Andy Rothery is the CEO for JATO Dynamics, the UK-based consultancy working with key automotive companies in the areas of vehicle specs, pricing and sales. Sharing the broader dynamics of the global passenger car market with Business Today's Chanchal Pal Chauhan, Rothery predicts that by 2020, India would overtake Germany and Brazil to emerge as the third largest market globally. Edited Excerpts:
Business Today(BT): How does JATO see the emerging potential of the Indian market globally?
Andy Rothery(AR): India is a key market for JATO Dynamics and we're tremendously excited about the possibilities for our Indian business. It's true that many eyes are now focussed on India, especially given the slowdown in China. However, it is also clear that India is not China and there are many differences between the two regions that need to be considered by automakers and those involved in the industry looking for growth and opportunities. Infrastructure is one of the main differences, with India behind China in this regard. So, while the population to car ratio increases, the transport systems need to grow too, to accommodate the increased domestic demand. Understanding these differences and helping our clients navigate this dynamic market is our focus at this time.
Overseas, we're helping domestic Indian brands that are looking for new markets to continue to grow, deciding on markets most attractive for their products, both financially and from a consumer profile point of view. We see a long-term future here and are investing in that right now.
BT: How do you foresee dynamics of the Indian car market changing and its attraction to global companies?
AR: The global car industry is shifting and India would be a major destination for investments in the coming time. We operate in 60 counties with almost all the global OEMs (automakers), and as China slows down and other major markets like Brazil get more complex on taxation, there is a growing preference to India which has far more stable policies with a renewed focus on manufacturing.
BT: With India likely to emerge as the Top 3 global PV market by 2020 or earlier, how do you see the emergence of new players on the scene. Would Suzuki retain its edge or could newer dynamics emerge?
AR: We expect Suzuki to retain its leadership position due to its reach and massive customer loyalty. New offerings from global players will surely intensify the rivalry, going forward. The Indian car customer is quite demanding these days, and new products and differentiation strategies are going to play a very crucial role for all manufacturers. A good example here is Renault Kwid launching in the entry-level segment and targeting well-established products from market leaders. In India, we have been witnessing a shift in decision making from sentiments to product differentiation. As such, we are seeing a lot of interest from our clients to understand European and global product offerings and trends. Those OEMs who have brought new products to the market have seen sales growth. It's clear, Indian consumers have never had so much choice.
BT: How do you see the focus in India moving from compact cars to hatchbacks or from sedans to bulkier SUVs?
AR: There are key issues of affordability. The key market price of cars in India should move from the current average of $5,000. We can easily say that new global models like the Renault Kwid are cutting the market pie of Maruti Alto and WagonR. Consumers would shift towards contemporary models with a constant pressure on manufacturers to invest in better technology, both for marketing needs and governmental policies like higher emission norms and safety standards.
BT: How do you see the Free Trade Agreement (FTA) shaping emerging markets like India and its role in enhancing the global automotive business?
AR: The FTA is like a double-edged weapon. The governments play a central and critical role in the framing of these policies. There have been frequent changes in the taxation structure as in Brazil, while countries pursue restricted agreements to safeguard their domestic market and companies. We may see emergence of manufacturing hubs that would help in significant investments in markets like India, Columbia or pockets of South America. They could emerge as strong zones for manufacturing specialised cars like India is known for its small car manufacturing.
BT: What influence would the Indian market have on Asia or other emerging markets?
AR: India has and is expected to have an edge over many markets for low-cost car manufacturing. Emerging demand of India-make cars from developing markets like South Africa, Latin America and Middle East will support future exports and will keep Indian manufacturers busy, besides the strong local demand.
BT: Will India be able to maintain its global advantage to manufacture small cars and maintain its cost-competitiveness?
AR: Yes, India has an edge due to low-cost component manufacturing and competitive operations cost. Challenges like high logistics cost, electricity and skilled work force will certainly need to be addressed in order to maintain decent growth rates in coming years. The current government seems positive to encourage the industry and manufacturing.
BT: How do you see the safety issue rattling the automotive world, especially the global brands? Toyota, GM, Volkswagen and Honda, amongst others, have faced controversies that could jeopardise the industry's future.
AR: We haven't noticed any longer-term impact on the industry from some of the safety recalls over the last few years. Toyota , for example, bounced back from its well-publicised recalls a few years ago and we expect to see the same for others. As safety is critical in automotive production, I think consumers are keen to see cars recalled and problems fixed as early and quickly as possible. We have witnessed several safety issues hitting the automotive industry, but vehicles and companies survive and continue for years. But, it would change the industry in terms of technology and the applications currently in use.