A Cross-Country Comparison of Performance of Chinese and Indian Automobile Companies

Globalisation has led to a relocation of automobile manufacturing into new regions, allowing a number of emerging markets to achieve tremendous growth in automobile production and sales during the last decade. Automakers in China and India are the main beneficiaries of this shift in global automobile industry as both countries were able to increase their market share tremendously on the back of cost leadership strategy and abundant foreign direct investment (FDI). These two countries are now the fastest growing producers of automobiles in the world and accounted for almost quarter of the world’s total automobile production in 2010. This study aims to examine the operational and financial performance of the four largest automobile manufacturers in China and India through an analysis based on accounting ratios. The results of the study show that despite the fact that Indian firms have given considerable competition in recent years, Chinese automobile manufacturers have outperformed their Indian counterparts in profitability, inventory management, liquidity and solvency. This study also identifies some critical factors such as profit margin management and cost control that Indian automobile manufacturers need to address in order to outpace Chinese Automobile manufactures in the future.

JEL Codes: M40 and M41c

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