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India, the next two- to four-wheel nation?

India’s road network, where wild roaming cows are not uncommon road hazards, continue to be dominated by two-, rather than four-wheeled vehicles, but times they may be changin’

Laying comparatively dormant for years, this vibrant and energetic nation, stretching from the heights of the Himalayas to the golden beaches of Goa, is forecast to become the world’s most populous nation during the coming decades and the mobility arteries pumping through the heart of this crowded country are consequently about to be put to the test. India, whose road network can be both described as majestic and treacherous in the same sentence, is home to 1.3 billion residents, all competing for limited space. Road hazards can ultimately include anything from cows to multi-colored rickshaws weaving in and out of slow-moving traffic, but now that winding road, that for long could have been used as a metaphor for India’s economy, is heading in a straighter, upward direction. Economic growth is continuing to grow at one of the fastest rates out of any other major market at seven per cent 7 per cent last year according to IMF data, helped by the lighting speed of digital connectivity adoption, seeing broadband connections rocket ahead, surpassing 500 million users last year, most connected by smartphones. Thanks to this confidence pulsating though India’s crowded streets, and economic growth working its way down the social classes that once had visions of a new scooter or motorbike as their ultimate freedom machine are now beginning to broaden that vision to four rather than two wheels.

‘BICYCLE-KINGDOM’ TO THE ‘CAR-KINGDOM’

 In a market where the fifth member of a four-person family has been a trusty motorcycle or scooter, transporting entire families - often at once - for generations, the backbone of India’s mobility network may well be about to be reaching its peak, surpassing a record 20 million sales last year.  As purchasing visions in a growing economy alter, while both safety and standards become stricter - this fifth member of the family could soon be replaced by a car, capable of carrying the same number of passengers, legally and safely, to their destination even under the most brutal of monsoon conditions. If just a moderate shift from two- to four-wheel vehicle ownership would be achieved, comparisons with neighboring China will soon be made which was once described as the ‘bicycle-kingdom’ that has now become the ‘car-kingdom.’ 

INDIA MARKET SUMMARY

  • WHAT’S SPECIAL?

    The Indian car market has played an understated role on the world’s passenger car market up until now, given the size of its population. With a younger than average population, it is forecast to become the world’s most populous nation within the coming decades, surpassing that of neighboring China. The over four million passenger car sales in 2018, promoted it to the world’s fourth largest passenger car market sandwiched between Japan and Germany and behind the USA and global leader, China - making it the ‘best of the rest’ of the BRIC (Brazil, Russia, India, China) nations. SIAM, the Indian passenger car manufacturers association, estimate that the passenger car market is likely to move ahead of Japan by 2020 making it a top three global market. Motorcycles remain the mobility of choice in a market where two-wheeled powered vehicles outsell passenger cars by five-to-one. China illustrated how, once momentum builds, a two-wheel mobility nation can rapidly transform into a four-wheel nation. A potential consequence of the forecasted growth would likely come at the expense to the environment, which the Indian government is addressing through tougher emissions regulations. 

  • WHAT’S NEW?

    The near global magnetic draw towards SUV/Crossovers hasn’t passed India by. The growing market share going to these vehicles, albeit smaller and more basic, due to smaller budgets and fiscal restrictions - heavily influencing the dimensions of vehicles - are sculpting a new face to India’s roads. The balance of offering budget vehicles but not making them overtly budget is a fine balance on the Indian subcontinent. ŠKODA, due to assume responsibility for the Indian market on Volkswagen Group’s behalf, as part of the ‘INDIA 2.0’ project, will launch an SUV/Crossover model designed and manufactured in the Indian market from next year (2020). The vehicle will be the first based on the, specially modified for India, MQB (Modular Transversal Toolkit) platform. The major part of the technical development will take place locally in India.  Following the introduction of the new modified architecture, all proceeding Volkswagen Group models sold and manufactured locally will be based on this architecture which already fulfills the stricter legal requirements for India, coming into force by 2020. The strategic aim of ‘INDIA 2.0’ is to improve on the Group’s current market position and focus on the local and complex regulatory framework while in the process making the company more local. “I am confident that we can make the ‘INDIA 2.0’ project a success,” said ŠKODA AUTO CEO, Bernhard Maier.

  • WHO’S STRONG?

    The Indian market is dominated by locally-established Asian manufacturers with a market presence stretching far back. Although Volkswagen Group brands’ have only a comparatively minor market share in India, a new chapter will begin in 2020 when the Group goes on the offensive. ŠKODA, active on the Indian subcontinent since 2001, having sold one quarter of a million vehicles since then and consistently increasing its sales in recent years, aim to carve out more of a foothold in the hugely promising and diverse market from 2020. The current state of play is that ŠKODA accounted for roughly half the amount of Volkswagen’s sales in India last year with both brands combined volumes commanding a lower single digit market share of the combined market. INDIA 2.0’s initial target is to achieve five per cent market share by 2025. 

  • WHAT’S NEXT?

    From 2020 new emissions standards will be enforced, marking a new chapter in India’s passenger car market. In an unusual occurrence the government has decided to skip an emission standard norm, jumping directly from the current BS-IV (Euro 4) to BS-VI (Euro 6). Thanks to early developments, all Volkswagen Group models based on the ‘INDIA 2.0’ strategy will be compliant. In a further aim to improve emissions and narrow its exposure to imported energy sources, the ministry of power has proposed a 30 per cent EV sales target by 2030. However, infrastructure will have to be dramatically improved by then with a recent study by Here Maps showing Mumbai has just a handful of public charging stations. Volkswagen Group are ready to respond as soon as the market is ready for electric vehicles.  One further trend in India is the growing Mobility-as-a-Service sector. Thanks to a young smartphone generation - smartphone use is likely to reach 500 million by 2020 according to Statista data - young Indians are increasingly using these for ride hailing services. One of the largest smart-phone based ride hailing services in India, OlaCabs with 150,000 drivers aim to help reach the milestone of having one million electric vehicles - including three-wheelers - on India’s roads by 2021.

 Migrating from a push bike to a car back in 1999, Shikha C. Agarwal, an early adopter from New Delhi, made the switch ahead of time, updating her vehicle ten years later. The English teacher said the aspects that were most important to her when choosing her vehicle were legroom and fuel economy. Although she says she’s not interested in smartphone connectivity due to safety concerns, India’s astounding smartphone uptake will most certainly play a key role in the next generation of vehicles set to come to market, with market research pointing to connectivity playing an ever-increasing role in Indian’s purchasing decisions. 

Passenger car sales in India drew almost equal with Germany last year according to German automotive industry VDA data but once the growing SUV sector is added to the equation, more passenger vehicles hit roads stretching from Chennai to Mumbai than Cologne to Munich last year. According to Fitch Solutions analysts, current Indian growth is just a dress rehearsal for what is to come, with the market set to overtake Japan by 2020 crowning it as Asia's second largest passenger car market, supported by a rising lower middle class and steady expansion in private consumption. According to consulting company McKinsey, it took India around seven years to increase annual car production from three to four million vehicles, in this market where almost all vehicles are manufactured locally due to high import vehicle taxes. However, the next milestone - five million - is expected in less than five years. Basic, compact entry level vehicles, the backbone of the passenger car market, have now been joined by the global appetite for SUVs – albeit by smaller models as are seen in Europe - making a big impression and will likely help that five million target to be achieved even more rapidly.

The Volkswagen Group which will soon be celebrating 20 years in India following the introduction of the ŠKODA brand in 2001, operates two plants, in Pune and Aurangabad, aims to profit from the projected growth. From 2020 the Group, led by ŠKODA as part of the INDIA 2.0 plan will introduce only the most modern MQB vehicles in India based on a specially and locally designed MQB-IN platform. INDIA 2.0 is committed to meeting tougher emissions and safety standards set to be imposed from 2020.  Emissions standards will jump directly from the current BS-IV (Euro 4) to BS-VI (Euro 6) in 2020 in an unprecedented move in leap frogging a level, and an indication of the government’s intention to proactively tackle growing pollution concerns. Volkswagen Group, having prepared its homework early, with all new compliant vehicles from 2020, are eagerly awaiting to commence the new plan and accelerate their market push in this market dominated by Asian manufacturers. Audi and Volkswagen brands were also launch in India in 2007, and the Porsche and Lamborghini brands followed in 2012. 

ŠKODA AUTO and Volkswagen have opened their new Technology Center in Pune, India, this January. The opening ceremony was attended by Czech Prime Minister Andrej Babiš and other government officials. On behalf of the Volkswagen Group, ŠKODA is leading the INDIA 2.0 project, which sets out the Volkswagen Group’s model campaign on the Indian market. At the new Technology Center, 250 engineers will be developing vehicles tailored to the needs of customers in the subcontinent. To ensure maximum market proximity, ŠKODA AUTO will achieve radical localization of 95 percent, meaning that almost all vehicle components will be made in India.

“NOW WE’RE IGNITING THE BOOSTERS FOR THE NEXT STAGE,” HERBERT DIESS

 By 2025 The Group aims to achieve a five per cent market share with Herbert Diess, Volkwagen Group’s CEO describing it as, transferring top-class technology to India and leveraging it into Volkswagen Group’s local vehicles and production there. He described it as, “igniting the boosters for the next stage. Our specific goal is for Volkswagen and ŠKODA to capture a combined market share of approximately five per cent in India by 2025.” 

Volkswagen Group is investing one billion euros towards the implementation of the project, primarily between 2019 and 2021. To ensure the products are perfectly suited to the Indian market, ŠKODA have constructed an engineering centre in the country. The new model campaign will begin in 2020 with a mid-size SUV designed and engineered specifically for the Indian market in one of India’s fastest gaining sectors.

However, in the meantime Volkswagen continued to be the Group’s largest brand in India last year led by the Pune manufactured Ameo, a four-door sedan, topping the Volkswagen Group sales list. The same model is celebrating its 10th anniversary of its own race series in India this year. Volkswagen Motorsport India’s touring race car series includes a widespread of individuals, taking place with both woman and men competing alongside each other on circuits including India’s only Formula One track, in Greater Noida.

“A CROSS BETWEEN LE MANS, WITH COWS, MINUS A SANCTIONING BODY”

In a country where that racing mentality doesn’t necessarily just stay on the racetrack, two American motoring journalist Ed Niedermeyer and Alex Roy from the website The Drive, recently took part in an alternative 1,000 mile cross-country Indian rally describing some of the road conditions as a cross between the world famous Le Mans race series, with cows, minus a sanctioning body. Experiencing some wild unconventional and slightly leftfield road conditions, Ed went onto to describe how only a powerful bash on the horn can separate the roaming cows, cars and pedestrians competing for the same road space can often get you further.

PUJA CEREMONY

Two of Ed’s main memories of his journey was witnessing a Puja ceremony taking place in the East coast city of Chennai and the humbling mentality of such a hectic nation. The Puja ceremony is a Hindu custom, welcoming the car as a new member of the family and can be seen taking place at car dealerships throughout the country. When collecting a new vehicle from a dealership this mainly Hindu nation have the option of a such a ceremony. Before collecting the keys to the vehicle, the new vehicle is ceremoniously welcomed to the family with a blessing, incense and flowers sprinkled on the cars still gleaming bonnet.  The purpose behind the tradition is to bring good luck and prosperity to the new car, which when leaving the car showroom is purposefully driven over four lemons placed under each of the four wheels to eradicate bad omens. Having experienced Indian roads for the following five days Ed made it clear that he wouldn’t leave an Indian showroom again without four freshly flattened lemons in his rear-view mirror.

With Indian economic GDP growth figures forecast to stay consistent and growing prosperity in the lower to middle social classes, if just a fraction of the motorcycle and scooter owners made the switch to four wheels those 70 ŠKODA dealerships and 70 service centres spread throughout the country should perhaps start stock piling lemons as India’s economic giant may finally be about to rise.