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The President of Hyundai Motor India Ltd, Mr BVR Subbu's lucid and outspoken analysis of the current state of India's auto-industry will have a sobering effect on the industry as a whole. According to him, the passenger car segment is just "chugging along" at a mere 12 per cent growth rate, contradicting the earlier euphoric projections of the marketing pundits in the field. Mr Subbu also says that further growth will depend entirely on the "broad spectrum economy". Translating this phrase into lay language, he probably wants two things to happen: One, purchasing power of the people should improve significantly and, two: There should be enough good roads for the cars to move about, that is, major investment in infrastructure.

Henry Ford, who introduced the "assembly line" for the mass manufacture of automobiles nine decades ago, realised early on that the purchasing power of his own workers had to improve before they could buy the cars they assembled and so, he doubled their wages overnight. It will be interesting to know how many of the workers in India's auto-industry own cars.

Mr Subbu also says that manufacturers have to "bring down costs dramatically" and for achieving this, the suppliers (component manufacturers, in particular) will have to cooperate.

The problem with the auto-industry worldwide, not excluding India, is one of excess capacity which will automatically bring down prices in a highly-competitive market. The car manufacturers will naturally pass the buck to their component-suppliers.

The law of the jungle — the survival of the fittest — will prevail in the industry in the years to come.

Kangayam R. Rangaswamy

Madison (US)

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