Automobiles: Gearing up for the overdrive

03 January 2007

The country is set for an avalanche of new models. By Mohini Bhatnagar

The Indian automobile industry, which has been on overdrive for the past five years, stayed on course in 2006 and is estimated to register double digit growth in calendar year January to December 2006. Based on figures released till November 2006, a total of 10.9 million vehicles were produced in India in calendar 2006, a growth of 17 per cent from 14.5 per cent in 2005 over the previous year.

The sales growth of passenger cars is expected to be about 20 per cent against the 7 per cent growth seen in 2005. Sales of utility vehicles grew at 12 per cent and MPVs at 16 per cent.

The most striking aspect of the year was that compact cars and mid sized cars led the market while the market for entry level and luxury cars actually fell by 7.2 per cent and 5.6 per cent respectively.

Sales of compact cars grew by 25.3 per cent and mid size cars by 18.9 per cent while the executive segment grew by 32.9 per cent. On the export front also the news was good. Overall automobile exports are expected to register a 25 per cent growth in 2006 over 2005. More than 190,000 passenger cars are estimated to have been exported in 2006 a growth of 11.7 per cent over the previous year''s growth. The brisk sales of compact cars were on the back of the 8 per cent cut in excise duty to 16 per cent which caught the attention of Indian and MNC carmakers who promptly announced big investments in setting up manufacturing facilities in India.

Volkswagen, for one has announced plans to set up a facility in India, and has indicated that it would be launching the small car Polo. The company is investing Rs2,400 crore for its manufacturing plant in Maharashtra, which is set to come up by 2009. Maruti Suzuki announced an additional Rs3,000 crore investment in India over and above the Rs6,000 crore investment already announced for new models, a new car plant and diesel engine production. This takes Suzuki''s total investment into India upto 2010 to Rs9,000 crore. Suzuki has announced that as part of its five-year plan in India, it will make diesel engines under technical assistance from Fiat and has started plant construction with production scheduled to begin from December 2006.