Profits elude most foreign carmakers

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Foreign carmakers like Honda, Toyota, Ford, General Motors and Skoda, which have manufacturing bases in India, are yet to turn profitable Foreign carmakers like Honda, Toyota, Ford, General Motors and Skoda, which have manufacturing bases in India, are yet to turn profitable
SummaryAccumulated losses in India jump 20% in FY13

or below cost, industry sources said. The aim of this strategy is to gain a large slice of the market and spread brand awareness, which they hope to take advantage of later while taking a hit in the short term. Gaining large volumes and market share is necessary for most new players as a prerequisite to later profitability.

“Most companies take losses on certain variants, mostly the entry model, in order to establish themselves. They need few cash cows, like Maruti's Swift, so the entire range gets balanced out,” said Puneet Gupta, principal analyst at IHS Automotive.

Gupta added that many global players have pared down on their India plans of late, with investments on new products being delayed in many cases. “Most global companies initially thought that the slowdown was for the short term. Till 2012, many had been positive of expanding in India, but now many have delayed new launches to 2015,” he said.

Frost & Sullivan's Ramakrishnan added that getting a large market share in India boils down to pricing products competitively, for which one needs large scale. So companies need to plan out exports from the start. “To be profitable in such a tough market is all about strategy. You have to have volumes, but you cannot sell as much in India, so you have to start out with big exports. That is what Hyundai did, what Nissan did, what Ford is going to do now. All others I believe will follow suit,” he said.

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