Tougher scrutiny of foreign investment in India has soured the plans of China’s smartphone manufacturers seeking to expand beyond selling hardware for a bigger share of the South Asian country’s competitive financial services market.
Xiaomi and Oppo, with more than 100 million in combined smartphone users in India, cannot directly lend to consumers without a shadow banking licence and have partnered with Indian financial companies to provide the funds for services offered on their platforms.
Xiaomi is the No. 1 smartphone brand in India, which is also its biggest international market, according to Hong Kong-based technology firm Counterpoint Research. It has a 30% market share based on shipments versus rival Oppo with a 12% share.
The Chinese phone brands, however, are keen to establish their own non-banking financial company (NBFC) which will help improve margins by allowing them to directly sell financial products to their pool of smartphone users.
India’s new foreign direct investment (FDI)rules add another layer in an approval process already incumbered by red tape, a lack of transparency and worries that Chinese investors are encroaching into Indian businesses.