India is set to become the 3rd largest Auto market by 2020? Enthusiast’s view of the Auto sector in India.

India is set to become the third largest auto market by 2020 according to a McKinsey report. This report was published when the auto sector in India was growing at 30% year-on-year, but since the last few months there has been degrowth in this sector. So the big question is what is the future of the auto sector in India?

Michael Boneham, the President of Ford India said a few months back that nobody had predicted the sudden demand for diesel engines after the price of petrol was increased 13 times since last 2 years. Today, there is an average waiting period of 2 months for most diesel cars in India. So, why was whole of the auto-sector caught napping? Why was there no increase in the diesel cars’ production capacity? It is very clear, like Steve Jobs said,  it is easy to make the future than predict it.

Everyone predicted the doom of Maruti Suzuki once the global car manufacturers set up shop in India. However, the truth is, even today Maruti is in a very strong position with a market share ranging between 45 and 50%. I feel it’s shares would come down only marginally by 2020, since India will continue to remain a small car market for many more years to come and Maruti Suzuki being the dominant player in this segment. Maruti might again attempt to launch vehicles in the C or D segment a few more times, but if it fails, they will probably focus only on selling small cars which they have been doing well.

One primary reason why Maruti has been able to maintain its high market share is because the most other global car manufacturers did not have small cars in their global portfolio. So when they launched the cars made for European / American market in India they failed to get a reasonable number. Now that they have studied the market better, the last few years have seen the global car manufacturers launched “Made for India” cars like Polo, Brio, Liva , Etios, New Fiesta, etc., which are doing all right however none of them have become leaders in their segment.

Honda, Toyota and others will sure learn from their first Indian specific product launches and will come back with better products by 2014-2015. Next generation of cars will typically be launched after 4-5 years, so the real competition in India will only come then. Today, Maruti has 10 different cars below the 8 lakh price range where as, Honda, Toyota and other major player have at the most 2-3 cars.

Hyundai is the only other player who has understood the Indian car market well after Maruti and they have consistently launched new products in the small car segments which today are either at number 2 or 3 in their respective segments. i10, i20 and the recently launched Eon are all doing well. Hyundai has also successfully launched Verna in the premium segment which Maruti has been unable to do. Hyundai also has a very strong product portfolio for the upper C class segment and D segment though they have not yet launched in India but which are doing really well in American market.

Mahindra and Mahindra will continue to dominate in the SUV segment in which they are very strong since they understand the consumers’ needs of this segment very well. XUV500, Scorpio, Bolero are all number 1 in their respective segments and Mahindra is very focused to continue to build their competence in these segments and become a global SUV manufacturer. Mahindra’s acquisition of Ssang Yong motors could be seen as a good move, however, I feel the decision to buy the electric car company Reva was a bad move since electric cars are never going to be accepted in India. I am assuming they will integrate the technology into their SUVs and improvise on what they already had launched in the Scorpio a few years back – the Micro Hybrid technology.

I doubt if the electric vehicles craze will really catch up in India even by 2020. They will form a very small percentage of overall sales because the technology is still very far from being widely accepted (affordability vs value – design, space…) by the masses. It also needs massive infrastructure to be set up all across the country which in itself will take many years to come.

It’s going to be very exciting time ahead in the years to come and hope the Government supports the auto sector and fuels the much needed growth in this sector. This will indeed make India the 3rd largest car market in India just like the McKinsey report predicted. Let’s keep our fingers crossed.

Share this via:

Enjoyed reading it? Please help spread the word by sharing with your friends.
Furthermore, kindly click here to subscribe to us.

No related posts yet.