Should SAIC Motor’s debut in India Worry Existing Players?

The Chinese automotive giant is all set to make a grand entry in the Indian market. The fortune 100 company will also be the first Chinese carmaker to set its foot in India. MG Motor a subsidiary of the group will be rolling out operations in the country that has reportedly registered itself as ‘MG Motor India’.

SAIC’s ambition in India is pretty much driven by the soaring popularity of cost-efficient Chinese products in the Indian Market. In recent years, India has emerged as a massive market for the Chinese manufacturers, which is easily justifiable by the robust consumption of China-made consumer electronic goods in the country. India’s growing economy is playing a major role in luring international brands towards the country. Nation’s millennial population has a taste for more adventurous and quality lifestyle, promoting it to a prospective buyer category.  With the rising per capita income, people are having more options and exploring into various segments, though cars still remain a luxurious commodity for most. Meanwhile, a high aspirational value of the commodity has kept the auto industry on its feet, as brands such as Honda, Maruti Suzuki, and Hyundai look forward to launching more compact and price-efficient cars.

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While the introduction of mid and low priced cars will be a priority for the automaker, gaining consumer confidence must also be taken into account for long-term sustenance. Besides, it appears that the company is fiercely gearing up to measure its growth prospects in country – ‘after all, revenue is the most important part of any business’. As per online sources, the Shanghai-based company has hired KPMG for analysing the automotive market in India. The company will also be assisted by few other prominent research organisations such as PricewaterhouseCoopers trading as PwC and EY (also known as Ernst & Young) for assessing overall cost of manufacturing in the country.

How will be the business in India different than in China? Regardless of the massive population, India’s geographical size is much smaller than China’s. In India, the size of the car is valued higher than its characteristics. Government policies favour the use of compact cars to ease the growing traffic pressure and bring down emission levels. Therefore, it might take a while before the Chinese giant finds all the right combinations. However, consumers in both the countries are connected with the unique sense that is ‘value optimised pricing’. Which puts the automotive manufacturer at an advantageous position, as there are very few contenders who could match the low-cost pricing offered by Chinese manufacturers.

Yes, the existing brands should be concerned about the growing Chinese interest in the Indian market. Despite having a very low penetration of the Indian sub-continent, Chinese car makers are in better position as compared to North American or other oversea players. Obviously, the geographical benefit cannot be denied. Unlike other regions, investment in India and its neighbouring markets could be more direct. Alliances and partnerships are certainly not an order in this region, which will allow Chinese players to operate more independently. On the contrary, domestic vendors will probably line-up to offer their generous support in exchange of Chinese cost-efficient technology and design. SAIC is currently in talks to acquiring General Motor’s manufacturing facility in the state of Gujarat. However, due to some unresolved labour issues the company might look for a different manufacturing location.

About the Author

Nikhil Kaitwade

With over 8 years of experience in market research and consulting industry, Nikhil has worked on more than 250 research assignments pertaining to chemicals, materials and energy sector. He has worked directly with about 35 reputed companies as lead consultant for plant expansion, product positioning, capacity factor analysis, new market/segment exploration, export market opportunity evaluation and sourcing strategies.

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