MUMBAI: Many automakers from China, the world’s largest car market, are sealing agreements with their Indian counterparts in a bid to sell Auto Industry their competitively-priced brands in the fastest-growing car market.
Chinese carmakers such as Chery Automobile, China FAW Group, Great Wall Motor Co and Zotye Auto are looking to get a foothold here after setting up operations in Latin America, Eastern Europe, Africa and Russia.
“The Indian auto market is very price and value sensitive. China too is a developing economy offering price-competitive products, and there is a lot of opportunity,” said Ravi Santhanam, managing director of Hindustan Motors.
Doshi family-promoted Premier, one of country’s oldest car companies, has partnered Zotye Auto to launch its Zotye 2008 compact sports utility vehicle (SUV) in the Indian market. The base variant of the mini SUV is expected to be priced at Rs 5 lakh, the cost of a mid-size sedan. Asia MotorWorks, owned by Mumbai-based entrepreneur Anirudh Bhuwalka, one of the new entrants in the commercial vehicles space, imports heavy truck kits from China, while Hindustan Motors has tied up with Shandong Shifeng to import knocked-down kits of mini trucks from the company. The maker of Ambassador cars plans to initially assemble 1,000 mini trucks per month. Other domestic auto players such as Bajaj Auto and Asia MotorWorks are buying parts and kits from China to retain competitiveness.
Two-wheeler maker Bajaj Auto has begun buying parts for its export vehicles from China, a strategy that has helped it gain price-competitiveness in African and Asean markets. However, the company continues to make the engines for these export models at its Indian plants.
A stickler for specifics, Bajaj Auto has stationed its staff at the Chinese suppliers to ensure they stick to its specified quality levels.
Other Chinese firms such as Chery, FAW and Great Wall, have had discussions with potential Indian partners to enter the country.
Over the years, Chinese companies have built huge car making volumes that are expected to touch 12 million vehicles this year, more than those in the US and 10 times India’s capacity. “While China always plays on volumes, they are now focusing on quality as well. There is a lot of push from their government for them to develop indigenous vehicles and stand firmly on quality parameters,” says Abdul Majeed, auto-practice leader at PriceWaterhouseCoopers.
As volumes start building up, economies of scale kick in. Manufacturers start investing in better dies, tooling, fixtures, gauges and other production equipment, giving components consistency, quality and accuracy, Mr Majeed added.
An indirect subsidy from the government has helped Chinese auto firms price their products competitively. While almost every Chinese carmaker would like to enter the promising Indian market, they are likely to face copyright issues similar to the ones they faced in the developed world, especially the US and Europe. Many western automakers have accused Chinese companies of copying their designs Apart from possible copyright issues, another inhibitor would be finding local partners as there aren’t enough established Indian OEMs that are without any tie-ups, said Adil Jal Darukhanawala, editor of Times Zigwheels.
Like in India, car ownership in China is low: Only 15-17 people per thousand own a car, presenting a significant growth opportunity in the Chinese automotive market. A two-decade headstart in reforms when compared to India and government support—by way of purchase tax trimming, car subsidy programme for rural areas and subsidy for vehicle scrap, among others—helped Chinese auto market grow.
“With rising affordability and easy bank finance, vehicle sales started picking up,” said a senior official from a Mumbai-based car company planning to launch Chinese vehicles in the Indian market.
Chinese automakers have grown by adopting practical and frugal strategies when deciding capital expenditure on their plants: Many facilities have manual assembly lines, developed at a low cost, that deliver quality and productivity.
Some analysts say that China will be, in the next decade, what Japan was to the auto industry in the 1980s and South Korea in the 1990s, said an auto analyst at a Mumbai-based brokerage.
Source : The Economic Times