By on April 10, 2013

Long feted as “the next China,” the Indian car market turned into a big disappointment: India’s annual car sales fell for the first time in a decade in the financial year just ended, Reuters says.

Carmakers in India, two years ago the world’s hottest growth market after China, have seen high interest rates, rising fuel prices and prolonged economic gloom turn an industry recently growing at 30 percent a year into one plagued by huge discounts, showrooms full of unsold cars, and chronic overcapacity.”

Car sales in the financial year that ended March 31 fell an annual 6.7 percent, according to data from the Society of Indian Automobile Manufacturers (SIAM) released on Wednesday. Last year, India’s car sales grew a tepid 2.2 percent. Similarly lackluster sales are expected for this year.

At the same time, carmakers are sitting on huge amounts of newly-built capacity. Says Reuters:

“Last month, Tata Motors Ltd’s factory in Gujarat, built solely to manufacture its much-vaunted low-cost Nano, cranked out just 1,282 cars, a miserly 6 percent of total possible capacity at the 250,000 cars a year plant.”

India’s average industry utilization level stands at alarming 55 percent, with more capacity coming on line in the next few years.

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18 Comments on “Indian Car Market: Big Hopes Turn Into Big Disappointment...”

  • avatar

    India, followed by the continent of Africa are going to be HUGE MARKETS opened up by China’s intervention. If you guys are smart, you’ll have your money ready to invest in African motors, African medical and African industry. I made GOOD MONEY investing in Chinese companies.

    Face it, America is getting marginalized and China/India are coming up. I wonder how much “CO2” India and Africa are gonna produce while our government shackles our own industry to the ground?

    • 0 avatar

      I think western people are often forgot about something absolutely crucial about things like having a good-sized auto markets and things. That ‘thing’ is infrastructure. China, as they grow prosperous, embarked in a huge infrastructure program, perhaps rivaling, if not exceeding, what Eisenhower did in the US with the interstate building project. India, like Indonesia, being a (rather immature) democracy, did no such thing. So their car market can’t grow as big as they should based on population alone. They’re running out of places to put those cars already.

      • 0 avatar

        Yes, in India, it still takes 4 hours to routinely drive 100 miles. While the infrastructure is better than it used to be, particularly in places like Delhi or Bombay, it’s still not great and nothing like China, which is why the economic growth of India has been greatly oversold.

        I remember the Economist in 2006 detailed how long it takes a lorry to get from Calcutta to Bombay. 8 days to go 1340 miles:

        www dot economist dot com/node/6969805

        Could you imagine how boring Vanishing Point would have been if it took almost 8 days for Kowalski to get from Denver to San Francisco (1270 miles)?

        It’s still a lesson for the US. We aren’t spending enough on infrastructure.

    • 0 avatar

      I am not so sure about India in the long term. It is an already incredibly densely populated country that is not close to getting a handle on population growth–and being a democracy does not help it here. It really could be a time bomb–the same could be said of much of Africa for similar reasons. Stability counts for a lot.
      China is better off because it has more of a handle on its population growth, and has already invested heavily in its infrastructure. It is not perfect, and things could go south, but it is in so much better shape than India and Africa.

      • 0 avatar

        China, Africa and India have huge, undeveloped areas which when developed will end up allowing growth of their car industries to get people between suburbs and cities.

        • 0 avatar

          India has 1/3 the land area of China, but the same population. China’s authoritarian government has taken “Draconian” measures to control its population–but it is working. India’s population growth continues at an alarming rate, and probably does not have the means to control its population. A stable population of 1.2 billion may be a good market for cars. A rapidly growing population of 1.2 billion, much less so. I hope that India is able work through its challenges, but I just do not see how it can.

          • 0 avatar

            I’d just like to point out a nice chunk of China’s land mass is the Gobi Desert which isn’t nearly as habitable as the rest of it.

          • 0 avatar

            28 cars later

            If you gave me the power to develop outwards past the areas I LIVED IN in Shanghai and Hangzhou, I’d have solar powered buildings with LED lighting, road systems with solar powered, photo-electric sensor activated lighting and transportation for water and energy – as well as high speed rail. They are developing it, but they are developing the cities first. There are still classic chinese houses being torn down in the cities.

        • 0 avatar

          The development of suburbs is dependent on cheap transportation.

          In a century of $100/bbl oil, why would anyone poorer than dirt want to move out somewhere where they’ll have to pay for land, pay for a new house, and pay more to get to work? Population density in cities in developing nations is dense specifically because people DO NOT want to move out into the suburbs en masse.

  • avatar
    Secret Hi5

    One can hope that those countries will eventually develop into modern societies that are not dependent on cars.

  • avatar

    Does this have anything to do with GM’s recent investment in the Palanquin Co.?

  • avatar
    Brian P

    In many countries with warm climates and dense population, a scooter or small motorcycle makes a whole lot more sense.

    Take a look at traffic over there (plenty of videos on youtube). Now imagine what would happen if even a decent fraction of all those scooters were replaced with cars. Gridlock.

    • 0 avatar

      Asian gridlock is bad. B.A.D.

      Drive a 40 mpg Honda Civic over here and you’re lucky to get 14-16 mpg. Drive an Accord or a CR-V and you’re looking at the depressing possibility of hitting single digit numbers.

      A scooter, on the other hand, gets you there quicker, costs pennies to buy, and can get well over 40 mpg in traffic and 80-90 mpg out on the highway at the positively communist 50 mph we drive around here.

    • 0 avatar

      True, but there were a lot more space dedicated to roads in more advanced countries like US. So places like India needs to build more roads, and in cities replacing places currently occupied by something else, which is typically the main problem with road construction in a democratic country. It can be expensive to buy land for roads. This is where Communist China has a huge advantage. It’s much easier to designate a land already occupied with something else (like homes and shops) as roads.

      • 0 avatar

        Yet Communist China is building entire cities to encourage dense populations to disperse. Not working. Even with their Communist system, they still let workers select their own jobs and housing.

        Building more roads into crowded Asian cities only exacerbates the problem. The level of human traffic simply expands to take advantage of the new infrastructure. Spreading development out and moving jobs and workers into less congested areas is the ideal, but the market and the pressures of competition will ensure that everyone (employers and employees alike) will gravitate to the densest areas possible.

        • 0 avatar

          Heh, that’s certainly true. Every time a new road is built here, the promise is always that it will eliminate traffic jam. But shortly after it’s opened it’s back the way it was before, full of cars, including the new roads!

      • 0 avatar

        Agreed — in India, the populists get a lot more sway, and it’s hard to do anything. That’s why Tata wasn’t able to build the Nano factory in West Bengal. The farmers got their way.

        Instead of acting to bring more jobs, which are desperately needed in West Bengal, the Communist Party of India (Marxist) gave in to the farmers. The CPI(M) ran Bengal into the ground during their 34 years of rule, good riddance to them. Calcutta was once the British capital, but it has not seen the success of places like Delhi, Bombay, and Bangalore because of the incompetent CPI(M).

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