Is Asia the future of Automotive?

A slew of developments have taken place in last one year which changed the dynamics of world economics. Finance and Automotive sector can be used as gauge to measure the turmoil taking over the governments all over the world in their sleep. Though the changes in Financial sector are recent, Automotive has been showing the symptoms for some time now.

We saw Toyota Kirloskar Motors becoming the largest carmaker overtaking the previous title holder General Motors in 2007. Then we saw Tata Motors an Indian company taking over the prestigious European brands Jaguar and Land Rover. These events are significant as they mark the acceptance of Asian brands by the western markets. As these brands grow so would the dominance of Asian Automotive companies in the world market.

The Asian counterparts didn’t just limit themselves to brand building but focused on innovations too. These innovations spread from latest technology in green cars which Honda is now almost a synonym but also in creating new segments for the industry. The launch of Tata Motors’ Nano, “the Rs 1 Lakh car” (equivalent to about USD 2.2K) would unlock a whole new strata of society to automotive consumption. This is relevant as a large population in countries like India and China fall in this category. Is this something really out of the box, I don’t believe so as this principle has been time tested. All products start with limited upper class market and slowly spread to the masses with time. What really is worth appreciating is the first mover advantage which the Tata’s would have. Other companies like Toyota and Bajaj have also announced their rival products but they would take time to enter the mass market. Even then also, it’s the Asian counterparts who have the will to compete.

Lastly with bankruptcies of GM and Chrysler a vacuum would be created in world market specially US, which is by far the largest automotive market. The assets of GM are still to be sold off and a slew of Asian companies would be waiting to grab these at cheap prices. The assets though of low quality as they are defined for products which no longer hold to market requirement would provide easy entry to many smaller companies compared to the likes of Toyota and Honda. Already the buzz is on for the sale of Hummer to a Chinese company.

Coming times would provide great opportunity to the rising Asian Automotive companies, but the race is not over yet. European majors have shown resilience in these testing times and would give a good competition. They have the advantage of array of brands and the luxury image they maintain in the consumer mind. But the new war would not be fought in US and Europe but in countries like India and China with huge untapped potential giving Asian majors the ‘home turf’ advantage.

Thanks to Rahil for this article