Analysis: Inside the world of the Indian car market

Those models will be sold by an expanded dealer network that will more than double in size, and will be backed by schemes such as a six-year warranty and cheaper parts and servicing costs. All this adds up to a €1 billion investment.

The target is then 100,000 sales per year by 2025 for Skoda before a long-term goal of a 5% market share of a market that the most optimistic estimates believe could grow to six million units by 2030 and be the world’s third largest market, giving some 300,000 sales per year for Skoda. That’s huge, ambitious growth from its position of around 15,000 units per year now, and there is no case study of any European car maker cracking the Indian market.

Unsurprisingly, the VW Group isn’t the only one to sense the potential. Hyundai has been the star performer of the Indian market in recent years, its Creta SUV doing in India what the Nissan Qashqai did in Europe. Now its sister brand Kia looks set to perform even better: since its launch in the middle of last year with the Seltos SUV, it has already become India’s fourth-biggest brand for sales and has an aspiration for a 10% market share.

Clearly, with all these growth aspirations, something will have to give, and that could be from long-term market leader Maruti Suzuki. It has for a long time dominated the Indian market, with just under 50% market share. It has been in the market a long time, and been able to take advantage of favourable tax rules that favour locally-built cars under four metres in length.

Yet upcoming BS6 emissions regulations in April (similar to EU6 in their severity, and expedited from the current EU4 regulations to try and improve the appalling air quality in Indian cities such as New Delhi) will see Maruti Suzuki drop all diesel engines from its range, a bold move given diesel’s popularity even if its share is shrinking to a quarter of the total market size.

It’s these more globally-aligned emissions rules, as well as a growing awareness of road safety in a country where road deaths run into the hundreds of thousands each year, that global car makers feel count in their favour, as cars will need fewer changes than before to be sold in the Indian market.

One thing will count for Maruti Suzuki’s is its huge size. It has a vast dealer network, which is a huge advantage in a country with some 780 different languages and 86 different scripts. Lots of little local successes can grow into a huge one nationally.

Global trends are also mirrored in India. The popularity of SUVs is rising, and the rollout of electric cars is in the early stages. Infrastructure for them though will be an even greater challenge than Europe, and India does not have the wealth or central political power of China to simply decree that electric cars can and will happen, and rollout the infrastructure to support them.

Chinese car makers are also eyeing success in India. Most intriguing is Great Wall, the maker of the Haval range of SUVs that are China’s best sellers. An Indian launch will happen in 2021. State-owned SAIC also began the rollout of its model range of different brands but all under the MG name last year, and in four months on sale it outsold Skoda’s entire 2019 output.

Who will win, then? If the market grows as fast as some expect, perhaps everyone. The view in India is that the VW Group’s plan is ambitious – an eightfold increase in sales in just five years – and that the historical success, or rather lack of, European brands counts against it. The rapid rise of Hyundai and Kia perhaps speaks for itself in its ability to launch the right cars at the right time at the right price, similar to how it took advantage of the UK’s scrappage scheme a decade ago to enter the mainstream here.