Suzuki reconsiders the promise of the Indian car market, and is not alone
NEW DELHI: Suzuki Motor Corp said it was no longer excited about the Indian car market, the fourth largest in the world, where it has experienced relentless growth over the past seven years. And the father of the largest automaker in the country is not alone.
The Japanese automaker issued the warning after reporting a fall in quarterly earnings this week in drop sales in its Indian unit, Maruti Suzuki , which represents half the number of cars sold in India.
We no longer think that growth in India will be an uninterrupted upward movement, Suzuki president Toshihiro Suzuki warned. Maruti sales, which grew until January, have been reduced every month between February and September 2019.
India's automotive sector has plummeted this year due to poor liquidity of shadow banks, high taxes and the weak rural economy have diminished the purchasing power of consumers.
Global players like Ford, Volkswagen and Fiat are already reassessing their strategy while struggling to enter a market dominated by small cars.
Car manufacturers are becoming very cautious about their future investments in India. Most of them differ or simply discard their new model plans from India, said Puneet Gupta, an expert in the IHS Markit car industry.
Automotive executives and analysts point out that some automakers are focusing on their strengths in terms of products rather than chasing volumes with small cars. Some others are taking drastic measures to reduce their exposure.
Ford agreed to sell a majority stake in its arm of India to Mahindra&Mahindra, ending its independent operations in the country after two decades and highlighting the challenges facing car manufacturers to grow profitably in Asia's third largest economy.
A cocktail of higher taxes under a new regime of taxes on goods and services, a radical change in the policy of electric vehicles and a boom in shared travel companies such as Uber and Ola have plagued global car manufacturers in India. Not having the right cars and a smaller sales network has also hurt, some executives say.
When there is political instability, it becomes very difficult to convince the central offices to invest more in the country, said an executive of a Western automaker.
India is largely a small car market and that is not a strength for most global car manufacturers, which sell more SUVs and luxury cars in other places such as in China and the United States, the two main car markets of the world, added the executive.
Western automakers had to design products specifically for India, which is an expensive exercise, said V.G. Ramakrishnan, managing partner of the Avanteum Advisors consultancy.
Many chose a mass market strategy instead of a niche one, and are returning to focus on specific segments, he said.
Volkswagen has put its sister company Skoda in charge of India strategy and will focus on SUVs. Fiat too has put SUV-maker all terrain in charge of boosting sales in the country.
The demand for SUVs in India is growing faster than some small car segments, which caused even Maruti, who dominates the small car space, to consider launching SUVs and crossovers.
Sling It is reassessing its plans in India and can turn one of its two plants into a research center, local media reported.
Toyota and Suzuki have formed an alliance to share supply chain costs and develop new vehicle technologies together.
Car manufacturers want to exploit their existing resources, minimize their costs and maximize their returns, Gupta said.