India is likely to become the third largest car producer by 2018 (after the US and China), helped by a shrinking European car market and shift in manufacturing to emerging economies.
At the end of last year, it was fifth after South Korea, Germany, Japan and China.
Felix Kuhnert, Partner at PwC and the Automotive Industry Leader for Europe, said registration numbers have declined in Europe for the fifth year. Apart from the German firms (and Land Rover), most carmakers in the region are struggling to post growth.
The BRIC nations, along with recovery of the US and Japanese markets, are expected to be “saviours” of the global car industry, which is slated to grow to 79 million units this year (from 74 million last year).
“In Europe, the capacity utilisation is significantly below the average industry average of 75 per cent. The market cannot grow there because the demographics are such that the population is declining.
“The scrappage schemes announced a few years back had sucked a lot of demand out, because of which today customers are not buying cars,” Kuhnert said.
This is why Kuhnert feels that though Europe may see growth from next year, reaching the 2007 production of 19 million units will prove elusive – in 2011, only about 16 million cars were made in Europe.
Improving Exports
India’s car export woes may also be over from next year. Kuhnert said that North-western Europe (the UK, France and Germany) are expected see an improvement in small car demand from next year, though southern countries such as Spain and Italy will take longer to turnaround.
Europe is the biggest destination for Indian made small cars. Renault-Nissan and Hyundai export about half their production from India, while market leader Maruti Suzuki also supplies significant numbers overseas.