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Indian Car Market Keeps Foreign Car Manufacturers Guessing


Following the success of BMW, Audi and Mercedes-Benz, many other foreign car manufacturers are dropping into India to tap the robust car market here. The one thing that is common to all new entrants is that none of them are willing to set up shop here completely. They are shying away from making huge investments initially and are treading their paths carefully through well thought out tie-ups with Indian companies.

It’s a very curious development on the Indian automotive scene. The Indian car market is getting ‘juicier’ by the dozen. Every car manufacturer is eyeing a sizeable share of the pie that is the Indian car market. India is the new Promised Land. However tempting the pie, rising inflation and input costs have thrown foreign car companies on the defensive. The car scene is reporting a slower growth level every month. Maintaining profits has become challenging and have forced the foreigners to adopt new strategies.

Interesting

  1. Italian car manufacturer Fiat pulled out of the country recently after a tie-up with Tata Motors for retailing and aftermarket services for its car models.
  2. American automotive giant Chrysler is considering a tie-up with Mahindra and Mahindra for a foray into India.
  3. Renault has already released a sedan model ‘Logan’ in a joint venture with Mahindra and Mahindra.
  4. Japanese car manufacturer Suzuki has been a partner of Maruti for long and has introduced several car models to the Indian market.
  5. Hindustan Motors, who make the iconic Ambassador cars, are currently marketing Mitsubishi’s Lancer, Cedia, Pajero, and Montero car models. The partnership is now looking to launch a new SUV ‘Outlander’ soon.
  6. Nissan has hired certain companies to evaluate the Indian market and study the sustainability of their premium priced cars in India. Renault and Nissan have entered into an agreement with Mahindra and Mahindra for marketing support in future projects.
  7. Toyota has its manufacturing agreement with Kirloskar. Marketing of its cars is handled by another company.

Very few companies are willing to invest large sums of money yet and are opting for joint ventures or similar partnerships with Indian vendors thereby relying on the well set up countrywide networks of large Indian companies. Setting up own shops is too cumbersome and expensive. A recent survey has revealed that the Indian car industry is already spending Rs 10,000 Crore and upwards for distribution, sales and servicing, and customer satisfaction in aftermarket goods.

It is common belief that India is essentially a small car market. Most of this market for hatchbacks and sedans is found in urban and semi-urban areas and is currently held firmly by the likes of Maruti Suzuki, Hyundai, Honda, Skoda, and Tata Motors. Main players in the MUV segment are Tata and Mahindra. BMW and Mercedes-Benz are seeing excellent sales in the luxury car segment. All others car manufacturers are required to fight it out for the remaining portion of the competitive car market.

It’s not feasible to create a huge infrastructure for a small percentage of market. Over that, the Indian car market can still be considered unchartered waters. Foreign car manufacturers are uncertain about the about the response to their products. Via Indian alliances, they hope to carve out a small portion of the market for themselves leaving further expansions plans for later. It’s about getting the toe in the door for the moment. Foreign companies trust the Indian car companies to handle their marketing portfolio and help them find their initial foothold here.

A well set up infrastructure is an important requisite at the moment as the car market has drifted away from the metros and toward tier-II cities in the country. Currently, most of the demand comes from the small cities and large towns. All metros are reporting low sales. It would be impossible to reach these markets without an infrastructure in place that has already penetrated so deep.

For foreign car manufacturers, the Indian car market is currently a bundle of contraptions and requires deft and thoughtful handling. The input costs are hard to predict and understanding customer requirements is a true challenge. Despite all the hurdles, the infinite prospects of the budding Indian car market cannot be overlooked and will continue to tempt several foreign companies to indulge.
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