What’s Luring Back Global Companies To India?

One swallow does not make a summer. But could the return of one or potentially two multinationals in quick succession reflect the relative resilience of the Indian market, and be a small turning point of sorts? On Monday, the $98 billion French retail giant Carrefour announced they would return to India with a fresh partnership. The company had exited India a decade ago. On Wednesday it was reported that Ford Motors, which shut shop in India in 2021 leaving car owners panicking, is discussing buying its old plant. This will the third time the company is making a return to India.

India is not an easy market as many companies have learnt the hard way. It takes years to find the real, addressable market for a product or service. Designing the right approach for India’s highly value-conscious consumers can take longer. There is also no guarantee that the markets will always grow. Take, for example, electric vehicles. This is a logical product for a price-sensitive customer who has to shell out more than Rs 100 per litre for petrol. Electric two-wheelers and three-wheelers are selling well in India but electric cars are slowing down. Hybrid cars now seem more attractive and allow car owners to hedge against a fully electric car which has some charging infrastructure limitations.

Tesla, which seemed to be gung ho about entering India, clearly found that it would only make sense to export cars into India and not set up a greenfield plant. Tesla’s cars are clearly beyond the average customer's reach. But everything has a context.

After Donald Trump came to power in 2016, America started making it difficult for Chinese imports. Companies started considering moving manufacturing to countries like India.

India has had its own problems with China, particularly at the border and flowing into trade matters too. However, global multinationals who are retreating into their primary markets are likely discovering their own markets are not growing much or growing in a limited way. This is particularly true as the post-pandemic surge in spending is now ebbing the world over.

China is a big factor too. Chinese demand is not recovering even as the country continues to reel from the fallout of the housing crisis. Demand is weakening because of which global oil prices are sliding right now. If countries can’t sell more to China, from within or from outside, that’s a major growth market off the table. Other countries like Russia are not in the reckoning, remember many American brands like McDonald’s have departed after its invasion of Ukraine.

A Yale School of Management report, first published in January this year and since updated, said around 1,000 companies publicly announced they were curtailing operations in Russia. Meanwhile, India is a broad market where premium customers are continuing to grow, though with some fits and starts. Some 10 crore customers with strong purchasing power cannot be ignored by any brand, anywhere in the world. India has also evolved into a dependable manufacturing cum export base.

Remember companies like Maruti export around 14% of their production. This amounted to 2.8 lakh cars last year, a large number. Other global car majors are also exporting from India even as they sell to the domestic market. Ford is reportedly looking at both the domestic and global markets with fresh eyes. Many multinational pharma companies have pulled back from the domestic market in India but they have expanded their R&D presence to serve their parent firms. Many manufacture generic drugs here to export overseas

Carrefour, which has 14,000 stores in 40 countries, says it will launch in India next year. Carrefour and Ford have another thing in common. Both came in with joint venture partners that did not work out. They must have realised that there have been fairly successful foreign ventures in India in recent decades in their own sectors, including joint ventures.

Remember, Walmart is in India, though not in the way people first thought they would, nor did Walmart itself. The company course corrected to focus on e-commerce for Indian consumers and the India manufacturing base for exports. There is a fairly obvious reason why some companies evolve and adapt faster to India and its multi-layer opportunities.

That is mostly to do with people. The successful companies had the right ones driving it.