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Germany's Volkswagen aims to further cut its dependency on Europe and will focus on emerging markets, including India, says a senior company official.
Kevin Rose, executive director of Volkswagen's international sales, said at the launch of the company's Passat sedan in India: "We have consistently been the market leader in Europe for more than two decades. In future, the growth in markets will come from outside of Europe.
"About 56 per cent of the sales of Volkswagen brand are already there ... This should be over 70 per cent in the next eight to 10 years."
Rising incomes and new models are boosting sales of bigger sedans and premium cars in India. More growth is expected as only eight in every 1000 Indians owns a car.
Annual passenger vehicle sales in India are forecast to nearly double to two million units by 2010. More than two-thirds of the market is for small cars.
"Clearly India is a fast developing, fast changing market with potential to grow, who knows two, three, four times," Rose said. "We will begin slowly and steadily."
Sales of vehicles have been hit in recent months after India raised interest rates, making loans more costly, while exports have been hit by a strengthening rupee. Some 80 per cent to 85 per cent of vehicles sold in India are bought with loans.
Volkswagen also aims to launch a small car by 2009 to cater to the Indian market, the head of its India unit says, but did not comment on its pricing.
India's Tata Motors plans to launch the world's cheapest car, at just 100,000 rupees ($3500) next year.
Japan's Toyota is also looking to launch a small car within two years and has said the first production facility may be in India. French carmaker Renault, which makes its no-frills Logan sedan in India with Mahindra & Mahindra is in initial talks with Bajaj Auto on making "very competitive vehicles" on the sub-continent.
The Passat, which is being assembled at a Skoda facility in the western city of Aurangabad, will be available in two variants, priced at 2.2 million - 2.4 million rupees, Volkswagen says.
A Volkswagen official says the company aims to ramp up its dealership network to around 150 in the next three years, from just three at present.
"We will gradually increase it," said Thomas Kadicheeni, general manager of sales and dealer development. Volkswagen's premium unit, Audi , has also set up a marketing and sales office in India and expects to sell about 3000 cars by 2010.
Honda will more than double its dealer network in India and consider segments such as diesel and alternative fuels for a larger share of the market, a company official says.
Honda is spending more than US$490 million ($712 million) on a second plant in India which will have an eventual annual capacity of 200,000 vehicles, and will target smaller cities and towns with a small car, which accounts for the largest share of the local market.
"So far, we have been targeting the bigger and more premium segments, but with our small car we can go into smaller towns," said Tatsuya Natsume, director of marketing for Honda Siel Cars India. Honda, which sells the City, Civic and Accord saloon cars and the CR-V sport utility in India, is also increasing capacity at its plant near New Delhi to 100,000 units a year. It aims to make and sell more than 150,000 vehicles in India by the end of 2010. To service the bigger output, Honda will increase its dealer network to 160 from 62 , Natsume says. "Our benchmark is 1000 cars per dealer, so we are going to need that number."
Honda is not keen on developing a super cheap car like some of its local and foreign rivals are doing, because it is not convinced such a car will meet its standards.
"We are not sure a US$3000 car will meet the Honda standards of quality, so we would rather focus on features like greater fuel efficiency."
Natsume said Honda was looking at the diesel segment and was keen to launching its hybrid in India.
- Reuters
