High lending rates and rising petrol prices have effected the sales of cars in India, to overcome this sluggish demand in domestic market, car makers are looking to export vehicles globally to make up for the low domestic sales. According to Society of Indian Automobile Manufacturers (SIAM), in last six months (April-October 2011) the car sales in India dropped by 1.8 percent to 1,378,513 units while in the same time period the export rate registered a growth of 19 percent to 293,426 units.
In the last fiscal, domestic car sales grew by 33 percent while the car exports registered a less than 2 percent growth during the same period. However this time the trend has reversed. The overall expansion of exports was led by the local manufacturing units of global car makers such as Nissan Motor Co. Ltd and Ford Motor Co., as both of auto giants have identified India as an export hub for small cars and have recently started exporting their products from their plants in India. Nissan which sells products like Nissan Micra, the Sunny sedan and the X-Trail SUV in India, started exporting Micra in October 2010. The firm already consigned 59,770 units of compact hatchback in the period of April to October 2010.
Similarly, Ford India also started exporting its popular hatchback Ford Figo in June last year, and raised its export volume to 15,402 units compared to the same time span from 4,882 units a year ago. The export value for the last four years suggest a strong correlation with domestic demand. Whenever the local market witnesses a sluggish growth, auto manufacturers intensify exporting their products and vice versa. According to car makers, by exporting their petrol models globally will benefit them, as per now the demand for petrol cars in India has dipped and customers are moving towards diesel cars in the country. India's largest domestic car maker and second largest car exporter, Maruti Suzuki India Ltd and Hyundai Motors India Ltd, also did not post strong growth.
Hyundai dispatched around 144,000 units from April to October, registering a growth of 1 percent whereas Maruti India registered a decline of 25% to 63,850 in comparison to last year. After the global economy faced a crisis following Lehman Brothers Holdings Inc.’s collapse, European government in some key western markets offered incentives to car buyers to trade fuel cram cars for fuel efficient cars. This increases the demand for global car makers like Suzuki Motor Corp. and Hyundai Motor Co., which made India a manufacturing hub for such vehicles. In the words of Ford's Boneham, currently company exports its models to 27 countries and has plans to add another half a dozen countries to the list by June next year. By exporting a high number of cars to newer locations or countries, auto makers are not just hoping for better capacity utilization, but also making benefits by making the most of sliding rupee against major currencies.
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