Why are the Americans failing in the Indian automobile market?
In early April, 2017, General Motors announced that they’re selling one of their two plants in India to SAIC, their Chinese joint-venture partner. This, potentially, signals the beginning of the end for the beleaguered American giant and its Chevrolet brand as they seem to be headed towards a total withdrawal from the Indian car market. And why does this matter? Because the Indian car market is the 5th largest globally and one of the fastest growing in the world, nearly tripling its output between 2006 and 2016.
GM’s American rival Ford are doing better, but not by much. Ford holds an almost minuscule 3.1% market share in the mass-market, non luxury segment, as of March, 2017. That’s 8th place out of 15 established brands. GM is floundering at 0.47% in 12th place. In March, 2011 Ford & Chevrolet sold 10,485 & 9,365 cars respectively. In March, 2017 they sold 8,700 and 1,318 respectively. During those same months, Suzuki sold 110,424 & 127,695 cars. So what’s gone wrong for these American stalwarts?
The Lay Of The Land
The top selling cars in India are relatively cheap and fuel efficient. More recently, compact crossovers are becoming relevant, but the volume drivers in the market, even in this class, are still small and fuel efficient. A quick look at the top two sellers Suzuki (under the Maruti Suzuki brand) and Hyundai reveals an interesting trend. Nearly all the top performing vehicles, even from these market leaders, are either cars designed specifically for India or those that compete well in the European market. Neither of these two market leaders have attempted to sell the sort of products designed generically for “emerging markets”.
From this information, it seems that you either go really cheap or you go premium and offer something that feels good to own and live with. There’s also the unique-to-India mini sedan class which is a money spinner for these two brands. Yet, both brands offer mini sedans based on cars that are doing well in the European market. There are a couple of exceptions to this trend in Toyota and Honda whose only successful models in India are cars that do well in the ASEAN (Thailand, Indonesia, etc) markets. The American companies tick almost none of these boxes.
The (seemingly confused) American Way
Ford began its India journey in 1995 with GM following in 1996. The Indian market was quite primitive at this time, so both these companies had time to establish themselves. GM began with the German brand Opel which was received extremely well at the time. Customers loved the feel of a solidly built European design. You’d think that they would have built on that success. Instead, the brand was killed and replaced by Chevrolet. In isolation, this seems like no bad thing. The issue is, Chevrolet began selling cars designed by the recently deceased Daewoo motors of South Korea with the bowtie logo slapped on them. GM wrongly believed that they needed to be cheap, without being bargain basement, rather than premium.
This led to a gradual and continuous fall in sale numbers with no new products launched and no plans to rescue the failing brand. Instead of picking cars and platforms from their relatively competitive European or even American arms, GM kept offering old models from the Chinese or Korean markets. That’s not to say that these markets aren’t capable of producing good cars. It’s just that as consumers, Indians wanted something that was either really cheap or really good. Being a middle market player took them nowhere. The sad irony in all of this is that their two best selling products in their troublesome Indian journey, the Cruze & Beat were both globally successful models, not older or cheaper options.
Ford India has made its own missteps as well, although they are still surviving. Their two most successful models to date have been a European Ford Fiesta based hatchback, the Figo, and a global model, the Ecosport. Recently, they began exporting the latter to the US market as well. Although the mistakes are fairly similar between GM & Ford, Ford has relied more on its higher quality products from Europe to source platforms and technologies. As America’s number one brand and a star performer in Europe, Ford has all the tools in its arsenal to grow in India. Whether they will is almost entirely up to them!
So What Do I Take Away From This?
- The Indian market remains a mystery for American brands, even in other sectors like consumer goods.
- The top six auto brands in India are of Asian or Indian origin. Is it a cultural thing?
- Indians will pay a premium for a good quality product which explains why the Hyundai i20 sells in large numbers despite being one of the most expensive superminis in the market. Cheap is not the only way.
- Research is imperative. In order to succeed in the market, many many man hours need to be spent to understand the psyche of the Indian consumer. India has several different regions with different languages, cultures, geography and economics. Treat it as a continent, not a country.
- In order to threaten the established order, you have to be better or unique. Providing a similar product as the market leader gets you no response.
As an Indian recently relocated to the US, I am writing a series of articles based on my thoughts and experiences both in India and in the US. I look forward to hearing your thoughts and comments.
Edit: May 18, 2017: GM India have announced the withdrawal of their Chevrolet brand from the Indian market. The company will continue to manufacture cars for export from its remaining Indian plant at Talegaon near Pune, India, but will cease retail operations by the end of this year. A sad day indeed for one of the world’s iconic brands.