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Harley's India Play
Good morning. In today’s edition: we delve into India's automotive market, where even Harley-Davidson has adapted itself to local rules. Plus, a look at how global tensions are impacting India's shipping industry and causing a container shortage.
THE TAKE
India's Automotive Ace: Why Even Harley Plays by Local Rules
In 1930, Colgate Palmolive listed on Wall Street, more than 100 years after its founding as a starch, soap and candle business in New York city. In 1937, a decade before independence, the company arrived in India with its Colgate dental cream.
I usually think of Colgate whenever someone asks me about India-US economic relations as I was at a recent small gathering of leading communications professionals from around the world. The specific question was about the impact of a Trump or Harris presidency. I really struggled to think of what could change dramatically.
For instance, what could change for an all American corporation like Colgate who has been in India for close to a century and with public shareholding for close to 50 years?
Well, there is a new angle. And that is the iconic motorcycle brand Harley Davidson, a midwest-based company that is younger by almost 100 years as compared to Colgate Palmolive.
In an interview to Fox News last week, Presidential candidate Donald Trump raised the issue of India’s high tariffs on Harley Davidson bikes. Actually, he raised the same issue in the context of Harley in 2017 as well, referring to the 100% tariff levels, though both India and Indonesia had similar tariffs. Trump’s point now is that America should slap reciprocal taxes on countries like India.
The interesting thing is that Harley, like many other auto giants, have over time accepted the fact that the best route to the India market is to have local manufacturing or assembly which it set up in 2010 before launching its range of bikes. Around 2019, however it said it was shutting shop because of lower than anticipated volumes and of course high tariffs.
Exactly a year later, it returned, this time in partnership with Indian two wheeler giant Hero Motors. The strategy this time: smaller sized bikes, local partner and of course more affordable price, for example, the X-440 range which is made in Neemrana, Rajasthan and sells for Rs around Rs 2.4 lakh.
Harley’s path is somewhat similar to Ford who of course has entered and exited India three times, the last time being the latest entry last month.
For Trump, there is political mileage in aligning with a brand like Harley which is all-American though not as large as a car brand like Ford or General Motors. GM has also exited India after a not so happy run.
But Harley’s own actions are more practical and pragmatic. This can be understood by its desire to return to the Indian market, just about the largest two wheeler market in the world as it is projected to surpass China this year.
On the other hand, India’s policy has been consistent and focussed on encouraging local manufacturers and job creation, except for a brief interlude earlier this year when it looked like policy makers would cave in to Elon Musk’s charms and allow imports of Teslas without a local plant.
There is still some heartburn among other global car makers on India’s EV policy. It would be interesting to see how it evolves if Trump were to be elected and Elon Musk starts playing a role in the government, even if it is a distant one, as has been suggested.
But that is a discussion for another day.
The bottomline is that self-interest will drive some economic policies, even if not all, for both countries. India’s automotive market is amongst the most competitive, open and fair and in some ways a benchmark in a globalised world.
In 1999, in an amazingly prescient observation, then Ford CEO Jack Nasser said he saw Ford as a local manufacturer and exporter and wanted to harness India’s brainpower in IT. Moreover, he was against imports and quoted the example of countries like New Zealand where imports had killed the local car industry.
It struck me later that automotive leaders like him were also against imports because they were now vested and invested in India.
Harley Davidson seems to have concluded similarly as has Ford in its subsequent avatar. Maybe Trump’s new avatar, if he were to be elected next month, would view things a little more pragmatically as well and in India’s favour.
DECODE THE NEWS
Geopolitical Tensions Are Worsening India’s Container Shortage Problem
Shipping is crucial in India as trade 95% by volume and 70% by value, is heavily dependent on it. India is also home to many ports—12 major ones and 200+ smaller ports.
But there’s a slight problem. While there are plans to expand Indian ports, the country has been stuck in a never-ending container shortage loop. For nearly two decades, India has grappled with a container scarcity that hampers its exports.
India's container shortage is deepening, with rising geopolitical tensions adding to the strain. The latest trigger? An impending increase in U.S. tariffs on Chinese goods.
This shortage intensified in July and August as Chinese exporters rushed to ship goods to the U.S. and Europe before an August 31st deadline, aiming to avoid the new duty fees on imports.
“Any products exported from China by August 31st were duty-free, while after that, duties were imposed due to political issues and business concerns. This is shipping at its best. You send ships, cargo, and containers from expected flow areas, particularly where exports surge,” Partha Bhattacharyya, branch manager at Hapag Lloyd Kolkata told The Core.
Why is Indian shipping being hit by global tensions?
CORE NUMBER
Rs 58,711 Crore
That’s the staggering sum pulled out of Indian equities by Foreign Portfolio Investors (FPIs) in October 2024. This massive outflow, fueled by the escalating conflict between Israel and Iran, rising crude oil prices, and the impressive performance of the Chinese market, has sent ripples through the Indian stock market. FPIs, who were net buyers for much of the year, turned net sellers in October, highlighting growing concerns about geopolitical stability and economic headwinds, according to a PTI report on Sunday. While this exodus is undoubtedly significant, experts believe the situation may stabilise post-US elections, offering a potential rebound for the Indian market.
FROM THE PERIPHERY
—🎞️ JioCinema has reached a new milestone, surpassing 16 million paid subscribers by September 30th, 2024. This growth is fueled by attractive monthly subscription plans (INR 29/month and INR 89/month for a family plan) and a growing content library, including popular shows like Bigg Boss OTT, international hits like Kung Fu Panda 4, and extensive sports coverage, according to an update filed in the markets by Network18. This success comes as JioCinema prepares for a major merger with Disney+ Hotstar, following the combined might of Reliance Industries Limited (RIL), Viacom18, and The Walt Disney Company. This landmark deal is expected to create a joint venture valued at $8.5Bn post the merger.
—💸 Ola Cabs has been directed by the Central Consumer Protection Authority (CCPA) to revamp its refund policy and provide customers with the choice of receiving a direct refund to their bank accounts. This directive comes after the CCPA received numerous complaints from consumers who felt that Ola's "no-questions-asked" refund policy, which exclusively offered coupon-based refunds, was unfair and coercive. The regulator argued that instead of providing an option for cash refunds, Ola Cabs was essentially asking customers to take more rides by offering coupons for future trips. This practice, according to the CCPA, does not constitute genuine redressal of consumer grievances. In addition to the refund policy changes, Ola has also been instructed to mandatorily provide invoices for auto-rickshaw rides booked through its platform. Previously, Ola did not issue bills for these rides, a practice the CCPA deemed an "unfair trade practice" under the Consumer Protection Act, 2019.
—🧓 The central government is mulling expanding health cover for people aged 70 years and above under the Ayushman Bharat Pradhan Mantri Jan Arogya Yojana (AB-PMJAY). The National Health Authority, which is the implementation agency for AB-PMJAY, is looking to expand the scheme to benefit an additional 60 million people, covering 45 million households by the end of the month, according to a PTI report on Sunday. This expansion will focus on providing comprehensive health packages specifically designed for the elderly, including coverage for age-related ailments and geriatric care.
PODCAST
One way to understand the late Ratan N Tata's enduring qualities as a leader is through the eyes of those who have worked with him closely. The first is in the face of challenges and adversity, the second is in the pursuit of innovation. One requires determination, the second, an opinion mind fired by curiosity. There are many more attributes to leadership, including of the diversified kind Tata exemplified.
On The Core Report's Weekend Edition, Govindraj Ethiraj attempted a potrait of Tata over the years through the eyes of four different veterans and periods.
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