Car Brands that Indian carmakers can Potentially invest in

Automotive Industry alike any Industry runs on 2 things: Revenue and Profits.

Carmakers try to ensure that they earn revenue (by selling cars), are able to make profits to ensure a Return on Investment for the stakeholders (Public or Private).

The process then simply becomes Raising Capital->Capital Investment->Production->Sales->Profit-> Return to Investors
and the cycle repeats

Alike any market, car market too goes from its share of ups and downs. For example Volkswagen was the biggest car maker in year 2008, in 2025 the biggest car maker by Market Cap is Tesla

Understanding Business Lifecycle



Any Business has 4 major stages- Introduction, Growth, Maturity and then Decline. All businesses including automakers also go through the 4 stages. In order and to attest the 4th stage, car makers plan various strategies to expand and rejuvenate



Strategy 1. Diversification

Moving into other zones, territories, and entering new horizon. Done mainly to expand. Can be performed via Investment, Expansion projects, Acquisition, Mergers, etc.

Strategy 2. Rebranding

Changing the known brand image into something new, this is performed through process of communication which reflects the change

Strategy 3. Letting go off Non Performing Assets

In any organization there are Non Performing Assets or assets that don't provide adequate return on investment. Such assets are disposed off as either sale or write off

Strategy 4. Cost cutting and Resizing

Finally if any organization enters the decline stage they try to cut the cost in order to salvage the Operating margins






Attached above are the Operating Margin, Earnings and Market Cap of Automakers

A) Operating Margin- refers to as Margin between Operating Revenue and Operating expense of an organization. Calculated as Operating Revenue less Operating Expense

B) Earnings- Refers to as Net Revenue earned by an organization

C) Market capitalization- Refers to as the Capital raised by the automaker in public listed companies through investment in the companies shares

What does Operating Margin, Earnings and Market Cap of an Organization show?

Simply put
(1) Operating Margin shows margin at which organization operates, bigger the margin more leeway they have with their expenditure
(2) Earnings, shows how much organization is able to give back to the Investors
(3) Market capitalization- The trust the investors have in organization has, a low trust organization has a lower market cap as investors are hesitant to invest.

Operating Margins can be achieved by frugal cost activity with lower returns, Earnings can be made by selling off assets or Return on Bank Deposits or even through raising Debt, Market capitalization can simply be a result of Ballooning of stock through a promise of return

As a result all the 3 need to be looked together to make sense of the Automakers performance

Some Automarket Macros of Present

1. The Chinese carmakers are rising rapidly in their home market and are also raising footprints Abroad
2. European economies have remained more or less stagnated since Financial Crisis of 2008
3. Trump Administration is imposing auto tarrifs on countries at pro rata basis
4. Only major car markets to be showing growth are India, China and Brazil

The Automakers that are in trouble

After examining the 3 considerations carefully, here are the automakers that seem in trouble (I am excluding Chinese automakers and really small automotive groups that don't bring much impact to the table)

1. Volkswagen Group - falling market cap, falling earnings and high dependency on European and Chinese car market

2. GM Group-falling market cap, falling revenue and earnings, low operating margins

3. Ford Group- falling market cap, falling revenue and earnings, low operating margins

4. Vinfast- high PE Ratio, high debt, falling market cap, limited presence, bad reputation

5. Isuzu- limited market cap, limited revenue (yet falling) and niche presence

6. Mitsubishi- already in news for their troubles

7. Mazda- limited market cap, falling revenue

8. Aston Martin- high losses

9. Stellantis Group- falling market cap, falling revenue and earnings, low operating margins

10. Renault- falling market cap, falling revenue and earnings, low operating margins

Indian Macroeconomics

India will be the world's third-largest economy by 2028 as it becomes the world's most sought-after consumer market and gains share in global output, driven by macro stability influenced policy and better infrastructure, Morgan Stanley said. From a USD 3.5 trillion economy in 2023, the Indian economy is projected to expand to USD 4.7 trillion in 2026, which will make it the fourth largest in the world behind the US, China and Germany.

( Link)

Overall outlook will be positive and growing


Simple answer is yes. The reasons are

1. It increases the presence of the brand

2. It raises investor confidence in the company

3. It helps acquire technology that other the car brand possess

4. It helps enter newer territories where the car brand is present

5. It adds to company assets

Ways one can invest in other brands

1. Acquisition- complete takeover where the other brands entity ceases to exist

2. Merger- merging with the other car brand to form a new entity

3. Investment in stake- also known as partial investment in form of capital

Automakers are National Assets?

Automakers are huge contributor to any countries economy, thus governments around the world are vary about them potentially going into hands of any foreign OEM. For example- GM and Ford have both been saved by US Government time and time again from Bankruptcy, where Government itself acted as financial impetus to sustain their business

Thus the process of leasing out auto stake within any organization generally goes like this

1. Foreign Brands are liquidated out- eg: Volvo that was owned by Ford was sold to Geely
2. Foreign Stakes are liquidated out- eg: GM selling its business to SAIC during their wrap up in India
3. Internal stakes are liquidated out- eg: Volkswagen staking Porsche
4. Acquisition by a local company- eg: REVA being acquired by Mahindra
5. Merger with a local company: Honda Nissan merger that is in news
6. Finally company buy out: the last step if nothing else works

In further posts I will describe the potential brands our Indian automakers can possibly invest in, will give my reasons to believe that why one particular carmaker should invest in that brand

TeamBhp members are welcomed to add their opinions and brands they would like to see acquired by Indian car makers

(NOTE- The reason to exclude Chinese Brands from this discussion is due to Political environment. The Chinese Government won't let any Foreign Entity Invest or Acquire a Chinese brand)

Disclaimer- This post doesn't reflect actual strategies that the company are going to choose going forward and is no way a source of any kind of news

Brand 1: Vinfast



Vinfast is a EV car brand belonging to the Vinfast Group and plans to launch their first car in India in 2025.

Vinfast's Financial Performance: Poor, their Operating margins are in negative (indicating more costs than revenue) and their Earnings are also in negative (indicating an inability to provide return to stakeholders). Even considering they are a new brand, the performance is not up to the mark for investors and they would soon need to turn things around

Indian automakers showing potential interest: Tata Group, TCS already does some of the software related to Vinfast and will be interested to invest in Vinfast

Possible style of Investment: Investment in stake, as Vinfast is a significant part of Vietnamese identity thus the Government of Vietnam will not let Vinfast be completely sold off. Thus if needed, they would invite a possible stake investment in the company

Possible upside of Investment:

(a) Vinfast has decent cars, their EVs have potential
(b) Vinfast is biggest carmaker in Vietnam
(c) It will help buyer get an entry into the South East Asian market

Possible risk of Investment

(a) The brand has not shown a profit yet, any investment in it is purely an exercise hoping they give returns in future
(b) Quality issues in fit, reliability and software
(c) Doesn't carry a premium image outside Vietnam

Brand 2: Isuzu Motors



Isuzu auto group is a auto car company from Japan that makes Commercial vehicles, Cars, Trucks and more. They are one of the niche Japanese companies among sea of big horses (like Honda, Toyota, Suzuki, Subaru). Isuzu's carries a niche in SUVs and Pickups

Isuzu's Financial Performance: Poor, their earnings and revenue are on a decline although their Operating margins are decent. They have remained stagnated for sometime now and the brand doesn't carry a major legacy among buyers.

Indian automakers showing Potential Interest: Mahindra Group, Mahindra would like to hold stake in Isuzu as it would enhance their image as the SUV maker and both companies can find a product fit among themselves.

Possible style of Investment:: Investment in stake, Japanese Government and niche presence of brand are reason why investment in stake will make sense

Possible upside of Investment:

(a) Niche brand presence that can be used to sell high Operating margin products
(b) Entry into the Japanese market
(c) Entry into the Pickup truck segment

Possible risk of Investment:

(a) Limited presence of the brand
(b) Cultural issues as Japanese working style is different to that of the rest of the world
(c) Will provide low market penetration

Correction. Most global Auto makers have had some work done on their Software, Body in white, Manufacturing tooling etc. with most major Indian Services companies like TCS. Their engagement is purely as services. This cannot be mixed up with intent to invest.

I have worked in L&T before and managed their engagements with Stellantis in Product Design & Development. This cannot automatically mean that L&T would be interested to invest in Stellantis.

Brand 3: Mazda



Mazda is one brand that isn't present in India but carries its own identity in the International Market

Mazda's Financial Performance: Poor, their Market Cap has remained stagnant, their Earnings have remained stagnant and their Operating margins are very low. Mazda today remains at same place they were in 2014

Indian automakers showing Potential Interest: Maruti Suzuki India, Maruti Suzuki remains the top performing automaker in India but they have a limitation with regards to stretchability of their budget. An average Indian hesitates to buy their products above 20 lakhs. Investing in Mazda and bringing that brand to India can negate that problem

Possible style of Investment: A JV like what Toyota and Suzuki have or Nissan and Renault have. Japanese Government would prefer a Japanese company to invest in the brand

Possible upside of Investment:

(a) Aspirational brand image
(b) International presence
(c) Wide range of products that cater to different types of buyers

Possible risk of Investment:

(a) Japanese style of working which is different from rest of the world
(b) Lack of Indian presence, thus a complete investment is needed for their brand building

Brand 4: Aston Martin



The aspirational British Brand has perpetually always been in losses. The Super Premium Luxury cum Sports brand has a history of high Investment in their cars which do not give adequate returns. Since past 2 decades it is been flipping among investors.

Aston Martins Financial Performance: The poorest among all legacy car makers, they just cannot seem to make any earnings.

Indian automakers showing Potential Interest: Mahindra group, in the past they were in news for acquiring the brand before the news fizzling out

Possible style of Investment: Brand buy out, British Government wouldn't have an objection of a possible brand buy since it caters to a very niche buyer

Possible upside of Investment:

(a) Super premium brand image
(b) Operates in a high margin car space where the elasticity of demand in relation to price is close to zero
(c) Valuable addition to Goodwill of a Company

Possible risk of Investment:

(a) Has been termed as a forever White elephant, the brand has never generated tangible revenues
(b) Lack of products catering for future
(c) High Cost of Operations, other car makers can make similarly capable products at way lower prices

Brand 5: Mitsubishi



Mitsubishi is no stranger to this country, the Lancer and the Pajero even today carry a cult following among the loyalist. Mitsubishi is struggling internationally

Mitsubishi's Financial Performance: stagnated and losing, they held a bigger market cap 15 years ago.

Indian automakers showing Potential Interest: Mahindra group and Maruti Suzuki, Mahindra for the common interest in Mitsubishi's SUV line up which is commanding. Maruti Suzuki to bring in a premium line up to their portfolio

Possible style of Investment: A JV like what Toyota and Suzuki have or Nissan and Renault have. Mitsubishi Motors belongs to a bigger Mitsubishi Conglomerate who would not want to lease out their brand despite losses

Possible upside of Investment:

(a) Carries a goodwill among Indian buyers and a premium brand image
(b) Highly reliable cars that act like workhorses

Possible risk of Investment:

(a) Very limited brand presence
(b) Is a Japanese company whose working style is not compatible with all the organizations
(c) Belongs to a bigger Mitsubishi conglomerate who would still want to call the shots in the auto brand

Thanks for this thread

My two cents on this

Avoid - I don't think Vietnam would cede control. The indigenously developed cars have more niggles that one would think Tata is Japanese. Additionally, it is a recent company. Started with rebadged cheap Chevy's and remodelled BMW's. That partnership did not continue if I cam correct.

As we know, Mahindra is the Elizabeth Taylor of joint ventures. They could not get Ssangyong together. Saying that Isuzu is strong in Africa and in the light commercial space. It suffers as GM has a stake in it. It is primarily a commercial vehicle operation.

Would be an ideal candidate for Eicher-Volvo!

Mazda suffered due to underinvestment by Ford. Toyota have a stake in Mazda and Suzuki. Toyota could easily use spare capacity to build Mazda's and Maruti sell via the Nexa network!!!

Mahindra? They have done nothing for Pininfarina. Stroll would want a decent return and run the company until Lance retires from F1

Tata's- Strong possibility - The AM plant is not far from JLR operations. They could merge R and D. The next DBS could have RR Sport underpinnings. The Jags could use AM chassis underpinnings and provide the AM EV platform

Shoot it although Benson will shoot me. The Pajero is dead. None of their cars have anything special

There is very little to be gained by Indian companies if they buy any of these brands. Their existing R&D capabilities are more than enough to compete with rest of the brands in India. Also, automotive knowhow can be acquired from hundreds of consulting companies. Need help building a 250 BHP diesel/petrol engine for XUV1000? AVL Austria can help!

Anyway, when you make an acquisition, you don't just acquire brand and R&D capabilities. You also have to deal with salaries of thousands of employees all over the world and large debt burden that will be transferred to the buyer. Worse, every passing year will result in losses of hundreds of millions of dollars, simply because operating expenses will be higher then revenues.

Only time an acquisition makes sense is if Tata or Mahindra gets serious about expanding into USA or Europe or East/South East Asia.

But its a moot point anyway. None of the brands are on sale. I don't think Japanese companies sell their brands to outsiders. They would rather shut it down. They also have a Keiretsu system, which makes it near impossible for a foreign takeover to succeed
https://en.wikipedia.org/wiki/Keiretsu

M&M in talks to buy entire promoter stake in SML Isuzu: CNBC Awaaz Exclusive

Though this for commercial vehicle division I didn't expect a move this soon, hopefully they even make a move in the Passenger vehicle division

Link

Those Charts were very informative though. I had seen them in other charts, but not in this way. The most intriguing case to me is that of Tesla. Market Cap 100 x Revenue? Are they planning to sell outside Earth too?