vivo encounters India's "pig killing plate"

Text/He Yiran

Editor/Yang Lei

The latest victim of India's "pig killing plate".

Recently, some media reported that vivo India is negotiating with India's Tata Group (Tata) to acquire its majority stake and establish a joint venture company, in order to meet the Indian government's requirements for Indian executives to be Indian nationals and localize the marketing network to achieve the purpose of localization.

According to the report, the negotiations between the two parties are currently in an advanced stage, and Tata Group is very interested in the acquisition, while Vivo India hopes that Tata can increase the purchase price, but the two parties have not yet reached a final agreement.

In this regard, vivo told the Chinese media that it had not responded (to relevant news and statements).

This is the latest news from vivo India since the arrest and release of two vivo executives on suspicion of money laundering at the end of 2023.

According to Canalys data, vivo ranks second in the Indian smartphone market in 2023 with 26.1 million units shipped. According to the latest report from Counterpoint Research, smartphone shipments in India increased by 8% year-on-year in the first quarter of 2024, and vivo took the first place in sales with a market share of 19%.

It is not vivo's intention to give up the family business that has worked hard. But in order to survive in the Indian market, vivo may have to make concessions.

01

There was an anecdote circulating in the mobile phone circle, vivo commissioned a consulting agency to do a research report before preparing to enter the Indian market, and the advice given by the research agency at that time was: India is accustomed to introducing foreign capital first and then "closing the door and beating the dog", and it is recommended to enter cautiously.

After receiving the report, vivo stopped working with that agency again. Clearly, this proposal did not satisfy the company's top management.

After all, at that time, the domestic smartphone market was becoming increasingly saturated, and no one wanted to give up the incremental market of India.

In 2014, China's smartphone shipments reached 389 million units, down 8.2% year-on-year, and the market share reached 86%, of which Android mobile phone shipments reached 349 million units, down 12.4% year-on-year, accounting for 89.7% of smartphone shipments in the same period. The decline in mobile phone shipments is due to the increase in the penetration rate of mobile phones in China, which reached 1.28 billion by the end of November 2014, with a penetration rate of around 95%, and the growth rate of users has slowed.

At that time, only 120 million of India's 900 million mobile phone users were using smartphones. Compared with the strong Chinese market, Samsung and Nokia occupied nearly 6% of the market share in the Indian mobile phone market at that time, and the remaining 4% was occupied by Indian local brands Micromax, Karbonn and Apple mobile phones, and no matter which brand, its smartphones were basically produced in China.

Due to the family planning policy and the popularization of higher education, China, the "factory of the world" for many years, is changing from a "demographic dividend" to a "talent dividend" around 2014, and the average age of the labor force has increased significantly. India, which is also a large country with a large population, has shown a "young" advantage in terms of labor. According to the data, the median age of India's population is 28 years old, and the labor force in the 15-59 age group accounts for 80% of the total population.

In 2014, Modi became India's prime minister. In order to boost India's industrial standards, he proposed a "manufacturing plan" when he took office. At the beginning of his tenure, Modi made large concessions to foreign-funded enterprises in terms of factories, land, and taxes. On the one hand, it has huge potential, and on the other hand, it has attracted the attention of enterprises from all over the world. According to statistics, the amount of foreign direct investment in India hit a small climax in 2014, reaching US$45.1 billion.

It was also in this year that Shen Wei, the founder of vivo, went to India for an investigation. In 2015, the Modi government launched the "Phased Manufacturing Plan" (PMP), which aims to promote the development of the mobile phone industry, and came up with tariff exemptions to attract foreign investment to build factories.

In 2015, vivo chose to invest heavily in building its own factory and laying stores in India.

Although the research institute's report failed to convince vivo, vivo also remembered its reminder.

为了避免被印度“关门打狗”，vivo很早便喊出了拥抱本土市场的口号，即“More Local, More Global（越本土，越全球）”。

Statistics show that vivo is one of the mobile phone brands with the most investment in India, and its smartphone production base in India is close to the size of two factories in China, and it has also launched mobile phones with under-display fingerprint and lifting camera functions for the Indian market. In terms of marketing, vivo named the Indian people's favorite cricket game and signed Bollywood star Aamir Khan as the brand spokesperson, fully catering to the aesthetics of Indian consumers.

vivo tries to use the way of showing favor to the Indian people and binding various interest groups, so as to achieve as much "localization" as possible to avoid being "harvested" by the Indian authorities in the future.

02

In the first few years, vivo and its Chinese competitors made a big splash in the Indian market. In 2019, the Indian smartphone market shipped 158 million units, and Xiaomi ranked first with a market share of 28%, and Realm, vivo, and OPPO squeezed into the top five.

It was also the year Modi was re-elected for a second term as prime minister, vowing to increase the share of manufacturing to 25% of GDP by 2025.

Compared with the wooing of the first term, this time, Modi's policy has changed significantly.

In fact, in 2017, the Indian government further increased the tariff on imported machines and parts to increase the added value of products, with the intention of promoting the localization of the industry.

In 2020, Modi launched the "Self-Sufficiency India" initiative, launched the Production Linked Incentive Scheme (PIL) to support local Indian companies, and launched a $2.6 trillion industrial incentive plan to encourage the development of industries such as semiconductors, electronics manufacturing and automobiles, and get rid of dependence on foreign supply chains.

Subsequently, the policy encirclement and suppression of foreign-funded enterprises in turn was greatly pressed.

The Indian government has banned more than 200 Chinese mobile apps on so-called "national security" grounds. At that time, India was Tik Tok's largest overseas market, with 150 million monthly active users and more than 2,000 employees in the Indian branch.

At the same time, a number of Chinese-funded enterprises have been caught in the "tax" and "money laundering" turmoil, and the Indian government has taken turns to embarrass Chinese mobile phone manufacturers in various names such as tax audits, asset freezes, and restrictions on employee visas. In 2023, the Indian government even found an excuse to seize 4.82 billion yuan of Xiaomi's funds.

At the end of 2023, India's Enforcement Directorate arrested a number of senior executives of vivo India over an anti-money laundering investigation, including the interim CEO and CFO of vivo India. vivo's localization strategy has not yet been exchanged for a "talisman".

But despite the unfair treatment, vivo was unwilling to give up the Indian market and chose to compromise. In April 2023, vivo said it would invest another Rs 1,100 crore by the end of 2023 to further expand the company's manufacturing capacity in India.

In the face of vivo's compromise and overtures, the Indian government's high-pressure policy has not backed down. According to the source, India's requirement is for manufacturers to establish an India-centric smartphone ecosystem, including local channels. It can be said that India clearly wants to take the achievements of foreign investment as its own and use coercive means to turn foreign investment into "Made in India".

According to media reports, since April, vivo has switched to agency cooperation with Indian companies in New Delhi, Punjab and other regions, and vivo's manufacturing plant in Greater Noida has also been taken over by a subsidiary of Micromax, a local technology company in India.

A spokesperson for vivo India reluctantly said: "Vivo's strategic cooperation with local partners will help align the brand with the government's vision. ”

At its peak, the market share of Chinese smartphones in India was as high as 74%, and local brands were almost "wiped out", so India continued to adjust its policies to restrict the development of Chinese smartphones in India, and the use of the Foreign Exchange Management Act and the Prevention of Money Laundering Act to conduct tax and compliance investigations on Chinese mobile phone companies is a common method used by the Indian government.

But on the other hand, India's mobile phone manufacturing industry has also grown rapidly due to the continuous establishment of production plants in India by Chinese mobile phone brands. In 2014, 78% of India's smartphones were imported; By 2023, 99.2% of smartphones sold in India will be made locally.

It can be said that India has attracted countless companies to seize the market in recent years by virtue of its market size and cost advantages. After China's mobile phone companies helped India complete the market cultivation, the Indian government still couldn't hold back, and finally revealed its way of doing things, the first second was still "warmly welcomed", and the next second it became "closed doors and dogs", India unabashedly and indiscriminately "robbed" Chinese capital, and the intention of the white wolf with empty gloves was overflowing.

In the World Bank's Doing Business report, India is considered "one of the hardest countries in the world to do business in". This time, it is estimated that vivo will remember the bitterness of the report ten years ago.

03

To some extent, vivo's choice of Tata may also be a relatively compromise among many options. The Tata Group is an established Indian conglomerate that made its fortune through cross-border trade during British rule in India. From the British colonizers to Mahatma Gandhi to whoever the Indian leader is, Tata has been able to stand invincible for more than 100 years.

In November 2023, Tata Electronics, a subsidiary of Tata Group, acquired Taiwan's Wistron's local business in India for $125 million, becoming the first Indian company to manufacture iPhones. In addition, the Tata Group is in talks with Pegatron to acquire a majority stake in its Indian plant.

Some media predict that the next foreign-funded company to be put on the Tata negotiating table by Indian officials is likely to be Foxconn.

Under the integration of Tata, the smartphone assembly line in India may usher in a wave of resource sharing, which may be conducive to stimulating the continuous growth of smartphone consumption in India.

Tata may indeed be a better partner than other major Indian conglomerates, as its relationship with Modi is not as close. If it is Ambani or Adani who is involved, then foreign capital is likely to make a wedding dress for these two giants.

In June, the 73-year-old Modi was elected prime minister for the third time after a long election.

Modi's re-election as India's prime minister is the biggest sign that he has led India to rapid economic growth. In 2014, India's economy ranked 10th in the world, and in 2023, it has grown to 5th in the world. According to the latest data, India's GDP grew by 7.8% year-on-year in the first quarter of this year, and the annual growth rate is expected to reach 8%, making it the world's fastest-growing large economy.

At the swearing-in ceremony of Modi's third term as prime minister, two of India's top billionaires, Mukesh Ambani and Gautam Adani, showed up with their families to show their support.

Abani and Adani, nicknamed India's "AA economy" (this abbreviation is taken from the initials of their surnames, similar to the "two horses" in China), account for 4% of India's GDP and 25% of India's listed companies.

Modi, Ambani, and Adani are all fellow villagers in Gujarat. In the stereotyped impression of Indians, the Gujarati label is "good at business".

The Ambani family caught up with the Gandhi family in the sixties of the last century. Due to India's highly planned economy at that time, the Reliance Group of the Abani family was in close contact with the Indian government, forming a monopoly situation in the fields of telecommunications, retail, and energy. There is a saying in India that there is no opposition ruling party in India, only the Reliance Party.

When Modi, who advocated the power of big conglomerates to improve the efficiency of the country's economic planning, became a political celebrity, Ambani took advantage of the situation and sided with Modi as a staunch political ally.

In contrast, Adani and Modi have a closer relationship, which can be described as friendship. In 1993, Adani seized the opportunity to buy land in Port Mundra at an extremely cheap price, accumulating a rapid amount of wealth. When Modi was governor of Gujarat, the two men were inseparable in public, and Modi would also attend Adani's family events.

With his close relationship with Modi, Adani has attracted a large number of infrastructure projects since Modi became prime minister, and his wealth has exploded in the past decade, becoming the richest man in Asia. The correspondence between the two has also frequently appeared in the media and has become the focus of public opinion.

From the "toilet revolution" to the aggressive privatization of the economy to the development of infrastructure, digital networks and clean energy, the evolving "Modi Economics" has always been backed by the support of India's major conglomerates.

With the help of big conglomerates and big enterprises, India has indeed managed to hand over a relatively good-looking economic growth report card on paper. In the run-up to India's election this year, the media laid out a vast network of connections detailing the intersection between Modi and various Indian conglomerates.

The close relationship between the government and the big conglomerates has exacerbated the gap between the rich and the poor in India. As a country with a large population, especially when the working-age labor force population is still growing exponentially, solving the problem of employment is a major problem for the Indian government.

Post-pandemic, India's unemployment rate has increased significantly. According to the general election poll, the biggest concern of the public is "underemployment". India's unemployment rate reached 8.1 percent in April, according to the Centre for Monitoring India's Economy.

Hunting for foreign capital and subsidizing the local community can not only enable the big conglomerates to continue to sit firmly in the lead, but also give local people employment opportunities to alleviate internal contradictions.

Enterprises around the world know that India is a "cemetery for foreign investment", but in the face of such a huge market, companies are reluctant to give up completely. With growth in developed markets almost peaking, India's demographic advantage can indeed attract foreign investment that is not willing to give up and continue to "test the poison" here.

"Local consortia eat meat, and foreign-funded enterprises drink soup." Perhaps, for India's "pig killing economy", the expectation can only be so much.

This time, no matter what form of "cooperation", vivo is likely to "bleed" again.