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COVID-19 and growing sentiments against Chinese products compel Changan Automobile to delay India entry, says GlobalData

COVID-19 and growing sentiments against Chinese products compel Changan Automobile to delay India entry, says GlobalData

Following the news that the India entry of Chinese SUV and electric vehicle maker Changan Automobile is delayed by a year due to COVID-19 outbreak;

Animesh Kumar, Director of Automotive Consulting at GlobalData, a leading research and consulting company, offers his view:

“The decision is not surprising as multiple reasons have played a role in the postponement of Changan’s entry into India market. In 2019, the company had announced investment of INR40bn in India in a phased-manner. It had plans to set up manufacturing as well as distribution operations through multiple entities. The plan included turning India into an export hub and launch the first vehicle by 2022. The automaker was contemplating to launch CS75 Plus, which would have been a rival for vehicles like MG Hector and Tata Harrier.

“However, since the announcement to enter into the Indian automotive market, there is no tangible progress. The company failed to get the suppliers and vendors to agree to its demands and requirements. Moreover, it could not finalise the site for the manufacturing plant.

“A key reason behind the decision to defer the market entry is the disruptions caused by COVID-19. All aspects of the automotive value chain have been impacted. Automotive manufacturing was suspended but has now resumed, although at lower capacities. Sourcing, dealership operations, demand, sales and servicing have all been impacted. Imports and exports would remain impacted in near future and there are logistical challenges as well.

“In addition, there is a growing sentiment towards boycotting Chinese products. It is due to the recent stand-offs between Indian and Chinese troops along the Line of Actual Control (LAC) in Ladakh, India. Moreover, the fact that COVID-19 originated from China could be further fuelling the sentiments. People are boycotting Chinese products such as mobile phones and uninstalling Chinese mobile applications.

“Against this backdrop, there is a possibility that customers may steer away from vehicle brands or models that have a Chinese connection. It could be a direct connection i.e., Chinese brands like MG Motors, Great Wall Motors, BYD, Haima, who have either entered India or plan to start operations in near future. It could also be an indirect connection, where the brand or model has Chinese investment or technology. A possible boycott must be another reason – but a key reason – that compelled Changan to revisit its India entry plans. It would not be surprising if Changan completely shelves the plan to enter India on its own and opts for a strategic joint venture with an existing OEM as that may reduce the risks and present synergies.”