India Drowns In Car Factories
India, often touted as the “next China,” has too much capacity and not enough sales, says a report by Reuters. It is getting worse: India’s carmakers “speed towards a head-on collision with a capacity glut,” the report says.
According to the report, carmakers earmarked $6 billion to almost double India’s annual production to more than 6 million vehicles. After record growth in the past two years, car sales in India are set to shrink in the current fiscal year, for the first time in 10 years. The report sees an excess capacity of around 1 million cars, and a capacity utilization of around 60 percent. In the industry, capacity utilization below 80 percent is considered dangerous.
While domestic and foreign makers continue to build assembly plants in India, Credit Suisse predicts that capacity growth will outstrip demand growth for the next two to three years. GM sold 111,510 cars in India in 2011, only 700 more than in 2010. No reason to worry, says P. Balendran, VP of GM India:
“We have already created the capacity and are aligning our production suiting the demand. Since we are expecting double-digit growth in the next financial year, we are not envisaging any capacity utilization fall.”
Michael Boneham, president of Ford India, opines:
“The sales slowdown is creating a short-term concern domestically. But we’re not depending on one market. Our growth is both domestic and export focused and we have a flexible manufacturing process…We’re not taking our foot off the pedal.”
Bertel Schmitt comes back to journalism after taking a 35 year break in advertising and marketing. He ran and owned advertising agencies in Duesseldorf, Germany, and New York City. Volkswagen A.G. was Bertel's most important corporate account. Schmitt's advertising and marketing career touched many corners of the industry with a special focus on automotive products and services. Since 2004, he lives in Japan and China with his wife <a href="http://www.tomokoandbertel.com"> Tomoko </a>. Bertel Schmitt is a founding board member of the <a href="http://www.offshoresuperseries.com"> Offshore Super Series </a>, an American offshore powerboat racing organization. He is co-owner of the racing team Typhoon.
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COnsidering how many cars GM sells in China, I'm surprised to hear GM's footprint in India is minicule. Doesn't GM's former subsidiary Suzuki have a pretty good presence there?
Is it not strange that traffic rolls on the right side of the road in the picture? India drives on the left.
Driver, keep your foot on the gas pedal! Never mind the hairpin bend coming up...