[anjan_c2007]

Prior to the liberalisation measures unveiled by the Union government in 1991, all automobile companies needed to compulsorily have a majority stake by the respective Indian partner and a minority stake by the collaborator. For Maruti Suzuki India Ltd (formerly Maruti Udyog Ltd) the share holding pattern at its beginning was 26% by Suzuki Motors since 1981, upped to 40% in 1987, and to 50% in 1992, and further to 56.21% as of 2013. Some 23 % of it is presently held by foreign banks and institutions.

I am posting this thread owing to the curious pattern of the constant failures by automobile makers, especially from Europe and the US lately to due to loss of traction in our booming market. The "lockout" bug has bitten them during the past years and winding up of operations and closures are becoming commonplace.

It is no wonder that Ford started by collaborating with Mahindra and Mahindra Ltd but went on its own, when the government allowed 100% investments by foreign auto makers in the 1990's. GM started out with Hindustan Motors Ltd (HM), the partnership went steady for a few years, before the principal took a decision to become the whole and sole owner of this joint venture (JV). Similarly, Fiat had started out with Premier Automobiles Ltd (PAL). Thereafter, Fiat also decided to invest 100% equity in the JV leading to PAL's exit. PAL had also entered into a joint venture with Peugeot but the venture failed miserably. The case of Harley Davidson is just an example of how things can go wrong especially for the western solo ventures (or commercial misadventures) in our market. They have now since early 2021 joined with Hero Moto Corp to market their bikes after announcing their shocking exit in 2020.

On the contrary, the luxury brands from the West are doing well, satisfying their pragmatic sales projections. Again, the Ford Mustang is an exception here, the sales of which are meagre.

The automobile makers from the Far East, it is now very clear have a connect with the Indian market and their sales figures show that they are here to stay to the benefit of the customers and their principals in the parent country. They very well know the pulse of the buyer and what the buyer expects from them. Mitsubishi (joint venture with HM) from Japan is an exception where the two and three figure annual sales are commonplace.

As a precautionary measure, hopefully if the Western automobile makers take help of an Indian joint venture partner and hold a good stake on their own, despite the option to invest 100 %, this can be a good safety valve for them to get Indianised feedbacks specific to our markets to survive and flourish. Presently, they have Indian management and engineering experts on their boards even in top posts, but the irritant is that their decisions are dominantly imposed from the Hqs either in Europe or the US. Most of these decisions fail to click as has been evident since the past more than two decades. Fiat India is going nowhere and let us only hope Skoda and Volkswagen sustain with the new sales hoopla generated due to their recent launches.

Since the Western automobile makers are repeatedly failing to gauge the pulse of the Indian market and the car buyer, allowing an Indian partner to have a say in their management could help circumvent failures of the kind that have recently happened. And this can only happen if the Indian JV partner has a sizeable stake. The 100% foreign investment route remains, but as an option and self imposed safety check, the foreign principal needs to voluntarily exercise such an option.

I am aware that this takes our automobile industry backward in time, where infusion of the latest technology from the principals will be under scrutiny and filtered. But hopefully, this is a better alternative as compared to the company's losing out the competitive match and finally exiting. The thousands of jobs remain and ancillary industry order books remain ticking when lockouts and closures are avoided. The owners of cars and bikes of such a venture remain happy with the company surviving and service centres working.

And this old pattern of JV investment as an option for long term survival will be the subject-matter of a new debate, where both favourable and contrary views need to emerge.

[shankar.balan]

This is an interesting topic for debate.
Do have a look at this youtube video about Mitsubishi by BigCar.

https://youtu.be/VypEjwQq86o

Their favourite strategy to enter multiple new markets was by forming JV’s wuth strong local players.
But this strategy didnt succeed. So its a moot point now whether this method will succeed in today's times in India.

[GForceEnjoyer]

This is a very interesting topic without a clear-cut yes or no answer. Both strategies can work out, but it depends on the execution.

First, the objective should be clearly established. A new entrant into the market will most likely have survival as their main objective, while a dominant player abroad expanding their business and entering India might have growth or profit maximisation as their main objectives. These need to be communicated with employees in ways relevant to their individual roles, so that they can effectively work towards it. This is necessary to achieve efficiency in operation regardless of the type of ownership in any business; not just cars.

In India, competition is very fierce from Maruti and Hyundai, which means that something innovative must be offered in order to encourage consumers to make the switch. The threat posed by substitutes (alternative forms of transport) isn't very high, but isn't negligible either. So once again, we are left with the need for the understanding of consumer needs.

One major reason Maruti succeeded initially was because their fuel-efficient offerings got people from A to B with a low cost of running. They identified this consumer need as well as the fact that creating efficient cars was their strength. They effectively marketed it too, "Kitna deti hai?" The resulting brand loyalty is the reason that nearly every household at least considers a Maruti when buying a new car. Suzuki was able to provide technical know-how for this, while the Indian representation at an executive level led to its effective implementation.

Today, Hyundai is growing increasingly dominant. They cater to the rising demand for cars which are above the bare-minimum; cars which give good value for the money. This allows them to cater to a different kind of consumer who wants something to be able to brag about (features). Additionally, the existence of cars like the Elantra, Sonata, Santafe and Tucson serves as halo products to improve their brand image. They did so without an Indian partner, because of their understanding of Indian consumers as well as having the right technical expertise from the start.

Both these companies did their respective approaches right, leading them to becoming the two largest mass-market players.

The big three German luxury car manufacturers cater to those who generally want a status symbol, a way to shout to the world about their success. Mercedes-Benz had the first-mover advantage when they entered in 1994, and they understood the pulse of the Indian luxury car buyer very well. Their extensive dealership network (for a luxury car brand) ensured that their products gained significant aspirational value. Today, they are the leading luxury car manufacturer here.

So, the need of the hour would be to carry out extensive market research and keep updating the product range accordingly. These were two areas where Ford did not fare so well, for example. The Fusion was far too ahead of its time, when the crossover craze had not even begun, while the global Fiesta did not build on the strengths of its predecessor apart from handling. Then, they got complacent with products that did succeed, for example the EcoSport. Constantly reshuffling features and increasing prices did little to help their image, since it created a sense of uncertainty. They also failed to innovate to match emerging (at the time) rivals in the segment such as Hyundai and Maruti. The decision to remove the Sync3 system was a perplexing one in a market that gave tremendous importance to features!

It was a similar story with the new Figo and Aspire. They had nothing particularly unique that they excelled at to make them stand out from the crowd. The go-kart handling and supernatural steering feel from the previous car had been lost, so had the tank-like build. What was left were products without a USP. Of course they bombed!

With Ford, the stepmotherly treatment given by HQ was only part of the reason for the downfall. They let their bread-and-butter model, the EcoSport become increasingly irrelevant in a segment now saturated with offerings. They were too slow to react to changing consumer needs, resulting in them getting the axe by the global executive team due to unprofitability. Where was connected car tech when it was the most needed? Where was a diesel-automatic powertrain? Due to the brand no longer selling locally made cars, the fate of CBUs such as the Mustang was also jeopardised. Why would someone buy an imported 75 Lakh car from a brand that just quit India?

Meanwhile General motors severely diluted their brand image by re-badging Chinese cars which proved to be disastrous in India. They also lacked direction, which ultimately left them with no realistic, quantifiable objective. Their reason for exiting was also an unprofitable business.

In both these cases, more representation from Indian entities would certainly have helped communicating consumer needs in theory. To make that actually work, thorough market research would also be needed. It would provide them with valuable information, for example the growing demand for connected cars. Only then can efficient decisions such as focusing on connected car tech be made, which would lead to long-term profitability. Allowing the foreign HQ to overpower such decisions would negate any possible benefit.

TLDR: Having an Indian partner in operations can help communicate consumer needs directly to manufacturers, but they would need to carry out extensive market research and make the right business decisions following it in order to aid implementation and be successful. However, with a proper strategy from the start, the same result can still be achieved without an Indian partner. It's all a matter of implementation.

I'd love to hear others' views on this too, this topic calls for some serious thought.

[srini1785]

If a new company wants to invest in a market like India, there are enough market research firms which can do the due diligence for them and give a realistic feedback on the Indian market. This applies not only to Automotive but to any field that a company wants to invest in. There's no need for an Indian partner to get a better product for the Indian Market. The only part where Indian partners may probably be needed, at least in the past, were for liaisoning with the GOI and that's putting it mildly.

Its no big secret that the Japanese don't like a Non Japanese in their board rooms and the same applies to the Germans or the Koreans.