Car market | Indian Car Blog

Car Investments will see a rise in coming years
The auto industry has been witnessing growth like never before. Did you know that Daimler, Maruti Suzuki and M&M are set to lead an estimated $30-billion investment by car makers in the next four years? Wonder why? Simple; they want to do their best to meet the demand in the world’s second fastest-growing market after China.

Global auto majors experiencing a tranquilizing growth in existing markets are putting in lots of money too. They are looking at tapping the growing demand in India as investment spending and the government’s social programmes raise incomes in smaller cities and rural areas. The investments are being aimed at component suppliers too. Car makers are looking at expanding capacities by component suppliers.

“The Indian automobile industry is geared up to invest up to Rs 80,000 Crore in fresh capacity in the next four years,” said Vishnu Mathur, director-general at the industry lobby group SIAM. “The components industry will also invest $12 billion up to the end of the Automotive Mission Plan.”

Back in 2006, the Indian government had prepared the 10-year road map. This Automotive Mission Plan had the goal of making India an automobile hub. It was also aimed at raising the industry contribution from the current 5 per cent to 10 per cent of the gross domestic product, and providing additional employment to 25 million people.

We already see Indian auto sales setting records with increasing incomes, the low-interest auto loans and also new model launches like the Figo, Polo and Linea. Car sales rose 25 per cent last year to 19.5 Lakh, the fastest in 6 years.

We saw the car prices increasing. But in spite of that, passenger car sales surged 40 per cent in April. The stunning growth rate has been positively catalyzing the plans of several auto makers for India. A few experts expect higher interest rates coming in to reduce the demand for cars. Let’s wait and see what happens.

Daimler India plans to invest Rs 4,400 Crore by 2015 to make light and heavy trucks at its 160-hectare plant in Oragadam, near Chennai. Tata Motors, maker of world’s cheapest Nano cars, plans to invest around Rs 8,000 Crore. Toyota is planning a Rs 3,200 Crore second plant at its Bidadi complex in Karnataka to make the Etios sedan and hatchback. Ashok Leyland-Nissan is also planning new factories. M&M and its subsidiaries will invest Rs 5,000 Crore by 2013.

Experts say that the Indian car manufacturing capacity is set to rise to 57 Lakh units by 2015 and the industry’s growth momentum will continue at least 10-15 per cent compounded annual growth rate with the capacity build-up not just for domestic but export growth too. Some expect higher interest rates in coming months to reduce the demand for automobiles.

Maruti already reached its zenith of producing 1 million units a year and is now going to invest Rs 1,700 Crore in a new plant aimed at producing 250,000 units by early 2011. Maruti Suzuki also exports to other markets. Looking at the current demand for Maruti Suzuki cars, nobody is sure if the new investments are still big enough to meet the needs. The car maker may have to think again. Half the cars sold in India wear the Maruti Suzuki badge. Cars that used to be delivered in a day-or-two till recently now have waiting periods even running for months.

We see the Indian car market expanding by the day and with so many options, buyers are getting picky. Everybody would like to own a Porsche car or an Audi or may be even a Mercedes Benz. It also depends on one’s spending power. Not everyone can afford a Mercedes Benz. People, therefore, buy premium sedans like the Toyota Camry or Honda Accord.

Currently, market trends are changing and we can have a BMW at the Camry price. Take for example the Corporate Edition of the BMW 3 series. This BMW car sure offers value for money.

BMW 3 series corporate edition

It was earlier conceived as a slightly stripped-down variant suitable for fleet buyers or companies in India. It was for those buyers who handed keys to a driver. They did not want the top notch features. The buyers just wanted the brand and power of owning a BMW. The attractive 320d Corporate Edition was priced at an attractive Rs 24.4 Lakh only while the regular 320d Highline was priced Rs 31 Lakh. Both cars were strapped with the 177 bhp engine and six-speed automatic transmission. What a deal that can be!

That was about fleet buyers. But slowly sales grew and individual buyers too wanted the model. We now have the Corporate Edition for individual buyers too. The demand has been so great that BMW is currently facing some back orders. The sales figures in two months have crossed 300. In spite of all this, Mercedes grabbed the numero uno position from last year’s winner, BMW. Everything is part of game.

Not just BMW. We have other luxury cars too being sold for less. Volkswagen has re-launched the Passat with a 157 bhp, 1.8 TSI petrol engine and manual transmission at Rs 19.2 Lakh. Competition for BMW, ah! If not, with a BMW available for Rs 24 Lakh, why would anyone buy a Volkswagen Passat at the same price? The Rs 5 Lakh plunge from its earlier diesel engine and automatic transmission version still gets you most of the ease and comfort, and the car looks just as splendid and grand with its chrome-enhanced appearance.

Mercedes-C-Class-executive edition

Now we also know why people stress on having a premium hatch and not just any hatchback at dealerships. Those who were satisfied with MUVs earlier now want them with plush interiors. More than plush interiors, it is the brand. That is the emerging trend today.

The BMW strategy has now forced Mercedes Benz to work out a similar proposition with its new “Executive” variant C-Class sedan. Right now, the car maker insists that it would be just for the corporate and fleet sales. However, individual sales are on the cards given the irresistible demand from buyers. Mercedes too has tried something out of the box. We had 115 Mercedes sold on a single day in a single city. Audi’s basic variant of its A4 model will also be in the market by June.

Other auto makers too have begun thinking. Honda, Toyota and Nissan, and even Skoda are thinking of reducing prices. The Skoda Superb, in fact, also has a cheaper, manual version at Rs 18.28 Lakh with pretty much the same features as the Volkswagen Passat.

2010 new_vw_Passat

The Cruze was launched by Chevrolet at a much lesser price than the competition. Then, we also have the Toyota Corolla Altis and the cheaper Volkswagen Jetta, priced aggressively. Future models that plan to step into India may face some danger. Ford with its Focus, Renault with its Fluence and Tata Motors with its Prima concept will also have to consider a lower entry price point. These cars will grace the Indian roads by next year. It is buyers’ market in India. The options are immense, the luxury and performance options are aplenty, and the prices are more attractive than ever before. These will only get better.