Cars in India – Times are changing

By BankBazaar.com | May 7, 2010

Driving the most luxurious car has been made possible by the stiff competition in the automobile industry in India, with overseas players gathering the same momentum as the domestic participants. Every other day, we have been hearing about some new launches, some low cost cars – all customized in a manner such that the common man is not left behind. In 2010, the automobile industry is expected to see a growth rate of around 10-14%.

Amidst all the havoc of the financial crisis of the past two years, it looks like India has a “sun-rise’  sector to bet on! The Automobile sector especially passenger cars are moving into top-gear. Although industry predictions are of 10-14 % growth as against 26% last year, yet, this sector seems to have some smiles to give at the end of 2010-11

Let’s look at some of the history and how we stand in today’s world.

Following economic liberalization in India in 1991, the Indian automotive industry has demonstrated sustained growth as a result of increased competitiveness and fewer restrictions. Several Indian automobile manufacturers such as Tata Motors, Maruti Suzuki and Mahindra and Mahindra, expanded their domestic and international operations.

The automobile industry in India is the ninth largest in the world with an annual production of over 14,049,830 units in 2009-10. In 2009, India emerged as Asia’s fourth largest exporter of automobiles, behind Japan, South Korea and Thailand. In 2009-10 the Automobile Domestic Sales increased to 12,292,770 units from 9,724,243 units in 2008-09.

Evolution

In 1947, the Government of India and the private sector launched efforts to create an automotive component manufacturing industry to supply to the automobile industry. After 1970, the automotive industry started to grow, but the growth was mainly driven by tractors, commercial vehicles and scooters. Japanese manufacturers entered the Indian market ultimately leading to the establishment of joint ventures with Indian companies.

In the 1980s, a number of Japanese manufacturers launched joint-ventures for building motorcycles and light commercial-vehicles. It was at this time that the Indian government chose Suzuki for its joint-venture to manufacture small cars. Since then, automotive component and automobile manufacturing growth has accelerated to meet domestic and export demands.

Exports

India has emerged as one of the world’s largest manufacturers of small cars. According to New York Times, India’s strong engineering base and expertise in the manufacturing of low-cost, fuel-efficient cars has resulted in the expansion of manufacturing facilities of several automobile companies like Hyundai Motors, Nissan, Toyota, Volkswagen and Suzuki.

For the quarter ending Jan –  March, 2010 Hyundai Motor India Ltd, the country’s second largest car manufacturer and the largest passenger car exporter achieved record sales of 162,273 Vs. 121,565 units for the same period last year. The exports grew from 21,405 units in March, 2009 to 23,534 units in March, 2010. Nissan Motors plans to export 250,000 vehicles manufactured in its India plant by 2011. Similarly, General Motors announced its plans to export about 50,000 cars manufactured in India by 2011.

In September 2009, Ford Motors announced its plans to setup a plant in India with an annual capacity of 250,000 cars for US$500 million. The cars will be manufactured both for the Indian market and for export. The company said that the plant was a part of its plan to make India the hub for its global production business. According to Bloomberg L.P., in 2009 India surpassed China as Asia’s fourth largest exporter of cars.

Potential of the Automobile industry

Driving the most luxurious car has been made possible by the stiff competition in the automobile industry in India, with overseas players gathering the same momentum as the domestic participants. Every other day, we have been hearing about some new launches, some low cost cars – all customized in a manner such that the common man is not left behind. In 2010, the automobile industry is expected to see a growth rate of around 10-14%.

The turnover of the entire industry in April-February 2009-10 stood at Rs. 1,62,708.77 crore vs. Rs. 1,28,384.53 crore in the same period last year. India has attracted lot of Multi-national automobile manufacturers to set up their plants here. Some of the manufacturers who are manufacturing their automobiles are:

  • Audi: A4, A6.
  • BMW: 3 Series, 5 Series.
  • Chevrolet: Spark, Aveo U-VA, Aveo, Optra, Cruze, Tavera.
  • Fiat: Palio, Grande Punto, Linea.
  • Ford: Ikon, Fiesta, Fusion, Endeavour
  • Honda: Jazz, City, Civic, Accord.
  • Hyundai: Santro, i10, Getz, i20, Accent, Verna, Sonata.
  • Mercedes-Benz: C-Class, E-Class
  • Mitsubishi: Lancer, Lancer Cedia.
  • Renault: Logan
  • Skoda: Fabia, Octavia, Laura.
  • Toyota: Corolla, Innova, Fortuner
  • Volkswagen: Jetta, Passat.

India is second biggest car buyer in the world

The stimulus packages from the government led to the high growth of the automobile industry. This made India the fastest growing automobile market in the world, second to China. Society of Indian Automobile Manufacturers (SIAM) is extremely excited by this rate and has predicted that the industry will grow at a rate of 10-14% in 2010-11. SIAM released the annual figures which showed that 1, 22, 92,770 units of vehicles were sold in India during 2009-2010 which is a considerable high from previous year’s sale, 97,24,243 units.

Experts have suggested that factors like the government sponsored stimulus package, low interest rates and the aggressive competitiveness to launch newer models have contributed to this growth, which has made India second fastest growing automobile market in the world. China saw a growth of 42% last year and Germany saw 23% growth. Most other markets in the world saw a negative growth in their automobile industry.

However the floating automobile industry in India is set to slow down, relatively, and register a growth rate in the low double-digits in 2010-11, primarily due to the high base effect of 2009-10. It is expected to register a growth of 10-14 per cent this year vis-à-vis the 26.4 per cent growth of the total industry last year.

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