Before the roll out of Nano, India’s small car priced at USD 2, 500 fears are being expressed that North American car makers and NAFTA need to do more to meet this development. In the past few years the auto export from India has been growing at more than the local demand. Presently around 10% of the auto output is being exported. Every major auto maker has established a niche in overseas market.

Over the week end Canadian Industry Minister Jim Prestice gave a warning to the auto makers in the North America to take the challenge posed by Brazil, Russia, India and China seriously in the market place as they are collectively set to overtake North American auto makers. He had a point that on the check points that hinder the movement of industrial goods across the NAFTA participants borders. These multi point delays affect the competitiveness of the North American car makers. The Indian or Chinese autos on the other hand are likely to have an inspection oriented delay at the port of entry or at a single point as compared to multi point inspection or checking to the movement of industrial goods in the NAFTA countries. At the borders additional security measures were imposed in the wake new threat perception after 9/11. These measures mean longer delays, higher inspection, additional fees, and enhanced layers of security affecting the cross border movement of goods within the free trade area.

Are these fears unfounded?

It is not easy guess that free trade when mixed with heightened need for security can lead to delays that are avoidable at the borders of transit. India has emerged competitive in steel making in the last decade. Further in few segments of auto industry India has now world class market size and production base. Hyundai has made India base for its newer models. Suzuki has been exporting cars made at its Gurgaon, India plant for the last decade and more in good volumes to the European market. Already India has been supplying a good portion of the auto spares. Investment in Auto Industry is highly labor intensive and promotes large indirect employment as the service needs of automobiles grow with their numbers and years of ownership. Lately Indian auto majors have started getting toe hold in developed markets with well planned take over of local companies. Jaguar was acquired by Tata very recently. There is lot of truth in Canadian Minister’s fear and the NAFTA has to do more than opening the borders to give comfort to the auto industry in North America. Second wave of cheap cars are coming from non- Japanese makers.