News: Indian auto sector set for investment boom

(DNA 24/07/2006) New Delhi - The Indian automobile industry is on an investment overdrive. Whether it is passenger car or two-wheeler makers, commercial vehicle companies or three-wheeler ones - everyone appears to be in a scramble to hike production capacities. Result? India is expected to witness over Rs 30,000 crore of investment over the next three-four years (or by 2010). And these mega bucks span all segments of the market, from small cars to heavy duty trucks and buses.

Not only Indian companies, several overseas automobile majors are also planning to put up capacities between now and the turn of the decade, according to estimates by the Society of Indian Automobile Manufacturers (SIAM).

And what does this kind of mega investment mean for you, the car buyer? Well, over the next one year, as many as 20 new cars could be unveiled. Sample this: After launching the new Wagon R, Maruti Udyog is coming out with a new Zen and the diesel Swift during the next few months; Hyundai will surely be unmasking the Verna apart from a brand new diesel car. The Rs 1 lakh Tata people’s car would have been unveiled two years from now; General Motors will launch a mini and maybe a compact car during this time whereas the Mahindra-Logan project will be up and running some months down the line.

In terms of investments, most companies in the automobile sector have made their intentions clear. While market leader Maruti Udyog has already set up its second car plant with a manufacturing capacity of 2.5 lakh units per annum with an investment of Rs 6,500 crore investment (Rs 3,200 crore for diesel engines and Rs 2,718 crore for the car plant itself) Hyundai and Tata Motors have also announced plans for investing a similar amount over the next three years. While Hyundai will bring in more than Rs 3,800 crore to the country, Tata Motors will be investing upwards of Rs 2,000 crore in its small car project.

General Motors (Rs 100 crore), Ford (about Rs 350 crore) and Toyota have also announced modest expansion plans even as Honda Siel has earmarked Rs 3,000 crore over the next decade for India - a sizeable chunk of this should come by 2010 since the company is also looking to enter the lucrative small car segment.

Some new entrants may also test the waters before long. They include Citroen, Volkswagen AG, Nissan (separately, apart from its tieup with Suzuki), Alfa Romeo, Maserati, Land Rover and Aston Martin are the big names being mentioned in passenger cars.

In the commercial vehicle segment, Ashok Leyland and Tata Motors have each announced well over Rs 1,000 crore of investment whereas M&M’s joint venture with International Trucks is expected to see an infusion of at least Rs 500 crore.

In two-wheelers, Chinese bike major Lifan and the iconic US brand Harley-Davidson are expected to enter the country soon. Market leader Hero Honda is looking at establishing a fourth manufacturing plant even before the third one has come up, whereas Bajaj Auto and TVS Motor are going to the excise-free zones of Himachal Pradesh and Uttaranchal for putting up new capacity.