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Chinese cars on Indian roads

December 12, 2012

Very soon, Indians will be driving Chinese cars manufactured in India on roads financed and constructed by Chinese firms.

China’s largest sport utility vehicle (SUV) and pickup manufacturer Great Wall Motors Company Ltd. is contemplating entering the Indian auto market. According to the Wall Street Journal, the privately owned enterprise is looking at locations for a factory in three states Gujarat, Tamil Nadu and Maharashtra and is close to finalising a destination soon. After breaking ground on its factory early next year, GWM plans to roll out its first SUV in India by end 2015. GWM officials were recently in India to meet members of the Society of Indian Automobile Manufacturers to iron out details.

Taking advantage of the potential within India’s fledgling automotive market, Beiqi Foton Motors, China’s largest commercial vehicle maker who recently  committed the largest Chinese investment in India (US$ 380 million (Rs 1,676 crore)) has already acquired land for a factory to manufacture commercial vehicles in Maharashtra, the state to which India’s commercial capital Mumbai belongs. Beiqi Foton Motors already has a deal with Cummins India to source engines in India and export them to China. Furthermore, Cummins Inc has a joint venture with Foton Motor in China since 2009. Beijing Foton Cummins Engine Company Ltd (BFCEC), the world’s largest engine production, is a 50:50 joint venture between both the companies and produces light duty diesel engines for the Chinese market.

According to the WSJ, A foray into India will enable Foton and Great Wall tap into a market that is currently in the midst of a slowdown, but is expected to become one of the biggest markets globally by the turn of this decade. The two will face competition from companies such as Tata Motors Ltd., Volvo AB, Mahindra & Mahindra Ltd., Hyundai Motor Co.  and Ford Motor Co., which already have factories in India.

Sales in China—the world’s biggest automobile market—have decelerated sharply and are expected to grow between 5 percent and 8 percent annually over the next decade, according to JP Morgan. China’s automobile sales growth slipped to 2.5% in 2011, the firm said. While Indian sales have also slumped, they are expected to rise as consumers growing affluence leads to  an increased demand in the gas guzzlers.  Sales of SUVs surged 62 percent during April to November, compared with a 1.3 percent gain in car sales. The sales of SUV’s and commercial vehicles both are only expected to increase as the government fights to stick on by providing her citizens with better infrastructure.

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