From M2 Communications

By 2015 India is expected to be one of the top 10 countries in terms of vehicle sales. But a study by IBM and the University of Michigan's Transportation Research Institute finds the country faces significant challenges to continued rapid growth in its automotive industry. Key to success, says the report, is a stronger partnership between industry and government.

"India's automotive market has come a long way in a short period, growing more than 15 percent compounded annually since 2001," said Sanjay Rishi, global automotive industry leader, IBM Global Business Services.

But India also faces challenges in its transportation infrastructure, product quality and skilled workers, as well as labor and tax regulations.

"The Indian government will certainly play an integral role in shaping the automotive industry and its future. Their Automotive Mission Plan could be construed as a step in the right direction," said Bruce M. Belzowski of the University of Michigan Transportation Research Institute.

A finding of the study concluded that the small car (especially the inexpensive "1 lakh car" at about $2,500) is a key strategy for growth. Indians see small, inexpensive cars as their country's global niche and a way to meet the needs of domestic buyers. Other global manufactures that can leverage economies of scale will challenge that approach. The study also found that labor and skills could constrain the industry's growth. Already, India's carmakers are suffering from an undersupply of skilled labor. And labor laws and regulations also seem to be hampering business.

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