The global auto industry is setting the stage for rapid growth over the next decade ruled by automakers and suppliers from six major markets - China, India, Japan, Korea, Western Europe and the U.S.
India is expected to grow into one of the auto industry’s superpowers during the next decade, according to a new report. The automotive industry in India is one of the largest in the world and one of the fastest growing globally. The majority of India's car manufacturing industry is based around three clusters in the south, west and north and categorized into passenger cars, two-wheelers, commercial vehicles and three-wheelers, with two-wheelers dominating the market.

India has already generated a name for itself in this industry catering to the changing needs of the Indian consumer and through various innovations. It reportedly stands as the second largest manufacturer of motorcycles in the world. In terms of passenger car and commercial vehicle manufacturing, India has taken its place as the seventh largest overall. There is a consistent growth of between 25 and 30 percent annually. Even India’s automobile exports are currently climbing to such high levels.

A few of the top players in the Indian automobile industry include Maruti Suzuki, Tata Motors, Mahindra and Mahindra, Hyundai Motors, Hero Honda and Hindustan Motors in addition to a number of new entrants.

Reportedly, India's strong engineering base and expertise in the manufacturing of low-cost, fuel-efficient cars has resulted in the expansion of manufacturing facilities of several automobile companies like Hyundai Motors, Nissan, Toyota, Volkswagen and Suzuki. According to a recent report by Rothschild, the investment bank, India is set to become the third largest automotive maker in the world by 2015. Ernst & Young also has reported that overseas investment in India rose for the first time in three years in 2011.

The Tata Motors Group, India's largest automobile company, with consolidated revenues of $US27 billion in 2010-11, reported its global wholesales, including Jaguar Land Rover, at 119,799 units in January of 2012, higher by 21 percent over January 2011. Cumulative sales for the fiscal were 985,260, higher by 13 percent compared to the corresponding period in 2010-11.

Automakers around the world are gradually shifting their production facilities from high-cost regions such as North America and the European Union to lower-cost regions such as China, India and South America. This is also coupled with the shift in auto market consumer preferences towards hi-tech, fuel-efficient, environment-friendly vehicles, such as small cars. India is currently meeting up to the demand of being a cost-friendly and demand-driven market which is encouraging automakers to shift their locations there.

The Asian countries, especially China and India, are expected to account for 40 percent of growth in the auto industry over the next five to seven years. Global Insight, a U.S. based provider of economic and financial information reported in its study that India can bring about 14.7 percent of growth by 2013.

Mercedes Benz said in a recent release that it is planning on investing $US71 million at their plant in Pune, India and will also be launching 5 new compact premium cars in the country within the next two years. Mercedes Benz has already invested $US130 million in India and this additional $US70 million, will take the total investment to $US200 millon. Deiter Zetsche, Chairman, Management Board, Daimler AG, said, "India is an important growth market for us. We see high demand for our A and B Class segments in India. We plan to enlarge our dealer network and ramp up production capacities."

Matthias Luhrs, Chairman at Mercedes Benz India, was quoted as saying, "It is important to start local production for A and B Class. We hope to double our volumes with these models."

On the other hand, BMW has gained hugely, as far as sales are concerned, by launching its X1 compact SUV. Small cars are catching on in the Indian auto industry, and by launching more small cars in India, Mercedes Benz believes that it can double its sales there by 2020.

Small cars make up 70 percent of the domestic market, and although Tata and Mahindra provide strong local competition, foreigners are dominant. According to Ernst & Young, foreign direct investment (FDI) into the Indian automotive industry has increased by 48 percent to $US7.4 billion in 2011 and Suzuki alone has a 45 percent share.

Even the Swedish car manufacturer Volvo looks at India as a long term strategic market and plans to introduce more vehicles in luxury car segment in order to get a grip of a bigger share in this market. Volvo plans to gain a 15 percent share in this segment by selling over 20,000 units per year by the end of the decade. The car maker also has plans to launch a new model in India during the first quarter of next year, as it aims to become one of the top three players in India.

With no caps on FDI, new entrants are spurring competition. And in contrast to recent policies on retail, state governments have been welcoming. Automobile manufacturing clusters are being created in the south and west of India, where states such as Tamil Nadu and Gujarat offer cheap land to attract investment.

But it's not just the domestic market that is fuelling growth. Exports already make up 15 percent of output, and many firms have ambitions to develop their international angles further. Hyundai uses India as the global source point of all their small cars. Last year it exported 247,000 cars from India -- almost double the 2007 figure. Ford is stepping up export of Indian cars to over 50 countries. And Toyota says it plans to export cars to South Africa in March 2012, the first time it will ship Indian-made cars overseas.

As the SUV market continues to expand, this could encourage more carmakers to move their production or assembly to India. Ford recently revealed its plan that it would spend $US142 million on its plant in the southern Indian city of Chennai to begin manufacture of a new global SUV planned first for the domestic market, and subsequently to be built for export. Mahindra said its new Ssangyong SUVs launched in January 2012 would be assembled in India, avoiding high tariffs. Jaguar Land Rover, owned by Tata Motors, already assembles some of its luxury SUV models at its Indian plants. Carmakers also see SUV models improving customer perception of their entire vehicle range, and even complementing their small-car offerings in increasingly brand-conscious India.

"Entering into the SUV space increases brand image, it makes you a more respected and stronger player here in India," said H.W. Park, chief executive officer of Hyundai India, which recently launched a concept vehicle called the MPV.

In a new study, “India Automotive 2020: The Next Giant from Asia,” it was noted that the vast sub-continental market had already surpassed France, the United Kingdom and Italy to become the sixth-largest automotive market in the world in 2010. More than 2.7 million light vehicles were sold in India in 2010, up from just 700,000 a decade earlier.

The report also projected that India’s automotive volume will grow to 11 million units by 2020, positioning the nation of 1.2 billion just behind China, which has projected annual sales of 35 million units in 2020, and the U.S., where light vehicles sales are projected to reach 17.4 million.

This whole momentum in the Indian auto market is believed to have been driven by a more open and market-driven economy, an powerful and less risk-averse work force, and then further added to with more consumer-driven culture and an craze towards small car production.

While India has certainly made significant progress in building its automotive industry, the country still faces various other challenges that could affect it from reaching its future potential. For example, for India to build vehicles of high quality and also quantity, in particular for export, it needs to focus more on improving its components industry as well.

With regard to the standing of the luxury car market, research indicates that it is expected to witness strong growth with a rising number of foreign players planning expansions in India. It is no doubt currently being identified as a big automobile trade mart. Recognizing this, Japanese, European, Korean, French, Italian and American automobile companies are all in the process of setting either their manufacturing base in India or have joined hands with Indian automotive firms to launch new products in the Indian market. Companies like Toyota, Renault, Nissan, Fiat, Kawasaki, Honda, and Cummins are examples of industry forces who have joined this list.

Concurrently, Indian companies are also trying to acquire foreign automobile companies to strengthen their presence in the global market. Recently there was the acquisition of Jaguar-Land Rover by Tata Motors and Mahindra & Mahindra’s acquisition of three Italian companies - G R Grafica Ricerca, Metalcastello and Engines Engineering.

Currently, in India, the southern cluster near Chennai is reportedly the biggest manufacturing region with 35 percent of the revenue share. Chennai is often referred to as the "Detroit of India", as the operations of Ford, Hyundai, Renault and Nissan are headquartered in the city, and BMW has its assembly plant on the outskirts. Chennai accounts for 60 percent of the country's automotive exports. Haryana in North accounts for 32 percent, which includes Gurgaon and Manesar as the prime hub where the country's largest car manufacturer, Maruti Suzuki, is based. The Chakan corridor near Pune, Maharashtra in the west takes represents 33 percent of the manufacturing market. Companies like General Motors, Volkswagen, Skoda, Mahindra and Mahindra, Tata Motors, Mercedes Benz, Land Rover, Fiat and Force Motors have their assembly plants in these areas.

Aurangabad is yet another area where companies like Audi, Skoda and Volkswagen have their Indian manufacturing base. In Gujarat, General Motors has its manufacturing facility in Halol and Tata Nano at Sanand. Ford, Maruti Suzuki and Peugeot-Citroen plants are also set to come up in Gujarat. Kolkatta is yet another noteworthy area in the eastern part with its Hindustan Motors. Honda has its unit in Noida, NCR of Delhi and Toyota has its automotive manufacturing unit in Bangalore.

Car lovers across the country are hoping to see increasingly better times in their near future. Many world-class car manufacturers are targeting India as the hottest destination. This has magnified a range of options for car loving people in India. India definitely has a good chance to excel and reach the top of this industry in the years to come.