I want to appeal all the people world over from the ramparts of the Red Fort,” Prime Minister Narendra Modi said in August last year, “come, make in India; come, manufacture in India. Sell in any country of the world, but manufacture here.”

For inspiration, his target audience need not have looked beyond India’s vast automobile factories that build millions of vehicles for global markets every year. Just to illustrate, South Korean car maker Hyundai, which set up shop in the southern city of Chennai in 1996, now exports to 119 countries, shipping over 190,000 cars in 2014-15.

Exports of cars, utility vehicles, commercial vehicles and two-wheelers have grown every year since 2000. In the financial year that ended in March, Indian factories exported a record 3.5 million vehicles which, according to industry figures, was 15% more than what they managed a year back. This compares with domestic sales of just above 2.6 million units during the same period, up 5% from a year ago.

Exports have helped automobile companies mitigate risks from the cyclical demand in home and overseas markets. The tepid demand in the local market in the last three years saw a renewed exports thrust by automobile firms, particularly those that saw a sharp decline in domestic volumes.

Car sales in India contracted by 7% and 5% in fiscal 2012-13 and 2013-14, rising 5% in fiscal 2014-15.

Even as overall automobile exports rose, car exports fell 1.66% to 542,082 units in 2014-15 from 551,218 units in 2013-14. The reason: an 18% fall in overseas shipments by top exporter Hyundai Motor India Ltd to 191,221 units. An HMIL spokesperson attributed this to the sharper focus on domestic markets, adding that the maker of i20 small cars, Verna sedans and Santa Fe SUVs will “keep penetrating the existing markets and expand our business in the newer markets in the future”.

There is another reason, though. In September, Hyundai stopped shipments to Europe from its Chennai facility, assigning the task to its plants in Turkey and Czech Republic. The Indian operation continues to be the hub for Asia, Latin America and Australia, but it was Europe that accounted for 40% of HMIL’s exports.

“The decision to shift a product export to a specific overseas plant such as Turkey is a strategic decision to meet the customer demand in that specific market while balancing the domestic market demand,” the HMIL spokesperson said.

Where Hyundai slowed, others have leapt ahead. The local arm of Volkswagen AG, which makes Polo small cars and Vento sedans, raised 2014-15 exports by 95% to 64,994 units even as its domestic sales slipped by 14.3% to 45,018 units. Similarly, the local arm of Ford Motor Co., which saw domestic sales fall 11% to 75,138 units in 2014-15, raised exports by 70% to 81,703 units.
Ford, which makes Fiesta sedans, Figo small cars and EcoSport SUVs at its Chennai plant, is now building a second plant at Sanand in Gujarat, which will triple its exports. The $1 billion factory will produce 240,000 units per annum, out of which at least half will be shipped overseas.
The higher proportion of exports in overall volume was seen at the local arm of the local unit of Japan’s Nissan Motor Co. Ltd as well. Albeit a small base, local sales at the firm rose 25% to 47,474 units while exports rose 3.45% to 120,331 units in 2014-15.

Nissan’s India operations head Guillaume Sicard said this year could be even better for exports, with the government’s focus on manufacturing. “They have already streamlined documentation and consolidated schemes into simple and clear objectives for the enhancement of the automobile industry. We are also seeing increase in incentives for exports, especially for Europe,” Sicard said.

He, however, disagreed that exports are a strategy to compensate for poor domestic sales.
“We do not use exports as a strategy to tide over the slowdown in a market; we particularly prefer a robust environment in our domestic markets, as well as exports.”

Rakesh Batra, who heads the auto practice at consultancy EY India, said exports from India will continue to be the preserve of global automakers and not homegrown ones.
According to Batra, “unlike a Tata Motors Ltd or a Mahindra and Mahindra Ltd who need to invest in all the three areas—product, brand and distribution—making exports a strategic play, for the multinational firms it’s all about a sourcing decision”, since they own strong brands and networks.

With limited scope for products made in India, the addressable markets will also be select, he added, referring to countries in West Asia, Latin America, Africa and Southeast Asia. Trade agreements between South Korea and the European Union, too, have prompted companies such as Hyundai to shift some production out of India.

Sugato Sen, director general of industry body Society of Indian Automobile Manufacturers, said automobile export volumes are largely driven by smaller-ticket models like two-wheelers. Close to seven out of 10 automobiles shipped out of India in 2014-15 were either a scooter or a motorcycle. Two-wheeler exports rose by 15% to 2.4 million units.

The auto industry contributes to more than 40% of India’s manufacturing sector, according to R. Raghuttama Rao managing director at IMaCS (Icra management consulting services).
Most global vehicle makers have set up shop in India, clearly endorsing the point that India is competitive and capable of delivering quality despite several negative perceptions still associated with the country.

The auto industry provides guidance for the general manufacturing industry in terms of how to straddle the two ends of being a high quality player and cost competitive,” says Rao.
Nissan’s Sicard points out that taxation and sectoral reforms to encourage exports of made-in-India vehicles and lower cost of capital will help raise investments in manufacturing.
For now, though, global carmakers are sold on making in India.

On Monday, after meeting Prime Minister Modi in Seoul along with chiefs of several other companies, Chung Mong-koo, group chairman of Hyundai, said his company is looking at building a third plant in India. According to Reuters, Hyundai’s affiliate Kia Motors is also reported to be keen on building a factory in India. For global car makers at least, Make in India is truly on.

Source:- livemint.com