They came, they saw ... and they got their projections wrong. Lured by estimates of a 200 million-strong Indian middle class, multinationals flocked to the new promised land, wooing customers with an array of gizmos. Only to find that the glitter of growing markets does not always translate into gold for ambitious marketers.
MNCs covering a gamut of industries, including white goods, automobiles and soft drinks, are being forced back to the drawing board. While some companies are re-assessing their production capacities, others are examining their demand projections. Some companies are even reconsidering the size of their investments in the country.
Take the colour television industry. The Consumer Electronics and Television Manufacturers Association (Cetma) estimates that the domestic CTV market will amount to only 4.4 million sets per annum by the year 2000 if the existing duty structure continues to prevail. This is a far cry from the 7-8 million sets earlier projected for the same year by the department of electronics in 1993.
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The effect on companies is already discernible. Japanese giant Sony, which entered the country in 1994, has been forced to postpone its sales target of 1.2 lakh CTV sets from 1995-96 to 1997-98. Clearly, the famed Sony brandname was not enough to pull in customers.
Last year, we had estimated that the total CTV market size in the country will touch 3.5 million by 2000. But this year we think it will fail to reach even the 3 million mark. A lot depends on what the political situation in the country is like rues Sony India chief Y Kubo.
Sony is also going slow on its additional investment plans, which involve bringing in $16 million by the end of 1997-98. Sony has directly invested about $10 million in India till date.
The multinational has also indefinitely delayed its plans to set up a picture tube plant with its proprietary Trinitron technology in the country. In its application to the government, Sony had said the plant would be set up this year.
A similar fate has hit Sonys South Korean competitors Samsung Electronics, Daewoo Electronics and LG Electronics, all of which see India as a major manufacturing base.
Samsung Electronics, which launched its products a few months ago and received permission for a 100 per cent subsidiary company last year, has decided to be cautious. Unsure of the Indian market, the Seoul head office has taken nearly a year to clear the initial equity investment in the subsidiary, which is slated to be formed this year.
Worse, the companys $200 million colour picture tube (CPT) project has been delayed till 1999. Our CPT study team is very nervous because of the market conditions, said a senior Samsung executive.
Daewoo and LG Electronics also feel that the market size is much smaller than they had earlier anticipated. Gone is the initial
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