Scalable business model offers sustainable growth in India, Dimerco says

Peng Chen, DIGITIMES Asia, Taipei 0

Guests inspect electric scooters in Mumbai in March 2023. Credit: AFP

India is on many companies' lists for alternative production bases as it has become the world's most populous country. According to international logistics company Dimerco, adopting a scalable business model that tests the market first and builds a production plant later would be a better approach.

Headquartered in Taiwan, Dimerco entered India 10 years ago and has six offices in major cities. It primarily supports clients in semiconductors, telecommunications, internet networking components, consumer electronics and automotive industries based in Taiwan, the US and China.

Rajesh Srinivasan, country manager for Dimerco India, said the company plans to commence a new program in the second quarter of 2023. With a strategic partnership with a CPA firm, Dimerco will start offering operation setup solutions for small and midsized companies outside India, in addition to the existing free trade warehousing zones (FTWZ) and customs bonding services.

Test, trade and manufacture

India has been the rising star as companies are looking to build production plants outside China. Its popularity is expected to grow further with Apple's investment. Dimerco India suggested companies, instead of rushing in, enter the market with a plan composed of several phases.

Jane Chiu, sales and marketing specialist for Dimerco India, said companies should consider taking a scalable business model – test the market first, do some trading to gain experience in the country and then set up their manufacturing model.

She also said enterprises need to think about regulation complexity in India. For example, the country has direct and indirect taxation structures, which will take time to understand.

Learning about and adapting to Indian culture is another critical work. Chiu said employers are suggested to understand the Indian working style and before building a workforce.

Srinivasan said South Korean and Japanese enterprises entered the Indian market in the 1990s and 2000s, respectively, with a similar business model. They came to the country with a clear strategy of learning about the culture and discovering the demand. They later adapted to the market and began applying their products to it, he said.

Semiconductor and EV segments to scale up

Through the Make in India program launched in 2014, the Indian government offers several incentives to grow electronics and semiconductor manufacturing capacity. One of them, the Production Linked Incentive scheme (PLI), "woke up" India in 2020, according to Srinivasan.

He also said the government will soon introduce PLI 2.0 to encompass more segments like EVs and battery manufacturing.

While India is still early in building its semiconductor ecosystem, semiconductor supply to the market is poised to take off. Srinivasan said demands for the components exist in multiple industries.

"All the global players want to have a presence in India. They all want to come and supply India," he added.

Those suppliers are the clients that Dimerco India is targeting, according to Srinivasan. He said the company has already formed relationships with semiconductor manufacturers. It also works with distributors primarily based in Asia and the US who intend to supply India.

Thanks to the world's largest population, India also holds great potential in the EV segment. According to Dimerco, the country saw 3.22 million in car sales last year. More than 400 million people need transport solutions.

Chiu said India has joined the worldwide EV 30@30 campaign, aiming to electrify 30% of vehicles sold domestically by 2030. The government has pushed electrification of all kinds of vehicles and seen the initial results, she added.

Nitin Gadkari, India's road transport and highways minister, has said the number of electric two-wheelers grew by 422%, three-wheelers by 75%, and four-wheelers by 230% between 2019 and 2021. The number of electric buses also increased by 1200% during this period.

Chiu said more EV plants and charging stations will be set up in India in the coming years. The market will continue to grow.

India can expect a significant number of two-wheelers to be electrified in another two to three years and the wave will arrive at the car segment later, Srinivasan said. It is mainly because the infrastructure for electric two-wheelers is more available in India now, he continued. In addition, the price parity between charging and fueling the motor vehicle is closer.