Why it has been a long and bumpy ride for American carmakers in India

Last week, ET reported that the big three US carmakers— General Motors, Ford Motor and Fiat Chrysler Automobiles (a US-Europe combine) — will push back on investments or review strategy in India. Long-time watchers of the Indian automobile industry were hardly surprised by the turn of events. Ford and GM have faced fluctuating fortunes while Chrysler after delaying entry into India twice in the past, is finally entering.

Two decades since they entered India, the two US car makers Ford India and General Motors have been skulking in the corners of the automobile market. In one of the fastest-growing automobile markets in the world — India is poised to become the world's third-largest passenger car market by 2020 — their market share combined is just 4-5%.

The companies are blaming the ever-changing regulations and customer preferences for the reviewing the India future strategy. If that is the case, how is it that Maruti Suzuki of Japan and Korea's Hyundai have been successful in India? The two companies together enjoy more than 67% market share. Rival Japanese carmaker Honda too has enjoyed a prosperous run; its City sedan is one of the highest-selling models in India, though it has been struggling of late.

In contrast, nor Ford or GM can boast of a model that has captured the imagination of the Indian automobile consumer. True, there have been models like Ford's Figo and Ecosport or GM's Optra and Beat that sold briskly after launch, but all of them floundered soon after.

Automobile analysts say the failure of the two US carmakers in India stems from two key reasons — one, they have not understood the Indian consumer and two, they have been reluctant to listen to the Indian consumer. Merely cloning strategies from other emerging markets like Brazil, China, and Mexico in India will not work, says BVR Subbu, former CEO, Hyundai India.

As it happened, the US carmakers got the strategy wrong right at the start. Ford and General Motors initially launched bigger sedans — Escort and the Opel Astra — in the Indian market. These models offered them bigger margins, but a vast majority of Indian consumers preferred small cars because of their limited purchasing power.

Ford India Limited