The Global Automotive Leader at Ernst & Young, Mr Mike Hanley, said during a recent visit to India that this is the perfect time for Indian auto companies to enter the US. He said that the expansion can take place in two ways. The first is to acquire US based companies, and the second to enter the US market organically. The market for small, fuel-efficient cars is growing rapidly in the US, something that Indian car makers can capitalise on. India is fast emerging as the world’s small-car hub, with more and more companies (both Indian and global) choosing to manufacture their small cars here. This is because small cars account for nearly 80 per cent of the Indian auto market. Mr Hanley said that the low density of cars in India – 9 cars per 1000 people – is one major reason why the country has so much potential for automotive growth.
Tata Motors has already entered the US market with its acquisition of marquee car brands – Jaguar and Land Rover. Mahindra & Mahindra too will soon be selling the Scorpio ‘pick-up’ in the US. According to Hanley, the expansion route that Indian car companies are likely to follow will be similar to already established Japanese ad Korean companies. They will begin by importing their vehicles to North America, and start manufacturing operations only after their presence is well established in the region.
However, these companies may also face challenges in the form of North American customers’ evolved preferences and tastes. Customers in the US are very particular about safety standards, emission norms, accessories and additional features, all of which standards must be met by any Indian company hoping to enter the market. In case of expansion through acquisitions, it may be easier for companies to fulfil buyers’ expectations more easily.