The Hindu Business Line : Passenger car market on a roll in 2006

In fact, car sales have grown by upwards of 20 per cent since the excise duty cuts (on compact cars) announced in the year's Union Budget. And not surprisingly compact cars have driven the bulk of the sales.

According to industry data, while total passenger car sales grew 22.6 per cent in the April-November period 2006, the compact car segment (which accounts for 80 per cent of total car sales) grew by 28.3 per cent to 4,71,508 units.

Needless to say momentum in sales was driven by the 8 per cent cut in excise duty to 16 per cent on compact cars.

Small Car

The momentum in the segment caught the attention of both domestic and foreign carmakers alike, who announced big ticket investments towards setting up manufacturing facilities in India. Volkswagen, which announced its plan to set up a facility in India, indicated that it would be launching the small car Polo.

The company is investing Rs 2,400 crore for its manufacturing plant in Maharashtra, which is set to come up by 2009. Maruti Suzuki announced an Rs 9,000-crore investment for a new car plant, diesel engine plant and new product launches.

The company further said that it was developing a new compact car for both the export and domestic markets.

New Models

Further General Motors announced its decision to set up a facility in Maharashtra to manufacture the small car Spark — the new avtaar of Daewoo Matiz.

Honda too announced its intention to set up a second plant in India to make a small car, while Hyundai Motor India is expanding its facilities in the country to launch new models, including one positioned between the Santro and the Getz.

However, the most significant announcement was the expansion of Mahindra & Mahindra's tie-up with Renault. M&M and Renault have announced plans to set up a greenfield car manufacturing plant in India, which can also be utilised by Renault's sister company, Nissan.