Not only Indian car market is facing slump in car sales, but also the US and European markets are under the same situation. This is due to the economic slowdown that has pioneered a beneficial opportunity for Indian car manufacturers. The reasons as to why they are shifting to small cars are higher interest rates, liquidity crunch, growing costs and mounting oil prices.
Therefore, these global markets are jerking from bigger cars to smaller and more economical cars. The demand for cars made in India is increasing speedily especially the Maruti 800, Alto, Zen Estilo, Hyundai i10, Santro, and Getz.
According to the Society of Indian Automobile Manufacturers (SIAM), “the export of compact cars has risen up by 47.3% in April-August this fiscal at 1,02,423 units, against 69,545 units in the same period last year. The export of compact cars comprises 83.17% of total passenger car shipments from India. Since most premium cars are bought on credit, due to the liquidity crunch and high interest rates now, people overseas prefer smaller cars.”
Leading car manufacturer Maruti Suzuki’s operating profit margin was 16.67% for the quarter ended June 2008, compared to 2.83% at General Motors, the leading car manufacturer in the US, for the year ended December 2007. Also the raw materials are increasing rapidly by 25-30% during this period. Whereas in India Honda, Hyundai, and Toyota had low operating margins at 9.78%, 9.35% and 10.20%, respectively.
Therefore, there is a huge demand from the overseas market to Indian car manufacturers and the decrease in rupee value in India is an additional benefit to the car manufacturers.