New Government Boosts Indian Automakers’ Optimism

MUMBAI – Expectations are running high that the new Indian government elected last week will shake up decades-old policies affecting the auto industry.

Hopes have soared for a revival of automakers’ fortunes and, with them, welcome revenues.

“Creation of jobs, moving manufacturing to a much faster rate of growth and good governance should be the priorities for the government,” Maruti Suzuki Chairman R.C. Bhargava says.

Vikram Kirloskar, president of Society of Indian Automobile Manufacturers, is more specific. He has a 3-point program: replacing multiple taxes that add up to 59% for small cars and 90% for larger sedans and SUVs with a simpler and affordable General Service Tax; keeping in place excise duties on passenger vehicles that were meant to be temporary when rolled back 4% to 6% in February; and labor reforms to help industry improve productivity.

Light-vehicle sales in India saw their sharpest decline in 11 years in 2013, falling 7.2% year-over-year to just over 3 million. WardsAuto data shows the drop in April sales was even sharper, a 12.2% fall to 218,302 units.

Rising manufacturing costs, interest rates and sale prices, plus a decline in availability of financing, have inflicted damage on the Indian automotive business in the past 24 months. Investments have been put on hold, jobs have been curtailed and worker unrest is widespread.

Automakers have not waited for government action. They keep changing designs, performance and prices while taking take advantage of opportunities for development and placement of their models.

Maruti Suzuki's well-engineered, spacious new Celerio compact hatchback (less than 142 ins. [3,600 mm] in overall length) is making waves. It is available with a 5-speed manual or with the new automated manual. An added advantage is its 54.3 mpg (4.3 L/100 km) fuel efficiency. Maruti deliveries declined 24% in April, but Celerio and other compact-car sales rose 10%.

Volkswagen offers five brands in India including Audi, Porsche and Lamborghini. VW started with an initial investment of €580 million ($789 million), added €100 million ($136 million) in 2012-13 and plans to invest another €100 million by 2020.

“India is a key strategic market for VW Group and success is important for us in our plans to achieve world leadership,” says Mahesh Kodumudi, president and managing director-VW India. He adds that VW vehicles are designed for India and their production increasingly is being localized.

Tata Motors sales tumbled 38.6% to 107,187 units during the 2013-14 financial year, and it ranked fourth in the Indian market after Maruti Suzuki, Hyundai India and even Honda India.

“Tata Motors is planning a big leap to reclaim its position in the Indian market and to play a bigger role in the global markets,” says Ranjit Yadav, president-passenger vehicles business.

“We have harnessed all our capabilities and designed (the) new models Bolt and Zest effectively,” he says, adding Tata plans to launch two new vehicles every year.

The focus is on quality and design. Tata has introduced a new product and process system (known as NPI Gen 3) and has set up Design & Development Centers in India, Italy and the U.K., home to the Tata Motors European Technical Center. “It pools all our learning and experience from across the (European Union) and the globe,” Yadav says.

Nissan, Renault, Ford and Fiat-Chrysler similarly have created long-term strategies and more product plans to meet the challenges of the tough Indian market. Nissan’s Datsun Go and Renault’s Duster already have recorded significant sales in both the domestic and export markets. Ford has resumed bookings for the popular EcoSport.