Top Asian automobile companies are planning large investments in India to meet growing global demands for compact cars. India has both the consumer demand and production capability to attract carmakers.
Japan's Suzuki Motor Corporation says it will invest $1.5 billion, along with its Indian subsidiary, Maruti Udyog Ltd., to build a new car plant in northern India. The plant is expected to produce some 50,000 compact cars by 2008. Most of the vehicles will be exported to Europe.
For its part, Maruti, India's largest carmaker, is also gearing up to boost car production by 50 percent for the domestic market. It plans to churn out nearly one million small vehicles a year by 2010.
Korean carmaker Hyundai is aiming to double its production capacity in India to meet the rising demand in both the Indian and overseas markets for compact cars. Other companies planning new investments in auto plants include Tata Motors, and the Indian arm of Japan's Honda Motor Company.
Yogendra Pratap, at auto magazine Overdrive, says India's rising middle class incomes are commanding international carmaker interest.
"After China, India is one of the fastest growing car markets. It has seen good growth, up to 20 percent at times over the last five, six years," he said. "All these car companies have been looking at India as having a huge potential."
At the same time, automakers are also tapping India's low-cost manufacturing base for the small car market. Global automobile companies say stricter emission rules in Western markets and rising fuel prices will scale up demand in Western countries for small cars, which account for most of the cars produced in India.
The new investments were announced as the Indian government forecast astounding growth in the sale of cars and auto components in the coming decade. New Delhi says it expects demand to more than quadruple, from $34 billion at present to $145 billion by 2016.
Such massive growth would means that the auto industry's contribution to India's gross domestic product will double from five percent at present to 10 percent in 10 years.