India is now considered a major target for overseas expansion by China’s leading car companies. The three leading Chinese automotive companies are SAIC, Great Wall, and Chongqing Changan, and all are currently undergoing major expansion efforts in India.
There are a few reasons why Chinese car companies are taking India more seriously. First, the Indian car market is very similar to that of China. – cars prosper. China, as the world’s largest manufacturer and possessing incredible economies of scale, cannot continue to choose to lead an out-of-focus effort.
Second, the Indian car market, along with the rest of India, is booming and many are calling it the last frontier of growth after the China and Russia. It is the world’s fifth largest car market but is predicted to rise two ranks by 2020 to become the third largest. During this time, annual sales are forecast to nearly double from the current 2.7 million vehicles to 5.
Thirdly, India represents a key strategic market for Chinese players looking to expand even further overseas. The Chinese automotive market has slowed down in recent years, and it has now become essential for businesses to invest in other markets in order for them to sustain growth.
Conquering The Indian Market: China’s Strategy
However, another question comes to mind. How are these Chinese companies with no presence in the Indian subcontinent going to make a mark with their entry strategies?
Despite acquisition being the main method of overseas expansion, Chinese automobile giant Chongqing Changan will use the Greenfield method, directly investing into the country with no strategic alliances. However, they will not be without help as the company reached out to a local Indian consulting company to help with their market entry. Chongqing Changan plans to produce cars in India by 2020.
The even bigger companies such as SAIC and Great Wall are taking another approach. Due to their size and the negotiation power that comes with it, they have initiated separate talks with the government of Maharashtra in Western India for the possibility of setting up factories in the auto hub of Pune City.
SAIC is also considering other forms of market entry, including the acquisition of GM’s manufacturing plant in Western Indian state of Gujarat. However, despite all the initiatives, the companies still have many challenges to face if they are to successfully penetrate the Indian automotive market.
Different Countries, Different Car Preferences
One main difference between China and India is the size of the two countries, making a huge difference in the way their economies are shaped. The Indian people value the size of the car over other characteristics, even though the Indian government, through lower tax rates and other policies, also encourages the use of compact cars to fight pollution and ease traffic in India’s already jammed cities.
It will be a challenge for the Chinese giants to adapt their feature-rich and luxurious cars in to capture the Indian customers, but there is light at the end of the tunnel. One thing that the Indians really value, which also happens to be something the Chinese value, is a low price tag. This is good news for China’s car companies as there is no better low cost manufacturer in the world than India.