Did you notice one thing? Many things are exiting India nowadays Indian Cricket Team's captain announced his exit, Punjab's captain made an exit, CM of Gujarat made an exit, And now Ford India is planning to exit.

We’ll discuss the exit of Ford India. On 9 September they announced that their company is restructuring and following this, the production of every ford vehicle which is consumed in India will be shut down with immediate effect. The production of vehicles which are exported from India continues till 2022 only. 


Why Big Car Companies are Leaving India?



Ford India said that we have tried every way. Whether it be finding a partner or reseller or doing a collaboration But nothing has worked so we should exit. They say that now it is unviable to do business here. In the past 10 yrs, they have faced a loss of 2 billion dollars and due to the pandemic. The hit which they faced in the demand Ford Is completely unable to recover from and that's why they have to close their operation of manufacturing from India. People who own ford vehicles don't get panic. Ford has made arrangements for you all. They will provide you servicing and all. But the exit of ford is not the only exit this trend is trending for the past few years. In August 2021 SsangYong announced that the partnership which they had with Mahindra and Mahindra worked with only one car and they too are exiting or pulling off. Before this in December 2020, general motors also made such type of statement that after operating for the past 13 years due to low sales and increment in losses, they are shutting down. Before this, in September 2020 Harley Davidson also made such a statement. In February 2019 Fiat also said that just 7yrs after entering the market they are planning to move out. So if ford is not alone in exiting then this is a concerning situation for India. So it is very important to know why is this happening? 


1. Slow Growth, Consolidated Market

Now if we discuss domestic cars the cars which we use if you look at their market shares then you will observe that HYUNDAI, MARUTI SUZUKI, MAHINDRA AND MAHINDRA, and TATA. These four manufacturers have controlled the whole lion's share of the Indian market. This is the main reason due to which foreign companies don't get space in the market. The overall growth rate of the market is around 2 to 3 percent CAGR which stands for Compounded Annual Growth Rate.  If you look at the past few years market is growing at this growth rate only it means the market is not growing rapidly. The market is already consolidated and controlled 3 to 4 players only have controlled the whole market.

 

2. Unique Demand

Second is the unique market requirement Look, Ford, general motors, etc are foreign companies. The type of cars required in the countries of their origin is totally different from those required here in India.  Neither the segment and size of the car which is in the foreign countries have demand here nor people have money and access to roads which are needed for those cars.

So, as a result, the types of cars required here are of low price segment, cars which require a low cost of ownership. Those cars are not available to these Foreign companies. These cars are available at Hyundai, Maruti Suzuki, and Tata that's why their cars are selling a lot, and cars of foreign companies have no buyers. 

If foreign companies even try to sell cars of this segment Let's do some cut-corner or lower the prices So their global reputation and global brand value which they have to preserve. Like if they, by cutting corners try to manufacture a car that may be less safe or a car of the segment which is available nowhere. So they fear of decrement in their brand value and image in the global market. This fear keeps them away from launching such types of cars And this is a big reason why they are not able to fulfill the requirements of the people here. The cars which they are offering have no demand. That's why they are not able to grow their market.

 

3. High Taxes

The third thing is high taxes as I already discussed Sale are not increasing even the CAGR growth rate is not increasing And taxes here are 40% to 50%. This is not only for petrol-based or diesel-based vehicles because many people think that taxation is only for petrol-based or diesel-based vehicles it won't be for electric vehicles. Elon Musk also said that first reduce the taxes then only we will be able to launch our cars. Officials from AUDI tells that their sales in India are only 1% of their whole global sales But its revenue is 10%. Because the major portion is spent on the taxes. 50% to 60% of the car value goes into taxes And due to these huge taxes. The price of the car in the Indian market is 1.5 to 2 times the price in the market of the US or Europe. So neither the company is able to justify the cost nor is the car affordable for Indian people. So this is a big reason as to why if the foreign companies even try to sell their cars in India by importing from other countries that too seems nearly impossible.

 

4. Shared Mobility

The fourth reason is, maybe people don't want to buy cars. This is a very interesting concept which is called Shared Mobility. The brands which offer cars on rent comes under this category. The brands which offer cab services come under this category like uber, ola, etc. The brands which wish to work on subscription model comes under this category. So the demand for this concept will increase in the future. You buy a car and drive it only 2 days a month it is better to use the concept of shared mobility. Take a car on subscription for the period of time it is required and then returned. Nowadays working on the subscription model has increased. Many people must be reading this blog on a website that is also a subscription, Adobe premiere pro where people edit the videos is also a subscription which people buy. So these subscription-based products have also entered the market of cars. By which requirement of 10 people will be fulfilled by one car. So the overall sales of cars will decrease as earlier 10 cars were sold. Now only one So a dent is made in the sales that maybe people don't want to buy a car. So this trend emerging in the market. This is very important to look at Due to which the automobile sector is declining.

 

5. The EV Resolution

The next point is related to Electric Vehicles. In the year 2017, Mr. Nitin Gadkari said that 250 million vehicles that are currently running in India especially petrol and diesel cars will be converted into electric vehicles by the end of the year 2030. This dream gets fulfilled is not mandatory. This seems to be a very huge target. This may get delayed by 10 to 15yrs but hopefully, this would happen and nowadays people are shifting to electric vehicles as people get subsidies, taxes are reducing and rebates are given. Various state governments are promoting this And within 10 to 15 yrs a market worth 200 billion related to electric vehicles will stand in India. If you a look at the foreign company's cars India, they are also slightly turning towards electric vehicles.  But at present all their cars running are either petrol-based or diesel-based. Any car which is priced below 10 lacs And comes under the segment of electric vehicle has no existence. None of the electric cars available at present is value for money and we don't have a charging infrastructure. But the companies which will soon shift from petrol and diesel and move out towards EV the companies which will soon launch electric vehicles. Understands the demand of the market and will make appropriate changes those companies in the coming years will succeed.

 So the companies which are working on past policies will face difficulty in running their business. So these were some of my thoughts on why foreign companies are exciting. Which changes the automobile sector in India is facing And which exciting developments can happen in the coming 10 to 15 yrs.

 

JAI HIND : VANDE MATARAM