Strategy Analytics: Indian automotive market adapts to a volatile economy

MASSACHUSETTS, USA: The recently-published Strategy Analytics report India update: Flexibility and localization in a volatile market, comments on how the automotive industry in India is adapting to the challenging conditions posed by the downturn in the economy there. Demand for electronic systems fitted to light vehicles assembled in India had fallen by 7.7 percent in 2013.

Strategies to cope with the downturn include increasing the level of localization in the supply chain, raising exports to other emerging markets, utilizing economy car designs and platforms for product development, as well as developing sub-compact models for the sub-4 meter segment that receive favorable tax rates for Indian consumers.

Further developments also include raising fuel efficiency from engine management systems, with opportunities for alternative fuel technologies; offering affordable safety systems, such as front airbag and anti-lock brake systems, as well as offering more comfort and convenience systems, such as automated transmissions and climate controls.

Kevin Mak, senior analyst in the AES at Strategy Analytics said: "Recent currency fluctuations and high inflation have dampened demand for light vehicles in India, affecting the price of vehicles and the availability of credit to consumers. Auto makers are, therefore, using export strategies to ensure that utilization rates remain profitable at their Indian assembly plants. Vendors are also responding by raising their development and production capability in India, to limit cost and to develop systems that are more relevant to the Indian market."

Such developments could enhance India's standing among emerging automotive markets. Backed by a young and urbanizing population, Indian demand for light vehicles is also expected to grow again. But Mak added a warning: "Labor unrest continues to affect the Indian automotive industry. If this issue is not resolved fully, then this could limit the industry's future potential."