India will become the world's largest producer of A-segment small cars by 2013, a recent study by US-based market global intelligence firm Global Insight reveals. By 2013, India will produce about 31 per cent of the world's A-segment cars.
A combination of key reasons such as technical expertise, low costs, stable economy, government policies favouring small cars, large and integrated supplier base, and competence in diesel powertrain manufacturing will propel India as a major small car manufacturer.
Last year, about one million small cars were manufactured in India. Global small car production will grow from the two million units to about five million units by 2013. This will raise India from its 10th position to fifth largest producer of light vehicles in 2013, behind China, Japan, the US, and Germany. The study predicts that the export of small cars, which currently stands at 2.5 lakh units, will approach the one million-mark by 2013.
Exports will play a larger role in the automotive industry. Biggies like Hyundai and Maruti Suzuki are planning to step up exports once i20 and AStar are respectively launched by the year-end. International companies like Ford, GM, Honda, Toyota, and Volkswagen are also investing in new capacities for supply to local and overseas markets.
By 2013, India will become one of the largest exporters of small cars in Asia along with Japan, Korea, Thailand, and China.
Rising fuel prices and interest rates, and fluctuating commodity prices that push the costs of production of cars, have been cited as the key reasons for the preference for small cars in the future. The impending launch of Tata Motor's Nano will also raise the sales of small cars. The study predicts about 27 per cent of the small car segment will be garnered by the ultra low cost (ULC) cars like the Nano by 2013, and minus the Nano growth of small cars in the country will be gradual.
Global Insight also predicts a larger market share for Tata Motors on the back of the Nano launch (from 21 to 25 per cent), while Maruti's current market share of about 40 per cent will be pared to about 30 per cent in 2013. The study says India will have one of the most competitive small car segment in the world by that time. The passenger car market remains the most buoyant sector of the market.
While sales of passenger cars grew by 12 per cent in FY08, the segment is expected to slowdown to about 10 per cent in FY09.
