COVID deals new blow to foreign carmakers’ Indian dream

Vehicles are pictured at a toll post in Mumbai, India, August 13, 2019. REUTERS/Francis Mascarenhas

NEW DELHI, June 18 (Reuters) – Foreign automakers’ hopes of a booming Indian car market are fading fast as a brutal second wave of COVID-19 infections and limited government room for more stimulus spending suggest a recovery could lag far behind China and the United States.

Carmakers that saw nearly a decade of Indian sales growth wiped out in 2020 are expecting a bounce back in demand this year. But it is likely to be led by small, affordable cars – a sector dominated by homegrown leader Maruti Suzuki and rival Hyundai – rather than the premium models churned out by most foreign manufacturers, industry executives and analysts say.

With their Indian factories running well below capacity and sales far behind original hopes, firms like Ford (F.N), Honda (7267.T), Nissan (7201.T), Skoda and Volkswagen (VOWG_p.DE) face difficult decisions about future investments.

“It is a survival issue,” said one senior executive with a Western automaker who declined to be named.

“Choosing to remain in India depends on the cost benefit analysis of other international markets,” the executive added, forecasting that, if the outlook remains grim, the number of automakers in the country could fall.

India has already seen General Motors (GM.N) and Harley-Davidson (HOG.N) shut up shop last year.

Anurag Mehrotra, managing director at Ford India, told Reuters the car market had not grown as projected and COVID had made matters worse, hurting domestic sales and exports.

“The uncertainty in the long-term growth prospects of the auto industry and economy have resulted in serious challenges, including capacity utilisation,” Mehrotra said.

He said the pandemic demanded “agile solutions and tough decisions,” but did not give details of Ford’s plans. The U.S. automaker has said previously it is working on a new plan for India.

Volkswagen, which revised its India strategy in 2018 putting its sister company Skoda in charge, reiterated its plan to invest $1.2 billion to corner 5% of the market by 2025 with new launches, starting with two SUVs this year.

The ambition is to continue building and reinforcing the group’s position in the Indian market, a spokesperson for the local unit, Skoda Auto Volkswagen India, said.

Honda and Nissan did not respond to emails seeking comment.

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