Recently, the Indian Parliament adopted a very ambitious program for the construction of the world's largest network of roads and highways, the National Highways Authority of India (NHAI). The national highways, with a combined length of approximately 70,000 kilometers, will connect all of India through a quadrilateral network of roads stretching from north to south and east to west. This will increase average speeds for travellers and goods alike, thereby placing new demands on both vehicles and roads. In close collaboration with a number of governmental companies and other interest groups, the Indian Ministry of Industry has created a vision and action plan for the development of the Indian automotive industry. The objectives are to, by 2016:
Make India a primary choice for the design and manufacturing of vehicles.

Increase automotive industry profits to 145 billion US dollars, which means that the automotive industry would account for more than 10% of India's GNP. Increase employment in the Indian automotive industry to over 25 million jobs. To reach the above goals, the industrial sector is planning large investments - about 40 billion US dollars has been earmarked for investment over the next few years.

 
New safety and fuel requirements on Indian vehicles
There are currently approximately 40 million vehicles in India, 75% of which are two-wheeled. But as this fleet of vehicles grows and as speeds increase, terms and conditions change and traffic becomes more congested, the issue of safety becomes more and more important. The safety plan for roads, which will cover both passenger cars and commercial vehicles, will be implemented through regulations and ordinances. Compared to current requirements on certification for transportation vehicles, vehicle inspection and maintenance will presumably become increasingly important. Beginning April 1, 2010, the "Bharat step IV (Euro-4)" regulations will be applied in 13 of the largest cities. Even fuel quality must be in line with these standards, which is prompting all manufacturers and oil companies to race to meet the new demands. SIAM (the Society of Indian Automobile Manufacturers)  has taken even further initiatives in regard to fuel consumption ratio markings on vehicles at dealerships.

 
Factors contributing to rapid automotive growth and increased demand
With a growing middle class, increased accessibility to bank loans, higher ambitions among families and reasonable prices, the demand for passenger cars is on the rise. Keeping pace with the improvement in freeways, increase in production, growing demand for consumer products, increasing need for cell phones and growth in housing construction, steel, cement, mining, etc., the market for commercial vehicles is also on the rise. All of these economic activities, including export, will in turn lead to an increased demand for effective logistics, supplier chain management and punctual deliveries.
Good roads and more heavily loaded vehicles have caused a paradigmatic shift in the commercial vehicle transportation sector, and there is a very clear shift in trends from two-wheel drive to three-wheel drive, multiple-wheel drive and towed vehicles incorporating advanced vehicle design. Passenger transportation in big cities has also experienced increased demands in regard to comfort, safety, shorter travel times and fuel efficiency. The higher average speeds on the roads has already dictated the need for trucks and buses with advanced engineering to meet safety and performance standards.

  
Opportunity to establish in India
The many positive signs of growth in both the passenger and commercial vehicle sectors point to great potential on the Indian automotive market. For all participants on the Indian automotive market, it has become essential to have a good balance between engineering and cost-benefit ratios in order to gain a secure foothold on the market. Swedish companies setting up in India must see the benefits of a steadily growing mass market, dare to make decisions concerning forms of collaboration and formulate clear strategies for their business models. To achieve long-term success, it is also important to drive and lead the development in technology and engineering, and deliver innovative and cost-effective solutions in production and development.
Instead of remaining on the "top of the pyramid" and acting on a market with limited volume, a launch onto the Indian market would mean a number of interesting challenges in regard to the optimization of engineering, prices, customer value and deeper customer relations in order to reach down to the "base of the pyramid".

Formulating a clear business strategy and creating win-win situations for all parties involved is a good path into India's mass market. Swedish companies that succeed in this have excellent chances of gaining a foothold and achieving profitable growth.

S.R Venkatesan
BU Head, India Automotive