India wants to drive a Chinese company out of the below Rs 12,000 smartphone market

The action aims to drive Chinese goliaths out of the lower tier of the second-largest mobile market in the world.

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In an effort to revive its flagging domestic sector, India wants to prohibit Chinese smartphone manufacturers from selling products for less than 12,000 rupees ($150). This could hurt companies like Xiaomi Corp.

According to those with knowledge of the situation, the initiative aims to drive Chinese companies out of the second-largest mobile market worldwide’s lower segment. They claimed, while requesting anonymity because they were addressing a delicate subject, that it corresponds with growing worries about high-volume companies like Realme and Transsion undercutting local manufacturers.

Exclusion from India’s entry-level market would be detrimental to Xiaomi and its competitors, who have relied on India more and more recently to fuel growth as their domestic market has been subjected to a number of Covid-19 lockdowns that have severely hampered consumption. According to industry researcher Counterpoint, shipments of smartphones priced under $150 accounted for up to 80% of the sales volume in India during the three months ending in June 2022.

During the last few minutes of trading on Monday in Hong Kong, Xiaomi’s shares continued to decline. It decreased by 3.6 percent, bringing this year’s loss to more than 35 percent. The insiders said it’s uncertain whether Prime Minister Narendra Modi’s administration will make any announcements or use unofficial methods to express its preference for Chinese businesses.

Xiaomi and its rivals Oppo and Vivo have already been exposed to intense financial examination by New Delhi, which has resulted in tax demands and claims of money laundering. The government has already used clandestine methods to outlaw communications equipment made by ZTE Corp. and Huawei Technologies Co. Although there isn’t a formal policy that forbids Chinese networking equipment, wireless operators are urged to buy alternatives.

Since Apple Inc. and Samsung Electronics Co. charge more for their phones, the change shouldn’t have an impact on them. Requests for comment from Transsion, Realme, and Xiaomi representatives went unanswered. Inquiries from Bloomberg News went unanswered by the technology ministry of India’s spokespeople as well.

In the summer of 2020, India increased pressure on Chinese businesses after a confrontation between the two nuclear-armed rivals on a disputed Himalayan border resulted in the deaths of over a dozen Indian soldiers. As ties between the two nations deteriorate, it has subsequently blocked more than 300 apps, including WeChat from Tencent Holdings Ltd. and TikTok from ByteDance Ltd.

Before new competitors from the neighbouring country upset the market with affordable and feature-rich smartphones, domestic manufacturers like Lava and MicroMax accounted for slightly less than half of India’s smartphone sales.

The majority of smartphones are currently sold in India by Chinese companies, but the junior IT minister of India told the Business Standard newspaper last week that their market domination was not “based on free and fair competition.” Despite their dominant position, the majority of Chinese handset manufacturers in India consistently incur annual losses, which fuel accusations of unfair competition.

According to the persons, the government is still privately requesting that Chinese executives develop local supply chains, distribution networks, and export goods from India, indicating that New Delhi still values their investment extremely highly.

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