But each global firm is not following a similar strategy. BMW and Mercedes may make India as their manufacturing, r&d and outsourcing hub, or a gateway to sell in the region. Volvo, which debuts in India this September, is not overly anxious to drive in volumes right now. Over the next few years, India can become the regional distribution centre for some of the global players.
Says Chenoy, "New entrants are looking at building the market in India. As tourism is a definite growth area and foreign visitors, including business ones, would like vehicles they are used to driving in their home countries, the demand is bound to increase." Adds Murad Ali Baig, noted auto expert, "It will only be a while before the players start firing on all cylinders. For them, the focus would be more on image-building than marketshares."
However, they are still excited about the long-term prospects locally. Explains Paul de Voijs, MD, Volvo Car India, "Look at how the premium market has evolved in countries like China and Russia. Now, of course, we know that every company is not the same. But an inflation under control, a galloping gdp growth, and an improving infrastructure are enough economic indicators for a luxury car manufacturer."
Agrees Benoit Tiers, MD, Audi India, "We have ambitious growth plans for India and hope to sell 3,000 vehicles by 2010. Our goal is to become the leading luxury brand here." Porsche too does not have plans to set up an assembly unit in India. With models like Cayenne, Boxter and Carrera, it has sold 300 cars, and averages sales of seven units a month at price tags between Rs 50 lakh-1.25 crore.
"The market is gradually opening up," informs Anshuman Asthana, manager (sales), Porsche Centre, "and we expect sales to go up. Not large numbers but it shows where the Indians are headed." Same is the case with Volvo, which is keen to get a feel of the market. "Volvo's S80 and XC90, with their refined styling and enhanced luxurious features, will be imported from Sweden," says Voijs.
The fact is that the luxury car market in India has a huge potential when compared to other emerging markets like China. To cite an example, the figure for India is much less than China, where the luxury car market share is 7.5 per cent of the overall sales of 4 million units per annum, according to industry sources. "We feel there is a lot of scope for growth in India. Globally, we sell about 1.1 million vehicles per annum," says Suhas Kadlaskar, director (corporate affairs and finance), Daimler Chrysler. In the first seven months of '07, the company sold 1,454 Mercedes Benz models, but this is nothing compared to China, where sales have crossed 21,000 units per annum.
At the same time, there are others who see value in making India one of their strategic global hubs. Czech carmaker Skoda Auto has already announced it will almost double its production capacity in the country. Skoda will also export its models to Bangladesh. France's Renault, which has partnered Mahindra & Mahindra to make Logan Sedan, may also export cars and spare parts from India.
German giant BMW too considers India an important stop in its global manufacturing roadmap, and has mega investment plans. Since the company believes the demand for premium cars is likely to double in the foreseeable future, it hopes to upgrade its Chennai plant to make it a global operational and r&d sourcing centre. The German major aims to reach a target of 3,500 per year by 2012 and 10,000 by 2015.
While Daimler Chrysler may not want to admit to the temptation of making India a manufacturing hub, the initial strategic signs are telling. It plans to consolidate production under a new, mega facility near its existing one in Pune that will be completed by the first quarter of '09. "The unit will have an initial capacity of 5,000 which will be ramped up in tune with the mission plan that envisages a compounded annual growth of 10 per cent," says Daimler's Kadlaskar.
Apart from a regional blueprint, brand strategy seems to be the top priority for Maruti Udyog, which launched the new Grand Vitara, a top-end stylish and Suzuki's third generation suv. "We need to diversify the product line-up to meet the rapidly changing customer demands," explains Jagdish Khattar, MD & CEO, Maruti Udyog. He adds that the Grand Vitara widens the range of products that the company offers.
Despite the optimism, there are a few speedbreakers. One of the most important is that the luxury segment in India is growing at a very slow pace. This may partially explain the aggression among the global auto firms to expand the market in a hurry. This may also explain why firms like Daimler and BMW are even willing to offer loans to woo customers. For, if they fail to do so, their FI (Formula India) strategy will crash in no time.
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