[RavenAvi]

As exports to Africa fell for the first time in almost a decade, Latin America, which is India's furthest export market in terms of distance, has now become India's largest auto export market.

Out of the total auto-related exports worth $8.86 billion (Rs 59,360 crores) in FY2015, shipments to Latin America accounted for $2.26 billion, a jump of nearly 19%!

According to statistics provided by ET, as much as a quarter of the total automobile exports out of India in value terms were sent to Latin America in the last financial year, despite steep logistics cost of shipping vehicles some 15,000 kms away from our country.

Leading the charge is European auto giant, Volkswagen. Out of the ~70,000 VW vehicles which were shipped out in 2015, almost 63,000 units were of the made-in-India Polo and the Vento, the latter gaining good acceptance in Latin American markets, especially Mexico.

Hyundai, the largest car exporter from India, shipped more than 49,000 cars to it's Latin American counterparts in 32 countries, an aggregate of 29% of the Korean auto major's total exports. Among others, Ford exports the Figo & the Aspire sedan, General Motors ships the Chevrolet Beat, and even Suzuki Motor Corporation exports the made-in-India Ciaz to that region.

India's highly costeffective manufacturing capabilities and government incentives are helping offset some of the impact, say industry experts. Some auto makers that weren't doing well in the domestic market were only too happy to utilise the opportunity offered by a market with profiles similar to India, as it allowed them to keep their factories running here.

"India is known for its frugal engineering, which enables automobile makers to manufacture vehicles here at competitive costs," said Puneet Gupta, associate director at consultancy firm IHS Automotive. "Of course, there are freight costs involved in shipping vehicles to Latin America. But if you look at it holistically, exports help companies improve capacity utilisation, better productivity of hired workers, gain economies of scale and meet commitments made to suppliers."

Europe continued to totter. Though the share of vehicle exports to the European Union improved marginally to 14% from 13% the previous fiscal year, it was still a far cry from fiscal 2010, when the continent accounted for as much as 47% of total value of India's vehicles exports. In percentage terms, Africa accounted for 23% of the value in fiscal 2016, compared with 29% the year before.

Incentives offered by the Mexican and Indian governments help in mitigating logistics expenses. Lauermann of Volkswagen explained: "Mexico offers exemption of duties on imported cars for a number equivalent to 10% of the total production of cars done by the brand in Mexico. So, number of cars up to 10% of Volkswagen production in Mexico can be imported by Volkswagen into Mexico, without having to pay import duties on it. Add to that the good cost and quality position of our manufacturing in India, and it forms a good business case."

ET

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[avisidhu]

Interesting. One would rather expect the opposite to happen considering how economies like Brazil are suffering. The excise policy of Mexico sounds interesting, wonder how would it impact us if implemented here.

But overall good to see one sector contributing to the make in India initiative.