Small cars, global ambitions
Cars made in India are changing the world with car-makers queuing up to take advantage of low production cost, improving quality standards as India turns small car export-hub. Sumant Banerji reports.india Updated: Sep 07, 2013 00:13 IST
First, the humble small car changed the landscape of Indian roads. Now, the cars made in India are changing the world outside.
With its advantages such as a low cost of manufacturing and big numbers on small cars, India is emerging as global car makers’ preferred destination for production of mini vehicles.
While the volumes in India, which is tipped to emerge as world’s third largest automotive market with sales of over 5 million units by 2020, is itself an attraction, exports volumes are a bonus.
Maruti Suzuki and Hyundai are old hands at this game, but companies such as Toyota, Renault-Nissan, Ford, General Motors and Honda are now joining in, with plans to make India not just a laboratory for developing frugal small cars but also an export hub for global markets.
“If we get a product right in India then the product is ready to be accepted elsewhere....in growing markets,” Carlos Ghosn, chairman and CEO, Renault Nissan alliance, said.
“If you want to make a value for money product with frugal engineering, India is the place to do so. By 2016, 60% of the automobile market will be in countries such as India, Brazil, China, Russia and Indonesia.”
Ghosn’s Nissan is already utilising India as a major export hub for its global small car Micra, which is sold as the March in developed markets.
Its export tally of nearly 220,000 units in three years is over four times its domestic sales tally of less than 50,000 units.
Similarly, Europe’s largest car maker, Volkswagen, is also deliberating on a low cost brand to make cars for markets such as India.
The reason? The cost of making a small car in India is 15-20% lower than any developed — or even some developing — markets. The industry is poised to invest around $10 billion (R65,000 crore) to set up plants in India over the next five years, which will create about a million additional jobs, directly and indirectly.
Coastal states such as Tamil Nadu and Gujarat will benefit the most, due to the presence of sea ports.
Korea’s largest car maker, Hyundai, was the first to recognise the potential of India as an export hub, even for the demanding customers of Europe. Traditionally, Indian engineering has ranked low on quality and efficiency parameters.
Safety and emission norms are also more stringent in developed economies. But all this has changed in recent times.
“We are expanding our export business and it is the first step towards developing India as another hub for export of certain models,” said Hironori Kanayama, president and CEO, Honda Cars India.
“The Brio that we manufacture here is of best quality and ready to be introduced in international market.”
The Hyundai i10 has been the most exported model in India till date with over 750,328 units shipped overseas to more than 100 markets. In fact, in the last few years it has found more takers outside India than within.
“We are developing India as a major export hub for our cars,” said Dave Schoch, president Asia Pacific, Ford.
“The segment below our entry level Figo is attractive as there is a large customer base not only in India but in other markets as well.”
“Exports from India will help us to stay on track for (high) growth in the region,” said Schoch. Domestic demand for small cars continues to be strong even as compact sedans and SUVs have logged higher growth in recent times.
“India will continue to be predominantly a small car market,” said Mayank Pareek, CEO, marketing and sales, Maruti Suzuki India Ltd. ““It is fuel-efficient, practical and more affordable.”