Motown still bullish on India

The Indian automobile industry may be in the middle of a slowdown but companies continue to invest more in the country, banking on the market's long-term growth story.

From German auto giant Volkswagen and its Japanese arch rival Toyota to luxury carmakers Audi and Mercedes Benz and truck manufacturers Volvo Eicher, all announced fresh investments disregarding the lack of demand of the last quarter or so.

"We will invest €100 million in the entire group in the next two years," said John Chacko, Volkswagen Group's chief representative for India on the sidelines of the annual summit of the Society of Indian Automobile Manufacturers (SIAM). "The investments will go into improving production facilities in Chakan and Aurangabad and for making minor changes to the export variant of the company's sedans."

The company expects sales to rise 10-12 % in 2012 from 1.1 lakh units sold last year.

Toyota said it will invest at least ₹900 crore this year to increase capacity at its Bangalore factory by 100,000 units to 310,000 units by March 2013. Toyota's bread-and-butter Innova utility vehicle has seen historic sales this year, benefiting from the shift in consumer preference from petrol to diesel vehicles. Its cheaper Etios sedan and Liva hatchback have, however, seen below-par sales.

"We have never had excess capacity at our plants and have always been able to sell what we produce," said Vikram Kirloskar, vice chairman, Toyota Kirloskar Motor. "The concerns are valid for the short term. The long-term growth story is intact."

Luxury car makers, facing a tough market for the first time ever, also remained bullish. Mercedes Benz announced fresh investments of ₹250 crore, taking its overall investment in India to ₹850 crore. Similarly, Audi said it was setting up a production unit at Skoda's Aurangabad plant.

"We are bullish about the Indian market and this is reflected in our long-term commitment towards the market," said Peter T Honegg, managing director and CEO, Mercedes-Benz India. "The investment of ₹850 crore will help us strengthen our production and operational capabilities."