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Automobiles

Maruti Suzuki and Hyundai tighten grip on India as U.S. rivals exit

EVs offer rare chance to disrupt dominance of the 2 market leaders

Customers look at Ford Figo Aspire car in a New Delhi showroom. Ford said it will exit Indian production by June 2022.   © Reuters

MUMBAI -- The Indian auto market dominated by two companies, Maruti Suzuki and Hyundai Motor, is becoming even more so now that Ford announced its departure last month following the exit of American compatriot General Motors last year. But electric vehicles could challenge the duo, as U.S. upstart Tesla prepares to enter the market.

"Despite investing significantly in India, Ford has accumulated more than $2 billion of operating losses over the past 10 years and demand for new vehicles has been much weaker than forecast," CEO Jim Farley said in a statement.

Ford Motor planned to stop making autos for the Indian market by the end of September and said it would cease production of vehicles for export by June 2022.

The American carmaker entered the Indian market in 1995, eventually building local capacity to 440,000 units a year. But the No. 7 automaker worldwide by sales volume sold only 48,042 vehicles in India during the previous fiscal year, according to the Society of Indian Automobile Manufacturers.

Ford held less than a 2% share in passenger vehicles. In 2019, the company said it would merge production with local automaker Mahindra & Mahindra, but those discussions fell apart by the end of 2020, mainly due to the market fallout from the pandemic.

Ford will continue to sell imported vehicles in India. But finished autos are subject to heavy tariffs, so sales are projected to drop sharply. GM stopped selling vehicles in India in 2017 and ceased local production for exports in 2020.

India is reportedly the fifth-largest auto market, with 3.28 million units sold in the last fiscal year including commercial vehicles. Maruti Suzuki and South Korea's Hyundai form a virtual duopoly, selling a combined 2.71 million passenger vehicles that year.

Maruti, a subsidiary of Japan's Suzuki Motor, maintains its brand as the "people's car" of India. The company grabbed a roughly 48% share in passenger vehicles for the previous fiscal year. Maruti Suzuki, together with the Hyundai group, control over 70% of the market.

Hyundai affiliate Kia entered India in 2019. Propelled by the popularity of its compact sport utility vehicles, the automaker sold over 150,000 vehicles last fiscal year, surpassing Toyota Motor and Honda Motor along with Ford.

Though India's population tops 1.3 billion, average income remains low. Small, affordable cars with superior fuel efficiency dominate. Maruti Suzuki's mainline vehicle, the Alto compact, sells for about 315,000 rupees ($4,200) off the assembly line.

U.S. automakers, which specialize in large vehicles catering to the North American market, primarily offer models in the 700,000- to 800,000-rupee price range in India. They also were late in offering maintenance and other after-purchase services, said an India-based analyst. Limited product lineups compared with rivals were another factor, the analyst said.

MG Motor, a unit of Shanghai-based SAIC Motor, has expressed interest in buying Ford's facilities, according to local media reports. But participation by Chinese players in India faces a tall hurdle due to border tensions between the two countries.

Other automakers are being crushed by the price competition. Honda looked to resolve its excess capacity by integrating functions at two four-wheeler plants into one last December. Toyota, whose share is just above 3%, ceased selling and making the Yaris in India last month after introducing the global strategic vehicle into the market in 2018.

Though Maruti Suzuki and Hyundai have proven their dominance in gasoline-powered cars, the next big focus will be their strategies for electric vehicles. Global EV makers are targeting India. If the infrastructure for EV charging advances and the market grows smoothly, India's auto industry could be reshaped.

Severe air pollution afflicts New Delhi and other cities. EVs account for only about 0.1% of India's market, but the government looks to raise that ratio to about 30% by 2030 through purchase subsidies and other measures.

Tesla has established an Indian arm and is expected to import EVs to the market soon.

"If Tesla is able to succeed with imported vehicles, then a factory in India is quite likely," CEO Elon Musk tweeted in July. While hinting at an Indian plant, Musk has been urging the government to lower tariffs.

Other major automakers already sell electrics. India's Tata Motors is believed to hold the largest share in this space. EVs start at the low 1 million-rupee range, and the company has sold over 10,000 units in total through September.

Volkswagen plans to sell electrics in India as early as 2025, according to local media. Affiliate Audi launched EV sales in July.

Maruti Suzuki said it will roll out EVs by 2025. But when it comes to developing EV demand, the Japanese contingent appears to be lagging behind.

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