Chinese machinery manufacturers are spreading their tentacles in markets like India were German manufacturers have had a strong brand following as well as awareness

The year of Germany in India kicked off in September 2011 and concluded in February 2013. Part of the celebration was the Indo-German Mela, which saw the participation of German corporate majors like Siemens, Bosch, BASF, LAPP India, SAP, Voith, Volkswagen and others. A reflection of politics, business, science and education, and culture, the Indo-German Mela offered a glimpse of how Germany derives its strengths in areas of technology including automotive, power generation, medical equipment, machine tools, and others. The event also offered a glimpse into the business ties between the two countries. The presence of German majors like Bosch, Siemens and BASF dating as far back as fifty years, or more, in India. The presence of German industries in India is perhaps the longest by any country that India does business with. The respect for German companies stemming from their quest for offering products that are reliable, precision-made, and of high quality. These very qualities have also made German machine tool manufacturers a favoured destination by Indian engineering majors despite their seemingly high acquisition costs.

A change is in the offing. Despite their indefatigable reputation for high quality products, German machine tools manufacturers are under pressure in India. They are facing stiff competition from their Chinese counterparts. The only country that leads Germany in exports the world over, Chinese machine tools manufacturers are finding their way into the India market like never before. Far quicker than machine tools manufacturers from destinations like South Korea, which has an FTA with India. While lack of a FTA with India is proving to be a spanner in the works for the Taiwanese machine tools manufacturers according to industry sources, the Chinese machine tools manufacturers are carving a place for themselves in the India market.

And in all probability, at the cost of German machine tools manufacturers who are finding it tough to compete in terms of price. While the German engineering and machinery industry operating in India is trying to save its market share from an aggressively spreading Chinese counterpart, according to its liaison group VDMA, it is the considerable price difference between competing products that is drawing buyers to the Chinese machine tools manufacturers. At the root of the decision is the low price of Chinese machine tools even if they may not last as long as their German counterparts.

Under unrelenting pressure to keep costs down, it is the China-made machine tools that are turning out to be the best bet for many Indian engineering industries. In the last decade, Chinese machinery suppliers grew from a bare presence to hogging the largest market pie of 23 per cent in India. In the process, they dislodged older German players to the second place and 16 per cent of total sales according to Ulrich Ackermann, Managing Director, Foreign Trade for VDMA, the German short form for the German Engineering Federation. This despite the fact that German machine tools manufacturers have enjoyed an enviable reputation and brand awareness in India. While the 400-strong German engineering companies in India are further increasing their local involvement just as they would in other export markets, Mr Ackermann, speaking at a summit in India, is also said to have opined that growing competition to German companies is compelling them to closely observe and analyse the activities of their Chinese competitors. Not just in markets like India, but in other markets around the world too. Where German companies have traditionally enjoyed a strong market position. According to industry sources IPF/APF spoke to, rising preference for Chinese machine tools manufacturers comes from their price, but also better quality products unlike before. Many Chinese companies are also building a strong supply and service network, the sources opined.

While factors of an increase in Chinese presence in India include better earning opportunities for channel partners, it cannot be overlooked that Chinese companies sold machinery worth Rs 31,000 crore in India in 2011 against just Rs 560 crore in 2002. The German machinery industry made business worth Rs 26,000 crore in 2012. Engineering exports in the first six months declined by 15 per cent to Rs 10,800 crore.

(Photographs used are for Illustrative purpose only)