Almost two decades after entering India, here’s what General Motors Co. (GM:US) and Ford Motor Co. (F:US) have to show for their efforts in Asia’s third-largest automobile market: combined market share of about 6.5 percent and falling.
GM’s sales in the country have tumbled 17 percent in the past 10 months and Ford’s deliveries are off 8.4 percent, according to researcher Intelligence Automotive Asia. Though the U.S. carmakers say they’re optimistic, they face mounting competition from Toyota Motor Corp. (7203) and market leader Maruti Suzuki India Ltd. (MSIL), which makes 4 in 10 vehicles sold in India.
The wrong cars priced above rivals’ offerings, coupled with poor service, are among the reasons analysts cite for the Americans’ lack of progress in a country that’s projected to overtake Japan as the world’s No. 3 passenger-vehicle market this decade. While they are stepping up efforts to cater to Indian motorists, the Detroit automakers have yet to show they can reverse their slide toward irrelevance.
“GM and Ford have not been able to understand the market,” said Deepesh Rathore, a managing director for researcher IHS Automotive in New Delhi. “They haven’t been able to train their dealers and the competition is getting tougher.”
When Ford introduced its latest Fiesta sedan in India in July 2011, it priced the car at 823,000 rupees ($15,120), or almost 20 percent higher than Hyundai Motor Co. (005380)’s similarly sized Verna. The Verna has outsold the Fiesta four-to-one.
GM entered India in 1994 in a venture with Hindustan Motors Ltd. (HM), selling the Opel Astra and later the Corsa and Vectra -- all three sedans, in a country where most buyers prefer hatchbacks. GM bought out Hindustan Motors’ stake in the venture in 1999.
The company’s first hatchback in India, the Opel Corsa Sail, didn’t hit the market until 2003. And at 439,000 rupees, it was 25 percent more expensive than the comparable Fiat SpA (F) Palio and Maruti Zen. GM discontinued the model three years later, saying it wasn’t competitive. GM now has a market share (GM:US) of about 3.3 percent.
Ford was the fourth-lowest scoring brand and GM was third- lowest in the J.D. Power & Associates’s 2012 India Customer Service Index study, which ranks dealerships and service centers, released Oct. 31. Maruti ranked first, followed by Honda Motor Co. (7267) and Hyundai.
The Americans also lag behind in their dealer networks. GM has 279 dealers in India and Ford has 160, versus 1,100 at Maruti Suzuki and 355 at Hyundai. Recruiting more dealers may be a challenge.
‘Chicken and Egg’
“It’s a chicken and egg situation,” said Mohit Arora, an executive director at J.D. Power in Singapore. “If you don’t have the volumes or model lineup, you end up attracting sub- optimal dealers.”
Sometimes it’s the little things. To save on costs, power windows were only offered in the front seats when Ford introduced its Escort sedan in 1997. Buyers with enough cash to afford the car, though, typically have drivers, so they were in the back with wind-up windows while the chauffeur had power up front. The problem has since been fixed. In GM’s Chevrolet Optra and Aveo, drivers seeking to signal a turn by flicking the lever on the right, as is typical in India, would instead activate the wipers.
Today, GM is looking for inspiration in China, where it has been the No. 1 foreign automaker every year since 2005. GM last week began taking orders in India for the Chevrolet Sail, the second-most popular vehicle in China. This year, the automaker also plans to introduce the Chevrolet Enjoy, a version of a top- selling Chinese minivan called Wuling Hong Guang.
Lowell Paddock, president of GM’s India unit, said his company’s underperformance in the country has been due to shifts in market demand, particularly a growing preference for diesel engines as gasoline prices have surged.
“Success here requires a mix of an appropriate product together with expected levels of Indianization and localization,” Paddock said in an e-mail. “Some of our previous models, lacking diesel options, were limited.”
With the help of cars such as the Sail, introduced in New Delhi last week at 444,000 rupees, GM aims to increase its market share to at least 10 percent over the next five years, Paddock said. The Sail hatchback, which comes with a diesel option, will offer an industry-high five-year warranty on the engine and transmission, the company said Nov. 2.
Ford has had substantial success with the Figo, a hatchback introduced in 2010. The car today accounts for almost 80 percent of Ford’s India sales. Without it, the company’s market share would be below 1 percent versus 3.2 percent now.
The company aims to double its Indian sales and service outlets to more than 500 by 2015, Michael Boneham, Ford’s India president said in Mumbai while unveiling a revamped Figo on Oct. 15. The company is investing almost $1 billion in a new factory in the western state of Gujarat that will be complete by 2014. Ford plans to introduce eight models by 2015, including the EcoSport compact SUV next year, Boneham said in an e-mail.
In 1996, when Ford’s first India-built sedan rolled off the production line, the company said it would make 350,000 cars annually in the country by 1999. In the 12-months ended in March, Ford made 119,440 cars in India.
In the U.S., Suzuki Motor Corp. (7269), Maruti Suzuki’s biggest shareholder, is quitting the market, where it had 0.2 percent of industry sales through October this year.
Even as the Indian auto market’s growth will likely slow to about 1 percent in the year ending March, 2013, annual demand for passenger vehicles will triple to 8 million units by 2020, Barclays Plc (BARC) predicts. That would raise India to the No. 3 auto market -- behind China and the U.S. -- from seventh this year, according to the brokerage.
While that means there’s ample opportunity for the U.S. automakers to redeem themselves in India, they will need to step up efforts to cater to local preferences, said Ashvin Chotai, managing director at Intelligence Automotive Asia in London.
“Until you get some critical mass in the market,” Chotai said, “customers will not be as comfortable with Chevrolet and Ford as they are with Maruti and Hyundai.”
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