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France's Renault has become the latest global automaker to steer towards India as it seeks to make big inroads into one of the world's fastest-growing vehicle markets.
Renault, seeking to counter falling sales at home, said late last week it would build a plant in India with its Indian partner Mahindra and Mahindra to turn out half million cars a year by 2012.
India offers "important opportunities for growth and profitability," Renault chief executive Carlos Ghosn said as he announced the plant would assemble the no-frills Logan car.
Renault joined a clutch of big names such as US automaker General Motors, Germany's Volkswagen and BMW, Japan's Suzuki and Honda and South Korea's Hyundai that are stepping on the accelerator to invest in India.
Analysts say it is easy to understand why the rapidly expanding Asian economy with its low-cost production base and population of 1.1 billion looks like the next "Promised Land" for foreign automakers.
While the king of India's potholed roads was once the bulky Ambassador, based on the 1950s Morris Oxford, economic liberalisation has opened the country to foreign carmakers and meant a host of different models are racing out of showrooms.
Some 1.1 million passenger cars rolled off assembly lines last year and number is forecast to nearly double to two million by 2010, while scooters and motorbicycles sales are forecast to grow from seven million to 12 million units in the same time, according to industry figures.
"Indian domestic vehicle sales are growing by double-digit figures and when you compare that with anaemic rates in the US and Europe, you see why they're coming," said Dilip Chenoy, head of the Society of Indian Automobiles (Siam).
GM, for instance, just reported flat second-quarter North American sales while car penetration in India is still at an enticingly low eight per 1,000 people compared with 16 in China and 780 in the United States.
An Indian government mission plan said auto manufacturers are aiming for sales of 145 billion dollars in 10 years or average 16 percent annual growth, up from 36 billion dollars now.
"This will double the share of the industry in the GDP to over 10 percent, creating 25 million new jobs," said Heavy Industries Minister Santosh Mohan Dev.
Automakers' hopes have been fired by growing disposable incomes of India's middle class, estimated to number at least 300 million.
"The appetite is driven by the local market and the perspective for exports," said Abhimanyu Sosat, analyst at Sushil Finance.
At the top end, BMW has announced plans to assemble cars in India for the category of the new rich. But most of the action is at the small car level as automakers target first-time buyers.
Honda plans to triple annual sales to 150,000 by 2010 and pump in 650 million dollars in investment over the next decade, mainly focusing on small cars.
Suzuki, which through its Indian unit Maruti controls 55 percent of the Indian market, plans to double production to one million by 2010. Toyota says it also plans to sell a small car in India.
Volkswagen, Europe's biggest carmaker, plans to spend 540 million dollars to build a new plant and sell small cars. GM is gearing up for a 300-million-dollar plant in India to assemble the hatchback Chevrolet Spark. India's home-grown automakers, meanwhile, are readying to fight back.
Tata Motors, one of the world's largest truck and bus manufacturers whose small hatchback, the Indica is the country's top selling model, is aiming to produce a "workers' " car by 2008 that will cost just 2,163 dollars or 100,000 rupees - less than half the normal price of an entry-level car.

Copyright Agence France-Presse, 2006

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