Opinion - Editorials   

Small cars, big opportunities

Some significant trends are transforming the passenger car industry worldwide, and India seems to be well placed to take advantage of them. Global car production is expected to double to 110 million units, with some 180 new production facilities to be commissioned soon. In a sharp break with the past, most of the new factories will roll out basic cars rather than the premium saloons that have crowded the roads of the developed countries. That development will turn the economics of the passenger car business on its head. A big car contributes more to the overall profits than a small car does. Until recently, sales of small cars formed a minuscule part of the global auto sales. However, environmental concerns and higher fuel prices have contributed to a marked shift in favour of the smaller cars even in the West. There are no doubt practical difficulties in categorising cars. Unlike in many other countries where cars are categorised according to the engine capacity, in India the popular, though not scientific, way is to classify them in terms of their selling prices.

This categorisation has become topical in the current Indian scenario. Surely the enormous significance of the efforts of the Tatas to sell a car at Rs.100,000 ($2300), by the end of 2008, cannot be conveyed in any better way. Neither the new car's engine capacity nor the length of its wheelbase will capture adequately the challenge thrown by the Tatas to the global auto industry to mass produce affordable cars without compromising on any of its standard safety features. Practically all the world's leading automakers have taken up the challenge to produce cheaper cars, though at this stage they have not been able to go as far as the Tatas. But across the industry there has been a thrust on improving cost efficiencies. That is precisely where a truly globalised industry is discovering India. As Carlos Ghosn, the head of Nissan-Renault remarked recently, no automaker planning to go in for inexpensive cars can ignore India's low-cost manufacturing abilities and its frugal manufacturing and management practices. Currently, around 1.4 million passenger cars are sold annually in India, and the smaller version accounts for a bulk of them. This overwhelming preference of Indian consumers has in fact supported fresh investments in the manufacture of small cars for the export market too. The seismic shift towards smaller cars may turn out to be the most significant development since Henry Ford introduced the Model T a hundred years ago.

Printer friendly page  
Send this article to Friends by E-Mail

Stories in this Section

Beware of partisan temptations
Small cars, big opportunities
This has nothing to do with energy
Policies that could cost millions of lives
Corrections and Clarifications
We need to talk about narcoanalysis
Missile shield hosts ask U.S.: what's in it for us?
Shocking revelation
LTTE threat
On May Day

Copyright © 2007, The Hindu. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu