[HartBandit]

As a developing economy with a good appetite for cars, why aren't more companies throwing their hats in the ring and making cars?

OLA seems to be the only serious player with intentions to become a serious car maker (even though we haven't seen any prototypes yet). Others like Pravaig and a few others keep popping up in the news from time to time with their prototypes but none of them seem to gaining much traction.

Companies like Reliance, Adani, ITC, Godrej and even Ashok Leyland have the capital required and we seem to have the support of Government policies to start-up. There is so much more action in the two wheeler space (kudos to Ather, UV and Ola, and many others). Even established two wheeler companies like Bajaj, Hero and TVS have no big plans to make four wheelers - when this is a good moment to start because EVs are a gateway to start from scratch.

Suzuki and Hyundai-Kia are still taking the lion's share of the market and thankfully Tata Motors has been at the forefront of making some pretty good EVs to finally have a semblance of an answer.

But such a huge, promising, developing nation - and only two (proper) carmakers - what gives?

[Ferruccio]

A few years ago one of the rank outsiders who was interested in making EVs called me for a cup of tea which could or could not culminate in me becoming their Head of Product and Marketing. After hearing them layout their plans I thanked them for the tea and as I was leaving I said "It is easy to become a Millionaire in this business. But you have to begin as a Billionaire." And that sums up your answer.

Indians are too good at calculating ROI. Having competed against the Chinese for the last 2 decades and having seen their silly investments in a host of God forsaken countries worldwide where work takes me, I am convinced that the Chinese are not very good at arriving at ROI.

Chinese successes have been arrived at with brute effort, the business equivalent of the "human wave" attacks that over-run the brave Indian positions in NEFA in 1962. We credit them with having a well-thought, grand design in their machinations. Yet, all evidence points to their efforts being like 7 ants moving a grain of sand - 4 pulling in the right direction and the other 3 in random directions. Throw enough ants at the problem and they end up moving Mt. Everest. However, even the most illiterate Indian would question why you need to move Mt. Everest in the first place!

Were it so simple to make good EV's why would brands that have immense R&D budgets and have been building ICE cars for over a century, struggle with the endeavour? It is not as simple as it seems and that is why companies struggle.

The final costs of having 30 odd 4W EV makers and 300 odd 2W EV makers in China is yet to be tallied. The Indian auto industry is in a good place and I am sure as the technology gets more robust we will find Rapid Followers emerging. And it is better to have a handful of strong EV makers than a smorgasbord of garage shops.

P.S.: The company that offered me tea still have dreams but haven't rolled out anything that runs on its own power yet.

[Livnletcarsliv]

The simple and short answer to your question is "China is way ahead and better than India in terms of automotive market as well as industry".

To elaborate further the following are the points not limited to,

1. The Chinese automotive market is almost or more than 5 times than that of Indian market, in terms of volume.

2. The quality of Chinese products are way ahead compared to Indian products. Remember still in India, >60% of the 4 wheeler market is dominated by Maruti. And we all know the quality and price Maruti products.

3. The market expectations, product strategies, R&D budgets, product positioning, and customer purchasing power of China are way ahead and higher than India. Just compare the volume of 3 germans sold in China (Merc, BMW, Audi) and India last year where China is 100 times more than India.

4. Let us also not forget the start-up ecosystem in China which started in the 80's and 90's where in India its only a few years old.

5. The supportive government policies, the infrastructure, willing workers, etc are more abundant in China than India. Most of the policies are instigating, inducing and enabling in China whereas in India such things are limited. Can you name one city/place in India that has the infra, road network, planning of a comparable Chinese place/city?

6. The monetary benefits, and of course the returns are also high in China given China is also a leader in innovation and technology.

7. Also, China is still the manufacturing hub of the world. India with its current policies, road-map and attitude can never reach there. How many Indian smart phone brands do we have that is globally recognised? How many Indian TV/home appliance brands do we have that is globally recognised? In our every day, how many things do we use that doesn't have a single part from China?

8. Automotive industry is no exception. India is still a poor country compared to China.

9. India is a consumer market and doesnt produce. India relies on services. India it is not self-reliant in most of the things. But China is a product market, self reliant in many if not all, while also consumes. This is a big difference why China is way ahead than India in terms of economic status.

So we have a long way to go ONLY with the right, appropriate and imperative policies, road-map, strategies and execution to even have 2-3 more brands/names, let alone catch up with China.

[ellip5i5]

China’s higher purchasing power places their automotive market closer to Europe, Americas in terms of similar price. India has come a long way but still there is some way to go here in model parity.

A lot of the Chinese investments are geared towards having both domestic and export markets of multiple countries in the their market sizing. We are just seeing this with the likes of Mahindra today.

Summary we are a few steps behind and should see more companies looking beyond the domestic market. But given the steep entry barriers, domestic market skew towards low cost, I don’t expect lot of new players cropping up unless they can really differentiate themselves globally

[Bhodrolok]

Time to look at the purchasing power data as well as the per capita income data before comparing the Indian market with the Chinese market, The Indian market is just not big enough; forget new companies we are seeing existing large companies shutting shop from the market on a regular basis.

[HartBandit]

Originally Posted by Ferruccio

A few years ago one ....

Beautiful answer, very succinctly put. Just to pick your brain - do you think we are not in space to have atleast one or two more serious players in the mix? Is it because - as user @Bhodrolok pointed out - we don't have enough demand domestically? Or there are some other reasons - policy, perhaps - that is limiting us?

Originally Posted by Livnletcarsliv

....

I agree that the Chinese market is much bigger than ours, but the size of the market hasn't been a factor in the formation of multiple car companies in countries like Spain, France, Germany, Sweden, Romania, Czechia or Italy. They came about when their consumption was like how our consumption is today. They have had the advantage of industrial revolution before, but we are catching up.

And Chinese quality is still quite suspect. I don't think they have any kind of respect in the Western world when you compare them to Japanese or Korean products. So, while they have a focus on exports, I still think it is a bridge that needs to be crossed by them.

What policy changes would you like to see to enable the creation of more Indian automotive companies?

Originally Posted by ellip5i5

China’s higher purchasing power places....

So you're saying a new company should keep an eye on exports as much, if not more, than the domestic market to really make a dent? Because there is a perceived difference between what we have here and what they have outside? But cars like the Nexon are competing with global products like the Venue and the Sonet... Isn't that the right starting point.

---------
I am just trying to get a sense of the market and the sentiments, kindly don't take these questions personally. Any help with the understanding is highly appreciated.

[extreme_torque]

Originally Posted by Livnletcarsliv

The simple and short answer to your question is "China is way ahead and better than India in terms of automotive market as well as industry".

To elaborate further the following are the points not limited to...

Excellent answer but you forgot another incredibly important thing, quality education. China has some of the best universities in the world today and culturally just like India they place high importance on getting good education. All of it shows in the growth of their local industry as well as competitiveness of their companies abroad including the number of patents filed at which they are currently number 1. USA is the next best and they file less than half as many patents as China. Their spending on education as a percentage of GDP is 4.01 percent compared to 2.9 for India. Also remember that their GDP is approx 6 times larger than that of India and the fact that of the total government spend only a fraction reaches the public in India and the gap widens to chasm.

[antonylejos]

Back to 2004:

I was in the market to buy a mobile, in fact, my first mobile. My friends were all advising me to buy a NOKIA.

According to them, NOKIA had the following advantages:

• Resale Value
• Service
• Signal reception, even when the tower was far away, and many more.

Anyway I went and brought a LG G1500, which nobody had then

Fast forward to 2023, nobody is concerned about any of the above parameters when buying a mobile.

Now the cost of a mobile is something we can simply buy, use, and replace with a new mobile after 3 years, even if we get zero resale value.

People just replace their mobiles when they stop working, rather than searching for a service center.

However, cars are not yet like that for Indians, considering our income and the cost of cars.

That's why now when we are in market to buy a car, all our friends give us a risk-free (for them) advice to us. Buy a maruti. Reasons remain same.

• Resale Value
• Service
• Mileage (Signal reception, got replaced by mlieage here)

anyway I ignored them this time too, and went with Citreon C3, which nobody has

When our income grows a bit more (I am not going to state a specific number here), we will be able to treat cars the way we treat mobiles now. Maybe at a point in time when most Indians can buy a car with just 1-3 months of their gross salary, we will see a mushrooming of car companies in India.

By that time, people will stop seeing (normal commuting cars) as status symbols and a utility, which serves them purpose of travelling form point A to point B.

[anjan_c2007]

It's sn open market now as compared to the post 1957 era till the early 1980's. The market was opened for domestic and foreign companies with no holds barred by 1992-93. Many came and perished while many flourished.

Hence, if there is business sense more will enter and if there's no room newer entrants will be deterred. Every prominent businessman who can invest knows our car market and will organically enter, if there's room.

[Desi Dybuk]

What a wonderful topic to discuss @HartBandit! Kudos for initiating a discussion on a wonderful subject.

It is not that we don't have our own world class car companies; Tata & Mahindra are both proud products of our country. And both have products that can compete respectably in an international market; both in technology & safety (latter of which Chinese car companies have a bad reputation in).

I think it can be traced back to HOW the international automobile companies came to India after liberalisation & can be better understood looking at the 2-wheeler companies. Before liberalisation, in the 80s, the government decided to allow foreign 2-wheeler companies to setup assembly plants in India but with a condition that they need to partner with an Indian company. So, we had TVS partner with Suzuki (TVS-Suzuki), Yamaha with Escorts (owner of Royal Enfield now), Bajaj with Kawasaki (Bajaj-Kawasaki), Hero with Honda (Hero Honda).

Indian 2-wheeler companies learnt technical know-how, best manufacturing processes, quality control & developed knowledge base and a trained manpower through 2-3 decades of partnering with these international companies. Thus, companies like TVS, Bajaj & Hero gained enough knowledge & confidence to stand on their own feet when inevitably they separated from the big MNCs. Today, these Indian companies can stand shoulder-to-shoulder with any International company. This institutional knowledge & confidence is what enabled companies like Ather & Ola to strike out on their own as they had a ready pool of engineering talent, manufacturing workers, logistics & parts vendors.

This didn't happen with 4-wheeler segment. Till mid 90s, other than Maruti, there was no other international car brand. And because of liberalisation, international car companies didn't need to partner with any Indian company. (Although, Mahindra dabbled with Ford, DCM with Honda, Kirloskars with Toyota). This is unlike in China where even now, foreign companies need to partner with a Chinese company (except Tesla which got a rare exemption).

But things will change in the next decade. Car manufacturing, being a very capital intensive operation, needs deep pocketed investors to support a startup. Our economy is growing rapidly & with the whole shifting to EV movement, it is only a matter of time that Indian startups emerge in the car segment & which are backed by deep-pocketed Indian Venture Capital. My primary bet is that if Ola's secret car project produces even a half-decent car, it'll open the floodgates for other startups like Ather & Bounce.

The electric 2-wheeler startups of today are honing their skills on technology, QC & service and it's only a hop-skip-jump to the next phase of car & bus manufacturing. Within a short span of 4-5 years, India has become a leader in 2-wheeler EV space & can compete well with the mighty Chinese.

India's economy is growing, India's workforce is still young & tech-savvy & we have a couple of decades of strong economic growth ahead.

[Livnletcarsliv]

Originally Posted by HartBandit

I agree that the Chinese market is much bigger than ours, but the size of the market hasn't been a factor in the formation of multiple car companies in countries like Spain, France, Germany, Sweden, Romania, Czechia or Italy. They came about when their consumption was like how our consumption is today. They have had the advantage of industrial revolution before, but we are catching up.

And Chinese quality is still quite suspect. I don't think they have any kind of respect in the Western world when you compare them to Japanese or Korean products. So, while they have a focus on exports, I still think it is a bridge that needs to be crossed by them.

What policy changes would you like to see to enable the creation of more Indian automotive companies?

Size of the market and the market potential is certainly a significant factor for anyone to invest heavy wallets in any market, let alone China. Again comparing China/India with any of the European countries is not an apple to apple comparison at all because of the different scale of economies, demographics, cultures, and other reasons (India vs European countries - another topic of discussion).

Regarding the quality of Chinese products, it is absolutely qualified and competitive to western markets. There is no smoke without fire - without quality China cannot challenge the world. For eg - MG/BYD in India - How do you say that Chinese products are not respected or of poor quality. One of the important reasons why Chinese brands (especially cars brands) don't sell in the global/western markets are not because of dis-respect or poor quality. Some of the reasons are political, economic, sanctions, fair trade practice, competitive consumer forum and trade balance sheets, etc.

With respect to policies, it may not be appropriate for me to comment on that because I am neither qualified nor I am in that position.

Originally Posted by extreme_torque

Excellent answer but you forgot another incredibly important thing, quality eduction. China has some of the best universities in the world today and culturally just like India they place high importance on getting good education. All of it shows in the growth of their local industry as well competitiveness of their companies abroad including the number of patents filed at which they are currently number 1. USA is the next best and they file less than half as many patents as China. Their spend on education as a percentage of GDP is 4.01 percent compared to 2.9 for India. Also remember that their gdp is approx 6 times larger than that of India and the fact that of the total government spend only a fraction reaches the public in India and the gap widens to chasm.

The quality of education is good enough in India. However the problem is the system and the purpose. Majority of the population in India are still lower/middle class. In fact, unfortunately, a significant portion of the population of India is still BPL. So our (Indian Government's) priority and primary purpose is to uplift poor people first. So at present our education system is focussed on creating employees instead of entrepreneurs which IMO is not completely wrong. But still needs a strong road-map.

[condor]

Simply because we respect IP rights much better than China / Chinese companies do. Indian companies do do benchmarking, take ideas - but not blatant copying like Chinese companies do.

China and many companies there are very good in reverse engineering. The Chinese govt even picked up what ever was left of the USAF copter that crashed in Pak in 2011 during an incident - the sole purpose to reverse engineer the materials at least

[shancz]

Its a good thing IMHO.
Why would I want weeds/mushrooms in my garden ?

Quantity doesn't mean quality or even economy, just look at the EV scooters. Apart from Ather, TVS, Bajaj, Ola and a couple more others are mainly functioning as kit-assemblers with no service or future roadmap and good profits. All these are going to cause tremendous wastage of resources and financial loss when they eventually go bust.

Developing a vehicle with any number of wheels is a painstaking process which is refined over decades of RnD. While your point on engines is true but they're just a part of the product. Even in EV scooters you can easily see the difference in experience between the big three Ather, TVS and Ola. While Ather and TVS use different type of motors they deliver consistent performance while Ola does struggle with heat and its Battery Management Software during extended high load intervals like a 13km hill climb(as tested by Zigwheels).

Now moving this to cars will be a challenge of a completely different magnitude. Plus the projected market growth for a new entrant has to be good enough for the investment to make sense.
It is one thing to convince people to part with 70-100k for a scooter but completely different to convince them to part with 8-10 lakhs on an unknown brand.

Can a new entrant crack it ? Yes. But only if they have a worthy product and it will be a long path to gain trust.

[sanjeevs]

Simply put together Indian companies never had the vision of developing the mass car segment except for the Tata and Mahindra Brand and thankfullythat is happening now. The current crop of Asian companies from countries like Japan, S.Korea and now China all had the courage and guts to copy the European and American brands way back in 50's and 60's and develop the indigenous versions of the cars and sell in the developed western market.
Indian companies never did that and they were banking on the tie-up tech or collaborations. In the earlier days Mahindra, PAL and Ambassador brands were there and they could have taken the defined route. With market driven economy barring Mahindra, the other companies could not survive.

The current crop of the automobile companies like Toyota, VW, Ford and GM do have the deep pockets and unlike Indian Brands and they do have the courage in invest in R&D to develop the technology from the humble ICE from the earlier years to the current ICE technology, and I must say that the current ICE engines are near the end of life cycle (of course with abysmal efficiency levels) and moving on to EV sector. Hence IMO the way forward is the EV sector and even in spite of having the funding all these companies except for Tesla Brand have a long way to go in the EV segment. All other brands like Ford, GM etc. trying to be in the EV segment however all of them are losing money and burning cash...not sure about the Chinese brands.
Going forward
Only Tata and Mahindra amongst the Indian companies in the PV segment have woken up and are moving in the right direction by investing in the EV segment and I am sure that they are not making money in the EV segment.

The heartening point is that Indian 2 wheeler companies in the EV segment are right up there and popularizing the EV segment.

[abaliga]

There is a need to have a balanced market share breakup across manufacturers before we add more car companies, except for the top 4 or 5 manufacturers all are struggling to sustain, Hopefully focus on safety ratings will bring about a change in this area with buyers becoming more safety conscious as we progress.