The last decade witnessed a sudden boom of Chinese gadgets in the Indian market. They became almost a household name in the country for their affordable pricing. Economic ties between India and China were hit post the Galwan clashes and this also led to the crackdown on Chinese companies that had monopolised the Indian market.
The crackdown has been most visible against Chinese mobile phone companies that have grown by leaps and bounds, almost overshadowing the Indian firms. Many of these firms had been found violating Indian norms. THE WEEK spoke to a range of experts about the possible impact this may have on the market share and the credibility of Chinese brands in India. Majority of experts are of the opinion that though there may not be an immediate affect but prolonged scrutiny may have negative repercussions.
“The negative focus on Chinese brands and their activities in India puts them in a negative image bind. It does not affect immediate sales, but has the potential of growing into a negative sentiment among a portion of their customers,” said brand expert Harish Bijoor.
Experts feel that constant scrutiny and frequent news of impropriety among companies with their head offices in China do not queue well for the brands from there. Since their sales and distribution systems in India have expanded far and wide, product availability, visibility and pricing may not be of immediate concern.
“In the short-term as well as in the medium-term, there will be an impact on their sales in the country. At the same time there seems to be a steady growth in negative sentiments towards Chinese brands even in the non-metro markets of India. I also do not see any significant PR action from these brands in reaffirming their brand promise and attempting to neutralise the negatives. They are possibly too optimistic about the impact of their global visibility and the efflux of time to bury the ugly memories. Also they may be a bit unmoved because of lack of competitive choices in the market for the consumers,” pointed out Aditya Narayan Mishra, director and CEO of CIEL HR Services.
As per market reports, Vivo, Oppo and Realme owned by BBK Electronics, a Chinese multinational conglomerate are becoming a craze in India. Market data about smartphones in India indicates that together, the share of these three smartphone manufacturers almost doubled during this period (2017 -2021). And in the first quarter of 2022, they held the biggest chunk of the Indian market (around 40 per cent). To check their legalities and manner of conducting business, the authorities served them notices to share details about the components used in the smart phones they manufactured. The purpose of this probe is to ascertain that the products used in the handsets are safe to use in India and the decision is in the interest of national security amid ongoing tensions between the two countries.
“The companies in question are Vivo, Oppo, Xiaomi and OnePlus which together account for more than 50 per cent of the Indian smartphone market, according to data from Counterpoint Research.
Ever since the Indian government’s retaliation against Chinese apps last year, Chinese smartphone brands promoted their “Indianness” quite aggressively. They claim to have increased local production and investments in the country as well. But according to the report, some of these investments promised to the government by the four Chinese companies have not been fulfilled,” said Girish Linganna, Director of ADD Engineering Components India Limited,
Market analysts point out that India is going to be the most populous country in the world and it is a simple equation now that nobody can ignore India if they are looking to grow. From a seller's market, India is going to turn strongly into a buyer's market. “Brands cannot behave like they rule the world, but they will have to work with the authorities to ensure they have a long run. Cutting corners will not help if a brand wants to be a long term player. These Chinese companies entered India with huge budgets but did not work on their long-term strategy. So, unless one does not comply with the laws of the land one cannot build great businesses in India. The geo-political tussle is also not helping these Chinese brands. The scrutiny will only get stricter and companies need to comply with the local laws. If they still sit on their high horse, they will get shunted out of the country and probably the biggest market they could imagine. Already with the world shunning Chinese products, this could add salt on their wounds and affect the credibility of the brands. However this is a great opportunity for the homegrown players. They will need to be ready to fill in those huge shoes,” pointed out Sathya Pramod, CEO, Kayess Square Consulting Private Limited.
There is no doubt that credibility of a brand is one of the key factors of a company's success. Santosh Pai, a cross-border lawyer and partner at Link Legal and Honorary Fellow at the Institute of Chinese Studies, is certain that the brand credibility of Chinese brands in India will suffer but the greater impact will be on viability of their business model in India. “It will be interesting to observe whether the business of Chinese brands remains viable even after absorbing the tax penalties. It might encourage them to localise their sourcing more. This will decrease their imports from China which in turn will reduce our bilateral trade deficit. If their business in India remains viable, they will take steps to repair the reputation damage caused to their brand,” added Pai.