The growth of the Indian middle class along with the growth of the economy over the past few years has attracted global auto majors to the Indian market. Moreover, India provides trained manpower at competitive costs making India a favoured global manufacturing hub. The attractiveness of the Indian markets on one hand and the stagnation of the auto sector in markets such as Europe, US and Japan on the other have resulted in shifting of new capacities and flow of capital to the Indian automobile industry.

The midas touch of India is clearly visible on the financials of global auto majors. Be it Japanese auto majors Suzuki and Honda, or Korean car giant Hyundai, all are increasingly banking on their Indian operations for adding weight to their businesses as numbers stay uncertain in developed markets due to economic recession and slowdown.

Hyundai’s Indian subsidiary contributes between 15 per cent and 20 per cent to Hyundai's global turnover.

According to the International Yearbook of Industrial Statistics 2008 released by United Nations Industrial Development Organisation (UNIDO), India ranks 12th in the list of the world’s top 15 automakers.

Moreover, according to a new study released by global consultancy firm Deloitte, at least one Indian company will be among the top six carmakers that would dominate the global auto industry by 2020. According to the study, the car industry would see a massive capacity building in low-cost locations like India and China as manufacturers shift base from developed regions.

Production

Although the sector was hit by economic slowdown, overall production (passenger vehicles, commercial vehicles, two wheelers and three wheelers) increased from 10.85 million vehicles in 2007-08 to 11.17 million vehicles in 2008-09. Passenger vehicles increased marginally from 1.77 million to 1.83 million while two-wheelers increased from 8.02 million to 8.41 million.

In recent times, India has emerged as one of the favourite investment destinations for automotive manufacturers.

• Japanese major Nissan has decided to shift the entire production of its small car, Micra, from the UK to India. After production of the Micra begins here, Nissan plans to manufacture four more models in India, involving a total investment of over US$ 412.2 million.
• Toyota Motors (TMC) plans to utilise the proposed Indo-Thai free trade agreement (FTA) to make India a hub for small cars to be exported to its global markets. Toyota has earmarked US$ 657.1 million for 2008-11 to set up a second plant in Bangalore to make 200,000 cars from the current 80,000 units. The company is also keen to set up a transmission and engine unit at the second plant.
• Suzuki Motorcycle India (SMIPL), a wholly-owned subsidiary of Japanese auto major Suzuki Motor Corporation, plans to double production capacity of its two-wheelers to 300,000 units by the end of the current fiscal year. The company will invest Rs 125 crore (US$ 26.77 million).
• Ford Motor Company is investing US$ 500 million on transforming its India business into a volume manufacturing and export hub and a regional centre of excellence for small car development and production.
• Volkswagen has set a target to localise production in India to about 80 per cent in 2-3 years from the current levels of almost 50 per cent as it seeks to offer cars at more competitive prices.

Domestic Market

In spite of global economic slowdown, there was a marginal increase in the number of vehicles sold in 2008-09 as compared to 2007-08. Total number of vehicles sold including passenger vehicles, commercial vehicles, two-wheelers and three-wheelers in 2008-09 was 9.72 million as compared to 9.65 million in 2007-08.