It has finally happened! Indians are buying cars like never before. According to the Society of Indian Automobile Manufacturers, (SIAM) sales of passenger cars in India have exceeded the magical one million mark putting India among a select group of prosperous countries where passenger cars sell in such high numbers. The exact sales figure (including exports) was 1.03 million for the year 2003.

Significantly while domestic car sales increased by 27.4 per cent to 696,207 units from 541,491 units the previous year, exports rose 56 per cent to 1,25, 327 units during this period. Also for the first time in history of the industry, vehicles worth more USD 1 billion were exported.

Most significantly, passenger car exports have nearly trebled in four years, from 28,122 units in 1998-99 to 71,653 vehicles in 2002-3. According to Jagdish Khattar president of Siam and managing director of Maruti Udyog Ltd, India's largest carmaker, exports are further expected to rise by 15 to per cent in the current fiscal.

Analysts say the news on the exports front is the most encouraging and by far the best thing to have happened to the Indian automobile industry. This is because as more and more Indian-made cars flood foreign shores the low quality image associated with Indian products will ultimately fade, encouraging more automobile companies to look at India as a manufacturing destination that can cater to world wide markets.

Nothing could be better in terms of foreign direct investment and employment. Till a few years ago a limited number of companies had actually set up substantial manufacturing facilities in India to cater exclusively to the domestic market. However, Hyundai Motor was the first global company to put its faith in Indian manufacturing to cater to global standards.

Hyundai India
In June last year B V R Subbu, president, Hyundai India, announced that the Indian company was going to become the global manufacturing hub of Hyundai's small car. He revealed that the company was likely to enter the European market as the Europeans had found that the manufacturing standards of Hyundai Motor India matched global standards. He said the US and Europe would be the global hubs for large and mid-sized cars, respectively, and India would be Hyundai's global production hub for small cars. Hyundai's plant at Irrungattukottai near Chennai is its only production centre outside South Korea. Its production capacity is being increased to 250,000 units a year from the earlier 150,000 units. Hyundai aims to emerge as world's top five carmakers by the end of the current decade. To achieve this, it has to sell 5 million cars a year globally, a 40 per cent increase from the 3 million units that it sells now. Hyundai plans to convert its Indian production base as the second largest mid-size car facility and set up a manufacturing facility in the US for large-size cars in the near future.

Ford India Ltd
Ford India Ltd, the Indian subsidiary of Ford Motor Company, commenced exports of automotive components to its plant in China last year. The company is exporting completely knocked down kits of the Ikon to South Africa, Mexico and Brazil. The components that will be exported from India to China include regulators, steering columns, horns, chassis components, hinges, brackets, hoses, gearshift knob and smaller metal parts. A total of 169 different parts will be exported, which in value terms works out to $400 to $500 worth of components a car.

With the export of components to China, Ford India expects its total exports during 2003 to be worth about Rs.300 crore. The company says it aims to source $120-160 million worth of auto components from Indian manufacturers over the next two years under its "India sourcing program."

Tata Motors
Tata Motors is focusing on exports to the point of almost neglecting the domestic market. Earlier this year, dealers reported that the company was so heavily focused on the exports market that it was unable to supply Indica petrol passenger cars to buyers in India. This was since most of the petrol vehicles manufactured at its Pune plant were being shipped to MG Rover, UK. Tata Motors manufactures and supplies Indica to MG Rover of UK and has a pact with its owner, Phoenix Venture Holdings which distributes SUV Safari and pick-up trucks in the UK and Irish markets. That's not all. A slew of multinationals including Volvo Motor, Renault from Europe, Toyota, Koyo Steering, Kawasaki Motors of Japan, and, Hyosung Motors of Korea, have made or are planning to make India their global manufacturing outsourcing hub, either for a whole product or for one or more critical components. Reportedly, 15 global car makers - including GM, DaimlerChrysler, Mercedes-Benz, Audi, Isuzu and Nissan - have set up outsourcing offices in the country, with a combined budget of approximately $1.5 billion.

SUVs
Mahindra & Mahindra is another automobile manufacturer that is focusing on the exports market. Its sports utility vehicle, Scorpio, received a good response at the Detroit Auto Show in 2003 for its design as well as for its affordable price tag. Similarly Maruti and Toyota Kirloskar are finding ready buyers for their Altos and Qualis's in a number of American, European and South East Asian countries. Last fiscal the Indian automobile industry grew by around 16.5 per cent in numbers and 24 per cent in value terms. At present India is not a big name in the global automobile market but as more and more companies turn to India to make it their sourcing and manufacturing hub it will not be long before India begins to rival China in the region The next few years will be important for the industry in terms of government policy. Rising cost of production overseas is bound to make many more MNCs turn to India. The right measures in terms of lowering of excise duties and implementation of VAT will help the industry to grow further.