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Small cars, big deal

Two years after Ratan Tata unveiled the Nano at the Delhi auto show, the city is getting a glimpse of how carmakers across continents reacted to the world’s cheapest car.

india Updated: Jan 10, 2010 21:53 IST

Two years after Ratan Tata unveiled the Nano at the Delhi auto show, the city is getting a glimpse of how carmakers across continents reacted to the world’s cheapest car. This year’s exposition has on display small cars from Toyota, General Motors, Volkswagen and Honda, the heavyweights of the automobile industry. Most of the models will, over the next two years, be made in India where sales of cars, principally small ones, are growing at 16 per cent a year. Three in four of the 1.4 million cars that will be sold in India in 2008-09 will be compacts. China and India are the only two sizeable growth markets in the world, significant for any global manufacturer in the long term. India offers the added advantage of being a testing ground for a global shift towards smaller, fuel-efficient and low-emission cars.

This also brightens the prospects of the country emerging as a hub for manufacturing small cars. Already automobile companies in India led by Suzuki and Hyundai are exporting one in four cars they produce and the expectation is the scale could rise to a million cars by 2015 when domestic sales touch 3 million. Indian car exports should get a leg up with the entry of Japanese and European makers. Those late to arrive in the Indian market are attempting to buy their way in, like Volkswagen which has bought 20 per cent of Suzuki. The Chinese, way up in the automobile manufacturing food chain, are also interested. Shanghai Automobile Corporation has taken control of General Motor’s India operations in what could set off an export wave of frugal Chinese engineering.

This edition of the Delhi auto show heralds a phase of heightened competition with entrenched incumbents like Suzuki — which sells every second car in India — girding up not merely against the Toyotas and Hondas that bring to the market larger pools of proprietary technology but also against companies like the Tatas and the Mahindras that have a innate understanding of the Indian value proposition. Then again, it is bound to get crowded in a market that should double its size in five years. The world has been peering curiously at the stuff bubbling in the Indian automobile laboratory. This could be the decade when the billions at the bottom of the pyramid come into full view.