Indian car industry
accelerates By Siddharth
Srivastava
NEW DELHI - Prime Minister
Manmohan Singh has lauded the Indian automobile
and auto-components industry as a proud symbol of
the success of Indian enterprise in this new era.
Manmohan said the government will take necessary
steps to turn India into a global automobile
workshop.
Speaking near India's auto hub,
Chennai, Manmohan said the automotive sector "has
the potential to generate millions of jobs, which
our youth need. The Indian automobile industry
has, like a
beautiful butterfly, come out
of its protective cocoon and is showing its wares
across diverse continents.
"What is more,
it has done so with virtually no state subsidy or
support. It has done so based on a transparent
system of taxation, pricing and technology
development. It has done so on the basis of
domestic talent in design, marketing and brand
building," the prime minister said.
This
sunrise sector has grown impressively to carve out
a 7% share in the global market, Manmohan noted. A
government mission plan said Indian auto
manufacturers are aiming for sales of US$145
billion in 10 years, up from $36 billion now, or
an average of 16% annual growth.
Indeed,
Manmohan has cause to be upbeat. This year could
turn out to be the best for the Indian automobile
industry, riding high on domestic and
international demand. Between April and September,
Indian companies sold more than 4.86 million
vehicles, including cars, two-wheelers and
commercial vehicles, in the domestic market.
For the April-September period in 2005-06,
sales of domestic vehicles stood at 4.15 million,
up 13.4% over the previous year. Prior to this,
sales for the same period in 2004-05 were 3.6
million vehicles, a jump of 14.7%.
If
these trends hold, industry observers have said,
sales could touch 10 million by March for the
first time, an annual growth rate of 20%. After
China's, the Indian auto industry is the
second-fastest-growing automotive sector, totaling
about 8 million vehicles.
Some 1.1 million
passenger cars rolled off Indian assembly lines
last year, and the number is forecast to nearly
double to 2 million by 2010, while scooters and
motorbike sales are forecast to grow from 7
million to 12 million units in the same time.
"This will double the the industry's share
of the gross domestic product to more than 10%,
creating 25 million new jobs," Minister for Heavy
Industries Santosh Mohan Dev said recently.
The last time the 20% growth figure was
achieved was in 2000-01. Analysts say the boom is
due to several factors, including overall economic
growth, 8% excise-tax cuts in the budget for small
cars and attractive discounts, loyalty bonuses,
and exchange schemes offered by firms and dealers.
Said Maruti managing director Jagdish
Khattar, "I'm not surprised by the performance. We
have had two years of moderate growth, and last
year's was single-digit. Plus, the excise-tax
policy has paid off and if infrastructure is
available, the dream of India becoming a small-car
hub will also come true.''
India is still
dominated by motorized two-wheelers (it is the
largest manufacturer-exporter of two-wheelers),
but passenger cars represent a high-growth
segment.
Booz-Allen Hamilton and McKinsey
have estimated that the Indian domestic market of
1 million passenger cars (with 70% small cars)
will double by 2010 and cross 3.5 million by 2015.
India is also likely to grab 3-4% of the global
auto-components market ($700 billion) by 2015.
Foreign direct investment is likely to touch $8
billion in the same year.
More than 50 new
car models are expected to be launched in the next
12 months, the Society of Indian Automobile
Manufacturers reports. "In recent times, new
models have done very well, and people have come
to believe that these are the most effective way
to grab eyeballs," said Dilip Chenoy, head of
SIAM.
France's Renault recently announced
that it plans to build a plant in India with its
Indian partner Mahindra and Mahindra to turn out
half a million cars a year by 2012. India offers
"important opportunities for growth and
profitability", Renault chief executive Carlos
Ghosn said as he announced that the plant would
assemble the no-frills Logan car.
The
company joins a number of big names such as US
auto maker General Motors, Germany's Volkswagen
and BMW, Japan's Suzuki and Honda, and South
Korea's Hyundai that are stepping up their India
plans.
Following on the heels of Renault,
German luxury-car maker BMW has short-listed at
least six models, including four from
top-of-the-line 7-Series stables, to launch in the
Indian market.
The 3-Series (at completely
knocked-down prices) cars will compete against
premium models such as the Mercedes-Benz C-class
and Toyota Camry, while 7-Series (imported as
fully built units) will take on rivals such as the
Mercedes S-class and a slew of imported cars.
"Indian domestic vehicle sales are growing
by double-digit figures, and when you compare that
with anemic rates in the US and Europe, you see
why they're coming," said Chenoy.
Among
the new launches are: premium compact Chevrolet
Aveo UVA, the compact Spark by General Motors,
Grande Punto by Tata Motors, Getz diesel and a new
compact by Hyundai, Swift diesel and the new Zen
by Maruti Udyog, a new car by Volkswagen (Europe's
largest car company, which is entering India),
Fabia by Skoda, Logan by Mahindra-Renault and
either Jazz or Fit by Honda.
There will
also new offerings from DaimlerChrysler and its
arch-rival BMW, which is going to build the 3- and
5-Series in India from next year.
Indeed,
the trends continue to he positive. In October,
India's largest car maker Maruti Udyog Ltd's
top-selling 800cc hatchback Alto broke previous
records to become the highest-selling car that
month, with 22,294 units. Maruti sold an aggregate
of 55,894 units, up 11% over 50,308 in the
corresponding month last year. The company's other
models, which drove up monthly sales, were the
Swift and the Wagon-R.
In the same period,
the second-largest car maker, Hyundai Motor India,
notched total sales of 18,603 units, up 18% over
15,801 units sold in the same month last year; and
General Motors India registered a 12% growth,
selling 3,153 units as against 2,829 units in
October 2005.
Ford India sold 3,336 units,
up 142% over the same month last fiscal year.
Riding on the Civic and the City, Japanese car
maker Honda, Siel Cars India Ltd sold 5,566 units
registering a growth of 343% from a low base.
Given the stiff competition, hatchback
makers have announced big price cuts recently,
with Maruti's new Zen, Santro Xing and Tata Indica
in intense competition.
US-based
consultancy Keystone has forecast that India will
become the world's third-largest automobile market
by 2030, behind China and the US. Over the next 25
years, more motor vehicles will be sold than in
the entire history of the industry, the report
says. The projected size for China is 62 million,
US 23 million and 20 million for India. By 2017,
India's auto market is projected to surpass
Japan's.
Siddharth Srivastava is
a New Delhi-based journalist.
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