MUMBAI, India - India is emerging as a leader in small cars as declining sales in Western markets coupled with robust growth in Asia rapidly redraw the global map of the auto industry.
It's well known that China overtook the United States as the world's largest car market in 2009. Less noticed is that India will top Japan for the first time in sales of super-compact cars. It overtook Japan as the world's No. 1 producer of basic cars in 2007.
Automakers like Ford Motor Co., Nissan Motor Co. Ltd., Volkswagen AG, General Motors Co., and China's Shanghai Automotive Industries Corp. are pouring hundreds of millions of dollars into the country, hoping to capture a piece of the growing market for tiny, inexpensive vehicles. As they do so, they are quietly transforming India into an export hub for small car manufacturing.
"India is right in the center of the radar," said Michael Boneham, head of Ford India, which plans to roll out its first India-made compact, the Figo, in the first quarter.
More than 892,000 basic cars - the smallest category of passenger vehicle - were estimated to have been sold in India in 2009, up 14 percent from 2008 and surpassing the 708,034 forecast for Japan, according to J.D. Power and Associates.
Unlike China, Russia, and Brazil, where consumers buy a range of cars from basic to luxury, Indians overwhelmingly prefer small, affordable cars.
Nearly half of all cars sold in India fall into the basic category. These are cars so small they're almost nonexistent in the U.S. market. They could be called sub-subcompacts.
A trip down the streets of a typical Indian megacity, where the bulk of car buyers live, makes the reason clear. Drivers squeeze through any remotely plausible opening on the clogged streets, grazing handcarts, bicycles, cars, pedestrians, and livestock.
And executives say most Indians won't spend more than $8,000 on a car.
To manufacture these low-margin vehicles profitably, car makers must localize production.