The automobile market is growing at about 25% for the last three years. The number of persons
per car is 200, which is very large compared to other emerging markets like Korea and Brazil
which have about 12 persons per car. There is therefore a very huge untapped market. Uncertainty
exists about the extent of growth, but a minimum growth rate of 20% is expected until the year
2000. Sales are expected to rise to anywhere between 850,000 to 1.5 million vehicles by the year
2000. Markets are highly price sensitive since a car is about 18 to 24 months salary for the average
middle class buyer. However, incomes are rising and the economy has been growing steadily at
nearly 6%.
Import duties on CKDs and components is 50%. Reduction of prices because of lower duties and
taxes and progressive indigenization, and rising middle class incomes are likely to further increase
industry growth rates. Penetration in rural and semi urban areas is extremely low and could
provide fresh markets. New entrants will have to deal with uncertainty of demand, different and
evolving customer needs, a relatively poor supplier base, a market crowded with competition and
industry wide capacity shortages. However, if there is a shake out as many analysts expect, further
opportunities for survivors will open up. Another implication is that India could emerge as a significant manufacturing base for exports. The supplier industry is also going through massive growth, although from a small initial base. Except for Telco, indigenous product development capabilities are very low, and the industry has some way to go before it becomes world class
