India's Booming Car Market Attracts Automakers

Anjana Pasricha
Voice of America
May 29, 2005

Attracted by its growing economy, foreign automakers are pouring into India. The country is poised to become one of Asia's largest car markets.

Suzuki Motor Corporation launched a new compact car in India recently, in a bid to ward off competition from other companies, Indian and foreign, that have entered the market in recent years.

Suzuki sells its cars in India through the Maruti Company, in which it owns a 55 percent stake. Maruti's compact cars have dominated the Indian car market for the last two decades.

But now Maruti is facing serious competition. Vehicles from Korean, Japanese and American auto companies are frequently seen on Indian roads.

And the list of new models will soon grow longer. Yogendra Pratap, executive editor of Overdrive, India's popular auto magazine, says that, in the coming months, Mercedes, BMW, Audi and other luxury carmakers will enter the Indian market.

"All the automotive companies are very hot on the market; they have already established a presence here. And the ones that had missed out are testing the ground. They [are] all hoping that [India] will turn out to be one of the largest markets in the world," he said.

The auto industry is growing at about 20 percent annually, and analysts expect that India will add at least one million cars a year for the next three years.

While the luxury cars will attract some well-off buyers, small and compact cars are still expected to predominate in a country where the per capita income is now about $500 a year.

The soaring growth in the auto industry is being fueled by rising incomes, a boom in consumer spending and cheap loans. Mr. Pratap says many of the new customers are young people working in thriving sectors of the economy, such as software.

"Earlier, buying a car would be once in a lifetime thing, and it's all changed now to younger people buying cars, and they [are] buying cars over and over again," said Mr. Pratap.

And the auto industry is likely to grow for years to come. Only eight Indians in a 1,000 own a car, compared to 450 car owners per 1,000 in developed markets.

Along with the growth in car sales, India is also playing a larger role in auto design and manufacturing. Indian engineers worked on the design of the Swift, the new Suzuki car, and more than 85 percent of the models sold in India are manufactured in India.