Tue, 07 Dec 2021

by Pankaj Yadav

NEW DELHI, Sept. 21 (Xinhua) -- India, one of the leading auto markets across the globe, has been dealt with a heavy blow recently with the exodus of major carmakers.

The South Asian country used to be the "Land of Promise" for automakers, who were lured there by the easy car loans on low interest rates, high incomes of professionals working in different private sectors, and recurrent pay commissions leading to a rise in government employees' incomes.

Earlier this month, however, U.S. car maker Ford announced a plan to cease production in India, though describing it as a "restructuring" operation.

On Sept. 9, it announced the closure of both its manufacturing plants in India, one in the southern state of Tamil Nadu and the other in the western state of Gujarat. The company would, though, continue selling imported cars in India.

As per the official announcement by the company, Ford India will shut down its Gujarat plant by the fourth quarter of 2021, and its Tamil Nadu plant by 2022.

Ford India is among the major auto giants to exit India in recent years. Others which pressed the Exit button include Harley Davidson, General Motors (GM) and Fiat. STRING OF EXITS

Media house India Today recently reported that the string of exits by big multinational firms "does not augur well for the country," which has been seeing high unemployment rates amid the COVID-19 pandemic.

"GM's exit in 2019 was driven by a decision to get out of non-profitable operations. Harley Davidson left India as part of its 'Rewire' strategy to focus on other select markets, such as North America, Europe and parts of Asia," the report said.

It further stated that the pandemic had only made matters worse for auto companies as they were forced to keep their retail outlets shut amid lockdowns.

For the past couple of years, Ford India has been in talks with India's auto majors to possibly strike a collaboration in order to survive, but decided to wind up after the talks failed to materialize.

The American company's presence in the country lasted for over 25 years. In the past one decade it suffered a whopping net loss of more than 2 billion U.S. dollars.

Experts say that the major reasons behind the American auto giant's failure in the world's fifth largest car market are price tag not matching Indians' aspirations as well as the low resale value of all its models. FORD'S FAILURE

Auto expert Tutu Dhawan told Xinhua over phone that Ford failed to be customer-centric and focused too much on safety features, which "unfortunately do not match an average Indian customer's choice."

He said that at the time of purchase, most Indian car buyers (basically of a small family car) only care about low-price, easy services and repairs, and hardly about safety features.

Only India's largest car manufacturer Maruti Suzuki and South Korean auto conglomerate Hyundai have been successfully able to justify these two features so far, and thus, continue to be the market leaders in India, Dhawan explained.

"When an Indian goes to buy a new car, the major question that strikes his/her mind is how much the four-wheeler would fetch him/her at the time of selling it five-ten years down the line. This is an average Indian's mentality. Ford cars' resale values have been much lower compared to other car makers like Maruti. This was one of the other reasons for Ford's failure in the Indian market," said Rajiv Malhotra, a software professional and an avid watcher of the Indian auto market.

Malhotra, who has owned four different cars from different companies over the past one-and-a-half decade, said, "no doubt Ford cars had a better technology and stronger built if compared to other cars available in India -- Maruti, Hyundai etc., but safety issues matter least for the Indian car buyers."

Besides, Indian customers look for easy availability of spare parts in the open market, which Ford resisted throughout its stay in India, Dhawan added. "A car owner here has a tendency of buying cheaper but genuine spare parts from the open market and getting the car repaired or serviced by a local mechanic instead of the company-owned workshop. Because that's a cheaper option."

With thousands of private mechanics' workshops mushrooming across the country, car owners will easily find "both the spare parts and a Maruti mechanic, even in the remotest parts of the country."

Among the other major reasons behind Ford's failure was the company's inability to offer commercial vehicles to be driven as cabs and taxis. FIERCE COMPETITION

In the cut-throat competition in India's auto market, every other Indian car buyer eyes the maximum mileage, rich resale value, and low prices. "Over the years Ford India failed on all these parameters," Malhotra added.

Meanwhile, Japanese and South Korean automakers have tightly gripped the Indian market for the past several decades. Indo-Japanese carmaker Maruti Suzuki has a roughly 48 percent share in the Indian market, while South Korea's Hyundai India enjoys around 17 percent.

One of the features of India's auto market is that the company that rolls out the maximum number of models annually catches the eye of most customers. Maruti Suzuki has been doing it all these years, which is why it has remained the Number One in India's auto industry.

"Indian customers love to see and drive new models that are cheaper and give maximum mileage per litre of petrol or diesel and fetches a better resale value," Dhawan said.

Like Maruti Suzuki, Hyundai too has presented the Indian customer a fair number of options, ranging from small budget family cars to SUVs for the richer segment(s).

China's Morris Garages (MG) and South Korea's Kia are the latest entrants in the Indian car market, and doing fairly well so far.

"Their mid-segment cars are fabulous, as they offer a wide variety of features, including Artificial Intelligence, which have indeed caught the Indians' imagination," Dhawan said of China' MG, describing it as a promising entrant for the Indian auto industry even in the years to come.

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