http://www.nytimes.com/2007/10/12/business/worldbusiness/12cars.html?_r=1&oref=sloginNEW DELHI, Oct. 11 — A revolution is taking place in India that could change what most of the world drives.
Rush hour in New Delhi. Analysts expect more cars to join or replace the 65 million scooters on India’s roads, with new ultra-affordable cars leading the boom.
Next fall, the Indian automaker Tata Motors is scheduled to introduce its long-awaited People’s Car, with a sticker price of about $2,500. Hot on its tail may be as many as half a dozen new ultra-affordable vehicles — some from the world’s leading carmakers, including Toyota and Renault-Nissan.
With a median age of just under 25 and a rapidly expanding middle class, India will overtake China next year as the fastest-growing car market, according to estimates by CSM Worldwide, an auto industry forecasting service.
To tap that emerging market, automakers are starting to respond to Indians’ desire for small and cheap cars. As a result, car companies are coming up with new ways to develop and build automobiles worldwide.
“Ask one billion people, and 99 percent of them are going to say they want a car,” said Jagdish Khattar, managing director of Maruti Suzuki India, the country’s largest car manufacturer. “The problem is, How many can afford it?”
For a long time, only a few carmakers in India concerned themselves with that question. The small-car market in this country is dominated by Hyundai Motors India, Tata and Maruti Suzuki, which is a joint venture between Maruti of India and Suzuki of Japan. Maruti Suzuki has more than 50 percent of the car market, thanks to models already as low as 195,000 rupees (about $5,000).
Now, foreign carmakers are entering the competition, increasing pressure to make cheaper yet appealing cars. From June to September alone, Skoda, a subsidiary of Volkswagen, said it would start making and selling the Fabia, its small car, in India; Toyota’s chairman, Fujio Cho, said his company might introduce a new small car to India; Ford Motor executives said they were studying the situation; and Renault-Nissan announced it would set up an engineering and design center, adding to previous plans to build a plant in India.
Renault-Nissan — a car-building alliance between Renault of France and Nissan of Japan — has been talking with local scooter maker Bajaj Auto about building a cheap car that analysts say could cost as little as $3,000. Hyundai is adding a new small car model to its existing line and doubling its local production, and Honda is planning a small car tailored to the Indian market. On Thursday, Fiat stepped up a partnership with Tata, announcing a 50-50 joint venture to make cars, engines and transmissions in India for the domestic and overseas markets.
India differs from giant slow-growth and no-growth auto markets like the United States and Western Europe, and even from fast-growing markets like China, in that the emphasis is on small, low-cost cars — but with four doors, not two, and room for the extended family.
While the Indian upper classes are snapping up roomier models and even imports like Mercedes-Benz, first-time buyers will provide a big chunk of growth for years to come.
By 2013, CSM predicts, India’s market will expand an average of 14.5 percent a year, compared with just over 8 percent for China. CSM estimates that in 2013, the Chinese will buy 10.8 million cars, compared with 3.8 million in India, but says there is already a glut of local and foreign manufacturers in China, making India a more attractive long-term market.
If global manufacturers can figure out how to make small, cheap cars in India, they are expected to start exporting them to other fast-growing markets where the proportion of car ownership remains small — places like Southeast Asia, Africa and the Middle East.
But first they have to conquer this market. A. T. Kearney, an international management consulting firm, estimates that a car with a $3,000 list price could attract 300 million buyers in India by 2020. Of course, forecasters were bullish on China for decades before its growth finally took off. And economic upheaval or political change could stall India’s expected growth, too.
But the millions of Indians who will buy cars are likely to agree with Shuchita Bagga, who bought her first auto in July. “Budget was the most important thing,” said Ms. Bagga, 26, a trainee in human resources who earns about 375,000 rupees a year (about $9,500) and paid a little more than 235,000 rupees ($6,000) for it. “I’m not in a position to buy a big or an expensive car.”
In addition to new economy types like Ms. Bagga, car manufacturers are looking at India’s approximately 65 million scooter owners, mostly men. Currently, entire families commute on scooters, with the man of the house driving, his wife sitting side-saddle on the rear, and as many as three children wedged in between.
The People’s Car will create a situation where “someone who never even dreamed of a car finds it within reach,” said Ravi Kant, the managing director of Tata Motors. “Imagine what excitement there is.”
Environmentalists and safety advocates are less enthusiastic.
Anumita Roychowdhury, the associate director for the Center for Science and Environment in New Delhi, said the ultra-affordable vehicles would worsen India’s pollution and traffic congestion. Already, nearly 60 percent of India’s cities have pollution levels that are considered critical, she said.
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