China has become synonymous with cheap goods in India. But that can change soon. From cheap toys and phones that gave Indian manufacturers a run for their money, Chinese companies have now started rushing into the Indian automobile sector.
A few days ago, Chinese auto maker SAIC Motor said it would invest over Rs 5,000 crore till 2025 to establish its presence in the country. It will introduce the Morris Garages (MG) brand in India in 2019. It’s a British brand that SAIC acquired from Chinese firm Nanjing Automobile about a decade ago.
Chinese automobile market is slowing down. The China Association of Automobile Manufacturers estimates China’s overall vehicles sales to grow a relatively lackluster 3 per cent this year, the same as in 2017 but significantly below the stellar 13.7 per cent gain in 2016, according to a Reuters report.
China’s auto market, until recently an engine of growth worldwide, will only deliver “slow and steady growth” from now, Shi Jianhua, the association’s deputy secretary-general told The Wall Street Journal this month. The association anticipates 3% growth in 2018.
The Indian passenger vehicle market is one of the fastest growing — by over 9% in 2016-17 — and is projected to be the world’s third largest car market by 2020. That’s one reason why Chinese automakers are looking at India. Of the $278 million Chinese FDI that entered India in 2016-17, 60% was in the automobile sector.
However, Indian market would not be as easy for Chinese auto companies as it has been for toy makers or smartphone makers. Credibility, quality and after-sales service matter a lot for car buyers. Maruti’s hegemony over Indian market through value-for-money products will leave little scope for Chinese auto makers to acquire any significant footprint in the Indian market.
Yet, Chinese companies cannot be taken lightly. They know how to evolve to quality products as is evident from smartphone maker Xiaomi. Many of Chinese auto makers have acquired stakes in global auto brands which have presence in India. India’s massive push to shift to electric vehicles will open up vast opportunities for Chinese companies which have already developed expertise in the new technology as China has become the world’s biggest market of electric vehicles. China’s biggest electric-vehicle seller BYD, a joint venture partner of Hyderabad-based Goldstone Infratech, has bagged electric bus supply contracts along with Tata Motors for nine out of 10 cities.
The two companies have beaten rivals such as Mahindra & Mahindra, Eicher Motors and JBM Solaris.