Why auto MNCs don’t hit top gear in India

Rashmi Pratap Mumbai | Updated on January 12, 2018 Published on June 28, 2017

Car eps

All, except Hyundai, overlook entry segment; and there’s little response to local needs

The mojo of global auto giants does not seem to be working in India, as they continue to struggle with a market share of 5 per cent or less in the world’s fifth largest passenger vehicle market.

Barring Hyundai Motor India, which is at the second spot in the pecking order, no MNC has succeeded in crossing the 10 per cent market share threshold in a country that loves small cars the most.

“Segment ‘A’ (including Maruti Alto, Hyundai Eon and Tata Nano) and ‘B’ (Maruti Wagon R, Tata Indica etc) still account for over 60 per cent of the Indian market. Most of the MNCs are not present in these categories with appropriate products,” VG Ramakrishnan, MD and Managing Partner at Avanteum Advisors LLP, told BusinessLine.

“So, they are competing only in segments like sedans, SUVs and crossovers, where the market is still relatively small.”

According to data from the Society of Indian Automobile Manufacturers (SIAM), Toyota Kirloskar, Renault India, Ford India, Nissan Motor India, Volkswagen India, Skoda and Fiat India reported less than 5 per cent market share at the end of FY17 (see table). Honda India, with a 5.2 per cent market share, has skid from 7.3 per cent in FY15.

Lack of understanding

Suraj Ghosh, Principal Analyst - South Asia Powertrain Forecasts at IHS Automotive, observed that MNCs have failed to make a mark partly due to a lack of understanding of the Indian customer in terms of product expectation, price sensitivity and the overall cost of ownership.

“Their one-size-fits-all strategy was a blunder, as American and European products were launched here without being tailored to suit Indian requirements,” he said.

For instance, for General Motor’s Opel Astra, the ground clearance was inadequate and Ford’s Mondeo was too expensive for customers here.

Moreover, said Ghosh, most MNCs did not launch the right products at the right time. “(Maruti’s premium hatchback) Swift Diesel had a solo run in the segment for almost three-four years and that’s a long time in the market acceptance cycle,” he pointed out.

Most automakers have largely been playing catch-up — following market trends set by Maruti or Hyundai. “A more innovative and trend-setting approach would have succeeded,” Ghosh said.

How Hyundai made it

And that is something Hyundai realised early on despite being an MNC. “Hyundai has believed in constant innovation and understanding of the Indian consumer’s pulse. We have consistently offered products made in India and conforming to the global quality benchmarks,” said Rakesh Srivastava, Director – Sales and Marketing, Hyundai Motor India. Its first offering in 1998, the tall-boy design Santro, was a game changer in the Indian market. And its success has been followed by other Hyundai models such as Grand i10, Elite i20 and SUV Creta.

Sridhar V, Partner and Practice Leader at Grant Thornton India, said: “Indigenisation and spreading its dealership network has helped Hyundai and that is something others can also benefit from.”

In the last two years, Renault’s Kwid has also succeeded in the domestic market largely because it is an indigenised product with local sourcing of components and aggressive pricing in India’s most-loved entry level segment. It has boosted Renault’s market share from 1.7 per cent in FY15 to 4.4 per cent in FY17.

Sridhar further said Kwid has managed to catch the imagination of the public, demonstrating that MNCs too can make a mark in the market with the right product, pricing and sourcing strategy.

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Published on June 28, 2017
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