INSUBCONTINENT EXCLUSIVE:
A decade ago, India was widely tipped to be the world's third-largest car market by 2020Foreign automakers' hopes of a booming Indian car
market are fading fast as a brutal second wave of COVID-19 infections and limited government room for more stimulus spending suggest a
recovery could lag far behind China and the United States.Carmakers that saw nearly a decade of Indian sales growth wiped out in 2020 are
expecting a bounce back in demand this year
But it is likely to be led by small, affordable cars - a sector dominated by homegrown leader Maruti Suzuki and rival Hyundai - rather than
the premium models churned out by most foreign manufacturers, industry executives and analysts say.With their Indian factories running
well below capacity and sales far behind original hopes, firms like Ford, Honda, Nissan, Skoda and Volkswagen face difficult decisions about
"It is a survival issue," said one senior executive with a Western automaker who declined to be named."Choosing to remain in India depends
on the cost benefit analysis of other international markets," the executive added, forecasting that, if the outlook remains grim, the number
of automakers in the country could fall.India has already seen General Motors and Harley-Davidson shut up shop last year
Anurag Mehrotra, managing director at Ford India, told Reuters the car market had not grown as projected and COVID had made matters worse,
hurting domestic sales and exports."The uncertainty in the long-term growth prospects of the auto industry and economy have resulted in
serious challenges, including capacity utilisation," Mehrotra said.He said the pandemic demanded "agile solutions and tough decisions," but
did not give details of Ford's plans
automaker has said previously it is working on a new plan for India.Volkswagen, which revised its India strategy in 2018 putting its
sister company Skoda in charge, reiterated its plan to invest $1.2 billion to corner 5% of the market by 2025 with new launches, starting
with two SUVs this year.The ambition is to continue building and reinforcing the group's position in the Indian market, a spokesperson for
the local unit, Skoda Auto Volkswagen India, said
Honda and Nissan did not respond to emails seeking comment.Lagging BehindA decade ago, India was widely tipped to be the world's
third-largest car market by 2020, lagging only the United States and industry leader China, as car ownership per capita among its 1.3
billion people caught up with more mature markets.Instead, years of high taxes on large cars and SUVs that disproportionately
affect foreign automakers, an economic slowdown in 2019 and the pandemic have held it back at No
5.The purchasing power of Indian consumers remains far below those in the West, with the weighted average price of a car just $10,000
compared with $38,000 in the United States, according to Ravi Bhatia at consultancy JATO Dynamics.The long-term potential remains, analysts
say, with India home to only around 27 cars per 1,000 people.Consultant LMC Automotive expects Indian car sales to surge 35% this year to
3.17 million from almost a decade-low of 2.35 million in 2020.But that would still be a fraction of the top markets
LMC sees sales in China rising 7% to 22 million vehicles this year, and climbing 21% in the United States to 13.5 million.While both China
and the United States are putting the pandemic behind them, India is still recovering from a deadly second wave and has fully vaccinated
only about 5% of adults.The extra pressure on public finances has also left India at risk of losing its investment credit rating, limiting
its scope for the sort of additional stimulus measures that have helped to boost U.S
and Chinese auto markets.High HopesIt is a grim prospect for foreign manufacturers at a time when they are having to invest in electric
vehicles and future technologies in more mature, profitable markets.According to the Society of Indian Automobile Manufacturers (SIAM),
Ford, Honda, Skoda and Volkswagen saw sales in India drop 20%-28% last fiscal year through March 31, more than twice the decline at Maruti
Suzuki and Hyundai.Utilisation levels have fallen below 30% at some foreign manufacturers' factories, data from SIAM showed
That is a far cry from their initial goals
Nissan had hoped for five per cent share of India's car market by 2020 but has less than one per cent today.Honda told Reuters in 2018
that to be a "meaningful player" it needed 10 per cent market share
Its share has fallen to three per cent from five per cent back then, and it has closed one of two plants in the country.And Ford, which
has invested over $2 billion in India, has less than a two per cent share
To compete in India companies need a steady stream of new products, which needs more investment, said LMC's Ammar Master."Automakers with
an aged product range face an uphill battle and are at a greater risk of losing sales and market share," he said, adding companies like
Ford, Nissan and Honda do not currently have strong product pipelines.A lack of clarity on export policies and other regulatory hurdles are
complicating matters for global carmakers, executives at two of them said.India last year withdrew its export incentive scheme - crucial for
companies like Ford and Volkswagen that ship out more cars than they sell locally - and is yet to finalise a new one.The absence of free
trade agreements between India and export nations is also putting it at a cost disadvantage compared with places like Thailand and Vietnam
that have such deals, the executives added."India needs to offset its associated risks that hold back multinational automakers from scaling
up or investing further," said former Ford India executive Vinay Piparsania.