core sector communique

Chinese cars scale Indian wall

The Chinese aren't the centre of gravity of the automobile industry; yet, they are keen on spreading their wings.

There weren't too many people who took notice of three Chinese carmakers which had their products on display at the Frankfurt Auto Show seven years ago. After all, they were up against giants such as BMW, Mercedes and Porsche and, to top it all, had quirky names like Geely, Landwind and Brilliance.There were a few who didn't sneer at the offerings, and reminded the sceptics that the Japanese and Koreans were, similarly, the butt of global ridicule decades ago, only to have the last laugh. And just look how prophetic their words were. Geely recently took Volvo Cars from Ford Motor Company, while China's leader of the group, SAIC Motor Corp, is one of the reasons why General Motors managed to stay afloat after the global crisis of 2008-09. Some years earlier, Nanjing Auto had bought out UK's ailing MG Rover in a move that stunned the auto industry.

SHEER SIZE

Today, China alone accounts for annual sales of more than 15 million cars, produced through a host of joint ventures with top multinationals. Every automaker salivates at the prospect of doing business in the country. PSA Peugeot Citroen clamped the brakes on its India project last week, but isn't curtailing investments in China, whose sheer size will help the French company meet its goal of being a global player. GM, which was virtually written off as a sick unit four years go, has returned with a bang, thanks largely to its China operations, where it is the market leader with a slew of alliances.

Jaguar Land Rover, owned by Tata Motors, has been doing remarkable business in China, and is now close to signing a joint venture with Chery Auto. With Europe in the stranglehold of a slowdown, and the US just getting on its feet again, China remains the best bet for JLR and, consequently, the Tatas, whose own car business at home in India isn't exactly on the path to fast development at this point.

The Chinese aren't unaware of the fact that they are today the centre of gravity of the global automobile industry. However, the country's local manufacturers are as keen on spreading their wings and setting up shop across the globe. SAIC is a case in point, which, along with GM, has been exporting vehicle kits to South America, and is now in the process of readying a facility in Egypt. However, it is now up against its biggest challenge in India, where it is keen on establishing a brand in one of the fastest growing car markets globally. Privately, Chinese automakers resent the idea of being clubbed in the BRIC (Brazil, Russia, India and China) league since they believe their country is way ahead in the numbers game. Yet, unlike their Indian counterparts, they have come to be synonymous with unpredictable quality and, worse, with issues relating to infringement of intellectual property rights.

GLOBAL ALLIANCES

In fact, the ‘Copycat Chinese' is the kind of brand association that the likes of SAIC would rather live without in their India foray. Are these accusations justified? Not everyone in the auto industry thinks so, and ancillary suppliers actually reiterate that Chinese carmakers are now coming into their own in the quality game. “They are also remarkable in adapting to new challenges and, unlike Indian vehicle manufacturers, think really big in the numbers game,” an industry veteran said.

In tandem with GM, SAIC is looking at an aggressive product mix in India, comprising light trucks, small cars and luxury sedans. Competition is only too aware that the Chinese are second to none in the costing game, and this will play a big role in their India innings. This will also be the beginning of a bigger story for the GM-SAIC combine, which will then look at some other regions in ASEAN. Talks are already doing the rounds of Malaysia, Indonesia and Thailand being the new hunting grounds for the future.

Premier Auto, better known as the manufacturer of the Padmini, has a tie-up with China's Zotye group to manufacture the Rio compact SUV in India. The vehicle was launched more than two years ago, and is now set for its next phase of growth across India's vast terrain of cities and towns. Premier has been around for decades and has had its share of global alliances with top European companies. Yet, the Zotye alliance seems the most promising in terms of drafting a successful comeback script in the auto arena for the Indian company. The best part is that Zotye is barely seven years old, and is already churning out big numbers in China.

FIERCE AMBITION

It is this aspect of scale that puts Chinese carmakers on a different footing, in sharp contrast to their Indian counterparts. This, by itself, reflects a fierce ambition to be right on top, and where the partnership route can help realise the goal, so be it. Hence, SAIC will leverage GM's long stint in India to make its mark, while Zotye plans to follow suit aggressively with Premier.

It is very clear that both SAIC and Zotye view their India innings as a long journey which will have strong rivals to contend with. Neither company is keen on advertising its brand in a hurry either, to drive home a point. The GM-SAIC product line-up will still sport the Chevrolet badge, while the Rio, likewise, will ride on the Premier legacy. Will this arrangement continue in the long term? Unlikely, if both these companies want their brands to be top-of-recall in customers' minds. For the moment, though, they are quite happy to play the waiting game.

In the non-car arena, China's Foton has big plans lined up in trucks, where land has already been identified near Pune. Thus far, most of the action has been limited to Chinese components doubling up as inexpensive options for Indian vehicle manufacturers. China is also emerging an affordable export hub for two-wheeler makers like Bajaj Auto and TVS Motor. In the tractor segment, Mahindra & Mahindra has two successful joint ventures with Jiangling and Yancheng.

With the Chinese now planning to pull out all stops in India, it will be interesting to see how market dynamics in the automobile arena will be affected as a result. The last two decades have shown that Indian companies have held their own comfortably against the MNC onslaught. It shouldn't be very different with the Chinese either.

- Umesh Shanmuhgam