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Last Updated: Tuesday, 3 April 2007, 23:05 GMT 00:05 UK
India prepares for automotive boom
By Jorn Madslien
Business reporter, BBC News, Delhi

The sound of horns honking is relentless as the cars crawl along at a pedestrian pace, motorcycles and motor rickshaws filling every gap in Delhi's afternoon traffic.

Traffic in Delhi
The passenger car market, which was one million in 2003-2004, can easily cross the three-million mark by 2015
India's Automotive Mission Plan

Driving through Delhi's gridlocked streets is a gruelling experience, and yet there are millions of Indians who are desperate to have a go.

As India's GDP, or gross domestic product, continues to rise by some 8% per year over the next decade, the number of drivers in India is set to soar from seven in 1,000 today to 11 in 1,000 by 2010 - a doubling since 2000 when 0.5% of Indians had a car.

"India is one of the fastest-growing markets in the world," according to Carlos Ghosn, chief executive of alliance partners Renault and Nissan. "It offers significant potential for profit growth."

Crucial infrastructure

A sign of things to come can be seen by heading out of the centre towards Gurgaon, one of Delhi's satellite towns, where a 28km express highway is being constructed.

The construction of a highway in Delhi
New highways are being constructed at break-neck speed

Once completed, the highway should reduce the journey time from an hour or two to a mere 20 minutes, hopeful voices insist.

Similar road-building projects can be seen across India, where a network of eight-lane highways is being rolled out to link India's four main cities - Delhi, Mumbai, Madras (Chennai) and Calcutta.

"We need more roads, we need faster roads and we need higher quality roads," Indian Ministry of Commerce and Industry official Ajay Dua says in an interview with BBC News.

"We've jumped from 7km of roads per day three years ago to 14km per day now."

New factories

Such investment in infrastructure is largely a response to the growth in car ownership, points out Ratan Tata, chairman of one of India's largest industrial conglomerates, Tata Group, in an interview with BBC News.

"The demand for road use is driving infrastructure."

India's car industry
The value of India's automotive industry is set to double by 2010, then double again
Fresh investment of $35-40bn by 2016 should ensure this

But as part of a virtuous cycle, the improved infrastructure is also pushing up demand for cars - which, in turn, makes it attractive to invest in new car factories.

Several carmakers, both foreign and Indian, have announced major investment plans in India in recent weeks.

And Mr Ghosn's Renault is among the recent entrants into the Indian car market.

"India is going to be a very big market for us," he says.

On Wednesday, Renault and its joint venture partner Mahindra & Mahindra's new factory in Nashik is to be inaugurated, the day after Renault's Logan, a budget car designed specially for developing countries, was unveiled in Mumbai.

"This marks the start of Renault sales on the Indian market and sees the first right-hand drive version of Logan created to meet the needs of our Indian customers," according to Mr Ghosn.

"The Logan is a milestone for us as it marks our entry into the most competitive segment of the automotive market," says Anand Mahindra, chief executive of Mahindra & Mahindra.

Valuable exports

The 7bn-rupee investment in the Nashik plant is part of an anticipated $35-40bn investment in India's automotive sector over the next decade, according to the India's Ministry of Heavy Industries & Public Enterprises.

As India's car market grows, the country is also emerging as a global automotive production hub

Some of the investment is expected to be channelled into a string of new car factories that are being built in automotive production, many of them joint ventures between Indian and foreign car makers.

"The passenger car market, which was one million in 2003-2004, can easily cross the three-million mark by 2015," the report predicts.

But much should also be invested in India's burgeoning components industry, which aims to become a supplier to car companies outside India as well as to those manufacturing cars here.

All in all, the value of India's automotive industry is set to double by 2010, then double again by 2016, the ministry predicts in its Automotive Mission Plan, which has been written by senior industry figures.

India should "emerge as the destination of choice in Asia for the design and manufacture of automobiles and automotive components", the Mission Plan sets out.

Thus, although there has been much talk about China's emergence as an automotive giant, India is getting ready to square up to its Asian neighbour.

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