India - The Choice Production Location

Paper Summary:

This paper takes an in-depth look at India as a possible location for a new production facility. There are various factors to be taken into consideration by a company looking to open a new facility in a new location, and this paper reviews these factors in relation to India as the location of choice.

From the Paper:

"While the Indian market is large, it is not as large as it might be had the Indian economy been better for a longer period of time. While India's population has just broached 1 billion, a mere 3 million passenger cars travel the roads. Still, there is a promise of a burgeoning well educated and prosperous middle class that has served as a lure that so far has attracted 14 global automakers to India's major manufacturing centers in Delhi, Bangalore, Mumbai, and Chennai. The main reason for the investment is seen in the data on the country and its market. Currently, the ratio of cars per head is one of the lowest in the world at nearly four cars per 1,000 people. Just bringing India up to average ownership level of developing countries (39 vehicles per 1,000) would require the sales of 35 million vehicles. Indian automobile sales did surge ahead in the first half of the fiscal year ending next March 31, 1999 as commercial vehicle sales for the first six months rose to 71,153 units from 55,259 in the corresponding period of 1998. The market for automotive components in India is expected to be worth $4 billion in a short time. Car sales increased to 300,419 units in 1999 compared with 205,087 a year earlier, which is a reflection of a return of consumer confidence following Asia's 1997 economic free fall, and this also reflects favorably on a range of new small car models recently introduced, such as the Honda City, Daewoo Matiz, and Ford Ikon. It is expected that the country's market for small cars, alone, will grow to 160,000 units, up from 100,000 last fiscal year."

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