Summary
- India has surpassed China as the most populous country on Earth
- India has protectionist walls with a 100 percent tariff on imported cars
- Foreign automakers see a business opportunity in India for their products
- Volkswagen and VinFast are interested in selling cars in India
- VinFast plans to enter the Indian market with two premium electric SUVs and invest $500 million in India
Article
India has surpassed China as the most populous country on Earth in 2023, but it lacks the intense economic focus of the Chinese government, resulting in fewer goods labeled “Made in India” appearing on global shelves. The country’s automotive market is dominated by Tata and Mahindra, with foreign automakers seeing a significant opportunity to break into the third largest new car market in the world. Volkswagen and VinFast are among the foreign manufacturers eyeing India as a potential revenue source, with varying strategies to enter the market.
India has implemented protectionist measures such as a 100 percent tariff on imported cars, hindering the entry of foreign automakers like BYD and Great Wall Motor. The government has been hesitant to allow joint ventures with foreign companies due to security concerns with Chinese investments in India. Despite political tensions, there is a growing interest in electric vehicles in India, with companies like Tesla, BYD, and Hyundai vying for a share in the market.
Skoda Auto Volkswagen India Private Limited (SAWVIPL) has chosen to focus on the low-budget segment of the Indian market, aiming to make affordable and profitable electric vehicles using its India Main Platform (IMP). The IMP platform will serve as the basis for four electric SUVs, two for Volkswagen and two for Skoda, with regional adaptations to meet regulatory requirements and pricing constraints. SAWVIPL’s decision to pivot towards the mass market segment reflects the potential for high sales volumes to outweigh lower profit margins.
On the other hand, VinFast is taking a different approach by targeting the premium segment of the Indian market with two electric SUVs, positioning itself against established players like Mahindra and BYD. The company plans to invest $500 million in India over five years to build a car and battery factory in Tamil Nadu, with an initial capacity of 50,000 cars per year. VinFast is also seeking a reduction in the 100 percent tariff on imported EVs to facilitate sales while its factory ramps up production, a move opposed by domestic automakers.
Despite the Indian government setting a goal for one-third of new cars to be electric by 2030, the slow implementation of supportive policies has hindered the transition towards electric mobility. Volkswagen’s focus on affordability and high sales volumes contrasts with VinFast’s emphasis on premium, higher-profit vehicles. Both companies are navigating the challenges of entering a complex and competitive market, with time being the ultimate judge of the success of their strategies in the Indian automotive landscape.
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