India ranks just behind China with the world’s second largest population at over 1 billion people. Less than 1 percent of the population currently owns automobiles, which is a much smaller proportion than the rest of the Southeast Asia region. For example, the regional average of ownership is 16.45 percent. Nonetheless, sales of passenger vehicles in India have more than doubled since 2001 to over 1.5 million units.
India also has one of the fastest growing economies, and many U.S. companies view India as a potentially lucrative market. It is expected that the automotive industry will play an important role in helping the economy to continue this growth. Not only are domestic sales expected to grow dramatically, but India will play a significant role in the global automotive market. The world’s top manufacturers, General Motors, Ford, Toyota, Honda, and others, have a significant share of already established manufacturing bases. These manufacturers hope to not only capture an emerging market, but also to use these bases as export hubs to serve the region and the global market. As can be seen in the Table, exports of passenger vehicles have more than quadrupled since 2001.
In the last few years, the world automotive industry has changed its location preferences due to various reasons. Earlier, the automotive industry was largely confined to the triad – North America, Europe and Japan; however, with the emergence of some vibrant developing economies, like Brazil, India and China, the global automotive industry has been considering a different growth perspective, and has been relocating the operations. These growing developing economies has been evolving as the manufacturing hub, as also the newfound markets, for the global majors like Ford, General Motors,
Chrysler, Toyota, Honda, Nissan and BMW, who are competing to enhance their market share in these markets. Increasing growth in GDP and the growing disposable income has catapulted these emerging economies as market for automotives, while the low cost of operations and skills in design and R&D made them as destinations for investment and manufacturing operations.
The entry of global auto-majors into India has significantly altered the automobile-manufacturing scenario in the country. The changes in design and adaptation of international technologies have enabled the Indian automotive industry to compete globally, and thus are also exposed to global challenges. Alongside the challenges, the trend also presents a plethora of opportunities to Indian automotive industry, which needs to be capitalized, so as to emerge as a successful global player.