Thursday, July 9, 2009

Auto Investments Ahead in Auto Industries

An incremental Rs 20,000 crore investment is expected in the Indian automobile sector in the next 18-22 months.

This, despite the current economic slowdown and possible rethink by some global investors on making huge commitments to the Indian market just yet.

According to figures made available by the Society of Indian Automobile Manufacturers (SIAM), many big-ticket expansion projects are going on stream between now and March 2011.

Bajaj Auto is expanding its two-wheeler manufacturing capacity besides investing in four wheelers; Mahindra & Mahindra, Tata Motors (the Nano plant at Sanand); Honda Motorcycle & Scooter India is getting into the 100 cc motorcycle market and expanding capacity for the purpose.

Then, Andhra Pradesh's MLR Motors is expected to begin its small car project in collaboration with an Italian partner; Daimler if firm on investments in India despite the Hero Group breaking away from a proposed joint venture for commercial vehicles, Piaggio which has already announced plans to enter two-wheeler space and Toyota which has already announced a second small car project in India.

In addition to these investments, at least two internationally known passenger car makers as well as an American superbike brand are among the investors which have lined up for taking part in the Indian growth story.

Besides, French car maker PSA Peugeot Citroen is expected to announce its Indian manufacturing and sourcing plans by September this year.

But wouldn't further capacity creation add to the industry's woes? Already, a back of the envelope estimate pegs passenger car overcapacity to be at least 20% and sales have not exactly been spectacular over the last few months. Even the export front has been a huge disappointment, with first quarter exports growing by just 1.32%!

Siam secretary general Dilip Chenoy points said the government's determination to make India a small car hub needs further fiscal incentives.

"Almost all of the committed investments in the automobile sector have come in and more international companies are willing to come to India despite the global scenario....but for the small car hub dream to take shape, the Government will have to provide more incentives".



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