For decades, the automotive industry in India lagged behind those of the United States and Japan. However, after the nineties, things changed dramatically, fostered by different means including Indian trends, credit access to customers, highly trained professionals and comparably low labour cost. Improvements were especially due to the Indian Government’s enabling policies that eased regulations on foreign trade and restrictions on private companies, thereby attracting investment and growth in a country whose population is around 1 billion.
India – nowadays home to more than 40 million vehicles – has one of the lowest ratios of cars-to-people according UN Statistics (see table 1).
In conjunction with this statistic, the twin factors of low car penetration and rising incomes are likely to trigger increased demand for automobiles in coming years in India (Indian Business News). Table 1. Number of motor vehicles per 1,000 people, by country Country | Motor vehicles per 1,000| United States| 765| Australia| 619| Canada| 563| Germany| 546| Japan| 543| United Kingdom| 426| India| 12| China| 10|
Source: UN World Statistics Pocketbook and Statistical Yearbook, 2007 (cited in Farres et al.
2009) The low car penetration and high demand of the Indian new middle class is the focus of different global companies like General Motors, Honda Motor, Mitsubishi Motors, Fiat, Ford and Maruti Udyog (See table 2). Competition is expected to intensify further as Indian automotive manufacturers obtain greater access to debt and equity financing in the international capital markets or gain access to more advanced technology through alliances. Table 2.