By Andrew Ganz
Monday, Apr 16th, 2012 @ 9:13 am
 
In a sign that the new car market in India is beginning to mature, three automakers are looking to end their joint ventures in order to tackle Asia's third-largest economy on their own.

Ford and Honda say that they are increasing their investments in India without relying on the local partners who helped establish their foothold in the rapidly-growing market. Other automakers, like General Motors and Hyundai, are also following suit, while late entrants Nissan and Volkswagen chose to go it alone in India entirely.

In its first decade, a Ford-Mahindra & Mahindra joint-venture gave the Michigan automaker a place in India, and it helped deliver around 120,000 new cars over 10 years. A few years later, Ford's $2 billion solo project sells around 100,000 units annually without having to share its profits.

"The automotive industry requires significant investment, particularly at the initial stages, coupled with a lengthy product development cycle," Ford's India chief told Reuters.

Honda, meanwhile, is in a spat with its partner, Usha International, over the Japanese automaker's plan to build more diesel engines on its own. Usha hasn't been shy about ragging on Honda in the local media, calling the automaker's actions "inappropriate."

"We do not wish to stand in their way, but will insist on transparency and acknowledgement of missteps in a mature manner," said an Usha representative.

The mass exodus away from joint-ventures comes in part from hefty government incentives designed to lure foreign investment in the fast-growing economy, says Vishnu Mathur, the head of the Society of Indian Automobile Manufacturers.

"Traditionally, an Indian partner was always required to take you through a labyrinth of government process, procedure and policy," Mathur said. "But when the policy is so transparent... then the need for a local partner diminishes."

While the joint-ventures have suffered, India has flourished as a carmaking hub. Production capacity has doubled to 3 million vehicles in just five years and India has secured itself as Asia's third-largest vehicle importer behind giant China and early standout Thailand.