Drive in Growth

Ratan Tata poses with the iconic Jaguar

Mercedes Benz Class

BMW brings the Mini Cooper  to India

Indians bought roughly 2.5 million cars in calendar year 2011, worth some Rs 150,000 crore or $ 30 billion. Another half a million were exported during the year.

In 2012, if car loan rates were to go down, this market could grow by 10-12 per cent. If rates remain static and annual economic growth drops below 7.5 per cent, analysts say the car market would still grow by 5-7 per cent.
Of course that's not much compared to the 30 per cent growth in sales which automakers clocked in 2010, when interest rates were still low and the economy was booming. Or for that matter the double digit annual car sales growth through the 2000s.
No wonder every auto-maker is scrambling to be at the Delhi Auto Expo now on at the sprawling Pragati Maidan (Progress Gardens) show-launching some 60 new glitzy models.
Japanese shipping line NYK, which among other things specialises in bulk transportation of cars, estimates India will  make about 5 million cars by 2015. It bases its projections on plant capacity being set up by various automobile giants.

Almost all cars and sold in India are `made in India’. Typically, as General Motors’ India chief Lowell Paddock, says most cars have between 70-98 per cent Indian components. The more `Indian’ the car is, the cheaper it is. Partly because it’s cheap to manufacture in India, partly because the tax structure is skewed in favour of domestic manufacture.
That’s a result of shrewd planning on the part of Indian policymakers who in the 1990s sought to lure global automakers to India with the bait of its huge market, but cleverly brought in a tax structure which discouraged imports of built up and knocked down car kits. What one industry secretary in those days had told me was “we don’t want to see screwdriver assemblies in India. We want full scale car manufacturing plants.” India has had full scale car plants since the 1950s. But without technological innovations, they kept churning out ‘50s and ‘60s era cars till Maruti, a joint venture with Japan’s Suzuki Motors brought out the M800, a simple 4-seater mini, in 1984.
The auto policy crafted in the 1990s, brought in global auto majors starting with the now defunct Daewoo to General Motors, Honda, Mercedes Benz and Audi and forced the global biggies to make huge investments through the 1990s and 2000s to set up factories, develop Indian vendors who could make quality spare parts. Most of them have still kept the most important or key elements of their cars, a `secret’ from their Indian engineers. For instance, Maruti-Suzuki, India’s largest carmaker, just wouldn’t trust Indians with gear box technology and had a running battle with the industry ministry on this issue through the 1990s.
Tatas and Mahindras have however broken that tech barrier by simply buying their way in. Tatas, who used to make horrible cars like the Indica, with gears which felt like they had been lifted out of trucks, have bought Jaguar-Land Rover (JLR) and now have access to some of the best car designs and engineering secrets in the world. Ratan Tata today told reporters he would be manufacturing the iconic JLR cars in the country. Besides, pepping up the civilian car market, versions of the Land Rover, an all terrain vehicle, could well try to be a replacement for Jonga, a 1960s design jeep-type vehicle, which the Indian Army still drives around in.   
Mahindras have bought Korean car-maker Ssangyong. Its cars are not considered great in terms of design but are grudgingly accepted as value for money, robust vehicles. BBC’s Top Gear says “This is not some Korean epiphany, it’s a bunch of very badly designed cars indeed. They’re cheap, but if you buy one, so are you,”   but also adds “This much SUV at these prices? Too good to be true? Well, yes, in the sense that it all feels cheap and a bit nasty, but you can’t escape the allure of a poor man’s M-Class.” Mahindras are now trying to buy up Saab, a Swedish-Dutch automaker, which at one time was owned by General Motors.
But before Indians can start bringing out the champagne in celebration, they should also note that the Chinese have taken a similar route to building up their own automotive industry and produce a mind boggling 17 cars million a year. The Brazilians who make about 3.5 million cars annually, are already ahead of the Indians, in many respects. My own guess is that by 2025, the battle royale in the autoworld will  be between Indo-European and Japanese-Indian firms on the one hand, Sino-American and Sino-Euoropean firms on the other and US-Latino firms at the third corner of the global car Triad.