Why Indian Auto Industry will never rule the world?

Facts as of Jan 2013:

• Indian Automotive Industry has been one of the larger markets
• Been fastest growing globally with now a more flat growth
• India is the sixth largest passenger vehicle manufacturing industry in the world beating the likes of Belgium, UK, Canada & Russia.
• Third largest exporter from Asia behind only Japan and South Korea.
• Indian auto manufacturing industry largely based out of three clusters – Chennai in the south, Mumbai – Pune hub in the west and Gurgaon-Manesar in the north. Immense potential of growth in Gujarat in the West, Kolkata in the east and other NCR regions in the North
• Follows indigenous Bharat Stage IV (and III) emission norms no less than other internationally known emission norms
• Exports expected to cross $12 Billion by 2014
• Exports to countries like US, UK, Germany, UAE, Spain, France, South Africa and many more
• Houses global car giants like Aston Martin, Audi, Bentley, BMW, Bugatti, Chevrolet, Ferrari, Honda, Hyundai, Toyota, Lamborghini, Mercedes, Porsche, Rolls Royce and what not.
• Acura, Infiniti, McLaren, Cadillac, Lexus, Jeep, Mazda and many others in various stages of official introduction to Indian market.

And yet?



And yet, I say that Indian automotive industry may never rule the world.
I am not denying that India is not the larger and lucrative market. I am also not saying that India is not one of the bigger manufacturing hubs in the world. Hell, I am not denying any of the facts.

What I am saying is that INDIAN automotive industry will never rule the world. Here are some other facts.

1. Most Indian automotive companies are small regional players. Some of them are not even in the passenger vehicles section. 
2. Home grown companies like Premier are now only assemblers or others like Chinkara are more diversified into specialty segment like marine.
3. San Storm a coupe manufacturer is also in specialty section and imports only to UK and is marketed by a Sussex based company. Does not have a worth mentioning presence in Indian market.
4. Probably the only three names which have some presence both India and abroad are Tata Motors, Mahindra and Maruti Suzuki, of which Maruti is a subsidiary of Japanese manufacturer Suzuki Motors which in turn has Europe’s stalwart Volkswagen as its largest shareholder.

Tata Motors and Maruti Suzuki have a wide product range and serve various customer segments. Mahindra in response have a less varied suite for consumer car segment. Of late both Tata & Maruti have seen slowdown in growth in Indian market due to presence of other car models.

Maruti exports to various countries like Angola, Benin, Djibouti, Ethiopia, Kenya, Nepal, Sri Lanka, Uganda, Guatemala and few others. A stark contrast in terms of where Indian automotive industry on a whole seems to be exporting. Most of these countries where Maruti exports are not very big markets and neither mature not lucrative for the likes of Toyota and Honda. In future they may be and then Maruti will face challenges in another market where it will pretend to be well established.

The dilapidated situation of Indian automotive companies in a burgeoning world auto trade and Indian manufacturing saga usually remains hidden or goes unnoticed. Most of the Indian manufactures (sans Maruti, Mahindra & Tata) are most likely to close down, get acquired by foreign companies or may become just assembling units and commoditized spare parts manufacturers.

Maruti, M&M and Tata cannot survive with a focus on just Indian market. They will have to grow organically (by serving markets in and outside India) and in-organically (by acquiring smaller overseas players in strategic location or with niche abilities in design or technologies).

Maruti unfortunately is way behind the curve than Tata motors. A controlling stake by Suzuki ensures that Maruti remains a strong hold for Suzuki in India. Suzuki in spite of being the third largest Japanese manufactures is losing ground in European and Americans markets. Sure they wouldn’t want to lose on Indian soil.

The approach by Tata and Mahindra had been more aggressive. Mahindra had been setting up offices in UK, Europe and China while continuing to largely churn their Indian units for production. Tata on the other hand had been acquiring motor companies and design companies, well known like Jaguar Land Rover and small, unheard of like Italy based Trilix.

However Tata and Mahindra are very small players in the global scale especially compared to Toyota / Honda who have a rich Japanese legacy of low maintenance, efficient vehicles or Volkswagen which has a several luxury brands like Audi, Bentley or several of its own C-segment passenger cars with an impeccable German Engineering hum to it. Not to mention the revenues which are also small compared to these organizations, the economies of scale and scope and access to cheaper technology. Rupee exchange rate does not help either be that compared to dollar, Euro or Yen.

Indian companies have neither a legacy nor a reputation. Not even a powerful currency. Whether they survive long before bowing out or whether they will rise like phoenix, only time will tell. Indian automotive companies will have to mend the ways they do business if they have to even come close to challenging the Asian or European rivals.