That should happen by the middle of this decade, Ford’s Hinrichs said, and “that’s when we expect another dramatic growth phase.”
Environmentalists warn of the prospect of millions more cars on India’s roads, especially in cities with some of the worst air quality in Asia. Nor is it easy to imagine how those roads will cope, congested as they already are with motorcycles, scooters, bicycles, three-wheeler auto rickshaws, ox carts, trucks and vans.
But even if infrastructure investment fails to keep pace with demand and congestion worsens, car ownership in India, just like in China, is becoming an important status symbol for an aspiring middle class.
To take advantage, General Motors set up a car factory near the western city of Pune, close to Mumbai, in 2008 and is expanding its plant at Halol in Gujarat, just a few hours’ drive from the site of Ford’s new factory at Sanand. It, too, is launching products for local tastes, such as the seven-seater Chevrolet Enjoy, aimed at bigger Indian families, and the Chevrolet Sail, both designed in China with the company’s joint-venture partner there.
Although high interest rates flattened India’s car market here last year, the company is equally bullish about the medium term.
Three brands dominate the Indian market — Maruti Suzuki, Hyundai and the homegrown Tata Motors account for roughly 70 percent of passenger car sales — but GM, like Ford, thinks it can significantly raise its market share from the roughly 4 percent it has now.
“We’ve made a very strong commitment to India,” said Lowell Paddock, the company’s India president and managing director. “There is so little growth in a lot of the developed world that markets like India, even though they may be growing less strongly than in the past, are still more attractive.”
‘The auto hub’ of India
Much of the new investment in India’s car industry is arriving on the shores of Gujarat, a state run by business-friendly but polarizing Chief Minister Narendra Modi.
Modi was denied a visa to travel to the United States in 2005 over allegations that he turned a blind eye to or even actively encouraged riots in 2002 in which more than 1,100 people, almost all of them Muslims, died. But Ford said the incident had no bearing on its decision.
“We don’t make a political statement one way or the other, we’re making a business investment,” Hinrichs said. “These are multi-decade manufacturing facilities that last beyond any politician’s career or any individual’s career in business as well.”
Tata Motors is already in Gujarat, manufacturing the world’s cheapest car, the Nano, on a site bordering Ford’s. French automaker PSA Peugeot Citroen announced last year that it would build a plant in Sanand, while Maruti Suzuki also plans to follow.
Gujarat is one of India’s richest and fastest-growing states, and Ford and GM talk enthusiastically about the investor-friendly conditions there, the stable policy environment, the lack of corruption and the tremendous infrastructure, including uninterrupted power supply, great roads and access to ports for export.
Indeed, Modi makes no bones about his desire to turn Gujarat into “the auto hub” of India with consistent, pro-business policies.
“As a state, we are competing with China in the manufacturing sector,” he said. “There is no red tape-ism, only the red carpet.”
GM India’s vice president for corporate affairs, P. Balendran, speaks glowingly of governance in Gujarat and says Modi gives foreign investors his personal attention. Riots occur all over India, Balendran said. “It is only a temporary aberration, and this being a temporary aberration, it does not impact any of the investors.”