Why Chinese Cos Have Been “Indianising” Themselves.
Jan 14, 2025
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In this engaging discussion, Sharmistha Mukherjee, an automotive industry expert from ET, delves into how Chinese companies are adopting 'Indianisation' strategies to navigate complex market dynamics. She explores how geopolitical tensions shape these partnerships and the government's role in demanding local leadership. The conversation also covers the challenges faced by brands like BYD and MG Motor in establishing a foothold in India’s automotive sector, while addressing the critical balance between trade deficits and security concerns.
Chinese companies are adapting to Indian market norms by forming joint ventures and integrating Indian leadership to navigate government restrictions.
Economic pressures in China are driving firms to explore opportunities in India, highlighting a contrast between local growth and domestic challenges.
Deep dives
The Indianization of Chinese Companies
Chinese companies are increasingly adapting to Indian market expectations by forming partnerships with local firms and integrating Indian leadership into their operations. This shift is largely driven by government-imposed norms requiring these companies to either collaborate with Indian counterparts or appoint Indian executives to their boards. For instance, Hisense and Hire are actively seeking Indian partners to comply with these expectations, while Media has successfully appointed Indian directors due to visa rejections for their Chinese counterparts. This strategy appears to be essential for Chinese firms looking to expand their presence in India amidst a backdrop of rising bilateral tensions.
Challenges and Strategies in the Automotive Sector
Prominent Chinese automotive companies are navigating the complexities of the Indian market through strategic joint ventures. The collaboration between Saik Motor and JSW highlights the potential for Chinese brands to establish a footprint in India, even amid challenges such as a negative perception of Chinese products. As Saik enters the Indian market with the MG brand, the emphasis on electrification and regular model introductions showcases an effort to rebuild consumer trust and adapt to local preferences. Despite the initial hurdles, such partnerships may pave the way for sustained growth in a lucrative automotive sector.
Economic Motivations Behind Chinese Expansion
Chinese firms are motivated to penetrate the Indian market due to economic pressures and favorable growth prospects compared to their domestic environment. The internal challenges facing China's economy, such as declining consumer spending and increasing trade barriers, push companies to seek new opportunities abroad, particularly in a rapidly growing market like India. Notably, firms like Hire and Media have reported impressive sales growth in India, contrasting sharply with struggles in China. This expansion reflects not only a strategic move to tap into one of the largest automobile markets but also a necessity to alleviate overcapacity in their home country.
Chinese companies are embracing ‘Indianisation’ strategies. Because of an unsaid mandate from the Indian government, wary of security concerns that Chinese presence brings to the country’s industry. Over the last one year, Chinese giants in consumer electronics and automotive have been establishing joint ventures with Indian companies and appointing Indians on the boards of their units. The alternative is an endless wait for visas for Chinese executives or worse, an outright refusal to set up shop here. Will their efforts be enough to convince the govt? Also India needs Chinese presence to cut its trade deficit with its neighbour. But can it afford a deluge of Chinese expansion here?