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India set to become global small car making hub

India, increasingly seen as a global tech outsourcing centre, is taking rapid strides towards becoming world's manufacturing hub for compact cars.

business Updated: Jan 17, 2004 12:42 IST
Sumeet Chatterjee (IANS)
Sumeet Chatterjee (IANS)

India, increasingly seen as a global technology outsourcing centre, is taking rapid strides towards becoming the world's manufacturing hub for compact cars.

Pipe dream? Not really, when you start assessing the growth of exports of small cars to countries as far as the Netherlands, Britain, Nigeria and nations closer home like Bangladesh, Nepal and Sri Lanka in the last over one year.

First, sample these figures.

Maruti Udyog, a business unit of Japanese vehicles major Suzuki Motor, is well set to achieve the export target of 50,000 units in the fiscal year ending March 31, up from some 32,000 shipped overseas in 2002-03.

Over 70 per cent of Maruti's export is likely to be accounted by the Alto compact car, which is one of the top-selling models in its class in the Netherlands and also enjoys considerable market presence in Finland, Austria and Ireland.

Hyundai Motor India, the local arm of the South Korean automobile giant, exported 30,000 cars from India in 2003. This year, it is targeting 70,000, a whopping growth of over 100 per cent.

And Tata Motors, a cars and commercial vehicles making arm of Tata Sons, one of India's top business houses, will make 100,000 hatchbacks for Britain-based MG Rover over the next four years.

"India has all the ingredients in place to become the worldwide manufacturing hub for small cars in the next couple of years," said noted automobile industry expert Tutu Dhawan.

"The country is well known for its very strong auto component manufacturing base that meets global quality standards," Dhawan told IANS.

"Add to this availability of a huge pool of skilled engineering professionals at lower costs, then there is no reason why India can't emerge as a strong contender to the tile of global manufacturing hub for compact cars."

India, Asia's third largest economy, has emerged as a large car market in recent years.

The country of over one billion people, where only six out of every 1,000 people currently own cars as compared to nearly 500 in developed economies, is expected to see an explosive growth over the next few years.

The National Council of Applied Economic Research (NCAER), a New Delhi-based economic research group, predicted in September that car sales would rise to one million vehicles a year by 2012.

And a significant portion of this would be accounted by exports, says experts. In the fiscal year ending March 31, total car export from the country is tipped to cross the 100,000 mark, up from a mere 20,000 a few years ago.

"India has already become one of the largest small car producers in the world," said Tata Motors Ltd'svice president (commercial and passenger car business)Rajiv Dubey.

"So, it won't be surprising if the country also emerges as the largest exporter of small cars in the years ahead. We already have a very booming domestic market that can absorb a big part of the output of compact cars," he added.

Small cars account for nearly 60 per cent of the domestic 600,000 cars a year market.

"We must understand that unlike Japan, you don't have government-aided growth in India. It's basically the manufacturers who decided what best we can do to serve the global marketplace," said Dubey.

Tata Motors plans to start marketing its cars in all major countries in Europe over the next few years. It has already bagged an order from Britain's MG Rover to export 100,000 units of the hatchback City Rover car over four years.

The City Rover, a modified version of the Indica car, is produced in both 1,400 cc petrol and diesel engine models. Indica is billed as the subcontinent's first genuine indigenous car.

Maruti Udyog managing director Jagdish Khattar, however, feels that the Indian auto industry would have to focus on research and development and quality in a big way to realise its dream of becoming a manufacturing hub.

"The competitive pressure is very high. You must understand we are competing against the world leaders in the automobile industry in overseas markets. So, the quality of small cars will surely be a strong competitive edge for us," he said.

First Published: Jan 17, 2004 12:42 IST