Market Overview India: Broadening Horizons

Author / Editor: Kruti Bharadva, Vogel Business Media India / Rosemarie Stahl

India's leading Machine tool builders see great business opportunities in Mexico. With a comparable level of economic and technological developement, combined tith Mexican investmentfriendly policies, Mexico belongs to India’s largest export destinations.

Principal Trade & Investment Officer and Director of Pro Mexico for SAARC,rodrigo Blaco (centre) recently spoke on business opportunities for Indian companies at an EEPC conference.
Principal Trade & Investment Officer and Director of Pro Mexico for SAARC,rodrigo Blaco (centre) recently spoke on business opportunities for Indian companies at an EEPC conference.
(Photo: EEPC India)

Sharing similar geography, culture, socio-economic development priorities, attitudes, and mindsets of people India and Mexico are two large emerging economies with democratic, secular, and pluralistic systems, as well as convergent worldviews. Both the countries are almost at comparable levels of economic and technological development and are members of G-20. LATAM (Latin America) stands out significantly as the largest vehicle export destination accounting for 19 per cent of India’s total exports in 2015–16 and consumes 29 per cent of India’s global motor cycle exports.

According to Engineering Export Promotion Council of India (EEPC), Mexico’s imports from India jumped to a 12.18 per cent increase with a well-diversified basket, comprising engineering goods, automobiles and auto parts and pharmaceuticals. Besides Mexico’s own sizable market and investment-friendly policies, the country enjoys the strategic advantage of North American Free Trade Agreement (NAFTA) drawing large FDIs. Hence, several Indian companies are increasing their investment in Mexico to sell their products to its NAFTA partners—US and Canada as well as to the 40 plus countries with whom Mexico has Free Trade Agreements.

Market dynamics

Mexico—a front runner among LATAM countries—is a major auto components hub catering to North America. “Its proximity to the US market makes it an ideal sourcing destination with relatively low manufacturing cost,” shared Chairman & Managing Director, Jyoti CNC Automation Ltd, and President, Indian Machine Tool Manufacturers’ Association (IMTMA), PG Jadeja. In sync, CEO, Micromatic Machine Tools Pvt Ltd, TK Ramesh affirmed, “Though the Mexican market has slowed down of late, there are possibilities of revival in the coming years, essentially owing to lower cost of production & logistics and the country’s proximity to the big US market. Brazil and Mexico significantly meet the local consumption demands of the automotive, aerospace, white goods industry from the US as well as LATAM markets.” Observing an interesting phenomena, Director, Chennai Metco, C Renganathan opined, “There are not many capital equipment manufacturers in Argentina, and hence despite stiff currency, conditions and exchange rules, Argentine customers are still importing capital equipment. The absence of local manufacturers place Indian companies at a competitive pedestal as Indian companies enjoy a clearprice advantage to the American and European suppliers.” For Chennai Metco, LATAM is a good market with repeat orders for its heavy duty cutting machines from customers such as Scania, Volkswagen and Fiat in Argentina and several other customers in Brazil, Chile, Mexico and Peru. Notably, Micromatic Machine Tools have supplied its hydraulic cylindrical grinding machines to Guhring Mexicana, S.A. de C.V and Ekin Mexico S.A. de C.V through its US-based dealers and has no local LATAM dealer. Aligning on the same lines, Maulik Patel, Executive Director, Sahajanand Laser Technology Ltd added that the Indian machines are in substantial demand from machine tool, electronics, heavy machinery and metal forming sectors.

Paving the way through challenges

The ease of doing business prevails in most parts of LATAM, but the real challenge lies in understanding the market dynamics. “These markets are drastically distinct from the other global markets. Though the customers here share similar elements with their global counterparts, such as willingness to learn about machines, extensive study prior to finalizing machines, there is a demand for more and more features in budget machines,” emphasized Patel. Talking of challenges in LATAM, Jadeja stated, “High import duty, foreign exchange regulations, financial instabilities, prolonged custom clearance are responsible for delays in finalizing deals. However, during the last 4–5 years, we witnessed lot of positive changes in Brazil, Argentina and Mexico, which helped us establish our business in these countries.” Speaking of the high custom duty, especially in Brazil, Ramesh shared, “The cost of our standard products is not attractive to the local markets. However, tooled up solutions that require engineering and trials have a better chance.” The average Brazilian company looks for quick deliveries and many a times customers retract post learning the high lead time. Submitting his thoughts on these lines, Rengenathan elaborated, “We do not see any difficulty in product engineering, but branding, marketing and increased logistics time are unfavorable factors that need to be addressed in a collective and concerted effort to position Indian machines as an option to the LATAM companies.”