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

VOA Exclusive: Interview With Myanmar President Thein Sein

Thein Sein calls allegations that minority Muslim Rohingya are fleeing alleged torture in Rakhine state a media fabrication More

Video Better Protective Suit Sought for Ebola Caregivers

Current suit is uncomfortable, requires too many steps for removal, increasing chance of deadly contact with virus More

UN Rights Commission Investigates Eritrea

Three-member commission will start collecting first-hand information from victims and other witnesses in Switzerland and Italy next week 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.
Ebola Economic Toll Stirs W. Africa Food Security Concernsi
X
November 19, 2014 11:39 PM
The World Bank said Wednesday that it expects the economic impact of the Ebola outbreak on the sub-Saharan economy to cost somewhere betweenf $3 billion to $4 billion - well below a previously-outlined worst-case scenario of $32 billion. Some economists, however, paint a gloomier picture - warning that the disruption to regional markets and trading is considerable. Henry Ridgwell reports from London.
Video

Video Ebola Economic Toll Stirs W. Africa Food Security Concerns

The World Bank said Wednesday that it expects the economic impact of the Ebola outbreak on the sub-Saharan economy to cost somewhere betweenf $3 billion to $4 billion - well below a previously-outlined worst-case scenario of $32 billion. Some economists, however, paint a gloomier picture - warning that the disruption to regional markets and trading is considerable. Henry Ridgwell reports from London.
Video

Video Mexico Protests Escalate Over Disappearances

Protests in Mexico over 43 students missing since September continue to escalate, reflecting growing anger among Mexicans about a political system they view as corrupt, and increasingly tainted by the drug trade. Mounting outrage over the disappearances is now focused on the government of President Enrique Pena Nieto, accused of not doing enough to end insecurity in the country. More from VOA's Victoria Macchi.
Video

Video US Senate Votes Down Controversial Oil Pipeline - For Now

The U.S. Senate has rejected construction of a controversial pipeline to transport Canadian oil to American refineries. The $5 billion project still could be approved next year, but it faces a possible veto by President Barack Obama. As VOA’s Michael Bowman reports, the pipeline has exposed deep divisions in Congress about America’s energy future.
Video

Video Can Minsk Cease-fire Agreement Hold?

Growing tensions between government troops and separatists in eastern Ukraine further threaten a cease-fire agreement reached two months ago in the Belarusian capital of Minsk. Critics of U.S. policy in Ukraine say it is time the Obama administration gives up on that much-violated cease-fire and moves toward a new deal with Russia. VOA's Scott Stearns has more.
Video

Video Chaos, Abuse Defy Solution in Libya

The political and security crisis in Libya is deepening, with competing governments and, according to Amnesty International, widespread human rights violations committed with impunity. VOA’s Al Pessin reports from London.
Video

Video US Hosts Record 866,000 Foreign Students

Close to 900,000 international students are studying at American universities and colleges, more than ever before. About half of them come from Asia, mostly China. The United States hosts more foreign students than any other country in the world, and its foreign student population is steadily growing. Zlatica Hoke reports.
Video

Video Ferguson Church Grapples with Race Relations

Many white residents of Ferguson, Missouri, say they chose to live there because of the American Midwest community's diversity. So, they were shocked when a white police officer killed an unarmed black teenager in August – and shaken by the resulting protests and violence. Some local churches are leading conversations on how to go forward. VOA’s Ayesha Tanzeem reports.
Video

Video What Jon Stewart Learned About Iran From 'Rosewater'

Jon Stewart, host of the satirical news program "The Daily Show" talks with Saman Arbabi of Voice of America's Persian service about Stewart's directorial debut, "Rosewater."
Video

Video Lebanese Winemakers Thrive Despite War Next Door

In some of the most volatile parts of Lebanon, where a constant flow of refugees crosses the border from Syria, one industry continues to flourish against the odds. Lebanese winemakers say after surviving a brutal civil war in the 1970s and 80s, they can survive anything. Heather Murdock has more for VOA from the Bekaa Valley in Lebanon.
Video

Video China's Rise Closely Watched

China’s role as APEC host this week allowed a rare opportunity for Beijing to showcase its vision for the global economy and the region. But as China’s stature grows, so have tensions with other countries, including the United States. VOA’s Bill Ide in Beijing reports on how China’s rise as a global power is seen among Chinese and Americans.

All About America

AppleAndroid