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Not Just Investors, Chinese Startups Too Making a Beeline Entry into India

May 15, 2018 by The Passage Team
Not Just Investors, Chinese Startups Too Making a Beeline Entry into India

By Durba Ghosh

Even as India keenly anticipates a big-bang entry of Chinese e-commerce giant Alibaba in India, there are several startups from the country with innovative urban solutions that are quietly tapping the lucrative Indian market.

In just 10 years, China has built world-class MNCs that have graduated from making cheap copycats of western products to competing with world's biggest companies such as Apple. And now, having witnessed rapid expansion in home market, these companies are making India their new turf.

Alibaba, Baidu, Tencent, WeChat, and Xiaomi are examples of Chinese companies growing from zero to billions of dollars within a few years, thanks to policy measures of the Communist regime that revolves around the tenet of creating, protecting, and nurturing Chinese companies. These companies have already made strategic investments in India and are actively scouting for partnerships and large equity investments to enter the market.

Besides these large-cap companies, startups such as cycle-sharing firm Ofo and clean air solutions company Kaiterra are some other examples of Chinese startups introducing unique solutions in India market.

This is primarily because of a slowdown in Chinese economy and saturation of market that restricts scale. India is the next best fit for Chinese companies to replicate their success in home market because of multiple similarities between the two.

On the other hand, Indian startup sector has a lot to learn from Chinese companies, much more than from Silicon Valley of the US. The two markets have similarities in culture, consumer spending behaviour and income levels, as well as problems such as cyber fraud and data protection.

The United States is fundamentally a very different market on all these counts. The biggest potential learning for Indian entrepreneurs from China is on handling scale.

Despite similarities between the two markets, the Chinese companies have grown to learn from the mistakes in home market. These companies have taken a cautious approach to study the market well, before expanding rapidly.

Ofo, for instance, has been present in India since 2017, but has spend at least one-year of its time here in talking to municipal authorities, taking consumer feedback, conducting scope analysis. It launched in January 2018 with a pilot run in Pune. The company is still on a pilot stage and is taking its time to create the ecosystem for cycle-sharing first.

Kaiterra, the clean-air solutions company has also taken a soft launch approach here. The company has been selling its clean-air products since 2016 in India. But its focus currently is lopsided towards social change. It is engaging with local authorities to study air quality in cities and it is deploying hundreds of monitoring devices across cities, starting with Delhi, to produce actionable insights on how to improve air quality.

Take smartphone-maker Xiaomi for example. Once considered a cheap copycat, it is now emerging as a leader in India. It plans to diversify into high-margin products such as electric vehicles and fast-track segments such as payment banking. Recently, it made a regulatory filing in India, stating its future game plan.

From electric and other vehicles--small and big--it also plans to sell laptops, gaming consoles, computer accessories, lifestyle products, network equipment, clothes, toys, backpacks and suitcases, and bath and kitchen products.

Given its runaway success in smartphones in a very short period, it can dominate auto and consumer goods segments in coming years.

Alibaba too has had several strategic investments in India, but is yet to launch its ecommerce brand here.

Born in the age of smartphone and artificial intelligence, news app Toutiao, group-buying service Meituan Dianping and ride-hailing service Didi Chuxing already have significant investments across the news aggregation, food-delivery and ride-sharing segments in India.

Other Chinese companies including Tencent and Walmart-backed social media company Kwai and Tencent-backed e-tailer JD.com are scouting for investments in India as well as exploring options to set up operations here.

Beginning 2016, Chinese companies have poured in $2.37 billion in Indian companies, according to research firm Tracxn. Much of the investments from Chinese companies such as Tencent, Alibaba and CTrip into large Indian internet startups such as Flipkart, Paytm and MakeMyTrip have been strategic in nature.

Chinese companies have already captured India's telecom sector. They control 51% of India’s $8 billion-plus smartphone market with brands such as Xiaomi, Oppo, Vivo and OnePlus. India imports telecom gear worth over Rs 70,000 crore annually, much of it from Chinese firms like Huawei and ZTE.

While political and geo-political differences continue to threaten the relationship between the two nations on a diplomatic level, the innovative and creative startup community is going all out to woo patrons in India market.

Indian investors and companies are also now shifting focus from Silicon Valley to Chinese companies to draw parallels and learn from it. In addition to this, huge investments from Chinese investors into Indian startups, which is giving them much-needed steel to compete with rivals. All-in-all, entry of Chinese companies and investors in India is creating a healthy competition and mutually level-playing field.

The Passage Team

The Passage is committed to creating in-depth content over technology industry across Asia with a focus on emerging startups in the technology, healthcare, education, food, tech, travel & mobility segments.

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