A small news item went unnoticed. It gives a pointer as to where the global consumption is headed for in the future. Hitherto, the Western Countries, led by USA, consumed using the savings of the Eastern Countries. The situation is changing. The governments of the Eastern countries have taken steps to discourage domestic savings to encourage domestic spending, to sustain their growing industrial economies.
Indian Automaker Maruti came into existence almost three decades ago, when no Indian cars were exported. Maruti, apart from enjoying the market leadership in India, built its business on its substantial export earnings, though it has to be admitted that they were not to the Western Economies, for whom the car was trash.
Maruti recently adopted a significant strategic direction change by deciding to curb its exports to only 15% of its total production, in order to concentrate on domestic markets. Incidently, Maruti's domestic market share went below 50% for the first time in more than a quarter of a century. It is facing tough competition from Tata Motors, Ford and GM who are cutting into its core segment of small car market. It is also paying a heavy price for not investing on localized R&D, but rather depending on technology import all these years. Their new models are just out of sync with the market psyche. Though it sold 50,000 more cars during the period April to July 2010, as compared to the same period in 2009, which denotes a 21% growth rate, the market has been growing at 34%, leading to a loss in market share. Thus, to protect its domestic market share, which is its bread and butter, Maruti is forced to limit its exports. The growth in domestic car market sale during recession is an indicator that Indians are spending more and saving less, which augurs well for the Indian economy.
Could we have envisioned such a scenario a few years back?
