India has been hailed by market analysts as an emerging hub for the manufacturing industry with its focus on engineering, innovation, and overall growth. Recently, a United Nations Development Program report hailed India as a powerful force in the global automobile industry and recognized it has the strength to sustain leadership and growth in the face of the global trading order.
According to the Society of Indian Automobile Manufacturers (SIAM) projections, domestic sales of passenger vehicles are set to grow at 20 percent over the next two years, given the current GDP growth, and exports are expected to grow at 40 percent.
Foreign Automotive Companies in India
India has become a preferred destination for American, European, and Japanese automotive companies because they realize that in the future, auto manufacturing will require world-class, cost-effective IT and engineering expertise—and India has an abundance of both. Furthermore, low-cost manufacturing and a supportive government have been key drivers for companies shifting focus to India.
India’s government no longer is regulating the equity participation in joint ventures and, instead, allows the drivers such as the technological, financial, and market strengths of the partners to set the participation percentages. These new joint ventures have led to the creation of an enhanced vehicle capacity, particularly in the passenger car sector, where the additional capacity is estimated to produce 3 million passenger cars in the next five years.
Coming Out of the Shadows
India and its biggest competition in the changed global order, China, share several similarities as emerging economies, but India doesn’t receive the same attention as China does yet. This fact reflects itself in the automotive industry, where China has been losing ground in terms of its markets but continues to attract the major percentage of global investments.
However, India’s immediate future looks very promising. SIAM predicts the next three to four years could see the industry pump in as much as $5 billion in investments, out of which foreign direct investment would be close to $3 billion. This figure still makes India a David to the Chinese Goliath, but India can’t be compared to China on figures alone. The Indian auto market is more stable than China’s, and it’s steered its own growth momentum.
Foreign Ventures
Indian auto companies realize the opportunity they’re sitting on and are moving aggressively into foreign markets. They’re following a two-pronged strategy to not only tap the Indian and overseas market potential, but also to lower their production costs by outsourcing from other countries. With changes at all levels and looking at India’s preparedness for the global challenge, it seems fully equipped and ready to become a leading player in the worldwide automotive sector. IBI