The automobile growth story in the country is double-layered: on the face of it, a mere 4-5% sales growth, 45-50% capacity utilisation and profit margins under pressure in the previous fiscal.
But the dismal figures mask a leap of faith — car makers, both domestic and foreign, have lined up investments of almost $10 billion or nearly Rs 60,000 crore over the next few years. The expansion plans renew hope in the Indian market’s long-term prospects, besides exploiting its potential as an export market.
“We expect India to become the third largest sales market, and production to reach 6 million units a year by the end of the decade,” says Gaurav Vangaal, senior analyst, forecasting at IHS Automotive. If Suzuki Motor is creating more capacity in India, Honda is looking to enter new segments. Renault, Nissan and Volkswagen on their part are building new capacity for exports while Ford and Fiat have both the domestic and export markets in mind.
Here’s the break-up of the committed investments: 10 car makers have invested around Rs 31,570 crore, two-wheeler companies, nearly Rs 8,555 crore and tyre companies around Rs 7,350 crore in the past 10-12 months to build additional capacity of three million vehicles, according to PwC. That works out to nearly a third of the current Indian automotive market.
And there is more to come. Suzuki Motor, through its new wholly-owned subsidiary Suzuki Gujarat, will invest Rs 8,500 crore in Gujarat to create a capacity of 7.5 lakh units.