If India isn’t just the two marines

 

India

In India, one of the greatest nuclear power (the largest importer of weapons in the world and, until 2012, the first user of gold in the world for 50 years in a row), there are been 2 important events about automotive sector : the 12th Auto Expo Components and the 12th Auto Expo Motor Show.

India, belonging to BRICS nations, receives special attentions by global OEMs. Prestigious research centers, or even just looking for visibility, in turn practice to expose thesis and trends about this market.

But why BRICS nations- which have current volumes dignified but distant, still over several decades, from data we generally see in EMEA, receive a lot of attention?

These nations are “interesting”, from macroeconomic point of view, because they have basically a non-existent public debt, if compared to that of the major Western nations in addition, of course, to a potential car demand superior than the traditional Western markets- currently become only replacement markets.
Let’s make two accounts:

  •  India, public debt by 58% of GDP;
  •  Brazil, 45%;
  • China, 18%;
  •  Russia, 6%.

It’s also true that the BRICS nations, but only from 2020 to 2039, according to forecasts, will have a GDP equal to that of G7 members…that is a fair few.

A further proof of the interest in these nations is the indebtedness of G20 nations.
For instance:

  • USA, in 2011 counts 100% of public debts relative to GDP;
  • Italy, more than 120%;
  • Germany, 77%;
  • Japan 199%.

 

Ironically, wealth seems to be synonymous with large debts and low savings if it is true that the G7, apart from Japan, has limited international reserves:

  • Germany 130 billion of dollars;
  • Italy and France about 100;
  • USA and UK 70;
  • Canada less than 50.

The intersection of these data provides a plausible trend of what will be the growing economies in the coming years.

India, for a complex set of reasons is also at geopolitical level- think the proximity to China and Middle East- a vibrant economy and OEMs are particularly interested in, a thing that to most may seem excessive.
It doesn’t seem excessive if you consider that today this market is estimated for about 2,5 million of cars and the forecasts count 7 million in 2020. The most demanded cars will be the ultra-economic and compact ones, under 4 meters in length.

Recently, -7.3% of registered cars in 2013 (a negative record for that market), India is hit by a liquidity crisis which has led to a decline in domestic demand … and what the Indian government does?

Well maybe it is a fugitive on the case of the Marines but It immediately inserts liquidity into the system with a reduction in the “Consumption taxes (VAT) on the purchase of cars… for large cars the tax goes down from 27 to 24%, for mid-sized cars from 24 to 20% – as declared. Taxes for small vehicles, motorcycles and motor scooters fall from 12 to 8%. For the SUV will decline from the current 30 to 24%”.

If you consider the elasticity of the demand curve for the individual segments, you will realize the importance of that – 4%.
And what does Europe that hasn’t these growing forecasts so florid? Is it enough giving money for renovations in the form of incentives for the electrics?

Maybe we should look at India not only how it is portrayed on TV these days… or not?

Translated by Federica Izzo

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