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Indian Auto In The Fast Lane

Indian Auto In The Fast Lane

January 29, 2010

After a stellar season for India’s auto giants, it could be just a few years before we see them on the world stage.

It’s been a spectacular season for the big auto giants in India. Take a glance at the quarterly numbers pouring in and you’ll know what I mean. The biggies Maruti Suzuki, M&M, Bajaj Auto and Hero Honda all seem to have shown rather impressive results with both quarterly and yearly profits soaring and sales picking up after what has undoubtedly been a tough year for the industry around the globe. Maruti’s profits have trebled and M&M saw its profits jump a whopping 848% year on year. Analysts say the festive season combined with a pickup in sentiment and the government’s stimulus efforts have paid off and low interest rates along with a spate of new launches by companies has kept the interest among consumers alive. In fact, they say the next year will be even better!

Testimony to this is the huge interest built up among global auto giants betting big on the Indian market. With Western economies still crawling out of a recession & domestic demand fragile, they have all planned a massive line up of new launches for 2010. From Nissan and Toyota to GM and Honda, automakers from across the globe are getting ready to unveil a slew of cheap compact cars for the first time Indian buyer, while producers in the high end, premium segment like Jaguar & Porsche are targeting the growing luxury market with SUVs and sports variants. Of course, Indian players like M&M, Maruti and Tata Motors too (after its 2009 launch of the iconic $2500 Tata Nano) are all set to make a splash this year with new models.

The broader consensus among experts seems to be that the auto industry is in for good times going forward, and India is well on its way to becoming a leading player on the world stage, both in terms of driving demand as well as leading innovation. The sector as a whole is poised to grow at 10-12% in 2010 and players like Nissan, Renault, Toyota, Honda, Mahindra & Mahindra, Tata Motors, Maruti Suzuki, General Motors, Ford, Volkswagen and Mercedes-Benz are among the several companies making huge investments in production capacities across the country. This could lead to India emerging as a center for automobile manufacturing and India’s apex automotive body SIAM says we will see 5 million jobs being created over the next 3 years alone.

But if global players are out there to service growing domestic demand, a latest report by KPMG says that Indian auto companies will be leading the global auto export market in the next 5 years. And that trend was visible in the quarterly numbers of players like Maruti whose results were buoyed by a strong export growth.

Of course, amidst all this euphoria there are immediate concerns like hardening interest rates, rising commodity prices and a roll back of the stimulus measures by the government, not to mention the tough emission norms which could hurt the sector in the short term. But at least for now, the good news definitely outweighs the bad!

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