Chinese carmakers are accelerating their entry into India to counter falling demand at home with a new market where mass car ownership is in its infancy.
Manufacturers such as Great Wall Motor and FAW Haima this month launched their first vehicles for the Indian market. SAIC Motor has been selling MG cars there since 2019. BYD, which makes electric buses in the country, has announced plans to launch electric vans too.
Chinese manufacturers dominated an auto expo in New Delhi this month, showcasing more than 10 models in total.
“They have been planning their India entry strategy” for years, said Puneet Gupta, an analyst at IHS Markit. “Finally we’re now seeing a lot of action.”
The push comes as China’s car market shrinks — vehicle sales fell 8 per cent in 2019. While India fared worse with a 13 per cent drop in sales, analysts expect a recovery and that its growth rate will overtake China.
By 2025, IHS Markit estimated India will overtake Japan to become the world’s third-largest car market after China and the US. According to 2014 US energy department data, India has about 30 vehicles per 1,000 people compared with more than 100 in China and almost 600 in western Europe.
The Indian market is dominated by Maruti Suzuki, a subsidiary of the Japanese carmaker, with a market share of more than 50 per cent. South Korea’s Hyundai also has a sizeable market share.
As Maruti Suzuki and Hyundai have a “stranglehold” on the market, according analyst Seshasayee Tatineni at Frost & Sullivan, Chinese carmakers are “looking to position themselves as tech-savvy alternatives to challenge the status quo”, offering internet-enabled “smart” cars and electric vehicles.
India’s government has ambitious targets and last year proposed that all vehicle sales be electric by 2030.
The arrival of Chinese manufacturers marked a new phase of competition in India’s car market, said brokerage Motilal Oswal. Whether incumbents such as Maruti Suzuki could keep up was “dependent on the pace of adoption of EVs”, it wrote.
SAIC’s MG Hector, a sport utility vehicle, has been popular since its launch in June. Sales have risen to more than 3,000 a month, making it one of India’s best-selling SUVs.
China’s bet on India looks likely to be temporarily held back by coronavirus. The Confederation of Indian Industry estimated that the shutdown in China could cause Indian production to shrink as much as 10 per cent this year if carmakers are unable to source parts.
There is also the fact that demand is shrinking in India. Passenger vehicle sales fell 6 per cent in January from a year earlier, as an economic slowdown and regulatory changes weighed on sales.
“There is definitely a problem in terms of the market growing,” Mr Gupta said. But he added that it was unlikely to deter the Chinese brands. “At the end of the day we’re a big market . . . They just need a share of it.”