The automobile industry in India is headed for a big churn

De-carbonisation of Indian roads is set to trigger a big churn in the automobile industry, which is diversified and entrenched with the presence of Motown majors. But now, it is set for an overhaul. Home grown Mahindra & Mahindra (M&M) partnering US major, Ford Motors, to push electric cars through joint product development, manufacture and distribution, points to a trend that is taking off in an industry, which attracted over $15.79 billion in foreign direct investment (FDI) between April 2000 and September 2016.

In fact, the M&M tie up this week with Ford Motors made headlines as the two had parted ways in 2005 after having jointly produced Ford Escort during their 10-year partnership. It’s interesting — and no coincidence — that both companies just have single digit share in India’s passenger vehicles segment dominated by Maruti Suzuki and Hyundai Motors. Though both the Japanese and Korean automobile giants have bet big-time on the Indian market that’s on the verge of becoming the third largest globally, changing customer preferences, technological innovation and the move to push electric vehicles have transformed India into a more mature market place. Gone are the days of good old Ambassadors or Fiat cars with manual clutch and gears defining fuel inefficiency and high carbon emissions.

Two other Japanese carmakers — Toyota and Suzuki Motor Corporation — had earlier this year announced tie-ups, making the competition tough for existing players in electric vehicles, high-end SUVs and sedans. Spending at about $7.6 billion in research and development of innovative products globally by Ford Motors will benefit M&M, a company that’s focused on India after having taken over the Reva Car to introduce the first electric car. M&M’s dalliance with Renault to produce Logan and partnership with Navistar to develop engines reflect Anand Mahindra’s mission to make his company a ticking enterprise.

While Ford benefits from M&M’s unassailable Indian network, the same would work for Anand Mahindra globally to ride piggyback on the US automobile major. In the ongoing churn, the gradual withdrawal of Germany’s Volkswagen and US-based General Motors, hints at cutthroat competition in the market that’s gone through convulsions.

On the other hand, Tesla’s decision to manufacture its iconic electric cars here would further rev up the race to dominate the market that’s regarded as complex and tough. The automobile industry that accounts for 7.1 per cent GDP in India, is likely to see intense maneuvers, given the innovation in driverless cars that’s taken the consumers’ imagination by storm. South Korea’s Kia Motors setting up a manufacturing facility in Andhra Pradesh, which proclaimed an investment of $1 billion, may rework its strategy to include the electric vehicles portfolio.

Most automobile, truck and two-wheeler businesses are set to be overhauled to fall in line with the government’s move to ‘green’ urban transport systems with an investment subsidy of Rs 25,000 crore for drastic reduction in carbon emissions and then complete phase out. If the auto mission plan of 2016-26 goes on track, there’s every reason for the automobile industry to move into the $300 billion bracket by 2026 with 65 million additional jobs.

With an annual growth of about 15 per cent, India may become the largest automobile export hub globally in the next nine years if one were to go by Young Key Koo of Hyundai, Joachim Drees of Man Trucks & Buses or Vincent Cobee of Nissan Motors. Given the electric mobility campaign of the Modi government, induction of reliable, affordable, technology-driven efficient electric vehicles with sustainable eco-system is the road ahead. There’s no reason why the government, companies, consumers and researchers cannot enter into a partnership to make India a world-class automobile hub.