Apple’s Indian Dreams May Crash Again

Apple (NASDAQ:AAPL) is said to be looking to open its retail stores in India after policy changes in the South Asian nation, but another government regulation may still stop the iPhone maker from doing so.

A recent law change allows foreign retailers in India to own a 100 percent stake in stores that sell their branded goods, up from the earlier allowance of only 51 percent. While the Economic Times reported on Monday that Apple was, as a result, evaluating opening its own stores in the country, it will struggle to overcome an additional hitch. As The Wall Street Journal points out, under the new rules, foreign retailers have to source at least 30 percent of the value of their sales from local firms. Apple famously contracts most of its manufacturing process to Chinese companies.

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“Apple sources its hardware from China and it may not possible for them to change that immediately,” IDC analyst G. Rajeev told The WSJ. The only way Apple will be able to open stores in India is if local rules are relaxed, Rajeev added, which is not likely to happen anytime soon. “The argument may find takers in a couple of years,” the analyst said.

Opening its own retail stores in India does make sense for the iPhone maker, which is currently forced to sell its products through local distributors and has to pay a fee to these partners. If it can save on the fee, Apple may be able to bring down the prices of its products in the country and increase its woeful market share. With pricing a big factor, the iPhone maker has a 1.2 percent share of the handset market in India, compared with a 51 percent share of leader Samsung.

Currently, Apple sells its devices through third parties such as Redington, the local operations of U.S.-based IT distributor Ingram Micro (NYSE:IM), and stores operated by Reliance Retail.

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