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This is our next special issue: a guest article on Business Models in Transition: Why The Traditional Export Strategy Does Not Work Any Longer With India.

New section: We’d like to introduce a new section in our guest articles. In “The Riser’s Choice: What Matters Now”, we hand the stage to our fellow Risers and guest authors to share ideas, events, and insights that matter most to them right now. From thought-provoking reads to opportunities shaping the Indo-European business landscape.

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Today’s guest author is our fellow Riser Wolfgang Bergthaler.

Wolfgang Bergthaler is an Austria-based consultant and founder of www.indische-wirtschaft.de. Since 2009, he has been reporting on India’s dynamic growth market and advising European companies on business development, lead generation, and recruitment in India. With a strong entrepreneurial background and long-standing expertise, he bridges insights from both Europe and India to support successful cross-border ventures.

Enjoy our next guest article!

Wolfgang lives in Austria, and recent developments at the famous Austrian KTM motorbike brand are in his opinion a sign that power is shifting.

Find details with Industriemagazin and what Wolfgang shared end of last year.

From Wolfgang Bergthaler

In the third consecutive year of recession in Germany, compounded by the geopolitical upheavals since Covid-19 and the war in Ukraine, India has once-more come into focus for Germany’s traditional manufacturing industries.

European companies refrain from investing in industrial equipment and capital goods due to economic stagnation caused by inflation-induced wage pressures, soaring energy costs, bureaucratic obstacles, and political indecisiveness. The United States, once an attractive, accessible, and lucrative market, has turned towards protectionism, tariffs, and subsidies. China, long regarded as the global growth engine, has become harder to access and is considered increasingly risky. Added to this is a global tendency toward deglobalization and the re-nationalization of supply chains.

Against this backdrop, India with its booming economy, seems to be the natural target market for German Manufacturing companies. Its young population, dynamic industries, and vast need for industry modernization demand new machinery and technology.

What may seem obvious at first glance comes with its own challenges. The Indian market is indeed wide open, but European companies must embrace new realities also in India.

When the majority of German firms first entered the Indian market some twenty years ago, they followed a proven model: Establish some kind of sales structure and channel in India, initially a representative or importer, ideally a 100-percent-owned-sales subsidiary (or a joint venture) to sell their premium machinery “Made in Germany” to the tier-one-companies in India.

Step-by-step companies could increase their sales. But compared to other (emerging) markets, “Made in Germany” market share in India remained modest, held back by high price sensitivity and limited localization. Still, German technology was always respected and welcomed.

Since then, market dynamics have shifted significantly. On the positive side, India’s purchasing power has risen, enabling a broader customer base to invest in international technology. On the other hand, the protectionist course of the Modi government, shaped by the “Make in India” and “Self-Reliant India” policies, has made reliance on exports increasingly difficult.

Companies that continue to depend solely on exports face tariffs, regulatory hurdles (especially when participating tenders), and high competition (from international and more often also from Indian market participants offering more mature products). The time when German firms could simply ship German machines to India and sell through their sales channels seems to be over. India (the government as well as the private sector) has changed the rules of the game – and those who want to succeed must adapt.

When Prime Minister Narendra Modi launched the “Make in India” initiative ten years ago and “Atmanirbhar Bharat” during/after Covid, the goal was to reduce dependence on imports, create jobs, and strengthen domestic industry. In practice this meant higher costs, phased manufacturing programs that gradually raised tariffs (or taxes) on finished goods and components, and a clear preference for local production. Machines and industrial equipment that could once be imported easily are now subject to tariffs, taxes and regulations. Many categories of products that used to arrive from abroad are only competitive today if they are assembled locally.

As we all know, this strategy is not unique to India. The United States, under the Inflation Reduction Act and now under Trump’s industry and tariff policies, has shown the way. But while German companies in the U.S. are trying everything to adapt quickly by setting up plants and circumvent the policies, the approach to India is often more hesitant.

Many Mittelstand companies want to get a proof-of-(the Indian) market first, export cautiously, and only once sales volumes are substantial consider local investment. What looks like prudence, however, turns into a deadlock:

This hesitation may be a costly mistake, but it is also understandable. The U.S. market usually represents a much larger share of total sales than India, which keeps management attention focused across the Atlantic. Yet it should not be overlooked that growth rates in India are far higher. An investment made today is likely to multiply business in India within five to seven years. In this market, long-term planning and patience are rewarded.

The problem with a pure export strategy is not just tariffs and duties, but also customer expectations. Indian buyers always want to know that their suppliers are committed to the local market and competitive pricing. They expect fast service, local spare parts availability, and engineers who can come on site without long delays.

Moreover, Indian government tenders often explicitly favor bidders with local value creation. Preference is clearly given to companies that have invested in the country. A German exporter without a local footprint is thus at a double disadvantage: higher costs due to import tariffs and weaker credibility in the eyes of customers.

At first sight, India’s protectionist policy looks like a hurdle. In reality, it opens the door to an enormous opportunity. With more than 1.4 billion people, a rapidly growing middle class, and massive investments in infrastructure and industrialization, India is one of the few markets worldwide still growing dynamically. Sectors such as automotive, renewable energy, pharmaceuticals, and food processing are expanding at double-digit rates.

For German companies, India also offers cost advantages that are impossible to replicate anywhere else in the world. Wages are a fraction of those in Europe, while the country produces hundreds of thousands of engineers and technicians every year. This means that not only assembly, but also adaptation and product development can be carried out locally at competitive costs. India is no longer just a sales market but can serve as a production (and service) hub not only for South Asia or the Middle East, but for the entire world.

As Rajiv Bajaj, Managing Director of Bajaj Auto and majority shareholder of Austria’s motorcycle manufacturer KTM, make the case very clear, by explaining the challenges and opportunities, not many in Europe want to hear:

For many European companies, the future model could be summarized as “Designed in Germany, Made in India, Exported to the World”. This formula preserves Germany’s strengths in research and development, engineering, and innovation, while shifting parts of the value chain to India. What sounds like offshoring is in reality a strategy to remain globally competitive and secure jobs at home. Apple, which built the slogan “Designed in California” into a global success, shows how such a model can work.

The first step need not be a full-scale factory. Even establishing a sales subsidiary sends a strong signal of commitment. From there, companies can gradually localize, first by sourcing individual components, then by setting up assembly, and finally by investing in full-scale production. The crucial point is to start – not to wait until exports alone justify the leap.

Naturally, India presents challenges. Bureaucratic processes can be slow, infrastructure is still developing, and cultural differences require sensitivity. German precision and Indian flexibility sometimes clash, and management styles need adjustment. Yet these risks can be managed. With the right local partners, careful preparation, and gradual expansion, they are far outweighed by the opportunities. Compared to the stagnation of European markets, India’s complexity is a manageable challenge – and one that offers significant rewards.

The conclusion is unavoidable: for the German Mittelstand, traditional export strategies in India no longer work under current circumstances. The world has changed, and India in particular has decided to promote domestic production over imports. Companies that continue to rely only on exports will remain marginal players. Those who adapt their business models, invest locally, and see India as a partner rather than just a customer can secure access to one of the most dynamic markets of the century.

The future will not be about “Germany exports to India.” It will be about “Germany and India create value together.” Those who understand this shift early will not only gain a foothold in India but also secure their global competitiveness. The Mittelstand, long known for its courage and adaptability, has every chance to succeed in this new environment – provided it takes the step from passive exporter to active market shaper.

Sources: Make In India, Wikipedia, CNBCTV18

If you want to explore more on this topic or have questions, please reach out to the authors via LinkedIn:

Wolfgang Bergthaler

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