India has seen a phenomenal growth in the automobile Industry. From the time Maruti 800 (a small car and nations favorite for a decade since 1990’s launch) or an Ambassador (big box shaped) to now when major car makers such as GM, Nissan and others have invested about a billion and a half USD in the car segment in India in the last 12 months or more, you can be assured that the Indian car market has arrived and its all set to get you!!

With increasing income levels and higher prosperity both in India and China their countrymen seem to be on a shopping spree � for cars!!

Market demand for passenger cars in China has captured the interest of several big international car makers who are planning to invest US$ 15 Billion in the sector by 2008, thanks to China�s mushrooming urban middle class. Due to the vast growth opportunities available, the car manufacturers worldwide have identified China as the potential market over the next decade.

Although the reports in dailies talk about the small car market as the upcoming mantra for the Chinese automobile Industry, but on the roads of Beijing and Shanghai you see a different picture. Small cars are few and mostly old models. The Chinese prefer the big ones, you name it and its available in �abundance� speaking volumes of the new money and growth in the economy. You would never see so many Audi’s or Volkswagen on Indian roads at a given point of time.

Small wins!

In India, on the contrary to China, you will find a large number of small cars flooding the markets. In New Delhi, roads are jammed with Wagon R�s, Indica�s and Alto�s. Considering their higher fuel efficiencies and low cost, they are the in thing and you will be surprised to know that about 50 or more distinct cars are ready to foray the Indian markets and about 75% of the share in the automobile sector belongs to the small car segment. These figures can be attributed to the rise in the middle class incomes in India and the reduction in duties on small cars from 24% to 16% in 2006 by the Indian Government in order to boost its manufacture (though taxes remain somewhat high compared to China).

India is soon to become the world�s factory for exporting small cars. Hyundai Motors has set up a plant in South India to make and exports to about 67 countries!
India�s own Tata Motors Ltd. plans to make a $2,500 car, setting new standards for the industry and Nissan and Renault are also exploring possibilities of cheap cars. The Society of Indian Automobile Manufacturers predicts car exports from India to rise more than five times to 1 million units by 2010

According to �Passenger Car Market: A Global Review (2006)�, growing incomes, increased buyer incentives, attractive finance packages, and low ownership costs in India will continue to drive the demand for cars. On the back of these favorable factors, the car sales in India are expected to average over 12.5% annually during 2007-08 and more than 11.2% in 2009-10.

To conclude: India’s entire automobile industry collectively manufactures about 1.4 million vehicles a year. However, it still will be light years behind China, which is on track to hit 10 million or so in 2007. Having said this, I believe that India could take it from China as far as the small car sector is concerned. Also the fact that in China a joint venture is required for domestic production for cars and in India 100% FDI is permitted, making India a more accessible location for investment in the automobile sector. Let me know your views on this�

This entry was posted on Wednesday, July 18th, 2007 at 4:18 pm and is filed under Business, Investment, Economy. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.