Sept. 8 – A newly confident and assertive India has long looked enviously at China as the country has apparently sped away in terms of export capabilities and its desire to be the world’s factory shop floor. Often you’ll hear the term “one party state” given as a reason for China’s superiority as the nation’s drive forward seemed unencumbered by democracy. India, mired in democratic squabbling and political horse trading, was only able to watch on with envious eyes.
However, that is now changing. The Indian domestic market may be just 19 percent of China’s — which has overtaken the United States to become the world’s largest — but the “Made In India” tag, especially on small cars, has clearly acquired a global cachet, helping auto exports grow as other countries (including China) have suffered a slump. India’s auto exports have, for the first time, overtaken that of China. In the seven month period from January to July this year, India exported a total of 230,000 cars, vans, SUVs and trucks, a growth of 18 percent as China’s exports tumbled 60 percent in the same period to 165,000 units.
India’s biggest advantage is its edge in small cars and the way companies, including global giants, are using the market for selling, as well as developing, new compact models. India also scores due to its more liberal foreign investment policies in the auto sector, and high quality manufacturing which stems from its growing prowess in research and development. Tata’s acquisition of Jaguar and Land Rover has also given it expertise in design, R&D and overseas outlets that China has been unable to match, being content mainly to purchase bankrupt production lines from the likes of MG Rover and other increasingly discredited, energy consuming US models instead. That policy, coming on the back of a global financial crisis and more global awareness about energy consumption, may be backfiring as China’s auto strategy seems increasingly hampered by brands and technologies that are appearing increasingly old fashioned. Consequently, the global recession and incentives offered for fuel-efficient low-emission vehicles in big markets like Europe and the US have also made India a focal point for auto manufacturers.
Cheap labor costs and especially-tailored lower manufacturing tax (8 percent excise duty) make small car manufacturing in India a highly-competitive option which increasing numbers of global companies are arriving in the country for — Suzuki, Hyundai, Nissan, General Motors, Toyota, to name a few. China, in contrast, is more of a big car producer and has been hit by the global slump in demand following the economic recession.
Additionally, China’s auto sector is restricted – a point not lost on the recent European Chamber of Commerce in China report criticizing China for not opening up its auto markets further to foreign investors. China insists on 50 percent Chinese ownership in its auto manufacturers – India does not and the R&D skills have poured into India rather than China as a result of both this, the greater assurances and protection of IPR, and the ability to go it alone and retain a greater share of profits.