Car makers head to Indian expo seeking growth

Posted at 01/05/12 1:54 PM

NEW DELHI - The world's leading car makers jostled for space at the start of India's Auto Expo on Thursday, eyeing a market that has slowed sharply but remains a hotspot compared with depressed Western economies.

The exhibition, which takes place every two years, has grown in stature in line with interest in the Indian economy, which is expected by economists to expand by 7.0 percent this financial year despite a recent slowdown.

"We now see this as one of the most important shows on the calendar," Ford's Asia-Pacific president Joe Hinrichs said on Wednesday, adding that the group expected India's vastly under-penetrated market to be the world's third-biggest by 2020.

In a sign of the changing priorities of car makers, Jaguar Land Rover, the British brands bought by India's Tata conglomerate in 2008, decided to skip the overlapping Detroit motorshow to focus on the New Delhi expo.

Beneath the dazzling lights, pounding music and exhibition girls set to accompany the launch of up to 50 new models at the sprawling exhibition centre lies a clear commercial logic.

Car ownership remains low in India, a country of 1.2 billion people where two-thirds live below the poverty line but an expanding economy is minting millions of new middle-class families and millionaires each year.

Growth of the passenger car market hit 31 percent in 2010, but has since dropped off sharply due to rising interest rates, higher commodity prices and economic uncertainty.

Auto industry group the Society of Indian Automobile Manufacturers (SIAM) said last month sales in the fiscal year to March would rise between two and four percent, far from the 16-18 percent forecast last year.

Far from discouraged by what analysts see as a temporary blip, French auto giant PSA Peugeot Citroen is to announce its return to India after an unhappy and ultimately aborted alliance with a local partner in the 1990s.

Fellow French manufacturer Renault re-launched itself in India last year amid a big marketing push and will unveil its new Pulse model and an SUV at the Delhi Expo, which ends on January 11.

Peugeot, Renault and BMW, the German manufacturer that dominates in the luxury segment of the Indian car market, face dire market conditions in their home markets as the European debt crisis dampens consumer spending.

"The current slowdown (in India) is not here to stay as the fundamentals of car sales growth, namely urbanisation and car density, are still very attractive," said the consultancy Deloitte in a recent study.

India remains a market dominated by small cars as consumers follow the familiar path of upgrading from push-bikes, to motorbikes to cars, with most new buyers opting for affordable models at the bottom of the market.

"It is always going to be about the value proposition in India," Hinrichs told reporters on Wednesday.

Earlier this week, India-based Bajaj Motors unveiled a new contender for the title of the world's cheapest car, its tiny RE60, which will compete with the path-breaking and locally-made Tata Nano in price.

But there will also be plenty of car makers looking to impress at the other end of the market.

Ford is using the Delhi expo to showcase a remodelled version of its small EcoSport SUV, which will be pitched at richer buyers looking for more comfort on India's congested and often poorly maintained roads.

A 2011 report on the wealthy in India by Merrill Lynch Capgemini found there were 153,000 Indians who have financial assets of over $1 million, excluding the value of their main residences.

This flush of new cash has attracted luxury brands. Ferrari opened its first showroom in May last year, while Maserati and Aston Martin followed suit.

Besides luxury and small cars, there will be new electric vehicles from Indian manufacturer Mahindra & Mahindra which will also launch the South Korean brand Ssangyong which it acquired in 2010.