Among all Indian automobile companies, Four enterprises have ceased operations in our nation since the beginning of this year. Harley-Davidson, General Motors, Ford, and UM Motorcycles are among the companies involved. This was recently shared with fellow BHP aficionados by BHPian TVR Esq.
Our government has requested that Tesla refrains from selling Tesla vehicles produced in China in India. We can readily deduce why the administration would have made such a statement.
They urge Tesla to build a plant in India, however, Elon Musk isn’t willing to give up his vision for the company just yet by building one. Since 2017, four major vehicle manufacturers have ceased business in the Indian market. Among them are global behemoths such as Harley-Davidson, General Motors, Ford, & United Technologies.
When manufacturers like them depart India, we lose access to some very high-quality items, and the ripple effects of the news are pretty severe. For example, after Ford Motors went out of business, around 4000 direct workers and 35000 indirect workers were placed in a difficult situation.
The vehicle business also contributes 7.1 percent of our entire GDP and 49 percent of our manufacturing GDP, which is impressive in and of itself. These data demonstrate the significance of the car industry as well as its continued existence.
As a result, when manufacture like Ford pull out of India, it is not only the owners of EcoSports and Endeavours who suffer; the whole market would be affected as a result.
The Indian Automobile Industry is now valued at around 118 billion dollars, with projections of an expansion reaching 300 billion dollars. India is now the world’s biggest producer of two- and three-wheeled vehicles, as well as the fourth largest manufacturer of passenger automobiles.
When it came to larger trucks, we are ranked third, and when it comes to agricultural vehicles, such as tractors, we are once again the world’s greatest producer.
Despite all of these distinctions and awards, the period from 2018 to 2019 was marked by very severe tensions, and our motor sector suffered substantially as a result of this.
There has been an 18.71 percent decline in total vehicle manufacture, as well as a 31 percent drop in passenger car manufacturing, per the SIAM (Society of Indian Automobile Manufacturers).
The following were the factors that contributed to this decline:
- A rapid rise in the cost of automobiles is a result of an increase in the related prices and fees at different stages, such as registration and licensing.
- GST (Goods and Services Tax) (around 28 percent GST is levied on automobiles).
- The introduction of shared mobility services such as Ola, Uber, and others.
- The shift from BS4 towards BS6 is complete.
- People who are delaying their purchase of electric vehicles or who are waiting for them.
Ford and Chevrolet have both departed. Toyota is surviving thanks to Maruti, whereas Honda has halted production of the CRV and Civic.
Nissan was having difficulties, and Magnate stepped in to help. The VAG group is working on an India 2.0 initiative. Jeep has unveiled the facelifted Compass, which comes with a price tag of Rs. 36 lakhs. Being a jack of all crafts, Maruti is managing to stay alive.
Surprisingly, KIA Motors has had a soaring level of success, having sold around 3 lakh vehicles in three years. (I’d like to call attention to the Isuzu, which has managed to live here despite everything.)
People’s apprehension about foreign manufacturers has, in reality, strengthened the marketplace for Indian manufacturers, who are now producing world-class goods in response.
However, there has to be some explanation for why Ford, Chevrolet, and Honda suffered in this market. Take a look at the issues that the Indian manufacturing industry is facing to gain a better understanding of the situation.
- Yes, there is unskilled work. Even though we have inexpensive labor here and in India, our skill levels are not competitive when compared to those of other nations.
- Indian land costs rank it among the most costly countries in the planet to buy property, according to Forbes magazine. As a result, establishing a production plant would be very challenging.
- The cost of electricity.
- When compared to other nations, the cost of capital is approximately 20 to 30 percent greater in this country.
- Costs of logistics: The worldwide average cost of logistics is approximately 8% of revenue, but the cost of logistics in India is approximately 13% of revenue.
There might be other issues involved as well, and all of them are causing problems for the businesses. Automobile production is a complex process that requires a significant financial commitment.
If these problems are not addressed, it will be difficult to manufacturers to remain in the country.
Currently, in the post-Cold War period, we are witnessing a significant increase in demand in the vehicle business, as individuals choose private transportation over public transportation. This has resulted in better times for the manufacturers, who are anticipating that a similar trend will continue in the future.
Let’s see how things turn out.
The following is what GTO would have to say about Indian Automobile Companies are struggling in 2022:
As a client and a car enthusiast, I am dissatisfied with the fact that two firms (Maruti and Hyundai-Kia) dominate around 70% of the market. When you include Tata and Mahindra, you have four companies that dominate 85 to 90 percent of the Indian automobile industry.
All of the other multinational corporations are left battling for crumbs, with just 10 to 15 percent of the remaining clients.
This significantly limits options, and for those multinational corporations, it becomes a major challenge. They either withdraw from the market (Ford and GM), reduce their aggressiveness (VW), or put India just on the backburner.
In many cases, like as Nissan, they become one- or two-product wonders. When your share of the market is less than 2 percent, it is difficult to persuade Global Headquarters to make more expenditures.
I wish India had a market in which eight firms controlled 80 percent of the total market share. That would result in much more competition and options for us. Take a look at the United States.
Only players have a 15 percent chance of winning (source). Furthermore, since the market is so large, even a 2 percent market share results in quantities large enough to support numerous goods and profits:
According to BHPian kosjam, the following is his take on Indian Automobile Companies are struggling in 2022:
Everyone continues claiming that we have lost big (at least internationally significant) automakers to India, which I find perplexing. Both Harley Davidson & UM were aware of the success of other companies & desired a piece of the action.
They conducted no research, conducted no analysis of the needs of the Indian client, conducted no inspections on how their cars would function in India, and conducted no comparative assessment of the quality of their products compared to the offers of their rivals.
In this highly competitive sector, it was to be expected that their goods would be inferior and below quality. More than the Indian causes, it is the failings of the firms themselves that have prompted them to close their doors and walk away, licking their wounds.
With regard to automobiles, although both Ford and General Motors were early entrants, neither company innovated nor attempted to read the market in order to determine what should be the perfect vehicle for success in India.
Only low-cost cars sell well in India, according to the conventional wisdom, but Hyundai and even Kia have proved that Indians are prepared to spend provided they are assured of high quality. In their visits to India, Ford and General Motors anticipated adoration for their inferior goods solely on the basis of the fact that they were American brands, as well as the general belief that Indians are crazy about everything American.
The Indian market provided them with a harsh reality check, but within the 2 wheeler category, utter disregard towards the special needs of the Indian market assured that they, too, were forced to flee with their tails between their legs.
It’s simple to compare the differences between McDonald’s & KFC/Burger King: whereas the former invested in market research and innovation to create items for the Indian market, the latter pair originally struggled because they assumed Indians would like them simply because they were American.
They have learned from their failures and modified their goods to better suit Indian preferences, and the benefits are now obvious on the market.
What BHPian shancz has to say about the situation of Indian Automobile Companies are struggling in 2022:
I do not even agree with the context of this topic, and IIRC, we had a similar debate in another thread shortly after Ford’s resignation was announced.
Despite the fact that our market is difficult, with many distinct needs that do not actually relate together, various expectations over the T1-Remote range, design preferences, and so on, the folks who do it right will be rewarded handsomely in the long run.
As a result, I do not believe that Kia & Hyundai’s success is unexpected; these are the companies that got it right the first time. Since the Tiago, even TML has gotten it right. Also, I disagree that we are simply purchasing low-priced items; just have a look at top sellers. They mirror the reality on the ground of our variety, with the Alto-WagonR & Creta-Seltos sharing parking spaces, among other things.
What’s the deal with the 12-14 lakh i20 hatchback selling in thousands of units while the much cheaper but larger Triber fails to make the top of the sales rankings if we’re purchasing cheap? “I have recognized that I cannot grasp how you guys belonged to the same nation with so drastically differing experiences,” observed a friend from the European Union after hearing about the very various life experiences of colleagues from throughout our country.
Overseas companies have been catered to extremely homogenous communities and tastes, but if they enter and fail to adapt, they will be forced to leave the country in the near future. Finally, the “fear” about foreign companies leaving is not a worry but a “reality,” as shown by the experiences of former Daewoo and Chevrolet employees.
However, Hyundai is regarded as an Indian company for all practical reasons, therefore the term “foreign” refers not to the country of origin, but rather to the company’s commitment to the market, which has been developed over many years.