India a Big Trade Mart for the Automobile sector
The automotive sector is one of the prime drivers of Indian economy. Economic liberalization policies adopted by government of India have primarily propelled India into the big league, with many global automotive players seeking to establish their operations in India. In fact in the last five years, India has turned into a big trade mart for the Automobile Industry, registering a growth rate of 15-27 percent.
And interestingly, the rise of Indian middle class and the simultaneous rise of the economy over the past few years have only charmed global auto majors to the Indian market. Moreover, India’s highly trained cheaper workforce has only added to its emerging status as a global manufacturing hub. All these plus points of the Indian markets on one hand and the recession faced by the auto sector in the developed markets like Europe, US and Japan on the other, have only resulted in increased capital flow to the Indian automobile sector.
Moreover, Indian car manufacturers are earning rare reviews in the wider world. According to Global 200: The World’s Best Corporate Reputations List, compiled by US-based Reputation Institute, India automaker, Maruti Suzuki India Ltd (MSIL) has earned the status of being the fourth most reputed auto company in the world, even ahead of its parent company Suzuki Motor Co of Japan.
Indian a big mart for original equipment manufacturers (OEMs)
Tata and Mahindra & Mahindra are the leading names in the Indian original equipment manufacturers (OEMs) segment, creating waves on the global arena too. And given the stiff competition, Indian OEMs are continually upgrading their technology and are producing superior quality vehicles.
Indian original equipment manufacturers (OEMs) like Tata and Mahindra & Mahindra are leading from the front on the global scene. And with India Inc facing increased competition from the global players, Indian OEMs have also been upgrading their technology and are manufacturing better-quality vehicles.
‘Economical Engineering’ has being the flavour of the Indian automotive industry, with Indian OEMs making the best use of its cost-efficient and highly –skilled work force. Also, the skillfulness of their suppliers has helped them in reducing costs and the manufacturing time. In fact, OEMs all across the globe are making a beeline to India to gain access to India-based design and development centers.
Production
In the recent years, India has emerged as the big mart for foreign automotive manufacturers.
• Japanese auto major, Nissan Motor Co, has chosen India among the five low-cost countries to manufacture its GenNext compact cars, including the Micra.
• Hyundai has converted India into its global hub for manufacturing small cars. By 2013, the company plans to invest US$ 1 billion in its second plant in Chennai. The company is also planning to invest US$ 40 million in its R&D facility in Hyderabad.
• General Motors till date has invested around US$ 1 billion into its Indian operations. The factory of its small car, Spark has been set up in Maharashtra, with an investment of US$ 300 million. The company also intends to make India its focal point for manufacturing of export engines, power trains as well as cars for neighbouring countries like the US and Europe.
• Mercedes-Benz plans to invest around US$ 64. 21 million in its plant near Pune. The plant will apparently have a production capacity of 2,500 trucks and buses and 10,000 cars over two shifts every year.
• Renault has entered into partnership with Nissan Motors to set up a manufacturing facility near Chennai at a cost of US$ 901.35 million to manufacture 400,000 cars annually.
• Skoda Auto is planning to make India its regional manufacturing hub. The company plans to start manufacturing cars in India by 2010 with a target of 50,000 units.
• Tata Motors plans to manufacture 80,000 units of its much awaited Nano at its Pantnagar plant in Uttarakhand in 2009-10. The mother facility at Sanand, in Gujarat, may be fully operational by 2010-11 and will have a capacity of producing 1, 50,000 cars annually.
Exports
Export figures of 2008-09 are a testimony to India’s growing status as big trade mart for the automobile industry. As per the data released by the Society of Indian Automobile Manufacturers, the passenger car sales in the overseas markets registered a growth of 63.01 pe+r cent during April-January 2008-09.
Exports scaled up to 2, 71,999 units as against 1, 66,859 units in the corresponding period in the previous year.
The growth in exports is primarily driven by Hyundai Motor India, followed by other auto companies such as MSIL, Mahindra Renault, Fiat India Automobiles, General Motors India and Honda Siel Cars India.
During April-December 2008, Hyundai Motors registered a growth of 100 per cent in exports with 198,600 units.
At 620,880 units as of December 2008, Bajaj Auto has clocked an increase of more than 35 per cent in exports.
Mergers& Acquisitions (M&As)
M&As have emerged as the key driving force in the Indian automobile industry. Recognizing India’s potential as a big automobile trade mart, Japanese, European, Korean, French, Italian and American automobile companies have either set up their manufacturing base in India or have joined hands with Indian automotive firms to launch new products in the Indian market. The list comprises Toyota, Renault, Nissan, Fiat, Kawasaki, Honda, Cummins and many more. Even, Indian companies have gone ahead and acquired foreign automobile companies to strengthen its presence in the global market.
One of the most publicized acquisitions in 2008 has been that of Jaguar-Land Rover by Tata Motors for US$ 2.3 billion. Even Mahindra & Mahindra had taken over three Italian companies - G R Grafica Ricerca, Metalcastello and Engines Engineering, during that period.
Other significant developments in this area include:
• Tata Motors,is planning to set up a dealership network for Jaguar-Land Rover in India. • The Auto Park established in Andhra Pradesh has received a whopping investment over US$ 401.55 million from about 34 automotive ancillary units.
• Toyota Kirloskar Motor Private Ltd (TKM) will be investing an added US$ 311 and around 83 million in its second plant, thereby taking the total investment in the plant to US$ 641.74 million.
Preserving Growth
• Mercedes Benz India witnessed strong growth in 2008 with 3,625 cars (46 per cent growth), 240 trucks (53 per cent growth) and 16 bus chassis being sold.
• BMW India sold over 2,500 units in 2008. In January 2009, for the first time ever, BMW beat Mercedes Benz in terms of sales, by selling 270 cars and sports utility vehicles (SUV) while Mercedes Benz, sold 89 units in January 2009.
• Audi reported sales of 1,050 units in 2008, a three times rise over 2007.
Luxury models to be launched soon include:
• BMW India launched the new BMW 3 Series for India in January 2009.
• German sports car maker Porsche will be introducing its Panamera in September 2009, which will be priced over US$ 1, 72,344.
• Skoda Auto India will be launching its three new variants of its hatchback Fabia in 2009. The company will also introduce a sports utility vehicle Yeti, in 2010.
India a big mart for Small Cars & Hybrid Cars
Electric car Reva is very much popular in South India. Other markets are also coming under its influence with too much emphasis now on going green these days. Few other car manufacturers like Hero Electric and M&M are also planning to launch electric versions.
The euphoria that Nano car generated has also inspired other auto giants to cash in on the massive potential of the small car segment.
According to the survey carried out by Invest India Incomes and Savings Survey 2007, by IIM Data works and another study by CRISIL Research, there is a colossal demand for entry level cars in India. And as per the survey there is a demand for 1.6 million small cars in India. So naturally, all auto giants have pulled up their socks towards capitalizing in on the prospect of this segment.
1. Fiat plans to roll out ‘Grande Punto’—plan in the new small car segment.
2. General Motors plans to launch its new mini car next year from its Talegaon plant, close to Pune.
3. Tata Motors is all set to offer new version of its Indica.
4. Honda intends to unveil ‘Jazz’, while Volkswagen plans to launch Indianised version of its popular ‘Polo compact.
5. Even Toyota and General Motors may join the bandwagon by 2010.
6. India launched its first hybrid car, Honda’s ‘Civic’, in June 2008, Indian majors like Tata Motors and Mahindra & Mahindra are also planning to launch hybrid cars.
7. BMW also plans to launch its hybrid car to India.
Automotive Mission Plan 2006–2016 to Sustain India’s Status as Big Trade Mart for Automobiles
The idea behind Automotive Mission Plan (AMP) 2006–2016 is help India emerge as a big trade mart for design and manufacture of automobiles and auto components.
As per the AMP, India would continue to be largest tractor and three-wheeler manufacturers in the world and also world’s second largest two-wheeler manufacturer. By 2016, India will be the world’s seventh largest car producer and fourth largest truck manufacturer. Moreover, by 2016, the automotive sector would contribute 10 percent to country’s GDP from current level five per cent.
