Car Industry in India for Next Generation

Not very long ago, the only cars that were available in India were the Ambassador and the Premier Padmini. The Ambassador is a replica of the Morris Oxford – an old British car, while the Premier Padmini was a Fiat 1100 assembled in India.

All that was in pre-liberalisation India, which existed before 1991, when the first liberalization measures were announced. Earlier, the production of the Maruti Suzuki 800 hatchback car in 1983 – a joint venture between Government of India and Suzuki Motors of Japan, paved the way for a renaissance in the Indian automobile sector.

Post liberalization, India is on every car manufacturer’s map. The reasons are not hard to notice. Currently, India is the second largest two-wheeler market and the fourth largest commercial vehicle market in the world. Not only it is the eleventh largest passenger car market globally, but it is also expected to be the seventh largest by 2016.

Post liberalization, many foreign manufacturers have lined up and have setup base in India. Other domestic manufacturers have also improved production levels and are in the race for producing better models as well.

Some of the car manufacturers who have set up base in India are Audi, BMW, Chevrolet Fiat, Ford, Honda, Hyundai, Mahindra, Maruti, Mercedes, Mitsubishi, Skoda, Suzuki, Tata, Toyota, Volkswagen, and Volvo. India’s economic growth is booming currently. These manufacturers have set up manufacturing facilities in India, or are importing cars and spares to meet the demands of this growing market.

For example, companies like Ford are planning to make India a regional hub for exports of both small cars as well as engines. According to Mr. Michael Boneham, President Designate for Ford India, the company plans to export the small car and the engine for markets abroad. He indicated that one of the markets would be chiefly Ford Asia Pacific Region while other markets are under consideration presently.

There are many reasons for the impressive growth of the Indian car industry. Some of these are comparatively easy availability of vehicle finance, attractive rates of interest, and convenient installments.

Competition has forced manufacturers to be innovative and responsive to customer demands and needs. Now that India is not alien to quality and perfection, customer expectations have soared to higher levels. Depending upon customers needs, four segments - small, midsize, premium and sports utility vehicles currently represent the car market in the country.

A niche concept cars segment is also emerging wherein reputed re-modellers like DC Chhabria cater to individuals who wish to remodel their vehicles to create concept cars for their use. Contrarily, a segment is also emerging comprising of people who wish to upgrade to cars from two wheelers. Tata already is in the process of launching the small car Nano to suit this segment’s needs. Many other car manufacturers such as Bajaj Auto are also following suit and are in the process of coming up with their specific versions to cater to this segment.

Currently, there is high demand for cars across all these segments. With the growing economy, people left with a lot of disposable income spend it towards meeting their mobility needs such as cars. Banks and other financial institutions have an assortment of vehicle loan schemes with attractive rates of interest and convenient installments.

These schemes encourage people to go in for loans to purchase cars of their choice. Additionally, a convenient union budget in the current financial year (2008-09) has worked in favour of the automobile sector, which has seen an uptrend in sales across various segments.

The latest trend of new cars on Indian road has led to the emergence of an entirely new market in second hand cars too. Many entrepreneurial and professional dealerships have sprung up in many cities in India dealing in second hand cars.

The growth of the second hand market is not surprising. The new car market has grown at an incredible pace in India. As mentioned, loans are easily available in the country for purchase of new cars. Moreover, many people are now upwardly mobile. Therefore, people who were earlier part of the small car segment now have moved over to the premium car segment, and those in this segment have moved over to the luxury car segment.

Therefore, the trend is to get rid of the cars that defined them as part of the earlier segments and buy cars that identify them with the newer segments. Apparently, the desire for newer cars and models is yet another reason. People get attracted by newer models, which prompt them to acquire them. This makes them sell their current cars for reasonable resale values.

This phenomenon benefits those who want to buy cars, but are not able to afford new ones. Many companies like Maruti Suzuki (Maruti True Value) have also established resale showrooms where people can purchase genuine, good condition, second hand cars at reasonable prices.

With the emergence of favorable trends in the automobile sector in India, what remains to be seen is how these developments will go a long way to transform the mobility needs of the ordinary Indian.