Nissan Joining in the India Auto Party

India’s auto market is booming, in part because new regulations are coming in later this year calling for stiffer emission standards on new cars which consumers fear will increase costs and reduce performance but also because India is rapidly becoming an export hub for the rest of Asia and Africa.

Maruti Sazuki the country’s largest producer with over half the market share saw its domestic sales rise 21% in January to 81,000 vehicles, while its exports rose three-fold to more than 14,500. According to the Financial Times this brought total sales to 95,650, its best ever sales performance in a single month and up 33% over January last year.

The Indian unit of Hyundai Motors which ties with Tata Motors as India’s second-largest passenger car maker reported a 42% rise in its January sales to 52,600 units, with increases of 41% in its domestic sales and of 43% in its exports. The 4WD SUV maker Mahindra and Mahindra on Monday reported a 71% year-on-year rise in sales in January to more than 30,000 vehicles.

Everyone and his brother appears to be piling into the market. Nissan is the latest to announce a major expansion on the back of an earlier decision to move production of their small car the Micra from the UK to India. They are to start production of their first made-in-India car near Chennai in May. The Micra will probably be made from kits and is intended for sale in Europe, but the new model will be 85% local content, a trend the company has suggested it will follow for its larger models in the future. At present, Nissan Teana and X-trail’s are imported as complete units but the plan is to bring in kits and assemble them at the Chennai works. This would significantly reduce the import tax and make both models more competitive in the local market. And here’s the encouraging trend, although India has had a stated aim of becoming an export hub for Asian car production, an aim the recent export figures suggests is becoming a reality, the fact remains much of the Indian auto industry’s growth is from the domestic market. Nissan is planning to add 55 dealerships over the next two years to meet the growing domestic demand.

The strength of the domestic steel industry, earning strong profits even as overseas divisions are losing it, is testament to the strength of domestic manufacturing, of which automotive is an increasingly important part. As with China, India’s consumers are playing a large part in fueling domestic growth and profits for metals companies and manufacturers, with so many aspiring to middle class life styles it shouldn’t be a major challenge to maintain the momentum, inflation not withstanding.

–Stuart Burns

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