India, The Next Rising Star!
While China is the current star of the automotive industry, LILY takes a look its potential successor – India.
India is forecast to be the world’s third largest light vehicle market by 2015. According to OICA, for the first six months of 2013, India ranked sixth in the world in light vehicle production (1 612 988 units) and eighth in commercial vehicles (416 601 units).
According to LMC Automotive’s forecast report in 2012, the sales of light vehicle in India could potentially exceed 5.2 million units by 2015, surpassing Japan, Brazil and Germany; production in Japan and Brazil is expected to reach 4.4 million units, while Germany could sell 3.5 million units.
When I read about Toyota ceasing manufacturing in Australia by 2017 while India is forecast to be the third largest light vehicle market by 2015, I found these two countries in complete contrast, economically and demographically, which created the platform for this trend.
India’s current population is at 1 270 272 105 while Australia only has a population of 23 397 345; India’s population is 54.3 times bigger than Australia’s. Australia has a low population density (one square kilometer for every three Australians), however it is highly urbanised; according to the World Bank, 89% of Australia’s population is focused in cities. We know that in some big metropolitan cities, people are moving from vehicle ownership to vehicle sharing, and making use of better public transport as well, which we have discussed at length in this news portal. Generally, vehicle ownership occurs more frequently in urban areas, as determined by better purchasing power, status perception, mobility requirement and so on.
In terms of urbanisation, vehicle ownership and population distribution, the situation in India is the polar opposite of Down Under. With only 31% of India’s population living in cities, there’s a huge potential for light vehicle sales. The current two and three-wheeler owners in India are the future light vehicle owners.
The strong Australian Dollar makes vehicle exports unfavourable and local consumption itself could not support the manufacturing activities. Conversely, India has a vast domestic market with favorable market and economic factor for export! The younger generation in India possesses higher aspirations due to unlimited exposure via the Internet; coupled with easy credit approval, owning a car is easy. Oxford Economics also predicts that India’s purchasing power will increase to USD4000 in 2015 from USD3000 in 2010. These are all positive contributions to make India the number three light vehicle market by 2015.
However, India is facing great challenges moving towards the 2015 goal. Does the government have sufficient funds to make good the infrastructure to support these developments? India has been suffering from chronic deficit since 1990. The country has been hampered by trade deficit for the past two decades; its currency is weakening, causing the escalating cost of raw material imports. Would the country be able to source local raw material to support the increasing needs of light vehicle production? The National Highway Builders Federation in India indicated that USD33 billion was spent on highways, from 2010 to 2012, three times more than the expenditure from 2003 to 2009. In spite of that, there is still an infrastructure deficit. The infrastructure needs to grow much faster than the vehicle market.
Success occurs when we thrive in challenges. I personally do believe that India can reach their goal. Business is borderless and dynamic, and the Indian market is growing with the expanding middle class. I believe that the challenges can be eliminated when the think-out-of-the-box business owners and corporations are willing to work hand in hand with the government to create a better infrastructure to support their business growth. It is easier said than done, or rather, easier written than done. Nonetheless, every great success begins with the first step.