands cant satisfy because otherwise they have to come down from their ethics or their offerings will be expensive. Eg toyota, honda.

[VeluM]

Voted for government policies and herd mentality.

Maruti and Hyundai/Kia: Suzuki isn’t successful anywhere else in the world, and Hyundai/Kia don’t sell these products anywhere else. These are all made for India products.

Is that a good thing? Should other manufacturers follow their example? Just think back to when Hyundai stopped manufacturing their European spec cars in India, and you have an exact starting point of when their QC issues and poor crash test results began.

Kia is “successfully” selling two Hyundais with facelifts. These are not new cars, so saying that they have come in with new products for India is just their marketing nonsense.

But what does all this mean? Simply that to be successful, you need to cut costs but not visibly. Design a low cost car and it won’t sell - Nano. Design a flashy, gizmo laden car with cheap underpinnings, and hey presto! you’re the segment leader! Think of any segment leader below D and that will prove the point.

This brings us back to the first point - government policies. The need to cut costs is because of the need to work around the high tax structure, and newer players aren’t interested in investing huge amounts in R&D for a minuscule portion of a pie dominated by two companies.

To their credit Tata and Mahindra are trying their best to maintain quality and compete, but the herd only wants bling.

[V.Narayan]

I'll go against the grain here guys at the risk of getting slaughtered. Many have expressed that our cars are not good enough, too over priced and are short of safety standards. All correct statements within a certain context when compared to USA or UK. Let's look at where we are compared to our own selves.

In late 1996 I booked a Cielo for an on road price of just short of Rs 7 lakhs. At that time, amongst Indian cars, Cielo and Opel Astra were top of the pops. In todays rupee that is ~Rs 30 lakhs. Regardless of taxes etc we get a lot more in a car costing Rs 30 lakhs today* than what the Cielo offered in c.1996. Apples to apples cars are much cheaper today than they were less than a generation back. Let's take another example. A Premier Padmini in 1990 cost Rs 2 lakhs which is like ~Rs 17 lakhs today. The only car we could compare the Padmini to is the humble but reliable Maruti Alto. And what does it cost on the road today?

No point comparing our indirect taxes with a developed country unless we are also willing to compare marginal income tax rates in those countries with ours. We may feel bitten by high taxes on cars but ask your maid servant or the junior most employee in your work place whether they think taxes on cars should be reduced? We are a nation with 33% to 40% below the poverty line so for quite some time goods and services largely consumed by those in the top 10% will be taxed high.

As for Govt policies - sadly they are not consistent. But Govt policy is but one of many many factors in running and building a business. India is notorious for its direct tax regimes and the way the IT Dept conducts itself with impunity. I wish it were not so but as someone who has lived and dealt with this ad nauseum these are not impossible problems to manage or fight through and certainly not as impossible as our journalists make them out to be.

A country's policy cannot and should not be determined by what is good for a big company or what suits the consumption pattern of the country's richest 5% - Team BHP members for example. The economic growth from 1999 to 2018 benefited this creamy layer the most with real wages increasing more then 3X in those two decades - so guess whose consumption the Govt will tax to meet its budgets?

A big company investing in an economy is only one of dozens of factors to be accommodated in policy making and balancing the budget. Policy is almost always an exercise in compromise. Big company's have the muscle to dominate the air waves where expressing their point of view goes which is why you hear so much on media about them. Govt departments by design don't work through PR agencies, other components of the economy {workers, farmers, SMEs etc} also don't have the muscle to get the media to work for them. And therefore, too often, we the consumers of media get the impression that only big businesses and their point of view counts. IMHO if Ford or GM or Nissan do not know how to operate in the 5th biggest market, which will in a decade become be 3rd biggest, then it is a reflection on them first and on our inconsistent policies only next.

*RBI figures

[coolabhi]

Hi everyone,

While most of you have covered almost all areas like Govt policies , Tax structure etc , I would like to highlight the financial aspect of it.

1) Business Viability :- Whenever a brand enters any market they have a viability study which assumes certain volume at various price points. The overall business plan also has assumptions for the overall market share that the business will achieve. These assumptions are very critical and this is where most brands go wrong. Offcourse its very tough to perfectly judge the business conditions even for 5 years ,but one can take a conservative approach.

Honda cars India was in losses for 6 years inspite of having trouble free cars. (https://www.financialexpress.com/ind...crore/1703647/)

Majority brands come to India with aggressive market share targets of 5% , 10%. But they need to ensure that their business is viable even if they
get less than 1% market share.

India is a developing country , for 1 single brand it might not give huge volumes ,but it has a big cost advantage. So a logical way to go is have exports from India.

The latest entrant Citroen is taking a very logical approach by going conservative.
a) Citroen invested in a brown field project (used manufacturing plant) instead of a brand new manufacturing plant. A used car makes so much sense , a used manufacturing plant makes great sense as it saves huge costs!

b) Citroen has already started parts localisation. They have started manufacturing power trains and gear boxes in India for their global requirements. The savings because of these localisations is huge and offsets the investments made in India. What Citroen group CFO talk about this in this YouTube video (

https://youtu.be/Q6NzuvFeCv4

)

c) Citroen has set a target of 2% market share which is very conservative and makes sense. They would be happy to sell more ,but if your plan is good and you can sustain even with 2% market share ,the brand will survive.

2) Dealer business viability :- A brand can manage its own business in the most professional way but in the end it all depends how well the dealership is doing. Business viability for Dealer partners is a crucial aspect for car manufacturers. In the inital years brands at times take on board dealerships that are not experienced , dont have the required knowledge and are not sound financially . Brands should carefully select dealer partners instead of hushing it up to expand network. Maruti has taken a great step :- it has purchased land worth 1500 crores in India which it will rent out to its dealer partners when they expand.

3) Indian market is cost conscious :- While we all want safer cars and thats the way it should be ,but affordability is a major aspect for Indian market. The current market leaders Maruti and Hyundai dont offer the best as far as safety is concerned but the bottomline is an Alto is still safer than a bike. If we make cars more expensive , a large set of population will continue to use 2 wheelers instead of upgrading to a car.

One more aspect is cost of ownership. A model is not safe , it has pathrtic design but it still sells because it is affordable and the cost of servicing it is low. Thats why an Indian customer will still go for a less safe car simply because its cheaper to maintain. The probability of a car accident is still lower than the probability of my car needing a service.

So to beat the market leaders is a big task and wont be easy for a new entrant. They have to establish themselves and might need almost a decade to snatch any volume from the market leaders and sustain.

[kamilharis]

No doubt, the main reason being changing government policies and disastrous taxing structure.

Originally Posted by ph03n!x

As you can see,

• The vehicle itself costs 9.22 lakhs
• It incurs 28% GST
• There is also a 20% cess

These take the ex-showroom to 13.65 lakhs.

Which means Mahindra is manufacturing this top end THAR for somewhere around ₹8Lakhs maybe ? I think then we don't have the rights to call some cars overpriced! In this day and age a 4-Star rated butch SUV will definitely cost around ₹7 or ₹8 lakhs to manufacture in it's fully loaded version with a modern diesel engine, how can we complain at the manufacturer for the absurd pricings!

Even I have read somewhere that the production cost of a HARRIER is just around ₹8-9 lakhs , ex. factory!

[pathik@2020]

IMHO taxes are only one part of the problem but its fair to zoom out a bit and look at the big picture. Any automobile company wanting to enter any market would first evaluate attractiveness & needs of the market and cross-tab it with their strengths. Unfortunately many MNCs look at growth numbers and per capita penetration in different sectors and extrapolate potential to developed market counterparts and paint a rosy picture of the overall potential. Truth of the matter is that we may never achieve per capita vehicle ownership of some of the developed markets due to various reasons or constraints. Then they throw in products at the low end of their portfolio expecting that consumers will latch up their offerings. Unfortunately very few companies actually try to understand customers' needs and those who do and tailor their offerings accordingly are rewarded like Toyota.
Automobiles in India are definitely heavily taxed in the hands of consumers but that is not reason enough for companies to lock-up and go away. Every market can have its unique characteristics but what really troubles companies is quick changes in direction of policy. I am not an avid follower of policy in this sector and its impact on manufacturers but stability and clarity + good market potential are things that help companies commit long-term dollars to any market.
Exits that we have seen in the recent past viz. GM & Harley can hardly be attributed to the market or policy or taxes. The blame for these should rest squarely at their own board-rooms. Either of these three or any combination have contributed: product offerings not matched with customer needs, unrealistic expectations and wrong strategy.
Automobile happens to be a high visibility sector but such decisions are being taken across other sectors too, be it pharma, aviation or financial services for an example. Also with COVID playing havoc with business plans most 'investment' markets may see withdrawal of companies, they would prefer to focus on their core markets while keeping the option open to re-enter at a later date. Survive today to fight another round tomorrow.

[SulemanP]

Lets accept the fact that we a are price sensitive people, majority wins! Not all the OEMs in the world will get it right for our market. 10 yrs back safety was not a concern for an average car buyer in India, they were most interested in FE, Maruti was able to read this perfectly and likewise they offered products which met the market expectations. I believe if you fail to read the market as an OEM rest of the criteria such as ever changing Government Policies, High Tax structure etc will play their role in the long run and eventually the OEM will step out of the market.

[shobhit.shri]

To say that if Hyundai/Kia has succeeded, the fault should lie on the others who tried and failed, is like saying the students who couldn't clear the medical entrance exams - with say, 1 to 1L chances - are all dumb. It's not a lie but hides the systematic failure too.

[Lalvaz]

I don't think the poll options are the only possible options that should be considered as an answer to this poll question.

I think it could be any of the following reasons or a combination of them:

1) Perhaps, it doesn't fit in with their long term business strategy anymore.
2) Maybe they tried to sell in India and realized that they don't have any USP that will allow them to compete for significant market share against the already entrenched players here.
3) Changing market conditions due to electric cars making ICE obsolete
4) Financial woes in their home countries or globally

I hear comments about high taxation and govt policies, but those are valid for all players, and are not directed against only one or two players. Also taxes are paid by buyers, how does it matter to the manufacturer if he is still able to produce a competitive vehicle vis a vis the competition?

Perhaps we're trying to fathom the reasons behind the GM/Ford/Honda moves, and I hope the govt is paying attention to this issue too. Hopefully they do manage to reverse the trend though, cos I do think the more the merrier.

[invidious]

The crux of the matter is understanding the market. Those who understand the market, crack it. GM, Ford and Hyundai entered the Indian market at about the same time in the mid 90s. I wasn't even of driving age then but had heard about GM and Ford and couldn't even pronounce Hyundai. GM brought in the Opel Astra, Ford brought in the Escort and Hyundai debuted with the Santro.

Hyundai also built a network which is only second to Suzuki.

Why? I think Western brands did come in with a bit of a chip on their shoulder. It's almost as if they were bringing products to India as a favor and Indians would lap them up. Also they have made the mistake of slotting India and China as similar markets. The Chinese did lap up a lot of GM products if memory serves me right.

So they probably figured, what's good for the goose will be good for the gander.

I reckon that's been their Achilles heel.

It doesn't have to do with regulation and taxes etc. Europe is as bureaucratic and crazy. Plus countries like China and other parts of Asia sometimes have a military junta and a language barrier. Indian bureaucracy and systems might be the worst but that doesn't mean other countries don't have that issue.

[HammerHead]

Those 'big' companies leaving Indian market never understood the market or it was too late for them to realize what would work here.

Looking at the kind of cars they offered, it looked like they considered Indian market as a dumping ground for their old/outdated or re-badged cars from the 'cheaper' brands they owned. Sure, Suzuki did the same for years but with the brand vanishing from the developed market they renewed their focus on Indian market and launched market specific as well as international products here in India.

Look at Hyundai. The way they entered Indian market, the kind of products they offered, the way they took a step back and re-work when their products failed to meet the sales expectations. They invested in building the brand, gaining trust and expanding their support network. One step at a time.

Tata, well they got to the party pretty late but they are on the right track.

By no means its easy but its not that hard for so called 'Auto' giants of the world.