It's a traffic jam of a different kind. It is almost as if every badge on the global auto marquee is driving into India. Sure, to not be in an economy growing at 9-plus per cent would be downright stupid.

Of course, the burgeoning middle class and the rising demand for personal mobility is a big draw. But the draw is not so much the scale as the potential. At current rates of growth, the trillion dollar economy promises to quadruple the number of car buyers to over 4 million within a decade. It is not surprising that Korean auto major Hyundai chose to premier its i10 in India.

When Shah Rukh Khan beats the blonde beauty to drive the i10 in the Hyundai commercial, he underlines India's lure rather eloquently. If last year's dozen new launches took car sales to record levels, this year will be a bonanza with 75 new models.

But it is not just the lure of marketshare that is driving the Renaults, Volkswagens and Volvos of the world. It is a complex two-way relationship. India promises a combination of market scale and engineering skills that makes it an irresistible investment destination. This is best illustrated by Suzuki's decision to unveil its concept car A-Star at the Auto Expo.

Mahindra (left) with Ghosn. With an investment of $100 million, the JV between M&M and Renault has become a test case for the auto market as it launched the Logan in just two yearsDesigned primarily for the European market, the A-Star has plenty of India in it because for the first time the Japanese automaker has leveraged the engineering design capabilities and manufacturing expertise of its Indian subsidiary Maruti Suzuki to create a world class product.

In less than 10 months, at least six major deals with a promised investment of $4.6 billion (Rs 18,400 crore) have been inked.

That is just for starters. There is more on the way. Of the over 2,000 participants at Auto Expo, 800 are foreign players-all looking to clinch both orders and supplies.

Says Suhas Kadlaskar, head for corporate affairs at DaimlerChrysler India: "MNCs are looking at India as a manufacturing hub because the engineering and R&D capability of India is of high quality and production cost is 25-30 per cent less."

Like other global consumer companies, automakers too are chasing the irrepressible 450-million middle class that's buying a million new cars every year. With automobile sales stagnating in North America and Western Europe, a small but promising market sure makes sense.

The boom, however, is not just in cars. At 7.6 million, India is the second largest producer of motorcycles and fifth largest commercial vehicle manufacturer at 0.4 million. While nowhere near China's market, which sells 4.1 million cars every year, demand is finally picking. If last year's dozen new launches took car sales to record levels, automobile biggies have lined up 75 new models this year.

Says Sylvain Bilaine, managing director of Renault India: "At 1.3 million India is a small market, but it's booming. Despite impressive growth rates, India's share of the world automobile market is 2.37 per cent of the total global auto sales of 66.46 million."

A bustling domestic market combined with competitive component suppliers and a remarkable engineering talent pool has made global automakers queue up to bring their products to India at the earliest.

The Automotive Mission Plan 2006-2016 has set an ambitious turnover target of $145 billion (Rs 5,80,000 crore) for the industry from a modest $38 billion (Rs 1,52,000 crore), which includes the auto component turnover at $10 billion (Rs 40,000 crore). In 2006, auto exports stood at $4.08 billion (Rs 16,320 crore) of which $1.8 billion (Rs 7,200 crore) were auto component exports.

Eicher's Siddhartha Lal (left) with Volvo's Jorma Halonen. With a proposed investment of $506 million, the partnership between Volvo and Eicher will create a new holding company

Given that Indian auto exports have been growing at a steady clip of 30 per cent CAGR over the last five years, India may be on a growth trajectory but unless infrastructure bottlenecks are sorted out, ambitions may not take wings.

Yezdi Nagporewalla, national industry director, industrial markets, in KPMG's India practice, believes that just when confidence is running high, questions need to be asked.

According to him: "India may be full of potential, but it faces more than its fair share of challenges too. From the remotest road-building site to the highest levels of government where policy is hammered out, there is work to be done."

The Indian market may be attractive, but it's not for the weak-hearted. With less than 100 models in the entire market, India offers the scope that potential car makers look for before driving into a market. Sure, it is not a market which can afford deep-pocket development costs but it has the eco system that can deliver both the skills to develop new models as also offtake.

Courtesy: www.indiatoday.digitaltoday.in, January 11, 2008