Indian Car Market: A Tough Period Ahead?

Indian car market is experiencing huge growth this year and it is really encouraging for the car makers who are now planning to get the best out of surging economy of the country. July sales of Indian car market shows 38% year-on-year growth as the total sales unit rose to 158,764.

Most of the leading car makers like Maruti and Tata Motors have seen excellent growth in sales. However, there are some concerns over the sustainability of this growth.

Alike many other car markets across the world, Indian car market was also hurt by the economic recession couple of years back as Indian middle class suffered from the credit crunch. However, economic recession has got over and the private finance companies are much more active now.

Moreover, India’s current economic growth is 8.5% which also contributed to surging demand. However, it seems car makers would find it pretty hard to continue the current growth as Indian government is planning to increase the interest rates of credit.

Another problem that manufacturers are facing is lack of production materials. Demand is very high, but still many car makers can not operate at full capacity due to component shortage. So, it could also be a constraint in keeping up the growth rate.

BMW Cars Flourishing in Indian Market

You know that BMW is one of the leading names in luxury car. India is not a rich country and perhaps BMW officials at first did not expect too much from this market. However, because of the continuous economic growth, there is an emerging rich class who easily can afford BMW cars and that is why the market is flourishing a lot here. In fact, the officials of that company are very happy and they are going to invest heavily in India. They are also going to increase their work force in the next few years.

What is interesting to me is that Indian economy suffered a lot in 2009 from economic recession. Still, BMW officials are optimistic about their great potential and that is why they are taking this market seriously. Well, India has now the fastest growing automaker in the world and I think that BMB. 

Honda has no Plan to Launch a Mini Car in India

Earlier, it was expected that Japanese automaker Honda would also jump into the recent trend of making low-cost minicar for the Indian market in order to capitalize on the price-sensitive Indian market. However, Honda has now revealed that it would rather launch a small car in India which would cost less than its Jazz passenger car.

Tata started the trend of launching low-cost car in India when it came up with its Nano model which is available for a starting price of Rs. 1,15,000 (Indian rupee). Car enthusiasts in India jumped on the model in a recession hit economy. Renault-Nissan alliance, General Motors and Hyundai Motor have all announced to bring out their own mini car in India. In fact, Honda was also initially keen to get into market, but has now come back from that plan. Honda Siel Cars India Ltd, the Indian unit of parent company Honda Motor Co., is now determined to produce a small car which would cost car enthusiasts less than Jazz hatchback car.

So, it seems that Honda does not want to target the primary level of the market. Rather, it aims to target the mid-range market. Well, Honda may think that economic recession is going to be over and Indian middle class families would not mind spending 3-4 lakh for a car that would provide much more features than what Nano gives. Moreover, with many companies entering into the low-cost segment, there could be huge competition. So, Honda now wants to play it safe by focusing more on the mid-range segment.

Carlos Ghosn: Ultra-Low Cost Car in India not in 2011

Tata Nano rocked the Indian market as it became the cheapest car in the world. Nissan and Renault were also eager to introduce a $2500 car in India by 2011. It was announced earlier but now, it is certain that this wont happen and the ultra-low cost car may hit the Indian road in 2012. The problem is with their Indian partner.

Bloomberg reported:

Renault, Nissan and Bajaj announced in May last year they formed a joint venture to build a car that will be priced about $2,500 and go on sale in 2011. The Indian motorcycle maker would own 50 percent of the venture with the rest equally split between the two carmakers, the companies said at the time.

“You have to try and learn from your trials and then correct your course and make sure you have the right product and the right approach.” Ghosn said.

It seems that no news is good news for Carlos Ghosn and his company in India right now. He understands this matter and he is determined to try harder in this market. It is a very rapidly growing market and most large auto makers are giving a lot of efforts to get some market share. 

PSA Peugeot-Citroen is Going to Set up a Production Facility in India

PSA Peugeot-Citroen, the second biggest car maker of Europe, now wants to enter into the Indian car market, setting up a manufacturing plant in the country. Well-known for strong, stylish, small and mid-size passenger car as well as motorcycle, Peugeot-Citroen along with IMIRB, a market research firm, conducted a market research in India last October. Having realized the market potential, the French automaker is looking to launch a production facility in India and they are already in search of a suitable location in the Indian state of Tamil Nadu and Andhra Pradesh. They have recently held talks with government officials of the two states and Automotive Research Association of India in order to know the rules and regulations of getting the approval of setting up a manufacturing plant in India.

Peugeot-Citroen initially wants to enter into the Indian market with its hatchback 307 and sedan C5 models. However, the company has not revealed any time-frame of setting up the plant. India has one of the fastest growing car markets and the growth of the Indian car market has been accelerated by the increasing number of Indian middle class population over the last few years. No doubt, the French automaker is now looking to create new market for their products as the European auto industry is suffering from global economic recession. Moreover, setting up a plant in India would help Peugeot-Citroen cut their production cost and thus they will be more competitive in European market too. So, this is a good initiative taken by Peugeot-Citroen in this time of global economic recession.

(This entry was first published in February 2009. Because of a technical problem, the entry had to be deleted and I am reposting again now.)