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India’s Automakers Face Big Hurdles in Pursuing Global Ambitions
Posted By:Hajas On 7/17/2007

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India’s Automakers Face Big Hurdles in Pursuing Global Ambitions
M. Laksham/Associated Press

Hyundai Getz Cars rolls out a vehicle every 56 seconds and ships more than a third of them from this port in Chennai, India, to Europe.

By NICK BUNKLEY
Published: July 17, 2007

Automakers already struggling with intense competition in the United States and many other regions of the world have long worried about their prospects after China and India begin building large numbers of ultra-cheap cars.

But Chinese carmakers have experienced numerous setbacks to their global ambitions, and a new study of the Indian auto industry reveals more obstacles than many outsiders expected.

The study, released yesterday by I.B.M. and the Transportation Research Institute of the University of Michigan, notes that Indian automakers are plagued by shortages of skilled workers, inferior product quality and inadequate highway infrastructure, among other challenges.

Its authors, who interviewed 30 high-level executives and automotive experts in India, are confident that the industry will surmount the impediments to make India one of the world’s top 10 vehicle-producing countries by 2015. But they suggest that the Indian car market remains in a fairly primitive stage of development.

“Roads are the big problem,” said Allan Henderson, senior managing consultant at the I.B.M. Institute for Business Value. “The infrastructure needs to be improved more than you might think. There’s a number of problems, but they’re aware of them and they know what it takes to overcome them.”

Sales of passenger cars in India have more than doubled since 2002, to 1.4 million from 675,116, according to the Society of Indian Automobile Manufacturers, which represents 38 makers of vehicles and engines. Passenger car exports have nearly quadrupled in the period but still were less than 200,000 in the last 12 months.

Future growth could be limited, however, by too few engineers and skilled trades workers. Although India is known as a home of plentiful low-cost labor, many workers do not have the qualifications that automakers there desire.

“It was almost unanimous amongst the interviewees that this is a challenge they need to work on,” said Bruce M. Belzowski, senior research associate in the Transportation Research Institute’s automotive analysis division. “We were under the impression, as most Westerners are, that India is an almost unlimited source of labor.”

Even if carmakers are able to increase production, the study found that many consumers do not want to buy the products because roads are in poor shape and congested. Motorcycles and other two-wheelers are the most popular form of transportation, outselling four-wheeled vehicles four to one.

Exporting is troublesome as well. Indian automakers have difficulty understanding foreign consumers, developing a range of models, managing global supply chain logistics and incorporating advanced technology, the study concluded. Additionally, Indian ports would need significant upgrades to handle high volumes of vehicles.

“They’re not ready for full-scale exporting,” Mr. Belzowski said.

The problems that Indian automakers are facing will not halt the industry’s growth, but they will take time and considerable resources to resolve, Mr. Henderson said.

Ultimately, he said, “it doesn’t look like there’s really anything that should stop the Indians from being major global players.”

“They fully expect to be a powerhouse on the world stage.”

The country’s automakers do have several important factors working in their favor: The Indian government is solidly behind their efforts, even drafting an aggressive mission plan for the industry, and Indian consumers generally want to buy vehicles made in their own country to support the economy. (In contrast, Detroit’s automakers often complain that they get little support from the United States government or from American consumers.)

As a result, executives interviewed for the study projected domestic sales to double, to 2.8 million by 2010 and reach 4.2 million by 2015. Even then, just a small fraction of the nation’s more than 1.1 billion people will own cars.

India can assert some advantages over China, which has about 200 million more people and a fairly extensive road network. Auto loans are more widely available in India, making it easier for less affluent consumers to buy a car, and intellectual property is more respected in India than in China, where vehicle designs are often copied freely.




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