Managing Growth

Managing Growth


Dear reader,

Is India, once counted among the most progressive and promising automotive market after China, losing its sheen? Do we still have the wherewithal to curb the menaces of high inflation, increased interest rates, lack of finance availability, poor infrastructure and steep rise in fuel prices to turnaround the Indian industry’s growth story? With the economy growing at its slowest pace in a decade, can the market expect retail sales to liven up the mood in this festive season?

Although pundits of the trade believe India has the opportunities that support growth, the industry is atypically stagnant. Industry body SIAM too is believed to be considering reassessing its yearly forecast for a second time this year, to the mid-single digits or thereabouts. Discounts and freebies offered by automakers are not providing enough pull, and recent price hikes by a few manufacturers aren’t helping sales either.

While domestic consumption is at its slowest in many years, the debt crisis in Europe too has been a hindrance for manufacturers with large export focus. New markets in Africa, Middle East Asia and Latin America now promise to be hotbed for automobile exports. Largely, the industry seems extremely bullish about the Indian industry’s long-term growth potential. The key lies in not losing its long-term focus, or swaying under pressures created by short-term figures.

The pressure is evident among automotive suppliers as well, but the domestic industry expects to grow at a rate of about 8-10 % this year, while exports are pegged to grow 15-20 %. The question is, should the industry be content with such growth estimates, when despite loud claims about quality and cost-competitiveness, the Indian industry still hasn’t been able to make a mark globally. Several players have acquired important and large global players, but the challenge continues to be in the realm of technology development, core engineering and innovation.

As of today, the Indian industry’s spend on R&D and product innovation is a meagre 0.4% of its annual turnover, which pales in comparison to countries like China (1.8 %), South Korea (1.1 %) or even Brazil (1.1 %). Can we expect rightful steps in this direction in the coming year?

Deepangshu Dev Sarmah


New Delhi, October 2012