Source: The Economic Times, Aug 18, 2015
MUMBAI: Mexico, one of the farthest countries from India, is set to become the biggest export market for Indian carmakers this fiscal, with one-fifth of all cars shipped out of the country expected to land in the Central American country some 12,000 nautical miles away.
Mexico, despite being a left hand drive market, is expected to overtake South Africa as the topmost overseas market for India-made cars this year, by importing about 1.3 lakh vehicles, industry insiders said. Car exports to Mexico will increase by more than 50% to 1.32 lakh units in 2015-16, as against 82,000 vehicles for the same period last year.
Europe’s largest carmaker Volkswagen alone is expected to ship more than 55,000 cars from India to Mexico, while General Motors will ship over 45,000 units of Beat small car, which is sold as Spark in that market. Hyundai’s i10 Grand and Xcent, Ford’s Figo and Figo Aspire, and Maruti Suzuki’s Ciaz are among the other Indian cars headed for Mexico.
Volkswagen Vento, which replaced the Jetta Classico in Mexico, became an instant hit there, a Volkswagen India spokesperson said. “Mexico is the most important and largest export market for Volkswagen India. In 2014, we shipped approximately 55,000 cars to Mexico. In 2015, we expect to ship slightly higher number to Mexico,” the person told ET.
Mexican market has been one of the rare bright spots for the passenger vehicle market across the globe. In the first six months of this calendar, to grew 22% year on year to more than 6 lakh units despite 2014 being a strong year with double digit growth.
Mexico is pitted to break into the top five car markets in the world by the end of this decade.
To be sure, there is a big freight element in shipping vehicles to Mexico that is literally on the other end of the world some 15,000 km away. But despite freight cost plus import duty of 20%, the likes of Volkswagen India and General Motors India have allocated large batches of cars from the country to Mexico to gain from economies of scale and cost advantage in the country that is about 20%-30%.
Gaurav Vangaal, senior analyst, forecasting, at IHS Automotive, said the booming demand in Mexico is a blessing in disguise for some carmakers that were unable to utilise their production capacity due to slow demand.
“Mexico is an emerging market and pillar of MINT nations (Mexico, Indonesia, Nigeria and Turkey that are expected to show strong growth over the coming decade). If we are able to sustain the competitiveness to Mexico it may write another chapter of competitiveness and open new floodgates to other overseas markets,” Vangaal said.
Rakesh Srivastava, senior VP for sales and marketing at Hyundai Motor India, said his company plans to increase exports Mexico by 37% in 2015 and ship over 12,500 cars.
Nissan is the market leader in Mexico, followed by GM and VW. Mid-size sedans like Nissan Sunny, Volkswagen Vento and Ford Fiesta make up for over 10% of the market at approximately 1.2 lakh units.
Experts, however, said carmakers can enjoy low cost benefits only if their brands are successful in the domestic market, which will ensure economies of scale. Otherwise ensuring return on their investments could be a challenge.
Another factor is that Mexico’s currency is weakening, making its imports expensive. The Mexican Peso has moved up to 16.26 against the US dollar from 12.65 in 2012.
