Mumbai: Global car makers are lining up to make India, home of Tata Motors Ltd’s Nano, the world’s cheapest car, a base for their export operations as they try to cut costs and move to compact, fuel-efficient vehicles.
South Korea’s Hyundai Motor Co., which already exports close to half of its Indian output, wants to make India its global hub for making and exporting small cars.
Toyota Motor Corp., the world’s largest auto maker, is designing a compact car for the Indian market and plans to make the country its small-car hub by 2012. And Ford Motor Co. is investing about $500 million (Rs2,445 crore) to double capacity at its India plant, which will not only produce a compact car but become a strategic global production hub.
Japan’s Suzuki Motor Corp. has a strong foothold as the majority owner of leading Indian car maker Maruti Suzuki India Ltd, which is spending at least $300 million on building a small-car research and development centre in the country. The firm exported 54,707 cars in the five months from April, the start of the 2010 fiscal year, more than double its shipments for the same period a year earlier.
“Apart from the obvious cost advantages, India has a good base of component suppliers who come with the experience of having supplied to global car companies,” said Deepesh Rathore, auto analyst with IHS Global Insight.
India’s domestic auto market is relatively small considering a population of at least 1.1 billion, with around 1.5 million passenger vehicles being sold last year. It is, however, a fast growing market, even in an auto downturn. For the first four months of 2009-10, domestic car sales rose nearly 10% from a year earlier. That potential offers an extra attraction to base export operations in India.
“Remember, India, along with Brazil, Russia and China, is a fast growing market,” said P. Balendran, vice-president, marketing, General Motors India. “All big companies have created capacities here. So when they have the capacity, it has to be utilized. Until the domestic demand picks up, these cars will be exported,” he added.
General Motors Corp., plans to export 20% of the output from its plant in Maharashtra in western India by 2011, once it reaches its full capacity of 140,000 units. Hyundai is stepping up production of its popular i20 hatchback to export to more countries to meet the growing demand.
John Parker, Ford’s Executive vice-president of Asia-Pacific and Africa, said its compact car would cater to local and export markets. “We see lots of potential for exporting cars from India,” he said, adding that India, along with China, Thailand and Africa, was seen as a strategic centre, especially for small cars.