When we were visiting firms in Detroit a few weeks ago many of the executives pointed to China and India as emerging markets poised for future growth. India has been a bit more complex of a market to predict than China, but up until 2013 it had seen steadily increasing auto sales for the prior 11 years. In 2013 auto sales in India fell by nearly 10 percent, which lead some into questioning whether a longer term saturation point had been reached. However, it seems that the dip in 2013 was only temporary, and the election of a new political regime bodes well for consumer confidence and increased demand. The election of Narendra Modi marks a turning point for the Indian people as a culture and as a political entity. Modi beat out landed high class politicians whose fathers and grandfathers had served high offices symbolizing the shift away from caste systems and the non-existence of upward mobility.
The election of this new regime has given the Indian people hope in something that had not even been possible a mere decade ago, the American dream. The Indian people now have an actual shot at upward mobility, at the opportunity to make their children’s lives better than their own through hard work and determination. For the auto industry, the possibility of an increasing middle and upper-middle class means an immense demand shock as they see their consumer base shoot up. The suppliers and OEM’s will not only see demand increase as Modi implements sweeping economic and cultural policies, but will also see pointed monetary policy that will grant citizens more access to credit. The auto industry in India is expecting the new regime to keep excise taxes low on the auto sector (lowering marginal costs to firms), lower interest rates across the country (thereby giving citizens greater access to credit that can be used to finance the purchase of a car), and increased government funds going towards improving and expanding infrastructure (more roads and bridges will be built while existing roads will be better kept together, all of this will add to consumer demand and increase the sales of automobiles domestically). I think that the future is bright for India’s auto industry this coming year, but I think the future is even brighter for India. Although Modi is only a step in the right direction and by no means a panacea to India’s problems, I think that their is positive movement in the correct direction and if India continues down this path then it can do great things.