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.