THE last few weeks have seen top honchos of the world’s leading automobile manufacturers make a beeline for India, either to inaugurate new plants, or to expand their existing production capacities in the country.

The high-profile auto czars who visited India included G. Richard Wagoner Jr, chief executive of General Motors, Carlos Ghosn, the chief executive of Renault-Nissan, Luca Cordero di Montezemolo, the Fiat chairman, and Norbert Reithofer, chairman, BMW AG.

Most of the global auto majors have also unveiled ambitious investments in India in recent months. According to auto industry analysts, these investments – announced by GM, Fiat, Volkswagen, Honda, Nissan and Hyundai – add up to over $1.5 billion in Greenfield projects. Brownfield projects add up to several hundred million more dollars, as all the leading players, including Toyota, Suzuki, Tata Motors, and Honda, plan to expand their facilities. Mitsubishi and Nissan also plan to invest in new facilities in the country.

And why are all the auto majors setting up manufacturing plants in India? The global auto industry is undergoing a major transformation. According to Wagoner, Asia is emerging as the prime driver for automobiles; in about 10 years, the continent would account for 70 per cent of global auto sales.

China and India will not only be the two biggest markets in Asia, but also major production hubs. Automobile giants from the US and Japan hope to export large volumes of cars from India over the coming years.

Santosh Mohan Dev, India’s heavy industries minister, estimates that total auto sales in the country will jump from under $35 billion at present to over $145 billion in under a decade. India is also emerging as a leading auto component producing nation – the sector is likely to balloon from around $12 billion at present to about $40 billion in seven years.

Wagoner said GM’s off-take of auto components from India alone will add up to about $1 billion within five years. All the leading international auto parts manufacturers are also eyeing India as a significant source for supplies and are making arrangements with local partners here.

The relatively low wages in India – a fraction of the costs in Detroit or even in the southern parts of the United States – the burgeoning demand for automobiles, and the steady decline in the western markets are forcing American, European, Japanese and Korean auto firms to set up production facilities in India.

The Indian government is also encouraging international manufacturers to set up plants in the country. Tax laws have been reformed, and the excise duty on small cars today is down to 16 per cent. Car sales are accelerating at about 15 per cent annually, and are expected to grow at a brisk clip for the next five years.

The entry of the sub-one-lakh car by Tata Motors in the next two years will boost demand for small cars even further. The auto sector is expected to account for 10 per cent of the country’s gross domestic product (GDP) in about 10 years.

Cities like Pune, Delhi, Chennai and Nashik are emerging as major automobile production centres, with a comprehensive network of auto component makers and suppliers as well. Indian universities are also churning out huge numbers of engineers every year, needed to run these workshops.

GM, which is putting up a new plant near Pune in Maharashtra, is doubling its production to nearly a quarter million cars a year in India. Three other manufacturers, including Japan’s Suzuki (which controls Maruti), Korea’s Hyundai, and India’s Tata Motors also produce nearly a quarter million cars each year.

By next year India will be producing almost three million automobiles every year, as against 10 million by China. At the turn of the century, India was producing 632,000 passenger cars a year and China about 600,000. The last seven years have, however, seen China’s automotive sector expand phenomenally.

The head honchos of global auto giants are now visiting India to see if a similar story will unfold here over the next few years. Ghosn of Renault –Nissan inaugurated a new factory recently together with Anand Mahindra of Mahindra & Mahindra at Nashik, where its Logan will roll out. The car costs almost $10,000, but Ghosn was hopeful that the European firm will be able to launch smaller cars costing a third of that price.

Automakers are hoping to lure the millions of two-wheeler riders in India, which could transform the auto business. An average motor-cycle costs about Rs50,000, but if Tata Motors succeeds in producing a car costing Rs100,000, it would dent the two-wheeler business, and millions of Indians would upgrade into the four-wheeler segment.

GM, which has traditionally been selling mid-size cars in India, has also launched its small car, the Chevy Spark, in India, with a price tag of around $7,500. The Spark is expected to take on small cars made by Maruti and Hyundai.

BMW’s Reithofer inaugurated the German luxury carmaker’s plant near Chennai in the southern state of Tamil Nadu. Unlike the other auto majors, BMW will be producing less than 2,000 cars a year; its vehicles, priced between Rs2.5 million and Rs4.5 million, are aimed at the upper-end of the market.

According to Reithofer, demand for luxury cars in India is expected to double in the near future, and BMW was positioning itself to take advantage of the growing demand.

INTERNATIONAL automobile manufacturers are also looking at India as a potential export hub for their vehicles, especially small cars. Suzuki-controlled Maruti is already exporting over 50,000 cars a years, and plans to raise this to 400,000 shortly.

The company is putting up a new factory near Delhi, to produce its sub-compact, the Swift. With several such ambitious expansion and export plans, the auto industry is worried as to whether Indian ports would be able to handle the increased demand.

Many of the auto giants are now scouring around for dedicated car terminals, which could handle huge volumes involving hundreds of thousands of cars. At present, Mumbai and Chennai ports are equipped to handle auto exports, but both the ageing ports are inefficient and would be unable to meet the future requirements.

Automobile manufacturers are now toying with the idea of setting up dedicated port facilities in other areas to ensure smooth movement of their vehicles destined for international markets. Maruti is likely to join hands with Nissan to set up such a facility in Gujarat, to handle nearly half a million cars a year.

Automobile factories located in the Delhi-Haryana region are keen on setting up terminals along the Gujarat coast, as it is the closest for them. Gujarat also has a few major private ports, established recently, and with better infrastructure than India’s major ports such as Mumbai and Chennai.

The government of India is also planning a dedicated freight corridor between Delhi and Mumbai, which would help speed up movement of vehicles to the Gujarat ports. Manufacturers like Ford and Hyundai have their plants near Chennai, and are looking at options for dedicated export terminals.

Domestic giants like Tata Motors and Mahindra & Mahindra are also aggressively looking at the overseas markets, especially in Asia, the Middle East, Africa, Latin America and Europe. Both have been successfully exporting their products to these markets in recent years.

Tata Motors recently launched its mini-truck, the Ace, in Nepal. The company has sold nearly 100,000 mini-trucks in India and Sri Lanka.