China’s Auto Company Changan Looking To Enter India’s Automotive Market

Posted: January 14, 2015 in Econ 101

SOURCE: http://www.livemint.com/Home-Page/ZRLw1JmPwv3cZDyVa6iDAI/Chinas-Changan-Auto-exploring-India-entry.html

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China’s Changan Auto exploring India entry

Top Changan executives met industry consultants two months ago

By Amrit Raj

Jan 12 2015

China’s Changan Auto exploring India entry

Changan is China’s oldest and fourth largest automaker and has joint ventures in its local market with companies such as Suzuki and Ford.
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New Delhi: Four months after Chinese President Xi Jinping announced investments worth $20 billion in India, the country’s state-owned automobile company Changan Automobile Co. Ltd is discussing an entry into India’s passenger vehicle market, according to two people familiar with the development.
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Changan is China’s oldest and fourth largest automaker and has joint ventures in its local market with companies such as Suzuki Motor Corp. of Japan and Ford Motor Co. of the US.
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Top Changan executives met industry consultants two months ago, according two consultants who requested anonymity.
“They were here in November and a marketing research firm was facilitating their meetings,” said one. “They were looking to understand the prerequisites of entering into the Indian market. Most of their questions were about India’s passenger vehicle market.” The second consultant confirmed meeting the Chinese firm, but declined to give details.
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Changan Automobile has six large manufacturing bases in China—in Chongqing, Beijing, Jiangsu, Hebei, Zhejiang and Jiangxi—and 15 vehicle and engine factories with an annual capacity of two million vehicles and two million engines.
India sold 2.5 million passenger vehicles during 2013-14—a decline of 6.05% from year-ago period—and shipped 600,000 units during the year, registering a growth of 6% over the year-ago period. Industry lobby Society of Indian Automobile Manufacturers (Siam) expects the local market to be of six million units per annum by 2020.
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According to consultancy firm KPMG Llp’s global automotive executive survey 2015, released on Thursday, India will export more than a million vehicles in the next three to five years.
Deepesh Rathore, director of consultancy firm Emerging Markets Automotive Advisors (EMMAAA), said Chinese companies have been looking at new markets, as global automakers dominate their mature home market. “Therefore, India seems like an appropriate market for them,” said Rathore.
According to India’s commerce ministry, trade between the two Asian nations has increased rapidly in the last decade, reaching around $65 billion at the end of 2013-14, with China now India’s largest trading partner. But India’s trade deficit with China is at about $37 billion.
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Last year, India’s exports to China grew 9.53% to $14.8 billion while imports declined 2.3% to $51 billion. Automotive trade is limited to seasonal imports of auto components and tyres.
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To be sure, this is not the first such attempt by a Chinese auto firm to enter the Indian market.
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In 2011, Beijing-based commercial-vehicle maker Beiqi Foton Motor Co. Ltd had announced plans for a factory at Chakan near Pune to produce a full range of commercial vehicles. However, Beiqi Foton’s plans, involving an investment of $400 million—the largest foreign direct investment by a Chinese company in India—is yet to take shape with a decision regarding the kind of models to be introduced in India still pending.
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According to Beiqi Foton’s initial plan, the India plant was to start production at 2013-end. Shanghai Automotive Industries Corp. Ltd (Saic) picked up a 50% stake in General Motors (GM) India in 2009 when the latter was trying to revive its Indian operations after its US parent filed for bankruptcy.
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Rathore of EMMAAA said the Chinese auto firm’s approach to India has been“frustrating” in the past. “A few others had come as well, but we have not really seen plans taking shape; so let’s just wait and watch,” he said. But the KPMG survey indicated that doing business in India will get easier, bringing investments from more companies. A detailed questionnaire sent to the Changan on 6 January remained unanswered. The email sent to the firm through its website remained unanswered.
In response to an email, the Chinese embassy said it was aware that “such a delegation” visited India but it was not aware of “further details”.
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