It took only one exit out of India for China to begin rejoicing. Recently, Ford Motors announced it was wrapping up its Indian manufacturing operations, effectively calling it quits out of the world’s second most populated country owing to losses and a two-decade run marred by utter failure. China couldn’t be happier, and the Chinese Communist Party, via its mouthpiece Global Times, has now sought to paint a doomsday picture of India. With the exit of Ford, Global Times wants us to believe, the Indian story is over. Following its usual pattern, Global Times called in a few Chinese “experts” to chime in with thoughts about Ford’s exit from India.
Now, Ford will supply cars to India by importing them on request. Ford has two manufacturing facilities in India, one in Tamil Nadu’s Chennai and the other in Gujarat’s Sanand. The combined manufacturing capacity of these two facilities is 4,50,000 units. However, Ford was operating these plants at just around 20 per cent of the installed capacity. So, are the Indian people to be blamed if they are rather decisive in their rejection of Ford, or is it for the company to introspect what went wrong for it in India?
Global Times has made some rather flagrant claims in its article, throughout which it quotes some ‘experts’ who have a very dystopic view of India’s automobile sector.
Claim 1: Prime Minister Modi’s ‘Make in India’ Pitch has Failed
The following lines can be found in the Global Times article:
- Ford’s move is another example of the failure of the Indian government’s “Make in India” strategy despite the so-called political partnership with the US, Chinese experts said.
- US automaker Ford Motor’s recent decision to stop making vehicles in India dealt another blow to the South Asian country’s goal to bolster its manufacturing industry under Prime Minister Narendra Modi and laid bare growing risks and difficulties for foreign companies in India.
The Truth: Ford’s exit from India was entire of its own making. It in no manner reflects a failure of the ‘Make in India’ initiative. Ford has consistently been a poor performer in the Indian market, despite a variety of carmakers entering the country and flourishing in it soon enough. For two decades, Ford has simply failed to establish itself in India. And much of it stems from a lack of commitment towards the Indian market and consumers. You can read our comprehensive take on Ford’s exit from India and the reasons behind it here.
Ford was simply not putting in the effort to carve a space for itself in India. It mindlessly established plants to manufacture 4,50,000 vehicles annually but paid close to no heed to catering to Indian consumers and strategizing its run in the country. Ford failed to concentrate on a particular segment and thought that making five of its cars available for Indians will somehow fascinate us, while also ensuring that Ford becomes a market leader.
That’s not how the automobile sector works in India. Maruti Suzuki is the market leader, and it has several cars to offer in practically every segment. Hyundai is catching up. Similarly, Tata, Mahindra & Mahindra, Honda, Toyota and Kia are posting successes because they have a definitive strategy on how to go about their operations in India, and much of that involves focussing on one particular segment at first, and then deciding whether they want to diversify their portfolio.
Anyhow, the failure of a carmaker to record a success in India is not a cross for the Modi government to carry. Ford was unsuccessful in India even before 2014, when ‘Make in India’ was not a thing.
Claim 2: Indian demand is relatively weak, while demand in the Chinese market remains robust
The Truth: The reality is that Maruti Suzuki is beginning to mark some shaky monthly sales because Indians are now buying vehicles from other makers as well. Indian demand post-pandemic remains strong, as more and more Indians are turning towards private vehicles to ensure their safety from unnecessary exposure to Coronavirus. India has the second-largest population, and if in such demography, carmakers are unable to register profits, they must seriously introspect on what is going wrong for them alone, even while competitors continue to flourish in Indian markets.
On the other hand, in numbers that speak to the untimely demise of the Chinese automobile sector, auto sales in China fell 12.4 per cent in June from the corresponding month a year earlier. China’s overall sales stood at 2.02 million vehicles in June, according to data from the China Association of Automobile Manufacturers (CAAM). According to the CAAM, China’s domestic passenger car sales growth rate was expected to reach 10 per cent in 2021, with the sales of new-energy vehicles exceeding 2 million, a record high or a year-on-year increase of 46 per cent. In May this year, China’s auto sales fell by 3 per cent on a year-on-year basis instead.
Read more: China’s automobile sector crashes
China is not getting enough semiconductor chips, and this has essentially killed the country’s automobile sector. A 12.4 per cent year-on-year drop suggests that China’s auto sector has catastrophically been impacted by the semiconductor chip shortage.
Claim 3: Foreign Companies Operating in India Now Facing risks and Difficulties
The Truth: Chinese President Xi Jinping is ravaging China’s economy. With all-pervasive crackdowns and witch-hunts aimed against private enterprise, businesses and entire sectors, Xi Jinping is making investors flee China, who are turning to India now, among other countries.
For example, China is cracking down hard on its IT and Tech sectors. The value of China’s ten major tech companies had dissipated by over $800 billion until May this year itself. So, China is not the country any tech company would want to invest in. Outflows from the Chinese tech stocks due to the regulations in China seem to be resulting in inflows for the Indian tech companies, contributing to the Indian IT and tech sector becoming one of the biggest gainers following the coronavirus outbreak.
Despite the UN Conference on Trade and Development report stating that global FDI flows plunged by 35 per cent due to COVID, FDI in India increased by 27 per cent to USD 64 billion in 2020 from USD 51 billion in 2019. The Indian equity markets, meanwhile, have now emerged as the best-performing among global peers on a year-on-year (YoY) and year-to-date (YTD) basis on the back of robust retail and institutional participation and better-earning prospects. India’s gross domestic product (GDP) grew at a record pace of 20.1 per cent in the first quarter of FY22 — the highest-ever GDP growth in a single quarter. Thereafter, the GST collection numbers released on Wednesday for August showed a 30 per cent increase from the same month the previous year and, crossed the $1 trillion mark for the second consecutive month.
India’s economic performance, and as a consequence, foreign companies’ attraction for it remains unscathed, which is not the case with China.
China’s Clone Car Industry
Chinese companies have been silently stealing designs of every expensive car you have wanted to lay your hands on. Chinese copy cars industry is bigger than you can imagine. You name any car that you always wanted to own, and we bet that China has produced its clone. Mercedes GL Class, BMW X1, Toyota Innova Crysta, Porsche Cayman, Lamborghini Diablo, Mercedes Benz C-Class and Cadillac Escalade, McLaren are just some of the world-class cars that China has copied.
China’s copy-paste domestic automobile industry is an embarrassment. China does not even bother to change the logo of vehicles it manufactures after copying their exterior and interior designs from foreign carmakers. As such, for China to try and paint a doomsday picture of India’s automobile sector is indeed rich, and could not be farther from reality.