DETROIT - Maitrea Doshi has this advice for companies considering setting up shop in India: Leave your pith-helmet stereotypes at home, be flexible, and come as a long-term investor, not a skimmer. Companies that come with the proper mind-set, Doshi said at the Automotive News World Congress and in a later interview, will make ``wagonloads'' of money in India.
``Too many Western companies want to tap into India's high rates of growth without having to go through the sometimes-painful process of adjusting to the realities of doing business in India,'' said Doshi, managing director and chief executive of Premier Automobiles Ltd. in Bombay. ``My advice to them is to forget their old assumptions, and to be flexible. Sure, there are problems with the business environment in India. But there's money to be made for anyone who's agile.''
Doshi said the greatest opportunities in India may exist for components makers. Although the Indian components industry is growing about 20 percent a year, total output amounted to less than $1.8 billion last year. The industry is dominated by small, family-owned firms and is concentrated on low value-added products, he said.
``We need everything. We need an across-the-board capacity increase in every conceivable area of modern parts and components,'' he said.
India has become an automo-tive hot zone since 1991, when Prime Minister Narasimha Rao launched economic reforms.
Drawn by projections that new-vehicle demand in a deregulated market will mushroom to at least 750,000 units by 2000 from 345,000 in 1991, some 14 automakers from around the world have set up ventures in India or are looking for partners.
Doshi, who has forged alliances for Premier with Peugeot to build the 306, and with Fiat to produce the Uno, cautions that firms that come with the idea of skimming off the top of the market won't survive long in India.
``But those companies willing to make major investments in plant and supply-chain development, and who come for the long term, will be rewarded handsomely by the market.''
The main reason: a tax structure that imposes heavy penalties on imported components and on the retail price of a finished car. Importers pay a 50 percent duty on the assessed value of complete knockdown kits, a 25 percent tax on engines and transmissions, and 10 percent on engineering drawings.
In addition, excise and sales taxes nearly can double the factory price of a finished car.
With taxes, Doshi said, the price of a car built from an imported kit swells to at least 3.42 times its customs price. Thus, a complete kit valued at $3,000 becomes a $10,260 car at retail - before manufacturing costs, factory profit and dealer markup.
``This dictates that only those companies who are prepared to get up to high levels of local content quickly will make it over the long haul,'' Doshi said. ``And even then, they must be prepared to accept several years of losses to stay in the game.''