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

Disappointing Report on China's Economy Shakes Markets

In London and New York shares lost 3 percent, while Paris and Germany dropped around 2.4 percent More

DRC Tries Mega-Farms to Feed Population

Park at Boukanga Lonzo currently has 5,000 hectares under cultivation, crops stretching as far as eye can see, and is start of ambitious large-scale agriculture plan More

Video War, Drought Threaten Iraq's Marshlands

Areas are spawning ground for Gulf fisheries, a resting place for migrating wildfowl, source of livelihood for fishermen and herders who have called the marshes home for generations 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.
Nobel Prize Winner Malala Talks to VOAi
X
August 31, 2015 2:17 AM
Nobel Peace Prize winner Malala Yousafzai met with VOA's Deewa service in Washington Sunday to talk about women’s rights and unveil a trailer for her new documentary. VOA's Katherine Gypson has more.
Video

Video Nobel Prize Winner Malala Talks to VOA

Nobel Peace Prize winner Malala Yousafzai met with VOA's Deewa service in Washington Sunday to talk about women’s rights and unveil a trailer for her new documentary. VOA's Katherine Gypson has more.
Video

Video War, Drought Threaten Iraq's Marshlands

Iraq's southern wetlands are in crisis. These areas are the spawning ground for Gulf fisheries, a resting place for migrating wildfowl, and source of livelihood for fishermen and herders. Faith Lapidus has more.
Video

Video Colombians Flee Venezuela as Border Crisis Escalates

Hundreds of Colombians have fled Venezuela since last week, amid an escalating border crisis between the two countries. Last week, Venezuelan President Nicolas Maduro ordered the closure of a key border crossing after smugglers injured three Venezuelan soldiers and a civilian. The president also ordered the deportation of Colombians who are in Venezuela illegally. Zlatica Hoke reports.
Video

Video Rebuilding New Orleans' Music Scene

Ten years after Hurricane Katrina inundated New Orleans, threatening to wash away its vibrant musical heritage along with its neighborhoods, the beat goes on. As Bronwyn Benito and Faith Lapidus report, a Musicians' Village is preserving the city's unique sound.
Video

Video In Russia, Auto Industry in Tailspin

Industry insiders say country relies too heavily on imports as inflation cuts too many consumers out of the market. Daniel Schearf has more from Moscow.
Video

Video Scientist Calls Use of Fetal Tissue in Medical Research Essential

An anti-abortion group responsible for secret recordings of workers at a women's health care organization claims the workers shown are offering baby parts for sale, a charge the organization strongly denies. While the selling of fetal tissue is against the law in the United States, abortion and the use of donated fetal tissue for medical research are both legal. VOA’s Julie Taboh reports.
Video

Video Next to Iran, Climate at Forefront of Obama Agenda

President Barack Obama this week announced new initiatives aimed at making it easier for Americans to access renewable energy sources such as solar and wind. Obama is not slowing down when it comes to pushing through climate change measures, an issue he says is the greatest threat to the country’s national security. VOA correspondent Aru Pande has more from the White House.
Video

Video Arctic Draws International Competition for Oil

A new geopolitical “Great Game” is underway in earth’s northernmost region, the Arctic, where Russia has claimed a large area for resource development and President Barack Obama recently approved Shell Oil Company’s test-drilling project in an area under U.S. control. Greg Flakus reports.
Video

Video Philippine Maritime Police: Chinese Fishermen a Threat to Country’s Security

China and the Philippines both claim maritime rights in the South China Sea.  That includes the right to fish in those waters. Jason Strother reports on how the Philippines is catching Chinese nationals it says are illegal poachers. He has the story from Palawan province.
Video

Video China's Spratly Island Building Said to Light Up the Night 'Like A City'

Southeast Asian countries claim China has illegally seized territory in the Spratly islands. It is especially a concern for a Philippine mayor who says Beijing is occupying parts of his municipality. Jason Strother reports from the capital of Palawan province, Puerto Princesa.
Video

Video Ages-old Ice Reveals Secrets of Climate Change

Ice caps don't just exist at the world's poles. There are also tropical ice caps, and the largest sits atop the Peruvian Andes - but it is melting, quickly, and may be gone within the next 20 years. George Putic reports scientists are now rushing to take samples to get at the valuable information about climate change locked in the ice.

VOA Blogs