CHENNAI, India – Motorbikes, auto-rickshaws and wandering cows are increasingly sharing India's chaotic streets with shiny new foreign cars — another sign of the country's historic economic expansion.
The world's biggest automakers are opening factories and ramping up production in India, where demand is being fueled by rising incomes, cheaper loans and a growing network of roads.
For upwardly mobile professionals like Parimala Rao, a 47-year-old newspaper editor in this southern Indian city, there's no going back to overcrowded buses after she bought a fully loaded Hyundai Santro about a year ago.
"It gives you an incredible amount of flexibility and freedom," Rao said. "It's so much more convenient. It gives me more time at home and more time at work."
Foreign auto companies are angling for their share of one of the world's fastest-growing car markets. General Motors Co., Ford Motor Co., BMW AG, DaimlerChrysler AG, Honda Motor Co. and Hyundai Motor Co. have all recently announced plans to expand production or build new assembly plants in India.
Last year, about 1.2 million cars and light trucks were sold here. That number is expected to increase by about 9 percent annually over the next five years, according to J.D. Power and Associates, a global market research firm based in Westlake Village, Calif.
The Indian market is still tiny compared to that of the U.S., where about 17 million vehicles were sold last year. But with a population of 1.1 billion and an economy that has averaged 8 percent growth over the past three years, it has a lot of room to grow.
Pete Kelly, an auto industry analyst for J.D. Power, said the country's young population and improving roads bode well for the fledgling car market, but warned about the potential impact of rising fuel costs or an economic downturn.
"There's no question this market is going up quite rapidly," Kelly said. "We're seeing huge potential and high risk."
The proliferation of foreign cars on Indian roads shows how much the country has changed over the past decade. Until the 1980s, the market was dominated by the Ambassador, a car based on a 1950s British model whose look hadn't changed for decades. Its manufacturer, Hindustan Motors Ltd., had a near monopoly until the government began dismantling the state-run economy in the 1990s.
So far, India hasn't been too lucrative for foreign automakers, which must compete in a marketplace dominated by small, compact cars that sell for as little as $3,000 and leave slim profit margins.
Foreign firms such as BMW are building brand recognition that they hope to capitalize on later when more Indians can afford larger, more expensive vehicles, Kelly said.
"We don't see big profits for them there for a while," Kelly said. "These small cheap cars are going to be pretty dominant for a while."
But the industry's long-term prospects look bright as more Indians join the swelling middle class, which views car ownership as a key step toward a better life. Banks and other financial institutions are competing to offer low-interest loans to car buyers, making it easier for them to buy their first vehicles or trade up for newer models.
"It's for utility and convenience, but it's also a symbol of pride, strength and status," said D.V. Venkatagiri, regional secretary for the Indo-American Chamber of Commerce in Chennai.
Venkatagiri, 32, bought his first car — a used Suzuki Maruti compact — in late 2004 and hopes to buy a bigger vehicle for his growing family in the next few years.
"If you come in a car, people respect you more," said Venkatagiri, 32. "If you come on a bike, they won't respect you."
The Indian government is also preparing for a car-driven economy, with plans to spend $45 billion to widen and pave 31,000 miles of roads and highways by 2012. For now, most drivers must jostle for space with exhaust-spewing buses, trucks, motorcycles, bullock carts and motorized rickshaws on aging streets built for much less traffic.
Many foreign car companies are setting up shop around Chennai, formerly known as Madras, to take advantage of its large port on the Bay of Bengal, its skilled technical work force and its large base of auto parts suppliers.
Inside Ford's sprawling assembly plant on the outskirts of Chennai, hundreds of young workers in blue uniforms weld frames, paint auto bodies and install engines in sedans and station wagons
Ford, the second-largest U.S. automaker, may be shuttering factories and laying off thousands of workers in North America, but it's boosting production and adding to its network of 115 dealerships in India.
The Detroit automaker sold 24,000 vehicles in India last year, up from 15,000 in 2002, said Arvind Mathew, Ford India's president and managing director. It sold 14,000 vehicles during the first three months of this year, nearly double the sales during the same period last year.
"Clearly, India as a country has huge potential," Mathew said, adding that there only nine cars for every 1,000 people in India, compared with 500 cars per 1,000 people in North America and Europe.
"Indians traditionally never made it far from home," said Mathew, a native of India who lived abroad for more than 20 years before Ford transferred him to Chennai in 2003. "With the growing car culture, you see people traveling more. People are far more mobile."
New car owners say driving has changed their lives. Rao has cut her commute time from one hour to 20 minutes and is seeing more of the country on family road trips. But she's also spending less time on her feet.
"In a way, it's made me more lazy," Rao said. "In the past, if I needed to buy a sack of potatoes, I would walk to the store. Now, we just say, 'Let's take the car."'
As more Indians get behind the wheel, environmentalists worry that the explosion of new cars will lead to more pollution, traffic, oil consumption and emissions of "greenhouse" gases blamed for global warming.
Dan Becker, who directs the global warming program at the San Francisco-based Sierra Club, said he hopes Indian officials will avoid creating a U.S-style transportation system built around cars rather than public transit.
"They can learn a lot from the mistakes that we made," Becker said. "They can weigh the advantages of a car-dependent society versus the many disadvantages."