India in spotlight at Frankfurt auto show

Forced by their own financial problems and shrinking demand in the traditional markets in Europe, Japan and the US, German carmakers are desperate to tap the new markets of the so-called BRIC (Brazil, Russia, India and China) countries.

Among them, India clearly stands out with a large cash-rich middle-class whose appetite for luxury products, including foreign brand-name cars, exudes considerable pull for German car manufacturers.
So it was no wonder that India hogged the limelight this year at Frankfurt's International Motor Exhibition, popularly known by its German acronym IAA, where a special India Day was organised to highlight the opportunities and challenges of the Indian market. The ten-day IAA which ended Sunday was held under gloomy economic skies, as a major crisis continues to ravage the West's automobile industry.

As Germany's car industry continues to bleed with declining sales and revenue, more and more German carmakers feel that one "simply cannot bypass the future market India", as the president of the German Automobile Association, Matthias Wissmann, a minister in former Chancellor Helmut Kohl's government, put it.

To highlight the market potential, Wissmann told the audience at India Day that whereas one out of two Germans drives a car, in India the ratio is 11 cars to 1,000 people. Sudhir Vyas, India's ambassador to Germany, highlighted India's "ambitious plans" for its industry. India, according to Vyas, has plans to move up the ladder from its present position as the world's eleventh largest automobile producer to the seventh position by 2016.

Management consultancy Deloitte predicts that by 2020, consumers will prefer small and energy-efficient cars and production will take place mainly in Asia, another reason to woo India. Meanwhile, Germany's - and Europe's - largest carmaker Volkswagen will join forces with Japanese carmaker Suzuki which has a tie-up with India's Maruti, a Suzuki executive revealed at the IAA.

Indian carmakers at the Frankfurt event appeared confident and bullish, buoyed by the unprecedented attention they received at the exhibition. "By 2016, we want to become the leading automobile nation in Asia," said Parwan Goenka, president of the Society of Indian Automobile Manufacturers and the top executive at India's fourth largest automobile group Mahindra.

Goenka predicted that turnover volume in the Indian market in the coming seven years would rise from $36 billion to $115 billion. That would account for a 10 per cent share of India's GDP by 2016. The number of workers directly or indirectly employed by the automobile industry would double to 25 million, he predicted.

Wilfried Aulbur, the managing director of Mercedes-Benz India, said that India had already "surmounted the worst" in the current global financial and economic crisis. The typical Indian car buyer was well-educated, brand-conscious "but not always loyal to the brand", he felt.

German involvement in Tatas' Nano was quite significant, according to Bernhard Steinruecke, the executive director of the Indo-German Chamber of Commerce. "Twelve German subcontractors are involved in the small car (Nano)," he said, adding that the car was essentially German technology. Without German involvement, it would not run, he claimed.

Consultancy firm Management Engineers has estimated that India's small-car market is the world's second fastest growing after China. The annual growth rate, it says, is 7-8 cars per 1,000 residents in India. Small cars presently account for some 61 per cent of India's automobile market while vans and SUVs make up some 13 per cent.

But German automobile experts are aware that India is not a "cake walk", as Karl Rodenstock, an analyst based near Frankfurt, put it. Representatives of established German automakers such as Audi, BMW and Daimler have experienced that Indians wanted "the best product at the lowest possible price".

While many Germans are discussing the low price of Nano which is being sold for 1400 euros, the German industry is also monitoring moves by Indian car manufacturers.
Bangalore-based Reva, which showcased its electric car at Frankfurt, announced plans to introduce the car in 12 European countries in 2010.

The four-seater car can run at a speed of 160 kmph and is equipped with solar panels in the roof. The car, which can be fully recharged from an electric grid in eight hours, is expected to cost between 12,200 and 14,000 euros, according to company sources.