China, which had been slow in entering the Indian market despite being a manufacturing power, has started actively investing in India in various fields, with its direct investment in India totaled $460 million in fiscal 2015, about seven times the level four years earlier. In fiscal 2016, through March 2017, the figure is expected to top $1 billion, making China one of the top 10 investors in India along with the U.K., Japan, German and France.
Smartphone boom supported by Chinese makers
Huawei Technologies, a Chinese electronics maker that has been operating in India since 1999, established its largest global service center outside China in Bangalore, India’s IT hub, at the end of August. The facility, which will cost 1.36 billion rupees ($20.3 million) and employ about 1,000 engineers, will support businesses in more than 30 countries in Asia, the Middle East, Africa and other regions. The company has also announced plans to start producing smartphones in India in the near future.
Indian consumers often purchase electronic products, including smartphones, from online shopping sites, but Chinese consumer electronics maker Xiaomi also aims to enhance sales offline, or via brick-and-mortar stores, in India. In April, the company applied for a single-brand retail license, which permits 100% foreign investment in the sector. Xiaomi already plans to produce smartphones in India in partnership with Taiwan’s Foxconn (Honhai Precision Industry) . In August, the company announced plans to market air cleaners in India, indicating its intention to enter the country’s household electronic appliance market.
Zopo Mobile, a Chinese startup smartphone manufacturer, announced plans in July to build a factory in Noida, an industrial city near Delhi, later this year by investing 1 billion rupees. The company plans to produce 200,000 smartphones a year at the new plant and export 100,000 of them to nearby countries, such as Nepal and Bangladesh. Last autumn, Zopo started entrusting smartphone production to Foxconn, major Indian electronics manufacturing service Dixon Technologies and other manufacturers.
Chinese smartphone maker Gionee also announced in August that it will build a new plant in northern India at a cost of 5 billion rupees. It has revealed an ambitious aim to expand its market share in India from about 5% at present to around 10% by the end of March 2017 by marketing four new models soon.
LeEco, a Chinese technology company, has also applied for a single-brand retail license. The company said it wants to expand its sales network in India to 65 cities in six months by enhancing offline sales. It also plans to establish an R&D center by 2017 and employ 1,100 engineers there, including those from the Indian Institutes of Technology. TCL Communication Technology, a Chinese mobile terminal maker that has been selling Alcatel-brand smartphones, introduced handsets under its own brand name in July and plans to cultivate the market for 4G smartphones, which are expected to come into wide use in the future.
In India, 15 Chinese smartphone makers have started business since 2015, including startups, such as Vivo Electronics and Oppo, and they are competing intensely in sales. Chinese manufacturers have offered mainly smartphones priced at $100 or less, in the so-called sub-$100 category, but they have also begun selling premium models. Zopo, for example, released the Speed 8, the first deca-core high-end smartphone in India, in July. The product is selling at 29,999 rupees.
As a result, the market share of Chinese-brand smartphones grew from about 15% in 2014 to 27% in the April-June period in 2016, according to Hong Kong-based Counterpoint Technology Market Research. Meanwhile, Indian smartphone makers, including Micromax and Intex Technologies, and South Korea’s Samsung Electronics have sharply reduced their shares.
About the reasons for the advance, industry analysts point out that the Chinese manufacturers have been able to eradicate the cheap image of their products through active and bold marketing and research and development efforts.
Winning orders for metro trains in many cities
Chinese companies with growing presence in India are not limited to the smartphone and IT fields. Shandong Beiqi Haihua Automobile Parts, a major Chinese autoparts maker, founded a joint venture with a subsidiary of A.K.Minda Group, a major Indian autoparts maker, in August and plans to start production of plastic oil pans, cylinder heads and interior parts at a factory in China possibly in the autumn of 2017. The new business will cost $12.5 million. The partners hope to supply autoparts to BMW and Daimler on an original-equipment-manufacturing basis. “This maiden JV in China would further help us in expanding our international footprint and cater to global OEM customers,” said D.C. Sharma, Minda’s group chief finance officer.
Tidfore Heavy Equipment Group, a major Chinese industrial machinery manufacturer, decided in August to invest $150 million in the capital of Uttam Galva Metallics, an Indian steelmaker in the Uttam Group. It will make an additional investment in a steel project in India’s western state of Maharashtra run by Uttam and South Korea’s Posco.
CRRC, China’s leading railway rolling stock producer, which produces high-speed rail cars, is rapidly increasing its presence in India. In June, the company signed a contract to supply 112 cars for 14 trains to Kolkata’s metro rapid-transit system. It is the largest order that a Chinese company has ever received in South Asia. In August, the company established CRRC Pioneer India, a joint venture that manufactures and repairs locomotives, in an industrial park in the state of Haryana, near Delhi, at a cost of $63.4 million. The company says it also plans to produce oil-drilling and wind-power generation equipment in the future.
CRRC has supplied 140 rail cars to metro systems in Mumbai and Gurgaon through the subsidiaries. It has become a successful bidder for the supply of cars to a planned metro system in Navi Mumbai, a new industrial city near Mumbai, and has also become the lowest bidder for metro cars in Noida, near Delhi.
“The new plant will create jobs and tax revenue and help to improve infrastructure,” Yu Weiping, vice president at CRRC, told Press Trust of India. “Given more than 60,000km of railways in India, it is far from enough to build a single locomotive engine plant in India.”
Chinese companies’ direct investment in India reached an all-time high of $495 million in fiscal 2014/15, up from about $73 million in fiscal 2011/12, and remained high at $460 million in fiscal 2015/16, according India’s Ministry of Commerce and Industry. The figure is expected to exceed $1 billion in fiscal 2016. If so, China will be among the top 10 investors in the country on a single year basis, along with Germany and the United Arab Emirates.
China’s investment in India remained at very low levels until the first half of the 2000s because the diplomatic relations between the two countries had worsened due to border disputes. However, the Indian government formally announced in 2005 that it would not discriminate against Chinese companies. In recent years, there has been an agreement of interest between India, which wants to prop up the manufacturing industry by pushing the Make in India policy, and Chinese companies, which pay attention to India as a new market.