Maxton was speaking on "Global Vehicle Outlook: Impact on India" at the 39th annual session of ACMA held in Pune. The domestic market in India remains small even if it recovers to reach its peak levels. Export development will remain difficult for the Indian vehicle sector as worldwide sales drop and competition from other export-led countries increases.

The WTO would be a more of a threat rather than an opportunity as opening up the national markets would be disastrous for the local industry. "Vehicle manufacturers arenot be ready for competition with companies 20 times their size and this is an uneven playing field," says Maxton.

World growth will slow down and short-term drop in sales volumes will lead to lower margins and intense competition. Manufacturers will find it hard to make profits leading to more consolidation and rationalisation. However Asian markets will grow faster than any other markets with Thailand expected to grow at 24 per cent, South Korea at 13 per cent and Indian would register a 11 per cent growth. "Between 1998 and 2005 the rate of growth in developing markets will be most attractive and offer better returns, " says Maxton.

Speaking on restructuring in the auto industry and its consequences for the component industry, Prof John Humphrey from the Institute of Development Studies, University of Sussex, UK, said the auto industry in the developing countries was grappling with strategies for survival. Radical liberalisation was a choice but there was a risk totally vanquishing of the localindustry. Integrating with established auto producers could achieve scale but ultimately led to takeovers. Creating regional markets improved efficiency and scale but it was difficult to get into regional agreements and implement it. The strategy of protecting domestic market also does not pay as these markets remain small. These are tough choices and there are no easy solutions says Prof Humphrey suggesting withdrawal from the market is the easiest option.

The trade liberalisation route taken for development of automotive industry has not helped South Africa or Brazil where imports increased dramatically at the cost of the domestic industry, says Prof Humphrey. The Indian component industry too will face increasing pressures to open up the component market from assemblers and the WTO. There will be increased presence of global component firms and TNCs will move in to dominate the show.

Humphrey suggested players to move out of the car segment and focus on two-wheelers or the commercial vehicle segment.The industry will have to find a niche in the second tier and ally with global companies to survive.