Why more Indian manufacturers should emulate TVS Motor’s global ambitions

As in cricket, so in manufacturing. When Prime Minister Narendra Modi unveiled the 'Make in India' initiative in September 2014, just months after assuming office, he aimed high. The objective was not just to boost domestic manufacturing but to transform India into a global manufacturing hub.

It was a lofty goal, more so because India's manufacturing sector had previously thrived largely within its own borders, benefiting from tariff-protected markets and policy tailwinds. Much like its cricket team of yesteryears, India's industrial landscape was a formidable player at home but a less-than-stellar performer on the global stage. Despite accounting for over 3% of the global GDP, India's share of worldwide exports was a paltry 1.6%. Moreover, low-tech sectors such as apparel, footwear, leather, and jewelry constituted nearly half of these exports.

But that was then. Today, 'Make in India', fortified by Production-Linked Incentive (PLI) schemes, now active across 14 sector, has begun to pay dividends. Smartphone exports, for instance, surged to ₹90,000 crore last year. Manufacturing behemoths like Samsung and Apple have not only transferred significant production lines to India but are also producing multiple models in the country, destined for global markets.

But, while global manufacturers have shown a willingness to make in India, Indian manufacturers have not been as quick to explore global markets. Which is why more Indian manufactures need to emulate two-wheeler manufacturer TVS Motor’s goal of becoming a truly global player active in all markets, not just at home.

TVS Motor was India’s third largest seller of motorcycles and scooters in India as of Q1, FY24. But rather than aiming to catch up with market leaders Hero Motocorpo and Honda Motorcycles and Scooters, TVS is setting a much more ambitious goal for itself – becoming a global mobility player of importance, with half its revenues accruing overseas. “By 2025, we see 30% of the scooter industry becoming electric and more than half of our revenues coming from outside India," TVS Motor MD Sudarshan Venu said in a recent interview to The Economic Times.

That kind of change in the revenue mix is not likely to happen simply by exporting more products manufactured primarily for the price-conscious domestic market. That can happen only if, like TVS Motor, Indian manufacturers look to not only create capacity overseas through partnerships, greenfield investments and brownfield acquisitions, but seriously start to engineer products specifically for global markets.

That is something which Chinese electronics and automobile manufacturers, to name just two, are pursuing actively. China emerged as the world’s largest exporter of cars in Q1 of this year, China exported 1.07 million vehicles, nearly a third of the 3,2 million vehicles it exported in 2022 to grab the second spot in the world automobile export market.

These are not just cheaper cars powered by China’s low manufacturing costs and export friendly policies. China is now a genuine world leader in electric vehicles, with Chinese carmaker BYD pipping Tesla as the world’s biggest EV maker. Chinese companies have also aggressively expanded overseas, acquiring Western brands and setting up manufacturing bases in major automotive markets like the US, EU and even in India, although here, some of their efforts have been stymied by the government.

In a 2022 paper, Bain Capital identified six megatrends that are likely to drive India’s manufacturing exports in the future. These are are supply chain diversification, advantages for India in certain manufacturing sectors, government initiatives to bolster manufacturing in the country, capital expenditure infusion into manufacturing sectors, heightened merger and acquisition (M&A) activity, and private equity/venture capital (PE/VC)-led investment in manufacturing.

To take full advantage of these megatrends, the authors said Indian manufacturers needed “a clear export strategy, the right execution chops, the right partnerships for enabling exports, and an optimal capital expenditure (capex) efficiency focus to build manufacturing capacity."

Unfortunately, that doesn’t look like happening right away. Far from achieving a contribution to GDP of 25% by 2025 -- the ‘Make in India’ goal -- the manufacturing sector’s share actually fell to 13% from 14% last year.

To achieve the original goal, India Inc has to look beyond domestic shores in a serious way. That would also require serious investment in R&D, which is not happening. India spends a paltry 0.7% of GDP on R&D. Here too, three-fifths is spent by the government. That is why, while an ISRO is able to compete with the world’s superpowers in space technology, Indian manufacturers struggle to make inroads into mature markets. Almost all of India’s two-wheeler exports, for instance, go to Latin America and Africa.

Admittedly, there are other bottlenecks – high taxes, high costs other than labour, and a cumbersome bureaucracy which make participation in global value chains difficult. But red tape can be cut through reforms, which the government has shown a willingness to do. Lack of quality and standards, however, cannot be fixed through policy changes. They require a paradigm shift in mindset. India Inc needs to start thinking like world beaters if it hopes to become one.