India as global player in auto sector

With my whole professional life in the auto sector, it’s really amazing to see India gradually but consistently approaching towards becoming a relevant global player in auto sector in the next decade. It’s been heartwarming to see the evolution. A country producing just 30-40,000 cars annually in early 1980s is producing 1.8 million cars now. And as estimated, by 2015 India will be a country producing 4-5 million passenger cars.

It all happened in four phases:

Post Maruti Phase
: Hindustan Motors in its plant near Calcutta and Premier Automobiles in Mumbai manufactured respectively Ambassador and Padmini.

Maruti with Suzuki: Maruti 800, the small car in collaboration of Suzuki of Japan appeared and became the darling of Indian middle class.

South Korean Entry
: South Korean auto manufacturers, Daewoo and Hyundai entered India with Santro and Matiz, and Tata Motors went for its own indigenously produced Indica that was unique and remains the most popular as private taxis even today.

Floodgate of Global Players: All the global players in auto business realized the potential size of India’s market and its growing middle class, and started entering India. It started with the two American biggies, General Motors and Ford and followed by the Europeans and Japanese auto manufacturers such as Mercedes, BMW, VW, Honda and Toyota. It all started with collaborations with the local manufacturers but pretty soon preferred to free it to go on its own.

Frugally Engineered Nano: With Nano launched at Auto Expo in January 2008, Tata Motors brought in that new surprise about which the whole of auto world was doubtful. Nano has demonstrated to the world the capabilities of Indian engineers and the excellent combination of frugal engineering with world-class research and development. Nano, the Rs 1lakh ($2,500) “People’s Car”, is the world’s cheapest car, a car for India’s millions and with potential for many millions globally, an example of how innovation in the auto industry is shifting from the West to the East. As pronounced by some in Business Week recently, ‘the impressive aspect of the Tata Nano is its potential as a platform for new products and new markets. Ratan Tata and his colleagues can hope to conquer market opportunities not just in India but worldwide.’

The existing manufacturers in the market are planning to add 0.9 million units to the 2.6 million units capacity of the passenger vehicle segment by 2012.

Most of the late entrants among the global automakers are setting up the manufacturing facilities and using the local auto components to be more competitive with local players. In next five years, Indian passenger car manufacturers will invest over Rs 70,000 crore, even by a very conservative estimate.

More interestingly, most of the global auto makers have already set up or are in process of setting up its design studios and R&D centres to develop cars not only for Indian market but also to use the facilities for its global products because of India’s superiority in talent and cost advantages.

Global automakers are also outsourcing the components from the Indian manufacturers for its facilities all over the world.
Taking advantage of the economic slowdown in West, Indian auto manufacturers are hiring from the US, Europe and Japan, mainly for technical and design-related jobs in good number, where local talent is inadequate and often untrained.

Carlos Ghosn, CEO, Renault and Nissan is sold out on India’s strength of frugal engineering and management. I don’t know if the younger MD of Bajaj Auto will finally go for launching its ultra cheap car. But many of the global players are ready to make India as a hub for manufacturing its small compact cars that will be more in demand with the focus on pollution control and saving of energy.

I wish some of IITs and IIMs, the institutes of national importance start giving manufacturing and its management its due importance to make India a leading manufacturing nation. And the auto industry may lead the game.

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