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Déjà-vuIndia - the toughest car market in the world

Now the VW group wants to try it on its own again. At the end of August, the Wolfsburg managers stopped the cooperation with the Indian car manufacturer Tata Motors, which they had announced with many warm words only six months beforehand. Now the subsidiary Skoda is to develop its own cheap car for the subcontinent. But that can take a while.

For now, the group can put its ambitious plans on the world's most difficult car market aside. And not for the first time. In no other country has VW failed as often as in India - not even in the USA, where one debacle followed another over the decades.

The German managers wanted to bring Skoda to India 20 years ago, but they quickly had to bury the project again. At that time, all manufacturers together sold just 430,000 new cars per year in this huge country. Last year it was three million, and sales could double again in the next 15 years.

However, German manufacturers could hardly benefit from this rapid growth. The Indian-Japanese joint venture group Maruti Suzuki alone accounts for a good half of total sales in India, Hyundai follows with a share of 20 percent. VW is pretty much at the end of the official registration statistics. All efforts to change that failed. Sometimes Volkswagen tried it together with the market leader Maruti Suzuki, sometimes with other Indian partners, then again alone. The result was always the same.

Again and again losses

Exactly 20 years ago, in Bombay, I spoke to one of the best experts on the Indian car market. Back then, he was still in labor pains - the streets were dominated by black Ambassador taxis, built by Hindustan Motors based on the British Morris limousines from the 1930s. The then head of the Indian industrial group Mahindra & Mahindra, R. K. Pitamber, prophesied three things to me in 1997: The Indian car market will grow strongly in the next 20 years; nevertheless it will be difficult for foreign manufacturers to make profits here for years to come; therefore it is crucial to think carefully about your strategy and only to increase the investments step by step.

That's exactly how it turned out. Mahindra & Mahindra comes in third in the Indian sales statistics. In the past 20 years, however, German corporations have repeatedly wavered between the exaggerated hope that India could become the “second China” and the disgraceful reality of their loss figures.

Again and again they offered the wrong products: too expensive for the Indian middle class or too outdated for the small Indian upper class. Above all, however, they were blinded by their successes in China - and wanted to transfer the strategies there more or less one-to-one to India. You violated the "number one rule for success here", which Pitamber gave me back then in Bombay: "India is NOT China."

Bernd Ziesemerwas editor-in-chief of the "Handelsblatt". In the “Déjà-vu” column, he picks up on strategies, problems and plans of companies every month - and examines them all the way back to the past. The column at hand was published in the current issue of Capital. Click here to go to the subscription shop, where you can order the print edition. Our digital edition is available from iTunes, GooglePlay and Amazon