BOMBAY, India — India has emerged as the sales leader in the smallest category of cars, overtaking Japan as declining sales in Western markets redraws the global map of the auto industry faster than many expected.
It’s well known that China will overtake the United States as the world’s largest car market for 2009, and also overtook Japan as the world’s No. 1 producer of the most basic cars in 2007.
Less noticed is the fact that India will top Japan for the first time in sales of these super-compact cars, although Japan is still ahead in overall car sales by a wide margin.
Automakers like Ford, Nissan, Volkswagen, General Motors, and China’s Shanghai Automotive Industries Corp. are pouring hundreds of millions of dollars into India, hoping to capture a piece of the growing market for tiny, inexpensive passenger cars. As they do so, they are quietly transforming India into an export hub for small car manufacturing.
“From a small car production hub perspective, India is right in the center of the radar,” said Michael Boneham, head of Ford India, which plans to roll out its first India-made compact, the Figo, in the first quarter of next year.
More than 892,000 basic cars - the smallest category of passenger vehicle - will have been sold in India this year. That’s up 14 percent from 2008 and surpassingthe 708,034 forecast for Japan, according to J.D. Power and Associates, a U.S. firm that tracks vehicle sales and quality.
Unlike China, Russia and Brazil, where consumers buy a range of cars, from basic to luxury, Indians overwhelmingly prefer very small, inexpensive cars.
Nearly half of all cars sold in India - like Maruti Suzuki’s Swift, GM’s Spark and Hyundai’s Santro - fall into the basic category. These are cars so small they’re almost nonexistent in the U.S. market. Think of them as subsub-compacts.
Drive down the streets of a typical Indian megacity, where the bulk of car buyers live, and it’s easy to see why. Millimeters count. Drivers squeeze through any remotely plausible opening on the clogged streets, grazing handcarts, bicycles, cars, pedestrians and livestock in the process.
And price matters. Executives say most Indians won’t spend more than $8,000 on a car.
To manufacture these low-margin vehicles profitably, carmakers must localize production to cut costs and increase volumes.
For now, they can’t sell enough cars in India alone to make the numbers work. The market is too consolidated - Maruti Suzuki sells half of all cars in India - and too small. India ranks 10th globally for total car and truck sales. J.D. Power expects Indian car and truck sales to hit 1.9 million this year, a far cry from Chi-
Business, Pages 56 on 12/27/2009