Compact cars accounted for more than two-thirds of India’s record sales of 1.4 million passenger cars and trucks last year. That segment is expected to continue to grow as overall demand in India surges.

Maruti Suzuki and Hyundai have dominated the market to date, with Maruti Suzuki accounting for more than half of all new vehicle sales in India. But other companies are scrambling to get a piece of the action. At the New Delhi auto show earlier this month, Ford, Fiat, General Motors, Toyota and Volkswagen all discussed plans to launch new small cars in India.

Toyota showed its Etios concept that will provide the basis for a production model due early next year. To better understand the market, Yoshinori Noritake, who headed product planning for the vehicle, visited various Indian cities and met with prospective buyers. A combination of 2,000 Indian and Japanese engineers worked on the program over four years.

Using an all-new platform, the Etios is expected to be base-priced at about $10,500 in India. It also will be exported to Russia and other emerging markets. Local production in Brazil is to begin in 2011.

Honda took the wraps off its own small car concept in Delhi. The production version, still two years away, is expected to be priced below $10,500, which would make it Honda’s lowest-priced model in India.

The new Honda model, which is being designed for global markets, will be launched simultaneously in Thailand. It also is expected to be built in several other countries. Honda’s operations in India took the lead in its development, and the company plans to rely heavily upon suppliers in India, regardless of where the car is built.

Other new small cars for India include the Chevrolet Beat, Ford Figo and VW Polo. VW recently launched local production of the Polo at its Mumbai plant, with about 50% of the parts sourced domestically. It

Maruti Suzuki, which is controlled by Japan’s Suzuki Motor Corp., is gearing up to meet the challenge by shifting more design and development work to India. The new design center it has planned is expected to take the lead on programs for southeast Asia and the Middle East.

A new report by Boston Consulting Group (BCG) Inc. predicts that new-vehicle sales in the so-called BRIC countries (Brazil, Russia, India and China) will drive global growth in auto sales for years.

BCG notes that China, Brazil and India all rebounded from the effects of the global recession in the second half of 2009 to post double-digit full-year gains. It also says sales in Russia will stabilize this year after plunging 48% last year, then grow 15% through 2014. But the report cautions that the Russian market is very difficult to forecast because its recovery will depend in large part on prices of raw materials and other external factors. It counsels companies to be selective in their investments there.

BCG is much more confident about China. New vehicle sales there soared 48% last year, making it the largest automotive market in the world. The report expects vehicle sales in China to grow at a more modest rate of 5% per year through 2014.

India, which grew 13% last year, will grow at a 9% annual clip through 2014, according to BCG. It says sales expansion in Brazil will slow to 3% per year during this period, down from an 11% gain last year.

By comparison, BCG says, auto sales in the U.S., Europe and Japan are expected to grow only 2% per year over the next five years.

To fully capitalize on the expected growth in Brazil, Russia, India and China, automakers and suppliers must develop customized strategies for each market, says Boston Consulting Group. It notes that virtually all multinational OEMs and major suppliers already have facilities in the so-called BRIC countries but have been slow to localize their operations.

The four countries must be treated separately because they differ dramatically in market development, local capabilities and consumer preferences, the authors say. At the same time, they add, companies should be cognizant of best practices that can be applied throughout BRIC and other emerging markets.

The authors expect Brazil—the most mature and stable BRIC country—to remain the second largest of the four through 2014. India will grow rapidly and remain the third-largest BRIC market through 2013. By 2014, BCG says Russia’s volume will surpass India’s.

Fewer than 10% of the 49 OEMs and suppliers analyzed are “deeply localized” in all four BRIC countries, BCG says, blaming much of the problem on a company’s existing operating structure. For example, the authors say that centralized global functional departments may constrain the activities of local research and development centers, which could make it difficult to find and retain local staff. The report found that 55% of foreign auto company R&D centers in China and India, and 30% of those in Brazil, have little or no autonomy from global R&D centers and only minimal levels of project responsibility.

Sourcing challenges include poor supplier quality, which limits volumes. BCG says international OEMs typically source fewer than 5% of their parts from China.

Contrary to their low-cost reputations, plants in BRIC countries often end up being more expensive than their counterparts in developed countries, BCG notes. It says there can be 5% to 15% premium for BRIC manufacturing due to the relatively small plant sizes that don’t benefit from the economies of scale in other markets, antiquated labor-intense processes and higher quality control costs. Brazil is the only one of the four countries where companies realize a true cost savings, according to the report.

Differences in national tastes and requirements, meanwhile, drives the need for market-specific vehicles. BCG says Brazilian consumers tend to favor sporty hatchbacks and Indians want ultra-low-cost minicars, while Russians prefer western-style sedans and SUVs and Chinese buyers are gravitating toward stylish, entry-level luxury sedans. But until sales ramp up sufficiently in each country to justify unique products, BCG recommends that manufacturers should adapt standard platforms significantly to meet local requirements.

New-vehicle sales in Thailand slipped to 548,900 units last year from 615,300 in 2008, according to industrywide data reported by Toyota Motor Corp’s Thai unit. But monthly year-over-year sales rose for the fourth straight time in December, following 15 straight months of decline, and analysts forecast a 9% full-year gain for 2010.

Combined sales of passenger and commercial vehicles slipped 2% in Malaysia last year to 536,900, a considerably better performance than expected previously, says the Malaysian Automotive Assn. (MAA). The group says year-over-year sales in December surged 20%.

MAA forecasts the Malaysian auto market will expand by 2.4% this year to about 550,000 vehicles—nearly equal the country’s all-time high of 552,300 units set in 2005. The group says annual sales will climb to 566,000 units in 2011, 583,500 in 2012, 600,000 in 2013 and 618,000 in 2014.

Passenger vehicles account for the bulk of Malaysia’s new-vehicle market. MAA says sales of passenger vehicles could increase to 498,300 this year from the 486,300 sold in 2009—the highest volume among all national markets in southeast Asia. Demand for commercial vehicles is expected to grow 2.2% to 51,700 units.

Neighboring countries such as Brunei, Indonesia, the Philippines and Thailand suffered double-digit decreases in car sales. Analysts say Malaysia’s relatively modest dip is due to a stimulus package and liberalization of the capital market to help attract more investment into the country.

MAA President Aishah Ahmad tells reporters that Malaysia’s economy began to improve in the second half of last year and is likely to expand at least 2% this year, with some analysts predicting 5% growth. Ahmad says the 2010 forecast is based in part on expectations that interest rates would remain at record low levels.

Ahmad also is optimistic about the long-term future of luxury vehicles, despite plans to eliminate subsidies for vehicles with large engines. She says buyers of such models won’t mind paying higher fuel prices.

For the fourth straight year, compact car maker Perodua was Malaysia’s best-selling car brand. The company’s market share rose to 31.1% from 30.5% in 2008, according to MAA. Rival domestic maker Proton also gained market share, accounting for nearly 28% of new vehicle sales in 2009 vs. 25.9% in 2008. Among foreign OEMs, Toyota had 15% of the market, followed by Honda (7%) and Nissan (6%), according to MAA.

Dongfeng Honda Automobile Co.—a 50:50 joint venture between Honda Motor Co. and Dongfeng Motor Group Co.—plans to open a new factory in China as demand continues to surge in what is now the world’s largest auto market.

The $168 million facility will be located near the automaker’s existing Wuhan plant in central China. Production is due to begin in the second half of 2012, with an initial annual capacity of 60,000 Honda Civic compact cars and CR-V compact crossover vehicles. Annual output is eventually expected to quadruple to 240,000 units, and Honda says it might make the gasoline-electric hybrid version of the Civic there.

Dongfeng Honda also plans to expand production at its existing Wuhan plant, which makes the Civic, CR-V and Accord-based Spirior midsize sedan, this year by 40,000 units to 240,000.

Honda operates three other plants in China, including two through a joint venture with Guangzhou Automobile Group Co. that have a combined capacity of 360,000 units. The third facility is a wholly owned plant that exports about 50,000 Honda vehicles to other markets.

Honda will have a total annual capacity in China of 710,000 units when the Dongfeng Honda plant opens and the existing one is expanded. This compares with 610,000 units of capacity last year.

Separately, Dongfeng Honda plans to introduce a small car under a new China-only Li Nian brand next year, Bloomberg News reports. Honda describes Li Nian, which means “ideal” or “spirit,” as the first car brand created in China by a foreign-domestic joint venture.

Li Nian models will serve as Honda’s entry-level vehicles in China, which analysts say will allow the Japanese automaker to compete in low-price segments without cheapening its own brand. Powered by engines that displace 1.6 liters or less, Li Nian cars will compete with the Nissan Livina small hatchback. That vehicle is built in China by Nissan’s joint venture with Dongfeng.

Mazda Motor Corp. predicts its sales in Thailand will zoom to more than 34,600 units this year from a record 13,200 vehicles in 2009.

The company expects its new Mazda2, which was launched last fall in Thailand, to account for more than two-thirds of this year’s volume. Most of the rest of the sales will be split between the BT-50 sports pickup and Mazda3 car. A sedan version of the Mazda2 also is in the works.

To support the increase in demand, Mazda says it will open 24 service centers in the country. It currently operates 106 there.

Volkswagen AG plans to build a new factory in Guangzhou, says China’s 21st Century Business Herald. The facility, which would be VW’s fifth in China, will eventually build up to 200,000 vehicles per year for its SEAT brand, according to the report, which cites an unidentified source.

It’s not clear which of VW’s current partners, FAW and SAIC, will be involved in the new assembly plant. VW declined to confirm the report. Last year the company pledged to spend $5.6 billion in China through 2011 to add capacity and increase local research and development operations. But VW tells Reuters the immediate goal is to boost capacity at existing plants in Nanjing and Chengdu.

VW sold a record 1.4 million vehicles in China last year, up 37% from 2008. It previously set a goal of selling 2 million vehicles per year in China by 2018, but it now expects to achieve this sooner.

Volkswagen AG plans to build a new factory in Guangzhou, says China’s 21st Century Business Herald. The facility, which would be VW’s fifth in China, will eventually build up to 200,000 vehicles per year for its SEAT brand, according to the report, which cites an unidentified source.

It’s not clear which of VW’s current partners, FAW and SAIC, will be involved in the new assembly plant. VW declined to confirm the report. Last year the company pledged to spend $5.6 billion in China through 2011 to add capacity and increase local research and development operations. But VW tells Reuters the immediate goal is to boost capacity at existing plants in Nanjing and Chengdu.

VW sold a record 1.4 million vehicles in China last year, up 37% from 2008. It previously set a goal of selling 2 million vehicles per year in China by 2018, but it now expects to achieve this sooner.

Hybrid Kinetic Motors Corp., a Chinese-American startup company based in California, has hired Italdesign Giugiaro to design and engineer a range of hybrid models that will be built and sold in the U.S. Italdesign says the contract is worth $500 million.

Last fall, HK announced it had selected a site near Bay Minette, Ala., for the greenfield plant. The optimistic company claims it will open the plant in 2013 and achieve annual production of 300,000 sedans, crossovers, SUVs, minivans and light commercial vehicles there. A hybrid powertrain will team an electric motor with a combustion engine able to run on either gasoline, ethanol or compressed natural gas.

HK says it may open additional facilities in North America and China, with a goal of combined output topping 1 million units per year by 2018.

HK Motors says it will invest $4.5 billion in the Alabama project but does not indicate where it will obtain the funds. Local government groups have indicated they will provide financial incentives to HK after the company has raised more than $1.3 billion in funds.

HK Motors is headed by Yung “Benjamin” Yeung, the former CEO of Brilliance China Automotive Holdings Co. Yeung, formerly known as Yang Rong, fled China in 2002 over a dispute with the Chinese government. When he was at Brilliance, Yeung hired Italdesign to design the Zhonghua sedan, which was introduced in 2001 as China’s first modern-era domestic car.