Indian car exports hobble in South Asia

Political instability, slow economic growth and flooding of used cars have hit the business of Indian carmakers in South Asia. As a result, growth in exports to Nepal, Sri Lanka, Bangladesh and Bhutan is “much lower than actual potential”, say industry representatives.

Mahindra & Mahindra, for instance, sells around 3,000 vehicles annually in these markets, but now believes that the recent global financial crisis has put a dampener on sales, especially in Sri Lanka.

“The challenge in these countries has largely to do with politics and economics. While political instability has impacted business, in Sri Lanka and Bangladesh, the policy of allowing used cars is a hindrance to new vehicle sales from India. A higher tariff structure, especially for passenger vehicles, is another bottleneck,” Mr P.N. Shah, Executive Vice-President, International Operations, M&M, told Business Line.

Potential

Not everyone is complaining though. Fiat India Automobile sees an opportunity in markets such as Bangladesh, which is dominated by used-car imports from Japan and Singapore.

“Due to the high appreciation of the yen and the dollar, these imports have become very expensive. Cars from India are cheaper due to the rupee trade with Nepal and Bhutan. The exchange rate (with the rupee) does not fluctuate and this is an advantage,” said Mr Rajeev Kapoor, Chief Executive Officer.

Fiat plans to export cars to Nepal, Sri Lanka and Bhutan. One major city in each country contributes up to 70-80 per cent of the business, be it Kathmandu, Colombo or Thimpu (Bhutan).

Market players

Indian carmakers are major players in these markets, which are characterised by marginal volumes, sometimes even smaller than a metro in India. Tata Motors is the market leader in commercial vehicles in Nepal, Bangladesh, Bhutan and Sri Lanka (where it has been exporting since 1962). It recently appointed a distributor in the left-hand drive market of Afghanistan.

“Now that the civil war in Sri Lanka is over, the country holds some promise. The same is the case with Bangladesh and Nepal where things are looking up,” said Mr Jnaneswar Sen, Vice-President, Marketing, Honda Siel Cars India. The company sold 68 cars in the South-Asian neighbourhood last year but saw volumes crash this year. Sales, this far, are only two cars.