Will Entry of Chinese Carmakers Provide the Impact India Tire Market Needs?
China’s entry into the India’s fast-growing automobile
industry may have positive ramifications for India tire market
China has been
one of the greatest success stories seen by the automobile industry over the
past two decades. The country has seen stupendous growth, where, in 2008, the
automobile production was just over 9 million units, to over 28 million in 2017.
India, vigorously trying to boost its ‘Make in India’ program, is trying out
the Chinese model of increasing FDI, curbing imports and boosting local
production. Some differences exist, obviously, but the model seems similar.
TechSci experts evaluate the various scenarios and the impact on various
subsectors such as that of the India tire market.
The State of the Indian Automobile Industry
Out of the $278
million Chinese FDI that entered India in 2016-17, around 60% was directed
towards the automotive sector. This is not an outlier, but part of an overall
trend. India has slowly and quietly established itself as a manufacturing hub
for automotive companies such as Hyundai, Nissan, Toyota, Volkswagen, Maruti
Suzuki, etc. This data can also be borne out with data produced by TechSci
Research which suggests that total vehicle production increased from 4.17
million units in 2012 to 4.49 million units by 2016. Subsectors that supplement
the industry, such as the India tire market, are also generating revenue and
employment due to the country’s strong automobile sector.
In spite of the
positives, India ranks a dismal sixth in terms of passenger car production,
behind China, Japan, Germany, US and South Korea. Closing the gap would require
a huge push, which is what Chinese automakers are relying on.
Entry into India Market: Pros and Cons
Given that India
ranks sixth in automobile production, the country is still highly competitive
when it comes to entry of new firms into the market. GM has decided to close
its India operations and companies such as Peugeot and Nissan have found it
hard to compete with India’s Maruti Suzuki enjoying a hegemonic dominance, with
around 51% of the passenger car market. TechSci Research report “India Tire Market Forecast &
Opportunities, 2012 – 2022” suggests that India tire market is growing at a
CAGR of 9.17%, which implies a similar rate for automobiles. However, the bulk
of the growth is coming from Maruti Suzuki. Given the recent entry of Chinese
companies, the fear is that competitors have already stolen march in terms of
infrastructure, understanding rules and regulations, understanding the needs of
the Indian customer, etc.
However, one
factor may level the playing field. The Indian government wants Indian cars to
go all electric by 2030. Given that China is today the world’s largest EV
market, having sold 352 thousand units last year. This may prove to be the one
great equalizer that Chinese companies need. Come what may, it seems that the
India tire market is in for some good times, given the serious competition
India is about to witness in the indigenous automobile sector.
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