There is a long list of foreign companies that are forging alliances with their Indian counterparts. Corporate participation in these alliances varies from 10 to 100 percent (i.e. wholly owned foreign subsidiaries). The Government of India is no longer regulating the alliance’s equity participation and instead allows the drivers such as the technological, financial and market strengths of the partners to set the participation percentages. The setting up of joint ventures has led to an enhanced capacity creation in the vehicle sector, particularly in the passenger car sector where the additional capacity is forecasted to produce 3 million passenger cars in the next five years.
India has become a preferred destination for American, European and Japanese automotive companies because they realize that in the future, auto manufacturing will require world-class, cost effective IT and engineering expertise and India has an abundance of both.
Furthermore, the low cost of manufacturing and a supportive government have been the key drivers for companies shifting focus to India.GM India posted a staggering growth of 121 percent in December 2005 compared with its performance in 2004. Its Japanese competitor, Toyota, which has a partnership with the Indian firm, Kirloskar Motors, posted its highest ever retail sales in 2005. Another Korean giant, Hyundai Motors, which has made its Indian subsidiary the manufacturing hub for small cars, exports to around 60 countries globally. Recently, they made a foray into the UK where they shipped over 8,000 units in December 2005 alone.
Earlier this financial year, Ford Motor Company announced its intention to launch its fifth new product in India where the Chairman noted that among the growing markets around the world - India tops the list.
