China may be the world’s shopfloor, but India is rolling it out faster when it comes to auto exports. India exported a total of 2.30 lakh cars, vans, SUVs and trucks between January and July, a growth of 18%, even as China’s exports tumbled 60% to 1.65 lakh units in the same period.
The Indian domestic market may be just 19% of China’s—which has overtaken the US to become the world’s largest—but the ‘Made In India’ tag—especially on small cars—has clearly acquired a global cachet, helping auto exports grow even as other countries suffered a slump.
Industry experts say India scores due to its liberal investment policies and high quality manufacturing that stems from a healthy research and development prowess which appears to be strengthening by the day. The country’s biggest advantage is its edge in small cars and the way companies are using the market to sell, as well as develop, new compact models.
While India itself presents a big opportunity in small cars given their big-volume status in the domestic market, the gobal recession and incentives offered for fuel-efficient lowemission vehicles in big markets like Europe and the US also make India a focal point for companies. Sharing of profits a concern in China
Along with its liberal investment policies, cheap labour costs and especially-tailored lower manufacturing tax (8% excise duty) make small car manufacturing in India a highly-competitive option which more and more companies are padding up for—Suzuki, Hyundai, Nissan, General Motors and Toyota, to name a few. China, in contrast, is more of a big car producer and has been hit by the global slump in demand following the economic recession.
“Among major reasons for India being preferred is the favourable investment regime. While India allows for 100% FDI in the automobile sector, in China you can only be present through a joint venture with a local partner. If you use the country as a major export base, you have to share the profits with your joint venture partner, which no company would like to do,’’ said Rakesh Batra, National Automotive Leader for Ernst & Young in India.
While sharing profits may be a major reason, analysts point out that sharing technology with the JV partner may also be a cause of concern in China considering the infamous expertise of its companies in culling out cheaper fakes at lower costs, even if they are of a lower quality. India also scores due to its superiority in research and development brains. “While China may be good at producing in mass-scale from a given design, India holds the edge in developing new technology products that makes vehicles produced here better in quality and more suited to advanced European markets. Also, production of a new small car model is cheaper in India when compared to that in Europe,’’ another analyst said.
Batra pointed out that India’s “geographical proximity’’ to key markets like Europe and Africa is another reason for companies using it as an export hub. “The cost of shipping a car from China will kill any major cost advantage that the country may offer,’’ he said.
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