Why Can’t GM and Ford Compete in India?

Source: http://www.flickr.com/photos/kwl/General Motors (NYSE:GM) and Ford (NYSE:F) have seen huge growth in China over the past year, so why can’t they replicate that success in India? The reason is a combination of hypercompetitiveness, American car companies biding their time, and a lack of new cars being introduced in Asia’s second biggest economy.

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Let’s address the first issue: hypercompetitiveness. The Wall Street Journal reports that both GM and Ford have seen a 16 to 20 percent drop in year-to-year sales in the months ending with March. Their combined share of India’s car market is just nine percent. Two of their biggest competitors in India, Suzuki, and Hyundai, hold 54 percent of the nation’s new-car sales, together owning 7 out of the top 10 best-selling models. However, despite these gaudy market share numbers from Suzuki and Hyundai, they can’t seem to turn a profit. While Hyundai’s global profit was $8.2 billion in 2012, its India net profit was a paltry $155 million.

This is because of the small profit margins, argue some experts. The hatchbacks popular in India usually sell for between $5,000 and $10,000. If Ford and GM want to turn nice margins, they’re going to have to figure out a way to make western cars a bigger draw among India’s consumers.

Looking Ahead

So far it doesn’t seem like GM and Ford are too eager to dive headfirst into the market. Since 2010 each company has only released one new car in India — the Ford Fiesta and GM’s Sail U-VA.

GM and Ford don’t plan on shirking the Indian economy for much longer, as the latter plans to release six new models by 2015. GM, for its part, has announced plans to introduce new models in India through its Chinese partner SAIC Motor Corp.

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Bob Socia, GM’s chief of operations in China, India, and Southeast Asia, said that India remains one of the company’s most important markets for growth, citing India’s expected growth of 3.76 million vehicles over the next ten years.

Despite the expected growth in India, unless GM and Ford can find ways to popularize traditional Western cars — accompanied with higher profit margins —  there won’t be much room for profit in one of the world’s most populous countries.

Here’s how Ford and General Motors finished trading on Monday:

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