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Automotive industry in India

The automotive industry in India is one of the largest automotive
markets in the world. It had previously been one of the fastest growing
markets globally, but is currently experiencing flat or negative growth
rates.[1][2] India's passenger car and commercial vehicle manufacturing
industry is the sixth largest in the world, with an annual production of
more than 3.9 million units in 2011.[3] According to recent reports, India
overtook Brazil to become the sixth largest passenger vehicle producer in
the world. throughout the course of 2011 and 2012, the industry grew 1618%, selling around three million units.[4] In 2009, India emerged as Asia's
fourth largest exporter of passenger cars, behind Japan, South Korea, and
Thailand.[5] In 2010, India beat Thailand to become Asia's third largest
exporter of passenger cars.
As of 2010, India is home to 40 million passenger vehicles. More than 3.7
million automotive vehicles were produced in India in 2010 (an increase
of 33.9%), making the country the second (after China) fastest growing
automobile market in the world in that year.[6][7]According to the Society of
Indian Automobile Manufacturers, annual vehicle sales are projected to
increase to 4 million by 2015, no longer 5 million as previously projected.

The first car on India's roads in 1897. Until the 1930s, cars
were imported directly, but in very small numbers.

The first car showroom in Secunderabad

An embryonic automotive industry emerged in India in the

1940s. Hindustan was launched in 1942, long time
competitor Premier in 1944. They
built GM and Fiat products respectively.[18] Mahindra &

Mahindra was established by two brothers in 1945, and

began assembly of Jeep CJ-3A utility vehicles. Following
the independence, in 1947, the Government of India and
the private sector launched efforts to create an automotive
component manufacturing industry to supply to the
automobile industry. In 1953 an import substitution
programme was launched, and the import of fully built-up
cars began to be impeded.[18]

The Hindustan Ambassadordominated India's automotive market

from the 1960s until the mid-80s

However, the growth was relatively slow in the 1950s and

1960s due to nationalisation and the license raj which
hampered the Indian private sector. Total restrictions for
import of vehicles were set and after 1970 the automotive
industry started to grow, but the growth was mainly driven
by tractors, commercial vehicles and scooters. Cars were
still a major luxury item. In the 1970s price controls were
finally lifted, inserting a competitive element into the
automobile market.[19] By the 1980s, the automobile market
was still dominated by Hindustan and Premier, who sold
superannuated products in fairly limited numbers.[20] During
the eighties, a few competitors began to arrive on the
To promote the auto industry the government started
the Delhi Auto Expo which was had its debut showcasing in
1986. The Auto Expo of 1986 was a window for technology
transfers showing how the Indian Automotive Industry was
absorbing new technologies and promoting indigenous
research and development for adapting these technologies
for the rugged Indian conditions. The 9 day show was
marked by then Prime Minister Rajiv Gandhi.

Auto Industry: Global Scenario
The production of passenger
and commercial vehicles has
reached a new record of 66.46
million units in 2005. The
growth in production has been
as follows:
There has been an addition of 10.59
million vehicle production since
1997. A majority of this growth is

coming from the Asia Pacific

region (excluding Japan).

A bulk of this increase in AsiaPacific region has come from

China where production has
trebled from 15.82 lakh units in
1997 to 46 lakh in 2005. from 7.72
lakh units in 1997 to
lakh in 2005


of Indian

Automotive Industry=
2.1 Automobiles
While the genesis of Indian Automotive
Industry can be traced to the 1940s,
distinct growth decades started in the
Between 1970 and 1984 cars were
considered a luxury product; manufacturing
was licensed, expansion was restricted;
there were quantitative restriction (QR) on
imports and a tariff structure designed to
restrict the market. The market was
dominated by six manufacturers - Telco
(now Tata Motors), Ashok Leyland,
Mahindra & Mahindra, Hindustan Motors,
Premier Automobiles and Bajaj Auto.
The decade of 1985 to 1995 saw the entry
of Maruti Udyog in the passenger car
segment and Japanese manufacturers in
the two wheelers and light commercial
vehicle segments. Economic liberalization,
started in 1991, led to the delicensing of
the passenger car segment in 1993

Between 1995 and 2000 several

international players entered the market.
Advanced technology was introduced to
meet competitive pressures, and
environmental and safety imperatives.
Automobile companies started investing in
service network to support maintenance of
on-road vehicles. Auto financing started
emerging as an important driver for
Size of the Indian Automotive Industry
The Indian Automobile Industry produced 8.5
million vehicles in 2004-05 amounting to around
USD 25 billion. During the financial year 2005-06,
Indian Automobile Industry produced more than
9.7 million vehicles amounting to almost USD 28
billion. The growth in production was 15%. India is
the second largest market for two wheelers in the
world. However, in value terms, the value of the
market for passenger cars and CVs is higher than
the market size for two wheelers.

Today, the Indian auto component sector has over

500 organised players and about 5000 unorganised
sector players. The

players of organised sector reached a turnover of

over USD 14 billion in 2005-06. Demand from
OEMs account for 67% of sales, replacement
market accounts for 19%, while exports account
for over 14% at about USD 2.0 billion. This is
exclusive of tyres, batteries and imported
and state exchequers. It also has significant spin off
on insurance, auto finance and oil sector.

Indian Automotive
Industry: Innovation
and Growth
In the early 21st century, with the
original four Asian Tigers at or near to
fully developed status, attention has
increasingly shifted to other Asian
economies such as China and India,
economic transformation at the
present time and are thus leading a
sort of redistribution of the epicenter
of global innovative activities. India
initiated economic reforms, beginning
comprehensive in the early 1990s.
The reforms included significant
liberalizations of the external control
regime, opening up for increased
Statics to Dynamics


automotive industrys growth over the
four decades since independence.
The evolution of Indias automotive
industry from a fairly static/slowpaced growth (from 1940s till 1980s)

to the recent impressive showing of

precedence to history.

Genre of Indian Automotive


Fig 4: Market Share of Various

Segments of Automobiles
Growth potential of Indian Automotive

Automotive Industry offers huge growth

potential in terms of sales volume
(including exports) and also immense
employment opportunities. The likely future
volumes of different vehicle categories
were estimated on the basis of projections
made by iMaCS, NCAER and AT Kearney.
The projected size in 2016 of the Indian

automotive industry varies between USD 122

billion and USD 159 billion including USD 35
billion exports. This translates into a contribution
of 10-11% to Indias GDP by 2016, that is, double
the current contribution. This would mean a
domestic vehicle market of USD 82 billion to USD
119 billion by 2016. Another USD 2 2.5 billion in
engineering will not only be an opportunity, but

getting adequately trained personnel will

become a major challenge.



Palanquins, also
known as palkis,
were one of the
luxurious methods
used by the rich
and noblemen for

cart and



Bullock carts have


been traditionally


especially in rural

used for transport,

India. Today, they
are used in smaller
towns and are
as Tonga or buggie


Public road

Public transport is

the predominant

rickshaw is still

mode of motorised

available in the city

local travel in

of Kolkata wherein

cities.[11] This is

a person pulls the

predominantly by

rickshaw by hand

road, since


commuter rail

rickshaws were
introduced in India
in the 1940s.

They are bigger

than a tricycle
where two people
sit on an elevated
seat at the back and
a person pedals
from the front.


services are
available only in
seven metropolitan
of Mumbai, Delhi,
Chennai, Kolkata,
Bangalore, Hydera
bad and Pune,
while dedicated
city bus services
are known to
operate in at least
25 cities with a
population of over
one million.


public transport
modes like tempos
and cycle
rickshaws assume

importance in

and a seat for

medium size cities.

passengers in the



Urban rail


Most of the
traditional taxicabs
in India are
either Premier
Padmini or Hindust
Ambassador cars.


Delhi Metro,
operational since

An auto rickshaw is
a threewheeler vehicle for
hire that has both
side doors and is
characterised by a
small cabin for the
driver in the front

Urban mass
rapid transit
The first
modern rapid
transit in India is
the Kolkata
Metro and started
its operations in
1984,this is also the
17Th Zone of
the Indian
India's oldest metro


is theKolkata Metro

present suburban
railway services in
India are limited
and are operational
in Mumbai, Kolkat

Kolkata tram is the

a, Pune, Chennai,

only remaining tram

Delhi and Hyderab

network in India

ad.[29] The Mumbai

Railway is the first
rail system in India
which began
services in Mumbai
in 1867, transports
6.3 million
passengers daily
and has the highest
passenger density
in the world.

The arrival of
British rule in India
saw trams in
addition to trains,
being introduced in
many cities
including Bombay
and Kolkata.
The Kolkata tram is
currently the only
tram system in the
country and
provides an
means of transport

in Kolkata while
the other tram
systems in India
were phased out

Rural sales
boost auto
revival in
high demand and
vehicle sales in rural
India have boosted
hopes of a turnaround
in the automobile
sector. In the past two
years, the auto
industry has been on a
prolonged slump in
urban parts. However,
during the festive
months of September
and October, the
demand for twowheelers in rural areas
increased, recording a
growth of 18 percent.
57,020 units of utility
vehicles (UV), such as
Nissans Terrano and
Fords EcoSport, have
also been sold in
October, which is a
rise of seven percent
following a threemonth decline.

Automotive Industry,
globally, as well in
India, is one of the
key sectors of the
economy. Due to its
deep forward and
backward linkages
with several key
segments of the
automotive industry
has a strong
multiplier effect and
acts as one of the
key drivers of
economic growth.
The well-developed
Indian automotive
industry produces a
wide variety of
vehicles: passenger
cars, light, medium
and heavy
commercial vehicles,
multi-utility vehicles
such as jeeps,
scooters, motorcycles, mopeds,
three wheelers,
tractors and other
equipment etc. The
sector has high
potential for
employment. This
will increase the
present level of
employment in
sector which
presently is quite low
at 12% as compared
to the countries like
Malaysia (50%);
Korea (62%) and
China (31%).


Automobile sector of west Bengal used to thrive back in the early days of production. A primary vehicle
manufacturing company HINDUSTAN MOTORS increased the standard of automobile hub of west
Bengal. Passenger vehicles like ambassador, short road cars were renowned all over the country. Its
1500ltr cc engine made it a perfect masterpiece.
But later in the current scenario, automobile hub is at stake in this state.
HINDUSTAN MOTORS closed down due to its lack of funding. Political wars make it a hectic process for
companies to build up manufacturing lineups in this state. So working class had to shift to Gurgaon,
Gujarat, Mumbai, Kerala to get jobs in automobile sector, where the industry flourishes.

The majority of India's car manufacturing industry is based around three clusters in the south, west
and north. The southern cluster consisting of Chennai is the biggest with 35% of the revenue share.
The western hub near Mumbai and Pune contributes to 33% of the market and the northern cluster
around the National Capital Region contributes 32%.[8] Chennai, houses the India operations
of Ford,Hyundai, Renault, Mitsubishi, Nissan, BMW, Hindustan Motors, Daimler, Caparo, Mini,
and Datsun. Chennai accounts for 60% of the country's automotive exports.
Gurgaon and Manesar in Haryana form the northern cluster where the country's largest car


manufacturer,Maruti Suzuki, is based.[10] The Chakan corridor near Pune, Maharashtra is the
western cluster with companies like General Motors,Volkswagen, Skoda, Mahindra and
Mahindra, Tata Motors, Mercedes Benz, Land Rover, Jaguar Cars, Fiat and Force Motors[11]
having assembly plants in the area. Nashik has a major base of Mahindra and Mahindra with a


SUV assembly unit and an Engine assembly

unit. Aurangabad with Audi, Skoda and Volkswagen also forms part of the western cluster. Another
emerging cluster is in the state of Gujarat with manufacturing facility of General
Motors in Halol and further planned for Tata Nano at their plant in Sanand. Ford, Maruti Suzuki
and Peugeot-Citroen plants are also set to come up in Gujarat.[13] Kolkata with Hindustan
Motors, Noida with Honda and Bangalore with Toyota are some of the other automotive
manufacturing regions around the country also under active consideration.


Computerization of RTOs & Driver Licensing System
5.10.1 India is a fast growing economy and the Automotive Industry is playing a leading role in this. The
number of vehicles being manufactured and sold is increasing

Stolen Vehicle Tracking

Enforcement of other laws introduced from time to time, e.g. ELV norms

Competitiveness in manufacturing
The share of manufacturing sector (within the Industry sector) has shown only a marginal improvement
from 16.6% in 1991 to 17% of Indian GDP 2003. In comparison, in some East Asian economies the share

of manufacturing has ranged from 25% to 35% of their GDP. It is known that stagnation of manufacturing
as a proportion of GDP has adverse impact on employment generation. Therefore it is imperative to

boost manufacturing given the huge anticipated increase in the workforce over the next 15
As observed by the National Manufacturing Competitiveness Council in its national manufacturing
strategy, the challenges faced by Indian manufacturers raise important questions for both Industry
and Government ....
this calls for breakthrough and bold thinking on the part of all stakeholders. Only bold aspirations
can enable India benefit from emerging opportunities in the manufacturing sector.

Figure 02: Key factors

Labour Productivity cost

Eciency factor

Labour Flexibility

Capital eciency / other production factors

Quality Manpower

Resource Availability


Raw Materials

Economic Policies & Stability

Ability to attract


Domestic / Exports

Proximity to Markets

Auto clusters
Source: IMaCS Limited Study for SIAM & ACMA

Prescriptions for Industry in the National Manufacturing strategy

The National Manufacturing Strategy has indicated that Industry would not only need to
think big in terms of scale but also need to:
Invest in R&D and technology
Have a continuing commitment for skills development and education

Benchmark their performance against best in the industry

Adopt best manufacturing practices and production techniques

Deliver on globally acceptable quality levels

Demand creation, brand building and infrastructure

international Business (Exports)
Export opportunities for four wheelers would lie primarily in the small car segment as Indian companies have

expertise in manufacturing vehicles in this segment and enjoy an advantage over other low cost
countries. India should capitalize on this expertise and target becoming a manufacturing hub for A/B
class vehicles. become substantial in the coming years

Environment and Safety Regulations

Emission norms came into force with the Idle Emission Norms in 1984. Mass Emission Norms were
introduced in 1991 for petrol vehicles and in 1992 for diesel vehicles. These norms have been
progressively made stringent and India has followed the European emission standards and test
procedures. Environment concerns led to India narrowing the gap with Euro norms at a rapid pace and
currently BS-II or Euro II equivalent norms are in force throughout the country and BS-III or Euro-III
norms in eleven cities

Human Resource Development

Employment is always a major factor when measuring the significance of any economic activity. The
automotive industry, on account of its backward and forward linkages, is a significant generator of
employment - both direct and indirect.

Areas to Focus
The future challenge for Indian automobile industry would be to develop a supply
base with emphasis on lower costs and economies of scale, develop technical and
human capabilities, overcome infrastructural bottlenecks, stimulate domestic demand
and exploit export and international business opportunities. The key to success is to
achieve the critical mass that would make India competitive and profitable for
sustained investments. Keeping these in view, the identified challenges and
interventions are in the areas of competitiveness in manufacturing and flow of
technology; demand, brand building and infrastructure; export and international
business; environmental and safety standards, and human resources development. A
key deficiency that needs to be addressed for attaining the vision is to improve
competitiveness in manufacturing. Systemic deficiencies could be overcome through
a long-term and stable policy regime that will support the industry to fulfill its potential.