WSJ: “Sleek new compact cars sporting the Maruti Suzuki and Hyundai brands stand out on the streets of India’s business capital against the mishmash of aging buses and black taxicabs.
The view is similar across India, a country where consumers have an affinity for smaller and fuel-efficient cars and, increasingly, for Asian auto brands. Much harder to spot are the logos of top Western mass-market car makers such as Volkswagen AG, VOW3.XE -0.88% General Motors Co. GM -0.73% and Ford Motor Co. F -0.63%
Profit margins are thin in India, where hatchbacks sell for as low as $5,000. Maruti and Hyundai together hold 54% of the nation’s new-car sales.
While major players in China, Asia’s other big and growing car market, the three are struggling to expand sales here. Each reported Indian sales fell between 16% and 20% year-over-year in the 12 months ended March, sharply underperforming the 2.2% rise among all passenger vehicle sales in the nation, according to data from the Society of Indian Automobile Manufacturers. Their combined share of the car market stands at just 9%.
Some industry executives say these companies lack the compact models that consumers prefer in India, and have too few sales and repair outlets in the country.
Others say razor-thin profit margins on small cars make India a highly competitive and unprofitable market, and may explain the Western companies’ small shares. India’s compact hatchbacks usually sell for between $5,000 and $10,000 each.
“It isn’t that the international companies are incompetent, it is just that there is not much of a prize [in India] yet. It is a much, much smaller profit pool,” compared with markets like China, said Max Warburton, European and Asian autos analyst at investment research firm Sanford C. Bernstein & Co.
Maruti, the Indian unit of Japan’s Suzuki Motor Co., 7269.TO +7.53% and Hyundai Motor Co 005380.SE -2.33% . together hold 54% of the nation’s new-car sales, thanks to a broad sales and service networks and a loyal following for their cars and hatchbacks, which last year took seven spots out of the 10 best-selling models in India.
Japan-based Honda Motor Co. 7267.TO +3.18% and Toyota Motor Corp. 7203.TO +5.03% also are gaining here despite the overall market’s stagnant sales following several boom years. Asian-brand cars account for around 64% of the nation’s market.
Meanwhile, Volkswagen hasn’t launched a new compact model in India since 2010, save for refreshed versions of existing cars, while Ford launched just one, the new Fiesta, in 2011. GM launched its Sail U-VA last November.”
- Biggest Carmaker Shifts Focus to Shield Margins: Corporate India (bloomberg.com)
- Indian car sales on longest declining streak (gulfnews.com)
- Maruti, M&M domestic car sales up in April; Hyundai, Tata down (thehindu.com)