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Old 03-05-2003, 08:53   #1 (permalink)
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Ford, other carmakers expect tax cut to boost Indian car sales

Wednesday, March 5, 2003
By Anand Krishnamoorthy / Bloomberg News

NEW DELHI -- Ford Motor Co., the world's second-biggest automaker, said its sales in India will rise 47 percent this year, boosted by higher demand for vehicles after the government cut taxes on cars.

Ford forecasts sales of its Ikon sedans will reach 22,000 in 2003 in the fourth-biggest car market in Asia after Japan, China and Korea, said Vinay Piparsania, vice president of the company's Indian unit, in an interview. Last year it sold 14,970.

General Motors Corp., the world's biggest automaker, Ford and other carmakers are seeking to increase their share of sales in Asia's third-largest economy as rising incomes and record low borrowing rates prompt consumers to buy more vehicles in a country where only six out of 1,000 own a car.

"India is doing the right thing by cutting taxes as this will lift sales," said Hideo Ueki, who helps manage $10 billion as chief investment officer at UBS Asset Management (Japan) Ltd. in Tokyo. "There is big, big potential in India."

India Friday cut the tax on cars and sports-utilities to 25 percent in the federal budget for the fiscal year beginning April 1 from 32 percent to boost vehicle sales.

Car sales rose 6 percent last year to 593,422, more than 30 times the number of vehicles sold in 1960.

Companies are lining up new models for sale in India after the reduction in the tax, which earlier made up as much as 65 percent of the retail price of the car, when adding provincial taxes.

Unveiling Models

General Motors Monday unveiled the Chevrolet Forester for sale in India. The company plans to sell more cars under the Chevrolet brand in India this year as it aims to boost sales by almost six times by the year 2005 to 50,000 cars.

"India has one of the world's two fastest-growing vehicle markets," said Raymond G. Grigg, Director, General Motors (Asia Pacific). "General Motors doesn't think we need to be a leader in this country, we know we have to be a leader here."

Since October, Toyota has started selling two new cars, the Corolla and the Camry as the company aims to win one-tenth of the market by the end of the decade.

Maruti Udyog Ltd., India's biggest carmaker and a unit of Suzuki Motor Corp., Japan's biggest minicar maker, Honda Motor Co. and others are all planning to sell new models this year.

Maruti has half the market, while Hyundai Motor India Ltd. is No. 2 with 19.5 percent and Tata Engineering and Locomotive Co. has 14 percent. Ford has a 3 percent market share and GM has about 1.5 percent of the market, giving them room for growth.

"Selling new models is critical in India if companies want to get market share," said Arindam Bhattacharya, a principal at the Boston Consulting Group (India) Pvt. "Compared with other markets like Thailand, an Indian consumer has fewer models to choose from."

As India improves its road network and interest rates fall to make cars more affordable, automobile manufacturers will have to invest more in the country to cater to the demand.

"One million is a threshold for the Indian auto market to be regarded as a good, growing market and be noticed, said Ueki of UBS Asset Management. "That size is critical for any new entrant to come into the market and you still have to bear in mind that we are talking of 1 million out of a population of a billion. That is still only a tiny piece of cake."
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