1)Driving these ambitious plans are three major factors. First, the reduction in excise duty on small-cars, effected in the last Budget, which has clearly given a leg-up to sales in that category. The concession extended to small-cars has been the catalyst for Honda and Toyota has to take a serious look at the options available for them in small-car market.
2)Second, the Free Trade Agreement India signed with Thailand two years ago. As per the agreement, the so-called 82 early harvest items, which include a range of auto components, will be subject to zero duty when imported from Thailand into India from September 1. Both Toyota and Honda have major operations in Thailand and the FTA will help them integrate their Thai operations into their India plans. The option of importing critical components from their own operations/suppliers in Thailand confers a twin advantage for the Japanese majors. First, the time to market can be crashed as they do not have to wait for Indian component suppliers to invest in production capacities and, second, it confers a big price advantage as they can import duty-free.
3)And the final factor is that India is now reckoned as a low-cost global manufacturing base for small cars; Hyundai has already taken the lead in this respect. The Korean company's Indian unit is a major exporter of cars. Exports accounted for 39 per cent of total sales in 2005-06 and the stated plan is to take this to 50 per cent once the company's second plant goes on stream in the next couple of years.
The companies recorded increase in their sales even after the recent increase in prices despite the fact that some of the models have been discontinued in the 13 big cities due to the recent BS 4 implications. Country’s largest car maker Maruti Suzuki India reported a jump of 29.70...