Maruti Suzuki, Hyundai tighten grip on India as US rivals pull out

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MUMBAI – The Indian car market dominated by two companies, Maruti Suzuki and Hyundai Motor, is becoming even more so now that Ford announced it was leaving last month after the exit of fellow American General Motors last year. But electric vehicles could challenge the duo, as US newcomer Tesla prepares to enter the market.

“Despite significant investments in India, Ford has racked up more than $ 2 billion in operating losses over the past 10 years and the demand for new vehicles has been much lower than expected,” CEO Jim Farley said in a statement.

Ford Motor planned to stop making cars for the Indian market by the end of September and said it would cease production of vehicles for export by June 2022.

The American automaker entered the Indian market in 1995, eventually increasing local capacity to 440,000 units per year. But the world’s No. 7 automaker by sales volume sold just 48,042 vehicles in India in the past fiscal year, according to the Society of Indian Automobile Manufacturers.

Ford held less than 2% of the shares of passenger vehicles. In 2019, the company announced it would merge production with local automaker Mahindra & Mahindra, but those talks collapsed by the end of 2020, mainly due to the pandemic’s fallout in the market.

Ford will continue to sell vehicles imported to India. But finished cars are subject to high tariffs, so sales are expected to drop sharply. GM stopped selling vehicles in India in 2017 and ceased local production for exports in 2020.

India is said to be the fifth largest auto market, with 3.28 million units sold in the last fiscal year, including commercial vehicles. Maruti Suzuki and South Korean Hyundai formed a virtual duopoly, selling a total of 2.71 million passenger vehicles that year.

Maruti, a subsidiary of Suzuki Motor of Japan, maintains its brand as the “people’s car” of India. The company took a share of around 48% in passenger vehicles during the previous year. Maruti Suzuki, together with the Hyundai group, controls more than 70% of the market.

Hyundai’s subsidiary, Kia, entered India in 2019. Powered by the popularity of its compact sport utility vehicles, the automaker sold more than 150,000 vehicles in the previous year, overtaking Toyota Motor and Honda Motor as well. than Ford.

Although India’s population exceeds 1.3 billion, the average income remains low. Small, affordable cars with higher fuel efficiency dominate. Maruti Suzuki’s main vehicle, the Compact Alto, sells for around Rs.315,000 ($ 4,200) off the assembly line.

US automakers, which specialize in large vehicles for the North American market, mainly offer models in the price range of 700,000 to 800,000 rupees in India. They have also been slow to offer maintenance and other after-sales services, an India-based analyst said. Limited product lines compared to competitors was another factor, the analyst said.

MG Motor, a Shanghai-based unit of SAIC Motor, has expressed interest in purchasing the Ford facility, according to local media. But the participation of Chinese players in India faces a major obstacle due to border tensions between the two countries.

Other automakers are overwhelmed by price competition. Honda sought to resolve its excess capacity by integrating the functions of two four-wheeler factories into one last December. Toyota, whose share is just over 3%, stopped selling and manufacturing the Yaris in India last month after bringing the global strategic vehicle to the market in 2018.

Although Maruti Suzuki and Hyundai have proven their dominance in gasoline-powered cars, the next big focus will be their strategies for electric vehicles. Global electric vehicle manufacturers are targeting India. If the electric vehicle charging infrastructure progresses and the market grows smoothly, India’s auto industry could be reshaped.

Severe air pollution afflicts New Delhi and other cities. Electric vehicles only account for around 0.1% of the Indian market, but the government is looking to increase this ratio to around 30% by 2030 through purchase subsidies and other measures.

Tesla has established an Indian branch and is expected to import electric vehicles into the market soon.

“If Tesla is able to be successful with imported vehicles, then a factory in India is very likely,” CEO Elon Musk tweeted in July. While alluding to an Indian factory, Musk urged the government to lower tariffs.

Other major car manufacturers are already selling electrical devices. Tata Motors in India is believed to have the largest share in this space. Electric vehicles start at 1 million rupees and the company has sold over 10,000 units in total through September.

Volkswagen plans to sell electrical devices in India as early as 2025, according to local media. The Audi subsidiary launched sales of electric vehicles in July.

Maruti Suzuki has said it will deploy electric vehicles by 2025. But when it comes to growing demand for electric vehicles, the Japanese contingent appears to be lagging behind.


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