The ripple effect in the Indian auto industry

For the longest time, India has been a market for mid and small sized cars. For the likes of all major automakers, the entry level mid-sized cars have accounted for maximum sales of all passenger vehicles sold in the country. 

According to the latest data from Society of Indian Automobile Manufacturers (SIAM), the sales of Passenger Vehicles grew by 9.23 percent in April-March 2017 over the same period last year. Market leaders, Maruti Suzuki and Hyundai Motors together account to about 65 percent of market share in India today. Indeed, the top two's dominance of the market becomes obvious when one considers that their incremental volumes are more than what some of their competitors sell in a year. Therefore, the retreat of GM makes the automakers’ wonder where its profits have been lagging and analyse their struggle with sales in the country.

General Motors has been in trouble since the financial crisis which hit the US and the world in 2008. The $ 80 billion bailout provided by the US government was enough for them to see them out of trouble for a while but it failed to completely recover especially in India. One, the company launched cars which were very expensive for the Indian market and second, it failed to understand the Indian consumer sentiment about getting a robust after-sales service. This is where companies like Maruti Suzuki, Hyundai, Ford, Volkswagen and Honda differ. They assessed and understood the need immediately and created a strong sales and after-sales network along with offering the consumer extended warranties and service packages as a part of the buying the car, giving the consumer a sense of trust and faith in the brand. 

The Indian automotive industry has also helped many with jobs in various functions like production, R&D, sales (direct and via dealers), service centres and other enabling divisions. Moreover, this sector contributes 7.1 percent to the nation's GDP and almost 50 percent of India's manufacturing output, making it one of the largest employers in the country. Hence, in a complex market like India, it requires skilled and talented people across levels to overcome hurdles and drive business successfully especially in sales. 

Retention is a challenge, especially within dealer sales due to very aggressive sales policies. Very strong training mechanisms and retention policies will help in sustaining the attrition and experiencing the returns on the investment. In the words of Richard Branson “Train the talent that they are able to move, and treat them so well that they don’t want to”.

Road ahead

While the government talks about Make in India initiative, the move of GM could be a minor setback to the program. Also political uncertainties in certain states do not help matters. For example, Renault Nissan has put its investment plan of Rs 500 million on hold in Tamil Nadu until there is clarity about the government. 

In a fiercely competitive market like India, it is also important for car makers to be price sensitive and strengthen service quality to ensure customer loyalty. The Government of India and the automobile industry will have to together devise a two way road map to encourage the next generation of opportunities, to make the Make in India campaign a real success.

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Swapna Amin is the director – engineering of Spring Professional India