Chinese car companies consider India a major target for overseas expansion. The three leading Chinese automotive firms are SAIC, Great Wall, and Chongqing Changan. All are currently going through 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’s the world’s fifth largest car market, but predicted to become the third biggest by 2020. Annual sales are forecast to nearly double from the current 2.7 million vehicles to 5 million during.

Third, 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. It’s now essential for businesses to invest in other markets for them to sustain growth.

 

Conquering The Indian Market: China’s Strategy

But another question comes to mind. How will Chinese car companies with no presence in India going to make their mark?

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.

They won’t be without help though. Chongqing reached out to a local Indian consulting company to help with their market entry. They 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’ve held separate talks with the government of Maharashtra. These larger players want to set up factories in the auto hub of Pune City.

SAIC is also considering other forms of market entry. These include the acquisition of GM’s manufacturing plant in the West Indian state of Gujarat. However, despite all the initiatives, companies still have many challenges to face if they’re to penetrate the Indian auto market.

 

Chinese Car Companies to Focus on Local Business Culture

One main difference between China and India is the size of the cars they prefer. This makes a huge difference in the way their economies are shaped. The Indian people value the size of the car over other characteristics.

This is 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 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 since there’s perhaps no better low cost manufacturer in the world than India.

About Reid Kirchenbauer

Reid Kirchenbauer is the Founder of InvestAsian. He's experienced with trading stocks and buying property in Thailand, Cambodia, and elsewhere. He's been featured in publications such as Forbes, Nomad Capitalist, Property Report, and Seeking Alpha. Download his free investment guide by clicking here.

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