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India’s Carmakers Aim To Produce 6 Million Cars Annually

In the race for sales, India’s car manufacturers may need to slow down their pace in order to avert a catastrophe in the enveloping capacity glut.

Attracted by the 30% sales growth over the past two fiscal years, car manufacturers have committed $6 billion to produce over 6 million cars annually, nearly doubling India’s annual car production. However, current sales growth has come to a near halt, with production capacity meeting the demand by over 40%.

These developments come in the wake of Maruti Suzuki’s (the industry’s biggest player) announcement in September 2010, to invest $390 million to expand its capacity by 250,000 cars a year. This investment proved fruitful as Indians bought 2.5 millions cars in the following fiscal year, an increase in sales of 63%. Global car manufacturers like Toyota, General Motors and Peugeot soon followed.

However, car sales will likely drop by 11% in the current financial year, says. R.C. Bhargava, Maruti’s chairman. As more players come into the market, the whole industry will have to work with thinner margins.


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