Industry

Will Entry of Chinese Carmakers Provide the Impact India Tire Market Needs?

Tire Market

China’s entry into the India’s fast-growing automobile industry may have positive ramifications for India tire market

China has been one of the greatest success stories seen by the automobile industry over the past two decades. The country has seen stupendous growth, where, in 2008, the automobile production was just over 9 million units, to over 28 million in 2017. India, vigorously trying to boost its ‘Make in India’ program, is trying out the Chinese model of increasing FDI, curbing imports and boosting local production. Some differences exist, obviously, but the model seems similar. TechSci experts evaluate the various scenarios and the impact on various subsectors such as that of the India tire market.

The State of the Indian Automobile Industry

Out of the $278 million Chinese FDI that entered India in 2016-17, around 60% was directed towards the automotive sector. This is not an outlier, but part of an overall trend. India has slowly and quietly established itself as a manufacturing hub for automotive companies such as Hyundai, Nissan, Toyota, Volkswagen, Maruti Suzuki, etc. This data can also be borne out with data produced by TechSci Research which suggests that total vehicle production increased from 4.17 million units in 2012 to 4.49 million units by 2016. Subsectors that supplement the industry, such as the India tire market, are also generating revenue and employment due to the country’s strong automobile sector.

In spite of the positives, India ranks a dismal sixth in terms of passenger car production, behind China, Japan, Germany, US and South Korea. Closing the gap would require a huge push, which is what Chinese automakers are relying on.

Entry into India Market: Pros and Cons

Given that India ranks sixth in automobile production, the country is still highly competitive when it comes to entry of new firms into the market. GM has decided to close its India operations and companies such as Peugeot and Nissan have found it hard to compete with India’s Maruti Suzuki enjoying a hegemonic dominance, with around 51% of the passenger car market. TechSci Research report India Tire Market Forecast & Opportunities, 2012 – 2022” suggests that India tire market is growing at a CAGR of 9.17%, which implies a similar rate for automobiles. However, the bulk of the growth is coming from Maruti Suzuki. Given the recent entry of Chinese companies, the fear is that competitors have already stolen march in terms of infrastructure, understanding rules and regulations, understanding the needs of the Indian customer, etc.

However, one factor may level the playing field. The Indian government wants Indian cars to go all electric by 2030. Given that China is today the world’s largest EV market, having sold 352 thousand units last year. This may prove to be the one great equalizer that Chinese companies need. Come what may, it seems that the India tire market is in for some good times, given the serious competition India is about to witness in the indigenous automobile sector.

 

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