Japanese giants Toyota and Honda are redirecting billions of dollars of investment to India, establishing the country’s position as a crucial manufacturing and export hub, setting it up as a pivot, moving away from China.
This move is not a sudden act but a well-thought-out response to the brutal price war in the Chinese market. Cutthroat competition from domestic Chinese EV makers has reduced the profit margins, forcing Japanese automakers to seek a new centre of gravity for the market.
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Why India?
Japanese auto makers have been scaling back in China, with direct investment in the country's transport sector plunging about 83% since 2021. On the other hand, investment in India is surging.
India represents the world's third-largest auto market, one with an increasingly fast-growing economy, and government incentives aimed at attracting major manufacturing. Most importantly, India is protected from the low-cost invasion of Chinese electric vehicles, which gives an opportunity to players like Toyota and Honda to build a profitable foothold.
“The Indian market is extremely important and is set to grow in the future,” said Toyota President Koji Sato at last week's Japan Mobility Show, as mentioned in The Economic Times.
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From local market to global Hub
Toyota and its partner Suzuki have committed a massive part of $11 billion investment to ramp up production. The company is expanding its capacity in India, aiming at a goal of one million vehicles annually. Critically, its new plants will not just serve India’s domestic demand but are being built to export new SUVs to markets in Africa and the Middle East.
Honda is following the same playbook. It has marked India as one of its three biggest markets globally, the other two being the US and Japan. Honda is making India the manufacturing and export hub for one of its new “Zero Series” electric cars, with plans to ship the “Made in India” EVs to Japan itself and other Asian countries by 2027.
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This strategic realignment now signals a new beginning for the Indian auto industry to emerge as a strong pillar for the automotive world in the times to come.
{News Ei Samay does not provide investment advice anywhere. Investment and trading in the share market or any field involve risk. Proper study and expert advice are recommended beforehand. This news is published for educational and awareness purposes.}
