Daimler, Maruti Suzuki and Mahindra & Mahindra are set to lead an estimated $30-billion investment by automakers in the next four years to meet the galloping demand in the world’s second fastest-growing market after China. Global auto companies facing a sedate growth in existing markets are investing to tap the growing demand in India as investment spending and the government’s social programmes raise incomes in smaller cities and rural areas too. These investments by automakers are set to trigger expansion of capacities by component suppliers too such as Amtek Auto and Bharat Forge.

The Indian automobile industry is geared up to invest up to Rs 80,000 crore in fresh capacity in the next four years, according to Vishnu Mathur, director-general Society of Indian Automobile Manufacturers. The components industry will also invest $12 billion up to the end of the Automotive Mission Plan.

Car and motorcycle sales in India are setting records with rising incomes, cheap lending by banks and launch of new models such as Volkswagen’s Polo and Fiat’s Linea. Car sales rose 25% last year, the fastest in six years, to 19.5 lakh and domestic motorcycle sales climbed 26% to 94 lakh. Domestic passenger car sales gained 40% in April, despite price increases. The growth rate has hastened plans of many manufacturers such as Germany’s Volkswagen and France’s Renault.

Daimler India Commercial Vehicles plans to invest Rs 4,400 crore in five years to make light, medium and heavy duty trucks at its 160-hectare plant in Oragadam, near Chennai. Tata Motors, maker of world’s cheapest Nano cars, will invest about Rs 8,000 crore. Toyota is putting up a second plant at its Bidadi complex in Karnataka at a cost of Rs 3,200 crore to produce the Etios, an India-friendly model with two versions—sedan and a hatchback. Hero Honda, the biggest motorcycle maker and Ashok Leyland-Nissan are planning new factories. M&M and its auto subsidiaries will invest Rs 5,000 crore in the next three years. Maruti, which hit peak capacity of 1 million units a year, is investing Rs 1,700 crore in a new plant which can produce 250,000 units by early 2011. The Indian unit of Japan’s Suzuki also exports from India.

Car manufacturing capacity is set to rise to 57 lakh units by 2015, according to consultants Ernst & Young. Further according to them, the growth momentum in the industry will continue at atleast 10-15% compounded annual growth rate and the capacity build-up is not just for domestic but also export growth.