As the new financial year started, India’s carmakers were quick to highlight their sales figures for the past year. And after covering this industry for a quarter of a century, I know that when carmakers do so, the numbers are usually pretty darn good.
And they were. The country’s five largest carmakers — Maruti-Suzuki, Hyundai, Tata Motors, Kia, and Mahindra — sold record numbers of passenger vehicles in the past fiscal year. The overall market for passenger vehicles in India smashed past the four million unit mark as expected, although final numbers are yet to be officially certified by the Society of Indian Automotive Manufacturers (SIAM). At Maruti’s year-end conference, outgoing Executive Director, Sales and Marketing, Shashank Srivastava signed off saying that the carmaker had hit monthly sales records for 15 months in a row. Publicly traded carmakers also hit record highs on the stock indices — Mahindra recently breached the Rs 2000/share mark. And Maruti is trading at nearly Rs 12,500/share; a 100x return on price alone for anyone who bought the scrip during the initial public offering in 2001. And to think people thought it was ‘too pricey’ then.
Yet, as the fizz on the champagne died out in boardrooms across the country, the reality of a new year hit for most carmakers. And all of them seem to realise that the new financial year holds challenges for growth. There are a couple of reasons for this. First, as Srivastava points out, is the ‘base effect’ — that even if sales climb this year, and last year’s numbers were so good, percentage growth will be lower. The other reason, as Tarun Garg, Chief Operating Officer, Hyundai, points out, is that some carmakers are hitting the stops when it comes to installed production capacity. Hyundai produced 7,77,000 cars in India this year, and with minor improvements to their Chennai lines, hopes to hit its installed capacity of 8,20,000 this year. But its newly acquired factory at Talegaon outside Pune (the former GM facility) will not come on-stream until 2025.
The lack of capacity is not the only thing worrying Indian automakers. As the Indian auto market moves from a small backwater to the world’s largest and into an ocean, it might attract a great white shark to go after the fish. Anyone who plays poker will understand the analogy.
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The big story
The big news of the week wasn’t around car sales. It was a Reuters news break that said that the Elon Musk-led Tesla Motors had started manufacturing right-hand drive vehicles for the Indian market at the company’s Gigafactory Berlin-Brandenburg. In addition, it has emerged that the company is scouting sites in India for establishing a gigafactory here. The cars being made near Berlin will be part of the 8,000 vehicles that Tesla will be able to import at a much-reduced duty of 15 per cent (as against 70 per cent as long as the customs landed price is under $35,000) if certain investment and domestic value addition targets are met.
While not explicitly stated, the Narendra Modi government has made attracting Musk a priority, and while this seems to have irked German luxury manufacturers in particular, Tesla’s proposed $2-3 billion investment leaves the Germans’ piecemeal investments by the wayside. In fact, the irony of Tesla importing the cars from Germany shouldn’t be lost on them. Fascinating that Tesla is not importing cars from their much larger Shanghai facility — maybe because Musk himself is an astute observer of geopolitics.
Anyone who has observed how Musk works should realise that he doesn’t work in half-measures. To continue with the poker analogies, he goes ‘all-in’, whether it is Tesla, SpaceX, or even on X. Call him what you wish, but there is little doubt that he is the single most influential human being on the planet right now.
While Indian carmakers are hedging their bets a bit, including on Hybrids as Maruti itself disclosed, this news of Tesla’s entry into India should worry them. And as any poker player knows, you have very few options when the shark goes all-in. As for me, I can’t wait to see how this plays out.
@kushanmitra is an automotive journalist based in New Delhi. He is one of the jury members on the ICOTY panel. Views are personal.
(Edited by Humra Laeeq)