Small-car production gives boost to Indian auto industry

• Source: Global Times
• [06:01 September 08 2009]
• Comments

Small cars manufactured in India under global brands such as Hyundai and Suzuki are propelling the country's auto industry to an unprecedented new level.

According to a Bloomberg report Monday, increasing demand for small cars that are more fuel efficient and environmentally friendly have boosted India's car-exports volume to a level higher than its neighbors.

Car makers like Hyundai, Nissan and Suzuki are expanding their small-car production in India, where labor costs "are about 10 percent of that in the US and Europe and raw material costs are lower by 11 percent," the report said.

"There is a worldwide shift toward fuel-efficient, compact cars," Jayesh Shroff, an executive at the SBI Asset Management Co in Mumbai, told Bloomberg. "This offers a huge potential for India and it can emerge as a leader in the small-car segment."

The country's exports of small cars rose by 44 percent between January and July, while the total exports, "rose 18 percent to 229,809," the report said.

In contrast, China's exports dropped 60 percent to 164,800, followed by South Korea, whose car exports dropped 31 percent during the same period and Thailand, who saw a 43 percent drop in auto production.

Encouraged by the numbers, "Nissan will set up its first factory in India by May and use it to export entry-level cars to Europe," Bloomberg said.

Suzuki also plans to build a new plant in the country in 2011. Hyundai and Toyota are also expanding their exports of Made-in-India cars.

Despite the huge export numbers, India remains one of the world's least-penetrated car markets with just seven autos per 1,000 people compared with 850 cars per 1,000 people in the US. Its domestic auto market is just 19 percent of China's, Bloomberg said.