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Indian cars: The road less traveled
By Siddharth Srivastava

NEW DELHI - At a time when the world is suffering from a car overproduction glut, global producers are starting to get competition from an unlikely source. India's auto industry, until recently composed of comic-book style Ambassadors and tiny Marutis, is starting to gain an export toehold in the competitive European and North American markets.

Though the numbers are only in the thousands, compared to the millions of cars sold across the world, a beginning has been made and exporting cars is very much on the agenda of Indian automobile exporters, whether they are homegrown or subsidiaries of international manufacturers.

From April to October, 53,870 units have been sold compared to 30,866 units last year, a growth of nearly 75 percent. This is a far cry from a decade ago when only Marutis were sold in miniscule numbers to Hungary. By October this year, Maruti had exported 20,048, a whopping jump of 101 percent - off an admittedly tiny base - from last year when it sold 10,951 units.

Maruti is not the exception. Its archrival Hyundai Motor India, a wholly-owned subsidiary of the South Korean automobile company, has also been successfully pushing overseas sales of cars manufactured in India. The company had exported 16,089 units by October this year compared to 3,321 sold in the same period last year.

Indigenous carmaker Tata Motors has also not lagged behind in the race to tap the global markets. The company has tied up with United Kingdom-based Rover to sell its cars in Europe and is confident it will sell 100,000 units in the next five years. The upgraded Euro-1V Tata Indica will be sold across UK and Europe under the brand City Rover.

Further, Tata Motors is close to acquiring South Korea's Daewoo Commercial Vehicle for around Rs 5.3 billion, a move that apart from helping the company make inroads into the Korean market, would provide a convenient platform to break into China. Then there's Mahindra & Mahindra (M&M), which has identified seven overseas markets for its utility vehicle Scorpio.

Even Hindustan Motors has set up an assembly plant in Sri Lanka, near Colombo, where 10 engineers from Kolkata are helping the locals put the 50-year-old Ambassador Classic together. Against all odds, the car has reached cult classic status, with the most visible user being Milinda Moragoda, the cabinet minister and confidante of Prime Minister Ranil Wickremsinghe.

The success of Indian-made cars can be further viewed from the fact that for the first time ever, the Maruti Alto achieved the number one position in the "A" cars segment in the Netherlands with an 18.7 percent market share. Maruti's cumulative exports to the Netherlands crossed the 50,000 mark. A major success for Hyundai has been the ability to export its small car, the Santro Xing, to the competitive markets in Europe. The company has ambitious plans to sell its vehicles in North American markets as well by the end of next year. There are plans to expand capacity to 250,000 units by the year 2004 with exports accounting for 30 percent of production.

The story goes beyond just automobiles. Two-wheeler makers such as Kinetic, TVS Motor, LML, and Bajaj are in various stages of going global. More than 25,000 units of scooters and scooterettes were exported between April and October this year, more than double the 12,022 sold in the same period last year. Motorcycle exports have grown by 62 percent, with 88,960 units sold in the seven months of the current fiscal, as per the latest data released by the Society of Indian Automobile Manufacturers. Three-wheeler sales overseas have also witnessed remarkable growth.

The success of the Indian auto industry was hardly in everyone's script a while ago. As a matter of fact, in the face of global competition many expected India's indigenous auto industry to surrender. The signs were all there - falling market share, bleeding financial statements, even griping chief executive officers complaining that their companies were not given enough time to get used to the rules of the open market.

It was hardly a sector that inspired confidence. Until very recently, India's predominant car was the 50-year-old Ambassador, a knock-off of the Morris Oxford, which was designed in the UK in the 1950s. The Maruti was designed in Japan in the mid 1980s and Premiers were a Fiat design from Fiat dating to the late 1960s. Even the famed Bajaj two-wheel scooters came from Piaggio in post-World War II Italy. Others were the Enfield motorcycle, a 1950s UK design. The Jawa and Yezdi motorcycles were from Czechoslovakia.

Then, surprisingly, the industry pulled itself up,with the sector going through one of the most intense business restructuring and cost-cutting exercises ever seen in corporate India. Suddenly, the British were driving Indian-made Rovers, Italians were behind the wheel of the India-originated Suzuki Alto, the Spanish loved their Tata Safaris, Brazilians were going gaga over the Bajaj Pulsar while Americans are importing Mahindra Tractors.

Analysts say that it was the imposition of stringent Euro norms three years ago that put immense pressure on the Indian automobile industry to upgrade engines quickly and start major development centers that are now cornerstones of growth plans. And, of course the Indian computer wizardry helped, as cars today are actually numerous computer systems on four wheels. A case in point is the BMW's highly acclaimed iDrive system, which was developed by an Indian software company.

But, as in the business and processing sector and call centers that are being outsourced from India, one of the major factors is the cost advantage. Indian-owned companies as well as their subsidiaries are looking to break into developed markets in the United States, the UK, Italy, Sweden, Germany, Spain, Australia and New Zealand - based on the low cost base that allows for low sales prices also. Automotive designs in India cost $60 per hour as opposed to $800 per hour charged by European design houses. The India-developed Reva costs less than half the next-cheapest electric car sold anywhere in the world. This also means that India is set to emerge as the preferred research and development center.

The current car and two-wheeler export boom has also been helped in no small measure by a booming auto-components segment that has actually witnessed greater growth than automobiles. Exports have touched US$850 million and are predicted to cross $2 billion by 2006. Firms such as Bharat Forge, Sundaram Fasteners and Sona Koyo have been exporting auto components designed and manufactured in India. Delphi, the world's largest automobile component company, has also long been active in the Indian market. The German-US auto giant Daimler-Chrysler AG aims to buy auto parts worth over Rs 50 million from India over the next two years. Aggressive cost-cutting measures coupled with world-class quality of local components are the major reasons for the increase in outsourcing from Indian companies. The auto-component sector has infused an element of familiarity about India's auto industry.

Observers also say that the world is increasingly becoming aware of made-in-India products that bear the stamp of quality, whether in the form of human capital such as engineers, doctors, teachers, nurses or software products. Further, the Made in India brand is increasingly being noticed, with India Inc beginning to assert itself with a series of international acquisitions - Reliance bagging Flag Telecom, Tata Motors becoming the preferred bidder for Daewoo's commercial vehicle unit, or Kumar Birla acquiring copper mines in Australia.

Motown India seems to have finally come of age, though it will still take some time before Indian products gain universal acceptability - after all Maruti is still exported under the Suzuki badge and Tata Motors under the Rover one. The journey will of course come to fruition when the dream of Ratan Tata, chairman of Tata Motors, culminates in the building of a global Indian car.

(Siddharth Srivastava is a New Delhi-based journalist)

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Dec 12, 2003

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