India is a world winner when it comes to outsourcing services, but the country has not been recognized as a manufacturing hub.
Now for the first time, India has surpassed China as Asia's biggest automobile exporter, and the country is fast emerging as a global hub for the manufacturing of small cars.
South Korea's Hyundai Motors already exports close to half of its Indian output. The Hyundai i10 – a mini car made in the city of Chennai - sold more than 100,000 units in 2008.
The country's leading carmaker, Maruti Suzuki India Limited, has also more than doubled its sales this year with the export of its hatchback "A-star". The company is now spending around US$300 million on building a small-car research and development centre in the country.
Many companies, including Nissan and Ford, are also setting up operations in India, as they are trying to cut costs and move to making compact and fuel-efficient vehicles.
"Firstly, there is a good strong vendor base, which is very, very quality oriented. Secondly, the low cost of manufacturing and thirdly, the government subsidies that have been provided for many cars - all these three factors are strong pillars for making India a hub for exporting cars," said Ankush Arora, vice president, Marketing and Sales, Chevrolet India.
The incentives given by the government have boosted domestic sales and have helped in reviving India's auto industry.
In the month of September alone, total car sales grew 21 per cent and small cars made up nearly 80 per cent of the sales. Luxury carmakers Mercedes Benz and Mahindra Renault were the only two companies which had negative growth.
"People don't just put a plant for 99 per cent export. You are still looking for a lot of domestic growth as well. It is very clear that India is expected to go from two million to four million (annual car sales) within three years. Nobody in the world sees that kind of growth," said Karl Slym, president and managing director, General Motors India.
With this growing demand for small cars, many new launches have been lined up. General Motors has started the production of the "Chevrolet Beat", which will be launched early next year.
German auto giant Volkswagon has all its engineers at its Pune plant working exclusively for its Polo, which will also come out in 2010. The competition fuelled by Tata's dream small car - the 2,000-dollar Nano - is becoming intense.
India's domestic car market is less than one-fifth the size of the Chinese car market, but with growing competition, automakers see India as a much more profitable center to develop cars for global consumption.
