Amid gloom in auto sector, Japanese firms stand out

Even as domestic passenger car sales hit a decade-low last financial year, forcing major automobile companies to resort to production cuts, a clutch of car makers with parent companies operating out of Japan, have lined up investments of about Rs 13,000 crore to enhance capacity.

While Maruti Suzuki is set to invest about Rs 6,000 crore to add capacity of about 500,000 units across Haryana and Gujarat by 2015-16, Honda Cars India has commenced work to double production by making operational a second facility at Tapukara (Rajasthan) by 2014. Nissan, set to debut the Datsun brand in India later this year, is learnt to be evaluating possibilities to expand capacity to about 600,000 units at its Chennai unit.

A closer look at the sales numbers offers insights into the investment plans of these companies. In 2012-13, every second car sold in India was manufactured by Maruti Suzuki, Toyota Kirloskar, Honda and Nissan Motor Company. In fact, despite the slowdown in the industry, these Japanese car companies have been able to improve their collective market share from 47.9 per cent in 2011-12 to 49.4 per cent. (Japanese auto investments in India)

This growth came at a time when major car companies across the board, apart from utility vehicle maker Mahindra & Mahindra (which saw sales increase 26 per cent to 319,707 units), struggled to raise volumes. While the share of European car makers such as Volkswagen, Fiat, BMW and Mercedes improved from 5.5 per cent to 6.5 per cent, largely driven by the success of the Renault Duster, the market share of US-based Ford and General Motors dropped to 6.2 per cent from 7.7 per cent.

Together, Tata Motors, Mahindra & Mahindra, and Hindustan Motors posted a nominal fall in market share - from 24 per cent in 2011-12 to 23.7 per cent.

Given the uncertainties clogging sales in India, the Germany-head quartered Volkswagen Group is learnt to have shifted to a pause-mode here and has, instead, shifted focus to China. It hopes sales of new models in that country would push it to the number one position by 2018 globally. The company has said no major investment, either for capacity expansion or new product development, for the Indian market is likely till 2015.

Mahindra & Mahindra, too, is said to have adopted a cautionary stance regarding its Rs 4,000-crore investment in a new manufacturing facility, owing to "challenging" market conditions.

In recent times, the only major commitment for investment in capacity expansion by a global manufacturer in India came from Ford India. The company is infusing $1 billion on a second facility in Gujarat, with an installed capacity of 240,000 vehicles a year.