The Indian car making menace?

By Brian Micklethwait | 6 December 2005

Americans have now found something new to worry about in India. India, says Sebastian Mallaby in the Washington Post, is the next place where bad news for Detroit will be coming from. That's right. India is getting seriously into car making, lead by the city of Chennai (formerly Madras):

Until the reforms of the 1990s, India had good engineers but lousy manufacturing because high tariff walls made its firms complacent. But the opening of India's economy has forced its manufacturers to reinvent themselves.

Chennai's auto-components firms have done this almost manically. Ten years ago, their brakes and valves were crummy enough to scare away the international car majors that considered manufacturing in India. Today, you can't spend an hour with any of the components firms without hearing about the international quality certifications they've amassed; the Deming Prize, awarded for manufacturing excellence by a Japanese committee, has acquired talismanic status. Much as Chennai's government leaders look to China, the city's business leaders pepper their conversation with Japanese management lingo.

Once again, we observe the futility of trying to build an internationally competitive industry behind high tariff barriers. Actually, as the Chennai car industry illustrates, if you want an internationally competitive industry, getting rid of the tariff barriers is where you start.

And once again, the new Indian story gets further confirmation. Meanwhile the Indian Economy Blog tells the same story about the rise of Indian manufacturing generally.