Hamish McRae: 'If you can't beat 'em, then just get 'em to join you'

You could say that it is the Ambassador's revenge. The Ambassador, as anyone who has visited India will know, is the Indian version of a 1956 Morris Oxford. You can now get it with a diesel engine instead of the old BMC series B but the basic body, steering and suspension is the same. It is perfectly OK to ride around in, though I gather not huge fun to drive, and any garage however remote can fix it.

But now Rover, the rump of Lord Nuffield's empire, has looked to India for its new mini, the CityRover. This is a modified version of the Indica, made by the Indian conglomerate, TATA. It goes on sale in November.

By all accounts it is a decent car and Rover have tarted up the inside, upped the power, stiffened the suspension and generally upgraded it to UK school run standards. It certainly will fill a gap in their range and I hope makes money for them.

So the wheel has come full circle. We used to supply India with automotive technology; now it supplies us. You might lament that - see it as an example of the decline of UK manufacturing competence, which I suppose in a way it is. But surely there are two bigger points that apply not just to Britain but to the industry as a whole.

The first is that building and designing cars is a mature industry. In other mature industries production and increasingly design has moved to lower cost countries. There is room at the upper levels for such European skills, witness the near simultaneous launch of the Bentley Continental and Aston Martin DB9. There probably is room in the middle-market, too. But at the bottom end, motor manufacturers will increasingly look to the design and manufacturing skills of countries like India and China.

The second is that in another 20 years' time the majority of cars sold in the world will be bought in what we still think of as developing countries. Up to now the dominant theme has been for established US, Japanese and European firms either to set up assembly plants in low-cost countries, or to license their designs to local firms. At the top end of the market that seems likely to continue. But assume that China becomes the second largest car market after the US, for it is already the second largest economy in the world if you take exchange rates that reflect different price levels. If that were to happen it would be astounding if it did not also become a big force in car design as well. Ditto India, which on the same basis is a larger economy than the UK.

So, buying a design from TATA is not just a random example of a weak western car company forced to buy a foreign design. It is also a sign that in some segments of the market Indian design is completely competitive. Expect the same from China. A generation ago hardly anyone believed that the Japanese could meet the sophisticated needs of US and European consumers. This year, for the first time ever, it looks as though Toyota will outsell both Chevrolet and Ford in the US to become the largest-selling single make.

European manufacturers hope they have the skills that will enable them to command enough of a premium to justify higher manufacturing and design costs. For the more fashionable end of the market that will probably hold true. But just as people who wanted a basic car 20 years ago bought Japanese, in another generation expect them to look to India or China.

So maybe Rover are being quite cute: if you can't beat 'em, get 'em to join you.