Global automobile original equipment manufacturers (OEMs), who have had a bumpy ride in India so far, could make a comeback over the next five to 10 years as they learn from their past mistakes, according to HSBC.

There has been a notable consolidation in the Indian passenger vehicle industry over the past decade. In the past 10 years, the market share of the top six OEMs has increased from 80% to 94%, HSBC said in a report.

Most non-top-six OEMs have lost traction in the market and are now at an economically unviable low volumes, the report said, adding that the reasons for the disappointing performance by these companies largely relate to product and pricing market fit and are discussed later in the note.

“We believe next five to 10 years provide a much better backdrop for fringe players to come back and expand in India compared to the past 10-15 years. Plus, the companies now have the wisdom of hindsight and past mistakes,” said the report.

HSBC cites three reasons for a possible comeback by laggard auto OEMs in India.

1. First, the customers are evolving. We see a clear migration to bigger cars/SUVs now, making it easier for global OEMs to compete. As customers migrate to bigger cars, the propensity to experiment/test new OEMs and vehicles also increases multi-fold.

2. Second, India is gradually emerging as the export hub and hence for most OEMs total volumes from the Indian production plants could be higher than domestic sales. This provides operational resilience even at weak domestic cycles.

3. Third, it's a level playing field for challengers if EV penetration surprises positively in India. We have a long-standing opinion that India will remain a multi power train market for a long time (refer India is likely to remain multi-powertrain in the medium term, 27 November 2024). However, in case EV penetration surprises positively, the new entrants may be able to gain market share.

Most of these OEMs are still optimistic about their long-term prospects in India and are strategising to revive their portfolio or distribution reach in India.