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December 24, 2009

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Home » Business » Auto

India thinks small on cars for big return

INDIA has emerged as the leading market for small cars, overtaking Japan, as declining sales in Western markets coupled with robust growth in Asia redraws the global map of the auto industry faster than expected.

It's well known that China will overtake the United States as the world's largest car market this year.

Less noticed is the fact that India will top Japan for the first time in sales of super-compact cars. It overtook Japan as the world's No. 1 producer of basic cars in 2007.

Auto makers like Ford, Nissan, Volkswagen, General Motors, and Shanghai Automotive Industries Corp are pouring hundreds of millions of dollars into the country, hoping to capture a piece of the growing market for tiny, inexpensive passenger vehicles. 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 be sold in India this year, up 14 percent from last year and surpassing the 708,034 forecast for Japan, according to J.D. Power and Associates.

Unlike China, Russia and Brazil, where consumers buy a range of cars, from basic to luxury, Indians overwhelmingly prefer small, affordable cars.

Nearly half of all cars sold in India fall into the basic category. These are cars so small they're almost nonexistent in the US market.

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 US$8,000 on a car.


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