[tvr_sdq]

Our government asked Tesla not to sell Chinese manufactured Tesla cars in India. We can easily figure out why the government would have told so. They want Tesla to set up their factory here in India, but Elon Musk is not ready to give up easily by setting up one.

After 2017, 4 major automobile manufacturers stopped their operations in India. Including global giants like Harley Davidson, General Motors, Ford, and the UM. When makers like them leave India, we really lose some great quality products and the shock waves created by the news are quite serious. For example, when Ford Motors left, around 4000 direct employees and 35000 indirect employees were in trouble. Not only that, 7.1% of our overall GDP and 49% of our manufacturing GDP is contributed by the automobile industry. These figures speak us the importance of the automobile sector and its existence. So, when a manufacturer like Ford leaves India, it is not just the owners of an EcoSport or an Endeavour who suffers, the entire market will have its side effects.

The current value of the Indian Automobile Industry is around 118B USD, and we are expecting growth to 300B USD. India is currently the world’s largest 2 and 3-wheeler manufacturer and fourth-largest passenger car manufacturer. When it comes to heavy vehicles, we stand third and in the case of vehicles like the tractors, we are again the world’s largest manufacturer.

In spite of all these ranks and honors, the time band of 2018 to 2019 had been one of the most severe tensions and our automobile industry suffered significantly. According to the SIAM ( Society of Indian Automobile Manufacturers), there was a drop of 18.71 percent in overall automobile manufacturing and a 31% drop in passenger car manufacturing.

The reasons for this drop were

1. Demonetization
2. A sudden hike in the price of vehicles due to the hike in associated price and fees in various stages, like the registration, etc..
3. GST ( around 28 percent GST is levied on automobiles)
4. Advent of shared mobility like Ola, Uber, etc..
5. Transition from BS4 to BS6.
6. People holding back on EVs or waiting for them.

Ford and Chevy left. Toyota is surviving with the help of Maruti, Honda stopped CRV, and Civic. Nissan was struggling and Magnate came to the rescue. VAG group has an India 2.0 project (on which expectations are high). Jeep is here with the facelifted Compass and a 36 lakhs price tag. Maruti being the jack of all trades is surviving. Surprisingly, the KIA motors have had a stampeding success, where they sold around 3 lakh cars in 3 years. ( I would like to mention the Isuzu here, who have survived here despite anything and everything ). The fear of people around the foreign manufacturers has in fact boosted the market for Indian manufacturers and they are coming up with world-class products (which is really hopeful).

But still, there must be something for why the Ford, Chevy, Honda struggled here. Let us take a look at the challenges faced by the Indian manufacturing sector to get a better idea.

1) Unskilled labor: Yes. We have cheap labor here in India, but the skillsets when compared to other countries are not competitive enough
2) Indian land prices place it among one of the most expensive to own places in the entire globe. So, setting up a manufacturing facility would be obviously difficult.
3) Cost of power
4) Capital cost, which when compared to other countries, is around 20 to 30 percent higher here.
5) Logistics costs: The global average of logistics is around 8% of the revenue, while in India, it is around 13%

There could be other factors also and all these are making the companies suffer. Automobile manufacturing is not a simple process and it needs very huge investments. If these issues are not fixed, it would be difficult for manufacturers to survive here.

Currently, we are experiencing a huge demand in the automobile industry, in the post covid era, as people are preferring private transport over the public ones. This has given better times to the manufacturers and they are hoping the same trend to continue going forward too.

Let us see how it goes.

[Whitebear]

Don't forget about India's convoluted bureaucracy.

New legislation and guidelines are introduced in the auto industry without careful review.

[kosjam]

I don't understand why everybody keeps saying that we lost major (atleast globally) automakers from India.

Harley Davidson and UM, both saw the sales numbers of other brands, and wanted a piece of the pie. They did no research, no analysis of requirements of the Indian customer, no checks on how their vehicles would perform in India, and no comparative study of their product quality vs the offerings by their competitors. Expectedly, their products came up substandard and below par in this highly competitive market. More than the Indian reasons, it is the companies' own failures which caused them to shut shop and leave, licking their wounds.

Coming to the 4 wheelers, while both Ford and GM were early entrants, they never innovated, they never tried to read the market on what should be an ideal vehicle to be successful in India. I don't buy into the ONLY CHEAP CARS SELL WELL IN INDIA, because Hyundai with its offerings, and even Kia, have demonstrated that if you promise quality, Indians are willing to invest. Both Ford and GM came to India expecting Indians to fawn over their inferior products just because they are American brands and the notion that Indians go ga-ga over anything American. The Indian market gave them a reality check and as with the 2 wheeler segment, a complete apathy towards the Indian specific requirements ensured that they too, ran away, tail between their legs.

An easy simile is the difference between the McDonald's and KFC/Burger King, while the former did its research and innovated with India specific products, the latter duo initially suffered, wrongly expecting Indians to fawn over them just because they are American. They learnt from their mistakes and improved their offerings, tailored to Indian tastes, and the results are already visible.

[Turbohead]

To keep it short- Harley Davidson should be removed from this list. Their popularity had been going down globally and it is not an Indian phenomenon.

GM was lazy. Period. They started off well and then brought a knife (Chinese products) to the gun fight right when Hyundai and the other companies really brought out their best stuff. They refused to accept failure and walked out. Big mistake - they won't be welcomed if they want to come back.

Ford's departure is truly a sad thing. They are one of those companies that put in a lot of effort. TBH, their biggest mistake was to cut costs on the latest Figo and Aspire, thereby alienating their original customer base while the rest of them would've bought a Maruti anyway. But it wasn't as bad as it was made to be.

The fact is our economy is going down the drain with no hopes of a recovery in sight. Inflation is eating up the income of the majority of Indians and the Ford management definitely can't justify holding on any longer as not many new customers can be created- only the top 10% can really own a car and not many opt for it either apart from herd mentality which will be prelevant even if the first time customer base grows.

And cars will be taxed to death since it doesn't affect the majority of the voters.Period.

[shancz]

I don't agree with the backdrop of this thread and IIRC we had the discussion in another thread immediately after Ford's exit.

Our market is tough, lot of varying requirements which don't really link together, varied expectations across the T1--Remote spectrum, design preferences etc. but in the end very rewarding to the guys who get it right.

So I disagree that Kia and Hyundai's success is surprising, they're the ones who got it right.
Even TML got it right since the Tiago.

Also disagree that we're only buying cheap stuff, just look at the top sellers. They reflect the ground realities of our diversity with the Alto-wagonR and Creta-Seltos sharing places.

If we're buying cheap then how is the 12-14 lakh i20, a hatchback, selling in thousands while the way cheaper but bigger Triber not making the top charts.

A friend from EU, after hearing how different life experiences were from colleagues from across our country said this "I have understood that I cannot comprehend how you guys belong to the same country with such widely varying experiences".
Foreign manufacturers have been catering to very homogeneous populations and preferences but when they arrive and fail to adapt they'll eventually have to leave.

Finally, the "fear" of foreign brands leaving isn't a fear but a "fact", coming from ex Daewoo and ex Chevrolet experience.
But Hyundai is considered Indian for all practical purposes so the "foreign" isn't about the origin but commitment to the market which has been forged over years.

[dust-n-bones]

While I agree with most of you on the reasons for the automakers' struggle in India (incredibly diverse market, unpredictable policy climate, limited manufacturing capacity and skills), I think the fundamental problem in committing to India is its weak macro-economics.

India was supposed to have done the homework for high growth trajectory with trade liberalisation as far back as 1990s, and but that growth spurt which would have justified the investments that global brands made, never came.
Look at the graph below on number of units sold per year. India has been stagnant against the competition for a long time now:

Data credit.

We are asking automakers to make deep investments in India, make 'India specific' models that make the taxman and the buyer happy. How can that investment be justified against our numbers?

Should an automaker use their investment dollars in growth markets (in battery technology, autonomous vehicles etc) or in India which is a market with 'lots of unproven potential' since forever?
The answer is obvious. Look at what Ford did when they divested from 'non core' markets like India.

PS: Some of the reasons for India's economic stagnation against competition are discussed here (Ford Mondeo makes a comeback in China).

[shancz]

Originally Posted by dust-n-bones

How can that investment be justified against our numbers?

Thanks for the infographic, makes sense and hadn't thought of it.

The investment cannot be justified now for sure. With the advent EV/alternate fuels doesn't make any sense, this should have been done when they entered but going by the models their approach wasn't dynamic enough in face of competition who got the pulse right.

Also, we aren't the center/most profitable car market of the world so manufacturers would line up but quite the contrary. For a foreign manufacturer to survive it would take a lot of effort and long term investments with lower profits. The rationale for this might not fly high in their boardrooms over time hence when they consolidate to markets which suit their interests the best.
I am neither surprised nor disagree with GM, Ford, HD leaving for good, it was the right call for them.

I won't be surprised with a few more leaving over the course of 2-5 years.

But I don't think its a loss for us, just how our market is and its the same for everyone with some having the benefit of remaining longer in the game but it's the same everywhere else.
The advantage Ford has in US markets is the same that TML has in Indian markets and vice versa.

IMHO, its more of what we, as individuals prefer and wish to happen here and stay like that but that's a road to disappointment, such is life and markets

I would also love if Saab and Subaru were selling in India but Saab doesn't exist even in Sweden and Subaru is barely surviving on GM dictats

[aaggoswami]

Investment in India isnt worth for most manufacturers. India is still evolving and we still have best selling cars that are under Rs. 10 lakh, an area where global players wont be having a product that fits Indian requirements, mainly the spacious rear seat.
GM was well ahead of its time, IIRC, they had sunroof on Opel Astra Club. They also did their homework well with India specific "rough road package", something that gave good ride quality to Opel Astra and even Corsa. Corsa was available in three body-styles and atleast in sedan guise, they had option of 1.4 and 1.6 petrol engines. 1.6 wasn't bad and car was built well, much better than most rivals. Did it sell ? Cruze had two problems IMO, interiors and rear seat space that was not as good as rivals.

Combination of spacious rear seat, safety, efficiency, high quality interiors and price is difficult to provide under Rs. 10 lakh for any manufacturer who has not invested in India or has a significant presence. While we may have Tata and even Mahindra as an example, can products from Tata and Mahindra under Rs. 10 lakh sell well in EU or even in other developed Asian markets like Japan, China, South Korea ?

Ford tried hard, and succeeded to an extent to provide cost of ownership that is at par with Maruti/Hyundai. But then for the same they had to asunder from famed "Build Quality" that was expected from Ford. Skoda isn't as premium in developed markets but we consider it as luxury here, helping VW. Honda is a manufacturer that I think wont last that long considering their sales that seem to have hit a consistent but low figure.

To summarize, new huge investment plus an India specific product (which will also eat into investment) is a high risk. Indian car market, volume-wise isnt jumping by leaps and bounds to attract new entrants. Kia and MG did it right, and they are actually exceptions in a good way. But remember, the Sold In India base models of their primary products i.e. Seltos and Hector either dont have an impressive safety rating or not yet rated. So there is a compromise. Ford did and suffered, other might have taken a note of it.

At the same time, I really appreciate the efforts by Mahindra and Tata. Atleast for Indian market space, the safety they provide is better than global players. Toyota can ride on Innova and Fortuner success, they deserve it and there is no option but to pay a price for the same. With massive inflation, the cost advantage of India might also have eroded a bit. All in all, its like oligopoly at best.

[prajwalmr62]

The problem no one sees is the stagnant middle class incomes. Now add inflation to it, we are seeing more people getting poorer each day. Now add the cost of an average car* in the equation and you will clearly see why companies are running at 3-5% margins.

Setting up a factory in India is a very costly affair because of the way these Governments work. It takes years worth of labor to set up a factory not to forget land acquisition problems, bureaucracy, and politicians. All these add up to the cost and finally, having a business just don't make sense financially.

The reason you are seeing more exits now, is because until 2018/19 auto sector still had hopes that things would turn around and they'll see an exponential growth. Now, they are on ground and thinking realistically, it is obvious to fund EV development rather than a factory in a stagnant economy.

---

* If you are buying a car worth 6L with lowest tax bracket (28% GST with 1% cess) then total taxes (GST + road tax) would be approx 2L. A car manufacturing company gets approx. 4L. This sounds bad when you go up the tax bracket (taxes are levied up to 48% GST).

[DicKy]

We preferred railways over roads.

Maybe due to above reason (poor and late infra), plus heavily taxed fuel plus our miserly nature means we are still a two wheeler nation. Add to that heavy taxation. And we are still on the gradual growth phase and not on the rapid growth phase. Cars are still a luxury/sin good for the government.

Originally Posted by tvr_sdq

Harley Davidson, General Motors, Ford, and the UM.

The mangoes for Harleys would have worked, but HD didn't really work on India specific models. The pent up demand was met, and further sales growth didn't happen plus there was the street talk of extremely high maintenance and spare parts price.

General Motors deserved it. Ford was sitting on the Ecospor for too long. UM? Who?

Originally Posted by tvr_sdq

6. People holding back on EVs or waiting for them.

This is a reason blown out of proportion. Ofcourse, people are waiting to see if BEVs are going mainstream, but it not going to affect much of the sales in a place where people are so conservative they wouldn't even think of buying a non-Maruti.

Originally Posted by tvr_sdq

Toyota is surviving with the help of Maruti, Honda stopped CRV, and Civic. Nissan was struggling and Magnate came to the rescue. VAG group has an India 2.0 project (on which expectations are high). Jeep is here with the facelifted Compass and a 36 lakhs price tag. Maruti being the jack of all trades is surviving. Surprisingly, the KIA motors have had a stampeding success, where they sold around 3 lakh cars in 3 years. ( I would like to mention the Isuzu here, who have survived here despite anything and everything ).

Have to wait and see how the upcoming Creta rival and MPV is treated by the Indian market before writing off Toyota. Honda is to be blamed for the mess they are in today. The faster they bring the City hybrid and a Creta rival, the better. Even today, there is a considerable market who thinks highly of Honda as an aspirational brand. Best wishes for VAG, but I do feel they are diluting some core atttributes like Ford did with the 2nd gen Figo/Aspire, but pricing optimistically.

Isuzu can stay around as they are financially strong, but feel they are losing focus.

Originally Posted by shancz

I would also love if Saab and Subaru were selling in India but Saab doesn't exist even in Sweden and Subaru is barely surviving on GM dictats

Mazda for me, but we can expect some random Chinese car company to sell here in India, than Subaru or Mazda entering the market. Both Subaru and Mazda still have majority of their manufacturing in Japan itself, more so for Subaru. Also the appeal for rugged AWD vehicles( read not SUVs) in case of Subaru and near premium driver focussed Mazda approaches don't really fly with the Indian market demands.

Btw, Subaru is now more of a Toyota company than GM. GM had already sold its stake to Toyota.

[shancz]

Originally Posted by DicKy

- Also the appeal for rugged AWD vehicles( read not SUVs) in case of Subaru and near premium driver focussed Mazda approaches don't really fly with the Indian market demands.

-Btw, Subaru is now more of a Toyota company than GM. GM had already sold its stake to Toyota.

- Forester and the endless ogling of the STi for me and the Mazda 6.
Did drive the Mazda 6 2.0 once with its 1st/2nd iteration of the SkyActiv, comfy suspension, excellent handling, beautiful exterior and matching interiors

- Thanks, didn't know that, stopped following after the GM takeover fearing Saab future. With Toyota I am happier

[kiredd1005]

IMHO, I can't stand OEMs selling tin boxes. But from the buyer's point of view, we are largely a very cost conscious country. We do not want to spend more on safety features but want very good leather seats, ICE etc. OEMs end up playing their cards just right and sell such cars.

[CliffHanger]

There is nothing wrong with India or Indian beauracracy. If a new entrant like Kia can succeed and an old timer like Tata can reemerge, any other manufacturer can succeed.

Success is hardwork, there is no easy money. The manufacturers who have left are US manufacturers who are used to flamboyant and shooting culture. Ours is different and our expectations are different. If they cannot adapt and expect easy money, it's their fault, not ours.

[rsidd]

Originally Posted by dust-n-bones

Look at the graph below on number of units sold per year. India has been stagnant against the competition for a long time now:

Interesting graph but I see it as a good thing. You would not know, looking at the choked roads in cities, that Indians are not buying so many cars. Cars are bad for the environment, period. Now even the Americans are realizing that. EVs are cleaner but will not solve the traffic-jam problem (if they become popular they may make it worse). We need public transport and bike lanes in cities.

But if the Indian car market does grow, I predict the growth will be in the EV segment. The time is right for some manufacturer to introduce a small, sub-6L EV with a range of 150km, good enough for city use and fleet use. I think it will happen in 2022.

[Shreyans_Jain]

Originally Posted by CliffHanger

There is nothing wrong with India or Indian beauracracy. If a new entrant like Kia can succeed and an old timer like Tata can reemerge, any other manufacturer can succeed.

Kia is not the right example to give. It benefited massively from Hyundai’s 20+ years of toil in the Indian market. It’s product lineup is also essentially shared with Hyundai, from platforms to powertrains. Their common synergies enable economies of scale. And let’s not forget…. Seltos GNCAP result is proof that they have suitably cut corners wherever they needed to.

If anything, MG is a fair example of how a new entrant fares in the Indian market in modern times, deep pockets nonetheless.

Just about every established manufacturer who sells in developed markets is always going to struggle in India. What is considered entry level in their home markets straightaway becomes D segment in India. That cuts off 95% of the market right there. There is simply no product overlap. Their emerging market products are killed by our stupid 4m/1200cc rule. Like it or not, India is simply too poor a country in terms of PPP to expect its mass market cars to be of international standard. Add to it some of the world’s highest taxes on cars as well as on fuel, most of us will be condemned to drive budget tin cans for the foreseeable future.

MG has learnt from Chevy’s debacle and has basically steered clear of the sub 15L or sub 13L market. It is so for a good reason.