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Hopes Of Foreign Carmakers’ Indian Dream Bit By Pandemic

Hopes Of Foreign Carmakers’ Indian Dream Bit By Pandemic
The brutal second wave of Covid-19 infections coupled with limited government space for providing more stimulus for spending have indicated that a recovery for the Indian car market could lag far behind China and the United States which has dented the hopes of foreign automakers of a booming Indian car market.
After experiencing almost a decade of sales growth in the Indian market, car makers saw that gain get wiped away in 2020. However car makers are hoping for a rebound in demand this year. According to industry executives and analysts that growth is expected that the growth will be primarily driven by small, affordable cars which is a sector that is dominated by the homegrown leader Maruti Suzuki and rival Hyundai, and premium models churned out by most foreign manufacturers are likely to remain in the red.
Difficult decisions about future investments is faced by firms like Ford, Honda, Nissan, Skoda and Volkswagen because their factories in India are running well below capacity and sales far behind original hopes.
"It is a survival issue," one senior executive with a Western automaker was reported to be saying in a report. "Choosing to remain in India depends on the cost benefit analysis of other international markets," the executive added and said that the number of automakers in the country could fall if the outlook remained grim.
Last year, General Motors and Harley-Davidson have exited the Indian market.
There has not been as much growth in the Indian car market as was projected and Covid-19 had made the situation worse as it hurt both domestic sales and exports, said Anurag Mehrotra, managing director at Ford India, in a media interview. "The uncertainty in the long-term growth prospects of the auto industry and economy have resulted in serious challenges, including capacity utilisation," Mehrotra said.
The pandemic demanded “agile solutions and tough decisions,” he said while not spelling out the plans of Ford. It is working on a new plan for India, the United States based auto maker has said previously.
The German auto giant Volkswagen had revised its business strategy in India by putting its subsidiary Skoda in charge of the market and it is still pushing on with its plans of investing $1.2 billion kin the market to gain 5% of the market by 2025. For this purpose the company plans new launches which will start with the launch of two SUVs this year.
A spokesperson for the local unit, Skoda Auto Volkswagen India, told the media that the company continued to harbour its aim of building and reinforcing the group's position in the Indian market.
No comments from Honda and Nissan were available in the reports.
India was touted to become the third largest car market of the world by 2020 about a decade ago – lagging only the United States and China, and this analysis was based on an increasing per capita car ownership in the country of 1.3 billion people which was inching close to the more mature markets.
However the market managed to reach only the 5th spot because of high taxes on large cars and SUVs that disproportionately affect foreign automakers along with an economic slowdown in 2019 and the pandemic.

Christopher J. Mitchell

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