India is the world's third-largest auto market, set for further huge growth before the end of the decade. Hyundai is banking on the $3.3 billion IPO to solidify its market position.
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00:00India is going mobile. Nowhere is the automotive market growing as fast as in the world's most
00:10populous country. Will the industry's future be determined here?
00:15India is looking very attractive as a car market. If you see just the numbers,
00:19close to four million cars now a year, which is quite high.
00:23India could be the new China in the 2030s. So it's not about making money in the next year.
00:33It's about making money in the next 20 to 30 years. And that's why you have to go to India now.
00:44How important is India for the German automotive industry?
00:48Against the geopolitical backdrop, with us wanting and needing to diversify,
00:52India is a country that we simply can't ignore.
00:58The automotive market in India, a promising but also difficult and highly complex terrain.
01:08So you have to adapt. If you don't adapt, you will not be successful. So be careful.
01:14So you have to adapt. If you don't adapt, you will not be successful. So be careful when you go there.
01:21There could be a role that the German car manufacturers play in India. My advice would
01:25be to really go in the direction of electric cars and try to position themselves as a leader in the
01:30segment in India. They will take the plunge because, you know, the EV race in India has
01:39just started. And this could be one of the big EV markets of the world in the future.
01:45I'm sure with the choice of the right products, German manufacturers have a great chance in the
01:50Indian market. It's not just the population growing fast in India. The more than 1.4 billion
01:56people need solutions for daily transportation, and car production is key to this. More cars are
02:02now being built in India than Germany. After China and Japan, the country is one of the world's
02:07largest car producers. Volkswagen, for example, has been trying to become a player in the Indian
02:12market for over two decades and has its own production facilities. But the Germans still
02:18lag far behind market leader Maruti Suzuki and some Korean and Indian companies in sales.
02:24Only around 50,000 Skodas and 40,000 VWs are sold in India every year.
02:29But the cards are now being reshuffled in India's car industry. One reason is the, in some cases,
02:35dramatic environmental damage and air pollution in the country. This is also forcing car bosses
02:41like the head of Indian market leader Maruti Suzuki to rethink their approach.
02:48In response to the tighter emission norms that the government has prescribed going forward,
02:54I think there seems to be a consensus that long-term electric vehicles will be mainstream.
03:01We are very impressed by the speed of transformation in India. And that makes us optimistic that the
03:07transformation to e-mobility can also really take off in India this time.
03:13Another reason the Indian automotive industry is setting a new course is geopolitical changes.
03:19The European Union in particular is keeping close track of how India's relationship with China is changing.
03:26They were a little bit always neutral, looking to east and west. But now they recognize that China
03:36is really playing a hard game geopolitically, also specifically regarding the South China Sea.
03:45And I was in India last year and I felt that they are now more open to negotiate with Europe
03:55and with the United States.
03:58It's no wonder Volkswagen is also making another attempt to find success in India.
04:02The Germans are now launching a cooperation with Indian carmaker Mahindra.
04:10We will supply our electric drive and battery cell technology to our colleagues in India.
04:15That has benefits. Of course, we have additional scale, so we achieve more volume.
04:19The new world thrives on volume. It benefits from the economies of scale that we bring to
04:24the technology. And I think it's good not to put all your eggs in one basket.
04:29In other words, not everything is focused on the Chinese market.
04:32German carmakers sell about 40% of their vehicles to China.
04:37Companies like VW have played a role in the country's transition from bicycles to cars
04:42and made a hefty profit in the process. But India is not China,
04:46according to Homaz Surabji, one of India's most important automotive journalists.
04:52The luxury car market in China is huge. In India, it's around 40,000-50,000 cars a year.
04:59So our volumes are concentrated at the lower end of the market,
05:03which have very small margins, very difficult for companies to make money over there.
05:09If you look at the German car manufacturers being particularly strong in selling large,
05:13luxury type of vehicles, it is not really the market that they feel comfortable with, I think.
05:20Small cars with lower margins have traditionally been more challenging
05:23for us European manufacturers. And there it is again, the topic of small cars.
05:29The ones from Maruti Suzuki have dominated India's roads for over 40 years.
05:34In 1981, Japan's Suzuki founded a joint venture with India's Maruti,
05:38which became the country's largest carmaker.
05:41Its vehicles have almost single-handedly made India mobile.
05:45They invested a lot of time and money to get into this country. That was not a fast lane way.
05:55The really basic reason for being market leader for such a long time is our obsession with customers.
06:05So all our processes, our systems, our products, everything is designed around the customers.
06:14Their cars are very suitable for Indian customers. They are efficient. They are very fuel efficient.
06:21The cost of ownership is very, very low. They are very reliable, good resale value.
06:26They can be fixed anywhere in the country. So really,
06:29it's just the way the Volkswagen Beetle was in Europe after the war.
06:44In India, new Volkswagen models are nowhere near as successful as the Beetle was globally.
06:53Why German cars are not so well received by Indians
06:56is best explained by Shashank Srivastava, the head of Maruti Suzuki.
07:04Some of the products which have been introduced by the European manufacturers here
07:11really are a mismatch of the requirement of the consumers.
07:15They sort of transported the products which were there, designed for other countries,
07:21and their basic history is about success in other places.
07:28And you can't really transport all your systems, all your thinking,
07:35you know, 100% into a new area, which could be totally different in India in that sense.
07:42Is Germany's luxury car industry missing the mark in the Indian market?
07:47Since 2010, Volkswagen has been selling the Polo there.
07:50But the perennial VW favourite, a worldwide success, has been bleeding money in India.
07:57The so-called world car does not really work.
08:01So, because every market, every client group has its own specific needs.
08:09But Volkswagen also seems to be learning from its setbacks.
08:12The company launched the India 2.0 project in 2021,
08:16four models designed exclusively for the Indian market,
08:19the Skoda Kushaq, Skoda Sport, and Skoda Evo.
08:24The Skoda Kushaq, Skoda Slavia, VW Taigun, and VW Virtus are selling like hotcakes.
08:32They've even tailored the car for Indian conditions, which is,
08:36especially with the sedan, given focus on the rear seat.
08:39Rear seat is quite important in India.
08:41Ground clearance is very important in India.
08:44And all these factors have been taken care of.
08:47The Indian automotive market is in a state of upheaval.
08:51E-mobility and the desire for more luxury are increasingly influencing car production.
08:57And lo and behold, more and more SUVs have recently been
09:00rolling off the production line at Maruti Suzuki.
09:03Suzuki, with 40 years, knows the Indian customer better than any other car manufacturer.
09:09And that's why the first electric car Maruti Suzuki is launching in the country is also an SUV.
09:16Yes, it is a mid SUV.
09:18Yes, it looks expensive.
09:19And yes, for the size, it will be expensive.
09:22We followed the customer trend.
09:24And there's no point, you know, if the SUV market is now 50%,
09:27you keep making this small hatches all the time, may not result,
09:32may not be good in terms of results for the market share.
09:34Just three or four years back, almost 50% was hatches, which is really small cars.
09:40And I remember about 10, 15 years back,
09:43hatches made up almost 60, 65% of the market.
09:47So it's been changing.
09:49Even if not everyone is cracking open champagne,
09:52the standard of living in India is rising, or at least the desire for more.
09:58People, as they earn more money, as they have more money to spend,
10:03they will move upwards the automotive chain, right?
10:06From entry-level vehicles, they will go to middle class and also,
10:10the number of luxury vehicles will grow.
10:12And I think these upwards trend, this is something which really plays
10:17into the cards of, into the hands of foreign manufacturers
10:21who have quality products, who provide good value and technological advanced vehicles.
10:28German car manufacturers would certainly not be the losers
10:32in the transformation that Indian society is currently undergoing.
10:37After COVID, Indians, which used to love to save earlier, now they want to spend,
10:42they've realized they only have one life and they need to enjoy it.
10:44So there's a shift in even mindset of the Indian consumer.
10:48And we live in an Instagram age.
10:50So everyone wants to, you know, have their fame digitally as well.
10:54So they buy cars as a way to show, to show off as well.
10:57Another thing, fortunately, is that made in Germany still commands special attention in India.
11:04So owning a German product is actually a very, very powerful status symbol.
11:17The luxury car market is a very, very important part of Indian society.
11:21Mercedes, BMW, Audi are clocked record sales, the highest ever in their history.
11:39We can only hope that we will move away from this luxury version of a German car
11:44and move more and more towards the mid-range,
11:47that mid-range vehicles will also be successful in India.
11:54That's what our manufacturers are working on.
12:03Even if sales of luxury cars are increasing,
12:06the segment still accounts for no more than 1% of the total market in India.
12:11After all, a German luxury car exported to India is three times more expensive
12:16there than in Germany.
12:17A complex system sets customs duties and taxes for foreign cars according to vehicle class.
12:23It also takes into account the proportion of Indian resources used in manufacturing.
12:28The European Union is currently scrambling to reach a free trade agreement with India.
12:34So that European cars have really a fair chance on the growing market.
12:42We've heard that there's definitely movement.
12:45Our partner association AGMA is now clearly in favour of a free trade agreement with the EU.
12:51And also in favour of tariff dismantling. That's a good thing.
12:55But of course, Indian manufacturers and even Japanese manufacturers
12:59investing in India don't want to surrender their high tariffs so easily.
13:07Indian Prime Minister Narendra Modi has been skillfully steering India's economic policy for
13:13years. Cosmopolitan and at the same time conservative and traditional.
13:19On one hand, they want to protect their growing industry by, let's say, having certain trade
13:28hurdles is a strong word, but import tariffs. On the other hand, they also would like to lure
13:33investment to their shores. And every government in such a situation need to find the right balance
13:39between free and open market and a proper protection of their growing industry.
13:47Behind market leader Maruti Suzuki,
13:49Indian companies Tata and Mahindra are making up more and more ground.
13:55Manufacturers that are fully committed to electromobility.
14:02But India is still heavily reliant on external help when it comes to battery production.
14:09That's why Prime Minister Modi has been in close contact with Tesla boss Elon Musk for years.
14:15The two are now negotiating intensively once again
14:19over optimal conditions for the American e-car manufacturer on the Indian market.
14:26Tesla's contention is that they want to test the market, they want to be competitive,
14:32and they will eventually start manufacturing cars here.
14:36Tesla is the poster boy of the EV world. Everyone wants Tesla. And it would be a great
14:42statement for the Indian government to have Tesla bring a manufacturing setup over here.
14:48And what we understand it will be for a low cost model, which is below the Model 3 right now.
14:54Another ambitious project by Chinese e-car competitor BYD has ended, however.
14:59It wanted to invest US$1 billion for the production of e-cars and batteries in India.
15:04But the Indian government stopped the factory from being built.
15:08It's no coincidence that this has happened after there was a big border skirmish or a border fight
15:16where the soldiers on both sides lost their lives. The worst we've had since in more than 50 years.
15:24So tensions between India and China have been very high because of issues at our borders.
15:29So this obviously has had an impact on, you know, let's say, Chinese companies investing here.
15:36An economic dispute between two giants, India, a country with a democratic constitution,
15:42and China, which is increasingly turning into an autocratic dictatorship.
15:49India has recognised that the geopolitical situation has changed.
15:55They were a little bit always neutral, but now they recognise that China is really playing
16:03hard game geopolitically.
16:06Is India, which is growing as a player and opening up to the global market,
16:10now the big opportunity for European car makers?
16:13The world doesn't revolve around Europe, and India is increasingly self-confident because
16:18they know they're an attractive market for many, many countries.
16:22And they're saying, well, things can't go on like this.
16:26The interests of the global south must be given much, much greater consideration.
16:33And I think we need to understand the big picture and not believe that just
16:37because they're not getting on so well with China now, that they'll run into our arms.
16:45The Volkswagen Group is clearly not waiting for the Indians to come running into its arms.
16:50Together with its Indian partner Mahindra, it's simply getting to work and producing.
17:07Currently, it is just a supply arrangement.
17:09But there is talk of going further, of maybe doing some joint product development.
17:15And I think what we've heard, and we've broken the story, actually, that there is a discussion
17:19between Skoda and Mahindra, with Skoda taking the lead for the MEB21G, which is the low-cost
17:29EV platform for India.
17:31So there's a new, let's say, low-cost or a smaller EV platform coming.
17:36And that Volkswagen and Skoda, at launching in India,
17:40they would ideally like a collaboration with Mahindra.
17:43It makes sense.
17:45Europe has long been waiting for the first low-cost German electric car
17:49that's truly affordable for everyone.
17:52Will it go into series production at Mahindra's Indian plant?
17:56The vehicles you potentially sell in India, right,
17:59or design in India, or manufacture in India, they could be attractive for other markets too.
18:05Of course, a market with a billion people, it's bound to have an impact on Europe.
18:21Against all odds, to achieve the impossible.
18:27For some journeys, even the sky is not the limit.
18:35India is taking off, and German companies are hoping to be right in the thick of things.
18:42I'm sure with the choice of the right products,
18:47German manufacturers have a great chance in the Indian market.
18:50We have great respect for Germany.
18:53It's great talent, the engineering expertise,
18:56the attention to detail, their excellence in terms of the workmanship and so on.
19:02We have a lot to learn from Germany and we hope we'll be better
19:07with the increased collaboration with Germany.
19:12Sounds like an invitation to German car makers to try their luck in India.
19:16A great adventure awaits Volkswagen, BMW and Mercedes,
19:21with a lot to gain, but also a lot to lose.