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EP 16: Dr. Deb Mukherji: Unraveling the success factors for newcomers entering the Indian market
27 Plays1 month ago
Dr. Deb Mukherji joins The Auto Ethnographer from Gurugram, India, a city near New Delhi. In today’s episode he helps to unravel the success factors for entering the Indian market as a foreign company, automotive or otherwise.
There are success stories and failures on the Indian market. These are woven into the conversation as we explore the main drivers for success: navigating regulations, technology adapted to local consumers, economics, and the human aspect including culture.
Dr. Mukherji has over 35 years of experience in the Indian automotive industry having worked for several vehicle manufacturers and their suppliers. Well-known brands he served directly or indirectly include Hyundai, Maruti (India’s market leader), Honda, Hindustan, and Omega Seiki Mobility.
His most recent challenge had been the development and launch of Omega Seiki Mobility as the company’s Managing Director between 2018 and 2023. OSM is a startup company focused on electrifying transportation in India primarily in the 3-wheeler and 2-wheeler sectors. In this role he set up several manufacturing sites as well as a 200 dealer distribution network across India.
Between 2010 and 2018 Dr. Mukherji founded and let ADM Technologies, a company that provided business and technical consulting services to both domestic and foreign companies in India. During this time he advised and participated in the building of several manufacturing facilities and businesses.
Prior to 2010 he worked in a variety of manufacturing and supply chain positions within the automotive industry. These included but are not limited to Bestex Marujun India P Ltd. (Honda group company), Caparo Engineering India P Ltd. (an engineering company that set up major projects for clients), and Hongo India Pvt. Ltd. (a JV with Honda Cars India and Honga Japan), and Hindustan Motors. In all cases he focused heavily on setting up manufacturing operations.
Currently, Dr. Mukherji is the Founder and Managing Director of ADM Prime Consulting Pvt. Ltd. a consulting company with focus on clean energy, electric mobility and connectivity businesses, developing strategies, alliances and JVs. ADM Prime have offices in Japan and South Korea offering services to enter the Indian market successfully.
To learn more about ADM Prime Consulting or to contact them please visit the homepage at https://www.admprime.co.in/
The Auto Ethnographer releases weekly podcasts with focus on international cultures and how they impact the automotive industry, although the lessons learned can universally be applied to international business. John Stech, the host of The Auto Ethnographer podcast, has 30 years of experience in the automotive industry with work and living experiences in North America, Latin America, Europe, Egypt, Russia, and Southeast Asia. He loves to explore cultural differences and what makes people who they are around the world.
To learn more about The Auto Ethnographer visit the home page at https://www.auto-ethnographer.com
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Transcript
Introduction to Podcast and Guest
00:00:00
Speaker
And that is the reason why Suzuki is so successful, Honda is so successful, Toyota is so successful, and GM and Ford could not because somewhere they implanted their European style or, you know, let's say Germans, you know.
00:00:17
Speaker
Hello and welcome to the Auto Ethnographer. I'm John Steck, your host on this journey. We travel the globe to bring you stories about culture and the global automotive industry. Fasten your seatbelt and let's get started.
00:00:30
Speaker
Hello and welcome to this episode of the Auto Ethnographer. Today we travel to India and have a great conversation with Dr. Deb Mughodji.
00:00:41
Speaker
He has a long and successful history in the Indian automotive industry, both at the OEM or automaker level, as well as at some of the larger suppliers in India. More recently, he was the managing director of Omega Seiki Mobility.
00:00:57
Speaker
a startup which is focused on electric three-wheelers and last-mile mobility. Here, he set up several manufacturing sites as well as of robust 200-dealer sales network.
00:01:09
Speaker
Prior to this, he worked in a wide array of manufacturing-related positions with either the OEM or suppliers to well-known brands such as Honda, Maruti, Hyundai, and Hindustan.
00:01:23
Speaker
Currently, he's the founder and the CEO of ADM Prime Consulting in Gurugram, near New Delhi, India. ADM also has offices in Japan and South Korea.
00:01:37
Speaker
Dr. Deb, welcome to this episode of the Auto Ethnographer. Thank you very much, John. It's a pleasure talk to you on your podcast, and I'm really looking forward to it.
India's Automotive Electrification and Growth
00:01:50
Speaker
Thank you so much for having me today. ah You're welcome. There's a lot happening in India in the automotive industry, and particularly you see a lot happening in electrification.
00:02:02
Speaker
Given that India is the a nation on the planet with ah the largest population, um I think it's certainly something that we should focus on and and talk about. But at the same time, it's a little bit mysterious.
00:02:15
Speaker
um There's been let's say a ah lack of success from some of the international automakers that have gone there. And I wanted to peel back the onion layer by layer a little bit to talk to you about, you know, what can they do better?
00:02:31
Speaker
but what What can be the formula to success? but But first, before we get into that, maybe you can tell us a little bit more about your background and your words. Yeah. ah Thank you, John. ah You summarized my background very nicely and thank you so much for talking so nice things about me.
00:02:54
Speaker
ah I am a mechanical engineer by education and then the after my engineering graduation. I did my master's in engineering and then eventually I shifted to more on the economics side and my PhD was ah researching the ah economic side of the Indian auto components industry ah way back in the early 2000.
00:03:26
Speaker
when we had a resurgent China and in the industry there was a lot of apprehension and concern that Chinese companies are going to kind of steamroll Indian companies and Indian companies Indian industry will not be able to compete with their you know, prowess with their firepower, with the economic power and also rapidly evolving technology.
00:03:58
Speaker
So that's an area where I worked on during my frequent travels to China. I watched them grow and sort of become ah what they are today after a couple of decades.
00:04:14
Speaker
But those were the days when the you know in the industry in in the Indian industry, we were trying to figure out how Indian industry can compete with China.
00:04:25
Speaker
ah So I worked on the component side of the Indian automotive industry. I worked with Japanese companies, I worked with the Korean companies and also some of the large Indian companies conglomerates. I mean, today they are huge.
00:04:46
Speaker
ah Those were the days when they were evolving. Maruti had just come. Maruti Suzuki, as you know, is the largest auto car maker in India.
00:04:58
Speaker
So some of the tier ones, ah you know, were evolving very rapidly in terms of scale and size. And I was fortunate to work in those companies.
Overview of India's Automotive Market
00:05:11
Speaker
And then finally, in 2010, I set out on my own ah with my own ah consulting and business advisory company uh ADM prime consulting and uh we ah mainly uh work with the foreign companies who wish to come to India who wish to do business here and uh we kind of become the bridge between them and the Indian market And as you rightly said, Indian market is a mix of enormous opportunities and possibilities as well as challenges. So these challenges could be
00:05:55
Speaker
ah of wide variety and this is where oh ah we help ah these companies, you know, ah sort out the issues on the ground, whether it is a regulatory side of it, understanding the Indian ecosystem, then coming to the ah business.
00:06:14
Speaker
We do the market research, then we also work with them on the supply chain side. human resource side which is the and in my opinion is the most important link in this whole value chain so we kind of offer a full package and in some cases we do work with our clients for a fundraise and raising money as well So most of my clients are either European, German or British companies and several of them are Japanese companies through my relationship with Honda Group and Suzuki.
00:07:00
Speaker
oh These are the companies who we have worked with and and as well as some Korean companies. So that's in short, you know, what we do currently.
00:07:14
Speaker
And ah I see, as I said, you know, there there are a huge opportunities which India offers today and we'll talk about it more in detail ah during the course of this.
00:07:28
Speaker
discussion but i see that uh you know the companies uh the foreign companies who wish to come here and do business they need to understand uh quite a few things uh or quite a few aspects of the indian uh of india and uh this is where uh my company And my team helps and we help these companies, these clients to settle down in India and do business here.
00:08:01
Speaker
I definitely am having this conversation today with the with the right expert in the field.
00:08:09
Speaker
Thank you, John. Let's start ah maybe looking at the at the big picture um for the Indian market as far as the auto industry is is concerned. can Can you frame out a little bit the the scope and the size of the market um and and just generally how it's structured? you You have some manufacturers, of course, you have domestic ah domestic brands.
00:08:31
Speaker
You have some foreign players who are either producing locally or purely operating as importers. Maybe you can frame that out a little bit and give us some scope on what the Indian market looks like.
00:08:45
Speaker
Yeah, John, ah
Challenges for Foreign Automakers in India
00:08:46
Speaker
Indian automotive market is is is a very well ah established market. and we have a very mature market and also very rapidly growing market.
00:09:01
Speaker
So, in terms of um just to give you an idea of what we have here, in terms of car, passenger car manufacturing, we do close to about three and a half million vehicles annually.
00:09:16
Speaker
And ah that puts us number four and in terms of global market size. then Then in in terms of, you know, India is a huge two wheeler and a three wheeler market because a large part of India
00:09:37
Speaker
lives in rural areas and also semi-urban areas where mass transportation may not be so well developed. So people tend to use their own two-wheelers, the scooters and the motorbikes in this part of the world.
00:09:51
Speaker
So in two-wheelers, last year we did 20... twenty 3 million two-wheelers. It's a mix of scooters and motorcycles.
00:10:04
Speaker
So, our 23 in domestic market, we sold about 19 million and roughly about 4 million were export from here. So, that's a gigantic market of 20 odd million vehicles annually and out of this 20 million domestic market about 14 million are motors bikes and about 6 million are the scooters so that's the kind of product mix coming to three wheelers we do roughly about a million plus three wheelers annually so that's again a very large market as you can imagine
00:10:45
Speaker
ah ah commercial vehicles and these are a mix of passenger, the the rickshaw that we call here carrying the passengers as well as the cargo delivery vehicles. They they carry typically a payload of about 500 to kilo.
00:11:05
Speaker
So that's the kind of three wheelers that we have here in both passenger as well as the cargo categories. Then coming to the bigger trucks, so we have the small pickup trucks, then we have the light commercial vehicle and then the heavy commercial vehicle, the bigger trucks.
00:11:24
Speaker
So overall the market is about 1 million trucks per year. so that's the kind of vehicles we produce and sell in india and almost 50 of this market is the small pickup trucks typically about 1 to 1.5 ton ah payload so that's the kind of load they carry because the ah our roads are narrow and many times the road infrastructure is not so well developed so that's where the smaller vehicles can navigate and deliver the cargo as well as passengers so that's the kind of market we have for trucks so two-wheelers three-wheelers cars and trucks so this is a full sort of package that we have and we
00:12:17
Speaker
are growing ah very very aggressively and electrification is also happening in a very big way in this entire industry so overall if you talk about the economic side of it so the total market is close to about 200 billion us dollars and we are expected to double it in in the five years. So by 2030, we are expected to become about 400 to 450 billion US dollars of Indian automotive industry.
00:12:55
Speaker
So that gives you an idea of the Indian market and the various form factors that we have here. This is an incredibly sizable industry and and certainly very diversified between different vehicle types, which which you don't actually find in many of the other markets, makete major automotive production markets. you You typically obviously don't have so many two wheelers and three wheelers in production in those markets.
00:13:26
Speaker
Right. So very, very diversified. If I want to loop it back for a second to what you had studied earlier on with the Chinese footprint and their capabilities, what role within all of this do the Chinese play so far? Are there ah Chinese ah EV production companies already in ah in India today?
00:13:49
Speaker
Yeah, ah John, it's a very interesting question. You know, you know China is ah is a massive automotive force today and they are and particularly in the a new age automotive industry, which is largely dominated by EVs today.
00:14:07
Speaker
ah China is ah is a the giant and the way they are churning out their new models in less than a year. bringing out new models, new features and all those um you know technology vehicles. it's It's incredible to really see what China has achieved in last decade or so led by the likes of BYD and NIO, Xiaomi, Shepang, etc.
00:14:38
Speaker
So it's it's ah's a massive force to reckon with and giving a run for the money to the established big giants like uh gm ford vw etc we we know the story of most of these guys having a huge problem closing down factories in china whereas chinese companies continue to expand and put you know massive investments.
00:15:06
Speaker
Coming to India, you know there is ah is a different story here, essentially because you know India and China have had a lot of political issues and post the military conflict that we have in the early 60s, India and China have never had a very ah you know cordial relationship to say.
00:15:30
Speaker
And recently also there were some border skirmishes because of that ah you know the Indian population, the sentiment is not really very hospitable towards China. and So, so um Indian government post that military issue about five years ago, they came up with a new ah law or ah or ah or a rule where in the border touching countries, the countries which touch India's borders physically, they need special ah permission from Indian government
00:16:12
Speaker
to ah make investments or set up businesses in India. So, ah I mean, this rule was ah brought in in essentially to curtail Chinese activities in India because Chinese are ah companies like Xiaomi,
00:16:31
Speaker
et etc are very very higher are very active in the the market in the cell phone and consumer durables space because you know they can churn out ah very very competitive products cell phones and whether it is a microwave oven or a refrigerator and stuff like that Coming to the automotive industry, so because of this rule, Chinese companies are not able to invest or enter India.
00:17:02
Speaker
So it's a kind of a you can say it's a kind of a protection that the Indian government provided to the Indian industry. ah So There is no restriction on the normal trade. we You can import or export ah of materials, parts, machinery, etc. There is absolutely no problem. But when it comes to ah putting money here, investment here, then there is a problem. So it's a it's a kind of a restriction, trade restriction that the government has put in.
00:17:38
Speaker
on Chinese companies and because of that Chinese companies are not ah ah able to enter India ah except a a company like MG which is a part of the SAIC, know, SAIC China and they acquired the Hindustan Motors facility which was again acquired by GM and they bought it over from GM and they but it's a small facility I think they do close to about probably about 50,000 or SUVs which are EVs so other than that in the automotive space there is no Chinese OEM here there are a few ah Chinese JVs or technical agreements
00:18:31
Speaker
which exists with Chinese companies and Indian partners and they continue to do business in the Indian component side or auto component side but in the OEM ah side you know companies like Photon for example a Chinese big truck company they came to India they also acquired some assets here long back probably around 10-12 years ago, but they could not put up a factory here because of the ruling that I mentioned to you.
00:19:05
Speaker
So overall, yeah it would be ah it would be right to say that there is a protection as far as China is concerned for the industry.
00:19:20
Speaker
and ah most of the if you take the car segment it's hugely dominated by maruti's suzuki suzuki as you know it's a japanese company and even after 50 years they have been here today they still control about 42 43 percent of the market which is ah very very significant and number two is the koreans the hyundai and kia So combined, they have close to about 20-22% market. So number one and number two control about 65% of the market.
00:19:56
Speaker
So and then, you know, the remaining 35 is split between Indian OEMs
Entering the Indian Market: Strategy and Challenges
00:20:01
Speaker
like Mahindra, Tata and others, Honda, Toyota, Nissan, etc.
00:20:10
Speaker
so uh that's the overall landscape of the indian industry uh and i ah don't see that changing much as far as chinese are concerned uh near future i think the that i mean that gives a opportunity to the indian oems and the japanese and the koreans here to expand their market And it's kind of a bit of a protection as well as China goes. aware of of that particular method yeah protection that
00:20:50
Speaker
especially specific to border countries, yeah sharing a border with India. But it's fascinating. It seems to be quite effective. And and that has addressed that issue um that that you studied 25 years ago.
00:21:05
Speaker
Why don't we move on a little bit for the companies that do want to tackle the Indian market? and to talk a little bit about the challenges that that they face and and get into a little bit more detail there.
00:21:18
Speaker
So in this case, we're talking about countries or companies from countries that don't share a border with India. there's There's a whole litany, I think, of of different challenges that they would have to face. And I think you've touched a little bit on some of them, and maybe we can dive in just a little bit deeper.
00:21:34
Speaker
um know The first one that you had mentioned already is some of the regulatory complexity that that they face. Could you highlight that a little bit? Yeah, and John, i would you know when when you talk about challenges or being being faced by a new entrant into India, I mean, it's it's pretty natural for any foreign country ah to have some sort of challenge when you enter a new country. I mean, that it's the same for an Indian company ah probably trying to do business in Europe or US. s you know it's it's ah
00:22:11
Speaker
It's pretty natural. But having said that, you know, ah for the benefit of the companies who are looking at India, because it's a huge market, as i said, and a very, very robust economy growing.
00:22:28
Speaker
close 8% year on year and we are already number 4 in terms of GDP. We just beat Japan. ah And now there are projections that India will become top 3 economy.
00:22:46
Speaker
now meeting probably Germany in next four to five years. So it's it's a 4 trillion US dollar economy today and expectations are by 2030 will ah be somewhere in the within the site of 8 to 9 trillion US dollars.
00:23:08
Speaker
So obviously it's a massive market and very very vibrant democracy unlike some other countries where the state has very tight controls.
00:23:20
Speaker
So the issues I would sort of segment them into one is the regulatory or the government or the bureaucratic side of it.
00:23:35
Speaker
Then the the technology side of it, number three would be the economic issues or challenges and number four would be the cultural and the human resource related challenges.
00:23:50
Speaker
So coming to the regulatory, yes, India has had a legacy of a huge amount of bureaucratic procedures and processes which we largely inherited from British.
00:24:03
Speaker
you know when you know we were ruled for almost 300 years by British. So when once they left, so they left with a lot of baggage and it took a long time for India to wriggle out of those, ah you know, bureaucratic procedures and processes and all those legal laws, e etc, e etc. So but of late, you know, ah starting 1991,
00:24:34
Speaker
when India opened um the economy to foreign investors and the companies want to come and invest here. Before that, it was a closed economy. Foreign companies were not allowed to invest, e etc.
00:24:47
Speaker
1991 was the first one when we opened the doors and the economy started growing and foreign companies came and all the foreign investments started happening.
00:24:58
Speaker
So since then India has moved quite a lot and we have had the subsequent decades we have had a lot of sort of cleaning up of these procedures and a lot of laws ah which were largely irrelevant ah in in the modern ah way of doing business got obsolete. So today i would say ah ah barring few areas, you know, the the company, the business set up and doing business, ah even repatriation of money back to your parent country is 100% allowed subject to all the taxation, etc. So it's a very, very sort of, I would say an open business culture, particularly in the context of automotive. Automotive is a 100% open sector, which allows 100% FDI for indirect investment.
00:25:57
Speaker
you can have your 100 ownership in a company that you want to set up in india the typically uh setting up a private limited company or llc takes uh between three to five days and there certain yeah applications etc have to be filled up which are almost all of them are online now and you get your cert certificate of registration along with your tax number etc and all the filings e etc are largely online now and they are very very i would say customer friendly taxation yes i think still we we have the vat what we call gst the general service and taxation wherein all the goods manufacture goods and services that you provide
00:26:50
Speaker
they need to be taxed with a certain amount so there is a uh i would say uh it still needs a little bit of refinement in terms of procedures and processes and filings etc so if you ah have a good chartered accountant or or company secretary there they can take care of these so Overall, I would say um we we are much much better placed today than few decades earlier when I used to work in the early stages of my career.
00:27:22
Speaker
So those most of those complexities have gone. But yes, we still need to do work. So this is as far as the regulatory side of it is concerned.
00:27:34
Speaker
If I may ask a question. um Yeah. I understand that there are powerful states within India. um Does the federal versus state add any complexity or is all of this occurring more at a federal level?
00:27:52
Speaker
For example, in in the United States, you have one country, but 50 states, but each of the 50 states has differing regulations and different laws, and and that adds some complexity to companies coming in.
00:28:05
Speaker
See, India is a federal country. We are we are a combination of states. We have 22 states and there are some union territories, etc. So ah the regulations, there are central rules which apply to all the states.
00:28:20
Speaker
There are certain rules, certain category of rules. For example, deciding whether automotive is an open sector or not. is is the job of the central ah government. you know They will decide and they they can pass ah pass a law.
00:28:36
Speaker
and For example, sectors like nuclear and defense and some aerospace etc are restricted, wherein the foreign companies cannot have a ah cannot have a uh major shareholding which is uh quite understandable because a lot of it deals with the national security for example or or nuclear power right so those are kind of uh the list or there is there is there is a list of items where central government will deal and
00:29:14
Speaker
then there is a certain list of items where the state government is empowered to deal with. They can pass a law and they can give, for example, if you approach a state like Tamil Nadu, which is in the south, where Hyundai has set up the facility, Runa Nissan has the facility.
00:29:35
Speaker
and BMW and several others, a very, very progressive state and Maharashtra in the West. So that those these states are empowered to ah give tax exemptions, for example, or any subsidy or any other benefit. For example, they can allocate free land, a parcel of land of maybe 200, 300 acres.
00:29:58
Speaker
that you wish to have for your project and the state government is empowered to give you these facilities these subsidies these uh financial as well as fiscal benefits so that's how India works so there are there are certain uh items which the central government controls there are certain items which the state government controls And there is something called concurrent case where both the central as as well as the state have a role to play.
00:30:29
Speaker
So that's how our constitution is structured. Yeah. Okay. Now, fascinating. It's ah it's multi-layered, which which is quite, quite interesting. yeah And it's also good to see that the states have, let's say, a little bit of competition, i would say, between them for securing some of those investment partners.
00:30:51
Speaker
You mentioned the next factor, which is a challenge in India was technology. what What technology are you referring to there? Yeah, and that's that's a very interesting discussion, John. And, you know, when you talk of technology in the context of automotive industry, ah you see the auto industry is ah moving exponentially on the technology curve.
00:31:17
Speaker
as we know that a lot of it is driven by electric vehicles which is essentially a change of fuel you know from whether it was gasoline or diesel or cng so now we have this alternate fuel which is the battery so the fuel mix again in the battery you want to have a base the full
Understanding the Indian Consumer and Market Dynamics
00:31:40
Speaker
battery or you want to have a hybrid plug-in etc are different categories And this is one one part of the technology which has evolved and spearheaded by Tesla, as we all know.
00:31:55
Speaker
And the second aspect of technology which has ah very very rapidly evolved and it's still you know evolving and developing at an exponential pace is the software side of the vehicle.
00:32:10
Speaker
So software cuts across all the layers of automotive the components the system the subsystem and the full vehicle itself and also going beyond the vehicle you know you have various uh uh today wherein uh you're connected uh and for example you're making payments uh you know using your ah connecting through your vehicle uh then the data that your car is catching a collecting and processing and then the oems are able to monetize the data and also the ota's the software updates which is again a new monetization aspect which has developed so ev being a new vehicle ah sort of fast-track these technologies so um ah what i in in the context of indian automotive <unk> industry
00:33:12
Speaker
a lot of it is is yet to come you know uh let's talk about electrification and and as a technology evs in india started about uh six seven years ago mostly through the chinese imports and lot of traders or e importers em imported these low-end vehicles the scooters and three-wheelers and put them in the market and they were just out there to make ah quick money just to give you ah context of it, you know there were more than 400 brands of electric scooters and three wheelers running in India, more than 400. So they were not OEMs.
00:33:54
Speaker
Obviously they were not manufacturers or they were not OEMs, they were simply traders. They were buying this low end stuff ah from China and selling it here.
00:34:07
Speaker
you know just Just to give you an idea, you know, ah typically a scooter, a two wheeler in India, it it sells for about a thousand uh us dollars so they they will typically buy it at uh 600 700 dollar and and make the money make it make a quick profit and sell it so that uh was the mode you know and then now is the time when the serious oems like uh bajaj which is a big two-wheeler company even honda they have come up with their
00:34:45
Speaker
ah designed and developed and technology based product scooters okay so So this this is a challenge, you know whether you want to go with a trading ah mindset, you want to import from Europe or US and you want to sell here or you want to develop it ah for the Indian market.
00:35:07
Speaker
So this is a piece of the puzzle that many companies miss and then they find it hard to compete with ah the local makers or giants like marou Suzuki and Hyundai, etc. that I mentioned.
00:35:22
Speaker
So I think the technology challenge is in two segments. One is that do you want to play and and and in in this new technology space and how do you want to play?
00:35:36
Speaker
ah is Do you want to really bring something like a fully automated auto autonomous car to India? Is that the right technology strategy for you?
00:35:48
Speaker
Or you want to use the technology and customize and make it something which is suitable for India? that's That's the one segment of the technology problem. you know And the second segment would be making it cost effective.
00:36:06
Speaker
ah I believe that you know technology is the answer ah to this whole cost competitiveness. ah Whereas people think it otherwise. you know they They tend to think that if I bring a high technology product or I put in ah technology on a higher level, it will become expensive.
00:36:26
Speaker
But most of the time, it doesn't work that way. If you engineer your vehicle, you use the technology in the right way. then I think you have a if you have a good technology product at the right price.
00:36:42
Speaker
So that's the sort of technology complexity or technology problem that you need to solve. Don't just copy paste something from Europe or US or some other part of the world and bring it here and think that it will sell because it's a huge market. Yes, the market is huge, but the market is also very sensitive in terms of what it wants, what what the customer wants, at what price, what features, what brand, what after sale, etc. etc So ah I think technology challenge is something which needs to be studied deeply by the companies who want to come here.
00:37:27
Speaker
and then find your own solution to it, oh that's where it's going to work. that That's my view. Do you find, ah thinking about the customer thermometer, consumer requirements, um is it is the is the typical Indian consumer very educated when when they shop for vehicles?
00:37:51
Speaker
um you know You hear stories of the German customers who read endlessly about the product before finally placing an order. um do Do the Indian customers educate the themselves highly on the product as well? Or do they come into the showroom looking to be educated?
00:38:09
Speaker
Yeah, John, it's an interesting question. You see, ah we have to segment the customer ah on on the product side. For example, somebody who buys a three-wheeler.
00:38:20
Speaker
okay Now, a three-wheeler or a whether it's a rickshaw or a cargo carrying vehicle, now it's a commercial vehicle. It's not a personal vehicle.
00:38:32
Speaker
ah He's going to use it to earn money out of it. So he has to run it, let's say about 10 to 12 hours a day and make enough money so that he can pay the the the interest on the borrowing that he has taken for a loan that he has taken for that vehicle.
00:38:52
Speaker
and meet all his expenses, whether it is fuel or electric charging or you know if he has a driver salary of that person and then take back some money home. right So that is how the equation works here. a day, he needs earn about 1000 rupees.
00:39:11
Speaker
he needs to earn about one thousand rupees okay So that's the kind of, but yeah. ah so So that's, so when when he comes to the ah to the showroom and he wants to buy a vehicle, he has to be absolutely sure that A, that vehicle will run flawlessly without getting into any maintenance or or issues or something breaking down, that sort of issues.
00:39:42
Speaker
and it must stay with him in that condition so that he is able to earn that thousand rupees which is which is about 12 to 13 US dollars a day ah for five years, at least you know four to five years.
00:39:59
Speaker
During which he is going to earn enough money to pay back his loans and meet all his expenses as well as save enough money to buy another vehicle. Okay, so that's like an earning member of the family for him.
00:40:13
Speaker
So when he does that for him, it's a very important decision to make whether he's going to buy Bajaj three wheeler or TVS three wheeler or Mahindra or Piaggio or some of the newcomers like Omega.
00:40:28
Speaker
So, you know, he is pretty well informed. And today, you know, it's a digital age. You can Google anything. Plus they have their own WhatsApp groups through which they chat they take feedback from their peers, their group members as to how is the new vehicle, for example, Omega, how is Omega vehicle doing? you know Does it break down on the road or you have had any problem with charging or is the battery good enough after two years, etc.
00:41:00
Speaker
So I would say that they are very highly um informed ah in this segment. So three b like Whereas go to the other segment like buying a car. Now car is an aspirational purchase in India. You know you aspire to have a car.
00:41:18
Speaker
The car ownership in India is still at a very very low level compared to the global standards. you know We still are just about 20 people, 20 out of 1000 own cars. Whereas in yeah global economies, you know it's probably 700, 800 out of own car. So car ownership is fairly low even today in India, even though we have a almost three and a half million cars produced every year.
00:41:46
Speaker
So what happens is ah somebody who is going to buy the first car okay for for him. So he is probably around 25, 27 year old kid out of his graduation. Then he has a job and he's earning enough.
00:42:02
Speaker
to buy a car which typically costs about 500,000 Indian rupees. ah so so So in that bracket, if he is going to buy a car, obviously he is going to do a lot of research and also have a have a brand pick up a brand that appeals to him.
00:42:23
Speaker
So as I said, 42% is market share of Suzuki. So if you go to Suzuki, now Suzuki offers a choice of maybe about 50 cars. So ah it's it's more of a rejection problem than a selection problem. You have to reject 49 and buy one ah car out of that full but product basket.
00:42:47
Speaker
so Typically now the data shows in the family and Indians are still quite close knit family and in the family, the decision makers or decision influencers are the young people somewhere around 15, 17 year old kids, because they are much better informed than the father or the mother about which car, what features, how does it look, how does it behave, etc.
00:43:16
Speaker
And they have something to show. to their friends. So you know that's how the the the the decisions get influenced that, okay, I don't want to buy a Suzuki because it's seen as a bit of a low-end thing. I'll buy a Honda, for example. you know So the 15-year-old kid will influence and the the father who is going to who is going to write the check of maybe about 8,000 or $10,000 that don't want a Suzuki because you know my school friends are not going to like if I travel that. So I need a probably a Toyota.
00:43:55
Speaker
ah and so So the answer to your question is I think the the awareness, the knowledge of car though in ah in and in different segments is at different levels. you know In the lower segment where it is a money earner, he is very well informed of how it behaves, what is the technology behind it on the over a period of time, whether it lasts enough for him.
00:44:25
Speaker
Whereas in a higher segment like car, it's more about the visual appeal, the brand, how it looks and what what kind of features it has. e Etc. Not so much about how the engine behaves or or whether you have a CRDI or a, you know, what kind of ECU you have, right?
00:44:45
Speaker
So that that's how it is. It works. So then you also pointed out that that economics plays into this. Were you talking about household economics or are you talking about the general economy?
00:44:58
Speaker
You see, in the context of the newcomers, new entries new new companies who are entering India, you need to understand the Indian socio-economic ah structure.
00:45:12
Speaker
okay What I mean is economy in the city is vastly different from economy of the ah semi-arban or rural areas of India.
00:45:25
Speaker
cities like Delhi, Mumbai, Bangalore, Chennai, you know, ah typically the earning capacity of individuals is high because the cities offer a lot of economic opportunities in terms of jobs, in terms of businesses and the work that you you can find here as compared to some of the smaller cities like we call them tier one or tier two cities.
00:45:52
Speaker
oh so So that's how ah you know the the economic structure of our country is.
00:46:05
Speaker
ah And now you need to you know ah position your product so that you are, what are you targeting? Are you targeting high-end car, for example? Now high-end car, obviously you have to target these metros, these five, six five six bigger cities like Delhi, Mumbai,
00:46:24
Speaker
et etc or if you if you are targeting a slightly lesser variant of the car then you can sell it in the other areas of the country so you can't have you know one size fit all in india that's the mistake that many companies make ah the reason maruti suzuki is successful is that they have such a huge big basket of products and so many variants for for the entire mass market you know They start with 300,000 rupees and they go up to 3 million rupees.
00:47:02
Speaker
ah So that's a huge band. okay And they target the right customer, right price ah with their product. So I think in India, the economics work in a little different because the country is is developing and a per capita income of Indian India is still very, very low is just about 2200 US s dollars ah per capita, even though the country is about 4 trillion dollar economy, but because the population is so high, the per capita income is high. The income disparity is also very, very high.
00:47:39
Speaker
You know, ah almost 60% or probably 70% of the earners are just about 1% of the population. So ah that income disparity, the income band that Indian population resides in, that needs to be understood by the companies who want to do business here.
00:48:04
Speaker
And don't just bring any standard off the shelf product from your stable US or Europe oh and and and imagine that it will sell here because it's not going to work that way.
00:48:20
Speaker
That's very interesting to understand, which of course leads us then almost directly into the the human aspects. You mentioned human resources and the topic of the entire podcast culture.
00:48:34
Speaker
What ah role does that play in the auto industry in India from your perspective? Yeah, John, I think out of all the other factors that we mentioned, I think human resource or human aspect and the whole socio cultural aspect of India is the most important, according to me.
00:48:53
Speaker
And I've seen companies fail. ah having great products having great technologies and massive power but they could not figure out the social social cultural aspect of india uh gm as you know ah failed here ford backed up from here nokia could not succeed here On the other side of it is Japanese company Suzuki makes an enormous amount of money here. they They are now setting up a new facility, new plant, which is almost ready. And the the capacity is 4 million cars a year.
00:49:30
Speaker
Today, the entire Indian car industry is less than 4 million. Maruti Suzuki itself wants to do 4 million. So that's the kind of growth they forecast that, yes, India is going to become 8 10 million car market in the next five to six years.
00:49:48
Speaker
ah Korean companies, Samsung, LG, Hyundai, they make huge a amount of money. ah So on one side, we have some classic failures and the other side we have, you know,
00:50:04
Speaker
stupendous success and companies keep growing keep putting in money here so the question is you know what makes them ah so succeed and the other side ah fail miserably i think the answer is ah the japanese they studied india very very in in detail they have to sort of deep ah the the social aspect of it, how Indians live, what do they eat, how much they save, how they make purchase decisions and so and so forth. And also when it comes to work, because you have to work with the Indian talent here, you have to hire people here and you understand the way, for example, a 22 year old kid who is just out of his college, how is he going to adopt
00:50:57
Speaker
to working in your company because they are very
Opportunities for Startups and Conclusion
00:51:01
Speaker
talented. they're As an individual, I think Indians are very highly talented individuals.
00:51:07
Speaker
But there are issues. Indians find it very difficult to work in teams. So we need to teach them. Team working, project management, time management. These are the areas where we need to teach and we need to teach them like school kids, you know, and that's where I used to do, you know, and that is the reason why Suzuki is so successful, Honda is so successful, Toyota is so successful, and GM and Ford could not because somewhere they implanted their European style or, you know, let's say Germans, you know,
00:51:43
Speaker
They have a very straightforward way of working. you know ah they each Each guy will do his individual job, in individual work that has been told to him or assigned to him, and nobody will bother him. you know Reminding is is very offensive if you remind somebody.
00:51:59
Speaker
Whereas in Indian culture, typically, if you do not remind somebody, then ah you can be sure the work will not get done. That's a typical where the Indian individual works now and the in the industry, you it can't be that way that you remind somebody every day, then you will have to have a reminding the department in the company.
00:52:22
Speaker
So the the the way to change that behavior aspect is teach these individuals, these young people that, hey, in the industry, there is something called program management. There is something called time management. There is something called resource management, right?
00:52:38
Speaker
If car has to be launched, then it has to be done in a particular day. That that day is fixed. The milestones are fixed. The events are fixed okay prior to that car. So that is where I think the Japanese and the Koreans did very well teaching and and and training and retraining and reskilling, etc.
00:52:59
Speaker
Whereas the other companies, they they could not do it. So I think this whole socio-cultural and behavior aspect of Indian ah people needs a very, very deep study and understanding.
00:53:20
Speaker
And that's exactly what this entire podcast is about, is is that success or failure is often predicated on a company's approach to working with local cultures. I think this is a ah great point that you've just made.
00:53:34
Speaker
Now, these are great insights on the culture. As we near the end of the episode, I wanted to give you the opportunity to you know kind of summarize from your side, perhaps some of the the the key points that you wanted to close with.
00:53:50
Speaker
Yes, John. I think, ah we you know, I kind of gave you an overview of what India is. Then we also dealt a little deeper on the micro side of it and how the Indian industry works and what are the kind of challenges or issues that you you face or you're likely to have.
00:54:13
Speaker
I would just say that you know these are not insurmountable issues or challenges and and this is is is very natural for any a company if you're based out of Europe or US or any other part of the world.
00:54:28
Speaker
that you are looking at India, then this is the right time. The opportunities are humongous ah in the context of the new age automotive industry.
00:54:39
Speaker
Even though the powerful companies I mentioned, Suzuki or Hyundai or Kia, etc. are there, but that I personally, I think that, you know, the the success of past does not guarantee ah success of your future.
00:54:57
Speaker
And I think ah ah the the new age of automotive era that we are witnessing today, you know whether it's led by ah electric vehicles or software-defined vehicles or any other you know new fuel-led vehicle, I think this is the era where if you have a technology and many of the new startups that we keep seeing,
00:55:24
Speaker
and have we having a great technology product you know and based out of US or yeah Europe, I think this is the time to come to India and disrupt this market. I believe that only startups have that power to disrupt.
00:55:40
Speaker
And it's been seen time and again. Disney was not worried about Netflix. Walmart was not worried about Amazon. But they did it. I think this is something which can be done in India and and with a bit of a careful planning.
00:55:57
Speaker
And this is where we are here. We are a group of seasoned professionals and we work with you and we help you and we ensure you ah settle down here and navigate through all these minor issues that we just mentioned.
00:56:15
Speaker
And we'll be very happy to handhold any of you here and ensure that you you have the right partnerships in place to avail these huge opportunities on Indian market.
00:56:30
Speaker
I think today, ah just to wrap up, you know, the market is massive, as we mentioned, close to about, you know, 400, 500 billion US dollars. And also the opportunities to export from India are are huge.
00:56:45
Speaker
And we are seeing this lot of jobs are moving. ah not only from US s and Europe but also from China because the customer out there is looking for China plus one strategy and this is where India comes in very very well placed on the opportunity pyramid and I think this would be a great opportunity for you guys to look at the cost ah competitive advantages that India offers to back to export to your country and this is where we can support you we can work with you as part of you and we can ensure that you have a great great success so oh that's all from my side john and i'll be more than happy to answer any specific questions from any of your viewers or listeners if they have and my
00:57:40
Speaker
The homepage is I am the founder and managing director of the company and me and my team would be more than happy to welcome any of you at whatever stage of your business are you are in. If you are looking to evaluate, looking to have a market study or dipstick study or whatever, we are more than happy to work with you.
00:58:10
Speaker
Thank you very much, John. Thank you for sharing the insights into the market and where the opportunities lie and how to navigate those. Thank you also for sharing the information about your company and how you're able to help your clients enter into the Indian market. I'll make sure that some of the appropriate contact information is in the show notes in the podcast as well.
00:58:35
Speaker
So thank thank you again for joining us today. And I think with that, I'm going to wrap up the episode. So to our listeners, thank you very much for joining today on the autoethnographer. I hope that you enjoyed our small trip to India and got a lot out of the podcast with regards to how to enter the market, how the culture works and how success can be found or lost if the wrong approach is taken.
00:59:03
Speaker
Until next week, keep on driving.
00:59:08
Speaker
Thank you for joining us on today's journey. Please remember to like and subscribe to The Auto Ethnographer and leave us a rating or comment. For more information, visit our website at auto-ethnographer.com.
00:59:20
Speaker
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