Indian Small Car Market

Assignment 4-4: Country Analysis 3

  MBA 750

  Sanjay Arya

  Prof. Douglas Ruml

  December 17th, 2009

Volkswagen - Entry into the Indian Small Car Market

      Car-ownership is an emblem of economic progress in India and is very high on a wish list of consumers. The face of the Indian automobile market has changed tremendously following economic liberalization in 1991 and will change further with the introduction of Tata Nano. Rising incomes, better financing and improved roads are the combined drivers for strong growth of automotive sector in India. In the fiscal year 2006-07, the Indian passenger car market grew by 20 percent, making India one of the fastest growing passenger car markets in the world in absolute terms. It is expected that the Automobile Industry in India would be the 7th largest automobile market by the year 2016. Current market leader in Indian automotive industry:


      Analysts say domestic growth rates for small cars have been boosted by the government’s effort to tackle the fallout of the financial meltdown in the second half of 2008. As a result, taxes on small cars were cut to 8 per cent. Car ownership in the developing world shows immense potential for growth. A report prepared by Deloitte says there are 511 cars on the road for every 1,000 citizens in the UK, compared to 22 per 1,000 in China and just 11 for India. Analysts predict that the largest purchasing segment by 2020 will be first-time buyers.

      Volkswagen brand is associated with certain standards of safety, they are not meant to be used only for intra-city travel. Volkswagen recently rolled its first Indian made car the ‘Volkswagen Polo’ from its Pune in Maharashtra. The price of Polo is about Rs 6 lakhs which is about 5-6 times that of Tata Nano, depending on options. In order to compete with the low-cost car, Volkswagen-Suzuki will have to cut on every step in production without sacrificing the safety that the company is known...