Unique Opportunity
Hyundai Motor Group and Japanese automakers, including Toyota and Nissan, are making aggressive investment plans in India, the world's third-largest auto market, indicating that intense competition is looming.
According to the Society of Indian Automobile Manufacturers (SIAM) and industry insiders, Hyundai and Kia sold a total of 84,371 vehicles in India last May, an increase of 12% from the same period last year. This number outperformed the sales growth of Maruti Suzuki, the unwavering leader in India, which is a joint venture between Suzuki of Japan and an Indian local company, showing a sales growth of 10%. Hyundai sold 59,061 vehicles, up 16.3%, while Kia sold 24,770 units, up by 3%.
Despite trailing behind Hyundai, Toyota recorded a remarkable sales increase of 110% year-on-year last month, selling 24,100 vehicles. The increase in sales was largely driven by the new minivan model, Innova High Cross, which was launched in India earlier this year. Toyota plans to switch its Indian plant from a two-shift system to a three-shift system and increase production by 30% to ramp up its annual production capacity to 400,000 units.
Toyota's pursuit of Hyundai in the Indian market has been evident since the second half of last year. In September, Toyota launched the Urban Cruiser Hyrider, an SUV aimed at competing with Hyundai's leading model in the Indian market, the Creta, at a more affordable price. Last month, it introduced a series of other models, including the Yaris Cross, to counter Hyundai in India and the ASEAN region. It appears that Toyota was shocked when Kia, which entered the Indian market in 2019, overtook Toyota within just a year, rising to fifth position in market share.
Toyota is also strengthening its alliance with Suzuki, the perennial number one in the Indian market, as Suzuki's market share in India declines. Toyota is currently manufacturing Suzuki's SUV, the Grand Vitara (known as the Urban Cruiser Hyrider to Toyota), in its own Indian factory. Both companies plan to launch their first jointly produced electric vehicle (EV) in India by 2025, and aim to introduce a total of six EV models in the Indian market by 2030. Suzuki, which has been lagging behind in electric vehicles, is injecting 2 trillion yen (US$14 billion) into its EV transition and is gearing up to target the Indian EV market. Similarly, Toyota recently invested 48 billion rupees (approximately 760 billion won or US$582 million) into its EV transition in India, with plans to fully kickstart operations by 2026.
Hyundai Motor Group has laid the groundwork for producing one million units locally by acquiring GM's local factory in India. The Indian market, which is transitioning to electrification, is practically a contest between Japanese and Korean cars, excluding local companies like Tata and Mahindra. German brands like Mercedes-Benz and Volkswagen are struggling with less than 1% market share, and American companies like GM and Ford have sold their factories and withdrawn from the market.
Tesla has yet to land in India. And, given the ongoing border dispute between India and China, Chinese electric vehicles are essentially blocked from entering the Indian market. This provides a unique opportunity for Korean and Japanese auto companies. The fact that the Nissan-Renault alliance and BMW have announced large-scale electrification investment plans in India proves that the growth potential of EVs, which currently make up only 1% of the total completed car market in India, is significant.
Eun Ji-hwan, head of KOTRA in Chennai, India, said, “In India, people often start their working lives driving an inexpensive compact car like a Suzuki, but as their income increases, they switch to Hyundai.” He added, “In particular, Hyundai's response to electrification is fast. While it's competitive against Japanese cars, it's never lagging behind.”