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India Automotive Market Review
just-auto, Nov 2008, Pages: 26
India’s automotive industry has a very different dynamic to the other three BRIC markets. Like Brazil, Russia and China, India has experienced rapid growth in the past decade. But the growth of the market is not hampered by the wealth of the population – indeed, India has a large and well-established middle class.
The problem is infrastructure. The roads of India’s crowded cities are in a state of gridlock. Mopeds, scooters and three-wheeler ‘tuk-tuks’ still provide much of the personal transportation. The car market has been dominated by small cars, with Maruti, established as a ‘national car’ programme in the 1980s, the dominant player.
Before Maruti, the market had been heavily controlled. No new investments had been made for many years, resulting in continued production of obsolete models such as the Hindustan Ambassador, a 1950s Morris Oxford, and the Premier Padmini, a Fiat 1100 of similar vintage. Maruti, with its small, affordable Suzuki-designed cars, was able to build a market share of 83% by the early 1990s.
The main stimulus for growth in India came in 1993, when the auto industry was delicensed. This opened the market to international auto makers, which started to establish joint ventures with Indian automakers. Delicensing coincided with a sharp reduction of excise duties from 66% to 40%, which considerably lowered car prices. Economic reforms, lower interest rates and lower inflation all helped release the pent-up demand for new cars.
The new car market, around 200,000 units in 1993, has grown rapidly, notwithstanding the ‘Asian economic flu’ of 1998. Passenger car sales in 2007 were up 14% to 1.4m units, according to JD Power, with light commercials adding a further 300,000 or so units.
Written by just-auto emerging markets specialist Mark Bursa, this briefing examines the status of the industry and its prospects. It includes market data, an assessment of government policy, intelligence on ultra-low cost cars and a summary of manufacturer activity.
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