IndiaThink

Coming Soon: An Indian Car to a Dealer Near You

“Mahindra’s American strategy is to offer high value and good milage from efficient diesel engines” NYT June 28, 2009

Goldman Sachs estimates that by 2020 one in six cars produced in the world will by bought by and insisted that the US will be driving them very soon. 

The Nano has been discussed extensively all over the web with excitement around mobilizing those with the capitol to purchase a motorcycle into a four wheel vehicle.  What we have heard little about is Mahindra & Mahindra’s plans to enter the US market by the end of the year with a sport utility vehicle and truck line. 

Mahindra’s plans focus on one work: DIESEL.  Its vehicles will run at reasonable cost points--around $25-30,000 and offer value and good milage. Mahindra could not have chosen a better time to enter the US market.  Owning a well versed line of SUVs and pick-ups that have trekked the roads of several countries beyond India, having product and production experience they are poised to enter when a void has appeared: dealers forced to close by Chrysler and GM who still want to be in business, but have been rejected by their franchise owner. 

The real question is.....How will the US public react?  Some dealers believe it will be difficult to cover truck owners to a new brand.  But what about locals?  People who saw their trusty GM dealer go under to emerge as a Mahindra speciality shop?  Will purchasing a Mahindra Pik-Up become a way to “act local”?  Will this be an experiment in a global company propping up a local community?

Mahindra owns Satyama, a list of global hotels, a industrial line of trucks and farm equipment, insurance firms, Financial firms, BPOs and many other lines of business....a huge conglomerate  that has so far been somewhat silent on the US shores.

Heading to the USIBC Synergy Summit

The USIBC Synergy Summit starts this evening in Washington, DC.  On hand will be the premier leaders of the Indian business community as well as Hillary Clinton and other US Government officials. 

Hillary will be telling the world about the Obama plan for the India US relationship.  More to come later!

Nano. Nano. NANO. NANO

The world so needs something to cheer about.  We need invention, shiny objects, fascination, a need to understand...

One wonders if Tata planned the launch of the Nano car in the middle of this endless pit of gloom on purpose. 

USA Today called it the most talked about car....that is not in US show rooms.  I call it a WOW.  Here is something everyone need in India...but for some reason no one made until now.

The Nano has over 70 facebook pages filled with pleas directed specifically at Tata to "bring the Nano here, and fast" with a few concerns about "how fast" it will really go and extensive details on how to get on the waiting list.

Yes.  I said waiting list.  The first 100,000 will purchase the car through a lottery system and must put down 50% of the total payment. 

So, that will set you back about $1,500. Check it out yourself...

Read Between the Lines: We are sending work to India

A few months ago I went to China.  Before I left, I read a few books about the history of China's government, one of which was Life and Death in Shanghai.  This is a story you should not miss.  Its relevant here because the main character "read between the lines" every day.  She carefully studied the paper, looking for clues about what was really happening vs. what was being reported.

I have been reading between the lines today.

GM reported to Congress today and they are going to be working on a "Global" strategy.  I have some very bad news for Detroit: this means they are working to move more of the company off shore. They blatantly told the US Congress today that they were going to stop focusing specifically on the US market.  What market specifically will they be focusing on?  My answer (although I bet you had a smiliar one) India and China.  The parts of the world that are growing.  India/China basket holds more than 3 billion people.  Most of which to not have cars.  That's growth.  And how will they compete?  Against the likes of Cherry who is owned by the Chinese government and stole some of GM's designs?(see article in the WSJ on this a few years back.  Fascinating pictures where the newspaper took off the door of a Cherry model and put it on the GM.  The "key" if you will to the car design is the door.) This is not possible in the US--building cars and parts here and then shipping things to China?

While none of these things were stated in the article (beyond the global strategy piece) what other assumptions are available?

Topic Shift.

Congress added some language to the stimulus bill that, well I will let the Economic Times explain:

"Nearly 100,000 skilled Indian workers' prospects of living the American dream may turn sour with the Congress barring firms that received bailout money from hiring foreigners through HI-B visa programme if they replace US citizens."

I wonder if Congress has ANY IDEA what the average profile is for an H1-B Visa candidate.  From my experience, and this data is backed up by the Economic Times, most of the H1-B visas are issued to technical or scientific skill sets.  Majority of these are jobs in IT.  There are only 65,000 H1-B visas issued each year. 

Here is the real story: Americans do not have the skill sets that these jobs require so employers have two choices:

1.) bring in a candidate and keep the job in the USA.
2.) send the work off shore.

H1-B VISAs holders are your neighbors.  They do not work for "less."  Or in any way impact the job search of someone who already lives here.  Why would an organization want to pay the legal fees to support a visa when they don't have to?  Its not cheap--they must file paperwork and employee lawyers to manage the process.

In essence this provision just sent MORE jobs off shore.  When a company needs something done there is no reason for them to keep that work, especially if they cannot find a candidate.  What a business can learn from this is that the US is being protectionist.  That the US is not helping businesses achieve its needs.  That the US is promoting that search to end with a job offer to someone in a different country.

Lots of folks are writing about this.  But Harvard's recent study of patent applications over the past 15 years really demonstrates that our foreign visitors contribute much more than Congress wants to understand. 

As Riots Flare... Lets Look Deeper

There have been numerous reporting of Hindu riots over the last few weeks, specifically the reports detail Hindu mobs burning Christian homes and churches.   Thus far about 50 people are reported dead and the Wall Street Journal reports that about 7,000 people have moved into refugee camps.

So why are the Hindu's attacking the Christians?  While its interesting to read these reports through the eyes of a Westerner who is surrounded by Christianity every day and think "those poor Christians."  I suggest you open your eyes wider as these stories are not so black and white.

 While India has long been known as a place of refugee for people escaping persecution such as the Tibetans, other parts of the population have an intolerance of outside religions (outside being outside the 85% Hindu population) such as Christianity and Muslims for a variety of reasons.  I have spoken about the Muslim plight in India here. There are very few successful Muslims in India which is not surprising considering that most with means migrated to Pakistan during separation in 1947.  Muslims tend to be viewed from a caste perspective, or system the of Chaturvarna, as part of the lower castes.  Ironically, Christians suffer from this same problem.  Most of them used to be Dalits or other lower castes, but they converted to Christianity to "escape" the caste system.  These are generalizations; there are rich Christians in India as well as Rich Muslims.  But lets be very clear, for the most part Christians of wealth likely started out as higher caste Hindus which means from the beginning that had access to more resources.  

Untouchables are viewed as un-pure so there are cultural traditions set up to keep the purity of the higher castes.  This means different tables if not different rooms entirely, using different drinking glasses, only allowing those of the same caste to wash their used glasses as they are considered contaminated, living down river so their water does not flow into the higher castes' supply, they can not take communion inside a Catholic church (in most situations its just not done anymore in India to avoid the conflict) for fear of sharing the same cup..and so on.  The hold idea is to keep these people at the edge of society in every way possible.  They are not granted land, they are entitled to grow a few things on the community property outside the village as the higher castes in the village realize they need the labor but do not want them to live inside town.  And you get the point....

To escape this plight Dalits attempting to leave this group change their names (last names indicate caste) and attempt to reject Hinduism by joining the Catholic of Buddhist faith.  Hindus view this as "Christians trying to convert our people" according to Jagannath Lenka who was quoted in the Wall Street Journal.  This is a "problem" as the Dalits are a powerful political force because of there sheer volume--its represents 16% of India's population or about 170 million people by today's numbers.  Guess what?  That is HALF the people that live in the United States.

Ironically, the idea of converting to escape the Hindu caste system was started by Dr Babasaheb Ambedkar who was one of the leaders working on the Indian Constitution in 1947 after its Independence from Britain.  Babasheb decided to encourage all Dalits to convert to Buddhism after loosing this fights to do away with Chararuvana.  Christian faiths picked up on this movement and sent in leaders to try to evangelize Indians to join their faith quickly there after.

The Hindus want the Dalits and other low castes to stay with the team--to keep working on the government to open up more affirmative action policies and more access to programs.  And the pressure is mounting as higher caste members are eliminating their need for the Dalits with the introduction of technology and the privatization of land ownership.  Dalits are no longer needed as much by society so they are being pushed father to the edges.  As a group, departure is viewed as a weakening team.  Its no wonder that so many Christians have been attacked over the previous weeks.

I have little tolerance for the Catholic Church's efforts in India.  The effort around the Dalits is filled with sappy language about how these people need Jesus and the Catholic's "God."  What the Untouchables really need is access to education where 90% of their group does not drop out because they are needed to work at home or they are heckled out by students after they are forced to clean the toilets.  They need access to skill building and training.  They need the same things that the US needed in 1960's around equal access---instead of being served out the back window with separate glasses they need a seat at the table.  They need for community leaders to not call meetings after dark when Dalit members are not allowed to leave the confines of their community to vote on issues.  Mind you, they hold a very large portion of the respective leader chairs as demanded by the affirmative action mandates, but they can not be used if they can't get to the voting time.  They need a way to build a community of their own, not one under the auspicious of seeking God.  Not a church that still demands separate cemetery plots based on caste or rejects the sharing of a communal cup.  I encourage the Church to find a path that these can be balanced and build templates that whole communities can use instead of building more walls, something India has plenty of already.   

Pot Holes that Just Won't Quit by Design

Greetings friends....thanks for allowing me to take a bit of a break while I settled into my new home in New York City. Onward!

I have talked before about bribery and corruption in India on a few occasions--and every occasion was met with refutes from the field.  Every time I find an article that supports my position I make an effort to post it so visitors to India can begin to understand how the inner workings of the country effect their everyday lives.  A recent post in the IndianExpress is a perfect match.

Karnataka which is the Indian state the holds Bangalore and Mysore both considered wealthy cities by most standards is looking into the problem of pot holes.  Specifically: why do they keep coming back?  The high court in Karnataka recently stated:

“They (Bangalore Mahanagar Palike) want the roads to remain in good condition only for two months so that they get kickbacks from the contractors for awarding relaying works. The palike does not want the road to be in good condition even for two years.”

I was once driving through Bangalore during a rain storm.  Bangalore does not get the rains of Bombay --- monsoon like rains that happened during this visit.  As we floated over to the call center on roads that were slipping over with water in our SUV we watched with horror as the beautiful lines that bring data into and out of the region were slip--slip--sliding around on the side of the road.  They had been unearthed and were floating there in all of their orange and blue glory. 

Many travelers complain about the infrastructure in India and this opinion piece is a testament to how far India has to go to build a sound foundation around all of the bubbling growth that has brought extensive capitol into the region--this region in particular has highly profited from Western investment into technology and customer service facilities.  Its time for India to take these proceeds and plan for the future needs of their state so they can continue to offer world class talent to the world.

Outsourcing: Coming to a city near you

A recent article in the New York Times , "Outsourcing Works so India is Outsourcing Jobs", made me wonder why us "ingenious" Americans are not taking advantage of the outsourcing trends that Wirpo, Infosys, and other heavy hitting Indian players.  I wonder if the US as a whole has written off the positibility of providing back-end services in-country or starting a US based firm to compete with the powerhouses in India.  Do we need to travel to India to learn "how its done"?

Yes apparently.  Indian companies see the global economy clearly.  Perhaps more clearly than we want to see it.  And why?  Is it the one stop shop that is most attractive?  Here is one example from the article:

Such is the new outsourcing: A company in the United States pays an Indian vendor 7,000 miles away to supply it with Mexican engineers working 150 miles south of the United States border.

I fear what the end of the article portrays through a cute story is actually what most Americans think is happening in India:

And yet, even as outsourcing takes on new directions, old perceptions linger.

For instance, when Jeff Rand, a 23-year-old American trainee, told his grandmother he was moving to India to work as a software engineer for six months, “she said, ‘Maybe I’ll get to talk to you when I have a problem with my credit card.’ ”

Said Mr. Rand with a rueful chuckle, “It took me about two or three weeks to explain to my grandma that I was not going to be working in a call center.”

Its time to think globally and act locally.  This means US companies should be concerned that companies like InfoSys are investing in Phoenix and Atlanta locations to increase the spread of their reach.  American companies should be called to jump into the outsource game with the same veracity that has caused the India explosion.

India's Mind-bogglingly Large Middle Class

McKinsey issued a report recently titled "Tracking the Growth of India's Middle Class" with the headliner:

"Over the next two decades, the country's middle class will grow from about 5 percent of the population to more than 40 percent and create the world's fifth largest consumer market"

India's consumer market in 2025:

• will contain 583 million people categorized as middle class
• 62% of the country's spending power will live in cities. 75% of city dwellers will be part of the middle class as compared with 0.1% today. 
• India's wealthiest citizens will total 24 million

The question is how can you as a proprietor of services and merchandise capture this emerging group of buyers? 

Today most Indians participate in what McKinsey calls an "informal" economy and what most westerners would call a very large disorganized bazaar of sorts with locations stretching from backyards to streets to small shops.  To put this in perspective think about the last time you got a flat tire.  You have a spare tire which is now on the car and you are off to get a replacement...any option found on the side of the road, say under a tent?  That tent of course has an air compressor that is operated by some type of gas powered engine.  No Costco around these parts only the group of entrepreneurs stationed on the side of the road all over India ready to bargain away to get to a deal.

Because India has an informal economy its citizens seek value which is found through negotiation.  Negotiation is not to find the right or best price, rather it is poised to move to a mutual agreement between parties. As Paul Davis states in his book What's This India Business; "Indians are above all else traders".  Factor this in with their need to be polite and you have an interesting situation on your hands for any negotiation--its rare that you will hear an Indian say NO.  Consider this in the context of buying and selling to a group that wants to bargain but doesn't feel comfortable being aggressive.  How is this delimma resolved?

One interesting case study was written up on the WSJ a few months back where the owner of Big Bazzar was profiled regarding his attempt so sell to India out of a "box" store.  His answer was to "replace long wide aisles with narrow, crooked ones" to make it feel chaotic, and placing battered produce in the same box as good quality to make customers believe they are getting a good deal.  Indians are not accustomed to plastic containers so they are sold unpackaged razors from large bins.  He hires people to walk around and talk about specials through loudspeakers to add to the already noisy environment.

Or what he does is recreate the idea of buying from the man on the side of the road with the large trucks blaring by and music playing right next to your ear as you are trying to get something that fits your rim.

Beyond the grocery store example McKinsey predicts that people will spend dollars on education, health care (private health care that is), transport (cars), and communications.  They suggest that companies interested in tackling this market should get started NOW.... 

Raging Rupee

Last time I was in India the exchange was 46 Rupees to 1 dollar.  Today its 39 to a dollar.  As the dollar continues it plunge into never never land the impact on exports from India is large. 

Washington Post featured an article about this on Friday Nov 11th.  In the piece they site numbers I have not uncovered before that I will share here:

• Hardest hit exporters are those garments, leather goods, handicrafts.

• Information technology sectors have also been hit.

• Job losses thus far are estimated at 4 million people with the expectation that 8 million will be effected by March 2008

The focus of the piece is an owner of a garment producer who creates pieces for Ralph Lauren, Ann Taylor, Liz Clairborne etc.  His concern is around where the work will go next if the Rupee "rages" on. Cambodia, Thailand?

What many of us may not know is that the garment trade in India is belabored by "Ghandi" laws that prohibit imports of particular materials making it very difficult for India to compete in any other space but these high end pieces. They are not able to import the volume of cheap fabrics in the same way that China is resulting in silks and high end cotton pieces being India's niche market.

Is India about to go through a similar transition to the US where people will have to find jobs outside the unskilled positions because they will eventually be moved to other locations?  The rule of globalization is everything speeds to the cheapest market available.  The question then becomes will India spend its raging Rupee on infrastructure to build schools and other necessary items to accommodate these society changes?

 

India's Infrastructure or India's Global Reach?

Week of Nov 5th’s Fortune Magazine has a feature on India focusing on the changes in its dynamics, clout, innovation, and business world over the past ~15 years. Highly recommend you read this article and enjoy some of the pictures that precede it. India is in the middle of a marketing blitz around its 60th anniversary of independence.  These efforts have been subdued in the press as most of India’s coverage this week surrounds their inability to pass nuclear accords with the US and details the Prime Ministers extensive efforts to convince the world that India continues to be "open for business" regardless of its political choices.

The author has a few messages sprinkled through out the piece but one that I believe must be brought to the surface is the economic and political structures in India and how they have done little to encourage growth inside the continent.  One feature inside the piece details a Hyundai venture located in Chennai.  The plant is highly successful but not without challenges--all of which surround infrastructure.  Or rather the lack of it.  Problems like difficulty in delivering products to nearby ports and no government support in its efforts to get water, electricity and other energy sources required to support its operations.

These are very important considerations that companies must understand as they enter the India market place.  The complexities abound around getting the right infrastructure to make your strategy work.  As the author states “China outspends India on infrastructure by a ratio of 7 to 1. The result: India’s manufactures pay twice as much for electric power as do their Chinese counterparts and three times as much for railway transport.”  These numbers are staggering for groups interested in moving into India for manufacturing.  Hyundai took on an Indian location based on a rejected application to China; their first choice.  How will India solve these problems with a government that has a ‘dysfunctional political system---driven by caste, religion, party and faction?”  As competiton heats between these two asian giants India must face its infrastructure woes and solve them.  Its unclear how long it will take the government to wake up to this harsh reality--my prediction is that its going to take a while.  India has grown too accustom to daily power outages and other infrastructure failures.  And the way India has grown has not been like China, through its government.  Rather it has been in spite of it.