Big car brands queue up for India

It might seem politically incorrect to term it a Chinese invasion but that is the closest you can get to defining the present pace of activity in the Indian automotive arena.

After SAIC Motor Corp took over General Motors’ Halol plant in Gujarat two years ago and has since hit the bullseye with the MG Hector, other Chinese carmakers are queuing up for India in a big way.

Changan Automobile, for instance, is keen on setting up a greenfield facility with speculation rife that Gujarat and Andhra Pradesh have emerged favoured locations. At one point, it was rumoured that the company was keen on taking over Ford India’s Sanand plant in Gujarat but that is now part of the latter’s new joint venture with Mahindra & Mahindra.

There has been no official comment yet from Changan on its India plans though industry sources say the company will go flat out with a product offensive in the coming decade. Clearly, the success of SAIC (with its MG Motor brand spearheading the product offensive) has been a factor in the likes of Changan now going ahead with their India plans.

Great Wall Motors is as keen on establishing its presence here and media reports have hinted that the company could be eyeing a takeover of GM’s other plant at Talegaon near Pune. The American automaker already signalled its India exit plans with Halol while reiterating that the Pune facility would service markets in Latin America.

According to industry observers, it was a “foregone conclusion” and only a matter of time before GM decided to sell this plant too and this is precisely what seems to be panning out with Great Wall Motors. Whether Changan will also attempt to throw its hat into the ring for the GM plant buyout race remains to be seen but nothing can be ruled out.

New geographies

Two big Chinese brands have now emerged on the horizon as serious contenders in the Indian automobile arena. Great Wall is an SUV specialist where its Haval and Wey brands notch up huge numbers annually back home in China to the tune of over a million units. Changan, on the other hand, has a wider array of products ranging from passenger cars to commercial vans and light trucks. Like other Chinese companies, it is clearly keen on spreading its wings to new geographies like India.

Beyond these two companies, there is yet another that is slated to join hands with Tata Motors as part of an effort to build economies of scale on its new platform. At one point in time, the name of Chery Automobile was doing the rounds but Geely now seems another strong candidate to reckon with.

There has been no confirmation coming either from Tata Motors or either of these two Chinese companies even while industry sources insist it is only a matter of time before a deal is struck. At one point in time, Tata Motors was in talks with Volkswagen as a potential ally but now the needle is pointing towards China.

Geely, incidentally, is no trifling player and has already emerged a celebrity of sorts in the global automobile space thanks to its spectacular success story with the Volvo Cars acquisition. Some of its more recent strategic moves have seen acquisition of significant stakes in Volvo Trucks and Daimler AG.

If Tata Motors were to actually end up with Geely as a partner, it will be interesting to see how the script pans out with platforms, products and eventual economies of scale. Will this help Geely also get a big foothold into India and establish its own retail network? These are early days yet and even while its entry with Tata Motors is still largely in the realm of speculation, there is no telling what will happen in the coming months.

Brand perception

What is coming through loud and clear is that the Chinese are now queuing up aggressively for the automobile play in India. Yet, they could face headwinds in brand perception, especially when any association with China is perceived as being on the cheaper side.

Yet, argue industry observers, the acceptance of Chinese brands in areas like cellphones (where they have been growing from strength to strength), washing machines and even television sets in recent times shows that customers are pretty fine with them.

“In a value-for-money market like India, customers want the best features at a competitive price. Chinese brands have shown the way in he electronics space,” says an industry official. Yet, he admits, the going could be tougher in something like cars “which is a completely different ballgame”.

In this context, the success of the MG Hector could be music to its Chinese manufacturer’s ears. SAIC was absolutely clear from the beginning that its branding strategy for India would focus on MG Motor, the British brand it had acquired years ago. The reasoning was straightforward: this was a much better way of drawing customers to its showrooms than positioning a relatively unknown Chinese brand.

The fact that SAIC is the largest player back home is of little consequence in a market like India where customers have traditionally gravitated towards brands like Suzuki, Hyundai, Toyota, M&M, Honda and Tata Motors. Over the last few months, Kia Motors of Korea, and part of the Hyundai group, has made a huge splash with its Seltos, which has grabbed the fancy of customers.

To still draw customers to its showrooms in this fiercely competitive market speaks volumes for SAIC’s efforts with the MG brand. It is now pretty clear that the Hector has made a mark and the challenge will be to sustain the numbers, especially at a time when the market is not in the best of shape.

Electric offering

SAIC is now gearing up to launch its electric offering and will attempt to send out a strong statement on cleaner emissions. It is something that could just do the trick with a younger generation of customers who are far more environment-conscious and this is where the MG brand could have another success story after the Hector.

Remember it was SAIC that had attempted an entry into India with GM nearly a decade ago when the Lehman crisis had pretty much paralysed the world. Detroit was virtually crippled too with companies like GM and Chrysler struggling to stay afloat, which meant that their overseas operations were gasping for breath, too.

This was when SAIC teamed up with GM for India and the two set about rewriting a new script in a 50:50 partnership. The plans then involved cars and pick-ups from the Chinese stable, where SAIC was also looking at making India its export hub for the ASEAN region. However, the script did not quite go according to plan and GM was back in the saddle again.

Yet, the honeymoon did not last too long for the American carmaker as it realised that the India story was going completely awry. This was the time it decided to get out of the retail business and bud adieu to its older plant at Halol. Its former ally did not waste too much time getting into the picture and turn things around at the plant while establishing a dealer network.

The Hector made its debut in record time and also a name for itself during the months that followed. It is quite likely that customers do know that its ownership is Chinese but that is not any deterrent, going by the market response to this SUV.

Great Wall Motors and Changan Automobile will also be hoping, likewise, that they will make as big an impact as SAIC in the Indian market. They will only be too aware that the subcontinent is on its way to becoming the third largest car producer in the world, only after China and the US. Additionally, it will not be lost on them that the Chinese automobile market is going through its worst slowdown in recent brands, which makes a global foray imperative.

The following decade in India will see a host of disruptions in the mobility arena in the form of new fuel preferences like electric as well pressure on ownership especially in big cities.

In a backdrop like this, the only way to stay ahead of the curve is to offer competitively priced products with a host of attractive features. This is what the new Chinese entrants will endeavour to do in what promises to be a fierce tug-of-war with established players.

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