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ZOOMING AHEAD with expansion plans.

Sceptics among us may have felt that the Government's incentives for making the country a hub for export of small cars were just a lot of hot air. But the slew of announcements earlier this week by major automobile manufacturers is proof that the transition from rhetoric to reality is happening.

The explosive growth in the Indian car market in the last few years may not be sustained. But there are no indications that there will be a major slowdown either. So, while much of the demand for cars will come from the domestic market, manufacturers will also be able to find synergies and strengths in exports.

That will be a big change from the present, where much of the export is driven by the need to maintain higher capacity utilisation levels, to keep per car fixed costs low and to leverage the investments made. Auto majors have announced investments worth Rs 11,000 crore during the past nine months, much of which will be used to set up small car manufacturing facilities. Unlike in India, however, globally, small does not mean low-tech. So, before we can hope to leverage our low manufacturing cost advantage, the component industry will first have to become world-class, and quickly.

S. Muralidhar

More Stories on : Automobiles | Cars | The Big Deal

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