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As we step into Delhi Auto Expo 2016, I am struck by an apparent paradox: In the last five years, the growth of India’s automobile industry has been nowhere close to what we had all hoped for. And yet, there is a great deal of optimism around this vital sector today.

On the basis of my distant view from Japan, I can see some important trends, patterns and enablers in the Indian market which I believe inspire confidence for the future despite slow growth in the past. Let me list them one by one.

The first positive pointer, of course, is the opportunity. Penetration of automobiles in India is only 18 per 1,000 people (compared with 800 in the US, for example). More important, most of the market is still highly confined. The 10 largest cities account for as much as 40% of sales. Smaller cities and towns have seen some growth in recent years, but their potential remains huge. The top cities will continue to be important; replacement demand will be crucial. But as incomes grow in the next layers of towns and cities, and as more manufacturers reach out with products and networks to develop those markets, these could be the growth drivers of the future.

I am also encouraged to see the enhanced focus on India from global players. India is gradually moving from the periphery of the global automobile industry to its centre. The first step was to set up manufacturing facilities and sales networks here. This was followed by introducing products that were designed essentially for global markets, but with Indian sensibilities. Now is the next level: more and more products designed primarily for India. That means more new products, and also that companies will do everything to make those products work in India. That is good news for the customer. Certain other developments point to India’s growing significance: exports out of India, dedicated research and development centres and of course, more frequent visits by global managements.

India’s story is remarkable also for its compact vehicles. These account for more than 70% of a market that is inching close to three million units. That is very impressive; India is clearly a compact car miracle. This is a unique example of consistent government policy with clear national objectives, nurturing a healthy ecosystem of manufacturers, products, suppliers and dealers, all coming together to create positive change.

I am specially struck by the growing phenomenon of compact SUVs in India, which marries customers’ desire for stand-out SUV design with the social objective of encouraging small cars. Besides innovations in design, compact vehicles in India now come fitted with the latest and the best in terms of features, safety and comfort, often at very competitive costs. In a global context, all these combine to make India a potential powerhouse for compact vehicles.

Historically, the success of the automobile industry has implications for the larger society. Pollution, safety and congestion are some of them. I can see similar concerns developing in India, at least in certain parts where vehicle density may be high.

Based on our experience in Japan, I can say that such societal concerns are bound to arise. At the same time, it is possible to resolve them with the participation of all stakeholders. Japan had a smog problem in the 1970s. The automobile sector joined hands with the government and other stakeholders and resolved the problem. Similar was our experience with road accidents and fatalities.

The positive side to all this is that solutions exist. Technologies have evolved to solve these problems, and are available for use by all. It is important for all stakeholders to come together, understand one another’s concerns and move forward on a joint action plan. In my view, India has done very well, for example, introduction of emission standards 15 years ago. Industry and the government have made good progress since then. As I have noted above, India also has the capability to innovate and evolve unique solutions to its situation. As in the past, automobile industry has to be a part of the solution.

India must do well, and it will. We reposed faith in this country more than 30 years ago.

It is heartening that the confidence in India is now widely shared, and that India is expected to become the world’s third largest automotive market and is preparing to create 65 million new jobs through this sector in the next decade.

Toshihiro Suzuki is president and chief operating officer, Suzuki Motor.

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