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1: The Beginning of New Era…
With the invention of the wheel in 4000 BC, man’s journey on the road of mechanized transport had begun. Since then he continually sought to devise an automated, labor saving machine to replace the horse. Innumerable attempts reached conclusion in the early 1760s with the building of the first steam driven tractor by a French Captain, Nicolas Jacob Cugnot. It was however left to Karl Benz and Gottlieb Damlier to produce the first vehicles powered by the internal combustion engine in 1885. It was then that the petrol engine was introduced, which made the car a practical and safe proposition. Then onwards, it has been one big journey...on the roads
1.2: History of Automobile Industry
The automobile as we know it was not invented in a single day by a single inventor. The history of the automobile reflects an evolution that took place worldwide. It is estimated that over 100,000 patents created the modern automobile. However, we can point to the many firsts that occurred along the way. Starting with the first theoretical plans for a motor vehicle that had been drawn up by both Leonardo da Vinci and Isaac Newton. In 1769, the very first self-propelled road vehicle was a military tractor invented by French engineer and mechanic, Nicolas Joseph Cugnot (1725 - 1804). Cugnot used a steam engine to power his vehicle, built under his instructions at the Paris Arsenal by
mechanic Brezin. It was used by the French Army to haul artillery at a whopping speed of 2 1/2 mph on only three wheels. The vehicle had to stop every ten to fifteen minutes to build up steam power. The steam engine and boiler were separate from the rest of the vehicle and placed in the front (see engraving above). The following year (1770), Cugnot built a steam-powered tricycle that carried four passengers. In 1771, Cugnot drove one of his road vehicles into a stone wall, making Cugnot the first person to get into a motor vehicle accident. This was the beginning of bad luck for the inventor. After one of Cugnot's patrons died and the other was exiled, the money for Cugnot's road vehicle experiments ended. Steam engines powered cars by burning fuel that heated water in a boiler, creating steam that expanded and pushed pistons that turned the crankshaft, which then turned the wheels. During the early history of self-propelled vehicles - both road and railroad vehicles were being developed with steam engines. (Cugnot also designed two steam locomotives with engines that never worked well.) Steam engines added so much weight to a vehicle that they proved a poor design for road vehicles; however, steam engines were very successfully used in locomotives. Historians, who accept that early steampowered road vehicles were automobiles, feel that Nicolas Cugnot was the inventor of the first automobile. The automotive industry has certain trends it has to follow, just like fashion designers and musical composers. In times of recession and decreasing sales there is less room to take chances and manufacturers are prone to follow the common pattern as a safer bet rather than releasing a controversial product or idea that might or might not be successful. However throughout the automotive industry's history, great innovators have "boldly gone where no man has gone before" to set new trends which have dynamically altered the industry as a whole. 1880's & early 1900's
About hundred years ago -The first motor car was imported
-Import duty on vehicles was introduced. -Indian Great Royal Road (Predecessor of the Grand Trunk Road) was conceived.
First car brought in India by a princely ruler in 1898. Simpson & Co established in 1840. -They were the first to build a steam car and a steam bus, to attempt motor car manufacture, to build and operate petrol driven passenger service and to import American Chassis in India.
Railways first came to India in 1850's In 1865 Col. Rookes Crompton introduced public transport wagons strapped to and pulled by imported steam road rollers called streamers. The maximum speed of these buses was 33 kms/hr.
From 1888 Motors Spirit attracted a substantial import duty. In 1919 at the end of the war, a large number of military vehicles came on the roads. In 1928 assembly of CKD Trucks and Cars was started by the wholly owned Indian subsidiary of American General Motors in Bombay and in 1930-31 by Canadian Ford Motors in Madras, Bombay and Calcutta In 1935 the proposals of Sir M Visvesvaraya to set up an Automobile Industry were disallowed.
1942 Hindustan Motors Ltd incorporated and their first vehicle was made in 1950. In 1944 Premier Automobiles Ltd incorporated and in 1947 their first vehicle was produced. In 1947 the Government of Bombay accepted a scheme of Bajaj Auto to replace the cycle rickshaw by the auto and assembly started in a couple of years under a license from Piaggio. Manufacturing Programme for the auto and scooter was submitted in 1953 to the Tariff Commission and approved by the Government in 1959.
In 1953 the Government decreed that only firms having a manufacturing programme should be allowed to operate and mere assemblers of imported CKD units be asked to terminate operations in three years.
Only seven firms namely Hindustan Motors Limited, Automobile Products of India Limited, Ashok Leyland Limited, Standard Motors Products of India
Limited., Premier Automobiles Limited, Mahindra & Mahindra and TELCO received approval. M&M was manufacturing jeeps. Few more companies came up later.
Government continued with its protectionism policies towards the industry. In 1956, Bajaj Tempo Ltd entered the Indian market with a programme of manufacturing Commercial Vehicles, and Simpson for making engines.
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In sixties 2 and 3 Wheeler segment established a foothold in the industry. Escorts and Ideal Jawa entered the field in the beginning of sixties. Association of Indian Automobile Manufacturers formally established in 1960. Standard Motors Products of India Ltd. moved over to the manufacture of Light Commercial Vehicles in 1965.
Major factors affecting the industry's structure were the implementation of MRTP Act, FERA and Oil Shocks of 1973 and 1979. During this decade there was not much change in the four wheeler industry except the entry of Sipani Automobiles in the small car market. Oil Shock of 1973 quickened the process of dieselization of the Commercial Vehicle segment. Three other companies, namely, Kirloskar Ghatge Patil Auto Ltd, Indian Automotive Ltd and Sen & Pandit Engg products Ltd entered the market during 1971-75. They ultimately withdrew in early eighties.
During the seventies the economy was in bad shape. This and many specific problems affected the Automobile Industry adversely.
1980's - The period of liberalized policy and intense competition
First phase of liberalisation announced.
• • •
Unfair practices of monopoly, oligopoly etc slowly disappeared. Liberalisation of the protectionism policies of the Government. Lots of new Foreign Collaborations came up in the eighties. Many companies went in for Japanese collaborations. Hindustan Motors Ltd. in collaboration with Isuzu of Japan introduced the Isuzu truck in early eighties. ALL entered into collaboration with Leyland Vehicles Ltd. for development of integral buses and with Hino Motors of Japan for the manufacture of W Series of Engines.
TELCO after the expiry of its contract with Daimler Benz, indigenously improved the same Benz model and introduced it in the market. Government approved four new firms in the LCV market, namely, DCM, Eicher, Swaraj and Allwyn. They had collaborations with Japanese companies namely, Toyota, Mitsubishi, Mazda and Nissan respectively.
In 1983 Maruti Udyog Ltd was started in collaboration with Suzuki, a Japanese firm. Other three Car manufacturers namely, Hindustan Motors Ltd., Premier Automobiles Ltd., Standard Motor Production of India Ltd. also introduced new models in the market.
At the time there were five Passenger Car manufacturers in India - Maruti Udyog Ltd., Hindustan Motors Ltd., Premier Automobiles Ltd., Standard Motor Production of India Ltd. and Sipani Automobiles.
Ashok Leyland Ltd. and TELCO were strong players in the Commercial Vehicles sector. In 1983-84 Bajaj Tempo Ltd. entered into a collaboration with Daimler-Benz of Germany for manufacture of LCVs. Important policy changes like relaxation in MRTP and FERA, delicensing of some ancillary products, broad banding of the products, modifications in licensing policy, concessions to private sector (both Indian and Foreign) and foreign collaboration policy etc. resulted in higher growth / better performance of the industry than in the earlier decades.
Mass Emission Norms were introduced for in 1991 for Petrol Vehicles and in 1992 for Diesel Vehicles.
In 1991 new Industrial Policy was announced. It was the death of the License Raj and the Automobile Industry was allowed to expand.
Further tightening of Emission norms was done in 1996. In 1997 National Highway Policy has been announced which will have a positive impact on the Automobile Industry. The Indian Automobile market in general and Passenger Cars in particular have witnessed liberalisation. Many multinationals like Daewoo, Peugeot, General Motors, Mercedes-Benz, Honda, Hyundai, Toyota, Volvo and Fiat entered the market.
Various companies are coming up with state-of-art models of vehicles. TELCO has diversified in Passenger Car segment with Indica. Despite the adverse trend in the growth of the industry, it is resolutely trying to
meet the challenges. Various issues of critical importance to the industry are being dealt with forcefully.
It is essential to leverage skills of different engineering disciplines to build these kinds of integrated systems. All laboratories in 7 . Since the sector is price driven. Some players are working towards development of efficient production systems that control the entire production process with high precision and accuracy. Analysts foresee high scope in the electronics for auto sector and expect the retailing of such electronics products to contribute a major chunk of future revenues. The government is increasing the research and development (R&D) fund for the automobile industry over and above the Rs 1400 crores earmarked for eight years.1.3: Preview of Automobile Industry The automobile industry. targeting different segments. for which indigenization is highly important. one of the core sectors. huge investment is envisaged to remain competitive through cost advantage. The sector seems to be optimistic of posting strong sales in the next couple of years in view of a reasonable surge in demand. has undergone metamorphosis with the advent of new business and manufacturing practices in the light of liberalization and globalization. The Indian automobile market is gearing towards having international standards to meet the needs of the global automobile giants and become a global hub.. Players are strategizing to consolidate their position and gradually increase market penetration with the launch of new models. Such systems working on real time operating systems allow efficient control of different parts of manufacturing and production. IT in the automobile sector plays a crucial role. The product becomes dearer if it is manufactured using imported parts.
have also been brought together through the setting up of a national R & D working group. Uttar Pradesh. India today exports: Engine and engine parts. Act. electrical parts. low cost manufacturing base and highly skilled manpower Not only a large number of world manufacturers have set up production bases in India but also a large number of foreign companies are collaborating with the auto component suppliers and vendors. such as BHEL which is developing cell technology as alternative fuel. It is trying to bring in varying products to suit requirements of different class segments of customers. so much so that in quality conscious markets such as Europe and America. because of its high machine tool capabilities. The Government should promote Research & Development in automotive industry by strengthening the efforts of industry in this direction by providing suitable fiscal and financial incentives. most of the raw material locally produced. Andhra Pradesh and West Bengal are vying to woo global players with proposals including heavy tax exemptions and to create a more investor friendly regime.the country researching on automobile technology. This will be improved further for 8 .T. and has become a excellent manufacturing base for global players. The sector is striding inroads into the rural middle class after its inroads into the urban markets and rural rich. Indian Automobile Components Industry has been making rapid strides towards achievement of world-class Quality Systems by imbibing ISO 9000/QS 9000 Quality Systems whereby the Indian Automotive industry has become more competitive in the export market due to its technological and quality advances. The group is working out a plan to link all major laboratories across the country to give a thrust to automotive research. it is emerging as a major player. based on its performance. extremely capable component industry. The current policy allows Weighted Tax Deduction under I. Indian automobile sector being a driver of product and process technologies. States like Rajasthan. suspension & braking parts among others. Maharashtra. 1961 for sponsored research and in-house R&D expenditure. each state is proposing to provide all regulatory clearances at express speed. drive transmission & steering pats.
This would include R & D leading to adoption of low emission technologies and energy saving devices. Allocations to automotive cess fund created for R&D of automotive industry shall be increased and the scope of activities covered under it enlarged. 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. 9 . Government will encourage setting up of independent auto design firms by providing them tax breaks.research and development activities of vehicle and component manufacturers from the current level of 125%. faculty or division within the company assessed as competent and qualified for the purpose or in any other R&D institution in the country. concessional duty on plant/equipment imports and granting automatic approval. In addition.
In 1952.e. to shut operations. The year was 1954 and this decision of the government marked a turning point in the history of the Indian car industry. Between 1910 and 20's the automobile industry made a humble beginning by setting up assembly plants in Mumbai. The other control imposed on carmakers related to production capacity and distribution. a CAGR of only 3. In the next two decades the number increased to 30. crossing the 30. Thanks to the Licence Raj which restricted foreign competitors to enter the Indian car market. for many of the initial years.1:4 Automobile industry – Wheels of Change India had its date with this wonderful vehicle first time in 1898.000 mark in 1930. In the absence of adequate technology and purchasing power. no new entrant was allowed even though they had plans of a fullfledged manufacturing program. Indian roads were ruled by Ambassador Car from Hindustan Motors and the Fiat from Premier Auto Ltd. The restrictive set of policies was chiefly aimed at building an indigenous auto industry. As a result General Motors. the GOI set up a tariff commission to devise regulations to develop an indigenous automobile industry in the country. Ford and other assemblers closed operations in the country.989 i. cars were imported to satisfy domestic demand. However. After the commission submitted its recommendations. Hindustan Motors (HM). Also. The GOI also had a say in what type of vehicle each manufacturer should make. The import/assembly of vehicles grew consistently after the 1920's. the GOI asked assembly plants. Then for the next fifty years. the restrictions on foreign collaborations led to limitations on import of technology through technical agreements. which started as a manufacturer of auto components graduated to manufacture cars in 1949. each product was safely cocooned in its own segment with no fears of any impending competition.5 per cent. Calcutta and Chennai. The demand for cars in 1960 was to the tune of 15.714. Premier Automobile Ltd (PAL) earned the distinction of manufacturing the first car in the country by assembling 'Dodge DeSoto' and 'Plymouth' cars at its Kurla plant. which did not have plans to set up manufacturing facilities. The GOI control even extended to fixation of prices for cars and dealer 10 . the car industry grew at a snail's pace in the 60’s. In 1946. Therefore.
the three decades following the establishment of the passenger car industry in India and leading upto the early 1980s. that the car makers were given a free hand to fix the prices of cars. The very face of the industry was changed for ever in 1983 with the entry of public sector Maruti Udyog in a joint venture with the Suzuki Corporation of Japan. thus.6% market share. 11 . a series of liberal policy changes were announced marking another turning point for the automobile industry. the licensing system was still very much intact. Thanks to MUL car sales registered a CAGR of 18. It was only in 1985. This changed the industry's profile dramatically. from 1981 to 1990. as his choice throughout this period was limited to two models viz. with a 74% stake in Maruti Udyog Ltd (MUL). the GOI announced its famous broadbanding policy which gave new licenses to broad groups of automotive products like two and four-wheeled vehicles. In 1985. Though a liberal move. multi-utility vehicles (MUVs) and mid-sized cars. this market share has plummeted to almost 62% in FY2000.6 per cent i.commissions. Car sales grew by 42 per cent yoy in 1985 after Maruti 800 was launched. The company has single handedly driven the sales of cars in the country cornering around 79. The car was launched as a "people’s car" with a price tag of Rs 40. Telco's Indica and Daewoo's 'Matiz'. Ambassador and Padmini. The GOI entered the car business. MUL extended its product range to include vans. Simply put. this figure came down due to rising competition from Hyundai's 'Santro'.e. However in FY2000. This triggered the start of a protracted legal battle in 1969 between some carmakers and GOI. MUL introduced 'Maruti 800' in 1983 providing a complete facelift to the Indian car industry. the joint venture with Suzuki Motors Ltd of Japan. effectively abolishing all controls relating to the pricing of the end product.000 units in FY99.000. Maruti 800 was well accepted by middle income families in the country and its sales increased from 1. after the entry of Maruti Udyog. With increasing competition from new entrants.200 units in FY84 to more than 200. proved to be the 'dark ages' for the consumer. In the early 80's.
Passenger cars also registered an impressive 34% growth in FY’04 and total sales volume crossed the 1 million mark for the first time. Within the past decade. continued infrastructure investment. etc provided impetus for the growth. two wheelers registered the lowest but healthy growth rate of 13% in FY’04. Also the lifting of quantitative restrictions on imports by the recent policy is expected to add up to the flurry of foreign cars in to the country. The Financial year 2000 has. The year also saw a sharp 56% rise in export volumes with all the sectors registering more than 40% growth. The Indian Automobile industry registered one of the strongest growth rates in FY’04. normal monsoon. Overwhelmed by newer models from new and existing players had led to an impressive shift from a constrained supply situation to a surplus one. scooters registered a 10% growth after 4 years of continuous decline. The de-licensing of auto industry in 1993 opened the gates to a virtual flood of international auto makers into the country with an idea to tap the large population. fiscal measures like cut in excise duty (in case of cars).Since then. Aided by sustained economic recovery. however. The automobile industry. The growth story was led by Medium and Heavy Commercial Vehicles (M&HCVs) registering a 40% growth while Light Commercial Vehicles (LCVs) recorded a 32% jump in total sales. the industry registered high growth rates in all major segments. While motorcycle volumes tripped on a high base. the economy slumped into recession and sales of cars remained quite stagnant FY97 and FY99. low interest rate regime. Three wheelers grew by 23% in FY’04. signalling the rising international competitiveness of the industry. Apart from strong economic growth in all sectors. been the turnaround year for the Auto industry with the economy looking up. Interestingly. 12 . crossed the half million mark for the first time in FY2000. about 30 models have entered the Indian market with a number of models still awaiting launch.A brief 3-year downturn till 1993 and car sales bounced back to register a 17 per cent growth rate in 1997.
notwithstanding the rise in prices of certain inputs like steel. the domestic industry still enjoys adequate protection. Many companies have entered the car manufacturing sector. to tap the middle and premium end of car industry. The potential borne by the industry is well exhibited by the growing number of international players setting up base in India and increasing competitiveness in the industry. with no import threats. Though the peak customs duty had been reduced to 20% in January 2004 and Special Additional Duty was abolished.Profitability improvements were recorded in companies across segments driven by rise in volumes and lower interest costs to some extent. 13 .
Availability of easy credit facilities also resulted in creating demand for automobiles.1.000 m in FY95 to nearly Rs 35.5: Background of Automobile Industry The automobiles industry for many years operated in a seller's market. Structure The Indian automobile industry can be broadly classified into: 2 /3 Wheelers Passenger Cars Commercial Vehicles (LCV/HCV/MCV) UV (Utility vehicles) Tractors The models in the car market can be fitted to different segments as given below: 14 . The car financing market has boomed from a turnover of Rs 7. Lack of innovation restricted the consumer’s options to the models offered by these companies. The number of manufacturers (domestic and foreign) increased dramatically after the de-licensing of the sector. Little or no attempt was made to control costs or to offer new products. improve technology and styling through research. Increased competition has forced companies to focus on cutting costs. In such a scenario the manufacturer could offer outdated models and also raise prices at will.000 m in FY97. It has also constrained them to limit price increases.
25mn) Mid-size segment (Rs 0. low pricing policies. Honda City.45. Hyundai Santro. The growth of the economy has also resulted in a shift in consumer preferences in each of the segment.45 mn) Luxury car segment (Rs 0.2 9. Gradual shift can be seen in buyers from mopeds to economy scooters. Maruti Alto etc. Opel Astra. Mitsibushi Lancer. from economy scooters to premium and from premium to motorcycles 15 . Maruti 800 etc. Rural areas have also become an exciting market to cater to. Hyundai Accent & others Mercedes Benz & other imported models The economy segment has a very large foothold over the Indian automobile market as compared to the mid-size and luxury segment. tata Indica. improvement in products and technology have fuelled demand for 4-wheelers. Tata Indigo. Fiat Uno. Segment Economy Mid-size and luxury Source: SIAM/ Auto Car India Market Share (%) 90.1mn) Super luxury segment (above Rs 1mn) Models Maruti Omni. The easy availability of finance and increased levels of disposable incomes has led to higher demand for premium models.25-0. The markets are clearly segmented between economy models and premium models. Ford Ikon.8 Increased urbanisation.Category Economy segment (upto Rs 0.
Figure -Structure of Passenger Vehicle Market (India) Trends in Passenger Car / Utiltity Vehicle Sales 16 .
better procurement prices. this segment has seen maximum foreign investment. The CV segment is directly linked to industrial production and foreign trade and is therefore subject to cyclical fluctuations of the economy. These vehicles have witnessed steady demand growth over the past few years due to successive monsoons. The passenger car segment has seen rapid growth on the back of rise in disposable income. increased availability of consumer finance. Ford. Commercial Vehicle Sales Growth v/s IIP Growth Demand for utility vehicles and tractors come from rural India. Post-1991. luxury cars such as Mercedes have found the going tough. and reduction in excise and customs duties. The demand for CVs is related to growth in movement of goods transported and freight rate levels. 17 . Cielo) have been moderately successful. and availability of finance. both of which are linked to level of production. While the lower and medium range cars (Maruti. improved irrigation facilities. There is a clear segmentation of passenger cars based on price and size.
A strong in-house R&D capability allows a manufacturer to develop and introduce products at lower prices. However. High rejection rate of auto components has prompted several global majors like Ford. thus saving costs of importing technology. Availability of quality components is another factor that determines smooth production without bottlenecks. Indian companies spend very little on R&D. to get their international suppliers 18 .
The market too expanded at a rapid pace with the entry of soft financial assistance from several financial institutions to middle income households. Volkswagen etc. Along with the entry of multinational auto companies. MNCs need to carefully plan their entry into emerging markets. There are several 19 . the Indian Government removed several restrictions in a bid to attract foreign investors into the automobile industry. these joint ventures have become fully owned subsidiaries of the foreign partners. Several companies are setting up or have already set up operations in India to cater to the Indian market.M.500 crore Indian car market is being opened up to foreign investors. later entrants have the opportunity to learn from the mistakes of the first entrant. With the exception of Suzuki. Most MNCs began their operations in India as joint ventures with local partners. G. On the other hand. Toyota. In all these cases. There are several global automobile companies who were averse to come and invest in India ten years ago. The Indian car market offers useful lessons in this context. Examples include Suzuki. the foreign partners have pumped in the additional capital and raised their equity stakes With the liberalization of the India economy. Early commitment to a market often results in first mover advantages that are difficult to replicate. Honda. The stiff competition to access market prompted companies to go for different models with differing qualities and efficiency. with its model Cielo.1. Other MNCs such as Ford and General Motors also entered the Indian market. followed by Hyundai. In the 1990s. the Rs 18. now have kept India as a priority destination for their investment. Consequently. Among the first to enter was Daewoo of South Korea. the profile of domestic auto companies too witnessed a structural change. Ford and Daewoo. targeted at the upper end of the market.6: Features of the automobile industry The structure of the auto market has been changing at a faster pace along with the global changes in the Industry. the local partners have just not had enough resources to chip in whenever the equity base has been expanded.
or 2.up Indian operations. Indian automotive market was characterized by weak air pollution regulations. Previously. This module aims to give the various entry options available to a foreign investor. This has resulted in the transformation of a seller’s market (created mainly due to the Indian government’s protectionist policies) into a buyers market. through a subsidiary company set . This will reduce the average life span of vehicles on road and the overall impact would be reduced per vehicle parts consumption. The impact of India’s initiatives in economic liberalization and globalization (post 1991) is most apparent in the automotive sector.strategies by which a foreign enterprise can set . especially for foreign direct investment. due to increased demand in the aftermarket. setting up operations through an Indian arm is advisable. entry strategies may be classified into two major types :1.e. Broadly. The benefit of this practice is the comparatively higher revenues for automotive component suppliers.up in India under Indian laws. 20 . This module does not deal with portfolio investments. But recent pronouncement of GoI to prohibit polluting vehicles in the National Capital Region (NCR) is likely to force the old polluting vehicles off road. Generally. All these factors resulted in prolonged operational existence of vehicle on Indian roads. Automotive industry is a key driver of economic growth contributing around four to five percent to the Indian GDP. In addition. The changing structure of this industry has posed many challenges and opportunities to the market participants. low labor cost of maintenance and the psyche of Indian consumer to delay the discarding of the old vehicle reduced the scrap rate. Introduction of reforms and entry of international companies has intensified competition in the Indian automotive sector. A foreign investor may directly set up its operations in India through a branch office or a representative office or liaison office or project office of the foreign Company . especially if the quantum of investment is huge. It may do so through an Indian arm i.
Brisk activities on infrastructural development will give a boost to the automobile industry.2% in the previous year. Lucrative finance schemes have made the purchase of mid-sized cars really affordable. The outlook for the year 2004-05 is promising and it is expected that the current growth rates of GDP and industrial output will be sustainable. Softening of interest rates and improved financing of second hand vehicles have made the purchasing of cars financially viable. Good performance of the economy has led to higher all round growth leading to high GDP growth 21 . Emergence of India as a manufacturing hub for the automobile industry is a good sign for the country’s future prospects. Within two wheeler segments. The present owners of the small car are likely to graduate to mid-size cars mainly due to declining importance of small car as status symbol and the marginal increment in repayment installment in the finance options. Availability of finance in rural and semi-urban areas have led the low-end customers to put money in the purchase of vehicles.5% last year. progressively mopeds are likely to be replaced by motorcycles. Excise duty reduction on passenger vehicles helped to reduce the ultimate price to the customer. Today we are fourth largest economy (USD 2. it is expected that a significant shift would take place from two wheelers (mainly scooters) to four wheelers. Japan and China in terms of purchasing power parity. these could be classified as entry-level vehicles. It is hoped that industrial growth would be around 7 per cent during the year 2003-04 as against around 6.Two wheelers generate the highest volumes and are more popular in rural and semi urban markets primarily due to lower income levels and poor road conditions. Therefore. which would ensure robust growth in the automotive sector. Agriculture output during the year 2003-04 increased by over 10% as compared to (-)3. With the growth in the family income of these rural and semi-urban buyers and the option of numerous used cars.5 trillion) in the world after USA. Good performance of the economy has led to higher all round growth leading to high GDP growth of 8%. The automotive industry performance is closely linked to industrial growth.
Hindustan Motors incorporated 1944. Ashok Leyland Limited. Automobile Products of India Limited. 1970 . the advantages hitherto enjoyed by the Indian car manufacturers like monopoly.The Government of India decreed that only those firms which have a manufacturing program should be allowed to operate 1955. The major factors affecting the industry were the implementation of the MRTP Act (Monopolies and Restrictive Trade Practices Act).The first imported car was seen on Indian roads 1942.1970 . 1980 . 1928. slowly began to disappear. FERA (Foreign Exchange Regulation Act) and the Oil Shock of 1973 and 1979.Premier automobiles started 1948.7: The landmarks along the way. -With the liberalization of the Government's protectionist policies.First car manufactured in India 1953. Mahindra & Mahindra and TELCO received approval.Only seven firms.1. namely. 1960 .Not much change was witnessed during this period. general Motors.With the winds of liberalization sweeping the Indian car market.Under the Govt. 1993 . 1997 .The two. and the automobile industries were allowed to expand freely. many multinationals like Daewoo. Premier Automobiles Limited.The National Highway Policy was announced which will hopefully have a positive impact on the automobile industry.. The Government also laid down the emission standards to be met by car manufacturers in India in the coming 22 . Mercedes-Benz and Fiat came into the Indian car market. Hindustan Motors Limited. three wheeler industries established a foothold in the Indian scenario. Peugeot. oligopoly. 1991 . the license raj was dispensed with.The first phase of liberalization was announced by the Govt.1980 . Standard Motors Products of India Limited.1990 ..'s new National Industrial Policy.
Tata Motors becomes the first Indian auto company to be listed on the New York Stock Exchange. respectively. 1999 . There were two successively stringent emission levels to be met by April 2000 and April 2005.The Hon’ble Supreme Court passed an order directing all car manufacturers to comply with Euro I emission norms (India 2000 norms) by the 1st of May. 1999 2004 . 2.millennium. hence the names Euro I (equivalent to India 2000) and the Indian equivalent of Euro II.1: Auto policy of the Government of India 23 . 1999 in National Capital Region(NCR) of Delhi. These norms were benchmarked on the basis of those already adopted in Europe. The deadline was later extended to 1st June.
24 . Conduce incessant modernization of the industry and facilitate indigenous design. affordable passenger cars and a key center for manufacturing Tractors and Two-wheelers in the world. phased. Development of domestic safety and environmental standards at par with international standards. Assist development of vehicles propelled by alternate energy sources. includingPromotion of R&D in the automotive sector to ensure continuous technology • upgradation. The objectives are to:• Exalt the sector as a lever of industrial growth and employment and to achieve a high degree of value addition in the country. research and development. building better designing capacities to remain competitive.VISION To establish a globally competitive automotive industry in India and to double its contribution to the economy by 2010. Steer India's software industry into automotive technology. and feels that the policy would serve as a reference document for all stake holders and other interested parties. The Auto Policy has spelt out the direction of growth for the auto sector in India and addresses most concerns of the automobile sector. Ensure a balanced transition to open trade at a minimal risk to the Indian economy and local industry. • • • • • • • SIAM welcomed the announcement of Auto Policy. POLICY OBJECTIVES This policy aims to promote integrated. Establish an international hub for manufacturing small. Promote a globally competitive automotive industry and emerge as a global source for auto components. enduring and self-sustained growth of the Indian automotive industry.
The recommendation of promoting passenger cars of length upto 3. However.subjecting unorganised sector also to 16% excise duty on body building activity as in case of OEMs • The policy has rightly recognised the need for modernising the parc profile of vehicles to arrest degradation of air quality.• Impetus to Alternative Fuel Vehicles through appropriate long term fiscal structure to facilitate their acceptance. SIAM has always been advocating encouragement of value addition within the country against mere trading activity. However. with the Auto Policy in place. this aspect has not been fully addressed.2: Role of Government in Automobile Industry 25 . The terminal life policy for commercial vehicles and move toward international taxing policies linked to age of vehicles. Emphasis on low emission fuel auto technologies and availability of appropriate auto fuels and encouragement to construction of safer bus/truck bodies . The Auto Policy allows automatic approval for foreign equity investment upto 100% in the automotive sector and does not lay down any minimum investment criteria. the automotive industry would get further fillip to become vibrant and globally competitive.8 meters through excise benefits is not in line with the free market concept and may lead to market distortion. The industry would get the required support from other Ministries and departments of Government of India in achieving the goals laid down in the auto policy 2. are steps in the right direction.
This would apply to passenger cars. with the growing number of vehicles. Government initiated controls by notifying emission standards from the year 1992 which were further tightened under the Motor Vehicle Act. India can also learn from countries like Japan that are already using these technologies for a wide number of applications.The government is making efforts to overcome the constraints at their research centers for automobile industry.2000 when India’s stage one norm equivalent to Euro-I will become effective. unleaded petrol was also introduced in metropolitan cities from 1995. Government initiated controls by notifying emission standard from the year 1992 under which were furthers tightened in April 1996 under the Motor Vehicles Act. For 2-wheelers. as per the order of Hon’ble Supreme Court. With the growing number of vehicles. Indian automobile industry is also consistently trying to meet the emerging challenges of environmental pollution and better safety standard. India has announced one of the tightest norms in the entire world. The Indian auto industry should launch programmes for market development and a wider acceptance of alternative energy-driven vehicles in India. It should also work in tandem with the government to make India a world leader in this area. the pollution in the cities is continuously increasing. the pollution in the cities is ever increasing. 2000. which enabled fitments of catalytic convertors on new petrol driven vehicles. For meeting these norms. automobile exhaust contributes more than 60% of the atmospheric pollution in metropolitan cities. India’s stage 2 norms equivalent to Euro-II norms. Euro-I emission norms have already been made applicable throughout the country and Indian is poised to induct Euro-II norms across the country by April 2005. Form that date 7 metropolitan cities are going to switch over to Euro–III norms. To meet this emerging challenges of newer emission norms Indian automobile industry has already braced itself up with new investment and fresh technological induction. According to a study. will be effective from April. In the national capital territory region of Delhi. The norms are being further tightened from April. 26 .
The Institute will be managed by the participating automobile industries and will train skilled category of auto workers. the government protected the car industry from new entrants by making effective use of licenses. the government could not muster enough courage to push the mighty automobile industry and enforce it. It also is making an effort abe to enlist the support of multilateral aid institutions to provide part of the funding for this project. During the era of socialist inspired controls. which promises tremendous environment-improvement benefits for the vehicle. while others like Telco. petrol prices and import duty of steel. Government will encourage and assist establishment of specialized training institutes for the automobile sector through the active association of interested automobile industries. PAL. But it was alleged that the policy was discriminatory in favor of MUL. import duty on cars and parts used in it. after 27 . The policy of broadbanding capacities in the eighties led to increased utilization of capacity for four-wheelers in the industry.The government seems most keen to hand over a huge replacement market on a platter to the automobile industry without ensuring that manufacturers take responsibility of the emission performance of the vehicles they produce for its useful life. etc. In fact the most important action point that was recorded after the ministerial consultation was that manufacturers would have to give emissions warranty for two. However. welding.wheelers from But ultimately. auto mechanical. HM were denied permission to produce cars in collaboration with Japanese companies. The liberal policy on foreign participation through technical and financial collaboration in early eighties led to substantial product upgradation and introduction of new models. in specified skill areas such as painting. The GOI controls the car sector by way of framing policies on depreciation norms. These institutes will be set up in Bidadi Industrial area and Dharwad Growth center. which create pollution.
Earlier. the duty is 32% (16% + 16%). The import duty on auto components will be a key factor in deciding the final pricing of cars as new ventures start with about 50% indigenisation levels. The reduction 28 . On vehicles designed for transport of more than six persons. but not more than 12 persons. states are now charging a uniform sales tax of 12%. The perception of a car as a luxury good lead to heavy excise duty on cars. the government has continually rationalized the excise duty regime. The import duty on catalytic converters and parts thereof has been reduced from 25% to 5%. But MUL vehicles receive favorable treatment in terms of sales tax as well.liberalization and with the consequent opening up of the auto sector in 1992-93. the license raj ceased to exist . designed for transport of not more than six persons (excluding the driver). the import duty on cars has also been further brought down from 50% to 40% ad valorem. Over and above the excise duty. cess by the Central Government. The excise duty doubled from 25% in FY87 to 55% in FY91. the GOI followed a discriminatory policy so as to charge lower duty on fuel efficient car with engine capacity of less than 1000cc. In the 80's. import duties varied between 150 to 200% based on the engine capacity of a car. The import duty on cars and components has come down in the last few years in line with general reduction in import tariffs. This came in being after the 15th of May 2000. But with lobbying from PAL and HM government withdrew the provision in 1987. states used to charge sales tax varying from 3 to 14%. The duty on CNG kits and parts thereof have been reduced from 10% to 5%. Presently. In the FY98 budget. Till 1987. In line with its treatment for luxury items import duties for car have been maintained high. Substantial reduction in import duty has been extended in the budget FY98 for import of certain items which would help the industry to reduce the emission level of vehicles. This helped MUL to price its car at a lower price in comparison to others. But with the onset of the liberalization process in the early nineties. there is a duty of 40% (16% + 24%) on motor vehicles.
2.in import duty on steel in the last few years has helped the industry in reducing raw material costs as major steel requirement of car industry was imported.3: Impact of union Budget 2004-05 29 . all CKD/SKD imports include metal pressed body panels. Even today.
30 .Budget Proposals / Measures • • • • • • • • • • • No change in basic excise duty on automobiles other than tractors Peak rate of customs duty to be maintained at 20% Automobile companies entitled to 150% deduction of expenditure on in-house R&D facilities Reduction in customs duty for alloy and non alloy steel to 15% and 10% respectively. Educational cess of 2% on excise. the current move is a step in the right direction. Budget impact: Tractor manufacturers will benefit from increased demand for tractors once they pass on the benefits of excise duty exemption to the end consumers. Thus. Reduction in customs duty on copper as well as some other metals to 15%. customs duties and Income Tax. Consortium of banks formed to ensure speedy conclusion of loan agreements and implementation of infrastructure projects. future survival will depend upon the capability to offer more technologically competent products. having registered a volume growth of 10% in FY04. From this perspective. The industry has just come out of a three-year slump. the current exemption is likely to give a further boost to demand. The target of doubling the agricultural credit in three years is also likely to make more funds available to the farmers for investment in farm mechanisation. With cost efficiency no longer the domain of any single player. 2005 Strong thrust towards sustainable rural economic growth. Likely implementation of VAT from April 1. deduction of 150% allowed on the same will encourage further R&D investments. Indications of continuing benign interest rate regime. Excise duty on steel increased to 12% from 8%. With major auto companies spending sizeable amount on product development and inhouse R&D expenditure in recent times.
The government has pushed for speedy implementation of infrastructure projects. 3: Demand 31 . improvement in road infrastructure will translate into increased demand for higher tonnage CVs. it would be nullified to some extend by increase in excise duty on steel. especially the CV manufacturers. which is a good sign for the auto industry. Overall. no significant impact for the automobile industry (other than tractors). In line with the international experience. Rural thrust is likely to result in long term increase in demand of automobiles. R&D sop will also boost investments in technology related areas. Cess of 2% may result in increase in end product prices if the manufacturers decide to pass on the hike. renewed impetus on infrastructure and thrust on rural economy are likely to sustain healthy growth rates across segments. Favourable economic scenario. Reduction in customs duty on alloy and non alloy steel would have a positive impact on the auto components and automobile industry. However.
The entry of Maruti Udyog Ltd (GoI-Suzuki JV) in 1983 with a "peoples" car and a more favorable policy framework resulted in a CAGR of 18. availability & cost of car financing schemes. depreciation norms. with the revival of economy. car sales bounced back to register 17% growth rate till FY97. After witnessing a downturn from FY90 to FY93. incidence of duties and taxes.203 27.5%. The table below indicates the past sales trend for cars Cars Volume Growth %yoy Source : SIAM FY94 209.0 55.989 in FY80 at a CAGR of only 3.6% in car sales from FY81-FY90. the economy slumped into recession and this affected the growth of the automobile industry as a whole.714 in FY60 to 30. during FY2000.486 30. The demand for cars increased from 15. The demand for cars was suppressed by various supply constraints.992 19.815 -2. However.The demand for cars in the past was supply driven as demand did not match supply. price of cars. introduction of new models. increase in per capita income.736 2. the segment went great guns posting a sales growth of 56%yoy. introduction of new models.8 The demand for cars is dependent on a number of factors. reaching sales of 409. But change in government policies coupled with aggressive capacity additions and upgradation of models by MUL in the early nineties led to increase in supply and subsequently reduced the waiting periods for economy cars.624 638. The key variables are per capita income. CAGR recorded during the FY94-FY99 period was 14. fuel cost and its subsidization. availability & cost of car financing have 32 .0 FY95 264. The first four factors viz.0 FY96 345. As a result car sales remained almost stagnant in the period between FY97 and FY99.0 FY99 FY2000 409. public transport facilities etc. This led to high premium and long waiting periods for the cars.4%.0 FY98 417.822 27.0 FY97 410.624 cars in FY99. Since then.
The demand for cars in the future is expected to come predominantly from the existing two-wheeler owners who will be upgrading to a four-wheeler. The dominance of economy segment will continue in the future as it will provide large volume to Indian car industry. income levels rise and present car owners upgrading from the economy segment to higher end cars. This is because a majority of customers for cars will graduate from two-wheelers. availability of finance and other factors the above mentioned potential for cars will be difficult to realize. But with the release of new models in the higher end of the economy segment. which will be costing just about two times the price of premium range two-wheelers. Therefore. The demand for mid-sized and premium cars is expected to rise as new models enter the market. 33 .positive relationship with the demand whereas others have an inverse relationship with demand for cars. This could affect the demand for first hand/new cars. excluding the owners of mopeds. the supply of second hand economy cars is expected to increase substantially. the potential demand for cars in the next fifteen to twenty years can be taken as 50% of the existing two-wheeler population of around 28mn units. with cross demand from utility vehicles. Growth in the segment thus is expected to hover around 15-20%yoy. An attempt is made to estimate the potential demand for passenger cars based on the household penetration level of passenger cars as explained in Annexure 4 of the report. or house hold penetration technique. The demand for cars in the future can be estimated with the help of making use of macro economic variables like growth in GDP. per capita income etc. due to rising income and necessity of car for personal transportation purposes. Also.
475 units to 181. But MUL made use of the opportunity open to its technologically superior product and increased its capacity from 100. which helped increase car production by 20.2 FY95 264. FY94 207.96.4 FY96 348.000 cars in FY96 and 350. The first ones to enter the field were Mercedes Benz in joint venture with Telco to manufacture E220. The production of cars has increased from 42.355 577.Supply The supply of cars in Indian industry till 1991 was dependent upon the production capacity of individual players.658 27.146 31.6 FY97 407. With the entry of MUL. attracted world majors who joined hands with existing auto majors. Peugeot in JV with PAL to manufacture Peugeot 309L.000 cars in FY90 to 240.002 (1.000 cars in FY98.420 units from 1981 to 1991 respectively.243 (2. Cars Production Growth %yoy Source: SIAM The major increase in production of cars in the 80's was due to the entry of MUL in 1983. to start their operations at the earliest.4 34 .539 17.1 FY98 401. The growth in production of cars has varied in the last three decades from just 1% in 1970-80 to 21% in 1980-90 and above 15% in 1991. high margin environment faced the prospect of not just diminishing market share.7) 32.000 cars per annum till the early nineties. E250D models.468 27. The table below gives the production numbers of passenger cars in the past few years. Existing producers who had operated in a protected.6) FY99 FY2000 390. The opening of economy in 1993. but a shift in focus from producing vehicles to selling them.000 to 30. the face of the passenger car industry changed forever. Fiat in JV with PAL to manufacture Fiat Uno.
070.000 130. Capacity The present production capacities is detailed in the table below.000 727.000 30.000 25. The segment which has seen a number of new entrants in the recent past will see two new models from the stable of Maruti namely the 'Alto'. which will be available in the 800cc and 1000cc configuration.000 100. This has increased from an estimated 600.070.This has helped in increasing the number of models available to the customer from 8 to 30 and hence provided a wide choice to him. Production capacities are expected to increase in the next two years as players introduce new models.000 50.000 110. which were a part and parcel of car cost in the eighties. The supply in the future. capacity utilization in FY2000 stands at 79. industry sources have indicated that after the hectic action of the past two years.000 50.000 130.000 72. This is still better than utilization levels the world over which stands at around 40%.000 30. Car Capacity Maruti Udyog Hyundai Telco Daewoo Ford India Fiat India General Motors Honda Siel Hindustan Motors Total FY2000 250.000 units in FY2000.000 Thus.000 70. will be in the mid-size and luxury segment.000 30.000 units in FY98 to the present 727.000 Expected 350.000 100. taking into account the plans announced by the car majors are expected to grow to 1.000 60.000 60. The entry of new players is expected to create a marketing 35 . this segment will slowly witness some stability in terms of sales volumes and prices. as was witnessed in FY2000. This has also helped in reducing the average waiting period and premium on cars.000 150.4%.000 cars by 2002. The major increase in supply. However.000 1.
the customer will be having a wider choice to choose depending on his specific needs Indian Automobile Industry An Indian car as one which has been conceived and designed in India. Recently. A start has already been made by sharp reduction in prices of Daewoo 'Cielo' and Maruti 800. companies like MUL. by an Indian company. Increased support through finance from auto manufacturers was quite evident in FY2000. Skoda of Czech Republic and Proton of Malaysia in the years to come. Therefore. the price of Wagon R was also lowered by MUL to face the intensifying competition. This is expected to affect their ability to reduce prices in the future. This will also create a platform for upgradation of existing two-wheeler owners to four-wheelers. This has and will in the future induce existing owners of cars to go for technologically superior products in the same segment leading to sharp drop in prices of second-hand cars. with manufacturers having to comply with Euro emission norms. car manufacturers have sold their products at lowered margins. The Indian passenger car 36 . The luxury segment will see more new entrants namely Toyota of Japan. has at least 85% of its components 'Made in India'. Lately. GM and Hindustan Motors have come out with new models to cover the present gap in the segment. However.warfare in the car industry.
951 units in the previous year. except maybe the name Padmini. The Uno came to India after the Mafiosi had their fill with it. Ind is an acronym for India or Indian. The erstwhile Premier Auto Ltd. Thus. no longer exists. The nearest thing to it in the present is Ind Auto Ltd. the Lancer is a borrowed from abroad product. However. The Siena is a very contemporary model. which till a few months back was adorning showrooms throughout the country. To start with. but do you call a tree your own if its roots are in someone’s courtyard. Since then. After witnessing a downturn from FY90 to FY93. As a result car sales remained almost stagnant in the period between FY97 and FY99. in 1983 with a so-called "peoples" car and a more favorable policy framework resulted in a growth rate of 18. But again. The entry of Maruti Udyog Ltd. the economy slumped into recession and this affected the growth of the automobile industry as a whole. The design came from Morris Motors and the present petrol power plant and drive train are Isuzu throwaways. The saving grace is only that this Lancer is a contemporary model and not some. the name isn't Indian and that's only the tip of the iceberg. there's very little Indian-ness about the car. Of course everything is made in India now. Brazil. but I always wonder why Fiat doesn't launch it in their motherland. Latin America inc. The present day stunner from HM is the Lancer. with the revival in the economy. the Padmini was a completely made in India product. The official mascot of the Indian political system. What's this 'special' car for India.6%.815 units as against 409. a GoI JV with Suzuki of Japan.industry as we see today is relatively recent in origins. the CAGR for the period FY96 FY2000 stands at 16. It being a good car and all. Africa. the Premier Padmini. 37 . car sales bounced back to register 17% growth rate till FY97. The other pre-Cambrian relic. the Triassic-era Ambassador has little Indian-ness in it. Its in the market since my grandpa learnt driving and at the time of its going to grave. but the products are all borrowed from Italy. FY2000 turned out to be a significant year for the industry in which it recorded volume sales of 638.6% in car sales from FY81-FY90. As with HM products from the past. Except the ubiquitous Ambassador and the Premier Padmini there was not much moving around with an Indian tag. The diesel version has a BMC engine.
the Ikon. At last count it held a 64% market share in the passenger car market with four out of every five cars .E. The engine technology had inputs from 'Moteur Modern' of France. So the only thing Indian about the car is the 'Josh' advertising gimmick. India is also the largest manufacturer of agricultural tractors. The estimated growth will automatically emphasize the need for better transport infrastructure facilities.A of Italy. and. since its inception has changed the automobile scene in India completely. First thing. In effect it was the case of an Italian body being wrapped around Indian mechanicals. Telco is a completely Indian carmaker with no major foreign collaborations. the company. nothing else. motor scooters and the world's fifth largest commercial vehicle manufacturer. churning out close to 300. So does the quest for an Indian car end with the Ikon. Every year it rakes in multi-billion rupee profits. good growth prospects are assured for the automobile industry. on Indian roads being Marutis. is bound to grow accordingly.D. No I don't think so. Each of these sectors experienced rapid growth during the last three years Demand in these sectors is driven by industrial. the company is American.e. yet the company is nothing more than Suzuki India Ltd. individual and agricultural consumers respectively. 38 . the Ikon's platform is that of the Fiesta. Maruti. Starting with the official one. Frankly I would have preferred an Indian body wrapping an Indian platform.Ford did take the pains to design an India specific car. Secondly. The increases have resulted from improved overall economic trends in India including large doses of foreign investment a more liberalized economy and higher productivity. The fortune of the Auto component industry is inextricably linked with that of the automobile industry which in turn is influenced by the general economic trends of the country the country's economic growth is projected to grow at more than six percent per annum in the coming years. It's has been the number one manufacturer. This means demand for automobiles and hence for auto components. Their Indica was much touted as 'The Indian car'. Therefore.000 cars last year. but it was styled by I. i.
Ikon Sources : various sources Segment Absence of adequate mass transportation system and rising income levels have resulted in personal vehicles becoming an important mode of transportation in the urban and semiurban areas. 144 in Malaysia. cars are segmented on the basis of price into three segments : Price Approximate Features of Range Main Models Market Share of the segment (Rs.1% above City. introduction of new models and availability of cost effective finance are the key demand drivers in the industry. Hence.World-wide. Santro. 204 in Poland and 90 in Brazil. price is the main factor determining the choice of car. Premium Performance. Uno. Rising household income. the Indian car volumes remain small at just over 1% of the world market with penetration rates of approximately 3. Omni. By international standards however. Cars currently constitute approximately 12% of the total stock of personal vehicles in India. Fuel Economy < 250 Uno. ‘000) the Segment M-800. in India. 1800 ISZ. Medium 250-500 43. Accent. Option Matiz Lancer. 118NE. Status Value. 500 & Cielo. cars are segmented on the basis of their size. Performance.Ambassador Price. Astra. Opel Features.9% Efficiency Ambassador Zen. Diesel Indica. increased urbanisation.1% Contessa. 10.7 cars per thousand people as against 24 in Thailand. 46. Price. Esteem. However. The 39 .
medium and premium segments constitute 46.1% respectively of the market. The midsize segment witnessed an increase of around 115% in sales volume during the period April 1999-March 2000.9%. 40 .premium segment cars are mainly targeted at corporates or businessmen and are usually bought on consumer finance.1% and 10. Currently the economy. 43.
Within the passenger vehicle segment. MPVs have grown at a lower rate of around 14. However. The cumulative passenger vehicle sales in the domestic market in April-March 2003-04 have grown by over 27% over the same period last year. Segment-wise Performance Passenger Vehicles The excise duty reduction on passenger vehicles given in the union budget 2003-04 has directly impacted the sales of passenger vehicles positively as it has reduced the acquisition cost to the customer. Passenger cars saw a 35 per cent growth in FY04 over the previous fiscal while medium and heavy commercial vehicles witnessed a 46 per cent growth.2: Automobile Industry Performance during 2003 – 04 During the year 2003-04 the automobile industry has registered a growth of around 16. the growth of MPVs this year is significant as it was (-) 15. However.5 per cent in numbers and 24 per cent in value terms. CARS – 84% 41 .7% in the last year. while passenger cars and utility vehicles have grown at a brisk pace of 28. this is against relatively low and negative growth rates in the previous years.4. Passenger Cars & MUV’s Annual Production FY 2003 TO 2004 in Nos MUV -16%.6% respectively.6% and 27.5%.
During the year 1998-99 sale of Multi axle vehicles was 4539. Commercial Vehicles Annual Production FY 2002 TO 2003 in Nos BUSES LCV 10% 41% 42 . The growth rate of all commercial vehicles during the year 2003-04 grew by 36.Passenger Cars Sales Segment-Wise Market Distribution FY 2002 TO 2003 in Nos Upper C Misc Lower C Luxury D A Seg Upper B Lower B 3% 3% 3% 10% 2% 32%32%% 16%% 34% Commercial Vehicles The performance of the commercial vehicle segment during the course of the year was very satisfying. The share of multi-axle vehicles during the same period has gone up from hardly 5% to around 40%. With improved economic performance especially in the agricultural sector besides expansion of the national highways and expressways. In percentage terms an increase of 67% per annum over a five year period. 59251 multi-axle vehicles were sold. This has also led to increased penetration of multi-axle vehicles on our roads. It has clocked over 30% growth rate in consecutive years.5%. M&HCV segment has grown by 39.5% whereas LCVs grew by 32%. we are also witnessing fleet rationalisation in the country. in the year 2003-04. Whereas.
3: Indian Automobile Market 43 .33. over 49% for two & three wheelers and over 40% for commercial vehicles. Passenger vehicle exports have crossed the hundred thousand mark and clocked sales of around 1.30.TRUCKS Exports 49% The performance of the automobile industry in exports is also encouraging. 4. Commercial vehicle exports have also increased to an all time high of over 17.000. In percentage terms the growth during the year over the previous year have been almost 80% for passenger vehicles.000.000 and two & three wheelers have crossed three hundred thousand mark for the first time clocking around 3.
and are referred to as the sub-Rs 2.but because of price. though. Honda City 1. The next is the Rs 3-4 lakh segment -. the Tata Indica should fall in the super-mini category because of its specifications -. Above Rs 4 lakh and all the way up to Rs 10 lakh is the luxury car range. Compact executive cars are small but immensely prestigious and include the BMW 3 series and the Mercedes C class. Hyundai Accent.which include the Daewoo Matiz. Executive cars embrace their bigger brothers -. Consider first the segments in the European or American market. would take in cars like the Opel Corsa.which include models like the Opel Astra and the Ford Escort. US-based Amerigon and Bangalore-based Maini Group are negotiating a joint venture to manufacture an electrical passenger car. the Zen as well as the Wagon R. The next segment. price plays the primary role in segmentation. which includes cars like Mercedes Benz and BMW. The last segment is of premium car segment. Scooters India Ltd (SIL).3 falling in the bottom layer. you have city cars' -. the Maruti 800. automobiles are generally segmented according to platforms -that is chassis-engine combinations.the BMW 5 series and the Mercedes E class. At the bottom.5 and Ford Escort in the upper range. Next come the budget minis -which would include cars like the Suzuki Swift (our own Esteem). and the Opel Astra. the BMW 7 series. of course. The Indian market. It is loosely divided into two halves -. In the West. The Maruti 800 and Zen fall in a class by their own -. Alto. Opel Corsa and Honda City 1.with Maruti Esteem. sports utility. Above the superminis are small family cars -. the Ford Ikon. In India. Priced at Rs 1. Strictly speaking. Assembly from imported Completely Knocked Down (CKD) kits will start as soon as an agreement is finalised among the partners. Medium-sized family cars are bigger and include cars like the Opel Vectra and Peugeot 406. it competes in the same segment. the superminis. the car will target the segment between two-wheelers and petrol/diesel based cars. Only a handful of cars are classified as trueblue luxury cars namely-. This venture represents a major 44 .75 lakhs. Fiat Uno. the Hyundai Santro. Daewoo Cielo.5-lakh cars.which includes all the other cars that would normally be classified as city cars in Europe.The Indian market confounds global carmakers simply because of the way it is segmented. is quite differently segmented. And of course there are the niches like sports. and exotics.Jaguar XJ8. Price plays a factor but only up to a point. Ford Ikon.
could erode its own base. It also plans to introduce an electric three-wheeler model. which so far has only produced two. Bajaj Auto has introduced its diesel three-wheeler in Hyderabad.1: Strengths of the Automobile Industry Low labor cost: India enjoys a comparative cost advantage in labour as compared to western countries. lower than its nearest competitor the Greaves Garuda. Its new product. drive transmission & steering pats. suspension & braking parts among others.and three-wheelers. a public sector enterprise.000. India today exports: Engine and engine parts. electrical parts. into the Indian market.000 (in Hyderabad). Indian automobile industry is emerging as a major player judging by its performance. so much so that in quality conscious markets such as Europe and America. already in use in Nepal. consequentially. 5.manufacturing shift for SIL. which is priced at Rs 85. The vehicle has a 416 cc engine and is priced at Rs 83. Bajaj’s petrol three-wheelers already account for 85 per cent of the India market. 45 . Indian Automobile industry has become more competitive in the export market due to its technological and quality advances.
2: Weaknesses of the Automobile Industry Low labor productivity: Cost advantage in labor wages is nullified by the fact that we have lower labor productivity.3 Reference: Competitiveness of Indian automotive industry Feb 2004. Availability of Skilled labour.5 7. 7.4 6.6 Availability of Qualified Engineers.6 6. 10 = high.4 6. Sr No 1 2 3 4 5 Country Germany India US Brazil Mexico Points.5 7. Sr No 1 2 3 4 5 Country India Brazil US Germany Mexico Points.2 6. On a scale of 1-10. 8.4 7. 46 . 1 = low.5 7. Skilled Manpower: India has vast pool of skilled manpower and qualified engineers among the largest in the world. 5.
Our auto. railways which lead to higher logistics cost and lower reliability. ports. Defect rates high: We have a higher defect rate about 10 times the world average.4 bn $ while Ford’s outsourcing budget is 86 bn $.3: Opportunities for the Automobile Industry Global automobile companies are setting up manufacturing facilities in India. 5.ancillary industry is of 2. Also. Low Investment in R & D: The Industry has a very low investment in R & D as compared to their foreign counterparts which will their sustainability in the future. Poor infrastructure : Poor infrastructure like roads. The year 2002-03 has already seen a significant 65% 47 . many Indian automobile manufacturers have announced their plans to increase the export of vehicles from India. Not reached critical mass: Indian companies are in nascent stage and hence not able to cater to the requirements of OEM’s.
It is important that this plan is implemented in time in the interest of a cleaner environment. The Company on its part has intensified the anti-spurious operations by conducting several raids across the country with the help of local regulatory authorities. In my last year’s speech I mentioned about the need for a well thought out and clearly defined policy on emission norms. augur well for the Company and the automotive sector as a whole. It is essential that legal reforms be put in place at the earliest to provide more flexibility in manufacturing operations and enable the industry to quickly adjust the work force in line with fluctuating market conditions. There is no need for the authorities to specify the type of technical solution required for this purpose as long as the end objectives are met. 48 . etc. It is now fairly certain that Bharat Stage II norms (equivalent of Euro II norms) will be implemented countrywide starting 2005. but also result in greater comfort and better drivability. there are also quite a few factors. which I also dealt with in detail in my speech last year.increase in export volumes during the period April to March. the introduction of newer technologies such as Electronic Diesel Control Systems to reduce emission levels. Additionally. While there exist many opportunities for growth in business. safety devices such as Air Bags. These technologies not only offer increased safety for drivers and passengers. The Company believes that continued focus and concerted action against spurious activities would improve safety and fuel efficiency of the vehicles and at the same time help in expanding our market share in the Aftermarket. The lack of any significant change in the labor law reforms also continues to be a matter of concern. Anti-lock Braking Systems. Technology is available to meet the advanced emission norms using gasoline and diesel fuel. The spurious and reconditioned goods market. continues to be a worrying factor as it directly affects our market share. The Company is also continuously educating the users about the benefits of using genuine spares in place of spurious and reconditioned spares. which act as an impediment. Large quantities of spurious and fake products have been seized and legal action has been taken against those indulging in such activities. Bosch and many other companies have proved this worldwide. This trend is expected to continue with more global OEMs sourcing vehicles from their Indian plants.
Financing has become so easy that an automobile is within every aspirant's reach. as most customers prefer the newer models available in the market. Hindustan Motors (manufacturers of Ambassador and Contessa cars) is in trouble due to the declining sales of its car’s. the Indian customer has been presented with a wide range of choices in automobiles.5. 49 .4: Challenges for the Indian automobile industry As we move into the new millennium. to suit every requirement and budget. The growth in automobile sales has been impressive for the past ten years since liberalization began. Automobile products of India (manufacturers of Lambretta scooters) and Ideal Jawa (manufacturers of Jawa and Yezdi motorcycles) have closed shop. Some of the older manufacturers like Premier Automobiles (manufacturers of Premier cars). Even the dominant player Maruti has seen its market share decline rapidly due to its models being old and jaded and is in addition facing labour problems in its plant. However. The market has turned into a buyers market where the customer is being wooed by the manufacturers and the dealers with a range of freebies unheard of before in India. the Indian Automobile Industry faces some tremendous opportunities and also great challenges. Competition has meant that manufacturers' margins have been squeezed severely and they are all under pressure to cut costs to be profitable and competitive. with liberalization.
Recent reports suggest the government is exploring the possibility of introducing Gasohol. this will increasingly become an important selling feature. this is a very logical step that should have been taken many years ago. but this will mean the companies will have to invest more in Research and Development of new models with better features. The challenge before the industry is to figure out the strategy for survival and growth. Hindustan Motors is said to be considering this option. Ford and Daimler Chrysler will almost certainly import vehicles from their large portfolio of models and makes. as are Mahindra. further segmenting the market into niches. Even Maruti despite its foreign 50 .To add to the problems. Since Alcohol is a byproduct of the Sugar industry (of which India has the worlds largest). which is to build vehicles that are considerably more fuel efficient and less polluting. It was surprising to see how the industry kept stalling the introduction of pollution norms for vehicles on the pretext that they needed more time to get the technology. Gasohol has been very successful in Brazil. The foreign manufacturers such as GM. With growing awareness among the public about pollution and the effective campaigns carried out by the NGO's. One way to achieve this will be to go for exports in a big way. which hitherto was not permitted. which can offer lower fuel consumption. Daimler Chrysler and more recently Daewoo. Even a small percentage reduction in the consumption of petroleum per vehicle can make a big difference to the balance of payments. which is a mixture of Petrol and Alcohol. come April 2001. The third opportunity is to overcome the vulnerability of the automobile market to oil prices by designing vehicles. The second opportunity is to become contract manufacturers for overseas companies. Maruti is already exporting vehicles. Telco. The overseas markets will have to be exploited more aggressively. A number of Japanese and Korean companies have been following this strategy very successfully. although how competitive they are in terms of price remains to be seen. India will have to permit import of fully built automobiles. under the WTO agreement. The industry must focus its R&D efforts in line with the global trends. It is clear from the picture painted above that the industry will have to increase volumes in each segment to achieve lower cost of manufacture.
The industry will need take initiatives firstly to train all drivers in safe driving and proper road discipline and manners. the industry can look forward to a bright future. Training of police personnel in better traffic management and advising them on better equipping themselves to deal with various problems will also have to be done. The Challenges External Level : Integrating into Global Supply Chains WTO – Multilateral trade regimes FTA’s (i. Bi-lateral Trade) Country Level : Infrastructure Cascading effect of Taxes Cost of Capital Cost of Power Inflexible labor laws Inflexible labor laws Firm Level : 51 .e.affiliation was caught off guard when the Supreme Court finally ruled that all new vehicles should strictly adhere to the Euro II norms. However in the industry's interest care must be taken to see that we also achieve the safety and convenience levels of using automobiles. In terms of the world averages. They will also need to assist government agencies in better road design and in building of multilevel parking lots. The inadequacy of road infrastructure in India is well known. This is compounded by the fact that traffic management is very poor or non-existent and the drivers are mostly ill trained and in disciplined. India's vehicle density is very low and if we have to achieve those density levels. this will become a major bottleneck. As more vehicles come on the road.
Export as a “mind set QCDDM – equation taken for granted Logistics Warranties & Liabilities Challenges for CEO’s Dilemma of Investment Addressing fast Global Business Environment Changing mind set of teams Developing & Employing people with “right “right skills” skills 52 .
5. Industry : • Marketing and Advertising in potential markets: 53 . • Research center: Government should establish a research center dedicated to automobile research called “Indian institute of automobile research” which can work with auto industry to develop cutting edge technology.5: Appropriate Strategies – the key to success: Government : • Flexible Labor laws : Stringent labor laws in India are hindering the over all development of the Industry.M cost: Government should reduce import duty and taxes on raw materials for auto ancillary industry which will bring down their raw material cost to counter Chinese threat. • Auto expo zones: On lines on software technology parks. • Cutting down R. • Corpus for R& D & expansion: Since most of auto ancillary companies are up coming their range of operation is limited to a few products. govt. In order to encourage these companies to venture into new product categories Government should allocate Soft loans. Changing these archaic laws will help in attracting investment and lead to expansion of the industry. equipping them with infrastructure & offering them tax sops or holidays. should establish export zones of autoancillary industries.
Bharat Forge acquired one of the largest forging companies in Germany. • R & D spending: Industry should target at allocating at least 5 % of their revenues on R & D expenditures for achieving cutting edge in technology.g. hence company should try to acquire tier I status and ultimately target OEM status. • Moving up the value chain: Automobiles companies are going for aggregate buying. • Acquiring Auto ancillary companies in potential markets: Acquiring companies in overseas market gives a direct entry in that market to Indian companies. 54 .ACMA in collaboration with CII or FICCI should organize Trade fairs showcasing Indian Auto ancillary industry both in India and abroad. Carl Dan Peddinghaus GmbH (CDP). For e. • Leveraging Software skills • Culture change: Auto ancillary industry should adopt concepts like six sigma rather than continuing with post Morton analysis.
However. The installed capacity for passenger car production in India is likely to reach around 1. especially in the mid car segment. This explains an over-capacity of around 50% as compared to the global over-capacity of around 30%. not giving in to multinationals. But the very fact of Indian company’s 55 . Indian players are trying to maintain their hold on the Indian market.1: Competitive Scenario The industry witnessed radical changes and entered a competitive phase with de-licensing and liberalization in the 1990s. these companies over-estimated the market in the short term and set up larger than required capacities.8mn by end2004.6. The attraction for these companies was the largely untapped Indian market. Mercedes Benz has decided to operate independently after suffering severe losses with Indian partner Telco. For example. The consolidation of the automotive vehicle industry is likely to have serious implications on the automotive component industry too. The global automotive industry is currently undergoing consolidation phase and the repercussions of this consolidation are likely to be experienced in India. Mahindra & Mahindra pulled out of car joint venture with Ford. While many of these conglomerates have turned out to be mutually beneficial few tie-ups weren’t as successful. Most of the foreign companies entered India using the joint venture/collaboration route. This resulted in price wars and thereby affected the expected margins. General Motors bought over the stake of Hindustan Motors in its Indian car venture. The two major developments during this period were a strong growth in volumes between 1993 and 1997 and the entry of international car giants into India. too. but the total passenger car sales is expected to be around 0.9mn.
There is a need for a level playing field to bolster Indian auto industry. 56 . entry barriers in commercial vehicle industry are among the lowest. in the last few years especially. with tariff at half that of cars. Bentley.reliance on foreign partners for technology is likely to drive the trend of collaborations followed by consolidations. Even in the case of imports. Foreign companies are now all over the Indian market. We take a look at the key factors that are vital for gaining a stronghold in such a competitive scenario. has gained considerably in internal efficiencies. Audi. in terms of external factors such as cost of finance.It is already a level playing field for companies setting up shop in India. infrastructure and labour legislation. Though the Indian industry. BMW all set to venture in the Indian markets. on the global plane. we have a long way to go for parity with the developed world Competition is heating up in the sector with a host of new players coming in and others like Porshe. things are different. However.
2: Competitive Edge Manpower The trends clearly indicate a huge opportunity for Indian manufacturers due to: Low cost advantage primarily on account of vast availability of low costhigh skilled manpower Average wage rates are 8$ per hour as compared to 20$ in the developed markets. Highly Competitive at Lower Scales Indian Auto Companies are highly cost competitive even at lower volumes due to: Appropriate levels of automation Low cost automation Autonomation High Quality & Productivity Indian Auto Companies have achieved a High level of Productivity by embracing Japanese Concepts and Best Practices: TQM TPM Toyota Production Systems In fact cost productivity is our key differentiator viz-a-viz competition from other low cost economies.6. Just-In-Time Delivery & Logistics Indian Auto Companies have proven capability to supply on JIT basis out of Warehouses situated near the Customers 57 .
Adequate Warehousing support and onsite Engineering support 7.66 mn in 1996 to an estimated 48. as compared to 17. Growth has dropped due to the increasing levels of saturation in the larger car markets of the world. The trend suggests that industry volumes may grow by just 2% or around 10 mn vehicles per year. The car industry generates large amount of employment opportunities in the economy. the international passenger car industry has been witnessing an over capacity of more than 30%. plastics. If this situation continues for the next few years the world car market may witness shakeout in the near future. Canada and USA brought about the major increases. every sixth worker is involved in the making of an automobile. which contribute to 53% of the world's car production.The world car production has increased from 44. rubber. This will enhance the useful life of cars and. hence. transport and insurance. Japan. The largest car market . For example in the US.the US market expects car sales to decline 8 to 9 per cent to 16 million cars in 2001. The global automotive car market is growing at a rate of only 2 percent per annum and is not expected to pick up in the near term. iron. Renault-Nissan. glass. However. aluminum.3 mn cars in 1999. since the last two to three years. Worldwide the trend is towards ensuring that one's products are superior in terms of quality. slow down growth in sales. Daimler- 58 . The recent mergers in the international car market are Ford-Volvo. Already signs towards this are being observed as the phenomenon of mergers catches on. The USA and Japan are the leaders with around 42% of the total world market. Most Indian companies have arrangements with major Logistic Providers for JIT Supplies.4 million cars sold in 2000. and electronics and down stream industries like advertising and marketing.1: Global Scenario The passenger car segment has emerged as a major driving force for upstream industries like steel.
bigger capacities among players means lesser fixed costs per car produced. technology-sharing and the offering of equity stakes is inevitable. With global consolidation in the car industry. which are under pressure due to wafer thin margins will be boosted due to greater economies of scale. Among the top car manufacturing companies General Motors and Ford Motors group of USA lead with a contribution of 15. players like General Motors Volkswagen and Toyota have begun to re-examine their dealer relationships and pricing strategies. Such deals will certainly lead to economy in terms of costs but it remains to be seen whether they will also create significant new opportunities for growth. Car makers would now have to think in terms of a new customer focus and provide better financing and servicing. Moreover. A few more players are expected to join the fray in the next few years so as to strengthen their hold in the world market. of world car production. The global domination of the larger automotive manufacturers is slowly on the wane and the trend in sales is shifting towards more "regio-centric" products.Chrysler. it is expected that more international players will work closely to bring about operational efficiencies. Strategic tie-ups.8% and 11. they can derive greater benefits from their R&D efforts. With the players getting together to produce more technologically superior cars. A few instances are Daimler Benz's tie-up with Chrysler of the US. the car industry is highly capital-intensive and vast amounts of money are being spent on R&D. Already. Automakers that have been enjoying a generally prosperous spell would have to rethink on the way vehicles are designed.6%. distributed or sold. Profits. manufactured. Volkswagen and Toyota stand third and fourth with more than 9% contribution each to the world car production. Even if mergers are not on the cards in the near future (one can see that the Daimler-Chrysler merger has not brought about synergies as expected by automobile experts). Ford's acquiring of Daewoo and tie up with Volvo Car Corporation and Renault acquiring a stake in Nissan. mergers and acquisitions have become the talk of the day. 59 . respectively. By nature.
It can easily be seen why TELCO has been in the news on rumors that it wants to hive off its car division and bring in an overseas partner. Already Daimler Chrysler and Ford are contemplating introducing new models in India from their various associate companies through their local subsidiaries. the car market has become extremely competitive and come April 2001. Majors like TELCO and Ashok Leyland are already exporting their products in reasonable volumes. one can expect to see a dramatic change in the auto market.In India. Clearly the customer is in for some good times with a wide range of models to choose from. better quality and prices and easy financing options . With the international acquisitions and alliances. India's automobile market will be thrown open to imports of completely built up vehicles. Hyundai and Ford as well as Mercedes Benz have started exports in a small way and this can grow. If GM were to acquire Daewoo in Korea. Clearly exports will be the big opportunity for Indian automobile companies if they can control costs and deliver good quality output. Reports suggest that HM is thinking of exporting parts from its manufacturing units and also assembling and distributing other makes of vehicles who may wish to enter into India. which hitherto was prohibited. Availability of easy financing options has been a major reason for the dramatic growth the automobile market has witnessed in recent times. Maruti has set up a separate financing unit in association with banks. GM has one of the largest financing companies in the US and can easily bring them into India should it so decide. then GM would be in a commanding position in India with its alliance with FIAT and Suzuki motors as well. 60 . Already Maruti.a far cry indeed from the days when one had to book a Premier car and wait for years after paying an advance. but cannot enter full scale manufacture due to the small market sizes. The situation could become very difficult for the purely Indian automakers such as Telco. Mahindra and Hindustan Motors unless they rethink their strategy.
Natural follow-thru is global sourcing.3: Global OEMs Sourcing from India: They have already come … Toyota: Hub for Transmissions Hyundai: Export Base for Small Cars Fiat: Plans US $ 200 Mill outsourcing Volvo: started outsourcing Ford: sourcing engines. 7.2: Key Driver – Global Business Step 1 : CKD/SKD Assembly Step 2 : Localisation Step 3 : Future already on horizon . & Plans 500 Mill USD outsourcing Renault: Sourcing Truck Parts 61 .7. Most Global OEMs have Indian operations with global platforms and world cars.
Each has unequivocally established himself as one of the winners in the first round of the car wars. Both the Indica and the Matiz had to upgrade their engines in less than one year after launch. Ratan Tata learnt that providing an internationally designed car with a great value proposition didn't get you far if you couldn't provide global quality standards. the battle is expected to get more vicious.G. not the cake itself to any manufacturer. Kim. the Honda City had to bring in both a new body and a more powerful engine.that price does matter. Between them. Daewoo's Awasthi admits candidly that he learnt precisely the opposite lesson -. Kim of Hyundai found out the hard way that you could get your pricing and value equation just right and still land up with egg on your face if you tried to cut corners in the technology game. no one expects the market to grow by more than 10-15% per annum.DC: exported Euro 70 Mill to its subsidiaries abroad Two Chinese Truck OEMs: Sourcing Drive Trains 8: Different players in Automobile industry Jagdish Khattar. they control almost 80% of the Rs 30. The really big volume gains will come from wresting market share away from rivals rather than because the market itself is growing exponentially. S. and Hyundai had to start offering a new variant with the power steering option barely a year after it hit the market. From now on. The four men are peers. the car market bounced back from the recession by showing a 55.S.500-crore Indian automobile market. Y. the winners have pulled way ahead of the also-rans. In 1999-2000. One old assumption has been vindicated -. And those mid-size and bigger models can only provide the icing on the cake.83% growth! But now. 62 . Maruti found out that price is no longer the most important factor in winning car battles. As the dust and excitement of the dozens of new models introduced in the past one year settles down. Awasthi. Ratan Tata.that over 80% of the Indian car market is still confined to the small. sub-Rs 4 lakh models. The battle royale in the Indian car market has entered the next phase.
the Indian car market had stagnated at a volume of 30. Maruti has recently completed a Rs.820. adapted to Indian conditions and Indian car users. 4 billion expansion project at the current site. To fend off growing competition. Maruti entered the Indian car market with the avowed aim to provide high quality. It has further plans to modernize the existing facilities and to expand its capacity by 1.000 vehicles per annum. Nineteen years back Maruti introduced the first small car in the Indian auto market. Customers were interested in having some different types of models with some fashionable looks.cost vehicles.efficient.20.96.00.000 cars for the decade ending 1983. The total production of the company will exceed 4. were Premier Padmini and Ambassador.1: Maruti Udyog Ltd. That was the perfect time to enter into market and Maruti took right step to introduce its different models. They started with their model Maruti 800 which was very popular at that time and still its major cash cow. The company reached a total production of one million vehicles in March 1994 becoming the first Indian Company to cross this milestone.8. Maruti collaborated with Suzuki of Japan to produce the first affordable car for the average Indian.00.000 units in the year 1998-99. fuel . The models.000 to 40. which were available at that time. It crossed the two million mark in 1997. 63 . which has increased the total production capacity to over 3. The sales figure for the year 1993 reached up to 1. At this time. low .000 vehicles per year. December 1983 heralded a revolution in the Indian car industry. Maruti comes in a variety of models in the small segment. Maruti established its monopoly over Indian auto market India's largest automobile company. Its cars operate on Japanese technology. This was from where Maruti took over.
910 39.816.313 406 36. Versa Alto.175 472. The C segment comprising of the Omni and the Versa has shown a 21.296 units. Zen Baleno. a rise of 31% yoy.150 28.6% 38.150 in April 2003.097 4.4% yoy from 28.2% 99. WagonR.910 units of exports compared to 3. Models of MUL 64 .668 952 310 25.2% growth yoy from 3.793 vehicle units in April 2003.6% 37.0% 44.132 14.668 units in April 2003 to 19. mainly driven by rising Alto sales. Sales for April 2004: Segment A1 C A2 A3 MUV Domestic Export Total Sales Models M800 Omni.3% yoy from 10.Maruti registered sales of 39. Esteem Gypsy.972 in the same period last year to 4. decreasing by 7.643 3.3% 21.4% April'03 – March'04 167.296 1. This is lower compared to some of its other segments.122 The A1 segment has grown by 3.816 19. The A3 segment has grown by 38% yoy to 1. Vitara April April % change 2004 11.793 3. The A2 segment comprising of the Alto.947 51. WagonR and Zen registered a 100% growth from 9.9% 31.561 59.555 420.526 176.838 2003 10. This includes 2.6%.928 2.173 3.741 units in April 2003 to 11.741 3.838 units in April 2004. it sold 406 units in April 2004 from 310 units in April 2003.972 9. up 38.0% -7.313 in April 2004 from 952 in the same period last year.097 units. In the multi utility vehicle (MUV) comprising Gypsy and Vitara.
while Hyundai Santro was harping on the fact that it was a new generation car. Alto Maruti 800 Zen Wagon R Omni Esteem Baleno 8. Hyundai made two mistakes. The two miscalculations that Hyundai made? First. Hyundai got everything right because it got the value-price-technology equation almost perfectly right from day one. But despite its great start. The Santro was an instant winner from the day it was introduced in the Indian market because it offered the optimum mix of space and technology in the small car market.even rivals admit -.2: Hyundai: Can The Dream Run Continue? Hyundai has become the undisputed number two in the Indian auto market. at a highly competitive price. Though the latter moved quickly in a damage-control exercise. it 65 . and the only one -. And when it launched mid-size Accent some time later. Hyundai proved that it could get its value-price equation consistently right across different segments. It was a mistake that rival Matiz capitalised on once Euro-II pollution norms were announced for the metros. the Santro did lose a bit of its sheen. Daewoo made most of the fact that every Matiz was Euro-II complaint -while Hyundai could offer an Euro-II version only at a higher price. it miscalculated demand for its cars. it hadn't brought its latest engine technology to India. And with easy consumer financing available in the market. Hyundai did not have to work too hard to persuade even entry-level car buyers to go for the Santro instead of the Maruti 800.with the capability of giving leader Maruti a run for its money in the total volume stakes though Hyundai in India currently sells just about a quarter of the numbers that Maruti does. The result: when demand peaked for the Santro.
Shortly after it invested over $1 billion to build up a fully integrated plant with a capacity to roll out 1. and then introducing a higher-priced Cielo-clone. the big worry for Hyundai is that other than the Santro (the Atos in Korea). or those of Kia Motors. Unlike Suzuki. ahead of schedule. Daewoo started out on a disastrous note by introducing the Cielo at a high price. Buyers had to wait for three months to get a Santro after booking it. This expansion is likely to be completed by December. 2001. An additional investment of $400 million will help expand capacity from 1. which is primarily a small car specialist.20 lakh vehicles per annum. then slashing its price to gain volumes. Hyundai's number two position in India could be seriously under threat. It lacks the sheer money power and product muscle to keep fighting the Fords and GMs in any market. Even in the small car segment.2 lakh cars to 2 lakh cars per annum. Hyundai is moving fast to sort out its capacity problem. That apart. it doesn't have any other small car in its armoury. The Matiz was introduced with a sticker price of Rs 3.67 lakh while the bigger Hyundai Santro was selling its base 66 . In India. which it took over last year. the Nexia. Hyundai can only introduce bigger cars in the Indian market either from its own product range. Hyundai is looking a bit vulnerable now because globally it is a minnow in the car market.3: Daewoo Motors India: Life After Death Daewoo should have been dead in the Indian market a long time ago.was in no position to offer the car off-the-shelf like its rivals. But even that could be a bit too late as it gives rivals that much time to grab sales that would otherwise have gone to Hyundai. And if Ford does take over Daewoo Motors. its entry was ill planned. Work will soon start on the second phase of its Sriperumbudur car project. its parent went bankrupt. 8. one year ahead of what was initially planned. It launched the Matiz in a single variant and at the highest price in its class.
it moved fast to introduce lower-priced. Ford's share in the total passenger car market will still be less than 5% this year. More importantly.98 lakh. including the stripped-down. before slipping to 3. stripped-down variants that got the pricevalue-technology equation correct.500 in July. First. Ford can never dream of playing the numbers game. non-AC Matiz SS. In May. The FordDaewoo combine could be the strongest challenger to Maruti here. Ford could become the number two player in Indian market. 67 . it introduced new variants. 2000. and saw its volumes rise 165% to 1. Given that the car was considerably smaller than the Zen. 1999.model at Rs 2. the Daewoo Matiz almost sank. 2000.853 in March. It touched a peak volume of 5. unlike its rivals. the announcement of the Euro-II norms helped it grab the image of being the small car with the best technology since all its variants met the norms. in the case of the Matiz. Daewoo and Matiz. But these problems could vanish overnight if Ford takes over Daewoo. Two things have helped Daewoo bounce back though. the Santro and the Indica. Despite the success of the Ikon. And now that the Matiz has been voted the best small car in the world by several prestigious motoring magazines worldwide. Daewoo image has got a further boost. With no small car in its portfolio.996 from the previous month's 754.
But the flip side is that all global giants can amortise the costs of development by selling the same car across different world markets. with the diesel engines being pushed hard. was clearly aimed at a segment none of the rivals was addressing. almost everyone grudgingly admits that the Indica has been a success. the consensus opinion was that Telco had goofed up again. When the Indica hit the market. And in the SUV market. Similarly. It is a smart strategy as it avoids taking any of the big guns head on. Telco has already introduced the premium Safari. It is ramping up capacity to 160. the new car Magna it is planning to launch is again expected to be a niche car addressing a particular need in the Rs 12-16 lakh car segment. But in the long run. The Telco formula of pushing the biggest small car with a rugged diesel engine has been a major hit in the semi-urban and rural markets. A year down the line. it could be the first casualty in this round of the 68 .and unless it keeps springing surprises. Telco can't afford to capture.At the moment though.4: Telco-The HomeGrown Challenger Telco did not boast a great reputation for developing even world-class commercial vehicles.000 cars anticipating that it will get the demand. The Indica. which again focuses on a small niche.000 from the current 120. the Telco strategy is to tap the niches first. The Indica cost $400 million from start to finish whereas the Hyundai Accent is said to have cost $1. Telco knows it has to take on its rivals in the mainstream markets as well.8. The Indica was riddled with quality problems. forget passenger cars. But Telco is also the weakest player in the small car market -..6 billion to develop.
front-end loaders etc by setting up a plant near Chennai. In the passenger car segment. the company has entered into a technical collaboration with Mitsubishi of Japan for the manufacture of the ‘Lancer’ car. the company has the well known ‘Ambassador’ and ‘Contessa’ models. in FY92. In 1948. presses and steel products under the heavy engineering division (HED). HML commenced the production of petrol engines in collaboration with Isuzu Motor Company. Birla group of companies The company became the first manufacturer of cars in India when it set up its plant at Port Okha in Gujarat. HML further diversified its activities to include earth-moving equipment such as dumpers. General Motors India Ltd. a project was undertaken to produce HCV’s at Vadodara. it was hived off to Hyderabad Industries Ltd.car battles. the company has diversified into earth moving equipments and power products. 69 . HML set up a plant at Hosur in Tamil Nadu for manufacturing heavy-duty transmission required for earth moving equipments. Over the years. It also has a small presence in the multi-utility vehicle and the heavy commercial vehicle segments. At present. In 1971. The later is generally manufactured for exports. Commercial production of the car started in October 1998. HML has diversified into heavy engineering equipment like excavators. It has recently tied with Mitsubishi of Japan for manufacturing the ‘Lancer’ range of cars. HML. 8. the company has a market share of 4. In 1987.5: Hindustan Motors Hindustan Motors Ltd (HML) is the oldest passenger car manufacturer in the country.K. a group company. In 1985. With the division becoming a loss making one. Japan. HML also entered into collaboration with OKA Motor Company of Australia to produce custom-designed rural transport vehicle. Recently. In 1986. is the flagship company of the C. Other than the automotive sector. it shifted its activities in Uttarpara near Calcutta and set up facilities to manufacture cars and trucks.2% in the car segment. incorporated in 1942. A part of the assets was later sold to a JV between GM and HML. cranes.
chemicals and many other. Japan’s first series 70 . was incorporated as Mitsubishi Motors Corporation in 1970.6: Mitsubishi Motors In the early 1870s. trading. business ventures in addition to shipping included heavy industries with ship building at its helm. the company quickly expanded into other fields of endeavor and became one of the largest combines in pre-world war II Japan. Following several name changes this company became Mitsubishi Mail Steamship Company in 1875. mining real estate. were the Model-A. a young entrepreneur. which rolled off the assembly line in 1917. banking. The history of Mitsubishi as an automobile manufacturer dates back long before the Motor Vehicles Division of Mitsubishi Heavy Industries Ltd. the root of the combined Mitsubishi Companies of today. as Japan emerged from over 300 years of feudal isolation. Mitsubishi’s epoch making vehicles. A family owned and directed business. By the end of 1945. Yataro Iwasaki. formed a small shipping company named the Tsukumo Shokia.Models of Hindustan Motors Ambassador 1800 ISZ Ambassador 2000 DSL Ambassador Nova Diesel Contessa motors 8.
The combination of high technology and classic build quality continues to woo customers the world over. Handling and 71 . The all new Mitsubishi Lancer comes to you from two automotive giants: Hindustan Motors and Mitsubishi Motors. the ship and aircraft-manufacturing arm of Mitsubishi produced vehicles. The Lancer scores superbly in all but the Ride. Always the innovators. but it has also proved that its mid-size car is the one customers like or appreciate most. Not only has HM cleared any doubts pertaining to the quality of its locally-made Lancer. and one of the very few that can boast a vehicle lineup which extends from mini cars to heavy-duty trunk buses and other specialized commercial vehicles. Mitsubishi Motors brings the most contemporary technology on Indian roads. Mitsubishi Motors ranks as one of the largest vehicle manufacturer.production passenger cars. and every aspect of the car is explored in detail to let you get a good feel for the car from the comfort of your own home. Mitsubishi provided you with a comfortable and intuitive environment to explore the Lancer. The Lancer has an impeccable rallying pedigree and has proven it's mettle in the toughest conditions. the project brings together their formidable expertise and experience to provide you with a whole new automotive experience. In early years. Today. the Mitsubishi Model-A were the pioneers of vehicles in Japan. A technical collaboration between the two. There's virtual reality so you can view the car as you would in one of our showrooms. There are useful tools to make your buying process easier. Therein the provenance of Mitsubishi Motor’s engineering excellence and the resultant reputation for outstanding reliability and all around performance of its vehicles.
Ashok Leyland's range of dedicated buses answer the special needs of urban mass transportation.5XS Montero Endeavor Montero sports Outlander Lancer Evolution Lancer Eclipse Eclipse Spyder Galant Dimant 8. No wonder then that four out of five STU buses in the Indian metros come 72 . Models of Mitsubishi MITSUBISHI MONTERO SPORT 3. Ashok Leyland has been a major presence in India's commercial vehicle industry. where customers find comparatively more problems. as a result of the stiffened and raised suspension. This performance in the APEAL study has been achieved due to the fact that the Lancer scores extremely well in each of the nine categories and this makes it the pick of the mid-size cars by a fair margin. The Lancer wins hands down in the APEAL study too.7: Ashok Leyland For five decades. Ashok Leyland was the first to introduce full-air brakes. multi-axled trucks and a host of innovations in buses. the Honda City a substantial lead. scoring a full 33 points more than its closest rival.Braking categories. These decades have been punctuated by a number of technological innovations by Ashok Leyland that went on to become industry norms.
Ashok Motors then. With British Leyland participation in the equity capital. They carried the name Cargo. ushering in a change Cargo and the state-ofthe-art Rs. part of the Fiat Group and Europe's leading truck manufacturer. Ashok Leyland buses carry more people than the entire Indian rail network. the Non-Resident Indian transnational group and IVECO Fiat SpA. Ashok Leyland vehicles have built a reputation for reliability and ruggedness. 6 billion factory at Hosur were built with IVECO'S global plan in mind. In 1987. The share of goods movement by road rose from 12% in 1950 to 60% in 1995. At 60 million passengers a day. From our state-of-the-art manufacturing Plant at Hosur. when international technology changed the way India perceived trucks. Since then Ashok Leyland has been a major presence in India's commercial vehicle industry. In 1950 started assembly of Leyland commercial vehicles and soon local manufacturing under license from British Leyland.from Ashok Leyland. The 375. At 60 million passengers a day. The 73 . This tradition of technological leadership was achieved through tie-ups with international technology leaders and through vigorous in-house R&D. The year when a new breed of world class trucks . Cargo brought with it. the jump is equally dramatic: from 25% to 80%.technologically superior and eco-friendly . the Company was rechristened Ashok Leyland. near Bangalore. Ashok Leyland buses carry more people than the Indian rail network. Some of them like double-decker and vestibuled buses are unique models from Ashok Leyland. when independent India was one year old. the overseas holding by LRLIH (Land Rover Leyland International Holdings Limited) was taken over by a joint venture between the Hinduja Group.rolled out on Indian roads. four out of the five State Transport Undertakings (STU’s) buses come from Ashok Leyland. tailor-made for high-density routes. in 1954. Ashok Leyland embarked on a major product and process technology upgradation to world-class standards of technology.000 vehicles we have put on the roads have shared the additional pressure placed on road transportation in independent India. assembling Austin cars at the first plant. In the populous Indian metros. In passenger transportation. at Ennore near Chennai.1994 was also the year. In 1948. Ashok Leyland was born. These years have been punctuated by a number of technological innovations which went on to become industry standards. a new set of values and an unmatched basket of benefits.
To Ashok Leyland. Group Companies Automotive Coaches & Components Ltd (ACCL) Lanka Ashok Leyland Ashok Leyland Finance Ashok Leyland Project Services Limited Ennore Foundries Models Viking / Cheetah Panther Vestibuled Bus Cargo 1512 Comet (4x4) Tusker Super 74 .Hosur plant servers as a world-class manufacturing base for IVECO supporting its extraEuropean markets. East Africa and Egypt from SKD/CKD packs exported from Hosur. Cargo is locally assembled in South Africa. In the journey towards global standards of quality. A recognized trading house.5 billion in 1997-98. The Cargo range of trucks meets contemporary emission norms and have gained acceptance internationally. Committed to Total Quality Management. Ashok Leyland is the country's first automotive manufacturer to obtain the coveted ISO 9002 certificate followed by the more comprehensive ISO 9001: 1994 certification and in late 1998. Ashok Leyland's export turnover touched Rs. Besides fully built vehicles exported to many markets. the latest version of QS 9000. Ashok Leyland exports to over 40 countries. These are major milestones in the company's TQM journey.1. it meant retaining its technological edge against potential global competition. Ashok Leyland reached a milestone in 1993 when it became the first in India's automobile industry to win the ISO 9002 certification. The more comprehensive ISO 9001 certification came in 1994 and ISO 14001 certification for all vehicle manufacturing units in 2002.
The Company has laid emphasis on Research & Development and thus made the range of Company’s product variants. was promoted in 1983. Dist. Ivory Coast. Kenya. Buses. The company has made improvement in product-mix and made wider 75 . Zambia. Taurus 2516 (6x4) Beaver Haulage Comet Tractor Beaver Tractor Hippo Turbo Tractor Alrd 20 Rear Dumper Comet Tipper Cargo 1614 Taurus Tipper Cargo 909 Cargo 759 Tipper Cargo 709 8. Japan and Sumitomo Corporation. Hosiarpur. formerly known as Swaraj Vehicles Ltd. Tanzania. Ghana. the widest amongst all new LCV manufacturers and has made it lead the indigenisation of hi-tech components. Water Tankers and Special Vehicles. The Company is in the manufacture of Light Commercial Vehicles like Trucks. Ambulance. Rwanda. Japan. It exports to countries like Nepal. Punjab and has a dealer network of about 128 dealers spread throughout the country. It’s factory is located at village Asron. Police Personnel Carriers. Bangladesh. Swaraj Engines and Punjab Scooters are its associate companies. Seychelles Syria and Jordan. by Punjab Tractors Limited in technical collaboration with Mazda Motor Corporation.8: Swaraj Mazda Swaraj Mazda limited..
school buses etc. It has achieved progress towards compliance of Bharat State-ll emission norms. Against odd industry condition and performance. post office delivery vans. Swaraj Mazda has been able to achieved a sale of 1. SML has products like Super.302 vehicles. Against odd industry condition and performance. privatizing the passenger segment and replacing demand. SML has stayed ahead of competition with respect to cost efficiency and product customisation. SML products caters to intra-city transport for short haulage. for implementation in the National Capital Region and other 3 Metros.market segment coverage. Swaraj Mazda sale volumes cross the 5000 level mark for the first timeand has made a sales-growth of 27% over previous year as a result the Company`s Profit has increased. powerful engine and higher payload. covering services like ambulance. Swaraj Mazda has been able to achieve a sale of 1. which is gaining increased acceptance in the market. The Company has introduced the CNG bus in the National Capital Region and also the new `Sartaj` model in the 5-ton range. SML is planning to grow by making structural changes in the industry. The happier component of this growth has been the improvement in product-mix as also the wider market segment covered. The Company introduces the CNG bus in the National Capital Region and also the new `Sartaj` model in the 5 ton range. SML`s is also strategizing to building market share through cost competitive pricing backed by its engineering capability to provide customized product offerings for niche applications like defense and other service sectors. an improvement of 33% over previous fiscal.302 vehicles an improvement of 33% over previous fiscal. Prestige and Sartaj in the 6-9 ton category and the Cosmo in the 5 ton category providing cost effective transport solutions in terms of larger wheelbase. 76 . It is also in the process of strengthening its dealer network by activating more dealers so as to increase its presence in the western parts of the country. In the passenger segment. the differentiation is in terms of end use rather than the gross vehicle weight. The happier component of this growth has been the improvement in product-mix as also the wider market segment covered. meeting the regulatory requirements.
which grew by almost 85% yoy.345 units in April 2004.540 10.99 8.604 units last year.87 42. growing by 43% yoy from 7.309 utility vehicles were sold in April 2004 as compared to 5.345 April 2003 5.235 during the same period last year.309 496 1.007 units of the Scorpio model compared to 1.540 threewheelers from 833 three-wheeler units in April 2003. Segments UV LCV Three-wheelers Total April 2004 8. however the company saw a huge growth in its threewheeler business. The LCV segment showed a 15% growth compared to last year.08 84.971 units during the same period last year registering a 39% yoy growth.971 431 833 7. 8.10: Tata Motors 77 .235 yoy (%) 39.16 15. Utility vehicle sales included 2. It sold 496 LCV units compared to 431 LCV units in April 2003 and 1.9: Mahindra & Mahindra M&M sold 10.Models of Swaraj Mazda 4 WD BT Swaraj Mazda premium Swaraj Mazda fire fighter Swaraj Mazda prestige Trunks Swaraj Mazda Dual cab 8.
5% yoy at 24.026 935 24. The company's sales in the domestic market increased by 60. CV segment Commercial vehicle sales at 12.Tata Motors registered a 57.829 yoy (%) 60.050 units compared to 7.961 April 2003 14.507 7.037 yoy(%) 76.54 8.966 863 15.829 units in the same period last year.69 The company exported 935 units in April 2004 as compared to 863 vehicles in April last year.037 units in April last year growing by 71.2% yoy.075 12.24 Medium and heavy commercial vehicles sales grew by 76.966 units in April 2003.961 units in April 2004. Passenger cars The passenger car business reported total sales of 11.1% yoy at 7.976 vehicles in the domestic market registering an increase of 51% over April 2003.05 62.075 units. 78 .975 units and light commercial vehicle sales showing a growth of 62. compared to 15.34 57. Volumes Domestic Exports Total April 2004 24. Segment M/HCV LCV Total April 2004 7.54 71.5% yoy at 4.7% increase yoy in total sales at 24.050 April 2003 4.975 4.530 2.026 vehicles from 14.3% yoy growth. which is an 8.
Indica sales recorded a 43.4% increase as compared to the same period last year. Sumo sales grew by 48% and Safari sales grew by 16% over the April 2003.002 units. while Indigo sales grew 84. International standards are also kept in mind while producing these products.3% growth yoy at 7.1: Automobile Fashion Automobile Accessories India has a good network of manufacturers of Auto accessories spread all over the country. showing a 43. Utility Vehicles Utility vehicles registered a sale of 2.251 units.9% yoy at 2.723 units. 9. 79 .
Major Insurance companies in India offering Auto insurance include The Oriental Insurance Company Ltd and New India Assurance Company. Companies can also acquire cars for eligible employees without affecting cash flows. Installment in advance scheme. Auto technology 80 . The interest amount can be claimed as business expense. Automobile Finance The availability of finance at lower interest rates. There are various insurance schemes available in India. Businessmen and professionals can treat the interest amount as a business expense and avail tax deductions against the depreciation of the Car. There is danger at every corner when it comes to Indian roads. Car Speakers. Car Cooling Coil. Automobile Services This is a section where the buyers and sellers meet. have made car purchase an affordable option for even young executives. CAR AC PARTS. Automobile Insurance Taking insurance cover for your vehicle is a must especially in Indian roads. There is always the chance of your brand new vehicle hit by someone who mistakes a highway for space. Car Reciver Drier. Car Care Products. Car AC Condenser. FLCD Kit and Car Batteries are available in India. early in Life.Best quality materials are used so as to meet the international standards. Financing schemes varies from Margin Money Scheme. stepped schemes and as varying as balloon schemes. Car AC Hoses. Sellers can place details of their products and buyers can specify details of their requirements in this section. Fog Lights. Insurance can pay for your financial loss. No income schemes etc The new schemes available in the market has made it possible for salaried individual to realize their aspirations to won a Car in India. Automobile Accessories such as Wheel Caps.
Auto consumables What are the constituents that keep your vehicle moving? Is it the wheels. it is on them that the performance of the vehicle depends. and those that are talking its place. Unbranded lubricants and fuel from unauthorized sources is a complete no-no. These include fuel.The drive is a long one. Different systems like the engine. engine oil. while big brands are spending extensively on positioning their products as 'guards for your engine'. besides the shapes. the fuel injection system. Or let's put it this way. It would need only one of the many subsystems to dysfunction for the entire automobile to come to a halt. what? Of course they do. 81 . Read on about those that are being phased out like the carburetor. but seldom know the mechanics involved. the axle. Vehicles that have used diverse technologies to make them function. This is why today consumers in all vehicle segments have grown cautious about the quality of fuel and lubricants that they use. it's a never-ending driveway. We present a list of such and other consumables that will aid you in looking after your vehicle. and various other lubricants that are responsible to keep a vehicle 'alive'. man's quest for automotive mobility led him to experiment with various kinds of vehicles. it is the technology behind them that has transformed the automotive landscape. Each works on disparate principles. which account for the running expense of any vehicle. tyres etc. From the steam . we sure have come a long way. Since the invention of the wheel. cooling etc. yet collectively. we give detailed explanations on the different systems and sub-systems that go in the making of an automobile. Here. It won't be an exaggeration to term these as the lifeblood of your favorite automobile. The environment factor is the latest to hit the market and has forced manufacturers and consumers alike to make and use environment friendly consumables.driven engine to the jet propelled aircraft. electrical. We drive our cars and our bikes. combine to make up a vehicle. But what keeps them running? It is actually the fuel that keeps it running. Same is the case with the other products like battery. the engine. And of course.
Maintenance means taking care of all the parts, even those that are inside the bonnet. These are the ones that directly concern the performance of your vehicle. Besides taking it to the service station at regular periods, it is a good idea to go through the owner's manual that will give a fair idea about its routine maintenance. Checking the battery, keeping a check on the oils, changing the oils, checking the electrical system, are some of the absolutely unavoidable things to keep your vehicle in good shape. Keeping a log book in which you keep all the details regarding repair, maintenance, routine check-ups etc. will not only give you an accurate idea of what needs to be done when. Maintenance is something most of us ignore, until our vehicle stops functioning, which is. And then we wonder what went wrong, where. Maintenance is one of the most serious aspects of ownership. It determines the longevity, performance and reliability of whichever vehicle you drive. Looking after your vehicle involves more than taking care of its external coat of paint and keeping it clean and shiny.
9.2: Innovation in Automobile Industry
Innovation has brought about a sea change in the Indian automotive sector, where slick styling, technology and new models have become the formula for success. These very factors led to the instantaneous success of Suzuki when it first rolled out the technologically superior Maruti 800 into the traditional Indian market. Even today it is the technology and a high degree of indigenisation, which have helped MUL attain a
price barrier, which is very difficult for competition to penetrate. This coupled with governmental support have perhaps been the clinchers for MUL's progress, despite recent competition from the likes of global players like Daewoo, Hyundai, General Motors Ford and the indigenously designed Tata - Indica. However, what auto companies need to do is develop ergonomic products, with slick styling, at an affordable price for the quality conscious Indian market. This can easily be done by commissioning any international design house. Indian auto companies need to take corrective measures to counter balance the shift in demands from motorcycles to cars. This is where Indian companies which do not have joint ventures with international automotive majors might well lag behind. Especially since, the development of fuel-efficient cars in-house is a long and arduous task, involving huge financial and manpower investments. It is in this department that foreign companies are already miles ahead. Thus one option, which might well become quite popular for Indian auto companies, is the joint venture route with an international major. The projected growth factors in an anticipated export thrust, as product quality and cost efficiencies go up in the auto industry.
9.3: Market trends
Emerging Market Trends The automotive industry is the barometer of Indian economy. The sign of recovery are most visible in the growing demand for automobiles. The aspirations of Indian consumer are rising with the growing demand. The cumulative effect of growing customer demand, increased competition, technology upgradations along with the traits are likely to be observed in the following trends.
International companies like Hyundai, Honda, Toyota, etc. are gaining market share. Technological up gradation will be primary requisite for success in the market. With the entry of new models, medium sized cars segment is further divided into low prestige and high prestige cars. Customers are upgrading from entry level small cars to sophisticated small cars and from sophisticated small cars to prestige car segment.
Stricter Pollution norms are likely to force vehicle manufacturers to adopt latest technology in maintaining emission standards. This is likely to curtail the average life span of vehicle on road while the maintenance cost and the genuine parts consumption per vehicle is expected to increase.
Due to free imports local industry is expected to face increased competition from international automotive companies. With the increasing number of vehicle population the two wheeler owners will have viable option of used cars. The vehicle with higher resale value and good service network is likely to dominate the market.
All the trends derived out of present dynamics of the Indian automotive vehicle market are indicators of internationalization of this market. India has become focus of international growth seeking companies as not only a cost competitive sourcing base but also a growing high potential market. In the near future the competition will be prominent in all the functions of business and only the companies with global standards are likely to survive. Indian manufacturers are gearing up for the challenge but surely the current scenario is apparently in favor of international players. The early movers are likely to secure a position to command the global competition Local market trends
Sales, particularly in the small car segment, will drive passenger car sales in the near term. However, within the next two years, capacity is expected to be twice the total demand for cars.
Worldwide • the trend is towards ensuring that one's products are superior in terms of quality. some countries in the region have witnessed cumulative falls of 70% this year. • • In view of expected surplus in the domestic market. slow down growth in sales. Sales in this segment will pick up as new models come in and income levels rise but it is still some time till it comes anywhere close to the economy sized segment. Sales in the used car market is also expected to do well as more and more older models get replaced by newer ones at a faster pace. • What will also drive car sales is the wide availability of finance schemes by a variety of banks and FI's. India will emerge as one of the leading car sourcing point in the Indian subcontinent. the action is shifting to the mid-size car segment. Growth has dropped due to the increasing levels of saturation in the larger car markets of the world. as they will be offered technologically superior products at better prices and terms and conditions. The coming in of Euro III and IV norms will also increase scrap page rates. Consumers will be the beneficiaries as a result of marketing war. According to EIU estimates. But the customer has a risk of model discontinuation as a result of shake-out expected in the industry. • International trend • The global automotive car market is growing at a rate of only 2% per annum and is not expected to pick up in the near term. hence. This will enhance the useful life of cars and.• With developments in the small car segment acquiring a degree of stability in terms of price competition. The South-East Asian crises has been a dampener to the collective fortunes of various carmakers worldwide. In Indonesia record sales 85 • .
Already. • Strategic tie-ups. 9. the market for cars and commercial vehicles is expected to fall from almost 600. Ford's acquiring of Daewoo and tie up with Volvo Car Corporation and Renault acquiring a stake in Nissan. training. In Thailand.000 this year. hiring and returnees) 86 . Automakers that have been enjoying a generally prosperous spell would have to rethink on the way vehicles are designed. Volkswagen and Toyota have begun to re-examine their dealer relationships and pricing strategies.4: Entry Strategies for MNC’s • • • • • • FDI Joint ventures Foreign and local buyers Licensing Sub-contracting Informal means (eg. manufactured. Carmakers would now have to think in terms of a new customer focus and provide better financing and servicing. distributed or sold. A few instances are Daimler Benz's tie-up with Chrysler of the US.000 units per year to 125.reported in 1997 are not expected to be matched until 2005. In Malaysia it is expected to be 2003 before peak sales and production volumes are repeated and in the Philippines the market will take seven years to recover. players like GM. • The global domination of the larger automotive manufacturers is slowly on the wane and the trend in sales is shifting towards more "regio-centric" products. Such deals would certainly lead to economy in terms of costs but it remains to be seen whether they will also create significant new opportunities for growth. mergers and acquisitions have become the order of the day.
German-based Robert Bosch group hold 60. 10.5% after the company brought back its shares in February 2002. licensing arrangement. The company is the pioneer of automotive Spark Plugs and Diesel Fuel Injection Equipment 87 .• • • • OEM Own Design and Manufacture (ODM) Strategic partnership for technology Overseas acquisition equity These are the ten entry strategies for positioning a country. It could be through joint ventures. It is possible to establish virtuous circle between investment. 2003 at Bangalore. MICO is India's largest auto-ancillary company.1: A Study of Motor Industries Company Motor Industries Company (MICO) held its 51st Annual General Meeting on 8th May. OEM and ODM contracts occur based on the resource endowments of the countries. hiring and returnees). marketing network. and using the export proceeds to finance imports of capital goods and intermediate inputs required for further productivity increases. FDI. exports and growth by investing in sectors with significant productivity and market potential. sub-contracting or even by informal means (training. It is generally agreed that a country’s pattern of participation in international trade is determined to a large extent by its resource endowments and the efficiency with which resources are utilized.
accounting for 16% of total turnover. From this.71 crore. Germany. which is sure to usher in increased demand for the CV sector especially in the multi-axle segment. Robert Bosch has entered into an agreement to buy 30. The overall sales turnover of the Company grew by around 7%. Its spark plug business is growing in the US and expects an increase in turnover from new products. from the common rail system and the Electronic control units. led by the strong growth in commercial vehicles segment has enabled the Company’s sales turnover to rebound in 2002. It had been bearing the brunt of the recession in the tractor and commercial vehicle (CV) segment in the past few years. Very recently.06 crore.2% of the share capital of Buderus AG in addition to 17% already held by the company. The Union Budget 2003-04 is also positive for the sector as it has increased its thrust on infrastructure (especially roadway) projects. 2002. focused efforts were made to get additional business from Robert Bosch.29 crore for the first quarter ended March 2003. MICO expects to touch 20% in three years. This led to a significant 29% growth in exports during the year. Net profit after adjusting for EO expenses rose 64% stood at Rs 134. Despite sales declining by 7% in the 1st quarter 2002 over the 1st quarter 2001. For the full year ended Dec. sharp recovery in sales of CV in FY 2002 has compensated for the continued fall in tractor sales. However the. 2002.08 crore. The successor to Andreas Nobis is expected to be known at a later date. Performance of the Company The recovery in the automotive sector. the company had registered a growth of 7% in sales to Rs 1550. Andreas Nobis. managing director of the company has taken over new responsibility in Robert Bosch GmbH with effect from 1st May 2003 to oversee the recent acquisition and integration of Buderus AG and hence could not attend the AGM. which are based on the Euro II norms and potential navigation systems from Blaupunkt. In continuation of the strategy to boost exports. quarter 2 and quarter 3 showed an 88 . Net sales during the quarter rose 17% to 432.in India. This was achieved mainly due to the better performance in the quarter ended June 2002 and Sept. MICO registered a 104% jump in bottom line to Rs 52.
increase of 21% and 14% respectively. The non-automotive businesses comprising of Power Tools and Packaging Machines. cost reduction measures such as strict control on additions to fixed assets. Of this 34% is for new products. 29. Germany. etc. 200. reduction in material cost through import substitution. In continuation of our strategy to boost exports. budgetary control on overheads.3 crore in the Profit & Loss Account. rationalization of supplier base.6% as compared to 2001. as compared to Rs. During the year. Sales to OEMs. overall sales in this area declined by 3. programs for rationalization and reduction of asset base. the investments in fixed assets amounted to Rs. which accounted for 7.3 crore in 2001. 94 crore. The general decline in the service business of the transport sector led to a fall in demand for fuel injection components in the Aftermarket. 1. increased by 6. This. improvement in labour productivity. Starters and Alternators. 94% of the total investments made in 2002 are in Plant and Machinery. which constitute nearly 45% of the total sales. accounting for 6. accounting for 16% of total turnover.1% of sales.5 crore. the Profit Before Tax increased by more than 50% and stood at Rs. This has led to a significant 29% growth in exports during the year. As a result of growth in sales accompanied by the various cost reduction initiatives. After taking into account the proposed dividend and transfer to capital redemption reserve. In spite of all counter measures. 9% for R&D activities and the balance 31% for auxiliary and other services.8%. 90 crore is proposed to be transferred to general reserve.13. were further intensified.8% of sales. The Profit After Tax also increased by more than 60%. This has significantly contributed to an improvement in operational efficiency. an amount of Rs. 26% for quality improvement. Cost cutting has now become integral to staying competitive. This growth was mainly due to increase in volumes of Multi Cylinder Pumps. focused efforts were made to get additional business from Robert Bosch. 89 . enabled the Company to post the 7% growth in sales for the entire year. In 2002. together with a steady 4th quarter. retaining a balance of Rs. grew by 18% due to a strategic marketing thrust and introduction of new products such as "Marble Cutters" and "Terra 25" packaging machines. Nozzle Holder Assemblies.
fuel and power will exert severe pressure on the profitability of the Company.5% in the financial year 2003-04 as against 4.4 crore for the period Jan-Apr 2003. recent spurt witnessed in the prices of steel.6% respectively. etc.5% GDP growth in the current fiscal year. Considering this positive performance but also the uncertainties prevailing in the global economy and its adverse impact on our exports as well as the uncertainties in the domestic market. and (iii) a second consecutive monsoon failure.4% achieved in the previous year.3% posted during the same period a year ago. interest rates. of course. Despite the poor agricultural output in the financial year 2002-03. Overall. However. This will inevitably lead to an increased demand for newer products such as Electronic Diesel Control systems. forecasted at this point of time. which accounts for an increase of 18% over the same period in the previous year. development of the rupee against the US dollar. Air bags. On the other hand there are some key risk factors such as: (i) the continuing problems in the Middle East. the slump in the tractor segment continues and is a cause for concern also this year. the commercial vehicles and passenger car segments maintained the growth momentum at 34% and 3.Future Outlook of the company As automobile manufacturers in India are increasingly tapping export potential there is a need to upgrade technology in order to meet the safety and legal requirements. 576. the trends in most macro-economic variables such as inflation. In the automobile sector. (ii) tension between India and Pakistan. aluminium. the underlying sales in 2003 are expected to grow by around 7% only. crude oil. the Company recorded a sales turnover of Rs. Anti-lock braking systems. the growth in industrial production has been quite good at 6. The Company will. in the first quarter of 2003. In order to secure business in these areas the Company is closely working with all major automobile manufacturers in India for development and application of these systems. are all positive. which may endanger the achievement of the 5. foreign exchange reserves position.1% in the period Apr-March 2003 as opposed to 3. On the cost front. In addition. These strong fundamentals will help the Indian economy to post a GDP growth of over 5. further intensify its cost reduction measures and pursue other 90 .
2: Case study.initiatives to counter the adverse impact of the rise in input costs and to maintain its profitability. the Company plans to further consolidate its position after the successful launch of "Terra 25" packaging machine. 10. In the Power tools business. superior service levels and offering value for money products. In the Packaging machines business. however big he or she may be. expanding the product range through introduction of Bosch branded products and further intensification of antispurious activities. in itself does not guarantee sales. increasing the number of 2-wheeler dealers. Exports continue to be a strategic thrust area for the Company. strengthening of 4-wheeler dealer network. Continuous and vigorous efforts are being made to increase the share of exports to 20% of the overall sales turnover of the Company by 2005. our focus will be on gaining additional market share through expansion of product range. In the automotive aftermarket the focus areas include aggressive marketing and promotional initiatives to increase sales turnover. This would mean that the Company must be in a position to continuously offer state-of-the-art products of international quality at a competitive price.Maruti Versa Improper positioning Associating with a star. 91 .
” In the words of Ravi Bhatia. To be fair. just like the brand’s ambassador. the average sales were 80-100 vehicles a month. But perhaps the positioning itself was faulty as people were expecting a larger than life car.3: Case study – Fiat Palio 92 . Last year. the brand’s sales remained sluggish. “the joy of travelling together. which was launched amidst a lot of fanfare about three years ago. General Manager of Marketing at Maruti.The most it can do is generate interest in the product or create a buzz around it. Last year. In spite of Maruti signing up superstar Amitabh Bachchan and his son Abhishek Bachchan as brand ambassadors for Versa. the Big B magic did work and the ads created significant interest. drawing people into the showroom. Take the case of Maruti Versa. with the core proposition being. 10. we saw Versa being repositioned as a family car. Now they are selling 450 vehicles a month. Versa has started doing well and has witnessed an upswing since the new positioning.
11. its sales took a beating. if anything. Sachin’s presence could’ve worked wonders but for the poor performance of the car in a market that is highly performance conscious. Unfortunately using a celebrity seems to be the easy way out of a parity product situation. But as word about the poor fuel efficiency of Palio spread. In fact. the product will fail faster because the presence of the celebrity will create a buzz and more people will know about the “ordinariness” of the product. In this case.Dissatisfaction with product quality/performance A company cannot sell an ordinary product just by making a celebrity endorse it.1: Automobile industry – at a glance Key Positives 93 . Sachin Tendulkar’s endorsement of Fiat Palio was quite a success initially.
Also. Environment led benefits: Any implementation of pollution norms in metros. courtesy the replacement demand Key Negatives Concerning income growth: The per capita income in the country has been growing at a slow rate. whereby vehicles beyond certain age need to be phased out could further translate into higher volume growth for all vehicles. owing to the fact that an estimated 39% of CVs plying on the roads are 10 years old. Exports buoyancy: On account of its low cost technical manpower and ever increasing focus on quality. the auto industry has emerged as an export hub.Increasing affluence of the Indian middle class and introduction of better quality cars has led to strong growth in the industry in terms of both market size and production capacities. demand for HCVs is expected to grow by a robust rate in the long term. Close to 65% of all the goods movement in the country takes place by roads as opposed to 55% a decade ago. Low interest rate regime: Close to 80% of the new cars being purchased in the country are financed. we expect the buoyancy in auto sales to continue over the medium to long term. Since the auto industry growth has a strong correlation with the same. Exports of passenger cars from the country have increased at a healthy CAGR of nearly 38% during the past five years and increasingly more and more auto majors are lining up to set up their production bases in the country. Given that interest rates are unlikely to rise at a rapid rate in the future. especially for the compact car segment. thus underlying the importance of a low interest rate regime to the fortunes of the industry. the 94 . Infrastructure thrust: Improvement in road infrastructure has led to increased movement of goods through roadways.
which posses a question . The passenger vehicles sector is a cyclical one. rising fuel prices and hike in interest rates might throw a spanner in the wheels. while others like USA and Japan remained lackluster in 2003-04. India is poised to become the manufacturing hub for the world with cheap and skilled labor. Also. 95 . multiple tax rules that exist in different states are eroding the comparative advantage of a large domestic market thus making it important to implement VAT (Value Added Tax) as soon as possible. Taxation anomalies: Duties on some select and key raw materials including steel and components are still pretty high and are thus hurting profit margins of the companies. With government committed to continue with infrastructure spending and economic growth likely to remain robust the industry seems to be headed in the right direction. Attractive finance schemes and buoyant economic growth helped both the passenger and commercial vehicle industry notch up growth in excess of 30%. India is one of the few countries to post double digit growth in passenger vehicles. Future Prospects look positive FY04 turned out to be one of the best years for the Indian auto industry. Maruti Udyog is aiming to become the R&D hub for its parent Suzuki’s Asia operations. However. Reforms need to be accelerated.Will the high growth rates witnessed earlier continue going forward? Our discussions with the industry gave us an insight on the demand projections for passenger vehicle volumes in the future. Already a number of companies are introducing vehicles in the CKD route. competition is expected to rise multifold.momentum has to continue to ensure robust automobiles demand. Competition from imports: With India coming under the WTO purview. Indian companies also have to contend with imports in the future.
economic growth and low interest rates are causing change in dynamics.Emission norms. infrastructure development. India: A value-adding automotive and manufacturing hub 96 .
including the automotive sector.000 crore. For some sectors.000 crore. including the automobile sector.The future of manufacturing in India.5 million this year to over 10m in the year 2007. the treatment for completely built products and SKD kits would be critical.2: Future Outlook 97 . By 2012. The automobile sector is set to grow from a projected 7.000 crore. 11. would undoubtedly be affected by the outcome of the Non-Agricultural Market Access (Nama) discussions. assimilate and develop technology. Investment in this sector is over Rs 65.00. their combined output would exceed Rs 2. The turnover of the component industry is set to double over the current level of Rs 25. The manufacturing sector is going through a period of revival. Indian industry has been able to acquire. It is this capability. production capacity. The challenge is to get an agreement that would make India a value-adding automotive and manufacturing hub. growth and investment. value addition and employment potential that should be kept in mind during trade negotiations.
The premium segment is likely to emerge as the largest segment over the very long term as people graduate to more expensive models. The transporters strike had impacted volumes in April 2003. It is worth mentioning that the car production capacity has increased significantly in the last three years. it is estimated that total capacity is expected to more or less match the expected demand by 2003-04. Consumer will however continue to remain the KING. There is always a fear of the shakeout eating into your favourite brand you own. The prospective buyer will be the main beneficiary of the marketing war in the industry not only in terms of prices but also better technology.If India is to achieve a sustainable 7-8% GDP growth and 9-10% growth of industrial production. In the meantime. Low capacity utilization will lead to an inevitable marketing war between the car manufacturers which is most likely to lead to a shake out which will see some of today's major players withdrawing from particular segments in the coming years. exports are also expected to increase because of over capacity in the domestic car industry and the Government's policy to bring about a more liberal regime on the foreign exchange front. India would have the largest young population of the world in next 20 years . The industry will witness substantial over capacity in the next few years unless there is a substantial spurt in sales. Commercial vehicle segment is expected to grow at a higher pace on the low base of the previous year and accelerated GDP growth in the current year. The car segment is likely to grow by 20-22% during the current year. The premium segment of the industry is however expected to witness acute over-capacity. The midsize segment is expected to record the highest growth followed by the premium and economy segments.The passenger car segment has continued to report a strong 30%+ growth in the first month of FY04. for example discontinuation of a model. partly due to low base effect. Growth in the short term is likely to be higher following increased consumer spending (improved economic performance) and launch of new models. In the economy and medium segments. If not. 98 .
with government pressing for improvement in road infrastructure. Segment wise growth expectations. provided the Government takes necessary steps that promote growth are: • • • • Passenger vehicles Commercial vehicles Two wheelers Three wheelers : 10 – 15% : 12 – 15% : 10 – 15% : 10 – 15% Ending the briefing on an optimistic note. With current penetration level of six cars per thousand people. we remain cautious. the incentive to do R&D with the Indian counterpart has increased. it is estimated that we should have a healthy growth of sales (including exports) in the automobile sector in 2004-05. 99 . the real challenge before the Indian automobile industry is to catch up with China which was at par with us till recently and currently aspiring to be the third largest market in the world. However. Since operating margins of auto majors have increased over the last three years. Also. the potential for growth is significant. significant further improvement from the current level is limited and to that extent. we remain positive on the future prospects of the industry. Based on SIAM analysis. In view of a couple of positive measures such as the excise duty exemption on tractors and 150% deduction on R&D expenditure. This defines the future vehicle owners of the country. the position of railways as the main carriers of goods such as food grains and cement has come under significant threat. Mr Khattar concluded that the passenger vehicle manufacturers would easily cross a domestic sale of one million vehicles during the year excluding exports.we should have 50 million people every year moving up from middle class to upper middle class. Since most manufacturers have a technology tie-up with a foreign major.
Secondly. This has come about. 100 . as the concept of "regio-centric" cars is becoming popular. the market for cars and commercial vehicles is expected to fall from almost 600. the South-East Asian crises has been a dampener to the collective fortunes of various carmakers worldwide. In Thailand. down from almost 77% at the start of the 1990s. given the recent trend of carmakers to opt for quality components which will increase the vehicle’s useful life. In Indonesia record sales reported in 1997 are not expected to be matched until 2005. the global domination by the large automotive players has slowly abated with local manufacturers getting hold over the market. Japan. In Malaysia it is expected to be 2003 before peak sales and production volumes are repeated and in the Philippines the market will take seven years to recover.3: Conclusion Automobiles have become an indispensable part of our lives. Western Europe and the North American Free-Trade Agreement area comprising USA. Analysts from EIU state that this saturation level may even translate into negative growth. cheaper and more convenient mobility every passing day. This slow down is due to the increasing level of saturation in the largest car markets of the world.Firstly.000 units per year to 125. the international car market is growing by around 2% pa and this set to continue for the next few years. 11. Thirdly. Mexico and Canada are expected to account for 71% of the global park by 2005.000 this year. some countries in the region have witnessed cumulative falls of 70% this year. an extension of the human body that provides us faster. According to EIU estimates.
requirements. This section keeps you updated on the latest and the most interesting researches conducted in the field of automobiles. Bibliography 101 . alternative medicine and so on. or rising motor accidents and causes.Behind this betterment go the efforts of those in the industry. vehicular technology. in the form of improvement through technological research. What actually lie behind this betterment of the automobiles are the opinions. be it about the pollution caused due to vehicle population in cities. and help you draw the right conclusion. likes and dislikes of those who use these vehicles. Numerous surveys and research are conducted throughout the world every now and then to reveal one or the other aspect of automobiles. These wheeled machines affect our lives in ways more than one.
com www.com www.com www.com www.hindustan.indiainfoline.Websites www.altavista.projecthubs.com Newspapers Times of India The Economic Times 102 .askjeeva.com www.google.aol.com www.