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Apr. 24 – The Indian Formula One Racing team Force India, while yet to get of the bottom of the pile, came close to winning their first F1 points in Shanghai last week. The team sports the Indian flag as its team colors and has attracted sponsorship from Indian companies Kingfisher, ICICI Bank, Reliance Industries and Kanyan Capital.
Force India was formed after Indian businessmen Vijay Mallya and Michiel Mol bought the Spyker F1 team for US$115 million. The team races its own designed cars, powered by Mercedes-Benz, and was able to rise from 18th to as high as sixth with just 5 laps to go. What would have been the first points of the season for Force India slipped away when Adrian Sutil’s car hydroplaned off the track and into the tire wall. Force India has been in the hunt over the last few races, but a combination of bad luck and occasional driving mistakes has left them empty handed to date.
With Delhi being added to the Grand Prix circuit in 2011, Force India are learning and may well be a team to reckon with by the time the Delhi Grand Prix arrives. The team has just signed a five year agreement with Mercedes for engines, and a partisan Indian crowd in Delhi may make a large impact at the event.
The participation in, and rise to prominence of an Indian team in F1 is in marked contrast to China, which despite having hosted the F1 in Shanghai for the past few years, does not field a competing team. This is somewhat surprising, given that both China and India are poised to be the world’s largest auto markets in the next two to three years, with more vehicles having been sold last year in China than in the United States for the first time.
The Chinese logic for hosting the event, but not participating, seems a little skewed. The Chinese government pays Formula One about US$50million each year to host the Shanghai event, yet the country has not followed that up with a competing presence, cars or drivers, in the rest of the series. The prices to attend the Shanghai event also seem bizarre if China wants to use it to promote its auto industry. Shanghai wages averaging at about US$500 a month, that’s equivalent to the price of the cheapest ticket on offer for the Shanghai F1. You’d need to charge US$4,000 to attend the Indianapolis 500 in the United States to achieve a similar disparity.
So while Force India prepares the world for Indian cars and trucks – Tata having already acquired global brands Jaguar and Land Rover, and about to launch Tata as a brand name in Europe and the United States through the Nano and its trucking division – the Chinese are just not getting on board. It’s a curious state of affairs, especially since F1 have apparently re-signed with Shanghai to host the event for another seven years. US$50 million seems a lot to pay for a one off annual event that the local Chinese cannot generally afford to attend, in which no Chinese team participates, in a 17 race series which is broadcast globally and attracts hundreds of millions of viewers.
Force India meanwhile are pushing forward at the top end the concept of Indian vehicles as reliable, and developing India as a manufacturing brand in auto that will assist its national auto manufacturers integrate into and penetrate international markets.
I’d love to see a Chinese team participate in F1. But perhaps, while the Chinese auto industry remains largely under state ownership, a once-a-year Shanghai Grand Prix is deemed enough to promote the Chinese auto industry globally. If that is the case, the advent of Force India as a competing team may be a bridge too far for the Chinese state marketing strategists when it comes to developing Team China as a brand on which its domestic auto industry can begin to globally compete.
April 26th, 2009 at 9:06 pm
Chris this is quite an astute observation that India is using sport to promote “Brand India” where China seems to be half-hearted about it and only invests in events on its own soil. I was reminded of your comments when I learned today that Liverpool FC are in talk with Indian billionaire Grandhi Mallikarjuna Rao over buying the club, and also what you said earlier in the week about Indian M&A. Indians are not only using sport to promote and help the nation become a “brand” for different industries, such as auto you mention here, but it also highlights the fact that Indian companies are free to invest in whatever they want unlike their Chinese counterparts. You’ve hit the nail on the head I think about a Chinese glass ceiling, and it is the Indian’s who are taking matters forward to the next stage. Very very interesting.
April 27th, 2009 at 9:59 am
I don’t get this, “Chinese glass ceiling”? What do you mean?
And Chris, “while the Chinese auto industry remains largely under state ownership”? There are more than 1000 Chinese car makers out there (some serious consolidations are needed), the Chinese state owns most of them you are saying?
We will say who comes out ahead. It is too early to tell.
April 27th, 2009 at 2:15 pm
Hi Pffefer, Chinese companies need approval from the State before they can invest overseas. Even private ones. There’s no such restrictions on Indian companies, who can do whatever their board decides. They have stockholder approval to take into consideration and adding value, not political considerations and approvals. It makes a huge difference in the international arena. So, just as one example, in F1 it manifests itself by the Chinese limited to sponsoring just one race held in China, while Force India get to have all the fun, and have cars in all 17 races. Which is the better marketing initiative if you want to promote your auto industry worldwide. As for China “showing it can hold international events” as is often touted as a reason for them hosting the F1, well they should be able to, shouldn’t they, with their resources! And Delhi holds it anyway in 2011, so any ‘advantage’ China has over India by then will be equalized. It’s the strategy of China in hosting this event I question. It doesn’t seem to make any sense. Megawati is right, there is a glass ceiling Chinese companies hit when it comes to investing overseas – their own government.
April 28th, 2009 at 5:19 am
Chris,
I don’t see how either holding F1 or participating in it helps polish the image of one’s auto industry. You mean the Indians are actually racing with Indian cars? Land Rovers and Jaguars don’t count.
April 28th, 2009 at 1:50 pm
Yes Pffefer they are promoting the Indian car industry. You see Kingfisher now has an Airline (A), beer brewery (B) and now it is time for the Kingfisher car (C), next will be kingfisher drugs manufacturing (D), elephant farming (E) etc. until they reach Z. Ofcourse the impact of a bit of F1 racing is limited and has no impact on the car industry in India whatsoever just like the stories about it have no impact whatsoever.
April 28th, 2009 at 4:50 pm
They have their own designed car, with Mercedes engines. My point is about branding, while Force India is flying the national Indian and becoming synonymous with F1 and racing, China isn’t. India’s auto industry is likely to have credibility spin offs via their participation, China’s isn’t. China holds one event, in Shanghai. India races it’s cars in 17 events annually. The marketing exposure for national “brand India” is obviously greater.
April 29th, 2009 at 5:04 am
Laurentius,
But who is Kingfisher? Does anyone outside India know what it is? Sounds like it wants itself to be like a Hyundai-tyle chaebol that does everything. Personally I think it is wiser to focus on one area and does it really well instead of trying to come up with everything, from A to Z and doing just OK on everything.
April 29th, 2009 at 5:08 am
Brand India? By participating in the events India certainly raised its national awareness for sure, no argument here. But if I were a F1 or NASCAR fan would I increase my desire to buy Indian cars because I saw the Indian team participating in the races? Most certainly not, unless India convinces me that its cars are worthy my money.
April 29th, 2009 at 6:08 pm
Pffefer; Kingfisher is a major listed group. The international airline is one of only six that is listed by Skytrax as being “Five Star” along with Cathay Pacific, Singapore Airlines, Malaysia Airlines, Qatar Airlines and Asiania. They tie-in globally with Hilton. They also operate the budget airline Kingfisher Red. You should try flying them, the service is really good. As for Kingfisher beer, as anyone that has been in an Indian restaurant anywhere in the world will probably know, is owned by the same group, and is India’s largest brewer with about 40% domestic market share. Vijay Mallya is the Chairman of both. If you think of him as India’s version of Richard Branson, you’re about right. As for “Brand India” well, F1 participation is one way in which India is trying to convince you to buy its cars. And frankly, I’d much rather drive a Jaguar or a Range Rover than a Shanghai Buick, which in any event is a US Joint Venture and only partially a Chinese vehicle.
April 29th, 2009 at 6:28 pm
…and I forgot they also own Whyte & Mackay, which if you’re a Scotch Malt Whisky drinker means the Dalmore, Isle of Jura and Fettercairn single malts, plus of course the ubiquitous W&M blend. If you’re on this site and wishing you were down the pub instead, the W&M website has a Darts Game and a “Hunt Lions in a Glasgow Pub” feature on their website here: http://www.whyteandmackay.co.uk/index2.cfm
Slainte!
Chris