David Fickling is a Bloomberg Gadfly columnist covering commodities, as well as industrial and consumer companies. He has been a reporter for Bloomberg News, Dow Jones, the Wall Street Journal, the Financial Times and the Guardian.

The world's biggest car manufacturers have a problem with India.

Toyota Motor Corp., Volkswagen AG, General Motors Co. and Renault-Nissan Group are the giants of the global industry, each selling about 10 million cars a year and together accounting for almost half of the passenger vehicles produced by major manufacturers worldwide. In India, though, they're minnows, with a combined market share that's not much above 10 percent.

To make matters worse, the local leaders are unusually dominant. Maruti Suzuki India Ltd. has about 47 percent of the domestic market and second-placed Hyundai Motor Co. has 17 percent. That heavy concentration of power makes it extraordinarily difficult for more minor players to break through. But even so, no carmaker with global ambitions can afford to ignore a market that's poised to become the world's third-largest.

The Best and the Rest
Maruti Suzuki and Hyundai dominate India's passenger car market share
Note: Volkswagen owns Skoda, and Nissan and Renault have a wide-ranging alliance.

That helps explain why Volkswagen is so keen to strike a deal with Tata Motors Ltd. The two are in talks about forming an alliance, Tata's Chief Executive Officer Guenter Butschek told Elisabeth Berhmann of Bloomberg News at the Geneva International Motor Show this week. Butschek, a former Daimler AG executive who helped build the Mercedes-Benz brand in China, said the tie-up could create a shared car-manufacturing platform and give Volkswagen a better Indian foothold.

If you think you've heard that line before, it's because Volkswagen's great rival Toyota last month inked a partnership agreement with Suzuki Motor Corp. that would have many of the same features.

With half of the world's 40 most-polluted cities and a heavy dependence on imported oil, India has ambitious plans to shift its nascent car fleet toward more fuel-efficient technologies. Power Minister Piyush Goyal wants the country to move to 100 percent electric vehicles by 2030, a perhaps aspirational target that would in theory put India not far behind Norway.

That's a problem for local players such as Maruti Suzuki and Tata Motors, which will struggle to afford the technology upgrade such a shift would require. Despite Volkswagen's diesel-emissions scandal and Toyota's late development of fully electric cars, the two have the largest R&D budgets in the industry. Hence the desire for marriages: In return for access to deep pockets, Indian firms can dangle the carrot of better market penetration.

Where's the Growth?
Toyota's sales outside North America and Japan have been falling for two years
Source: Bloomberg

Managing these relationships will require some subtle diplomacy. Toyota only got its chance to sidle up to Suzuki after a previous alliance between Suzuki and Volkswagen fell apart amid recriminations from both sides. Tata Motors, for its part, already has a joint production line with Fiat Chrysler Automobiles NV, and its Jaguar Land Rover division counts as a major competitor to VW, Audi and Porsche in the more profitable luxury and SUV segments.

Middle Kingdom
Volkswagen has grown ever more dependent on China over the past decade
Source: Bloomberg

Toyota and Volkswagen will just have to put up with that. Chasing emerging-market growth has been a huge success story for the latter over the past two decades, turning China into Volkswagen's biggest market. But growth there is set to slow and the industry faces fundamental longer-term constraints from the sheer shortage of road space.

India may be a tough market, but it can't be in any serious carmaker's blind spot.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
David Fickling in Sydney at

To contact the editor responsible for this story:
Katrina Nicholas at