India: Small Cars Are on a Roll

Small is beautiful when it comes to India's car market. Though India's auto industry is nowhere near as developed as China's, investment is starting to pour into the small-car segment. Global auto companies such as Hyundai (HYMZY) and Honda (HMC) and local ones such as Tata Motors and Maruti Udyog (MUDGF), a subsidiary of Japan's Suzuki Motor, are rushing forward with plans to launch small car models they hope will click with India's emerging middle class.

Small cars already account for 70% of India's total one-million-car yearly market—a figure that is expected to double in the next four years. Around a dozen new small and compact cars, with engine capacities ranging from 1,000 cc to 1,500 cc, are expected to hit the market in the next two years in gasoline, diesel, and hybrid-engine models. India's long-range potential could be impressive. A study by consulting firms Booz-Allen Hamilton and McKinsey predicts that India's domestic car market will cross 3.5 million by 2015.