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Indian Automotive Market – A Tough Nut To Crack?

  • Jul 07, 2017
  • 1572 Views

GM’s decision to quit sales operations in India would have surprised many if not all. After all, why would a carmaker turn away from a car market that is set to become the third largest in the world in a few years. In the FY 2016-17, India clocked its highest ever passenger vehicle sales figures, crossing the three million mark for the first time in history. With a diverse buyer profile, shouldn’t India be a market where all carmakers find their ideal audience?


Cruze


Announcing GM’s decision to quit sales in India, Stefan Jacoby, GM’s executive vice president and president of GM International, said, “We explored many options, but determined the increased investment originally planned for India would not deliver the returns of other significant global opportunities. It would also not help us achieve a leadership position or compelling, long-term profitability in the domestic market. Difficult as it has been to reach this decision, it is the right outcome to support our global strategy and deliver appropriate returns for our shareholders.”


Like GM (Chevrolet) there are other carmakers as well who are not able to churn big volumes in India. However, most carmakers are sticking in India in the hope of finding a firm footing in the years to come. Besides the existing players, foreign carmakers like Kia and MG Motor (SAIC) have big investment plans here, and they are expected to hit the market in a few years. Even luxury carmakers are investing to size up their portfolio, open new assembly plants and widen their sales and service network.


But why is it that some carmakers are struggling to get stability in India while others are having a ball? Let’s find out who all have mastered the Indian car market and what are they doing right, and also touch upon those who are on their way to a successful stint in India.


The Game and the Players


India is a high volume car market but it is dominated by two carmakers – Maruti Suzuki and Hyundai – who together constitute over 60 per cent of the net car sales. Maruti Suzuki has established itself over a long period but Hyundai entered the market in the late 90s. Understandably, both the carmakers offer a wide range of products in the high volume mass market segment with a diverse portfolio including small and premium hatchbacks, compact sedans and SUVs. That said, both these carmakers have also tried their hand in the more premium segments as well, although the results have not always been in their favour.


Maruti Suzuki has the biggest retail and service network in India followed by Hyundai. Spare parts availability for both the carmakers is seamless in most parts of the nation. Maruti Suzuki and Hyundai cars have also fared well in India on the reliability front. Resultant buyer trust has earned their cars a good rapport in the used car market as well, with some obvious exceptions.


While it may look like a smooth sail for both Maruti Suzuki and Hyundai, both the carmakers have had to face their own share of hurdles. Maruti Suzuki was stereotyped till very recent for being only a small (by car size) carmaker and it has had to shed this image to expand its portfolio and scale further heights. Even Hyundai tried its hand at the SUV segment in their yesteryears and failed. But both these carmakers have managed to come back with more vigour and better plans.


Vitara Brezza


Maruti Suzuki’s Vitara Brezza, Ciaz and Ertiga cars have proved to be successful non-hatchback models; and the Baleno has done exceptionally well in the premium hatchback segment. Hyundai, on the other hand, has managed to distance itself from Maruti Suzuki in terms of its product placement with some of its products priced at a premium over similar Maruti Suzuki products. The carmaker has also been successful in the Rs 10+ lakh segments with SUVs like Creta and Tucson gaining buyer popularity. Not to skip the fact that smaller cars like Hyundai Elite i20 and Hyundai Grand i10 continue to spin decent numbers for the South Korean carmaker.


The Success Mantra


A wide sales and service network seems to be the backbone of Maruti Suzuki and Hyundai’s success story in India. Buyer trust is paramount in the Indian market and they have gained it by being closer to their buyers. Cost of ownership, which depends on reliability of products and cost of spares, is another check box that these carmakers have managed to tick. Additionally, they have a wide product portfolio, and have managed to time their product launches well besides being competitive on the value-for-money chart.


However, even these carmakers have made some mistakes in the past. Products like Kizashi and Grand Vitara have flunked for Maruti Suzuki in the premium segment while cars like the A-Star and Zen Estilo could never match the sales numbers of their hatchback peers. For Hyundai, products like Terracan and new Sonata couldn’t do well. In the small car space, they’ve had to face tough times with cars like the Getz. However, both these carmakers have had more than one star performers in their portfolio at every point of time, and it is these products that have sailed them through tough times.


The Challengers


Apart from Maruti Suzuki and Hyundai, carmakers like Toyota, Renault, Honda and, of late, even Ford, have demonstrated that right products at the right time and at the right price can do well in India.


Toyota has swept away the premium utility vehicle segment with UVs like the Innova Crysta and Fortuner. Renault has proved its mettle first in the compact UV space with the Duster, and later in the small car space with the Kwid and Kwid 1.0. Since its launch the Honda City has also been one of the sought-after cars in its segment. Ford disrupted the sub-compact SUV market in India with the EcoSport a few years back.


The fact that other carmakers have had successful products proves that promising products can do well in India. However, a carmaker can’t just rely on one product to make fortunes, and it requires multiple successful products over a period of time to make an impact like Hyundai did in the past.


Can Others Replicate The Success Mantra?


Renault Kwid


Establishing a wide sales and service network takes time. So, the best way to find inroads in India is to launch the right products. If the products are well-researched and priced right, there’s no stopping them. A good example is the Renault Duster and Kwid; and because Renault has done it right twice, it shows that the carmaker is somewhere doing something right. Renault has also managed to keep its products fresh with regular updates and new variants, and that is what the Indian buyer wants. As far as sales and service network is concerned, the French carmaker is still far behind the leaders. However, that has not deferred buyers from proving time and again that it is the right product at the right time and at the right price that matters to India. So yes, India is a tough nut to crack but only if you don’t strike it right.

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