Team-BHP > The Indian Car Scene


View Poll Results: Global biggies on the verge/leaving India. What can be reason?
Our Government's ever changing policies / weird rules. 278 52.16%
High tax structure make foreign brand business difficult. 270 50.66%
Lacklustre product development/ aftersales support. 193 36.21%
Indian customers unique requirements unmet by foreign brands. 156 29.27%
Herd mentality of Indian people. 164 30.77%
Multiple Choice Poll. Voters: 533. You may not vote on this poll

Reply
  Search this Thread
69,198 views
Old 26th December 2020, 11:22   #1
BHPian
 
Dr.Abhi's Avatar
 
Join Date: Jan 2007
Location: Bathinda, Pb
Posts: 302
Thanked: 449 Times
Big companies leaving India or retaining limited presence - What is the reason?

Big automotive corporates entered India with equally big promises since the Indian market was opened to foreign brands. But as years go by, many of the brands have been sidelined and are on the verge of leaving India. What can be the reason??
1. Our Government and their frequently changing policies/weird rules to blame.
2. Our high tax structure that some companies are not able to cope up with.
3. Corporates inconsistent product policies/ lacklusture after sales support.
4. Indian consumers unique requirements regarding fuel consumption, build quality and cost of ownership and that being not understood by overseas big car manufacturer.
5. Herd mentality. We indians are too risk averse and want to stick to one or two brands in the long run.
Dr.Abhi is offline   (16) Thanks
Old 26th December 2020, 11:59   #2
BHPian
 
Superleggera's Avatar
 
Join Date: Mar 2007
Location: Kannur/Boston
Posts: 531
Thanked: 816 Times
re: Big companies leaving India or retaining limited presence - What is the reason?

Partly to blame the tax structures, but I think the reason is affordability and cost

We must accept the facts that,

1. India is poor. Only less than 10% of our population car afford cars, out of that only 3-4% or lesser can afford global biggies. The low volume obviously work against the manufacturers and they don't want to invest more. As you know, the total number of Corollas sold in US is more than the total numbers cars sold in India and corolla is an entry level in US and its a Luxury in India. This explains the affordability of the cars in other countries.

2. Fresh Global products from biggies cost money, don't think majority of Indians can afford it or willing to pay for it.

3. Manufacturers greed - A Forturner will cost 40 L on road. As an average Indian, I believe this is a robbery. I will not buy this even if I have money, as I have driven better cars elsewhere with 60% of the money. The VFM factor will keep bothering me.

4. Infrastructure: Driving is no more an enjoyable task unless you are a petrol head. People don't want to spend on some thing that they don't enjoy using.

Last edited by Sheel : 26th December 2020 at 15:42. Reason: Minor typo.
Superleggera is offline   (52) Thanks
Old 26th December 2020, 12:31   #3
Senior - BHPian
 
el lobo 6061's Avatar
 
Join Date: Apr 2011
Location: Navi Mumbai
Posts: 2,048
Thanked: 2,192 Times
re: Big companies leaving India or retaining limited presence - What is the reason?

I believe it's more to do with which manufacturer is willing to adapt to changing customer needs, business environment and pricing their products correctly.

Tax structure remains same for every manufacturer. Not like one pays more, other doesn't unless state govt has given any concession.

SUV, CUV, SAV became the next big thing; manufacturer who launched them in their portfolio came on top.
Eg. Hyundai with its Creta & Venue.

Honda didn't launch any proper SUV/CUV and they are lagging behind.

BS6 norms came, some manufacturer decided we will not sell Diesel, its too expensive.
E.g Maruti; only petrol driven portfolio. Other manufacturer Hyundai, Kia, Ford are making good sales in diesel making Maruti to reconsider its decision.

Audi India on the other hand only petrol portfolio and not launching new products has become a laggard. Selling 27 cars a month. Will they pack up next? BMW & Mercedes are selling diesel engine and bring new cars to India immediately after global launch and trying new things.
E.g Locally assembled AMG cars and BMW 3 series Gran Limousine.

VW India didn't have SUV in their portfolio. Didn't want to invest hugely in building assembly line; so they made use of 2500 units import rule to bring SUV. See how market reacts and then launch in CKD if it makes business sense.

Electric is next thing, who all don't bring electric cars, will again see their business wrap up.

It's all about adapting and listening to customer needs.
el lobo 6061 is offline   (19) Thanks
Old 26th December 2020, 12:35   #4
Senior - BHPian
 
Join Date: Apr 2011
Location: Pune
Posts: 1,155
Thanked: 1,956 Times
re: Big companies leaving India or retaining limited presence - What is the reason?

These companies are failing to read the Indian customers correctly. Many times, there products aren't bad. But they fail because of:
  1. Bad product portfolio. Not having products in the hot selling segments.
  2. Higher prices for the given product (like Jazz) without offering great utility + reliability like what Innova offers.
  3. Reliability issues (like DSG)
  4. Bad management of sales and lack of whole hearted integrated efforts in the sales chain. Fiat is an example.
  5. Not having enough number of dealers.
  6. Poor availability and insane prices of spares.

Higher taxes and changing Govt. policies is observed almost all over the world. It isn't something unique about India alone.

Herd mentality is also not the reason. In fact, the herd mentality is helping to sell a few cars. For example, the Honda City.

Last edited by Rahul Bhalgat : 26th December 2020 at 12:42.
Rahul Bhalgat is offline   (11) Thanks
Old 26th December 2020, 12:41   #5
Senior - BHPian
 
Join Date: Apr 2009
Location: Bangalore
Posts: 1,151
Thanked: 4,734 Times
re: Big companies leaving India or retaining limited presence - What is the reason?

All reasons laid out here are pointing towards India, Indian customer and India's current situation.

Were the Biggies not aware these scenarios existed before they entered Indian market?

I think, none of these points are real reasons for them to exit in short interval.

It is just their wrong strategy, and wrong positioning due to which they are not able to cope.

All I am saying is, customer is king. If the vendor is not able to sell his product, then he needs to change his strategies.

Customer cannot be a reason for vendor failure

Last edited by gkveda : 26th December 2020 at 12:52.
gkveda is offline   (18) Thanks
Old 26th December 2020, 13:02   #6
Senior - BHPian
 
speedmiester's Avatar
 
Join Date: Jul 2006
Location: bangalore
Posts: 2,380
Thanked: 6,600 Times
re: Big companies leaving India or retaining limited presence - What is the reason?

Voted for 3. Lacklustre product development for Indian market.

Look at the two new entrants, Kia and MG.
They understood what India wants and delivered. Now everybody knows the results.

GM has/had good potential, they had invested wisely and had seen results with Beat and Cruze, but somewhere along the way some idiot thought chinese cars like sail twins and enjoy should be good enough for us. Result: complete withdrawal from the market.

Honda brought in the Civic, bit late to the market and the CRV was always dead on arrival with it's lackluster diesel engine. Result: both cars withdrawn with few years of launch.
Don't Honda has a better product portfolio in the global market that we crave, but they lost the plot.

All other factors remains the same for all manufacturers.

India is a complex market, but if you get the right product, you will be rewarded. This is partly because of Reason no 5 listed above: Herd Mentality.
I know of 4 people within my close relatives and friends circle who got Sonet over others and 2 each who bought Seltos and Hector just on the basis of word of mouth. This is just in 2020. Their minds were made up even before the test drives or exploring other options in the market.
speedmiester is online now   (5) Thanks
Old 26th December 2020, 13:48   #7
Senior - BHPian
 
ph03n!x's Avatar
 
Join Date: Jun 2008
Location: Coimbatore
Posts: 2,561
Thanked: 5,952 Times
re: Big companies leaving India or retaining limited presence - What is the reason?

Global manufacturers have different regions in their portfolio, and products to sell in these regions. It's nothing but business sense to compare with region is giving maximum returns on investments and take strategic decisions.

With India, the tax structure is not making it easier. Case in point - the Mahindra Thar. The top end Automatic Diesel Convertible top that I bought.
Big companies leaving India or retaining limited presence - What is the reason?-road-accessories.jpg
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!

With Maruti Suzuki and Hyundai, India's become one of their (if not THE) major market and they have learnt to thrive here. They have invested in sub-4-meter products that form a majority of their portfolio - where the tax structure is not so high (compare the % of ex-factory vs. on-road from my Thar example vs. any other sub-4-meter car), and even their >4 meter products are priced at a eye-watering level (Creta, anyone?) but are selling because of the value proposition.

Indian car makers - Tata and Mahindra - they have their niche, and do not have another market that they're successful in either, where its easier for them to do business.

Toyota has a decent strategy where their products are priced obnoxiously high but has bullet-proof reliability and cheaper service costs. This eases pressure on dealerships too - lesser selling costs, more profit per sale, earn a bit more on services - and anyone who walk into Toyota showroom or service will agree how pleasant the experience is, because there is no pressure on anyone!

Now for a GM or Ford, who do not have a sub-4-meter product line anywhere else in the world, they'll have to have India-focused product development and product strategy, create the supplier pipe-line, and market/ sell products (because importing even components will attract higher tax, eating into my margin!) - in a country where
  • Maruti Suzuki and Hyundai's sub-4-meter length (+ 1.2 liter or lower Petrol engine / 1.5 liter or lower Diesel engine) cars already account for 51% of total vehicles sold in the country.
  • To put that into perspective all other manufacturers - Including Kia and Toyota's Glanza - account for just 21% of the market with their sub-4-meter offerings
  • Of the remaining 28% of the market, Hyundai and Maruti's >4 meter offerings take 13%! This too, not including the Kia and Toyota Urban Cruiser!
What is left is 15% for others to fight for - where you have Mahindra's SUV offerings like Boleros, Scorpios, etc., Toyota Innovas and Fortuners.. do the math, there's hardly any space! The luxury segment is more cut-throat than the aam admi segment!

Now as a multinational CEO, what will you do -
  • Spend the time, money and energy to create the product lines, factories and suppliers, spend on marketing, pray that the investment climate doesn't change...
  • Focus on diverting this investment into other markets where I have better ROI, create newer/ transformational products there?
If you step back and look at the automobile manufacturing business in India, it's mind boggling. True, Kia suceeded - but make no mistake, Hyundai's experience here would have played a HUGE role. 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!

Edit: all numbers/ % from Nov '20 car sales data.

Last edited by ph03n!x : 26th December 2020 at 13:54.
ph03n!x is offline   (90) Thanks
Old 26th December 2020, 14:14   #8
Senior - BHPian
 
jkrishnakj's Avatar
 
Join Date: Apr 2010
Location: Bangalore
Posts: 1,662
Thanked: 4,120 Times
re: Big companies leaving India or retaining limited presence - What is the reason?

Voted for the Changing government tax policies.

If one were to study the Vodafone and Cairn Energy case studies that the government lost (losing ), it makes a classic conclusion of what a government should not be doing.

Politics aside , the current government who was so against the ‘retrospective’ tax introduced by the then UPA government is still trying to purse these cases.

What more shall we say ?!

We need the biggies / corporates to feel comfortable and transparent and have a trust in the nation - regardless of which government comes to power.
jkrishnakj is offline   (6) Thanks
Old 26th December 2020, 14:16   #9
Senior - BHPian
 
Durango Dude's Avatar
 
Join Date: Mar 2009
Location: Chennai
Posts: 1,936
Thanked: 5,089 Times
re: Big companies leaving India or retaining limited presence - What is the reason?

Visible and "invisible" taxes take their toll on even the hardest international brand and to top it you should have the correct product, priced "very tightly" for the locals to buy. So your margins get squeezed in more ways than one can imagine. And when the state or central Govt changes you get a fresh set of problems.
Durango Dude is offline   (8) Thanks
Old 26th December 2020, 15:49   #10
Distinguished - BHPian
 
Join Date: Sep 2008
Location: --
Posts: 3,549
Thanked: 7,233 Times
re: Big companies leaving India or retaining limited presence - What is the reason?

It cuts both ways. Manufacturers and Govt. Can't put the blame squarely on any one.

But, more than anything else the 4m + anemic engine rule has caught out a lot of these biggies. Sure there are customizations for particular markets but fiddling with car's basic structure isn't cheap or quick or easy. This rule ensured the global models could not be launched as is and still remain competitive. At least say in the hatch or small SUV category - either the vehicle length or the engine size would make it ineligible for duty cut.

IMO the Govt should take stock of what this rule has managed to achieve and re-evaluate.

Related thread - https://www.team-bhp.com/forum/india...enefitted.html (10 years of the Small Car rule (<4-metre, <1.2L petrol, <1.5L diesel) : Has India benefitted?)

Last edited by Dry Ice : 26th December 2020 at 15:51.
Dry Ice is offline   (7) Thanks
Old 26th December 2020, 16:18   #11
BHPian
 
Join Date: Jul 2008
Location: HYD
Posts: 537
Thanked: 1,176 Times
re: Big companies leaving India or retaining limited presence - What is the reason?

I cant blame any government or market when new entrants are capturing buyers' attention under same rules. Give what market wants and I dont see why it will not work. If you just bring products that are lacklustre in comparison, you are going to fail. Eg CRV vs Fortuner. mobilio vs ertiga. Brio vs Swift/i10. WRV vs Brezza/Sonet/Venue. Jazz vs Baleno/i20 etc. What is the USP of these products. Why should a buyer buy these over competition. Also, why cant Honda give a Creta or Seltos competitor? Why did mobilio morph in lame BR-V. Just labelling everything as SUV also doesnt work. These are not niche segments, and other manufacturers are moving considerable volume.
Comrade is offline   (5) Thanks
Old 26th December 2020, 16:46   #12
Senior - BHPian
 
rajshenoy's Avatar
 
Join Date: Apr 2006
Location: bangalore
Posts: 2,883
Thanked: 2,226 Times
re: Big companies leaving India or retaining limited presence - What is the reason?

I would blame the taxation and the policies here. Other factors include chocked city roads that result in bad fuel economy, "kitna deti hai" has become synonymous with our market and only option left is to have light and frugal cars that end up compromising performance and safety.

Another trend is the india specific models which seems like desperate attempt to copy the market leaders.
rajshenoy is offline   (3) Thanks
Old 26th December 2020, 17:32   #13
Distinguished - BHPian
 
Kosfactor's Avatar
 
Join Date: Oct 2018
Location: COK\BLR\MYS
Posts: 3,589
Thanked: 10,109 Times
re: Big companies leaving India or retaining limited presence - What is the reason?

How many manufacturers have left India after having good products, good sales and after sales network?

I'm not able to remember a name yet.
Kosfactor is offline   (14) Thanks
Old 26th December 2020, 18:05   #14
BHPian
 
Join Date: Apr 2015
Location: Chennai
Posts: 163
Thanked: 274 Times
re: Big companies leaving India or retaining limited presence - What is the reason?

Look, it's true that our roads aren't great, most don't care for safety and taxes are high.

But let me also ask you, how many brands in India can claim to have a complete and updated product line up? You as a seller can't make half hearted attempts and then blame the buyer. This is a market that pays 40 lakhs for a Fortuner and has embraced a completely new brand (Kia).

If you actually take a look at the product line up, except for Maruti/Hyundai, Tata and to some extent Ford, most are just sad. (Read:Honda, Toyota, Renault, Skoda, VW, Nissan).
SS8939 is offline   (4) Thanks
Old 26th December 2020, 18:27   #15
Senior - BHPian
 
avishar's Avatar
 
Join Date: Oct 2008
Location: kolkata/bangalore,india
Posts: 2,901
Thanked: 4,140 Times
re: Big companies leaving India or retaining limited presence - What is the reason?

The reason?

Lets see,

1. Terrible products
2. Aged models
3. Lack of new launches
4. Inability to develop models specifically for India.
5. Unwilling to enter the fastest growing sub-segment of the car industry of that day.
6. Reliability
7. After sales experience and dealership/service network.
8. Brands which have suffered due to any of these faults from above and never recovered.
avishar is offline   (2) Thanks
Reply

Most Viewed
Thread Tools Search this Thread
Search this Thread:

Advanced Search

Copyright ©2000 - 2024, Team-BHP.com
Proudly powered by E2E Networks