INTRODUCTION

1. Definition and brief history of the product

An automobile vehicle or mechanism; esp., a self-propelled vehicle suitable

for use on a street or roadway. Automobiles are usually propelled by internal
combustion engines (using volatile inflammable liquids, as gasoline or petrol,
alcohol, naphtha, etc.), steam engines, or electric motors. The power of the
driving motor varies from about 4 to 50 H. P. for ordinary vehicles, ranging
from the run-about to the touring car, up to as high as 200 H. P. for specially
built racing cars. Automobiles are also commonly, and generally in British
usage, called motor cars.

2. Different uses and category of the product

Segment

Commercial vehicle

Cars and multi utility

vehicle

Two and Three wheeler

1. Brief overview of the industry (Dominant Industry Features)

Since the first car rolled out on the streets of Mumbai (then Bombay) in 1898, the Automobile
Industry of India has come a long way. During its early stages the auto industry was overlooked
by the then Government and the policies were also not favorable. The liberalization policy and
various tax reliefs by the Govt. of India in recent years has made remarkable impacts on Indian
Automobile Industry. Indian auto industry, which is currently growing at the pace of around18 %
per annum, has become a hot destination for global auto players like Volvo, General Motors and
Ford.

A well developed transportation system plays a key role in the development of an economy, and
India is no exception to it. With the growth of transportation system the Automotive Industry of
India is also growing at rapid speed, occupying an important place on the 'canvas' of Indian
economy. Today Indian automotive industry is fully capable of producing various kinds of
vehicles and can be divided into 03 broad categories: Cars, two-wheelers and heavy vehicles.
Among the two-wheeler segment, motorcycles have major share in the
market. Hero Honda contributes 50% motorcycles to the market. In it Honda
holds 46% share in scooter and TVS makes 82% of the mopeds in the
country.
Page No. 1 . 40% of the three-wheelers are used as goods transport purpose.
Piaggio holds 40% of the market share. Among the passenger transport,
Bajaj is the leader by making 68% of the three-wheelers. Cars dominate the
passenger vehicle market by 79%. Maruti Suzuki has 52% share in passenger
cars and is a complete monopoly in multipurpose vehicles. In utility vehicles
Mahindra holds 42% share.
In commercial vehicle, Tata Motors dominates the market with more than
60% share. Tata Motors is also the world's fifth largest medium & heavy
commercial vehicle manufacturer.

INDUSTRY INVESTMENT
According to Commerce Minister Kamal Nath, India is an attractive
destination for global auto giants like, BMW General Motors, Ford
and Hyundai who were setting base in India, despite the absence of
specific trade agreements.

Current Scenario

• On the cost front of Indian automobile industry, OEMs are eyeing India in a
big way,
Investing to source products and components at significant discounts to
home market.
• On the revenue side, OEMs is active in the booming passenger car market
in India.

Snippets
• By 2010, India is expected to witness over Rs 30,000 crore of investment.
• Maruti Udyog has set up the second car with an investment of Rs 6,500
crore.
• Hyundai will bring in more than Rs 3,800 crore to India.
• Tata Motors will be investing Rs 2,000 crore in its small car project.
• General Motors will be investing Rs 100 crore and Ford about Rs 350 crore.
• Ashok Leyland and Tata Motors have each announced over Rs 1,000 crore
of
investment.

Facts & Figures

The automobile industry in India is on an investment overdrive. Be it

passenger car or two-wheeler manufacturers, commercial vehicle makers or
three-wheeler companies – everyone appears to be in a scramble to hike
production capacities. The country is expected to witness over Rs 30,000
crore of investment by 2010.
Take note of this, Maruti Udyog is coming up with new Zen and the diesel
version of Swift during the next few months. Hyundai will also be unmasking
the Verna and a brand new diesel car. General Motors will be launching a
mini and may be a compact car. Most of the companies have made their
intentions clear. Maruti Udyog has set up the second car plant with a
manufacturing capacity of 2.5 lakh units per annum for an investment of Rs
6,500 crore (Rs 3,200 crore for diesel engines and Rs 2,718 crore for the car
plant itself). Hyundai and Tata Motors have announced plans for investing a
similar amount over the next
3 years. Hyundai will bring in more than Rs 3,800 crore to India, Tata Motors
will be
Investing Rs 2,000 crore in its small car project. General Motors will be
investing Rs 100 crore, Ford about Rs 350 crore and Toyota announced
modest expansion plans even as Honda Siel has earmarked Rs 3,000 crore
over the next decade for India - a sizeable chunk of this should come by
2010 since the company is also looking to enter the lucrative small car
segment. Some new entrants will also taste the water. They are the big
names in passenger cars like Citroen, Volkswagen AG, Nissan (separately,
apart from its tie-up with Suzuki), Alfa Romeo, Maserati, Land Rover and
Aston Martin. Talking about the commercial vehicle segment, Ashok Leyland
and Tata Motors have each Announced well over Rs 1,000 crore of
investment. In two-wheelers segment, Chinese bike major Lifan Harley-
Davidson are expected to enter India soon. Hero Honda is about to establish
its fourth manufacturing plant.

The Automotive Industry in India FACTS

 9th largest automobile industry.

 2nd largest two-wheeler market,
 4th largest in Heavy Trucks.
 2nd largest tractor manufacturer.
 Annual production of over 2.3 million units.
 The monthly sales of passenger cars in India exceed 100,000
units.

Production of 4-Wheelers
Tata Motors Ltd. 449,878

Mahindra & Mahindra Ltd. 128,601

Ashok Leyland Ltd. 65,085

Force Motors Ltd. 35,728

Eicher Motors Ltd. 24,348

Hindustan Motors Ltd. 15,458

MAJOR PLAYERS IN INDIA

TECHNOLOGICAL

Technology, for cars or for any other automated innovations, is a constantly evolving concept.
No two consecutive years ever see one single car technology trend doing the rounds in the
automobile industry. There is always something new coming up in the form of an auto model.
Be it a car, motorbike or any other vehicle, car enthusiasts always have something new to revel
at.
 Recently, a lot of happenings in the car technology arena have kept the global auto
market abuzz. Digital technology has largely taken over the automotive industry. With
each auto model year, vehicle manufacturers are coming up with more sophisticated
digital systems addressing vehicle safety, infotainment, and telematics. Computer in
various forms is becoming an integral part of a motor body. You find them almost
everywhere- inside the passenger cabin, or under the hood of a car or any other
vehicle. No wonder, automobiles today are increasingly being recognized as modern
“computers on wheels.”

Following are the four major areas where automotive technology is making great
progress:
• Powertrain and Safety: Engine Management, Power
Steering, Electronic Suspension, Braking Systems etc.
• Vehicle Controls and Comfort/Convenience:
Dashboard/Instrument Cluster, Security Alarm Systems,
Climate Control etc.
• Driver Assistance: Heads Up Display, Tire Pressure
Monitoring, Adaptive Cruise Control, Collision Warning etc.
• Communication and Infotainment: Audio Systems,
Telematics, Navigation/GPS, Games Consoles etc.

PLD: A Major Technology Trend in Automobile Industry

PLDs or Programmable logic devices are a power alternative to the silicon technology
based semiconductors ASIC and ASSP. There was a time when these were the
preferred semiconductor options, but now, car manufacturers in the global automobile
industry are opting for more powerful yet cost-effective car design platforms to meet the
growing networking needs of their increasingly complex car digital systems.

“Platform” concept: A Landmark Technology Trend in Automotive Industry

“Platform” concept is the newest thing in the evolutionary history of automotive
designing. In this concept, one basic design is used for car model differentiation. The
concept is further gaining popularity due to increase in the trend of converging data,
audio and video in a single automotive space.
Increased Demand for Digital Content in Automobile Industry
On-board motor digital content such as rear seat entertainment systems, navigation
systems, and driver assistance applications are no more add-ons in a car model. They
are now considered mainstream products in automobile industry.

Quality- The Mainstay in Automobile Industry

Motivated by the enhanced use of high definition, wireless communication in cars and
vehicles, system OEMs and automakers in the global automobile industry are
increasingly opting for cutting-edge technology driven semiconductor devices.
All these technology progress in the automobile industry has significantly brought down
the automotive design cycle from 60 months to approximately 24 to 36 months. This is
further going to expedite the innovation of automotive technology in the years to come.

IMPORTANCE:

The automobile industry is often characterized in terms that limit the scope of discussion
to the manufacture and sale of new automobiles. This panel broadens the scope to
include the broad set of complements, enablers, and constraints that make the industry
one of the largest and most influential human enterprises in history. The role of
information technology has been profound in the slow transformation of the industry
from its original status as a product industry into what is increasingly a service industry in
which ?product? is something far different from what it was when the industry first
became a powerful global force. The role of information technology (IT) in this process
has never been in the foreground: it has always been infrastructural, making possible
subtle but profound changes in nearly every aspect of the industry.
This panel will examine the mechanisms and logic of transformation in a world of rapidly
changing capabilities in information processing and communication. In this, we depart
somewhat from the contemporary practice of focusing on the ways in which specific
information technologies (e.g., the Internet, World Wide Web, or e-commerce) change
specific practices in the industry as it currently operates. Our focus is more upon the slow
accretion of capability enabled by information technology that, in time, results in
fundamentally new characteristics in the industry. In a way, this panel?s main interest is
in the relationship between information and the automobile realm. We break this analysis
into six regimes of change:
• Property regulation, risk mitigation, and complementary asset provision
• Atmospheric emissions control
• Passenger safety
• Entertainment, conviviality and control
• Expediting and coordinating production and distribution
• Manufacturer-customer relationship construction and maintenance
The most important impacts of information technology in this transformation have been
deep in the infrastructure of the vehicles themselves (e.g., emissions control, safety,
entertainment), and in the records systems that have fundamentally important in altering
the relationship between OEMs, dealers, automobile users, and other actors in the
automobile realm. Attempts to e-enable or e-transform the automotive industry, large
experiments, from changing the supply chain (e.g., Covisint) to revolutionizing sales
(e.g., Auto-by-Tel) have thus far proved to be far less significant than their proponents
hoped.
The story of IT in enterprise transformation in the automobile industry is one of slow,
infrastructural, accretionary change that produces powerful cumulative effects. It is not
surprising that this kind of change is difficult to see. Moreover, industry transformation
is not limited to the businesses processes of the firms. It affects the broad fabric of
economic and social enterprise in a world where information, knowledge, and value are
easily reproduced and transported.
The contemporary developments in the Internet and the World Wide Web might very
well, in time, produce such changes. To this point, they have not yet done so, and it is
difficult to predict whether or how they will. The history of the automobile industry has
from the start been one of complementary use of IT. The automobile industry co-evolved
with modern IT, and in myriad ways, incorporated that technology as it grew. The full
effects of such evolution are difficult to spot because they take a long time and so much
of what is important becomes infrastructural and invisible. That is the reason why a
broader view of automotive industry transformation is necessary to understand the effects
of a class of technologies as broad as information technology on an industry as large,
diverse, and complex as the automobile industry.

INVENTION:

The automobile industry is one of the fastest growing industries in India. With the continuous advancement of technologies new
inventions in the automobile industry is only paving the way for more and more technologically superior and sophisticated vehicles.
This in turn is forcing the automobile companies to implement these latest technologies in their vehicles in order to have an edge
over competitors. The Indian automobile industry is on a high and hence there is immense competition because everyone wants to
be the best whether it is the domestic players or foreign players who have their manufacturing units in India. Latest technologies are
being equipped into the vehicle. Even the dearth and rising prices of traditional fuel have given the automobile companies reason
enough to introduce electric cars and alternate fuel vehicle.

Latest Automobiles Inventions in India

Latest technologies invented to improve the engine of a vehicle.

Common Rail Direct Injection Engine (CRDI)

The Common Rail Direct Injection offers 25% more power than the normal direct injection and makes better use of the fuel by
breaking up the fuel into small particles and making optimum use of it. The CRDI engine has provided a tremendous boost to diesel
engines.

Multi Point Fuel Injection Engine (MPFI)

This technology sticks to stricter auto emission norms and manages to squeeze out the maximum benefit of the fuel by making
optimum use of even the last drop of petrol or diesel and providing the vehicle with a great mileage.

Latest technologically superior cars

Solar Power Car by Toyota: Global automobile giants Toyota already have designed a car air conditioner running on solar power
and now they have taken a great leap and are about to design a car that runs on solar power. The car will be having fixed solar
panels on the roofs of the car. This would result in a real revolution in the history of automobile inventions doing away totally with the
cost of fuels and emissions.

Electric Cars: The Reva India's first battery car was launched recently after 13 years of research and development. The concept of
the battery car was introduced mainly to have a pollution free environment. The Reva is a small car carrying a price tag of Rs
2,99,000 and a fuel efficiency of 80 kms per charge. The life of the battery of the Reva is 120 kms per charge. The company has
managed to sell 2,500 units already and still hopes to upgrade the Reva for higher sales figures and a green environment

Driverless cars: Driverless cars also known as autopilot, autonomous vehicle or auto-drive car are intelligent vehicles because of the
simple fact that they drive themselves, to put it in a better way they actually do not require drivers to drive them. These vehicles
navigate the roads themselves and give you a taxi experience.

Latest inventions in automobile components

In Car Journey Recorder: The latest inventions by Nikkai is the in car journey recorder. This is meant to be placed of the windshield
of the car. The journey recorder is a video recorder which records in front of you while you are driving. This is mainly meant to come
of use during accidents. It will benefit in the accessibility of loss incurred due to accident and also if you are being accused even if
you are not at fault.

Smart Pedal Technology: The brake override or Smart pedal technology is a system which is built into the car to prevent fatal
accidents. The computer system known as the smart pedal tells the engine to disregard the accelerator if the brake and the gas
pedal are pushed at the same time. Companies like Mercedes and BMW have been using this technology for quite some time now
and soon General Motors are introducing the smart pedal in India as well.

5 Star Shine: This is a unique paint protection system that keeps your car clean for five years. It has been tested and has managed
to survive 150 washings. This paint protection system increases the exterior life span of the car.

Automobile Industry Regulations in India

In view of the huge investment in the automotive sector, it is important to be aware of the laws relating to
and the regulation governing the automotive sector writes Vidya Sunderam.

The Indian automobile industry is the tenth largest in the world. It has an annual production of approximately 2
million units. There has been a sustained growth in the automotive sector of India following the economic reforms
of 1991 which opened up 100 percent Foreign Direct Investment in this sector. The competitiveness in the
automotive sector has been increasing since then. The industry has been growing annually at 20 per cent. India is
set to be a key player in the automotive sector.

The automotive regulations in India are governed by the Ministry of Shipping, Road Transport & Highways
(MoSRT&H) which is the nodal ministry for regulation of the automotive sector in India. Along with MoSRT&H,
ministries such as Ministry of Environment & Forests and Ministry of Petroleum & Natural Gas also have a vital role
in the formulation of automotive regulations and standards in India.

The principal instrument governing the automotive sector in India is the Motor Vehicles Act, 1988 (MVA) along with
the Central Motor Vehicles Rules 1989 (CMVR). The Act governs emission norms and safety standards in India and
consolidates the law pertaining to motor vehicles. The CMVR provide the rules that explain the MVA in detail.

MoSRT&H has constituted two committees to recommend and advise the ministry on issues relating to Safety and
Emission Regulations. These committees are - Central Motor Vehicles Rules-Technical Standing Committee (CMVR-
TSC) and Standing Committee on Implementation of Emission Legislation (SCOE). Central Motor Vehicles Rules-
Technical Standing Committee (CMVR-TSC) was formulated to receive draft recommendations from other
committees, such as Automotive Industry Standards Committee and Bureau of Indian Standards, and to finalise
and approve safety recommendations made by such committees. The joint secretary of MoSRT&H is the Chairman
of CMVR-TSC. CMVR-TSC comprises of representatives from Ministry of Heavy Industries and Public Enterprises,
Bureau of Indian Standard (BIS), Automotive Component Manufacturers Association of India (ACMA), Select State
Governments, Testing agencies, SIAM and other invitees. The purpose of CMVR-TSC is to finalise and approve the
draft standards and norms submitted by various committees. The CMVR-TSC is assisted by the Automotive Industry
Standards Committee (AISC) and Bureau of Indian Standards (BIS).

AISC is a committee set up by MoSRT&H. The purpose of establishing this committee was to review the safety
standards with regard to motor vehicles in India on a periodic basis and to give recommendations. The Chairman of
this committee is the Director of Automotive Research Association of India (ARAI) which is one of the testing
agencies constituted under CMVR-TSC. The AISC safety standards are formulated and prepared by separate Panel
comprising of representatives of various stakeholder associations such as Department of Heavy Industries,
Department of IPP, Department of RT&H, BIS, Vehicle Research and Development Establishment (VRDE), SIAM,
ACMA and ARAI. The representative of ARAI is the member secretary of this committee.

For preparing safety standards, consideration is on various aspects such as the status of technology, time frame
required for implementation, necessity of a particular regulation in relation to the safety and emission issues, etc.
AISC submits the draft safety standards in the form of recommendations to CMVR-TSC for final approval. The CMVR
– TSC looks into the recommendations of AISC and either approves or sends the recommendations to AISC for
amendments. After approval CMVR-TSC submits its final proposal to MoSRT&H. MoSRT&H then takes the final
decision for incorporation of the recommendations in CMVR.

The National Standards for Automotive Industry are prepared by Bureau of Indian Standards (BIS). These standards
are submitted for approval to the CMVR-TSC. After approval the CMVR-TSC sends it to MoSRT&H for final approval.
The standards formulated by AISC are also converted into Indian Standards by BIS. The standards formulated by
both BIS and AISC are considered by CMVR-TSC for implementation.

Standing Committee on Implementation of Emission Legislation (SCOE) is another committee along with CMVR-TSC
that was formulated under the MoSRT&H. This committee was established for the purpose of recommending
emission norms. This committee is established to discuss the future emission norms and to recommend norms for
in-use vehicles to MoSRT&H. This committee finalises the test procedures and the implementation strategy for
emission norms and advises MoSRT&H on any issue relating to implementation of emission regulations.

The CMVR-TSC and SCOE recommend the safety standards and emission norms for implementation by the
MoSRT&H. The standards and norms that are finalized by the CMVR-TSC are then sent for approval of the Secretary
(MoSRT&H) and the Minister. After approval by the Ministry, and based on the recommendations from CMVR-TSC
and SCOE, MoSRT&H issues notification for necessary amendments / modifications in the in Central Motor Vehicle
Rules. The finalized standards and norms are notified through General Statutory Rule/Statutory Order.

Under Rule 126 of the CMVR, various test agencies are established to test and certify the vehicles based on the
safety standards and emission norms prescribed by the Ministry. Every manufacturer of motor vehicle has to
submit a prototype of the vehicle to be manufactured to any of the test agencies mentioned hereafter. After testing
the vehicle for compliance of all standards and norms, the test agency shall grant a certificate to the manufacturer.
The test agencies are – Automotive Research Association of India, Pune (ARAI), Vehicle Research & Development
Establishment, Ahmednagar, Central Farm Machinery Testing and Training Institute, Budni, Indian Institute of
Petroleum, Dehradun, Central Institute of Road Transport, Pune and International centre for Automotive
Technology, Manesar.

The Indian standards and norms are at par with international standards to the extent that there is a sustained
growth in the automotive sector. But there is a need to consolidate the laws further by bringing a master legislation
in force that would govern and regulate all committees in force India rather than the committees being governed
by various Ministries.

Leaders & Laggards in Auto Manufacturers - Major

Top of Form

330 Long-Term Grow th Rate (5 yr) View

Bottom of Form

Leaders in Long-Term Growth Rate (5 yr)

BMW [BMW.DE] 88.41%

Toyota Motor Corporation Common [TM] 56.30%
Tata Motors Ltd Tata Motors Lim [TTM] 35.00%
Honda Motor Company, Ltd. Commo [HMC] 25.10%
Tesla Motors, Inc. [TSLA] 20.00%
SORL Auto Parts, Inc. [SORL] 18.00%
Ford Motor Company Common Stock [F] 17.73%
MAHINDRA & MAHINDRA LTD. [MNM.BO] 13.11%
MARUTISUZUKI [MARUTI.BO] 12.39%
General Motors Company Common S [GM] 10.30%

Laggards in Long-Term Growth Rate (5 yr)

FLEETWOOD FPO [FWD.AX] 8.67%

General Motors Company Common S [GM] 10.30%
MARUTISUZUKI [MARUTI.BO] 12.39%
MAHINDRA & MAHINDRA LTD. [MNM.BO] 13.11%
Ford Motor Company Common Stock [F] 17.73%
SORL Auto Parts, Inc. [SORL] 18.00%
Tesla Motors, Inc. [TSLA] 20.00%
Honda Motor Company, Ltd. Commo [HMC] 25.10%
Tata Motors Ltd Tata Motors Lim [TTM] 35.00%
Toyota Motor Corporation Common [TM] 56.30%

Market Size - Automobile and Light Duty Automobile

Manufacturing
The total U.S. market size for the Automobile and Light Duty Automobile
Manufacturing industry includes all companies, both public and private. In addition
to total revenue, the table contains details on employees, companies, and average
firm size.

The total U.S. market size for the Automobile and Light Duty Automobile
Manufacturing industry includes all companies, both public and private. In addition
to total revenue, the table contains details on employees, companies, and average
firm size.
Market Size - Automobile and Light Duty Automobile
Manufacturing
The total U.S. market size for the Automobile and Light Duty Automobile
Manufacturing industry includes all companies, both public and private. In addition
to total revenue, the table contains details on employees, companies, and average
firm size.

INDIAN EXPENSES:

At present time, Indian automobile industry is making a major contribution in increasing the country's GDP by 9% every
year. New heights has been scaled by the industry in the year 2010. In January 2010, total automobile sales in the
domestic market reached 1114157 units, the figures shows an increment of 44.9% compared to the sales units of
7,68,698 of same period last year. Even for the month of April-October after a gap of 11 years, total automobile sales in
India stood at 1,120,081 Units. Annually, the Indian automobile industry is growing at an average rate of 30% and
marking itself as one of the fastest growing industries in India. According to the reports of Society of Indian Automobile
Manufacturers, annual car sales are estimated to reach 5 million vehicles by 2015 and more than 9 million by 2020 To
believe New York Times reports, several automobile companies like Hyundai Motors, Nissan, Toyota, Volkswagen and
Suzuki have expanded their manufacturing facilities owing to India's strong engineering base and expertise in the
manufacturing of low-cost, fuel-efficient cars.

The following statistics explains the market share of different vehicles in the Indian automobile Industry. This
data is valid for the Indian domestic market only.
Passenger Vehicles : 15.86%
Commercial Vehicles : 4.32%
Three Wheelers : 3.58%
Two Wheelers : 76.23%
Production Rate Statistics

The production of automobiles in India has greatly increased in the last decade. At present India is the largest tractor and
three-wheel vehicle producer, second largest two-wheel vehicle producer, fourth largest commercial vehicle producer and
eleventh largest passenger car producer. For the year 2003-2004 the production rate crossed 7,243,5648 and for the
current year it has reached 14,049,830 in terms of total vehicles production. As a result of all this, the resultant annual
turnover of the Indian automobile industry for the year is recorded to be 38,238 million USD by Soceity of Indian
automobile Manufacturer (SIAM). For the year 2009-10, the production rate for different category of vehicles is as
followed(As per SIAM)

Passenger Vehicles : 2,351,240

Commercial Vehicles : 566,608
Three Wheelers : 619,093
Two Wheelers : 10,512,889
Grand Total : 14,049,830

Export Market Statistics

Last year, India's automobile exports had reached $4.5 billion and a consistent export growth rate can be estimated in the
year 2010 also with the estimation that it will cross $12 billion by 2014. As per the SIAM records automobile exports have
under gown a growth of 22.30 percent during the current financial year. United Kingdom is largest export market for
India's automobile industry followed by Germany, Netherlands and South Africa. In the year 2009-10, India has made a
huge profit by exporting 1,804,619 no. vehicles. Different brands are utilizing the Indian automobile engineering expertise
to manufacture and export maximum no. of vehicles from their Indian plants. Nissan Motors plans to export 250,000
vehicles manufactured in its India plant by 2011. Similarly, General Motors announced its plans to export about 50,000
cars manufactured in India by 2011. Listed below is the statistics showcasing export sales rate of Indian automobile
industry for the year 2009-10.

Passenger Vehicles : 446,146

Commercial Vehicles : 45,007
Three Wheelers : 173,282
Two Wheelers : 1,140,184
Grand Total : 1,804,619

Domestic Market Statistics

Even in the domestic market, the automobile industry is experiencing tremendous success. As per statistics launched by
Society of Indian Automobile Manufacturers (SIAM), there has been a growth of 32.28% in the domestic car sales, justified
from the January 2010 sales 145,905 units against the 2009 sales of 110,300 units. The Commercial Vehicles segment
grew marginally at 4.07 percent. While Medium & Heavy Commercial Vehicles declined by 1.66 percent, Light Commercial
Vehicles recorded a growth of 12.29 percent. Listed below is the statistics showcasing domestic market sales rate of Indian
automobile industry for the year 2009-10.

Passenger Vehicles : 1,949,776

Commercial Vehicles : 531,395
Three Wheelers : 440,368
Two Wheelers : 9,371,231
Grand Total : 12,292,770

Automotive Industry Life Cycle

This section addresses the automotive industry in the US. The potential customer base is large and broad and ranges
from individual private buyers, to corporations and small businesses.
The car industry has reached maturity in the US. Cars have been around for more than a century (so has GM) and
almost all adult Americans own one or more cars.
In 2008, GM sold 8.35 million vehicles. According to 2006 Department of Transportation statistics, there were
250,851,833 vehicles in the US, and 196 million drivers in 2003. This represents approximately 1.3 vehicles per
licensed driver.
Given this saturation level, and degree to which the major automakers are developed, there is little scope for new
entrants into the industry, which leaves the existing giants in a comparatively good position.
Another aspect relevant to this industry’s life cycle is the fact that it is highly consolidated (as opposed to being
fragmented). There are just a few players which command the majority of the US automobile market. GM, Toyota,
Ford, and Chrysler comprise more than 60% of the US market. In fact, it is almost Pareto-optimal, with 38% of the 21
manufacturers amounting to just over 79% of all cars made and sold in the US. According to one source, if fewer than
four firms control over 60% of the market, it is considered consolidated.
Being so consolidated, and with high barriers to entry, means that it is mature and developed. Over the years, the
largest and most successful have emerged in dominant positions. They have engaged in horizontal and backward
integration and have grown into massive firms.
The red X in the industry life cycle chart below represents where the industry is in the US today. It has already
reached a saturation level. While there are more people receiving driver’s licenses, there are older people who are no
longer driving. But the important thing to note is that cars have permeated US culture to a mature, saturated degree.
While the automotive industry is going through a shakeout of sorts during this financial crisis, the real
shakeout occurred decades ago. One point which demonstrates the type of shakeout that has already
happened in the US market is that there have been approximately 1,800 automakers in the US during the
20th century, and by the 1980s there were only three major brands: The Big Three.
Also, decline is indeed occurring in car sales, but this is likely not endemic or specific to the automotive
industry. It can be more attributed to current economic conditions and the recent rise in oil prices. As
such, the automotive industry life cycle is in maturity – between shakeout and decline.
 POLITICAL

AUTO POLICY
VISION
TO ESTABLISH A GLOBALLY COMPETITIVE
AUTOMOTIVE INDUSTRY IN INDIA
AND
TO DOUBLE ITS CONTRIBUTION
TO THE ECONOMY BY 2010

1. POLICY OBJECTIVES
This policy aims to promote integrated, phased, enduring and self-sustained
growth of the Indian automotive industry. The objectives are to:-
(i) Exalt the sector as a lever of industrial growth and employment and to
achieve a high degree of value addition in the country;
(ii) Promote a globally competitive automotive industry and emerge as a
global source for auto components;
(iii) Establish an international hub for manufacturing small, affordable
passenger cars and a key center for manufacturing Tractors and Two-
wheelers in the world;
(iv) Ensure a balanced transition to open trade at a minimal risk to the Indian
economy and local industry;
 (v) Conduce incessant modernization of the industry and facilitate
indigenous design, research and development;
(vi) Steer India's software industry into automotive technology;
(vii) Assist development of vehicles propelled by alternate energy sources;
(viii) Development of domestic safety and environmental standards at par
with international standards.
2. BACKGROUND
2.1 Automotive industry has universal5ly emerged as an important driver in
the economy. Although the automotive industry in India is nearly six decades
old, until 1982, only three manufacturers - M/s. Hindustan Motors, M/s.
Premier Automobiles and M/s. Standard Motors tenanted the motor car
sector. Owing to low volumes, it perpetuated obsolete technologies and was
out of sync with the world industry. In 1982, Maruti Udyog Ltd. (MUL) came
up as a government initiative in collaboration with Suzuki of Japan to
establish volume production of contemporary models. After the lifting of
licensing in 1993, 17 new ventures have come up of which 16 are for
manufacture of cars. This industry currently accounts for nearly 4% of the
GNP and 17% 0f the indirect tax revenue.

3. EXTANT POLICY
3.1 Before the removal of QRs with effect from 01-04-2001, the policy placed
import of capital goods and automotive components under open general
licence, but restricted import of cars and automotive vehicles in Completely
Built Unit (CBU) form or in Completely Knocked Down (CKD) or in Semi
Knocked Down (SKD) condition. Car manufacturing units were issued licences
to import components in CKD or SKD form only on executing a Memorandum
of Understanding (MOU) with the Director General Foreign Trade (DGFT). 11
companies signed MOUs with DGFT under which they agreed to:

i. Establish actual production of cars and not merely assemble

vehicles;
ii. Bring in a minimum foreign equity of US $ 50 Million if a joint
venture involved majority foreign equity ownership;
iii. Indigenise components upto a minimum of 50% in the third and
70% in the fifth year or earlier from the date of clearance of the
first lot of imports. Thereafter the MOU and import licensing will
abate;
iv. Neutralise foreign exchange outgo on imports (CIF) by export of
cars, auto components etc. (FOB). This obligation was to
commence from the third year of start of production and to be
fulfilled during the currency of the MOU. From the fourth year
 imports were to be regulated in relation to the exports made in
the previous year.

4. CURRENT STATUS OF INDIAN AUTOMOTIVE INDUSTRY

4.1 The industry encompasses commercial vehicles, multi-utility vehicles,
passenger cars, two wheelers, three wheelers, tractors and auto
components. There are in place 15 manufacturers of cars and multi utility
vehicles, 9 of commercial vehicles, 14 of Two/Three Wheelers and 10 of
Tractors besides 5 of engines. With an investment of Rs.50,000 crores, the
turnover was Rs. 59,500 crores in Automotive Sector during 1999-2000. It
employs 4,50,000 people directly and 100,00,000 people indirectly and is
now inhabited by global majors in keen contention.
4.2 India manufactures about 38,00,000 2-wheelers, 5,70,000 passenger
cars, 1,25,000 Multi Utility Vehicles, 1,70,000 Commercial Vehicles and
2,60,000 tractors annually. India ranks second in the production of two
wheelers and fifth in commercial vehicles.
4.3 India’s automotive component industry manufactures the entire range of
parts required by the domestic automobile industry and currently employs
about 250,000 persons. Auto component manufacturers supply to two kinds
of buyers – original equipment manufacturers (OEM) and the replacement
market. The replacement market is characterised by the presence of several
small-scale suppliers who score over the organised players in terms of excise
duty exemptions and lower overheads. The demand from the OEM market,
on the other hand, is dependent on the demand for new vehicles.
4.4 The auto sector (excluding Tractors) attained a steep cumulative annual
growth of 22% between 1992 and 1997. The Tractors achieved a cumulative
annual growth of 16%. Component production grew by 28%. There has been
a slowdown in the automobile sector in the past two years. However, the
component industry maintained a low but positive growth rate mainly due to
its export performance. Over the years, the component industry has
maintained a 10% - 12% share of exports in the total production.
4.5 Roads occupy an eminent position in transportation as they, as per the
present estimate, carry nearly 65% of freight and 87% of passenger traffic.
Although, India has 3.3 million kilometers of road network, which is the
second largest in the world, the Indian highways are getting overpopulated.
Traffic management and road sense also need attention.
5. NEED FOR A COMPREHENSIVE AUTOMOTIVE POLICY
5.1 The extant policy has drawn many overseas companies into India but
needs to be more investor friendly, address emerging problems and be WTO
compatible. The Indian car market is full of possibilities; but present demand
profile inhibits volume production, save by a few, and conduces contention
rather than competition. World over, the majors have consolidated to elevate
technology, enlarge product range, access new markets, cut costs and
 ingraft versatility. They have resorted to common platforms, modular
assemblies and systems integration by component suppliers and E-
Commerce.
5.2 The automotive industry is in the midst of a major structural
transformation in today's globalised scenario. "System Supply" of integrated
components and sub-systems is becoming the order of the day, with
individual small components being supplied to the system integrators
instead of the vehicle manufacturers. In this process, most of the SSI units
manufacturing smaller individual components are on their way to become
tier 2 and tier 3 suppliers, while the larger companies including most MNCs
are being transformed into tier 1 companies, which purchase from tier 2 & 3,
and sell to the auto manufacturers.
5.3 Indian auto sector needs to grow collaterally and in harmony with world
industry. India has the potential to be a global automotive power. However,
concerted efforts will be required to take auto manufacturing to a self-
sustaining level where they shall have volumes, generate requisite
technology and meet evolving emission requirements.
5.4 Volume is important for any manufacturing enterprise. However, it is
more important for automobile sector, both for the manufacture of vehicles
as well as auto components. Lack of volume will not only inhibit efficient
manufacture but also R&D and introduction of new models. The investment
and fiscal policies should create an environment for volume production and
indigenous capability for innovation for small cars and auto components.
5.5 Auto components manufacturers have been slowly gaining global
recognition and maintaining a certain level of exports despite the recent
downturn. It should be possible to achieve an export target of US $ 1 billion
by 2005 and US $ 2.7 billion by 2010. This would require three pronged
marketing strategy: exports through OEMs for their global sourcing
requirements, export to tier I manufacturers as a part of their international
supply chain and direct exports to aftermarket. The main challenges are
lower volume – low scale, fragmentation, inadequate R&D/technology
support, lower productivity levels, limited resources for international
marketing and establishment of an efficient supply chain.
6. MEASURES TO REALIZE THE POLICY OBJECTIVES
6.1 Initiatives relating to investment, tariffs, duties and imposts will be the
instruments to achieve the Policy objectives. These path government’s
economic reform and are in harmony with the commitments made to WTO.
6.2 Increased resource allocation to the highways sector to ensure collateral
upgradation and development of road infrastructure in step with the increase
in the population of vehicles.
6.3 An appropriate regulatory framework for smooth movement of traffic,
safety and environmental aspects.
7. FOREIGN DIRECT INVESTMENT
 7.1 Automatic approval for foreign equity investment upto 100% of
manufacture of automobiles and component is permitted.
8. IMPORT TARIFF
8.1 The incidence of import tariff will be fixed in a manner so as to facilitate
development of manufacturing capabilities as opposed to mere assembly
without giving undue protection; ensure balanced transition to open trade;
promote increased competition in the market and enlarge purchase options
to the Indian customer.
8.2 The Government will review the automotive tariff structure periodically to
encourage demand, promote the growth of the industry and prevent India
from becoming a dumping ground for international rejects.
8.3 In respect of items with bound rates viz. Buses, Trucks, Tractors, CBUs
and Auto components, Government will give adequate accommodation to
indigenous industry to attain global standards.
8.4 In consonance with Auto Policy objectives, in respect of unbound items
i.e., Motor Cars, MUVs, Motorcycles, Mopeds, Scooters and Auto Rickshaws,
the import tariff shall be so designed as to give maximum fillip to
manufacturing in the country without extending undue protection to
domestic industry.
8.5 The conditions for import of new Completely Built Units (CBUs), will be as
per Public Notice issued by the Director General Foreign Trade (DGFT) having
regard to environment and safety regulations.
8.6 Used vehicles imported into the country would have to meet CMVR,
environmental requirements as per Public Notice issued by DGFT laying
down specific standards and other criteria for such imports.
8.7 Appropriate measures including anti dumping duties will be put in place
to check dumping and unfair trade practices.
9. EXCISE DUTY
9.1 Motor Cars
9.1.1 The ownership of cars in India is just 6 per thousand of
population as against 500 in the developed economies. The
contribution of the auto sector to the GDP and employment is
likewise low. Expansion of local demand holds great potential
and is vital to install scale volumes of production.

9.1.2 Domestic demand mainly devolves around small cars not

exceeding 3.80 meters in length. Small cars occupy less of road
space and save on fuel. These capture more than 85% of the
market. India can build export capability and become an Asian
hub for export of small cars. The growth of this segment needs to
be spurred.
 9.2 Multi Utility Vehicles
9.2.1 MUVs are an important mode of economical mass transport
in rural India due to poor road infrastructure and lack of good
State transport system. They are the first vehicle purchased by a
number of farmers, traders, small businessmen in rural and semi-
urban markets. The Government will endeavour to provide fiscal
incentives to this sector.
9.3 Commercial Vehicles
9.3.1 Presently excise duty on commercial vehicles sold by a
manufacturer whether as a chassis or with a complete body is
16%. However, no duty is levied on the body that is built by an
independent body builder on chassis bought from a
manufacturer. This dispensation inveigles production of the
complete trucks and buses by the chassis manufacturer and is
detrimental to safety standards. The duty imposed on the
construction of bodies by an independent body builder, small or
organised sector, shall be equal to that of bodies built by a
chassis manufacturer.
9.3.2 The Government will encourage fabrication of bus body on
bus chassis designed for better passenger comfort instead of
truck chassis as is the current practice.
9.3.3 The Government will promote the use of multi-axle vehicles
for carriage of goods as they cause reduced environmental
pollution and lesser wear and tear on road surface in comparison
to the existing 2-axle trucks.
10. IMPROVING ROAD INFRASTRUCTURE
10.1 Traffic on roads is growing at a rate of 7 to 10% per annum while the
vehicle population growth for the past few years is of the order of 12% per
annum. Poor road infrastructure and traffic congestion can be a bottleneck in
the growth of vehicle industry. A balanced and coordinated approach will be
undertaken for proper maintenance, upgradation and development of roads
by encouraging private sector participation besides public investment and
incorporating latest technologies and management practices to take care of
increase in vehicular traffic.
10.2 For the convenience of traveling public the Government shall also
promote multi-modal transportation and the implementation of mass rapid
transport systems.
11. INCENTIVE FOR RESEARCH AND DEVELOPMENT
11.1 The Government shall promote Research & Development in automotive
industry by strengthening the efforts of industry in this direction by providing
suitable fiscal and financial incentives.
 11.2 The current policy allows Weighted Tax Deduction under I.T. Act, 1961
for sponsored research and in-house R&D expenditure. This will be improved
further for research and development activities of vehicle and component
manufacturers from the current level of 125%.
11.3 In addition, Vehicle manufacturers will also be considered for a rebate
on the applicable excise duty for every 1% of the gross turnover of the
company expended during the year on Research and Development carried
either in-house under a distinct dedicated entity, faculty or division within
the company assessed as competent and qualified for the purpose or in any
other R&D institution in the country. This would include R & D leading to
adoption of low emission technologies and energy saving devices.
11.4 Government will encourage setting up of independent auto design firms
by providing them tax breaks, concessional duty on plant/equipment imports
and granting automatic approval.
11.5 Allocations to automotive cess fund created for R&D of automotive
industry shall be increased and the scope of activities covered under it
enlarged.
12. BUILDING BYE LAWS FOR RESIDENTIAL, COMMERCIAL AND
OTHER USES
12.1 With the growth of vehicles, smooth traffic movement has come under
severe strain. The problem has been aggravated because of inadequate
provision of parking facilities generally. Starting with metropolitan and
important towns, the Government will pursue with State Governments and
Local bodies amendments to bye laws for upward revision of the parking
norms for new residential buildings, construction of common parking for
existing residential areas besides parking upgradation in all commercial
areas. Multi-storied parking shall also be encouraged.
13. ENVIRONMENTAL ASPECTS
13.1 The automotive and oil industry have to heave together to constantly
fulfill environment imperatives. The Government will continue to promote the
use of low emission fuel auto technology.
13.2 The Government after considering the recommendations of the Expert
Committee on Auto Fuel Policy headed by Dr. R.A. Mashelkar, have approved
a road map for implementation for the auto fuel quality consistent with the
required levels of vehicular emissions norms and environmental quality. The
Government will formulate a comprehensive auto fuel policy covering the
other related aspects and ensure availability of appropriate auto fuel/fuel
mixes at minimum social costs across the country. Suitable institutional
mechanism will be put in place for certification, monitoring and enforcement
of different technologies/fuel mixes. Appropriate fiscal measures will be
devised to achieve milestones in the roadmap for implementation of auto
fuel policy.
 13.3 In the short run, the Government will encourage the use of short chain
hydrocarbons along with other auto fuels of the quality necessary to meet
the vehicular emissions norms.
13.4 There is prime need to support the development and introduction of
vehicles propelled by energy sources other than hydrocarbons by promoting
appropriate automotive technology. Hybrid vehicles and vehicles operating
with batteries and fuel cells are alternatives to the conventional automobile,
which in their early beginnings, lie intreasured. As an impetus for the
development of such vehicles, an appropriate long-term fiscal structure shall
be put in place to facilitate their acceptance vis-à-vis vehicles based on
conventional fuels.
13.5 Internationally, the practice is to levy higher road tax on older vehicles
in order to discourage their use. In India, the road tax on vehicles varies in
nature and quantum among the states. Lifetime road tax is also in vogue.
The endeavour will be to move to the international model.

13.6 In order to facilitate faster upgradation of environmental quality, the

Govt. will consider having a terminal life policy for commercial vehicles
alongwith incentives for replacement for such vehicles.
14. SAFETY
14.1 Government will duly amend the Central Motor Vehicles Rules, Bureau
of Indian Standards (BIS) and other relevant provisions and introduce safety
regulations that conform to global standards.
14.2 Testing and certification facilities need to be revised and strengthened
in accordance with safety standards of global order. Government, in
partnership with industry, will tend to this requirement.
15. HARMONISATION OF STANDARDS:
15.1 Government recognises the need for harmonisation of standards in a
global economy and will work towards it.

Auto Sector Budget 2011 Highlights at a Glance

Full exemption of basic customs duty and concessional central excise of 4% extended to batteries
imported for electric vehicles in replacement market.
• Fuel-cell technology vehicles to get concessional excise duty of 10%.
• Hybrid vehicles part to be fully exempt from basic customs duty and special CVD.
• Concessional rate of 5% excise duty to incentivize domestic production of hybrids.
• Duty reduced from 10% to 5% on conversion kits for fossil-fuelled vehicles to hybrid (CNG, LPG kits)
• LED lights to attract only 5% excise from 10%, exempt from special CVD.
 • Outright concession in place of refund-based concession on excise duty for factory-built ambulances.
• Refund-based concession on taxis with seating capacity of upto 13 (including driver). Existing
concession on 7-seater taxis to stay.
• No change in existing excise duty, so no price hike for cars and bikes

In the Budget 2011, Pranab Mukherjee has proposed the setting up a National Mission for Hybrid
and Electric Vehicles that will be launched in association with all stake holders, which include
carmakers and battery makers. This mission will strive to provide green and clean transport to the
masses.

The Finance Minister also extended the exemptions from basic customs duty and a concessional rate
of Central Excise duty of 4 percent that was provided to specific parts of electrical vehicles in the last
budget. These concessions now include batteries for electric vehicles imported by carmakers for the
replacement market. What this means is, if you buy a Toyota Prius, you are not going to get any
reduction in its price as there’s no reduction in import duties on completely-built cars, but when the
time comes to replace its batteries, you will get them much cheaper. A concessional rate of 5 percent
excise duty has been proposed in Budget 2011 on hybrid vehicles to incentivize their domestic
production. It’s a good time for Toyota to consider making the Prius in India instead of importing it.

However, if you drive an indigenous electric vehicle like the Mahindra Reva, you will get the car
cheaper because it is assembled locally and the battery cost will be lower.

To spur research and development on fuel-celled vehicles running on hydrogen cell technology, the
Finance Minister has given such vehicles a concessional excise duty of 10 per cent only. However,
there are no commercially available fuel-celled vehicles in India yet, though Mahindra and Honda
have been doing some R&D on this locally.

All hybrid vehicles in India (CNG, LPG – dual fuel vehicles, and petrol-electric hybrids) get a
concessional excise duty rate of 10 per cent. Now Mukherjee has also granted full exemption of basic
customs duty and special countervailing duty (CVD) on specific parts for such vehicle, besides the 5
per cent duty to urge more carmakers to make hybrid vehicles locally.

He has also incentivized the conversion of petrol and diesel vehicles to hybrid technology like CNG,
LPG and electric, by reducing the excise duty on conversion kits from 10 per cent to 5 per cent. LED
lights are also likely to get cheaper (and can see more use in automobiles), as they now only attract 5
per cent excise duty according to Budget 2011 proposals for the auto industry.

It’s not just green cars. Mukherjee also wants green roads, and has exempted bio-based asphalt in
road construction from basic customs duty, as well as exempted machinery for road construction
(road-rollers, tarring machines, tunnel borers) from the same.

Tata Motors, Force Motors, Mahindra and other makers of factory-built ambulances can benefit
from Mukherjee’s proposal of an outright concession instead of a refund-based concession from
excise duty on ambulances.
Large taxis also benefit thanks to Budget 2011. Mukherjee has proposed a refund-based concession
on excise duty to taxis that have a seating capacity not exceeding 13 people, including the driver. This
concession is already available to 7-seater taxis. This again will benefit Force Motors and Tata
Motors, besides Mahindra, Maruti and Toyota.

Other automakers that benefited from Budget 2010 were Tata Motors and Ashok Leyland, as the
government funded 15,260 low-floor and semi-low floor buses in the NCR region under the
Jawaharlal Nehru urban revival scheme, and made public transport more comfortable.

Of course, consumers will have a wee-bit more disposable income to spend on cars. The income-tax
exemption limit has been raised by Rs. 20,000 to Rs. 1.8 lakh. For senior citizens, the age to qualify
is now 60 years (from 65 earlier), and the exemption is Rs. 2.5 lakh. For super-senior citizens (above
80 years of age), the exemption limit is now Rs. 5 lakh, putting a little more disposable income in the
hands of Indians.

Besides this, Mukherjee also reduced excise duty on petrol, but that’s not likely to have a significant
impact on fuel prices owing to the soaring price of oil. Thankfully, duties on regular cars and bikes
remain unchanged in Budget 2011. Many were expecting a hike in duties. Overall, the budget hasn’t
significantly changed the pace of growth of the automobile sector, but has tried to steer it in a green
direction.

 Economic
 The level of inflation Employment level per capita is right.
Economic pressures on the industry are causing automobile companies to
 Reorganize the traditional sales process.
Weighted tax deduction of up to 150% for in-house research and R & D
Activities.
 Govt. has granted concessions, such as reduced interest rates for export
 Financing.
 The Indian economy has grown at 8.5% per annum.
 The manufacturing sector has grown at 8-10 % per annum in the last few
years.
 More than 90% of the CV purchase is on credit.
 F inance availability to CV buyers has grown in scope during the last few
years.
 The increased enforcement of overloading restrictions has also contributed
 to an increase in the no. of CVs plying on Indian roads.
 Several Indian firms have partnered with global players. While some have
 formed joint ventures with equity participation, other also has entered into
 technology tie-ups.
 ‡ Establishment of India as a manufacturing hub, for mini, compact cars,
 OEMs and for auto components.
 Social
 Since changed lifestyle of people, leads to increased purchase of
 Automobiles, so automobile sector have a large customer base to serve.
The average family size is 4, which makes it favorable to buy a four
 wheeler.
 Growth in urbanization, 4th largest economy by ppp index.
 Upward migration of household income levels
85% of cars are financed in India.
Car priced below USD 12000 accounts for nearly 80% of the market.
Vehicles priced between USD 7000-12000 form the largest segment in the
 passenger car market.
 Indian customers are highly discerning, educated and well informed. They
 Are price sensitive and put a lot of emphasis on value for money.
Preference for small and compact cars. They are socially acceptable even
amongst the well off.
Preference for fuel efficient cars with low running costs.