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Hyundai’s global ascent is cue for Indian car-makers to shift gears

by Index Investing News
December 29, 2022
in Opinion
Reading Time: 6 mins read
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Just days ago Hyundai, the Korean company best known for its cars, snuck past General Motors to become the third largest car-maker in the world. Astounding, given that its international journey started only in the eighties. The ascent is notable for a couple of reasons: First, Hyundai is neither German nor Japanese origin, both nations that have dominated the auto world across the spectrum from mass market products made by Toyota, Honda and Nissan to premium and luxury cars by the likes of Volkswagen, Mercedes-Benz and BMW. Second, Hyundai was never known for either design, or top engineering compared to other Asian juggernauts like Honda and Toyota and even Nissan.

After all, Hyundai was at best a mid-tier player some 15 years ago with no real differentiators.

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The change in pecking order raises the question whether Indian car-makers such as Maruti-Suzuki, Mahindra & Mahindra and Tata Motors can pull off a similar feat in the near future.

So far, Maruti, Tata and M&M have dominated markets on account of price but not every consumer market cares about that –– especially in developed countries like the USA and those in Europe.

That leaves differentiators such as technology, design and prowess in EV vehicles as core competencies for them to play with. To be fair, some of that is happening already.

For example, Tata Motors has vastly improved its design and body language of its passenger cars while integrating its vehicles with EV tech even when it’s still evolving. On the other hand, M&M has seen modest success with its SUV the Roxor which it launched in America and which stands for rugged utilitarian functionality and is the preference of a few purists. M&M has held supremacy in SUV products but scaling that comes with challenges. The company would have to also roll out competent sedans and urban SUVs that go head to head with global leaders if it were to drive volumes.

Market leader Maruti (Suzuki) did make a play in America several years ago but had to phase its entry out because of a lack of sales traction. At the time, analysts took note of the fact that it lacked a robust SUV portfolio and was unable to compete on price alone, which by the way Hyundai’s sister brand Kia was already doing well enough. Given that Maruti Suzuki has partnered with Toyota in recent times to specifically address its SUV portfolio, that’s a gap that could potentially be filled and the future could see a re-entry in foreign markets.

At a broad strategy level, auto companies have more or less two options open for them when they want to.

Either they go top-down and enter big markets where consumers have deeper pockets and compete with the best of the trade with sophisticated high-end cars that have the latest tech; or they go bottom-up and target small but growing regions that include African markets, smaller Asean countries and parts of Latin America where competition is niche in certain segments. The second, however, is a tactic that analysts say is best deployed as part of a two-pronged gambit that leads to upping the ante in terms of product technology and price.

Tata Motors is one manufacturer that has not only begun the transition but also waded into making next-generation tech like EV drivetrains available in its passenger cars in India, along with futuristic design and styling elements. Given its symbiotic relations with Jaguar-Land Rover, it’s a fair assessment to say that the seamless back and forth of at least some design elements as well as technology and distribution and sales could potentially be harnessed in the years to come.

The bottom line is if Hyundai, which was not a top-ranked car-maker until recently, can produce world-class cars, what is stopping Indian car-makers to do that? The answer is players that are on the top of the heap here will have to re-examine their core competencies and determine where they want to position themselves. The choices will either be technology (EV), style and looks; cost and price (which is limiting); or reliability in terms of vehicle longevity like in case of Toyota.

China has, for example, side-stepped the ICE-drivetrain game and leapfrogged into the EV world by not just creating an array of electric OEMs (Geely, BYD, SAIC, and Chery Motors) but also setting up a stronghold in the area of electric battery manufacture with the likes of Contemporary Amperex Technology Co. Limited which is arguably the world leader in its area.

Ultimately, the car game is a long term one in which technologies, platforms and component manufacture are all designed and built out decades in advance. In some senses, Indian car-makers may have missed the boat on ICE cars but if they stick to the potential growth of EVs and zoom in on core competencies, and roll out market-specific strategies, there’s a chance that a decade from now the world could be buying cars made in India. Of course, for that to happen, OEMs will also need to rope in international talent in greater numbers, and not just in C-suite positions, but also across design, marketing and factory roles as well as throw in their financial heft in competing with the best there is out there.

Elsewhere in Mint

In Opinion, Sunil Duggal tells how to grow India’s mineral-intensive new-age economy. Sunjay Kapur says India is well-placed to gain from shifting mobility landscape. Tim Culpan brings positive news from one of the worst years for tech sector. Long Story reveals how telehealth firms are flooding TikTok and Instagram with misleading ads.

Catch all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint.
Download The Mint News App to get Daily Market Updates.

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