For a company that has been in India for more than 15 years, Mitsubishi Motors still remains a fringe player in the automobile segment. In contrast, Japanese companies like Toyota, Honda and Nissan, which came in much later, have surged ahead. Suzuki, of course, remains the leader, with Maruti. What then has stopped Mitsubishi from going all out in India?
Early this week, it announced its entry into Thailand's eco car project with the Mirage. Suzuki followed suit, almost immediately, with the new Swift, which is already part of the Indian landscape. Nissan and Honda were the earlier entrants to the Thai initiative with the March (Micra in India) and Brio respectively.
BUSINESS MODEL
Unlike Mitsubishi, these companies have made sure that their models for Thailand are also part of the product portfolio for India. This has helped them draft a smart growth plan for the Asia-Pacific region, and a long-term strategy for emerging economies like Brazil, Russia and Indonesia. Toyota will also throw its hat into the Thai eco project next year, with a derivative of the Etios which entered India more than a year ago.
It is an uncomplicated business model for these Japanese automakers. The eco cars produced in Thailand can find their way into the rest of the ASEAN countries comfortably, since there are no tariff barriers. Indonesia, Malaysia and the Philippines will soon be joined by Cambodia and Vietnam. India, in comparison, has a large domestic market and offers a gateway to South Africa, Latin America, and parts of Europe.
There is no reason why Mitsubishi shouldn't emulate this model, and bring the Mirage to India. It has, in fact, hinted that it is open to the possibility, albeit at a later stage. The only problem is that there is just no foundation in place here which will make the idea a reality.
Mitsubishi has been in a partnership with Hindustan Motors for many years, but this hasn't involved any equity participation. The facility near Chennai is an old HM plant, with a modest capacity of barely 15,000 units annually, unlike modern auto facilities which are created to accommodate at least 1.5 lakh cars.
Further, HM has its own set of problems to grapple with, and primarily needs a revival plan for its Bengal operations, which are home to the trusty, though outdated, Ambassador. Ideally, the stage is set for its Japanese ally to take a controlling stake in Chennai, but there is no sign of that happening in a hurry.
More than a decade ago, Daimler had a 37-per-cent stake in Mitsubishi, and the two were keen on collaborating on an Asia-specific car project. The German automaker was on a roll then, with its Chrysler marriage promising the moon. It also had a stake in Hyundai which, in tandem with Mitsubishi, could have provided the ideal Asia script.
GLOBAL ALLIANCES
Nothing went according to plan eventually. While the Daimler-Chrysler mega merger went kaput, the Mercedes maker quickly divested its stakes in Mitsubishi, and Hyundai too. The Asia car project was consigned to the archives as a result.
However, in this gloomy background, it was still clear that global alliances would be the order of the day in the future. Hence, even while General Motors had parted ways with Suzuki and Fiat, it had acquired Daewoo, which gave it an aggressive product line-up in Asia, and parts of Europe. Likewise, its partnership with SAIC Motor Corp in China would prove to be a lifeline in India in the aftermath of the 2008 Lehman crisis.
Post Daimler, Mitsubishi was on its own, but it was clear that it needed a strong ally for a bigger global play. This is when PSA Peugeot Citroen entered the picture a couple of years ago. The French carmaker had realised that the time had come to build its presence beyond the geographies of Europe. Emerging economies were the key to its business, and it had already identified China, Russia and Latin America as its future growth drivers.
It only seemed logical for PSA and Mitsubishi to team up, and talks began doing the rounds of a global compact car where India would be one of the key production hubs. The two companies discussed the possibilities of an equity crossholding, but nothing emerged eventually, and the proposal was shelved.
PARTNERSHIPS
Like Mitsubishi, PSA just could not get a fix on India, even though it was among the earliest entrants in the early 1990s. It was also the first to call it quits and missed the growth boom that followed. Last year, the company announced its intent to invest in a plant in Gujarat, only to end up putting the project on hold following a disastrous 2011 in Europe.
Experts maintained that a partnership with Mitsubishi was still the best way forward for PSA in India (and Asia on a larger scale) but the company decided to opt for GM, in a move that just does not seem to add up in terms of long-term viability.
In the process, Mitsubishi may just have to reconcile itself to the fact that the India story will continue to be elusive, unless it identifies a strong ally. PSA would have been the ideal fit, but there is no chance of that happening now. Fiat could be more inclined to teaming up with Suzuki which, in turn, wants out of an alliance with Volkswagen. Renault has had a successful marriage going with Nissan for more than a decade now, and is now gearing up for its next phase of growth in India, Indonesia and Russia.
Mitsubishi could, of course, choose to chug along in Chennai, but could end up missing the big growth story that is due to unfold in India this decade. With the slowdown in Europe and the US market recovering at a slow pace, companies are now firing on all cylinders.
India has even attracted the attention of Chinese automakers like SAIC and Zotye, which have teamed up with GM and Premier apiece to target the growing buyer mass across towns and cities. It will be a pity if Mitsubishi misses the bus.