Indian automobile industry on overdrive
26 April 2004
It has finally happened! Indians are buying cars like never before. According to the Society of Indian Automobile Manufacturers, (SIAM) sales of passenger cars in India have exceeded the magical one million mark putting India among a select group of prosperous countries where passenger cars sell in such high numbers. The exact sales figure (including exports) was 1.03 million for the year 2003.
Significantly while domestic car sales increased by 27.4 per cent to 696,207 units from 541,491 units the previous year, exports rose 56 per cent to 1,25, 327 units during this period. Also for the first time in history of the industry, vehicles worth more USD 1 billion were exported.
Most significantly, passenger car exports have nearly trebled in four years, from 28,122 units in 1998-99 to 71,653 vehicles in 2002-3. According to Jagdish Khattar president of Siam and managing director of Maruti Udyog Ltd, India's largest carmaker, exports are further expected to rise by 15 to per cent in the current fiscal.
Analysts say the news on the exports front is the most encouraging and by far the best thing to have happened to the Indian automobile industry. This is because as more and more Indian-made cars flood foreign shores the low quality image associated with Indian products will ultimately fade, encouraging more automobile companies to look at India as a manufacturing destination that can cater to world wide markets.
Nothing could be better in terms of foreign direct investment and employment. Till a few years ago a limited number of companies had actually set up substantial manufacturing facilities in India to cater exclusively to the domestic market. However, Hyundai Motor was the first global company to put its faith in Indian manufacturing to cater to global standards.
In June last year B V R Subbu, president, Hyundai India, announced that the Indian company was going to become the global manufacturing hub of Hyundai's small car. He revealed that the company was likely to enter the European market as the Europeans had found that the manufacturing standards of Hyundai Motor India matched global standards. He said the US and Europe would be the global hubs for large and mid-sized cars, respectively, and India would be Hyundai's global production hub for small cars. Hyundai's plant at Irrungattukottai near Chennai is its only production centre outside South Korea. Its production capacity is being increased to 250,000 units a year from the earlier 150,000 units. Hyundai aims to emerge as world's top five carmakers by the end of the current decade. To achieve this, it has to sell 5 million cars a year globally, a 40 per cent increase from the 3 million units that it sells now. Hyundai plans to convert its Indian production base as the second largest mid-size car facility and set up a manufacturing facility in the US for large-size cars in the near future.