Not content with being the numero uno by far in the domestic passenger vehicles market, the Rs 76,140 crore Maruti Suzuki has scored yet another feather in its cap. It has dethroned, Hyundai Motors India, the second largest passenger vehicle company in India. Incidentally, Hyundai Motors was the No.1 exporter of passenger cars from India since it began operations in the country nearly two decades ago.
For the first six months this fiscal year, Maruti Suzuki exported 57,300 units of passenger vehicles (PVs) as against 54,008 units during the same period a year ago. Sales were up 6 per cent year-on-year, according to the latest data by Society of Indian Automobile Manufacturers (SIAM).
Hyundia’s exports slipped to 44,585 units as against 63,014 units during the period under consideration, a decline of 29.25 per cent. Hyundai has now fallen behind Volkswagen and General Motors in the pecking order of passenger vehicle exporters from India.
Between April-September 2017, Volkswagen India exported 50,410 units at a growth of 16.92 per cent. It is now the second biggest exporter of PVs from India behind MSI. Last year, it had exported 43,114 units during the same period. Interestingly, General Motors (GM) which had on May 18 this year decided to stop selling its vehicles in India after struggling for over two decades to make a mark, is now the third biggest exporter of PVs from the country. In the first half of the fiscal, GM exported 45,222 units as against 30,613 units in the year-ago period, a growth of 47.72 per cent.
Another US auto major, Ford also posted impressive growth in exports of PVs from India during the period. The company's overseas shipments stood at 42,412 units as against 31,467 units in the same period last fiscal, up 34.78 per cent making it the fifth biggest exporter from India. Nissan Motor India, which was the third biggest exporter last year saw its overseas shipments during the first half of the fiscal decline by 37.11 per cent to 30,872 units from 49,091 units in the same period last fiscal.
Typically, there are two reasons why companies resort to exporting cars from any country. The first being, that when they first set up plants in a growing market, their capacities are in far excess of what they intend to sell in the domestic market. When Renault and Nissan set up plants five years ago in Chennai, exporting to markets nearby was one of the key strategic targets. The Renault-Nissan combine set up massive capacities keeping in mind the long term demand, but decided to export anyway to mitigate capital costs in the short term.
The strategy was no different with Hyundai and Volkswagen. The former kept adding capacity for many years as it introduced new models like i10 and i20, but also kept its pace of exports going. On the other hand, Volkswagen had to keep its exports up as its target for capturing 10% of the domestic passenger vehicle market has not fructified nearly a decade in the country.
The second reason why companies export is when the scale of operations in a country becomes large enough to become globally cost competitive producer of vehicles. This happens when local companies set up bigger and bigger plants, in anticipation of a growing domestic demand and use the spare capacity to service larger export markets. For this to happen, it is also necessary for attendant infrastructure, be it ports or roads, be in place.
Despite a fast growing domestic market for Maruti Suzuki, its focus on exports, indicates the growing opportunity for automobile makers to further expand their manufacturing footprint in the country in the coming years. India, is currently the fifth largest car market in the world, selling nearly 3 million vehicles a year compared to 20 million by China. India is also expected to be the third largest car market by 2020, displacing EU and Japan. However, India doesn’t figure in the top 15 exporters of automobiles. Germany was the top exporter in 2016, accounting for 22% of total global passenger vehicle exports, followed by Japan (13.2%) and US (7.7%).
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