China And India Racing Forward Essay

1532 words - 7 pages

Nick Smith
January 25, 2010

China and India Racing Forward

In the world today, the economy is constantly changing. Along with it, the many markets of the world change as well, including the car industry. China and India’s car industries are growing rapidly. These countries have many of their own companies, such as India’s Tata Motors, and they are making new revolutionary cars, especially in the super-compact car market. The auto industries of both of these countries have shown recent improvement as the rest of the world economy begins to recover. Additionally, there is increasing demand for cars in these countries and the governments have been providing incentives for people to buy ...view middle of the document...

This is consistent with the trend to move manufacturing facilities to other parts of the world, which happens in many other industries besides the automotive market. Costs of production, including labor costs, are cheaper in less developed countries of the world, such as China and India.

The countries of China and India now have many car companies based in them. India is home to companies such as Force Motors, Tata Motors, and Premier ("Automobile industry in India."). Tata Motors is revolutionizing the super-compact car market and India has passed Japan as the world leader in this market. In 2009, approximately 892,000 basic cars (the smallest type of passenger car) were sold in the country of India (“India overtakes Japan in super-compact car market.”). Tata Motors has created the cheapest production car in the world. It is called the Tata Nano and it’s a big deal because India is a very poor country with a Gross Domestic Product (GDP) per capita of only $1,100, so people need an affordable car ("List of countries."). The Nano sells for $2,500 and a battery version is in production. Tata’s sales have increased recently. For example, their new “mini-truck”, the Tata Ace, weighs less than one ton and caused their LCV (light commercial vehicle) sales to grow over 35% in 2005 ("Tata Motors."). On January 13th 2010, Tata hosted a press conference in Detroit and announced that the Nano will hit the American market around 2013. However the way it is currently produced, it does not meet all American standards and must be given a larger engine among other things. This will almost certainly drive the price up ("The Nano Is Coming.”).

Automobile sales in India and China have been rising recently at a fast pace. The middle class of these two populous countries has been driving up the demand for automobiles as the world economy grows. Although demand slowed some in 2008 due to a credit crisis, sales started rising again in 2009 as the governments of these countries created incentives for people to buy cars. In February of 2009 the car sales of both these countries rose over 20%. "Car sales cannot be isolated from the broader macroeconomic environment.” said John Zeng, who’s an analyst with IHS Global Insight ("China, India car sales recovery.”) This is good news for India and especially China, who’s GDP has been increasing rapidly recently. The GDP rose over 10% in the fourth quarter of 2009 as the country’s economy begins to recover ("Chinas GDP soars as it shrugs off global crisis.”). India’s GDP also rose from 2008 to 2009 and is still rising in 2010 ("Why I am Bullish on India Economy 2010."). These GDP rates are faster than those in developed parts of the world like the US and Europe.

The demand for automobiles among the middle class of China and India has been rising. As the economy grows, people have more money to spend on luxuries. In crowded cities, such as New Delhi and Shanghai, cars are not as much a necessity as a luxury since...

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