But Big, Expensive Problems Remain Including Power, Road, Rail
India will race into third place in world light vehicle sales by 2020 behind China and the U.S., but unless it addresses some basic problems the sub-continent is unlikely to meet its full potential.
That’s the conclusion of a report from automotive consultancy J.D.Power of the U.S.
Light vehicle sales in India are likely to more than quadruple in 2020 to 11 million compared with 2.7 million in 2010. That would yank it into third place behind number one China with 35 million and the U.S. with 17.4 million in 2020.
In 2010, India overtook France, Britain and Italy to become the sixth largest automotive market.
Car sales in India have responded to increased economic activity and a more consumer-driven culture.
“This momentum has been driven by a more open and market-driven economy, an empowered and less risk-averse work force, a more consumer-driven culture and an emphasis on small car production,” said J.D.Power senior vice president John Humphrey.
Citigroup Global Markets agreed that growth rates in India remain very attractive compared with other countries, and described the J.D.Power report as expressing remarkable confidence in its the outlook. Citigroup expressed some confidence of its own, predicting that the India car market would grow between 13 and 17 per cent year on year from 2012 through 2013, despite higher interest rates, higher inflation and falling consumer confidence.
According to the J.D.Power report, the average new vehicle price in 2010 in India was about $10,000 compared with $17,500 in China and $28,000 in the U.S. The report didn’t attempt to extrapolate average vehicle prices to 2020, but did say that this meant that Indian profit margins were thin and the business required careful management to optimize profits.
And there are challenges that might impede India’s progress.
Three deficits
“In India, government, business and academic officials regularly refer to India’s three deficits as reasons for caution about India’s future growth. These deficits are continual international trade deficits, chronic government deficits, and an underdeveloped power generation and distribution infrastructure.”
“To assure the country’s continued economic development, the Indian government has earmarked billions for investment in power generation and road/rail networks,” the report said.
Or is it four?
And automotive experts have found a fourth “deficit” – the lack of a broad-based automotive components and parts production industry, as well as the engineering talent needed to carry the automotive components industry forward, the report said.
Neil Winton – July 1, 2011
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