China's auto industry faces challenges from India

Shanghai, May 23 (Gasgoo.com) According to the latest research by Roland Berger Strategy Consultants, the annual sales of cars priced below 10,000 euros will reach 18 million units by 2012,  at least 4 million units more than the current figure.

Low-price cars have become a new favorite buy in the emerging market. Western auto-making giants have been looking for their way out in the global auto markets, and India, as an emerging low-cost market, has shown them a glimmer of hope.

Since mid-2007, global auto-making giants such as Ford, Nissan, Honda, Hyundai, Volkswagen, Daimler-Chrysler, have boosted their investment in India, and this trend is moving fast forward. The Indian government predicts that the country's auto industry will attract multi-billion-dollar investment in 2008, and there will be 20 manufacturers of passenger vehicles in India by 2010.

In January 2008, Ford Motor Co of the US announced plans to invest US$500 million to expand its India operations. The new investment will bring Ford's total investment in India to more than US$875 million. Meanwhile, Daimler Trucks of Germany, a division of Daimler AG, has formed a joint venture with the Indian company Hero Group. Nissan will start to produce its low-price cars in India in 2010.

A serious problem is that China's auto industry is lacking in independent innovation, while Indian carmakers have made great efforts in its own research and development for many years, and many of these companies have mastered the cutting-edge auto-making technologies, which will also leave China's carmakers far behind. About 90% of the cars made by Tata are self-developed and have been exported to Europe. 

While China is limited to technology transfer restrictions from their JV partners, and reliant on the purchase of old production lines, India has gone a step further and acquired a working, globally recognized business with it's own R&D, design and support infrastructure. That, coupled with India's proven IT skills and move towards gas-powered vehicles, may yet prove to be the shrewdest piece of business conducted in the modern global auto industry sector for some time to come.

Global carmakers would swarm the low-cost but technology-innovative markets. The status of China's auto industry as the world's manufacturing base is facing the challenges and pressures from its neighboring country - India.