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Global automotive producers are making efforts to show India into an export hub, as domestically produced autos focusing on wealthier drivers change into extra globally aggressive.

India, which overtook Japan because the world’s third-largest automotive market after the US and China final yr, had a 14 per cent uptick in auto exports within the yr to March, with 662,891 autos shipped. That remains to be properly behind Japan’s determine of three.37mn automobiles for a similar interval, however automakers in India see room for additional development.

As incomes rise, Indian drivers are choosing dearer sport utility autos and sedans over hatchbacks. Global automakers have responded by launching automobiles designed particularly for India, which they’re eager to introduce in different markets.

Frank Torres, president of Nissan India, instructed Nikkei Asia that the Japanese automaker “wants to use India as a big hub for exports”.

Nissan exports its Magnite SUV, launched in India in late 2020, to fifteen south Asian, south-east Asian and African nations. The firm plans to begin exporting left-hand drive variants of the SUV to the Middle East and Latin America. Nissan and its companion Renault dedicated $600mn this yr to roll out six new automobiles, together with electrical autos, that may go on sale in 2025. All these fashions will probably be exported.

“Export [from India] is one of the pillars of our strategy,” Torres stated. “It is not only to increase the revenue but also increase our [production] capacity utilisation.”

This article is from Nikkei Asia, a worldwide publication with a uniquely Asian perspective on politics, the financial system, enterprise and worldwide affairs. Our personal correspondents and outdoors commentators from all over the world share their views on Asia, whereas our Asia300 part gives in-depth protection of 300 of the largest and fastest-growing listed firms from 11 economies outdoors Japan.

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Analysts say the shift in native demand from small, cheap automobiles to higher-quality autos might encourage different international automakers to plan extra “India-first” fashions which are ultimately exported.

“Carmakers have learnt that if you make a compelling product, Indians are not averse to it,” stated Harshvardhan Sharma, head of automotive retail observe at Nomura Research Institute. “Manufacturers need not plan track one for India and track two for the global markets, as the Indian market is quite in sync and harmonised with global markets.”

India’s exports are already on par with its main south-east Asian rivals. Indonesia exported 512,448 automobiles within the yr to March, up 70 per cent on the yr, whereas Thailand exported 300,000 models between January and June, in response to native vehicle associations.

India’s decrease prices are one other potential benefit for an export-focused method.

Piyush Arora, managing director and chief govt at Škoda Auto Volkswagen India, instructed Nikkei Asia that the India unit would spearhead the group’s enlargement in south-east Asia.

“We are definitely exploring newer markets [for export from India] . . . Until last year, we were exporting only Volkswagen brand cars and now we started looking at Škoda brand cars as well [to the Middle East],” Arora stated. “I definitely believe that we have a cost advantage for the domestic market, and it translates into a cost advantage for exports as well. The strength of India’s low-cost manufacturing possibilities is definitely utilised.”

The nation has an in depth community of home part suppliers and relatively low-cost labour. The Automotive Component Manufacturers Association of India stated in a report this month that the auto components sector grew about 33 per cent in fiscal 2023 to about $70bn.

Analysts say rising exports is essential for international carmakers which were overshadowed by native rivals reminiscent of Maruti Suzuki, Tata Motors and the Mahindra Group.

“They [global carmakers] realised that if they wanted to compete with Maruti, they had to get the pricing right. And for them to get the pricing right, they had to get the volume right,” stated VG Ramakrishnan, managing companion at consultancy Avanteum Advisors. “For them to get the volumes right, the India market was not sufficiently big and the only way was to go for a large-capacity plant that would cater to both Indian and overseas markets.”

The mixed market share of Nissan and Renault in India dropped from 3 per cent in June 2022 to 2 per cent in July 2023. Škoda Auto Volkswagen’s share remained flat at 2.46 per cent throughout the interval.

Nissan and Renault’s mixed annual capability stands at about 500,000 models. Torres stated the group’s present manufacturing unit utilisation price of fifty per cent would shoot as much as 80 per cent by 2025 as new fashions hit the market. Škoda Auto Volkswagen’s Indian factories can manufacture about 240,000 automobiles. The group made about 133,000 automobiles in 2022, roughly 55 per cent of its capability.

An enhance in home demand coupled with plans to roll out EVs has additionally spurred native gamers to construct extra factories, with part of the output aimed toward abroad shipments.

Maruti Suzuki, India’s largest carmaker with a roughly 41 per cent market share, had an annual manufacturing capability of two.25mn automobiles in fiscal 2023, in response to the corporate. It is trying to fee a 3rd manufacturing unit in 2025 with an annual capability of 250,000 autos, a spokesperson instructed Nikkei, and goals to ultimately enhance capability at that manufacturing unit to 1mn models.

“The company is very optimistic about the growth potential of the automobile market in India as well as India’s automobile export potential,” the spokesperson stated. “To leverage this opportunity, Maruti Suzuki has put a plan [in place] to increase its manufacturing capacity.”

Additional reporting by Sayumi Take, Apornrath Phoonphongphiphat, Ismi Damayanti and Nana Shibata

A version of this article was first revealed by Nikkei Asia on August 16 2023. ©2023 Nikkei Inc. All rights reserved.

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