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With the global economy shifting into a lower gear, the time is ripe for a shakeout in the auto industry. Global realignments will necessarily impact the Indian market too. Who will survive the coming shakeout? BT's Suveen Sinha investigates.
Delhi-based S.K. Bansal is keen to buy the new trendy Santro Lip Jive, even though his wife is pitching for the more economical Indira, which went by the less desi name of Indica until rechristened as a mark of respect to a former prime minister on her 25th death anniversary. So, he decides to visit the Daimler Chrysler showroom in Lajpat Nagar, which has become a heaven ever since its flea market was shifted out. Plus, the General Motors showroom is just next door, where he could take a look at Maruti Futura as well as Daewoo Pretzel.
Actually, none of the above. It's merely a peep into the Indian car market as it is likely to look after a decade. "According to available trends, it will be mainly a contest among General Motors-Maruti-Daewoo-Fiat, Daimler-Chrysler- Hyundai-Telco-Mitsubishi, and Ford aligned with whichever of its partners comes to India. Honda and Toyota, however, may still be driving alone," says an industry analyst. It's already on Mention consolidation in the presence of a motoring enthusiast and you are unlikely to earn a friend. After all, consolidation by its nature robs automobiles of their peculiar traits by bringing them under one roof. It is no fun driving two similar cars wearing different badges and saying one is slightly better than the other. Ditto with cars that are powered by same powertrains. But, like it or not, consolidation is happening. The Frankfurt International Motor Show of 1999, witnessed a tiny Seat and a brawny Bentley launched in a space of 60 seconds on the same platform by VW boss Ferdinand Piech. If he had more space he would have crammed up the stage with a Skoda Fabia and a Bugatti EB 118. All these names were once independent manufacturers that have now come under the VW umbrella. Saab, the very Swede car maker, will soon be built from General Motors platforms. The other Swede, Volvo, and Ford will be sharing platforms, too. British elite brand Jaguar has more than a nut in common with the very American Lincoln LS, now that both brands are owned by Ford . The coming together of Daimler and Chrysler was touted as 'an extremely successful merger of two strong companies from different cultures, with complementary strengths and similar visions'. But now it is being seen by some as a sell-out of an American legend to the Germans. The Germans indeed are ruling DC, with the legendary American brand Plymouth being the first casualty. And by hunting down Mitsubishi, the troubled Japanese giant with lots of technology and very little money, DC chief Jurgen Schrempp is being labeled the 'motor industry predator'. But it's not been happy hunting for all predators. BMW almost got choked by Rover. There was no way that they could revamp the British company and, finally, they were desperate enough to throw away US$10 billion they had spent to get rid of Rover. While they still retain the rights for the Mini, they managed to orchestrate a sale of the Land Rover division to Ford. Ford, which already owns a good part of Mazda, looks to be picking up all the right brands and at the right kind of money. And if Ford is there, can General Motors be far behind? It has an alliance with Fiat, giving it a better foothold in Europe, a lot better than what they had with Opel/Vauxhall. It has just doubled its equity holding in Japanese small car giant Suzuki to 20 per cent. The alliance could be stretched to give GM a role in Maruti Udyog, in which Suzuki holds 50 per cent equity, as and when the Indian government decides to dilute its 50 per cent. GM has also replaced Ford as the front-runner to acquire Daewoo, which will help it make further inroads into Eastern Europe. (Incidentally, it was GM's technical assistance, and even engines, that made Daewoo what it is.) Another Japanese car marker, Nissan, is now controlled by Renault, the French company have taken about 37 per cent equity in it. The latest to join the consolidation caravan is South Korea's biggest car manufacturer Hyundai Motor Co. It has closed a deal with Daimler-Chrysler, which has agreed to pick up a 10 per cent stake in Hyundai at $480 million. The two companies also agreed to form a 50-50 joint venture in commercial vehicles and to develop a 'world car' with Mitsubishi, which holds a 4.8 per cent stake in Hyundai. Daimler-Chrysler, which also just recently took over a 33 per cent stake of the Japanese automaker, is also looked upon as the prime candidate to have some sort of a role in the car division of our very own Tata Engineering. DC and Hyundai are also banding together to make a bid to take over Daewoo Motor. There Are Reasons If a smaller number owns a large number of brands, it means more economical automobile production. For the consumer, that should result in more or less standardised technology at an affordable price. But automakers could soon be charging the premium that some of these brands earned over the years without having to spend a fortune on it. As for India, it is as good as inevitable. Almost all the big names of the automobile world have come in either directly or through subsidiaries - with Renault, Nissan, and BMW the only exceptions - and have set up a total capacity of about 1,250,000 million. The Indian car market, on the other hand, is no more than 500,000 at present. With the passage of time, losses will mount and some will be left with no choice but to sell out. "Some will have to think of their future," says Maruti Udyog CEO Jagdish Khattar. When that happens, one can expect standardisation of platforms bringing in the latest trends in safety and emission technology features across model ranges. Soon it won't make any financial sense for these truly global players to dump outdated technology on our markets. And, when all that happens, good old Bansal will be able to do exact what he is planning. |
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Hang on. Isn't something wrong somewhere?
Have automobile companies started having common showrooms? Is this a
spoof?