It's raining cars

By 2010, the Indian automobile industry will collectively manufacture over 2 million cars.

With over 50 new launches slated this year, major global car companies are eyeing the Indian market.

General Motors, Fiat, Honda, Volkswagen and Renault have announced big expansion plans. Korean major Hyundai plans to invest over $1 billion (around Rs 4,400 crore) to remain the country's biggest car exporter.

Maruti Udyog Limited (MUL) would be investing $2 billion (around Rs 8,800 crore) over a period of three years to maintain its leadership position, with 50 per cent market share.

With extensive sops for manufacturing, including lower excise for small cars, MUL would produce an all-new car for the European market with a sales target of 2,00,000 units. 
 

ZOOMING AHEAD
Year	Capacities	Production	Export
2006-07	18,81,436	15,05,149	2,37,067
2007-08	20,85,546	16,68,437	3,22,083
2008-09	23,13,636	18,50,909	3,79,900
2009-10	25,68,800	20,55,040	4,48,097
2010-11	28,54,574	22,83,659	5,28,539
2011-12	31,74,996	25,39,997	6,10,983
*Source- SIAM

Tata Motors' much anticipated Rs 1 lakh car is likely to create further ripples in the Indian market when it is launched in 2008.

The recent visits by industry bigwigs including Fiat chairman Luca Cordero di Montezemolo, Renault-Nissan CEO Carlos Ghosn, and GM's chief G Richard Wagoner demonstrates the importance that big car companies give to India.

Ghosn was in India to inaugurate a plant in Nashik, jointly run by Renault and Indian carmaker Mahindra & Mahindra, that will produce economy car Logan, priced around Rs 4.3 lakh. But Ghosn has other plans too. He hopes to launch an ultra-cheap model in India by 2010, to be retailed at about Rs 1.4 lakh.

By 2010, the Indian automobile industry will collectively manufacture and sell over 2 million cars. However, it will still remain behind China, which is on track to hit the 10 million mark this year.

India's growth dynamics look robust with a large base of young population, a booming economy, rising income levels, an under-served rural market, and with just seven persons per 1,000 owning cars.

The government has launched an ambitious 10-year Automotive Mission Plan to develop India as a global manufacturing hub. The government hopes auto sales would jump from last year's $34 billion to $145 billion in 2016. If all goes well, the domestic auto industry could represent about 10 per cent of India's gross domestic product.

Despite the hype, the fastest growing car segment in India is dominated by small cars, which require cost-efficient manufacturing and careful cost management to maintain decent profit margins. No wonder companies like Toyota, Honda, Volkswagen, Ford and BMW are planning to manufacture small hatchbacks for the domestic market in the price range of Rs 3-4 lakh.

The most crucial factor to future growth will be whether small car projects can really go mas-market in India. Tata Motors' Rs 1 lakh car for instance, will have four doors, and a 0.6 litre, 33 horsepower engine. And if all goes well, India's car sales could easily surpass 6 million units soon.

SNIPPETS

New entrants
Car companies are unmoved by the fact that sales have started slipping in the Indian market with increase in interest rates and persistent price hikes in the past six months.

In the last one year, over a dozen global players have set up shop in India including BMW, Audi, Volkswagen, Renault-Nissan, Isuzu, and Porche while well known brands like Opel, Chery, Peuguot, Mazda and Kia from Hyundai are expected to roll out in 2008 fiscal.

The market would be flooded with best-selling cars like Volkswagen Polo and Passat, General Motors Spark, Fiat Grand Punto, Skoda Fabia and Roomster, Renault Logan, Maruti-Suzuki SX4 and Escudo, Porsche Cayenne Turbo, BMW Mini, Volvo XC 90 & S-80 and Tata Motors' ambitious Rs 1 lakh people's car.

Car companies are going ahead with multiple launches to beat all past trends. Maruti could bring out three car this year while Hyundai is planning to roll out five, including variants, while Tata Motors would launch its new Indica series with modern CDRi diesel engines. The three companies control over 90 per cent of the Indian market.

2007 promises to be an exciting year as huge investments from several automobile companies will spawn a fresh range of locally built cars.

The good news is that these new cars will be affordable and appeal to a majority of the car buyers.

New tech
After treating the Indian market with obsolete technologies for decades, car companies are now carving out a niche by offering new cutting-edge technologies.

Market leader Maruti would be launching a new series of engines for its existing cars "" Zen, WagonR, Alto, M-800 and Omni "" which would commence with the launch of its new premium sedan, SX4, that will be fired with an all new M-series engine.

Hyundai, which has to its credit the best technology in automobiles, will bring out the latest in diesel technology, would have an all-new 1.1 litre CRDi engine. The existing cars, Santro and Getz, would also get the diesel advantage this year, followed by CNG and LPG options.

Indian majors Tata Motors and Mahindra & Mahindra are increasing their hold on the Indian market with the adoption of the latest technologies coming out of their strong research and development centres, which have created indigenously developed CRDi diesel engines.

Home-grown players have forced several new international players to introduce their best products in the Indian market.

"Car companies can no longer offer obsolete technologies as was done by Ford in Escort and Maruti in Versa and Baleno. Indian customers are extremely choosy and go for the latest technology and even give due diligence to engine capacities, features and functional accessories in cars," says Pradeep Saxena, of TNS Automotive Research.