The Auto Policy 2002 and the Automotive Mission Plan 2006-2016 state the government’s intention and outline the action required to make India an automotive hub.

A key element of this vision is the small car. While various policy measures are under discussion within the government, the automobile industry has proactively contributed to the realisation of this vision. Industry has committed and is currently in the process of investing over Rs 70,000 crore in India.

Of this nearly 65% of the investments in the passenger vehicles sector is stated to be directed towards producing small cars. There are four essential prerequisites for being called a small car hub. First the total production of small cars in India should rank amongst the top two in the world.

Second, small cars should have a high share of the domestic market. Third, exports of small cars should account for a significant share of the global market. Fourth, India should be home to the development and use of new technologies and manufacturing processes that would sustain this leadership over time.

There can be no question about meeting the first requirement. Although, the numbers of cars produced in India are small compared to the US, Japan, China and other European countries, India is the third largest producer of small cars after Japan and Brazil.

Small cars also account for over 71% of the domestic market. India would continue to be a predominantly small car market. Given the current projections for the Nano, India could easily become the second largest market for small cars in the world and in time perhaps become the preferred location, thus fulfilling the second condition. Last year 192,745 passenger cars were exported from India.