Even for the best in Europe, Indian consumer is a tough nut to crack

For a market that is one of the largest and fastest growing in the world, the performance of European car makers in India has been appalling.

Barring Fiat, which has had a long presence in India, and to some extent Skoda, most others including Volkswagen and Renault have been late entrants. And there is still one more big European car major in Peugeot Citroen that is yet to foray into the market.

What is perhaps even more disappointing than the delayed entries is that at least on paper, these companies should have done very well. Like India, Europe is very big on small cars. And like here, it is also enjoys close affinity to diesel technologies. Infact Volkswagen and Fiat are reknowned for their diesel powertrains.

Yet these companies have found the going to be tough in India. In the last five years, the combined share of European car makers (VW, Skoda, Renault, Fiat) in the Indian market has been restricted to under 7%. And that figure takes into consideration the spoils of the luxury car segment where European car makers have a hegemony and sundry blockbusters like Renault Duster.

In contrast, the Japanese have the same number of participants (Suzuki, Honda, Toyota and Nissan) but account for the giant’s share of the market. The sole Korean car maker alone commands double of all the European companies put together. And with just two companies and operating in an environment that is as alien, the two US car makers are also doing as well if not better than the Europeans.

So what stops these companies from striking it big in India?

For one, there is a huge cultural difference between the way Indians drive cars as against the Europeans. Though the cars are small in size they are as different as chalk and cheese. While in India small cars are preferred not because of technology, performance or convenience but because they are more affordable and easy to maintain. They are also more fuel efficient.

The European small cars on the other hand are high on technology, features and performance that in turn makes these cars expensive for India. For an average German or French, driving is also a source of adventure. They love taking their cars out on weekends more often and dont mind spending on it in terms of service. An Indian howsoever rich would curse his way to the workshop should the service bill hit four figures.

The background also tells us that European companies are used to very high level of profit on a per car basis. Which explains why their cars are expensive in India even when there is so little in terms of frills.

The bigger problem however, has been the lack of a will to adapt to the needs of the consumers here. India is not quite the market that will accept a car that has been built for Europe but modified for local conditions. It has got into the habit of demanding its own pound of flesh. That is something that even car companies like Honda realised belatedly and after much suffering.

“For a company that is this big, it does not come naturally to us to develop a car for just one market,” says Mahesh Kodumudi, president and managing director of Volkswagen India Pvt Ltd. “We would always make global products and then try to tune it to Indian conditions. The kind of quality, technology and profits we are used to cannot come if we develop cars specifically for one or two markets.”

Beyond paying lip service on the importance of India as a market, it is clear that for now some of these companies do not care much. Both VW and Fiat are strong in Latin America and Russia and VW is particularly strong in China. The success in those markets means they can take India lightly for the time being.

For now, the product pipelines for these companies is running dry in India. There is little on the horizon beyond the Polo and Vento for VW and Punto and Linea for Fiat in India. Beyond 2015, there could be a few aces up the sleeves and one hopes they would rise up to the challenge but by then, the Japanese and Koreans may not leave much scope for sustenance.

For all that is good in Europe, the Indian road is perhaps not the place for it.

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