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Signs of speed limits on the growth path

While Delhi’s Auto Expo was excited at India’s coming of age as the hub of small cars, the nearest metro station was closed for some time at 3 pm on Friday. Sumant Banerji reports.

business Updated: Jan 10, 2010 23:41 IST
Sumant Banerji

While Delhi’s Auto Expo was excited at India’s coming of age as the hub of small cars, the nearest metro station was closed for some time at 3 pm on Friday.

The metro authorities were intimidated by the passenger volume on account of Auto Expo. This apart, cars crawled in New Delhi’s central shopping area, Connaught Place, and all the roads that radiated from it.

The question is: If the city is unable to cope with an exhibition of this sort, how can it handle its car population, growing by 350,000 on average every year. The metro is expanding, flyovers are being constructed, yet the average vehicle speed in the city is reducing – it is about 18 km per hour during working hours on weekdays now.

It is the top 10 urban centres that continue to account for more than 40 per cent of car sales in the country. These are the cities that will also be at forefront of the numerous launches in the next few years. India has more than 10 million cars now and according to some projections, by 2025, the number of just cars will cross 40 million.

This is one side of the picture. On the other side is the story of the Indian automobile sector's emergence as the global hub for small cars. This year’s Auto Expo saw 10 global launches but more than that it put the spotlight on India.

Consider this. The world’s top four carmakers — Toyota, General Motors, Volkswagen and Hyundai — are so eager to capture the Indian market that they are advancing their product plans here. The biggest of the lot, Toyota, has been present in the country for a decade but it’s now with the launch of its Etios that it is making its presence felt.

“The Etios is a massive product for us and is a major component of our revival strategy,” said Kazuo Okamoto, vice-president, Toyota Motor Corp, adding, “in future, the growth drivers for us are going to be China and India".

Similarly, Volkswagen, realising it may have been a little too late to enter India, is planning an India-exclusive small car that will again be its smallest and cheapest car to date. Hyundai and General Motors have done much better but they are not resting on their laurels and have made India the laboratory of all future low-cost cars.

Volkswagen, the world's third-largest carmaker, is a market leader in other big emerging countries such as China and Brazil.

With an eye to overtaking Toyota and General Motors to becoming the world’s largest carmaker by 2018, it knows it has to get its act together. While it is readying the Polo for launch in March, it is also working on a smaller, cheaper car.

“We will need to offer a car below the Polo price but we have not decided yet on what car it will be,” said Joechm Heizmann, member of the board of management, Volkswagen. "The only chance to do something like that competitively is in India."

The Volkswagen-Suzuki global cooperation, announced last month, will also have a direct bearing on India and it is perhaps for the first time that India as a market plays a big role in a global tie-up.

“India never had an innovative trademark to its name but now you have to be here if you have to make a low-cost car,” said Bernd Bohr, chairman, automotive group, Robert Bosch GmBh. “After the global meltdown, there is a shift towards small cars and there will be more participants in this. No doubt, India now figures prominently in all of these plans.”

At a time when traditional markets — the US and Europe — are no longer the markets for growth, the growth story in India continues unabated. In 1996-97, about 370,000 passenger cars were sold in India. The figure for 1999-2000 was approximately 615,000 and for this financial year, it is expected to cross 1.4 million units.

The market potential, however, is only part of the story and the global meltdown of 2008 has given a twist to this tale. Major car companies across the world suffered a decline in profitability in the latter halves of 2008 and 2009. The companies that escaped this had either an Indian connection or supremacy in China.

This list includes Suzuki, Hyundai, Honda and Volkswagen.

Suzuki, a lesser-known entity in the US and Europe, suffered badly in Japan, but its Indian subsidiary — market leader Maruti Suzuki — outsold the parent company and even returned better profits.

Hyundai has a considerable presence in India, and China provided it the cushion to withstand the onslaught in Europe and the US. So was it for Volkswagen in China, where it is number one.

Honda lost heavily but its more than 20 years’ association with the country's largest two-wheeler manufacturer, Hero Honda, saved it the blushes.

These are not mere coincidences and cannot have escaped the attention of Toyota and General Motors – the former suffering its first loss in a quarter in 59 years and the latter becoming bankrupt.

All these prove that India is at the epicentre of the global automobile industry. But questions remain on whether our roads are ready to handle the extra number of cars, or if we have the necessary checks and balances to contain pollution and accidents, not to speak of traffic jams.

All this at an expo that the organisers claim to be the best and biggest in the business globally.

The venue of Auto Expo itself bore testimony of what was happening outside. While confusion reigned because of lack of co-ordination among the three organisers (Confederation of Indian Industry, Automotive Component Manufacturers Association, and Society of Indian Automobile Manufacturers), outside it was a veritable picture of hell with smoke, dust, fog and five-km-long queues of cars. Imagine an ambulance getting caught in this!

By the time the next edition of Auto Expo takes place in 2012, there will be more cars on the roads than ever and even more companies queuing up to enter India, with Pragati Maidan being what it is. Anyone listening?