Column: Maruti beats Suzuki

Written by Yogima Seth | Updated: Jan 29 2010, 02:33am hrs
Maruti Suzuki India has pipped its parent company Suzuki Motor Corporation (SMC) of Japan in annual vehicle production in 2009. But this is not very surprising. This development is in line with SMCs strategy to ensure that developing countries are utilised as bases that serve both domestic as well as export markets. The low cost of manufacturing in India lends weight to this strategy.

The development provides, however, a clear reflection of the rapidly changing dynamics of the global auto industry. It takes place against the backdrop of demand shrinkages in developed countries in the aftermath of the global economic recession. While the Japanese auto market shrank 10% last year, the Indian market grew at about 19%. Such a trend can also be attributed to the extremely low penetration levels in developing countries like India and China.

It makes better sense to manufacture in India and then export out of this country. For one, various state governments like Tamil Nadu and Uttarakhand are offering huge incentives to auto giants to set up facilities in a sector that is highly labour-intensive and also a huge contributor to the overall government kitty.

The growing popularity of Indian designers and engineers has also resulted in some of the leading auto manufacturers setting up large R&D centres in the country in order to centralise their entire operations. No wonder we have global products being designed and manufactured in India and the latest is the RIII concept showcased by Maruti Suzuki India at the recently concluded Auto Expo.

All this makes the India story really attractive. Players who have recently begun eyeing our market because of its huge growth potential include Ford, Honda Siel, Toyota Kirloskar, Renault and Nissan. While Ford will use India as an export base for Figo, Honda and Toyota will launch their global small cars in 2012 and will eventually export from here. Renault and Nissan are jointly developing an ultra low-cost car in association with Bajaj Auto. All these companies are betting big on these small beauties to enhance their global presence.