| dc.description |
In anticipation of rapid growth, the passenger car market in India is crowded with 18
companies trying to establish themselves. Most companies have joint ventures with Indian
partners and have entered the market in the last two years. The number of new entrants over a
narrow time window of two years is unprecedented. Demand forecasts vary and analysts
expect anywhere between 2 and 3.5 million cars to be sold in the next five years. Equity
holding for the international partner is usually over 50% and they retain significant managerial
control. Most of them have introduced cars in the $13,500 to $33,000 price range, which is
viewed as a luxury segment in India. Automobile companies have also chosen to establish
exclusive dealerships. Initially, companies have chosen to import completely knocked down
(CKD) kits and assemble them in India. However, this strategy is not effective in the long run
since such imports attract 50% duty. The major implications are that a shake out is likely and
that companies would need to have alternate plans, including introduction of cars in other
market segments, lower prices, and exports from India if they cannot establish themselves in
the domestic market. The supplier industry is very small and needs to develop simultaneously
on all fronts including rapid capacity expansion, acquisition of technology, improvement in
manufacturing practices, quality and productivity, adoption of lean manufacturing, and
developing product design capabilities to meet the needs of assemblers. Therefore, a critical
requirement for rapid growth of the industry is adequate assembler involvement in the suppler
industry. |
|