Why world’s top three carmakers Toyota, General Motors, Volkswagen are … – Economic Times

Posted: Tuesday, June 03, 2014
The financial year 2013-14 has been one to forget for carmakers in India. As the Indian consumer held back, sales of passenger cars fell 4.65%. Every manufacturer endured the pain. But for three carmakers—Toyota, General Motors and Volkswagen—the agony and frustration of 2013-14 was yet another humbling reminder of how, even after all these years, their numerical achievements in India remain a stark contrast to their achievements at a global level.

In worldwide passenger car sales, Toyota, GM and Volkswagen stand on the podium, in that order. But in India, the world’s sixthlargest market, they are ranked six, eight and 10, respectively, and struggling with the bottom line (See graphic). Volkswagen is a relative newbie, having entered India only seven years earlier. But Toyota drove into India 17 years and GM completes 20 years in 2014.

Why world's top three carmakers Toyota, General Motors, Volkswagen are laggards in India

According to Wilfried Aulbur, managing partner of Roland Berger Strategy Consultants, India is a market with unique attributes, which require car companies to tailor their operations differently. For example, the tax structure favours cars of a length of up to four metres, or the smallcar segment.

A big part of this is the sub-Rs 4 lakh car, which accounts for 70% of the Indian market. “It (the regulation) forces global players to adapt their products to the Indian market,” says Aulbur. “This implies significant investments, which, at present, not every large manufacturer is willing to make. In turn, volume opportunities get constrained.” For these companies, this 70% segment has either not been top priority (Toyota and Volkswagen) or they have been unable to crack it (GM).

Stumbling Strategies

Every company that has done well in India has done so on the back of a blockbuster model, one that balanced the diverse needs of an Indian buyer, and towered over everything else in its space for a considerable length of time. For Maruti, this was 800, Alto and DZire. For Hyundai, Santro. For Honda, City. For Mahindra, Scorpio.

In recent times, Renault Duster, Ford EcoSport and Honda Amaze have cracked the puzzle of combining functionality, design, features, pricing and after-sales. Toyota has had success with Qualis and Innova, but Volkswagen and GM have struggled to find models that bring in the volumes and endure in the Indian context.

The two models Toyota launched as India-specific models in 2011 have only met with moderate success. “Etios and Liva have been learnings for us in terms of customer expectations and buying patterns,” says N Raja, senior VP, marketing and sales, Toyota Kirloskar, who recently replaced Sandeep Singh, deputy MD. “We have addressed that by sprucing interiors, performance and rural reach.”

In its life of 19 years, the Indian subsidiary of General Motors has accumulated losses of Rs 2,740 crore, while garnering a minuscule 2% market share and a reputational taint for falsifying emission data. “If GM is struggling in India, it’s because it has been bringing in products designed for overseas markets,” says VG Ramakrishanan, managing director, Frost & Sullivan.


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