Global car manufacturers aim to turn India into an export hub as locally produced vehicles targeting wealthier drivers become more globally competitive.
India, which overtook Japan as the world’s third-largest car market after the U.S. and China last year, saw a 14% uptick in auto exports in the year through March, with 662,891 units shipped. That is still well behind Japan’s figure of 3.37 million cars for the same period, but automakers in India see room for further growth.
As incomes rise, Indian drivers are opting for more expensive sport utility vehicles and sedans over hatchbacks. Global makers have responded by launching cars designed specifically for India, which they are now keen to introduce in other markets.
Frank Torres, president of Nissan India, told Nikkei Asia that the Japanese automaker “wants to use India as a big hub for exports.”
Nissan currently exports the Magnite SUV, launched in India in late 2020, to 15 South Asian, Southeast Asian and African nations. The company plans to start exporting left-hand drive variants of the SUV to the Middle East and Latin America. Nissan and its partner Renault committed $600 million this year to roll out six new cars, including electric vehicles, that will go on sale in 2025. All those models will be exported.
“Export [from India] is one of the pillars of our strategy,” Torres said. “It is not only to increase the revenue but also increase our [production] capacity utilization.”
Analysts say the shift in local demand from small, inexpensive cars to higher-quality vehicles could encourage other global automakers to plan more “India-first” models that are eventually exported.
“Carmakers have learnt that if you make a compelling product, Indians are not averse to it,” said Harshvardhan Sharma, head of automotive retail practice 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 harmonized with global markets.”
India’s exports are already on par with its major Southeast Asian rivals. Indonesia exported 512,448 cars in the year through March, up 70% on the year, while Thailand exported 300,000 units between January and June, according to local automobile associations.
India’s lower costs are another potential advantage for an export-focused approach.
Piyush Arora, managing director and CEO at Skoda Auto Volkswagen, told Nikkei Asia that the India unit will spearhead the group’s expansion in Southeast 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 Skoda brand cars as well [to the Middle East],” Arora said. “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 utilized.”
The country has an extensive network of domestic component suppliers and comparatively cheap labor. The Automotive Component Manufacturers Association of India said in a report earlier this month that the auto parts sector grew about 33% in fiscal 2023 to about $70 billion.
Analysts say increasing exports is crucial for global carmakers that have been overshadowed by local rivals such as Maruti Suzuki, Tata Motors and the Mahindra Group.
“They [global carmakers] realized 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,” said V.G. Ramakrishnan, managing partner 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 combined market share of Nissan and Renault in India dropped from 3% in June 2022 to 2% in July 2023. Skoda Auto Volkswagen’s share remained flat at 2.46% during this period.
Nissan’s and Renault’s combined annual capacity stands at about 500,000 units. Torres said the group’s current factory utilization rate of 50% will shoot up to 80% by 2025 as news models hit the market. Skoda Auto Volkswagen’s Indian factories can manufacture about 240,000 cars. The group made some 133,000 cars in 2022, about 55% of its capacity.
An increase in domestic demand coupled with plans to roll out EVs has also spurred local players to build more factories, with a part of the output slated for overseas shipments.
Maruti Suzuki, India’s largest carmaker with a roughly 41% market share, had an annual production capacity of 2.25 million cars in fiscal 2023, according to the company. It is looking to commission a third factory in 2025 with an annual capacity of 250,000 vehicles, a spokesperson told Nikkei, and aims to eventually increase capacity at that factory to 1 million units.
“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 said. “To leverage this opportunity, Maruti Suzuki has put a plan [in place] to increase its manufacturing capacity.”
