Big Car Companies: A Passage To India (F)(TTM)

Now that most large global car companies have staked out positions in China, the rush in on to get market share in India. It is no wonder. The infrastructure of large roads is still in the process of being built. The country has an emerging middle class. Labor costs for auto factories are reasonable.

The market in India is clearly growing rapidly. According to the FT "more than 1.6m light vehicles and 7.8m motorbikes were sold in India last year, compared with 675,116 light vehicles and 4.2m motorbikes in 2002."

As Ford (F), Volvo, Nissan, VW, and others elbow into the market, they may not find it as attractive as they imagined.

The push into markets outside the US and Europe was less urgent when those markets were growing. The Western infrastructure to sell millions of cars per year was already in place. In a good year, the US market was worth 17 million cars and light trucks. Financing was plentiful and buyers wanted a new car every two years or so.

Companies like Ford will find that India is already crowded with its global peers and powerful local interests like Tata Motors (TTM), the leading contender to buy Jaguar and Rover.

Emerging markets may seem like good places to sell cars, but when a dozen or more companies are fighting for the same consumer, business is likely to be less brisk than imagined.

Douglas A. McIntyre