India seen as key small-car production base

New Delhi : As global automakers boost their presence in the thriving Indian market, they will turn the country into a stage for novel experiments in lowering production costs to levels not seen before.
Indian customers' unmatched sensitivity to pricing has meant the market has been dominated for nearly 30 years by Maruti Suzuki India Ltd. The unit of Japan's Suzuki Motor Corp has been able to build $5,000 cars such as the Maruti800 hatchback by using old, fully depreciated equipment provided by its parent in the 1980s.
Tata Motors took the low-cost theme to the next level with the release last year of the $2,000 Nano, which has achieved only modest success so far.
While the 10 new compact cars launched at the Delhi auto show this week will not be matching that level of pricing, rivals are seeking to inch closer.
Japanese automakers, for one, will enter uncharted territory by expanding parts procurement to Indian suppliers for goods such as sheet steel normally imported from Japan.
"The key to lowering costs was to look for locally available materials," said Yoshinori Noritake, chief engineer of Toyota Motor's Etios family car, one of the highlights of the Auto Expo this week.
The Etios is expected to be the cheapest offering in Toyota's global line-up when it goes on sale in late 2010 in India, with parts sourced from suppliers aligned with Maruti Suzuki and Tata Motors, such as Tata Steel, Noritake said.
Toyota said it has not set a price for the Etios. But most expect it to compete head-on with Honda Motor's hatchback based on the New Small Concept also unveiled at the auto show and which Honda said would cost less than 500,000 Indian rupees ($10,990).