The country is set for an avalanche of new models. By Mohini Bhatnagar

The Indian automobile industry, which has been on overdrive for the past five years, stayed on course in 2006 and is estimated to register double digit growth in calendar year January to December 2006. Based on figures released till November 2006, a total of 10.9 million vehicles were produced in India in calendar 2006, a growth of 17 per cent from 14.5 per cent in 2005 over the previous year.

The sales growth of passenger cars is expected to be about 20 per cent against the 7 per cent growth seen in 2005. Sales of utility vehicles grew at 12 per cent and MPVs at 16 per cent.

The most striking aspect of the year was that compact cars and mid sized cars led the market while the market for entry level and luxury cars actually fell by 7.2 per cent and 5.6 per cent respectively.

Sales of compact cars grew by 25.3 per cent and mid size cars by 18.9 per cent while the executive segment grew by 32.9 per cent. On the export front also the news was good. Overall automobile exports are expected to register a 25 per cent growth in 2006 over 2005. More than 190,000 passenger cars are estimated to have been exported in 2006 a growth of 11.7 per cent over the previous year''s growth. The brisk sales of compact cars were on the back of the 8 per cent cut in excise duty to 16 per cent which caught the attention of Indian and MNC carmakers who promptly announced big investments in setting up manufacturing facilities in India.

Volkswagen, for one has announced plans to set up a facility in India, and has indicated that it would be launching the small car Polo. The company is investing Rs2,400 crore for its manufacturing plant in Maharashtra, which is set to come up by 2009. Maruti Suzuki announced an additional Rs3,000 crore investment in India over and above the Rs6,000 crore investment already announced for new models, a new car plant and diesel engine production. This takes Suzuki''s total investment into India upto 2010 to Rs9,000 crore. Suzuki has announced that as part of its five-year plan in India, it will make diesel engines under technical assistance from Fiat and has started plant construction with production scheduled to begin from December 2006.

In the first year of operations the company will make 100,000 diesel engines and by 2010 would make 300,000 diesel engines per year. Suzuki Motor Co (SMC) of Japan now has 70-per cent stake in Maruti Udyog while Maruti has 30 per cent. The company has also started construction of a new four-wheeler plant and production will begin from this October. Maruti Suzuki also plans to make a new small car, which will be produced for export to Europe. Around 100,000 units of the small car would be exported and another 50,000 units would be sold in the domestic market.

Further General Motors has announced its decision to set up a facility in Maharashtra to manufacture the small car Spark, which was earlier Daewoo''s Matiz, in a new persona.

Honda too has announced its intention to set up a second plant in India to make a small car. Honda, which till now was considering launching a small car, recently announced its entry into the biggest volume segment of the Indian market. Honda Motor Company has said it would introduce a "small size" vehicle in India and put up a second plant to roll out more than 150,000 four-wheelers in India by 2010.

Industry sources say that Honda''s next small car for India is expected to be the next-generation Jazz. If it is finalised, the Jazz will compete in the domestic market with the Suzuki Swift, the Hyundai Getz and the Chevy U-VA and in the future with the Fiat Grande Punto and the Volkswagen Polo.

Hyundai Motor India too is expanding its facilities in the country to launch new models, including one positioned between the Santro and the Getz.

However, the most significant announcement in 2006 was the expansion of Mahindra & Mahindra''s tie-up with Renault. The two companies announced setting up a greenfield car manufacturing plant in India, with a capacity to produce five lakh units a year by 2012 in an expansion of an earlier tie up. The facility would also be utilised by Renault''s sister company, Nissan.

Renault is capitalising on its existing joint venture with M&M to commercialise the yet to-be-launched Logan car in India. In the first phase of the project, Renault and M&M aim to produce three lakh units of passenger cars by 2009. Renault also plans to start a power train factory in India to which M&M will have access.

M&M''s new greenfield production site will include a vehicle assembly plant, shared between the two partners. The partnership with the Renault Nissan Alliance would give M&M an opportunity to expand its product range, achieve economies of scale and increase efficiencies in the supply chain.

The M&M plant at Nashik will produce the Logan and the new venture will produce Logan derivatives. The Logan is likely to be on the road by the second quarter of 2007. The Logan and its derivatives will be manufactured largely for use within India.

Tata Motors and Fiat Auto have also announced an investment of Rs4,000 crore in a 50-50 joint venture to make cars and engines at Ranjangaon near Pune.

The companies announced that the new manufacturing facility, to be created at the Fiat''s existing plant, would have an annual capacity to produce 1 lakh cars and 1 lakh engines and gearboxes. Both partners would invest equal amounts in the new venture over a period of three years. The new plant will start making cars and engines by 2008. Both Fiat and Tata vehicles would be manufactured at the same facility. Fiat Auto plans to introduce its premium cars for the B-plus and C-plus segments thus avoiding overlapping of segments with its partner, Tata Motors. A first assembly line for Fiat cars has already been commissioned at Ranjangaon for Fiat Palio and Fiat Adventure models.

The first batch of cars will be rolled out in early 2007, he said. The joint venture will manufacture the Fiat 1.3-litre multi-jet diesel engine, the 1.4-litre and a new 1.2-litre petrol engine, both part of the `Fire family and Fiat transmissions''.

Much is expected from the Budget of 2007 including a further cut of excise duty on small cars by 8 per cent. Should this happen India is likely to become the Mecca of small cars. In such an event global automakers, which have so far adopted a wait and watch attitude to gauge continuation of policy will surely announce increased investments.