PARIS -- India's automotive market has been a sleeping giant. Only 18 out of 1,000 Indians own a car, compared with nearly 800 in the United States and around 500 in the European Union.
With 1.34 billion people in the country, the potential is staggering -- and just this year, India passed Germany to become the fourth-largest market in the world, according to the Financial Times, including passenger cars and light-commercial vehicles.
McKinsey forecasts that India will overtake Japan for the third spot in 2021.
But making long-term inroads with even a small fraction of the country's hundreds of millions of potential car owners has frustrated one company after another, from Volkswagen Group to Ford to General Motors.
That could be because the Indian auto market is like no other, according to one of the industry's elder statesmen, R.C. Bhargava, the chairman of Maruti Suzuki India, far and away the market leader. For several reasons, he said, India is not likely to gain the scale of China, which raced past the rest of the world in two decades to be the biggest automotive market.
"In the last 25 years, annual growth has averaged 9 percent," Bhargava said in a presentation here at the 100th anniversary of OICA, the international auto constructors' association. "But two-thirds of users of motorized transport are on two-wheelers" and that is where the real potential is, he said.
"This makes Indian mobility very different than the rest of the world," he said.
A look at sales figures from 2018 bears that out. Passenger car sales rose by 5 percent, to 3.4 million vehicles. Sales of three-wheel vehicles, on the other hand, grew by 31 percent, to 717,590 units -- and two-wheelers (motorcycles and scooters) grew by 13 percent, to 21.7 million units. There are now some 200 million two-wheeled motorized vehicles in use.
The cars that are in use are small -- 75 percent are under four meters long -- and Indians do not generally move up to larger cars, he said. That is because zoning makes it nearly impossible to turn India's network of tiny streets and winding roads into the wide boulevards and superhighways of China's newest cities, Bhargava said.
That means that selling prices are generally low, with premium vehicles a niche market. Sales of Mercedes, BMW, Audi, Jaguar-Land Rover and Volvo totaled just 40,000 last year.
But those automakers that have succeeded have a lock on the market, with the top four holding 82 percent. Maruti Suzuki sold 1.7 million vehicles in 2018, 8 percent higher than 2017. In second place was Hyundai, with sales of just 550,000; third was Mahindra & Mahindra, with 249,000 sales; and Tata Motors is fourth, with 237,200 sales. Ford of India is the highest-ranked European or American automaker, in seventh place with sales of 97,800 cars last year.
European automakers have not fared well. Renault, once the darling of the Indian market with the subcompact Kwid SUV, slumped to just 82,400 sales last year, a drop of 27 percent. India has also been a rare weak point for Volkswagen, which sold just 37,000 cars last year, falling 23 percent. Skoda and Fiat Chrysler also have a presence in India, but each sells less than 20,000 vehicles a year.
That does not mean that overseas automakers have given up. PSA Group, which has been in and out of the Indian market, is planning to start local production in 2020 or 2021. Hyundai's partner brand Kia has finished construction of an Indian plant, with aspirations to crack the top five in sales.
Tackling pollution and fuel imports
A big question is the shape of future mobility in India, Bhargava said. The Indian government is grappling with high pollution levels as well as the negative effect on the country's trade balance from importing fuel. Starting next year, Indian cars will have to conform to Euro 6 emissions standards. "That will make a big difference," Bhargava said.
The high cost of electric vehicles means that they will be adopted later in India than in China or Europe, he said. Instead, the government is backing compressed natural gas and hybrid vehicles in the short to midterm, until around 2030.
"The auto industry wants to keep all options open," he said, "We're not sure what the future will be."