One up against China

One up against China

The India versus China debate is unlikely to fizzle out anytime soon. Just when India was cheering signs of an economic recovery, amid news of the Chinese stock markets plunging, came another piece of exhilarating news – India has for the first time edged past its closest competitor in automotive exports.
This is a tremendous boost for an industry that is fast becoming the most preferred destination for global OEMs for manufacturing small, fuel efficient cars. Let us look at some numbers – in the first seven months of the current calendar, India exported a total of 230,000 vehicles against China’s 165,000 units. That reflects a growth of 18 percent for India, while China’s exports tumbled 60 percent in the same period. In volume terms, that is a good lead for India.

So what is it that is helping India score? Is it just the edge India offers in small cars? Most would say, yes. For over 25 years, Maruti Suzuki India has led the domestic race, primarily through its focus on small, affordable, fuel-efficient cars. Hyundai too has made India its small car manufacturing hub and more and more global majors, including the likes of Toyota, General Motors, Ford and Nissan are concentrating hard on their small car options for and from India.

The Chinese market on the other hand, is five times the size of India. In July this year, China overtook the United States as the world’s largest auto market with sales topping 6.1 million units in the first six months this year. India would, if at all, find it extremely difficult to catch up with its neighbour in sheer numbers.
But what lets India stand out, as many experts point out at various forums, is the country’s liberal investment policies, strong research and development and high quality manufacturing. Moreover, the fact that carmakers do not have to share some part of their profits with their local partner helps the Indian cause, unlike China. The Indian engineers’ attention to detail and understanding of processes is far superior to their Chinese counterparts, say many.

A Global Insight study said small cars will account for 95 percent of the 690,000 passenger vehicles India will export in 2015, and by 2016, India is likely to share the top spot for small car production with Japan.
Of course, compared to the aggressive pace of development in China, India is rather slow. But in the global arena, as against dozens of Chinese brands, the few Indian brands have far stronger brand equity – the other key reason for India scoring higher in exports. What’s more, foreign vehicle makers have to constantly face the effect of poor intellectual property rights enforcement in China, putting their design and engineering innovations at great risk.

I recently read a report about Yasheng Huang, a China-born Professor of Political Economy at the Massachusetts Institute of Technology. He is impressed with the fact that India has concentrated more on education and social sector development rather than being obsessed with infrastructure development. China is creating very little ‘real value’, he said and added that India needs to continue its existing course of privatisation and deregulation. And China needs to reverse all it has been doing over the years – a far harder task to accomplish, Huang was quoted as saying.