Indian Car Market: Big Hopes Turn Into Big Disappointment

Bertel Schmitt
by Bertel Schmitt

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.

Bertel Schmitt
Bertel Schmitt

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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 18 comments
  • 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?

    • See 7 previous
    • Corntrollio Corntrollio on Apr 10, 2013

      @MrWhopee 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.

  • Secret Hi5 Secret Hi5 on Apr 10, 2013

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

    • OneAlpha OneAlpha on Apr 10, 2013

      Or, hopefully India will one day become a place where the vast majority of people are prosperous enough to own multiple cars if they want to.

  • Cargogh Cargogh on Apr 10, 2013

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

  • Brian P Brian P on Apr 10, 2013

    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.

    • See 4 previous
    • MrWhopee MrWhopee on Apr 10, 2013

      @niky 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!

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