India has been touted as the second fastest growing economy after China. IT, Iron and steel, textiles, coal, pharmacy and various other sectors have seen India shining. Automobiles too have seen a tremendous growth. But where the Indian automobile industry has lagged off late is growth in the number of home grown and bred manufacturers. I realized this after a conversation with a friend as to how none of the Indian brands have a global appeal, be it any field of business apart from biryani and Chicken Tikka.
Germany boasts of BMW, Audi, Mercedes-Benz and Opel. France boasts of Renault, Peugeot and Citroen and Piaggio. Japan boasts of Toyota, Honda, Mitsubishi, Suzuki, Nissan, Kawasaki, Yamaha and Subaru. United States boasts of Ford, GM and Chrysler which themselves run multiple brands. While these brands sell internationally, other brands are only limited to their home country. This includes the 100 or so Chinese brands which copy other major cars models and survive selling in their own province. Sadly, Indian car makers face a similar crisis.
What exactly are the reasons for such crisis apart from the prevalent government corruption? The issue as raised by Mr Ratan Tata recently is the fact that only a couple domestic makers have been able to make it big enough to survive in the long run. I used the term ‘make it big’ and not global since none of the Indian car/motorcycle brands has reached a global status irrespective of their advertising slogans and punch lines. In this regards, government needs to be more attentive and supportive than corruptive.
Here is a contrasting fact. India is the largest two-wheeler market in the world with sadly no major two wheeler company attaining global status. We currently boast of Hero, Bajaj, TVS, Mahindra, Royal Enfield, Vibgyor and LML. But only Hero, Bajaj and TVS have reached adequate sales to be called world class manufacturers. Royal Enfield is a lifestyle arm of Eicher and caters to a niche market. LML and Mahindra (formerly Kinetic) have yet to reach enough sales just for survival.
Vibgyor on its part has remained absent since the company’s introduction at the last Auto expo with press releases promoted by none other than Sourav Ganguly. Considering the dearth of major two-wheeler manufacturers worldwide apart from the big four Japanese makers and Peugeot, it is surprising how Indian makers are still finding it tough to find a footing of this multi million vehicles a year industry.
LML which had started with a golden run with the help of Piaggio, decided to go alone with the onset of 21st century. The once revered name along with Bajaj quickly went under after their risk with motorcycles did not pay off. LML has always been known for sturdy and comfortable products. Their motorcycles were exactly that. But customers didn’t know if LML knew how to make bikes. The company took over heavy debt and stopped production for more than a couple of years. Only recently did it begin production on a small scale after a moderate FDI. Motorcycles are not a part of their current portfolio.
The LML story is not new for the Indian 2-wheeler industry since Kinetic has had a similar fate. The company started successfully being the only variomatic (automatic) vehicle maker in India. But with the launch of competing variomatic scooters and end of collaboration with Honda, Kinetic has only gone downhill since. A similar fate awaited their venture into the motorcycle segment along with Hyosung (Hyosung re-entered last month in collaboration with Garware). The Firodia’s finally decided to call it quits and sell off the company to Mahindra’s. Similar to LML, Mahindra (previously Kinetic) has only recently begun making moderate sales needed to sustain in the market based on durable and affordable scooterettes from SYM motors.
The Hero Honda breakup signs towards a similar story repeating all over again. One might not agree looking at the numero Uno sales position Hero Motors enjoy. But, Hero Motors has not had a new model on sale for the last 7 years. Their venture into the electric scooters has also not paid well (LML owners have also invested in this field).
The dark horse of this field has been TVS motors. Venu Srinivasan has been able to steer the company clear of trouble with constant R&D and efficient administration. Also to note that TVS-Suzuki was not in a leadership position during their love story. TVS Wego has been received as a scooter better than foreign competition and TVS Apache has also been received as the best sports bike in its segment. TVS has also recently entered into 3-wheeler segment where Bajaj was enjoying a monopoly (Piaggio has also entered this segment successfully).
Adding strength to Ratan Tata’s statement is the slow transition of Bajaj from a domestic bike maker to a multi brand seller. Since Rahul Bajaj transferred the reins to his son, the scooter maker has had a complete change in its way forward. Bajaj, once known for its scooters doesn’t have a single scooter in its portfolio. Also, with the success of Pulsar, Bajaj has decided to turn into a multi-brand sales company than remain a domestic 2-wheeler manufacturer. In this regards, Bajaj has bought a major stake in KTM apart from its existing collaboration with Kawasaki. With the launch of KTM bikes in India, Bajaj will be selling Kawasaki, KTM, Pulsar and Discover range of bikes with the latter two brands being manufactured by Bajaj itself.
The situation is no better within the Indian car industry. Only Mahindra and Tata have been able to breach the domestic boundaries and sell abroad. To give credit where it is due, there are more global car makers than two-wheel makers.
India currently boasts of Tata, Mahindra, Force, Hindustan, ICML and premier. Hindustan Motors was a pioneer car maker that survived testing times which others like Sipani could not. But, Birla backed HM does not have a survival story to say. Instead HM was successful thanks to the baburaj prevalent at the time. This has been proven by looking at how HM has only survived over a single model sold since 1956. Apart from its incompetent engine changes shared for cheap with Isuzu, HM has not really tried to develop or share a new car platform over 5 decades apart from the HM Contessa and their latest stint with a Chinese truck maker. HM last year reported to the BIFR which is a step before filing for bankruptcy in India.
The story as with LML and Kinetic is repeated here with Premier Motors. Mumbai based Premier LTD had a spat with Fiat during their successful sales of Padmini and 118NE leading to Premier exiting the business altogether. Over a decade later, the company is back with a Daihatsu based Rio built by a Chinese maker. Premier used an old TUD5 Peugeot Diesel engine after heavily modifying it for today’s common rail competition to keep costs down. With cash flowing in from Premiers other operations, Premier Rio BS-IV is rumoured to be re-launched with the Indian super engine Multijet from Fiat (its old partners). This can be Premier’s make it or break it step.
ICML has not had it rosy even though they decided to go alone and built a competitive car. ICML is a venture of the third Largest Tractor makers Sonalika. ICML has left Sonalika searching for cash as the company has not sold enough cars to turn a profit but burnt heavily in the process. ICML had to scrape its small car platform which could’ve led to the company getting insulin shot in the arm. The company is rumoured to have stopped manufacturing and exit the car business if sales do no pick up.
ICML has not had it rosy even though they decided to go alone and built a competitive car. ICML is a venture of the third Largest Tractor makers Sonalika. ICML has left Sonalika searching for cash as the company has not sold enough cars to turn a profit but burnt heavily in the process. ICML had to scrape its small car platform which could’ve led to the company getting insulin shot in the arm. The company is rumoured to have stopped manufacturing and exit the car business if sales do no pick up.
Force motors major mainstay was its Vans which sold well with the tourist operators. But Force has been consistent (albeit slowly) with model upgrades in a contrast to how other car makers keep selling the same cars. Force is about to launch a new premium SUV. The new SUV is based on an old Benz platform just like every other UV that Force manufactures. This has helped Force garner profits even with meagre sales. Force motor has not exactly been able to breach the consumer markets due to lack of any sort of marketing and their major sales still come from the Tourist operators.
Mahindra has been one of the older automobile makers in India along with HM. Mahindra’s mainstay was Willys styled jeeps which were a hit with the Indian army. The army contracts and lack of major UV makers or imports made sure Mahindra had a monopoly and lots of money. No doubt Mr. Anand Mahindra calls himself a man hailing from a moderate family (pun intended). Finally with the onset of 21st century and competition heating up Mahindra was forced to ramp up quality and brought Scorpio, Bolero and Xylo to the market. The company has held its market share well and purchased a majority stake in SsangYong and purchased Indian electric car maker Maini. Apart from its 4-wheeler intentions, Mahindra has also purchased Kinetic’s 2-wheeler operations.
Mahindra has been one of the older automobile makers in India along with HM. Mahindra’s mainstay was Willys styled jeeps which were a hit with the Indian army. The army contracts and lack of major UV makers or imports made sure Mahindra had a monopoly and lots of money. No doubt Mr. Anand Mahindra calls himself a man hailing from a moderate family (pun intended). Finally with the onset of 21st century and competition heating up Mahindra was forced to ramp up quality and brought Scorpio, Bolero and Xylo to the market. The company has held its market share well and purchased a majority stake in SsangYong and purchased Indian electric car maker Maini. Apart from its 4-wheeler intentions, Mahindra has also purchased Kinetic’s 2-wheeler operations.
Tata motors have over its two decade history been touted as the only car maker who has had constant R&D and least foreign support. Tata has also gone ahead and purchased Jaguar Land Rover for a heavy price and turned them into profit making brands. A feat which major companies like Ford failed at. But Tata has overtime hit a roadblock with R&D and increasing its market share. Its initial stint with selling their cars to Tourist cabs for extremely cheap prices has backfired. Indian consumers somehow have a problem with their cars being associated with cabs, even if they are better than competition.
This brings us to the fact that Indian manufacturers are finding it increasingly tough to find foothold on their home ground. The first and foremost point to note is the consumer notion of how Indian products are inferior to those of the foreign makes. Tata Indica costs cheaper than competing cars. Tata has also made sure it is loaded to the gills for its price point backed by a huge sales network. Tata has also made sure that Indica has an extremely low cost of ownership. But the company’s initial stint of selling to tourist cabs has left the company scarred in the eyes of consumers. The same is the case with ICML. The company’s product Rhino has not been able to survive in front of Toyota Innova even with loads of Kit and effective pricing. Sonalika’s image as a tractor maker has not helped either partly due to company’s lack of financing advertisements. Premier’s prior history of ditching its customers is fresh and the car kits they import from China are not exactly of good quality either.
With a little bit of fault on the customer perception and a major bit on company’s lacking competitive products, the government needs to stop corruptions on their part and reduce excise and customs on parts imports so as to facilitate domestic makers with strength in technology and quality and better pricing.
