India overtakes Brazil as sixth largest vehicle maker

New Delhi: With 7 million units, it is projected to overtake Japan, Germany and Korea by 2017; to beat initial estimate of becoming third-largest market globally by 2020.

India has overtaken Brazil as the world’s sixth largest automobile manufacturing country, going by data on the first six months this year, according to the international organisation of motor vehicle manufacturers.

The Organisation Internationale des Constructeurs d’Automobiles also reveals that India is steadily inching its way up on the global charts to make its mark as the third largest automobile market over the next five years, even as high interest rates and fuel prices have put a spanner on automobile sales in the domestic market. In 2009, India had raced past Spain in annual automobile production to become the seventh largest vehicle-manufacturing country in the world. India is now projected to overtake Japan, Germany and Korea to sell seven million units by 2017. This is way ahead of the initial estimate of becoming the third largest market globally by 2020.

As many as 2.04 million vehicles were produced in India till June this year, 20 per cent higher than the 1.71 million units rolled out in Brazil.

China continued to be the frontrunner with production of 9.16 million units till June, while India’s share in vehicle production, as compared to China, has improved sharply between January and June this year.

While last year, India produced a sixth of the number of vehicles rolled out in China, till June this year the country produced more than a fifth of the number of vehicles manufactured in east Asian nation. India’s market share in global vehicle production moved up marginally to five per cent from the earlier 4.5 per cent during this period.

PricewaterhouseCoopers says India is likely to produce seven million light vehicles of up to five tonnes by 2017. “Though vehicle sales have slowed down this year, the fundamentals remain strong,” notes Abdul Majeed, partner and head of automotive practice in the global professional services firm. “By 2017, India is likely to emerge as the third-largest market in the world after China and the US.”

What is boosting business confidence is that despite the economic uncertainties prevailing in global and domestic markets, India remained among the fastest-growing automobile markets in the world till October this year. While US topped the charts growing by 10.1 per cent to sell 10.54 million vehicles, Germany and India followed close behind growing by around eight per cent (to 2.93 mn units) and 7.8 per cent (to 2.73 mn units), respectively.

Society of Indian Automobile Manufacturers notes that the vehicle penetration in India is one of the lowest in the world — at 10 cars per 1000 people as against 565 cars and 453 cars per 1000 people in Germany and the US respectively. “So,” says Sugato Sen, senior director of the association “ the market will only grow over long term.”

Estimates available with market research firm J D Power show the automobile market in India is set to grow three-fold to sell over 11 million vehicles by 2020.

If we take a closer look at the sales data of the top six vehicle-manufacturing countries in the world currently, the domestic automobile market in India has already overgrown that of Korea at 2.73 million units. Till October, the Korean market had grown by 2.8 per cent to sell 1.23 million units. Vehicles sales in the country have fallen short of Germany (the fourth largest automobile market) by mere 200,000 units.

On the exports front, India stands at around a tenth of the 3.77 mn units exported by Germany till October this year. What is intriguing is that India is fast narrowing the gap with China. Till October this year China (which accounts for 24 per cent of global automobile production) exported only 703,341 units, while Indian exports grew by 17.45 per cent to 489,675 units.

Japan fared the worst in the current year hit by the earthquake and tsunami in March this year. While vehicle production dropped by a whopping 17 per cent to 6.71 million units due to insufficiency in supply of components, domestic sales declined by 20 per cent to 3.47 mn units between Jan and October this year.