Some of the world's biggest carmakers are yet to get their India strategy right after more than a decade of trials and more than a few errors. That's reflected in the sea of red ink on the domestic books of the likes of General Motors, Ford, Honda and Fiat. Between fiscal 2008 and fiscal 2011—fiscal 2012 figures are yet to be filed—these four global auto giants racked up a collective loss of about Rs 2,700 crore on Rs 43,000 crore sales. Much of that red ink is justified as they were in investment mode, expanding capacities and setting up new plants.
Now, however, as the pressure increases on the emerging market arms to make more meaningful contributions, the Indian subsidiaries have begun to shift gears. Potentially game-changing models, opening up new segments and creating a complete portfolio, expanding capacities, cracking the pricing game, a sharper thrust on localisation to be more costeffective, and exporting more out of India are some of the strategies being explored. ET takes a look at how the two Detroit behemoths, Japan's second-largest carmaker and Italy's number one auto company are pulling out all stops to make their domestic operations pay back.
General Motors India
Lowell Paddock | CEO
Now, however, as the pressure increases on the emerging market arms to make more meaningful contributions, the Indian subsidiaries have begun to shift gears. Potentially game-changing models, opening up new segments and creating a complete portfolio, expanding capacities, cracking the pricing game, a sharper thrust on localisation to be more costeffective, and exporting more out of India are some of the strategies being explored. ET takes a look at how the two Detroit behemoths, Japan's second-largest carmaker and Italy's number one auto company are pulling out all stops to make their domestic operations pay back.
General Motors India
Lowell Paddock | CEO
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Chevy, but no Cigar
Chevy did it for General Motors (GM). Almost. After starting out in India in the 1990s with the Opel brand, GM got some traction in the early-2000s, when it launched the Optra sedan under the Chevrolet umbrella brand. The multi-utility vehicle Tavera followed a year later, and between 2006 and 2007, the UVA hatch, the Aveo and SRV sub-compacts and the mini Spark.
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By the end of the decade, when it launched its small car Beat, GM, with eight products at different price-points, had the widest portfolio among the multinationals.
By then the Detroit giant had invested over a billion dollars in India, and had two plants in Halol in Gujarat and Talegaon in Maharashtra with a capacity of over 200,000 cars.
The problem: Only about half of that capacity is being utilised. Which explains why GM India had a market share of 4.2% in 2011, with sales of 110,000 units.
If GM is struggling in India, it's because it has been bringing in products designed for overseas markets, says VG Ramakrishanan, senior director, Frost & Sullivan.
"They have to get back to basics and design products for the Indian market. While the Japanese stand for reliability, Germans for their engineering, some of the Indian brands for value for money, GM needs to have its brand attributes in place and focus on them."
By then the Detroit giant had invested over a billion dollars in India, and had two plants in Halol in Gujarat and Talegaon in Maharashtra with a capacity of over 200,000 cars.
The problem: Only about half of that capacity is being utilised. Which explains why GM India had a market share of 4.2% in 2011, with sales of 110,000 units.
If GM is struggling in India, it's because it has been bringing in products designed for overseas markets, says VG Ramakrishanan, senior director, Frost & Sullivan.
"They have to get back to basics and design products for the Indian market. While the Japanese stand for reliability, Germans for their engineering, some of the Indian brands for value for money, GM needs to have its brand attributes in place and focus on them."
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Lowell Paddock, managing director of GM India since early 2012, agrees that "we will have to price our products competitively as Indian consumers have a low tolerance (to high prices), which also means we need to localise heavily." He adds that GM cannot survive on volumes alone. "GM wants double-digit market share and to increase its relevance in the market place. Ultimately, we want to get towards profitability."
A big step towards getting price-competitive will be launches from the stable of GM's partners SAIC and Wuling in the second half of the year. GM is expected to launch a multi-purpose vehicle, a hatchback and a sedan made by the Chinese producers under the Chevrolet brand. The challenge, however, will be to differentiate such models from the rest of those in the Indian market place, adds Ramakrishnan.
Fiat India
Enrico Atanasio Head — Commercial
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Third Run, With Chrysler
In its third avatar in India, Fiat's best hope of getting it right lies in the hands of the American company it acquired three years ago. With iconic brands like Jeep, Dodge and Plymouth under its umbrella, Chrysler could well be the muchneeded game-changer that Fiat CEO Sergio Marchionne needs in India.
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SUVs and MPVs from the Chrysler portfolio are being considered for the Indian market, with Jeep the most likely to be introduced first.
Alongside, Fiat will also dig deep into its small-car portfolio to look for suitable models for India.
"We will develop a broad range of cars. We are investing in the right products and segments that could be developed for India," says Enrico Atanasio, a veteran sales & marketing honcho from Europe who was airdropped into the struggling Indian operation, which has been in the red for the four years between fiscal 2008 and 2011.
Fiat's problem is that it has had too many pit-stops in India, and failed to come out of a few.
Alongside, Fiat will also dig deep into its small-car portfolio to look for suitable models for India.
"We will develop a broad range of cars. We are investing in the right products and segments that could be developed for India," says Enrico Atanasio, a veteran sales & marketing honcho from Europe who was airdropped into the struggling Indian operation, which has been in the red for the four years between fiscal 2008 and 2011.
Fiat's problem is that it has had too many pit-stops in India, and failed to come out of a few.
After a forgettable start with Premier Automobiles as partner, followed by 10 years of a solo ride during which Italy's number one carmaker had only the Palio to show as a success, Fiat reinvigorated itself by entering into a joint venture with Tata Motors in 2007.
Globally successful models like the Grande Punto and Linea were brought into the country, which would be sold through over 100 Tata Motors dealers.
The Fiat cars were priced above comparable Tata models to avoid any cannibalisation.
Globally successful models like the Grande Punto and Linea were brought into the country, which would be sold through over 100 Tata Motors dealers.
The Fiat cars were priced above comparable Tata models to avoid any cannibalisation.
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The partnership, however, didn't provide Fiat with the comeback it was looking for; although losses did drop from a peak of Rs 611 crore in fiscal 2009 in the following two years, so did volumes. In fiscal 2011, sales volumes dipped by 15% even as the overall market grew 25-30%.
Fiat is now once again on its own, and Atanasio says building a national sales company and independent network, developing product portfolio and introducing newer brands from Chrysler are three key pillars for growth in India.
Honda SIEL
Hironori Kanayama | President & CEO
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More than Jazz to Shake off the Blues
Just one or two new launches may not do the turnaround trick for Honda in India; it needs an entire new portfolio—of diesel vehicles, an area in which the Japanese carmaker hasn't made as much headway as, say, Volkswagen or Toyota.
A huge price differential between petrol and diesel in India may prompt Japan's second-largest carmaker to make India a hub for diesel engines. Along with the diesel thrust, Honda Siel Cars India (HSCI), its 97%-owned domestic subsidiary, plans to launch a small car below the hatchback Brio and a competitively priced multi-purpose vehicle (MPV); Honda has the compact MPV Freed, which is based on the Jazz platform, in its global portfolio.
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After 15 years, HSCI has a market share of 2.07%. To shake up the Indian operations, in April, Honda sent in Hironori Kanayama as president & CEO of HSCI. Kanayama, who was earlier president of Honda Taiwan Motor Company, has been with the carmaker for over three decades, and has worked in markets critical to Honda, like China, Taiwan and Japan. "India is definitely among the key markets for Honda, and Honda Siel (HSCI) has ambitious growth plans for it," says J Sen, senior VP, marketing, HSCI. "Our product portfolio is increasingly being aligned to Indian needs and requirement, with high levels of localisation."
In the past four years, a rising yen— which has gained 28% against the dollar in this period—has also impacted HSCI's business and profitability.
In the past four years, a rising yen— which has gained 28% against the dollar in this period—has also impacted HSCI's business and profitability.
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Globally, natural calamities disrupted production in plants from Japan to the US.
And then, in 2011, US sales fell by 7% over a year ago. HSCI, against such a testing backdrop, has to get its act together.
An investment of about Rs 1,300 crore in a factory in Tapukara in Rajasthan has helped localise body panels and engine components for volume models like the City and Brio.
"The thought process with vendors is changing," explains Sen. "We are looking at designing more parts locally to be less impacted by the currency fluctuation."
Ford India
Michael Boneham | MD
And then, in 2011, US sales fell by 7% over a year ago. HSCI, against such a testing backdrop, has to get its act together.
An investment of about Rs 1,300 crore in a factory in Tapukara in Rajasthan has helped localise body panels and engine components for volume models like the City and Brio.
"The thought process with vendors is changing," explains Sen. "We are looking at designing more parts locally to be less impacted by the currency fluctuation."
Ford India
Michael Boneham | MD
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After Figo Flourish, Time for an EcoBoost
In June, Ford Motor said its pretax profit will be "substantially lower" in the second quarter as overseas losses could be thrice that for the first three months. While North America and its financial services arm are likely to deliver "strong results", pre-tax losses from Europe, South America and Asia are expected to hit $570 million when Ford declares its results for the June quarter. "Our operations outside of North America are under increasing pressure," it said in a filing.
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India is one of the contributors to that pressure. Losses between 2007-08 and 2010-11 tot up to Rs 434 crore, though Ford has been in investment mode, having pumped $1 billon into a factory in Gujarat.
"In the last five years, we have been investing without any expectations of profitability," says Nigel Wark, ED, marketing & sales. "We are reinvesting cash profits for products and capacity expansion."
When Ford India started out in 1998— after a short-lived joint venture with the Mahindras—it created a buzz with models like the Escort, Ikon and Fiesta.
But it hasn't sustained the momentum as competitors with more attractively-priced cars gained ground. The Figo hatchback, launched in 2010 as part of the global 'One Ford' strategy, brought the company back into the reckoning. Ford India has sold over 170,000 Figos since launch.
"In the last five years, we have been investing without any expectations of profitability," says Nigel Wark, ED, marketing & sales. "We are reinvesting cash profits for products and capacity expansion."
When Ford India started out in 1998— after a short-lived joint venture with the Mahindras—it created a buzz with models like the Escort, Ikon and Fiesta.
But it hasn't sustained the momentum as competitors with more attractively-priced cars gained ground. The Figo hatchback, launched in 2010 as part of the global 'One Ford' strategy, brought the company back into the reckoning. Ford India has sold over 170,000 Figos since launch.
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Its next breakout could be the EcoSport, a highly-localised, fuel-efficient SUV that's expected to be competitively priced.
It will have a 1-litre, threecylinder 'EcoBoost' petrol engine, which can generate the power of a conventional 1.6-litre petrol engine.
Another launch that could drive sales is a small car below the Figo, expected in 2014. "We have set the building block to be a part of the next stage of growth," says Wark.
It will have a 1-litre, threecylinder 'EcoBoost' petrol engine, which can generate the power of a conventional 1.6-litre petrol engine.
Another launch that could drive sales is a small car below the Figo, expected in 2014. "We have set the building block to be a part of the next stage of growth," says Wark.
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