Growth and Marketing Strategies for Automotive Industry in India
After the pandemic-era slump, the global automotive sector is slowly recovering at a Compound Annual Growth Rate (CAGR) of 3.1%. Moreover, with more countries introducing climate change guidelines, companies are shifting their operations to manufacturing electric vehicles. They are ramping up their production in order to meet the shifting consumer demand.
Many auto manufacturers have also been considering shifting their operations to a different geographical sector to get a head start in this sunrise sector. However, shifting to a different country can bring forth several challenges.
This is especially true when starting business ventures in a country like India with varying demographics and price-sensitive consumers. Thus, implementing strategic growth and operational strategies is critical for fulfilling business objectives. In this regard, companies can opt for automotive consulting services in India for customized business management solutions.
Global Automotive Sector: What’s in Store for 2023?
Experts predict that in 2023, the global automobile manufacturing industry will show a growth of 29% year-on-year. However, given the current market conditions, certain factors can cause major hurdles for companies. They are as follows:
With the ongoing war in Ukraine, automobile manufacturers (especially EVs) are facing severe supply chain disruptions. This is because exports from major suppliers have slowed down causing them to encounter several bottlenecks.
To counter this situation, companies need to opt for inventory banking methods and consider shifting to local manufacturing. This may come at extra manufacturing expenses but given the rise in demand for electric vehicles, companies can take this calculated risk.
- Shortage of Skilled Technicians and Microchips
With the demand for EVs slowly rising, automakers are facing a significant shortage of skilled technicians. This is because several job roles related to the manufacturing of traditional vehicles are slowly becoming irrelevant and the need for talent who can work with electric vehicles is the need of the hour.
Thus, to solve this problem, businesses should consider training their existing workforce to bridge the gap in skills.
- Pricing of Electric Vehicles
The pricing of electric vehicles has always been a major concern for automobile manufacturers. This is because too high a price will deter consumers from switching to EVs and this can further impact the profit margins of the companies.
In addition, rising global interest rates and an ongoing energy crisis are raising the price of these vehicles. EV prices in the UK, Germany, and other European nations are significantly higher than in regions like the USA and East Asia. Therefore, automobile manufacturers should consider shifting their operations to a different geographical location to fulfill their business goals.
Growth Opportunities for Foreign Companies in India’s Automotive Sector
Here are some of the reasons why the Indian Automotive Sector can be an excellent choice for foreign EV manufacturers:
- Increasing Demand for Electric Vehicles
As per market reports, the share of EVs in the Indian market is set to rise from 0.7% to 3.8% by 2027. This is a result of rising disposable income and pent-up demand during the pandemic period. Moreover, there is a rise in demand among the Indian youth for luxury vehicles that can serve as an advantage for EV manufacturers.
- Shifting Consumer Demand for Private Vehicles
According to experts, there is an increasing shift in consumer demand for private vehicles in India. In addition, Indian consumers are choosing more SUVs when compared to other car variants due to the safety features offered by them.
So, EV manufacturers can leverage this factor and achieve growth in their sales.
- Resilient Automotive Sector
Despite the global energy crisis and chip shortages, the Indian automotive sector is still standing strong. The demand for commercial vehicles has almost reached the pre-pandemic levels. A probable reason behind such an exemplary sector performance is the young and aspirational consumer class.
Due to the pandemic, there has been an increasing trend of purchasing things online. Now, this has also become the norm for buying vehicles as consumers nowadays like to pre-book vehicles before their launch. This is because there is a tendency among customers to become the first ones to buy a product that is yet to be released.
Additionally, car manufacturers are also using digital media to advertise their products and assess consumer demand. Foreign companies can leverage this factor and plan rollouts accordingly to save manufacturing expenses.
- Supportive Government Policies
In the 2023-24 Union Budget, the Indian Government has removed customs duty taxes on the import of goods and machinery that are used for manufacturing lithium-ion batteries used in electric vehicles.
Moreover, there is also a plan to replace all old polluting vehicles under the State and Central Governments. All these measures have been taken to decarbonize the nation and build a greener tomorrow. For EV manufacturers, this is a golden opportunity to enter the Indian market and expand their operations.
To take advantage of India’s dynamic automotive sector, organizations need to partner with automotive consulting services in India for the best results.
Top 5 Strategic and Operational Growth Strategies
Here are the top 5 strategies to achieve strategic and operational growth in the Indian automotive market:
- Understanding Indian Consumers
One of the most important aspects for a foreign company to enter the Indian market is to understand the consumers. The consumers in this country hail from different regions, age groups, and cultural backgrounds and thus have varying needs.
Thus, foreign companies need to collect local information to assess consumer demands and modify their offerings accordingly.
- Having the Right Infrastructure
Finding the proper infrastructure in a developing nation like India can be a hectic task. This is because the demand for commercial real estate in this country is high and companies may need to book properties that are still under construction.
It is especially important for automobile manufacturers as they need to accommodate their workforce along with their entire inventory. Moreover, the property needs to be strategically located in order to make it accessible to customers.
- Correctly Setting the Price
Indian consumers are very price-sensitive. They hail from various economic backgrounds and each has its own financial capacities. So, foreign firms need to analyze these factors and set prices for their products in a way that appeals to all classes of the Indian population.
Overcoming the language barrier in India can be difficult for foreign companies. There are 22 major languages spoken in this country and thus hiring the right talent is crucial for any foreign organization to survive in this country.
- Partnering With a Management Consultant Firm
Now, to implement all these measures, in-depth knowledge of the Indian market is necessary. Additionally, the Indian legal and taxation system can be quite complex, and understanding them is an essential requirement to start a business in this country.
In this regard, opting for automotive consulting services in India is the best way. There are several consulting firms like Tecnova that can aid foreign companies in successful market entry and expansion.
Tecnova has experienced professionals who have a thorough knowledge of the various sectors of the Indian market along with adequate local resources to provide analysis and information on the same.
Furthermore, it also offers custom-made services like talent acquisition, performance optimization, expansion, growth advisory, site selection, retail roll-out, etc., that can be beneficial for businesses that are trying to enter the Indian market.
Reference
Automotive Consulting Services | Consultant for Automotive Components & OEMs
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