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									India Becoming Production Hub for Compact Cars
By Anjana Pasricha
New Delhi
25 September 2009

                                 India's exports of automobiles have surged as global
                                 automakers turn the country into a production hub for
                                 compact cars. A host of companies such as Suzuki, Ford
                                 and Toyota plan to spend millions of dollars in the
                                 coming years to build auto plants in India.

                                  When exports of automobiles crossed a quarter of a
                                 million in the first seven months of the year, India's auto
                                 industry had two reasons to cheer.

                                 Although India exported fewer cars compared to other
                                 Asian countries such as Thailand and South Korea, it saw
Maruti-Suzuki executive poses    a rise in exports, whereas these countries witnessed a
at unveiling of A-Star concept
                                 drop. Also, for the first time, India exported more cars
                                 than China.

All the cars exported from India were compact cars produced by global automakers
such as Suzuki and Hyundai.

The surge in exports comes as India turns into a production hub for cheap, fuel efficient

Yogendra Pratap, editor of Auto Bild India, says automakers first began making
compact cars in India to cater to a booming domestic market, where three out of four
cars sold are small cars. But as worldwide demand for compact cars began growing due
to rising fuel costs and stricter controls on emissions, manufacturers began to export
cars from India.

"Companies like Hyundai and Suzuki are basing production of some of their models only
in India, which gives them volumes, so helps reduce cost for domestic sales and
exports as well," Pratap said. "We give them a huge market here, and on top of that if
cars can be exported, there are great economies of scale, something that could not be
achieved in Thailand for example where the domestic market is really small. "

European countries such as Britain and Germany are popular destinations for small cars
made in India.

American automaker Ford is the latest to announce plans to launch a compact car in
India next year. Ford will double capacity at its car plant in southern India to make the
"Figo," which it also plans to export. Ford has said small cars represent the future for
automakers, and expects sales of these cars to double over the next decade.

Other companies such as Suzuki, Nissan, Toyota, and Honda have already announced
plans to spend about $5 billion to make small cars in India or increase production at
their existing plants over the next three years.

Their entry is not surprising. India is home to the world's cheapest car, the $2,055 Tata
Nano, a car which auto analysts say showed the world that India had the engineering
skills and low cost facilities needed to make a small, contemporary car.

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