Indian auto giants move to China
Domestic and international automakers in India are now rethinking their ambitious growth strategies amidst the rising cost of fuel and soaring interest rates in the country. Last year, many auto makers came up with multi-billion dollar plans following an impressive 30% increase in car sales that almost reached the two million mark. India is currently the world’s sixth largest auto market and trends showed that it could become the third largest market by 2020. It was also positioned to become the global hub for small cars. All these have changed within the past few months and many plans are being reconsidered.
India’s automakers are shifting gears
The distorted price of fuels, hefty government subsidies for diesel fuel and uncertainties in the labor sector have caused considerable dissatisfaction among auto makers. Added to the rising interest rates, there is growing concern about the rigid labor laws that are now forcing manufacturers to move to China where the production cost is 20% cheaper. Big companies such as Maruti Suzuki India Ltd. (MSIL), India’s largest automaker, Honda and General Motors are all facing labor problems. India’s largest carmaker, MSIL, is also facing labor problems in Haryana. Among the companies that have already shifted gears are:
- Hyundai, which has transferred part of its production of i20s to Turkey as a result of labor problems in Channai, south India.
- Bajaj Auto, a leader in two-wheeler manufacturing, had to relocate major parts of its manufacturing plant from Pune near Mumbai to China because of high labor costs.
- TVS Motors, India’s third largest motorcycle manufacturer which exports 200,000 bikes a year also moved two-thirds of its export production from Tamil Nadu to China.
Automakers are also finding it increasingly hard to find vast tracts of land in India. The biggest blow however, has been the constantly increasing interest rates which have gone up almost a dozen times since March 2010 as the country continues to fight inflation. (September 10, 2011)
