India key export base for auto firms
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India key export base for auto firms

India is evolving into one of the top global export bases of certain car models made by multinational automobile companies. This is true in case of bigger models, too, and not only in small cars, considered a speciality of the Indian auto industry. The trend is increasingly visible among global brands. Take the case of Germany’s Volkswagen. The Vento is produced only in India and Russia. And, India is the larger of the two.

“In 2016 calendar year, Volkswagen India produced 83,000 Vento cars, against Russia’s 60,000. Russia is also primarily producing the Vento for domestic consumption. They have low volume export to East European markets,” said Andreas Lauermann, president and managing director at Volkswagen India. However, nine of every 10 Ventos made at Volkwagen’s Chakan unit near Pune is exported, making it the biggest export contributing unit for this model.

Korea’s Hyundai, second biggest in India’s car sales, has a similar story with its two-year-old sports utility vehicle (SUV), the Creta. India is its largest producer and exporter. About 45,000 units of this went for export in 2016. However, unlike the Vento, Creta has substantially bigger local demand. Nearly 93,000 units were sold in India last year.
Hyundai is also geared to make India one of the top export hubs for its fifth-generation Verna, a sedan launched recently after a full model change. India will be the fourth production hub for the car, after South Korea, China and Russia.

What is driving these companies to ship large volumes from India? A prominent factor is that many have not had a great run in the Indian market, leading to under-utilisation of capacity. A mix of export and local strategy is leading to better utilisation. Also, India has turned to be a cost-competitive production base for these companies, with multiple plants across the globe. “Our cars manufactured in India have found high levels of acceptance and are in demand in several markets around the world, as they live up to global standards. And, India offers a great low-cost manufacturing opportunity. We have been able to localise to a great extent and that has given us a further edge,” said Lauermann.