International Markets - making and selling cars in India

“If you own a car in India, you’ve arrived in life,” says Arun Malhotra, country head for Nissan. This is a great article from the FT for analysing this international market.

First, looking at market opportunitites. The Indian car market is the world’s fifth-largest by sales, generating $35bn in financial year 2016. Even better, “The industry is going to virtually double every three to five years,” says Anurag Mehrotra, executive director of Ford’s operation in India. And both of the two biggest global markets are facing challenges because of changes in the Political environment - in China, the tax break that drove huge growth in 2016 is to expire, and the US, where higher import tariffs are being considered. As a result, the Indian market is starting to look a surer bet. Last year, Hyundai sold more cars there than in the whole of Europe.

There is reference here to the First-mover advantage gained by Suzuki when they set up a joint venture with the Indian government in 1992 to form Maruti Suzuki, and now have massive market share:

But they cannot afford to rest on their laurels here. Plenty of other competitors are sniffing an opportunity in this market. With only about one car sold last year for every 450 people in the country — compared with one for every 18 people in the US — any SWOT analysis will point towards opportunities to take market share.

Manufacturers are also seeing opportunities to off-shore here, and Nissan and Ford see India as the best location for their global production. This is helped by Prime Minister Narendra Modi’s Make in India drive, which aims to boost manufacturing investment through infrastructure investment, and complemented by a programme of accelerated highway construction. Nissan announced in February that it had exported 700,000 Indian-made cars to 106 countries since opening its Chennai plant in 2010, while Ford, which last year overtook Hyundai to become the country’s biggest car exporter, now views India as its global hub for production of smaller vehicles,

There is also evidence for some great Evaluation points. Manufacturing is subject to occasional unwelcome political decisions, Mr Mehrotra of Ford says, noting last month’s abrupt withdrawal of subsidies for some hybrid vehicles. Selling opportunities depend on the brand and market positioning. At the top end, growth in luxury car sales has not yet recovered from a 125 per cent import duty imposed in 2013. Porsche sold 401 cars last year in India, compared with 65,246 in China. And at the other end of the market, there are different issues. Most Indians drive motorcycles and scooters, which are typically purchased for well under $1,000, and outsold passenger cars by nearly six to one last year. In an attempt to win that market, Tata Motors launched the Nano. It was billed as the world’s cheapest car, with a launch price of Rs100,000 ($1,560). Tata built a factory with an annual production capacity of 250,000 vehicles — but sold only 9,054 units last year, and is considering closing the project down. The problem, acccording to an analyst, is brand image: “Nobody wants to be seen as driving a cheap car — cars are aspirational buys here.”

This means that the image established as part of the marketing mix is everything. In speaking of Nissan’s budget Datsun brand, their CEO for India is careful not to refer to it in terms of cost, but as the choice of “rising India”.