As we work with a number of global automotive suppliers wanting to launch and grow their auto-tech business in India, we receive a lot of questions about Indian automotive market, its undercurrents, tips for success, challenges etc. Here we bring to you, some of the most commonly asked questions about Indian automotive market and in-depth answers to these questions from our experts. For all Q&A’s click here
India is the 4 th largest and one of the fastest growing automotive markets in the world. It is a very unique market as well. Here, top 5 positions in any vehicle segment are dominated by local Indian OEMs. Hence, most of the decision making happens in India itself. Secondly, several major international OEMs and Tier-1 companies have their Global Research and Development centres in India, hence a new foreign supplier can introduce new and innovative technologies in Indian Technology Centres in R&D projects for global markets.
In the past, India was known for a low-cost vehicle dominated market. Things have changed significantly over last 5 years. Demand for low end cars (below $ 7000) has come down to 416,000 in 2020 from 1 million in 2016. There is a clear shift towards premium cars and SUVs. This is on account of affluence of younger Indians thanks to the IT and Tech Industries and secondly on account of marketing and advertising efforts that dictate, design and decide their life choices. Such customers are willing to pay more for automatic transmission versus manual as well as for additional features that add to comfort, convenience, and entertainment.
Further, people are also becoming safety conscious on account of advertising and awareness campaigns and are willing to pay a premium for higher safety ratings. GNCAP star rating has become a marketing platform that is already affecting buying decisions. Another interesting development has been the emergence of better highways in India over last 10 years, thus facilitating road trips and long drives which also demand better safety (especially crash safety) features than those required for usual city driving. This can be seen in the products that are being launched of late. For example, Kia with its launch of Seltos with new technology features achieved No.1 sales position within seven months of its launch.
Maturity regarding new technologies needs to be understood from different angles:
a. Maturity for Standards/Regulations: India is aligned with Global standards and has normally followed EU standards, specifications and regulations for creating its own and is more inclined towards the EU than NA standards. Till about 7-8 years ago, Indian regulations lagged 5 or more years behind EU regulations. The biggest change that has happened in the Indian market now is that the lag has come down to 1-3 years. In some cases, India is ahead of the world. For example, EU took a few years to migrate from emission standards of Euro 4 to 5 to 6, whereas India jumped directly from Bharat IV to Bharat VI stage, thereby skipping a stage to be able to match global standards. Similarly, with respect to safety, India was one of the first countries in the world to make active seat belt reminders (SBR) for front co- passengers directly mandatory, rather than going through a suggestive intermediate step like NCAP.
b. While OEM producers and automotive market are maturing fast for technologies, the supply chain may not get matured at the same pace, especially at the Tier 2 and 3 levels. This combination of demand maturity evolving faster in comparison to the speed of supplier maturity, is a great opportunity for agile and quick foreign suppliers to enter into the Indian market and establish themselves.
c. Regarding the point about NA/EU technologies being generally acceptable, it is a matter of affordability that is more important in India. On an average, India is at a lower price point in every class/ segment of vehicle as compared to NA/EU. The new technology features are required either because of the aspirational market demand or the changing regulations. However, even while the technology is required, buyers look for optimized costs. The expectation is not dilution or lower quality but optimized solutions to meet Indian needs. Adapting the product by modifying or innovating might be required to make it affordable in India.
Our experience at Quanzen shows that firstly, understanding the business culture in India and how it is different from other geographies helps. For example, there are far more people and levels in an Indian organisation, importance is given to hierarchy and inter departmental dynamics can be very different – especially for new technology products. This requires understanding & identifying how decision making happens in the organisations and who are the influencers and decision makers for your products. Secondly, strong background and references of serial supplies to similar customers elsewhere in the world is a crucial factor. The Indian market is highly risk averse. Unless a technology is already proven elsewhere in the world, the Indian customer will not even look at t it. Third important factor is ability & willingness to become local. A global solution adapted to local market needs and competitive situation does better in India. Key word is “glocalisation” of your offering.
Unless it is a monopoly product, local presence for customer support is a minimum expectation to get any business in India. A lack of it will be a huge limitation. Resident customer support can be in the form of sales support, project management support, quality support, etc. Since, a foreign company is not allowed to hire employees in India, depending on the strategy, you can either set up your own Indian entity (this stage in many cases might come much later) to hire your local team or as a soft landing, tie up with customer/ market support partners who meet your required profile, and they can provide local support as a service.