Electric Cars of the East, Part 1: A Tale of Two Nations
A Brief History of the Automobiles of India and China
Press coverage on electric cars remains dominated by the saga of Tesla Motors and the hijinks of its mercurial leader Elon Musk. While Tesla confounds and colours the outlook for electric vehicles in the Western Hemisphere, the latter’s fortunes in the two most populous nations of the world is quite different. Both nations are pursuing this segment with distinctive strategies loaded with their own vision of history, ideology and perspective.
This article is the first of a six-part long-form series detailing the history of automobiles, the breakdown of key players and the challenges that lie ahead in the two most populous nations in the world.
In the city of Bengaluru, India – formerly known as Bangalore and often described as the Silicon Valley of India – Ather Energy, a startup with modest beginnings with 2013, is an electric vehicle company that focuses on producing motor scooters. The company operates its own production facility and showroom (dubbed as an “Experience Center”) within the city. With a maximum production capacity of 600 vehicles per week, an online-only purchase model with doorstop service, 20 charging points across Bangalore and virtually no marketing in print or broadcast media, Ather Energy has sold out its more powerful variant of its scooter into future quarters. Hero Motocorp, an Indian two-wheeler manufacturer with a nearly 46% market share in a country where more than three-fourths of all vehicles manufactured are two-wheelers, now owns a little over 32% stake in Ather Energy and has its own visions for this space.
Meanwhile, at around the same time as when Ather began but a paltry 3,000 miles as the crow files to the northeast of Bengaluru, Bin Li started NIO in the city of Shanghai, China – often described as the showpiece for modern China. Billing itself as an emerging rival to Tesla, NIO holds lavish marketing events, operates around 20 showrooms – described as “clubs” for people to hang out and drink coffee – and flew in the US band Imagine Dragons along with thousands of its employees from around the world for its first car launch in Beijing late last year. Its flagship supercar the EP9 had become the fastest car around the punishing Nürburgring Nordschleife in Germany after beating the then-reigning champion – the Lamborghini Huracan Performante – by almost seven seconds. (The McLaren P1 LM – the hybrid limited-edition street-legal version of its P1 GTR – went on to break the EP9’s record by two seconds two weeks later).
This came three months after the EP9 lapped the Circuit of the Americas racetrack in Austin, Texas at a top speed of 160 mph – only 30 seconds slower than one with a driver behind the wheel – making it the fastest autonomous car in the world. With technology giant Tencent as its principal investor and Mr. Li holding about 48% stake in the company, NIO went on to file for a $1.8 billion IPO at the NYSE after selling about 500 cars – an offering that was smaller than what the company and its investors were reportedly hoping for.
These two stories stand as showcases for each country’s industrialists and their outlook in the rapidly-evolving electric vehicle. When tied to each nation’s history particularly in the pursuit of automobile manufacturing, they make quite a rich tapestry of aspirations.
China: Auto History
Through the 1950s and 60s, China established several vehicle factories with Soviet technical assistance. They were Nanjing (today known as NAC), Shanghai (today known as SAIC and the principal shareholder in NAC), Jinan (today also known as Sinotruk), and Beijing (today known as BAIC). The First Automobile Works (today known as FAW) was founded in 1953 while the Second Automobile Works (today known as Dongfeng) was founded in 1968.
The predominant focus of early efforts by the Chinese government was in commercial vehicles; private ownership was virtually unheard of, with reportedly only 5,200 cars being produced till date prior to 1985. Nonetheless, cars were produced in small numbers, particularly after Chairman Mao was left impressed by the ZIS limousines on a visit to the USSR in 1949, leading him to decree that the People’s Republic of China needed a ‘Top Person’s Car’ of its own .
The Dongfeng (“East Wind”) CA71 – a limousine whose chassis and engine were stylistically similar to the Mercedes-Benz W120 while the body was based on the Simca Vedette – began to be produced in 1958 by FAW and was typically favoured by senior officials.
Also produced in 1958 was the Hongqi (“Red Flag”) CA72, which based on the silhouette of a 1955 Chrysler Imperial acquired in Jilin, where FAW was founded.
When the ascent of Deng Xiaoping to China’s reins of power in December 1978, attitudes towards private ownership began to soften and personal aspiration was no longer deemed as being necessarily counter-revolutionary. By the mid-eighties, the Chinese received this message loud and clear and proceeded to purchase foreign vehicles since domestic production of automobiles was very limited. In 1985 alone, over 350,000 vehicles were imported from Japan, despite a 260% import duty. Subsequently, import duties and taxes were raised even further and eventually a moratorium brought into place that same year. Meanwhile, American Motors Corporation (later acquired by Chrysler) signed a 20-year contract to assemble Jeeps in China in 1983 while Volkswagen and Peugeot signed similar-duration deals to assemble their products out of Shanghai and Guangzhou respectively.
The Chinese government heavily encouraged the purchase of domestically-produced vehicles with patriotic fervour and established joint ventures with foreign brands to promote production: BAIC partnered with AMC and subsequently with DaimlerChrysler and Hyundai Motors, SAIC and FAW partnered with Volkswagen in two separate ventures and Dongfeng partnered with Citroën.
With the advent of the nineties came the fall of the Soviet Union and economic liberalization in full swing. A host of companies arose in the Chinese landscape: Chang’an arose from a military factory called Chongqing Chang'an Arsenal in Chongqing, Chery was started by the Anhui provincial government (which frequently attracts the ire of Chevrolet, owing to the name’s similarity with “Chevy”) while GAC was started by the provincial and city governments of Guangdong and Guangzhou, respectively. Also, private players like Geely and Great Wall Motors rose in the nineties and noughties, in addition to many others.
It is estimated that about a hundred auto manufacturers currently operate in China, generally with some government backing at both provincial and central levels. Foreign automobile manufacturers formed partnerships with state-owned firms to establish market presence in the nation.
As of 2020, Chinese brands account for a little under 39% of total car sales. German and Japanese brands accounted for a little less than 24% each. American brands account for about 10%.
It bears noting that nearly all foreign brands* are manufactured in partnership with a Chinese firm, usually state-owned or backed. SAIC, FAW, Chang’an and Dongfeng are predominantly referred to as the “Big 4 of Automobiles”, have joint ventures for manufacturing foreign brand vehicles, produce the bulk of the nation’s cars by volume and are all state-owned. BAIC and GAC are usually close behind in volumes relative to the “Big 4” and are similar to them with foreign brand partnerships and state ownership.
*Tesla, of course, is the exception here
India: Auto History
Prior to its liberation from British rule in 1947, almost all of India’s personal vehicles were imported, with luxury vehicles owned by members of Indian royalty who had subordinated themselves to the British Empire being the most visible aspect of vehicle ownership.
The automotive industry germinated in India in the 1940s around three family-owned companies: Hindustan Motors (started in 1942), Premier Ltd (started in 1944) and Mahindra & Mahindra (started in 1945).
Hindustan Motors started out of Gujarat and moved to Kolkata (formerly known as Calcutta) in 1948 and initially started out by assembling Studebakers under license. The company then commenced production of British vehicles under license, starting with the Hindustan 10 – based on the Morris 10. In 1954, the Morris Oxford II-derived Landmaster began production, followed by the Morris Oxford III-derived Ambassador. The Ambassador became an enduring symbol for Indian officialdom, owing to bulk purchases made by the government at both Central and State levels and its sturdy design principles.
Premier Ltd. began by negotiating with Chrysler and went on to assemble vehicles under the Dodge, Plymouth, DeSoto, and Fargo brand names by 1949. Its relationship with Fiat began in 1954 with a license to assemble Fiat 500Cs. Manufacturing out of suburban Mumbai (formerly known as Bombay), the company licensed and manufactured a version of the Fiat 1100 – known as “Padmini” in India – in 1965 along with the Premier 118NE (based on the Fiat 124 but with a Nissan A12 engine and a Nissan Cherry transmission) produced subsequently.
Mahindra & Mahindra began by assembling the Willys jeep in India; the vehicle went on to acquire an enduring popular image with the non-urban masses that continues to this day. The company then continued with commencing assembly of the Jeep CJ3 in 1954, along with branching out into light commercial vehicles.
The Tariff Commission established by the Government in the early fifties made recommendations that were implemented into new policies that would eventually exclude companies that only imported parts for assembly, as well as those with no Indian partner. Companies such as General Motors, Ford, et al – which had assembly-only plants in Mumbai – were thus forced out of the country. Government policies also capped production of and assigned permitted manufacturing volumes to all manufacturers at levels deemed to not substantially exceed total forecasted demand. These regulations – dubbed “license raj” by the people – led to the creation of a substantial supply-demand imbalance that led to months of waiting periods for vehicles.
However, the practice helped keep the likes of Hindustan Motors and Premier afloat. Meanwhile, Mahindra – along with Tata Engineering and Locomotive Company (TELCO; which started a partnership with Daimler-Benz in 1954) –maintained focus on commercial vehicles.
In 1981, a formerly-liquidated automobile company that was revived by the Government was established to form an alliance with Suzuki Motors. Named Maruti Udyog Ltd, the company released the Maruti 800 in 1983 (based on the SS80 Suzuki Alto) along with a van version (called the “Omni” in later times) followed by the Gypsy in 1985, a 4WD off-road vehicle based on the Suzuki SJ410. Since it was a government concern, indigenous production of components was deemed a necessary goal; by 1991, 65% of all models’ components were produced indigenously, thus enhancing the ecosystem of Original Equipment Manufacturers (OEMs) in India.
The nineties brought about economic liberalization and the end of the hated “license raj”. Premier and Hindustan Motors – hitherto relatively shielded from competition – began to lose market share rapidly. In 1988, TELCO, now known as Tata Motors, entered the passenger vehicle market with the tentative TataMobile 206 followed by the Sierra (a 3-door SUV) in 1991, the Estate (a station wagon) in 1992 and Sumo (a 5-door SUV).
Predominantly of Indian design with indigenously-manufactured components, the company’s 3 products skyrocketed in popularity among vehicle buyers. The company launched Indica in 1998, the first fully indigenous Indian passenger car, and began exports to Europe and South Africa.
Quickly becoming a mass favourite, which is evident on the streets to this day, the company went from strength to strength, acquiring Jaguar Land Rover in 2008.
Mahindra, meanwhile, began production of its own indigenously-designed vehicles. Starting with the Armada (based on the Jeep) in 1992 to its successor the Bolero in 2000 (with a Peugeot engine), the company followed up with the Scorpio in 2002, a SUV which highlighted the capabilities of the OEM ecosystem to the fore by having each and every component designed by suppliers as per the company’s specifications. The vehicle continues to be sold today in its third generation to over twenty countries in Europe, Africa and Asia.
Mahindra holds a top position in the SUV market; it forayed into passenger cars with the Logan (in partnership with Renault) in 2007, which evolved into the Verito as the Renault partnership wound down. The company also acquired Bangalore-based Reva Electric Car Company in 2010 (now known as Mahindra Electric Mobility Ltd) and South Korea-based SsangYong Motor Company in 2011.
Hindustan Motors stayed afloat in these new times by partnering with Mitsubishi and producing the Lancer (a sports sedan) and the Pajero (a mid-size SUV) on the latter’s behalf. The Ambassador brand and trademarks were sold to Peugeot in 2017. Suzuki Motors now owns over 56% of Muruti Udyog (now called “Maruti Suzuki”) while the remainder was released to Indian financial institutions as part of the Government’s disinvestment drive. The company remains one of the nation’s top automobile manufacturers, with a large stable of India-specific models. Premier fought to stay current in the noughties by producing licensed and assembled version of minor Chinese brands (which are themselves off-brand versions of older Japanese models); it retains no substantial market share today.
The likes of Hyundai, Toyota, Nissan and Ford have opened full-fledged production facilities and have gained substantial popularity among the buying public. European companies like Fiat, Volkswagen and Skoda have assembly plants in India; their market share, however, is quite small. Talks between Volkswagen and Tata Motors to base the former’s models (both under its VW and Skoda brands) on Tata Motors’ Advanced Modular Platform - which had a significant cost advantage over VW’s MQB-A platform - broke down in 2018. VW’s concerns were over the expenditure required to meet requirements with the Tata platform while Tata Motors, on the other hand, was reportedly more interested in revamping its commercial vehicle business. Ford Motors, meanwhile, has rekindled its partnership – which began and ended in the mid- to late-nineties – with Mahindra to boost its lagging operations in India.
As of 2020, Maruti Suzuki has a little over 51% market share in the car market. Hyundai India has a little over 17% while Tata Motors and Mahindra have a combined total of a little under 12%. Toyota – under its partnership with India-based Kirloskar Group – has a market share of around 4%.
This brings us to the end of Part 1. In Part 2, I take a closer look at the key factors that outline the automotive industry in these two countries, and start to work my way up towards the question of Electric Cars. Stay tuned and hit “Subscribe” here if you haven’t already!