The Indian Economy Blog

January 21, 2006

Indian MNCs Eye Emerging Markets

Filed under: Business — Reuben Abraham @ 1:56 am

(Via Salil) Most of the coverage of India Inc’s international expansion has concentrated on the expansion into first-world markets. However, the expansion into developing country markets are equally, if not more, important. Why? Most developing country markets are beyond even the peripheral vision of most first-world MNC’s, except for ones interested in BOP markets or looking for BOP markets in order to fulfill a CSR agenda. In most cases, the cost-structures (and business models) of the big MNC’s, as they stand today, makes it completely unviable for them to tap these markets. More importantly though, most of them fail to see large, untapped markets in places like sub-Saharan Africa. So, in that sense, these are great markets for Indian MNC’s to gain major first-mover advantages. Writing in South Africa’s Mail and Guardian about Tata Motors’ foray into South Africa, Lloyd Gedye‘s piece provides proof of market potential in the south for ambitious Indian multinationals.

Indian vehicle manufacturer Tata, having quickly established itself as a leading player in the South African bus and truck market, is starting to make inroads into the car market. Tata’s distributor Accordian Investments launched its Indica and Indigo passenger vehicles in December 2004. In January 2004 it sold 255 Indica and Indigo vehicles. This doubled to 463 vehicles by April and rose to 813 in September. Accordian’s share of the passenger vehicle market is just short of 2%, but chief operating officer Phonie Cillier says Tata is aiming to get a 10% share of the hatchback market.

“Our value proposition is our advantage,” he says. “We have not brought in cheap cars, but rather cars that offer the consumer value for money.” The Indica retails from R69 995 and the Indigo from R92 995, which makes them affordable compared to most models, but it is features such as power steering, electric windows, central locking, air conditioning and remote-controlled side mirrors which Tata says distinguishes it from its competitors. Econometrix consultant Frank Beeton says Tata has done very well to establish itself and that consumers who think laterally are choosing an Indica or Indigo over older designs such as the Volkswagen Golf or Toyota Tazz as an entry-level car. Tata will add to its range of passenger vehicles in the next few weeks with the launch of diesel versions of the Indica and Indigo Estate.

Tata showed a 375% sales increase on 2004 in trucks with semi-forward cabins, an 84% increase in trucks with full-forward cabins and a 52% increase in bus sales. It holds 19% of the medium commercial vehicle market, a 14% share of the bus market and a 10% share in the heavy commercial vehicle market. Beeton says Tata appears to have established itself as a senior player in the truck market without stealing sales from established manufacturers but rather creating its own market. “They are very serious players,” says Beeton. “People laughed at them when they entered the market, which was a mistake, and now they are going to have to be taken seriously.” Fellow Indian vehicle manufacturer Mahindra & Mahindra has also entered the market, launching its high performance bakkie the Bolero and its 4×4, the Scorpio, in October 2004.

3 Comments »

  1. I was in South Africa for an year and did enquire with my South african colleagues about their opinion of the Indica and Indigo. Overall, the response was very positive not only about Inida/Indigo but also about Tata’s double cab/single cab Telocline. Remember that S.A is a higly developed automobile market with almost all worlds leading brands/companies present.

    Comment by Prasanth Prabhu — January 22, 2006 @ 9:19 am

  2. Thanks, Prasanth. It’s always usefuk to get corroboration for these trends from readers like you who have personal experiences to relate.

    Comment by Reuben Abraham — January 23, 2006 @ 6:38 am

  3. Its not just Tatas but other indian company like Ranbaxy, asian paints, infosys,tcs are also doing extremely well on foreign soil. Its really great as they r not only giving quality products but also competing with the best of the world.

    Comment by gauri shankar — January 11, 2007 @ 3:21 am

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