Major Auto Makers Push Expansion Plans for India

Honda Motor Co. Ltd. CEO Takeo Fukui predicts India will be more important than China for the future of the global automotive industry.

“The growth rate is coming close to China's, and one factor in favor of India is that it is a democracy,” he says in a published report.

Ford Chairman Bill Ford at dealership grand opening in India.

Fukui cites the more harmonious relationship Japan has with India than with China as another reason Honda is placing so much importance on the Indian market.

The Society of Indian Automobile Manufacturers announced in September an ambitious Automotive Mission Plan, with a goal to raise automobile sales to $145 billion by 2016, requiring a $35 billion-$40 billion investment to achieve the goal, four times what has been invested over the last 16 years.

The majority of the investment is expected to come from the auto industry, Mahindra & Mahindra Ltd. Vice Chairman Anand Mahindra says.

Honda, along with fellow Japanese auto makers Nissan Motor Co. Ltd. and Suzuki Motor Corp., cranked up their commitment to the country this year, announcing expansion projects that are a nod to India’s ever-growing importance as a center of automotive expertise.

Nissan and Suzuki announced a wide-ranging pact to provide each other with products in different markets. One tenet of the agreement has Nissan utilizing manufacturing capacity at a plant owned by small-car maker Maruti Udyog Ltd., Suzuki’s Indian subsidiary.

Separately, Suzuki will build an A-segment car for Nissan in India, to be sold primarily in Europe, beginning in 2008.

Suzuki Chairman Osamu Suzuki says the auto maker and Maruti will invest in a new plant in Manesar, northern India, to supply 50,000 units annually of the small car to Nissan. The plant is set to commence production in late 2007.

Another Indian plant, with an investment from Nissan, also is in the works, he says, with an annual capacity of 250,000 units and requiring $551 million to build.

Honda is doubling capacity at its Honda Siel Cars India Ltd. subsidiary three years ahead of its previously announced timeline, to 100,000 units by the end of 2007. The auto maker last year increased capacity at the plant to 50,000 units.

Honda also is investigating a new small car for India that will place below its 1.5L City ZX sedan.

The volume of small-car announcements is not a surprise, considering the impact of rising fuel prices on most auto markets in 2006. The need for vehicles with increased fuel economy, and also for alternative fuel sources, rose to the forefront in the year.

General Motors India Ltd. announced plans for a compressed natural gas version of the 1.6L Optra sedan, joining Mitsubishi Motors Corp. and Maruti by offering either CNG or liquefied petroleum gas-powered models.

Tata Motors Co. Ltd. also is readying CNG and LPG versions of its Indigo lineup.

– with Sudhakar Shah in India

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