INDIAN AUTO MARKET GROWTH

Auto boom as car makers head for a splash in India

Indian automobile market to grow as car makers plan new car and motorcycle launches for 2006.

OUR AUTOMOBILE CORRESPONDENT

18 January 2006
NEW DELHI, INDIA

The Auto Expo 2006 has driven home one heartening point -- The world’s biggest carmakers, including Ford and General Motors, are looking for a kill in India, considered one of the fastest growing automobile markets. The auto majors are lining up major investments in the country, in an apparent bid to outdo each other.

Conservative estimates put the growth rate of Indian economy at 7 per cent, with the booming Indian automobile sector being considered as a key driver of growth. 

Analysts and industry watchers at the recently concluded Auto Expo 2006 in New Delhi, India said the steep rise in incomes, triggered by a booming economy, was the main reason behind the growth in car sales. The easy availability of automobile loans after the Indian economy was liberalised is also another reason why car sales in India have boomed.

India is the world’s largest mini car maker. The country is also the second largest maker of motorcycles, the largest tractor maker and ranks fifth in production of trucks and buses. 

Auto majors Ford, Skoda, General Motors and Mahindra & Mahindra flaunted their sedans during the Auto Expo.

The Indian auto market was primarily a market where small cars thrived. But this is changing rapidly, with increasing number of big vehicles swarming the roads as part of a new affluence which is changing the face of a resurgent economy.

Mid-sized cars like the recently launched Ford Fiesta and Honda City ZX are rapidly emerging as the favourite vehicle of a middle class that is no more reluctant to spend. As Indian auto majors shifted gears, retail financiers also stepped in to satiate the growing appetite for four wheelers. Automobile dealers did not fail to take the cue and set up shops in every potential center, even in remote small towns.

India’s automobile market has immense growth potential considering the fact that despite the boom in economy, the fruits of which are now reaching the middle class, only eight out of 1000 Indians own a car. Comparable figures for developed western markets are 450/1000.

Indian auto market analysts also point out that the transition of any economy from developing to developed has been historically driven by auto sector growth, examples being the United States in 1940S and Japan’s success saga in 60s. 

In this fiscal (April, 2005-March , 2006) so far, figures show that vehicle sales in India have risen by 20%, year-on-year. 

Czech carmaker Skoda Auto has announced plans to almost double capacity in the country. Skoda would also export cars to neighbouring Banglasdesh, propelling India as a regional hub. 

Japan’s third largest auto maker Honda sees its sales zooming to 40 lakh units by 2008. Honda expects the growth to primarily come from North America and Asia.

Honda would double annual car production from 50,000 units at present by 2010.

South Korea’s Hyundai, the 2nd largest carmaker in India, plans to set up another plant in India. This would boost its capacity by 150,000 vehicles annually, taking its capacity to 4 lakh units. 

France's Renault, which has partnered Mahindra & Mahindra to make its Logan Sedan, may also export cars and spare parts from India. 

Germany’s BMW and Volkswagen are also planning to set up plants in India. The auto boom is here to stay.