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Small is beautiful

The economic downturn has hurt the sales and expansion plans of Indian automakers. But the good thing is that they are not as down-and-out as the auto giants in the US and elsewhere, who are seeking Govt help to stay afloat, reports Sumant Banerji.

india Updated: Dec 31, 2008 22:49 IST
Sumant Banerji

The economic downturn has hurt the sales and expansion plans of Indian automakers. But the good thing is that they are not as down-and-out as the auto giants in the US and elsewhere, who are seeking government help to stay afloat. In fact, the current crisis has presented India an opportunity to make good of its expertise in the manufacturing of small cars.

And small cars is where the future lies, what with the unprecedented spike in crude prices earlier this year and the uncertain outlook on future oil prices driving buyers to small, fuel-efficient, low-cost cars.

“We started making small cars here and showed how frugal, no-frills engineering can have a big market. Now the whole world is waking up to small cars,” says R.C. Bhargava, chairman, Maruti Suzuki India. “Our next challenge is to scale up and be a name to reckon with globally.”

And what can be better way to do that than a successful rollout of the Nano? By the end of the first quarter of 2009, the Tatas’ Rs 1-lakh car is expected to hit the roads.

“This is the time when we should be investing heavily in research and development and preparing ourselves for the new world order that will emerge from the debris of this recession,” advises Vikas Sehgal, principal and executive director of consultants Booz and Company. “India’s auto industry has a very good chance of emerging as a front runner in the post-2012 scenario, but the preparation for that has to start now.”

General Motors already employs 1,600 engineers at its Bangalore centre which is driving the company’s foray into frugal engineering. Maruti Suzuki, which also has a design centre in the city, is doubling its engineering staff to 1,000 by 2011. Hyundai, which has already made India its export hub, is ramping up its workforce from 250 to 800 people at its R&D center in Hyderabad.

“The process of India playing a more prominent role in the global automotive industry has already begun,” says Pawan Goenka, president of Mahindra’s automotive division. “The current economic slowdown will not reverse the process, though there may only be a temporary stagnaation."