1. FE Special: Why later foreign car entrants like Toyota, Ford, VW continue lag Suzuki,Hyundai, Honda

FE Special: Why later foreign car entrants like Toyota, Ford, VW continue lag Suzuki,Hyundai, Honda

Foreign carmakers that entered India to tap the domestic market and make it a hub to serve overseas markets are seeing success

By: | Updated: April 10, 2016 9:07 AM
odd-even scheme, odd even rule

According to analysts, besides the domestic market, Nissan had been focusing on exports like Hyundai did in initial years in India. (Reuters)

Foreign carmakers that entered India to tap the domestic market and make it a hub to serve overseas markets are seeing success. Exports by foreign carmakers increased significantly in FY15. Carmaker Nissan ended FY15 by exporting 65-75% of its total vehicles manufactured in the country.

In the last fiscal, Volkswagen, Nissan and Ford increased the exports of vehicles manufactured in India to South Afica, Mexico and countries in South America and Africa.

German carmaker Volkswagen increased exports of its mid-size segment Vento by 74.45% to 56,064 units in FY15 compared with 32,447 units in FY14.

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A spokesperson of Volkswagen India said currently Volkswagen India exports the Polo and the Vento made at Pune plant to over 32 countries across Asia, Africa and North America.

“Given the significant slowdown in the Indian market in 2012 and 2013, we created an effective bridging strategy by significantly boosting our exports. The Vento which was created for the Indian market found high acceptance in Mexico and South Africa. Indeed this helped us create a natural hedging against the weaker rupee and difficult phase of the domestic market,” the spokesperson added.

Japanese automobile major Nissan exports a substantial volume of Micra and Sunny. In FY15, Nissan manufactured 82,715 units of Micra, including 76,120 that were exported. In the same period, 44,593 units of Sunny were manufactured of which 38,759 units were exported.

According to analysts, besides the domestic market, Nissan had been focusing on exports like Hyundai did in initial years in India. In the same period, American automobile manufacturer Ford increased exports of compact SUV Ecosport, manufactured in India, to 55,178 units from 17,504 units in May.

The sudden jump in exports was an implication of low volumes across segment in domestic market and company made huge profits by exporting Ecosport to other geographies, say analysts.

According to Icra, the automobile market in India is held by five manufacturers who control 80% of the market.

“Profitability pressures on relatively low volume players may be even higher resulting in sustained dependence on external financing to fund losses and capital expenditure requirements. Players having low volume in domestic market can leverage on labour arbitrage present in Indian market and can develop export hub for their small car requirement globally,” said Icra in a report on the automobiles sector.

“Global passenger vehicle manufacturers set up operations in India considering the potential of the Indian market. However their plans were also to make India a hub for some of their other markets based on the available skill set, design capabilities and the cost factor. This helped them maintain optimum capacity utilisation during periods when domestic market was weak.” said Shridhar V Partner, Grant Thornton India LLP.

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