News / Asia

Global Automakers Head to India to Tap into Growing Car Market

Selling inexpensive, compact cars to middle-class Indians helps make up for slumping sales in Western countries

Anjana Pasricha

Several global automakers are heading to India to sell compact cars, as the country turns into one of the world's fastest growing auto markets.  The country is also emerging as a manufacturing hub for small, compact cars.       

Twenty-four-year-old Gaurav Mehta wants to buy a car, but has decided to wait and take his pick from cheap, compact models being introduced to the Indian market this year by companies like Toyota, Honda, and General Motors.  Most of them will cost around $10,000.

"Well with so many cars coming in this price range now, I thought why not wait and look at the other models, also," Mehta said. 

He is among millions of middle-class Indians whom global automakers are eyeing as they target new markets to make up for slumping sales in Western countries.

As India shrugs off the global recession, car sales have been rising quickly.  January's figures were 33 percent higher, compared to the same month last year.

The 1.5 million cars sold in India in 2009 are still far behind China, the world's biggest car market.  But automakers say there is huge potential to be tapped in a country which has about 12 cars per 1,000 people and where a growing economy is propelling larger numbers into the middle class.

Yogendra Pratap, editor of the magazine Auto Bild, says the focus is on inexpensive, small cars which account for four out of every five cars sold in the country.

"All companies have realized that they need to have a good market share in India to survive recessions in the West, and that means that they need to have successful products in India. The other thing that these auto majors have learnt is that, in India, you need to be very cost competitive, because the Indian local manufacturers get out cars which are very cheap and sturdy so they need to design cars which are built keeping the Indian conditions in mind," Pratap said.

In a country where price matters, the compact cars designed for India cost around $8,000 to $10,000.

Society of Indian Automobile Manufacturers Director General Dilip Chenoy explains why small cars are the overwhelming favorites in India.    

"Small cars are within affordable reach and they give you intrinsically a better fuel efficiency and they cost less to maintain, so the overall total cost of ownership of a small car is such that it is very appealing to the Indian customer," Chenoy said.

Many of these compact cars are not only designed for India - they are also being manufactured in the country, to hold down prices in a market where margins are slim.

Auto analysts say domestic companies such as Tata Motors - which produces the world's smallest car, the Nano - have already demonstrated that India has the engineering skills and low-cost facilities to produce small cars. This has encouraged several global automakers to head to India.  

Yogendra Pratap says some global automakers are expanding existing production facilities and others are making an entry.

"Toyota's second car plant is coming up.  Hyundai already has a second car plant.  Nissan Renault is setting up a huge car plant, and Volkswagen has just set up a car plant.  So the infrastructure is already on the way, the ground has been laid ready for India becoming a global small car hub," Pratap said.

Many automakers also plan to export the small cars produced in India to other countries, as the world focus moves from gas guzzlers to more fuel-efficient vehicles.  This helps them achieve economies of scale and reduce costs.   

Dilip Chenoy says annual car sales in India are set to nearly double, to four million by 2016, while the turnover of the automobile industry is expected to rise to nearly $150 billion.  

"The ambition in India is to reach a kind of a market size of $145 billion by 2016. And, if we have one or two good years, like last year, and next year may turn out to be, we will be on track in achieving this ambition, and we could become a significant player in the automotive industry by 2016," Chenoy said.

But although car manufacturers are hoping to turn in profits in the growing market, many worry that more cars on Indian roads will only worsen congestion in towns and cities, where traffic already moves at a slow pace on crowded roads.

You May Like

Koreas Mark 61st Anniversary of War Armistice

Muted observances on both sides of heavily-armed Demilitarized Zone that separates two decades-long enemies More

Judge Declares Washington DC Ban on Public Handguns Unconstitutional

Ruling overturns capital city's prohibition on carrying guns in pubic More

Pricey Hepatitis C Drug Draws Criticism

Activists are using the International AIDS Conference to criticize drug companies for charging high prices for life-saving therapies More

This forum has been closed.
Comments
     
There are no comments in this forum. Be first and add one

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Students in Business for Themselvesi
X
Mike O'Sullivan
July 26, 2014 11:04 AM
They're only high school students, but they are making accessories for shoes, fabricating backpacks and doing product photography - all through their own businesses. It's the result of a partnership between a non-profit organization that teaches entrepreneurship and their schools. VOA's Mike O'Sullivan and Deyane Moses met the budding entrepreneurs near Los Angeles.
Video

Video Students in Business for Themselves

They're only high school students, but they are making accessories for shoes, fabricating backpacks and doing product photography - all through their own businesses. It's the result of a partnership between a non-profit organization that teaches entrepreneurship and their schools. VOA's Mike O'Sullivan and Deyane Moses met the budding entrepreneurs near Los Angeles.
Video

Video Astronauts Train in Underwater Lab

In the world’s only underwater laboratory, four U.S. astronauts train for a planned visit to an asteroid. The lab - called Aquarius- is located five kilometers off Key Largo, in southern Florida. Living in close quarters and making excursions only into the surrounding ocean, they try to simulate the daily routine of a crew that will someday travel to collect samples of a rock orbiting far away from earth. VOA’s George Putic has more.
Video

Video Not Even Monks Spared From Thailand’s Junta-Backed Morality Push

With Thailand’s military government firmly in control after May’s bloodless coup, authorities are carrying out plans they say are aimed at restoring discipline, morality and patriotism to all Thais. The measures include a crackdown on illegal gambling, education reforms to promote students’ moral development, and a new 24-hour phone hotline for citizens to report misbehaving monks. Steve Sandford reports from Bangkok.
Video

Video Virtual Program Teaches Farming Skills

In a fast-changing world beset by unpredictable climate conditions, farmers cannot afford to ignore new technology. Researchers in Australia are developing an online virtual world program to share information about climate change and more sustainable farming techniques for sugar cane growers. As VOA's Zlatica Hoke reports, the idea is to create a wider support network for farmers.
Video

Video Airline Expert: Missile will Show Signature on Debris

The debris field from Malaysia Airlines Flight 17 is spread over a 21-kilometer radius in eastern Ukraine. It is expected to take investigators months to sort through the airplane pieces to learn about the missile that brought down the jetliner and who fired it. VOAs Carolyn Presutti explains how this work will be done.
Video

Video Treatment for Childhood Epilepsy Heats up Medical Marijuana Debate

In the United States, marijuana is classed as an illegal drug by the federal government. But nearly half the states have legalized it, to some degree. Proponents say some strains of marijuana might have exceptional health benefits, for treating pain or inflammation in chronic conditions such as cancer, multiple sclerosis and epilepsy. Shelley Schlender reports on a strain of medical marijuana developed in Colorado that is reputed to reduce seizures in childhood epilepsy
Video

Video Airbus Adds Metal 3D Printed Parts to New Jets

By the end of this year, European aircraft manufacturing consortium Airbus plans to deliver the first of its new, extra-wide-body passenger jets, the A350-XWB. Among other technological innovations, the new plane will also incorporate metal parts made in a 3-D printer. VOA's George Putic has more.
Video

Video AIDS Conference Welcomes Exciting Developments in HIV Treatment, Prevention

Significant strides have been made in recent years toward the treatment and prevention of HIV, the virus that causes AIDS. This year, at the International AIDS Conference, the AIDS community welcomed progress on a new pill that may prevent transmission of the deadly virus. VOA’s Anita Powell reports from Melbourne, Australia.
Video

Video IAEA: Iran Turns its Enriched Uranium Into Less Harmful Form

Iran has converted its stockpiles of enriched uranium into a less dangerous form that is more difficult to use for nuclear weapons, according to the United Nations’ Atomic Energy Agency. The move complies with an interim deal reached with Western powers on Iran's nuclear program last year, in exchange for easing of sanctions. Henry Ridgwell reports for VOA from London.

AppleAndroid