Chinese auto makers may find the big Indian car market just as difficult as their Western peers have
By Jacky Wong
India’s vast but volatile auto market has tripped up many foreign car makers. Chinese manufacturers looking for growth abroad could be next.
General Motors completed its withdrawal from India last week, when it agreed to sell its remaining manufacturing plant to China’s Great Wall Motor.
The U.S. auto giant stopped selling cars in the country in 2017 but kept making them for exports. Just a few months ago, Fordsigned a deal to transfer its Indian assembly factories to a joint venture with local rival Mahindra & Mahindra.
As American auto makers reverse out of the market, Chinese ones are driving in. Great Wall wants to enter the market with sport-utility vehicles under its own Haval brand as well as electric cars. MG Motor India, a subsidiary of state-owned Chinese auto maker SAIC Motor,launched its Hector SUV in the country in June.
Chinese car makers may be looking to India for growth as their home market slows: China’s auto sales fell 8.2% in 2019, the second straight year of decline. India has a lot of potential, with roughly the same population as China but a much lower level of car ownership. A similar strategy has worked for Chinese smartphone makers, which now dominate the Indian market.
MG’s Hector was launched in India in June. Photo: Anindito Mukherjee/Bloomberg News
Selling cars is different from selling smartphones: Consumers change their phones more often than their wheels, and don’t need the same level of after-sales service from their phone suppliers.
But Chinese car makers do have one advantage over more established peers: They have experience in adjusting their products to serve a low-income market.
MG’s Hector has sold very well so far, as it offers many premium features at a relatively affordable price.
India’s utility-vehicle market, which includes SUVs and people movers, has been a bright spot, growing 13% last year.
However, investors shouldn’t underestimate the challenges for Chinese brands entering India.
For one, the wider car market is in bad shape. Sales of vehicles, including both passenger and commercial vehicles, dropped 13% last year.
A crackdown on nonbank lending has hit funding for new car purchases, while stricter regulations have raised prices. These clouds may eventually lift, but India’s record of erratic economic policy-making points to ongoing risks.
Chinese manufacturers are also going up against established titans. Japan’s Suzuki, through its subsidiary Maruti Suzuki,has around half of India’s car market, having been in the country for nearly 40 years.
Other Japanese and Korean companies, which are famed for selling quality cars at affordable prices, are fighting for the rest of the market.
Finding growth at home is getting much tougher for China’s auto makers, but that doesn’t mean expanding abroad is an easy option.
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