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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.
• • • •
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.
has undergone metamorphosis with the advent of new business and manufacturing practices in the light of liberalization and globalization.3: Preview of Automobile Industry The automobile industry. for which indigenization is highly important. Players are strategizing to consolidate their position and gradually increase market penetration with the launch of new models. The sector seems to be optimistic of posting strong sales in the next couple of years in view of a reasonable surge in demand. huge investment is envisaged to remain competitive through cost advantage.1. IT in the automobile sector plays a crucial role. 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. It is essential to leverage skills of different engineering disciplines to build these kinds of integrated systems.. Some players are working towards development of efficient production systems that control the entire production process with high precision and accuracy. Since the sector is price driven. 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 product becomes dearer if it is manufactured using imported parts. targeting different segments. one of the core sectors. The Indian automobile market is gearing towards having international standards to meet the needs of the global automobile giants and become a global hub. All laboratories in 7 . Such systems working on real time operating systems allow efficient control of different parts of manufacturing and production.
the country researching on automobile technology. The sector is striding inroads into the rural middle class after its inroads into the urban markets and rural rich. drive transmission & steering pats. have also been brought together through the setting up of a national R & D working group. The current policy allows Weighted Tax Deduction under I.T. each state is proposing to provide all regulatory clearances at express speed. and has become a excellent manufacturing base for global players. The group is working out a plan to link all major laboratories across the country to give a thrust to automotive research. Indian automobile sector being a driver of product and process technologies. 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. States like Rajasthan. Uttar Pradesh. electrical parts. because of its high machine tool capabilities. it is emerging as a major player. It is trying to bring in varying products to suit requirements of different class segments of customers. 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. such as BHEL which is developing cell technology as alternative fuel. most of the raw material locally produced. based on its performance. extremely capable component industry. Act. India today exports: Engine and engine parts. This will be improved further for 8 . suspension & braking parts among others. 1961 for sponsored research and in-house R&D expenditure. 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. so much so that in quality conscious markets such as Europe and America. 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. Maharashtra.
concessional duty on plant/equipment imports and granting automatic approval. Allocations to automotive cess fund created for R&D of automotive industry shall be increased and the scope of activities covered under it enlarged. 9 . Government will encourage setting up of independent auto design firms by providing them tax breaks. This would include R & D leading to adoption of low emission technologies and energy saving devices. 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. In addition.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.
the GOI asked assembly plants. The year was 1954 and this decision of the government marked a turning point in the history of the Indian car industry. 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. no new entrant was allowed even though they had plans of a fullfledged manufacturing program. Also. which started as a manufacturer of auto components graduated to manufacture cars in 1949.989 i. a CAGR of only 3.000 mark in 1930. the restrictions on foreign collaborations led to limitations on import of technology through technical agreements. In 1952. each product was safely cocooned in its own segment with no fears of any impending competition. for many of the initial years. The GOI control even extended to fixation of prices for cars and dealer 10 . crossing the 30. Calcutta and Chennai. In the next two decades the number increased to 30. In the absence of adequate technology and purchasing power. The other control imposed on carmakers related to production capacity and distribution. Thanks to the Licence Raj which restricted foreign competitors to enter the Indian car market.714. Indian roads were ruled by Ambassador Car from Hindustan Motors and the Fiat from Premier Auto Ltd.e. cars were imported to satisfy domestic demand. However. The restrictive set of policies was chiefly aimed at building an indigenous auto industry. The demand for cars in 1960 was to the tune of 15.5 per cent. In 1946. the GOI set up a tariff commission to devise regulations to develop an indigenous automobile industry in the country. the car industry grew at a snail's pace in the 60’s. After the commission submitted its recommendations.1:4 Automobile industry – Wheels of Change India had its date with this wonderful vehicle first time in 1898. The import/assembly of vehicles grew consistently after the 1920's. Between 1910 and 20's the automobile industry made a humble beginning by setting up assembly plants in Mumbai. The GOI also had a say in what type of vehicle each manufacturer should make. Hindustan Motors (HM). Ford and other assemblers closed operations in the country. As a result General Motors. to shut operations. Then for the next fifty years. which did not have plans to set up manufacturing facilities. Therefore.
commissions.000. The GOI entered the car business. a series of liberal policy changes were announced marking another turning point for the automobile industry. MUL introduced 'Maruti 800' in 1983 providing a complete facelift to the Indian car industry. Simply put.000 units in FY99. effectively abolishing all controls relating to the pricing of the end product.e. Though a liberal move.6 per cent i. Maruti 800 was well accepted by middle income families in the country and its sales increased from 1. that the car makers were given a free hand to fix the prices of cars. The company has single handedly driven the sales of cars in the country cornering around 79. this market share has plummeted to almost 62% in FY2000. This triggered the start of a protracted legal battle in 1969 between some carmakers and GOI. However in FY2000. This changed the industry's profile dramatically.200 units in FY84 to more than 200. this figure came down due to rising competition from Hyundai's 'Santro'. With increasing competition from new entrants. Ambassador and Padmini. Telco's Indica and Daewoo's 'Matiz'. The car was launched as a "people’s car" with a price tag of Rs 40. It was only in 1985. 11 . from 1981 to 1990. as his choice throughout this period was limited to two models viz. Car sales grew by 42 per cent yoy in 1985 after Maruti 800 was launched. thus. MUL extended its product range to include vans. the three decades following the establishment of the passenger car industry in India and leading upto the early 1980s.6% market share. proved to be the 'dark ages' for the consumer. Thanks to MUL car sales registered a CAGR of 18. the GOI announced its famous broadbanding policy which gave new licenses to broad groups of automotive products like two and four-wheeled vehicles. after the entry of Maruti Udyog. the licensing system was still very much intact. the joint venture with Suzuki Motors Ltd of Japan. with a 74% stake in Maruti Udyog Ltd (MUL). 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. In the early 80's. multi-utility vehicles (MUVs) and mid-sized cars. In 1985.
The Indian Automobile industry registered one of the strongest growth rates in FY’04. low interest rate regime. While motorcycle volumes tripped on a high base. been the turnaround year for the Auto industry with the economy looking up. Within the past decade. two wheelers registered the lowest but healthy growth rate of 13% in FY’04. Three wheelers grew by 23% in FY’04. Interestingly.A brief 3-year downturn till 1993 and car sales bounced back to register a 17 per cent growth rate in 1997. etc provided impetus for the growth. the industry registered high growth rates in all major segments. signalling the rising international competitiveness of the industry. the economy slumped into recession and sales of cars remained quite stagnant FY97 and FY99. Passenger cars also registered an impressive 34% growth in FY’04 and total sales volume crossed the 1 million mark for the first time. Overwhelmed by newer models from new and existing players had led to an impressive shift from a constrained supply situation to a surplus one. The automobile industry. 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. The Financial year 2000 has. fiscal measures like cut in excise duty (in case of cars). scooters registered a 10% growth after 4 years of continuous decline. 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. however. Apart from strong economic growth in all sectors. continued infrastructure investment. Aided by sustained economic recovery. 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. normal monsoon. 12 . about 30 models have entered the Indian market with a number of models still awaiting launch. The year also saw a sharp 56% rise in export volumes with all the sectors registering more than 40% growth. crossed the half million mark for the first time in FY2000.Since then.
notwithstanding the rise in prices of certain inputs like steel. Many companies have entered the car manufacturing sector. Though the peak customs duty had been reduced to 20% in January 2004 and Special Additional Duty was abolished. 13 .Profitability improvements were recorded in companies across segments driven by rise in volumes and lower interest costs to some extent. 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. the domestic industry still enjoys adequate protection. to tap the middle and premium end of car industry.
In such a scenario the manufacturer could offer outdated models and also raise prices at will. Increased competition has forced companies to focus on cutting costs. It has also constrained them to limit price increases.000 m in FY95 to nearly Rs 35. 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 number of manufacturers (domestic and foreign) increased dramatically after the de-licensing of the sector.000 m in FY97.1. Little or no attempt was made to control costs or to offer new products. The car financing market has boomed from a turnover of Rs 7. Availability of easy credit facilities also resulted in creating demand for automobiles. Lack of innovation restricted the consumer’s options to the models offered by these companies. improve technology and styling through research.5: Background of Automobile Industry The automobiles industry for many years operated in a seller's market.
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. Gradual shift can be seen in buyers from mopeds to economy scooters. Fiat Uno. Segment Economy Mid-size and luxury Source: SIAM/ Auto Car India Market Share (%) 90. Maruti Alto etc.2 9. The easy availability of finance and increased levels of disposable incomes has led to higher demand for premium models. improvement in products and technology have fuelled demand for 4-wheelers. tata Indica.45.45 mn) Luxury car segment (Rs 0. Hyundai Santro. Honda City. Maruti 800 etc.1mn) Super luxury segment (above Rs 1mn) Models Maruti Omni. The markets are clearly segmented between economy models and premium models.25-0. Mitsibushi Lancer. Ford Ikon.25mn) Mid-size segment (Rs 0. Rural areas have also become an exciting market to cater to. Tata Indigo. low pricing policies. The growth of the economy has also resulted in a shift in consumer preferences in each of the segment. from economy scooters to premium and from premium to motorcycles 15 .Category Economy segment (upto Rs 0.8 Increased urbanisation. Opel Astra.
Figure -Structure of Passenger Vehicle Market (India) Trends in Passenger Car / Utiltity Vehicle Sales 16 .
improved irrigation facilities. These vehicles have witnessed steady demand growth over the past few years due to successive monsoons. Cielo) have been moderately successful. increased availability of consumer finance. and reduction in excise and customs duties. better procurement prices. 17 . The passenger car segment has seen rapid growth on the back of rise in disposable income. While the lower and medium range cars (Maruti. Ford. Commercial Vehicle Sales Growth v/s IIP Growth Demand for utility vehicles and tractors come from rural India. this segment has seen maximum foreign investment. There is a clear segmentation of passenger cars based on price and size. The CV segment is directly linked to industrial production and foreign trade and is therefore subject to cyclical fluctuations of the economy. and availability of finance. Post-1991. The demand for CVs is related to growth in movement of goods transported and freight rate levels. both of which are linked to level of production. luxury cars such as Mercedes have found the going tough.
Availability of quality components is another factor that determines smooth production without bottlenecks. However. Indian companies spend very little on R&D. High rejection rate of auto components has prompted several global majors like Ford. thus saving costs of importing technology. to get their international suppliers 18 . A strong in-house R&D capability allows a manufacturer to develop and introduce products at lower prices.
later entrants have the opportunity to learn from the mistakes of the first entrant. followed by Hyundai. now have kept India as a priority destination for their investment. MNCs need to carefully plan their entry into emerging markets. Honda. Toyota. There are several global automobile companies who were averse to come and invest in India ten years ago.M. In all these cases. Consequently. On the other hand. the Indian Government removed several restrictions in a bid to attract foreign investors into the automobile industry. Examples include Suzuki. The stiff competition to access market prompted companies to go for different models with differing qualities and efficiency. the profile of domestic auto companies too witnessed a structural change. the Rs 18. The market too expanded at a rapid pace with the entry of soft financial assistance from several financial institutions to middle income households. the local partners have just not had enough resources to chip in whenever the equity base has been expanded.1. G. the foreign partners have pumped in the additional capital and raised their equity stakes With the liberalization of the India economy. Other MNCs such as Ford and General Motors also entered the Indian market. In the 1990s. Along with the entry of multinational auto companies. Early commitment to a market often results in first mover advantages that are difficult to replicate. Most MNCs began their operations in India as joint ventures with local partners. Ford and Daewoo. Among the first to enter was Daewoo of South Korea. Volkswagen etc.500 crore Indian car market is being opened up to foreign investors. with its model Cielo.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. Several companies are setting up or have already set up operations in India to cater to the Indian market. With the exception of Suzuki. these joint ventures have become fully owned subsidiaries of the foreign partners. The Indian car market offers useful lessons in this context. There are several 19 . targeted at the upper end of the market.
especially if the quantum of investment is huge. 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. Generally. due to increased demand in the aftermarket.up in India under Indian laws. The impact of India’s initiatives in economic liberalization and globalization (post 1991) is most apparent in the automotive sector. Introduction of reforms and entry of international companies has intensified competition in the Indian automotive sector. The benefit of this practice is the comparatively higher revenues for automotive component suppliers. It may do so through an Indian arm i. or 2. 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. The changing structure of this industry has posed many challenges and opportunities to the market participants. This will reduce the average life span of vehicles on road and the overall impact would be reduced per vehicle parts consumption. This module aims to give the various entry options available to a foreign investor. All these factors resulted in prolonged operational existence of vehicle on Indian roads. through a subsidiary company set . In addition.strategies by which a foreign enterprise can set . especially for foreign direct investment.e. Automotive industry is a key driver of economic growth contributing around four to five percent to the Indian GDP.up Indian operations. This module does not deal with portfolio investments. 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 . low labor cost of maintenance and the psyche of Indian consumer to delay the discarding of the old vehicle reduced the scrap rate. 20 . Indian automotive market was characterized by weak air pollution regulations. Broadly. setting up operations through an Indian arm is advisable. entry strategies may be classified into two major types :1. Previously.
It is hoped that industrial growth would be around 7 per cent during the year 2003-04 as against around 6. these could be classified as entry-level vehicles. Availability of finance in rural and semi-urban areas have led the low-end customers to put money in the purchase of vehicles.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.5 trillion) in the world after USA. Softening of interest rates and improved financing of second hand vehicles have made the purchasing of cars financially viable. With the growth in the family income of these rural and semi-urban buyers and the option of numerous used cars. Good performance of the economy has led to higher all round growth leading to high GDP growth 21 . Excise duty reduction on passenger vehicles helped to reduce the ultimate price to the customer. Emergence of India as a manufacturing hub for the automobile industry is a good sign for the country’s future prospects. 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. progressively mopeds are likely to be replaced by motorcycles. Today we are fourth largest economy (USD 2. which would ensure robust growth in the automotive sector. Agriculture output during the year 2003-04 increased by over 10% as compared to (-)3. Lucrative finance schemes have made the purchase of midsized cars really affordable.5% last year. Therefore. Japan and China in terms of purchasing power parity. Good performance of the economy has led to higher all round growth leading to high GDP growth of 8%. Within two wheeler segments.2% in the previous year. Brisk activities on infrastructural development will give a boost to the automobile industry. The automotive industry performance is closely linked to industrial growth. 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. it is expected that a significant shift would take place from two wheelers (mainly scooters) to four wheelers.
First car manufactured in India 1953.1980 . Standard Motors Products of India Limited.Premier automobiles started 1948. oligopoly.. 1960 . Peugeot. 1970 . the license raj was dispensed with. Ashok Leyland Limited. general Motors.With the winds of liberalization sweeping the Indian car market. namely. 1928. slowly began to disappear. three wheeler industries established a foothold in the Indian scenario.Only seven firms. Mahindra & Mahindra and TELCO received approval.Not much change was witnessed during this period. 1991 .The two.1970 .7: The landmarks along the way. and the automobile industries were allowed to expand freely.The first phase of liberalization was announced by the Govt. The major factors affecting the industry were the implementation of the MRTP Act (Monopolies and Restrictive Trade Practices Act). Automobile Products of India Limited. Hindustan Motors Limited. 1997 . -With the liberalization of the Government's protectionist policies.The National Highway Policy was announced which will hopefully have a positive impact on the automobile industry. the advantages hitherto enjoyed by the Indian car manufacturers like monopoly. Mercedes-Benz and Fiat came into the Indian car market. many multinationals like Daewoo.The first imported car was seen on Indian roads 1942.1.Hindustan Motors incorporated 1944. Premier Automobiles Limited.1990 .Under the Govt. FERA (Foreign Exchange Regulation Act) and the Oil Shock of 1973 and 1979. respectively. 1980 .The Government of India decreed that only those firms which have a manufacturing program should be allowed to operate 1955.. 1993 . The Government also laid down the emission standards to be met by car manufacturers in India in the coming millennium.'s new National Industrial Policy. There were two successively stringent emission levels to be met by April 2000 and April 2005. These norms were benchmarked on the basis of 22 .
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. 2.Tata Motors becomes the first Indian auto company to be listed on the New York Stock Exchange. The deadline was later extended to 1st June. hence the names Euro I (equivalent to India 2000) and the Indian equivalent of Euro II.those already adopted in Europe. 1999 in National Capital Region(NCR) of Delhi. 1999 2004 . 1999 .1: Auto policy of the Government of India VISION 23 .
research and development. 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. Steer India's software industry into automotive technology. Impetus to Alternative Fuel Vehicles through appropriate long term fiscal structure to facilitate their acceptance. • • • • • • • SIAM welcomed the announcement of Auto Policy. 24 . Development of domestic safety and environmental standards at par with international standards. Establish an international hub for manufacturing small. includingPromotion of R&D in the automotive sector to ensure continuous technology • • upgradation. phased. affordable passenger cars and a key center for manufacturing Tractors and Two-wheelers in the world. Promote a globally competitive automotive industry and emerge as a global source for auto components. Conduce incessant modernization of the industry and facilitate indigenous design. Assist development of vehicles propelled by alternate energy sources. building better designing capacities to remain competitive.To establish a globally competitive automotive industry in India and to double its contribution to the economy by 2010. 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. POLICY OBJECTIVES This policy aims to promote integrated. enduring and self-sustained growth of the Indian automotive industry. and feels that the policy would serve as a reference document for all stake holders and other interested parties.
However.• Emphasis on low emission fuel auto technologies and availability of appropriate auto fuels and encouragement to construction of safer bus/truck bodies . with the Auto Policy in place. are steps in the right direction. The terminal life policy for commercial vehicles and move toward international taxing policies linked to age of vehicles. 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. the automotive industry would get further fillip to become vibrant and globally competitive. 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.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.2: Role of Government in Automobile Industry 25 . However. this aspect has not been fully addressed.8 meters through excise benefits is not in line with the free market concept and may lead to market distortion. SIAM has always been advocating encouragement of value addition within the country against mere trading activity. The recommendation of promoting passenger cars of length upto 3.
Indian automobile industry is also consistently trying to meet the emerging challenges of environmental pollution and better safety standard. It should also work in tandem with the government to make India a world leader in this area. India’s stage 2 norms equivalent to Euro-II norms. The norms are being further tightened from April. To meet this emerging challenges of newer emission norms Indian automobile industry has already braced itself up with new investment and fresh technological induction. In the national capital territory region of Delhi. This would apply to passenger cars. Government initiated controls by notifying emission standards from the year 1992 which were further tightened under the Motor Vehicle Act. 2000. According to a study. the pollution in the cities is continuously increasing. India has announced one of the tightest norms in the entire world.2000 when India’s stage one norm equivalent to Euro-I will become effective. With the growing number of vehicles. The Indian auto industry should launch programmes for market development and a wider acceptance of alternative energy-driven vehicles in India. with the growing number of vehicles. Government initiated controls by notifying emission standard from the year 1992 under which were furthers tightened in April 1996 under the Motor Vehicles Act. will be effective from April. unleaded petrol was also introduced in metropolitan cities from 1995. automobile exhaust contributes more than 60% of the atmospheric pollution in metropolitan cities. 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 26 . 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. India can also learn from countries like Japan that are already using these technologies for a wide number of applications. the pollution in the cities is ever increasing. as per the order of Hon’ble Supreme Court. which enabled fitments of catalytic convertors on new petrol driven vehicles. Form that date 7 metropolitan cities are going to switch over to Euro–III norms.The government is making efforts to overcome the constraints at their research centers for automobile industry. For 2-wheelers. For meeting these norms.
welding. But it was alleged that the policy was discriminatory in favor of MUL. 27 . which promises tremendous environment-improvement benefits for the vehicle. etc. Government will encourage and assist establishment of specialized training institutes for the automobile sector through the active association of interested automobile industries. petrol prices and import duty of steel. import duty on cars and parts used in it. 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.of the emission performance of the vehicles they produce for its useful life. HM were denied permission to produce cars in collaboration with Japanese companies. after liberalization and with the consequent opening up of the auto sector in 1992-93. 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. while others like Telco. The Institute will be managed by the participating automobile industries and will train skilled category of auto workers. PAL. the license raj ceased to exist .wheelers from But ultimately. It also is making an effort abe to enlist the support of multilateral aid institutions to provide part of the funding for this project. the government protected the car industry from new entrants by making effective use of licenses. However. the government could not muster enough courage to push the mighty automobile industry and enforce it. auto mechanical. These institutes will be set up in Bidadi Industrial area and Dharwad Growth center. The policy of broadbanding capacities in the eighties led to increased utilization of capacity for four-wheelers in the industry. which create pollution. The GOI controls the car sector by way of framing policies on depreciation norms. During the era of socialist inspired controls.
cess by the Central Government. designed for transport of not more than six persons (excluding the driver). But MUL vehicles receive favorable treatment in terms of sales tax as well. Till 1987. Presently. In line with its treatment for luxury items import duties for car have been maintained high. import duties varied between 150 to 200% based on the engine capacity of a car.The perception of a car as a luxury good lead to heavy excise duty on cars. In the 80's. the duty is 32% (16% + 16%). The reduction 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. The excise duty doubled from 25% in FY87 to 55% in FY91. Over and above the excise duty. the import duty on cars has also been further brought down from 50% to 40% ad valorem. This came in being after the 15th of May 2000. But with lobbying from PAL and HM government withdrew the provision in 1987. 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. Even today. there is a duty of 40% (16% + 24%) on motor vehicles. states are now charging a uniform sales tax of 12%. But with the onset of the liberalization process in the early nineties. The import duty on catalytic converters and parts thereof has been reduced from 25% to 5%. Earlier. the government has continually rationalized the excise duty regime. 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 FY98 budget. The duty on CNG kits and parts thereof have been reduced from 10% to 5%. states used to charge sales tax varying from 3 to 14%. 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. but not more than 12 persons. The import duty on cars and components has come down in the last few years in line with general reduction in import tariffs. 28 . This helped MUL to price its car at a lower price in comparison to others. all CKD/SKD imports include metal pressed body panels. On vehicles designed for transport of more than six persons.
3: Impact of union Budget 2004-05 Budget Proposals / Measures • • No change in basic excise duty on automobiles other than tractors Peak rate of customs duty to be maintained at 20% 29 .2.
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. The industry has just come out of a three-year slump. Thus. 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. deduction of 150% allowed on the same will encourage further R&D investments. having registered a volume growth of 10% in FY04. 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. Educational cess of 2% on excise.• • • • • • • • • 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. From this perspective. the current move is a step in the right direction. the current exemption is likely to give a further boost to demand. Excise duty on steel increased to 12% from 8%. In line with the 30 . Indications of continuing benign interest rate regime. With cost efficiency no longer the domain of any single player. 2005 Strong thrust towards sustainable rural economic growth. Reduction in customs duty on copper as well as some other metals to 15%. Likely implementation of VAT from April 1. With major auto companies spending sizeable amount on product development and inhouse R&D expenditure in recent times. customs duties and Income Tax. The government has pushed for speedy implementation of infrastructure projects. especially the CV manufacturers. which is a good sign for the auto industry.
3: Demand 31 . no significant impact for the automobile industry (other than tractors). Cess of 2% may result in increase in end product prices if the manufacturers decide to pass on the hike. it would be nullified to some extend by increase in excise duty on steel. renewed impetus on infrastructure and thrust on rural economy are likely to sustain healthy growth rates across segments.international experience. However. Overall. 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. improvement in road infrastructure will translate into increased demand for higher tonnage CVs. R&D sop will also boost investments in technology related areas. Rural thrust is likely to result in long term increase in demand of automobiles.
increase in per capita income.0 FY95 264. price of cars. The key variables are per capita income.0 55.0 FY96 345. fuel cost and its subsidization. car sales bounced back to register 17% growth rate till FY97. depreciation norms. 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.992 19.486 30.822 27.714 in FY60 to 30. with the revival of economy.4%. As a result car sales remained almost stagnant in the period between FY97 and FY99. during FY2000. The first four factors viz.The demand for cars in the past was supply driven as demand did not match supply.8 The demand for cars is dependent on a number of factors.736 2. The demand for cars was suppressed by various supply constraints. reaching sales of 409. the segment went great guns posting a sales growth of 56%yoy. CAGR recorded during the FY94-FY99 period was 14.5%. the economy slumped into recession and this affected the growth of the automobile industry as a whole.6% in car sales from FY81-FY90. availability & cost of car financing have 32 . introduction of new models.815 -2.989 in FY80 at a CAGR of only 3. However.624 638. incidence of duties and taxes. Since then. introduction of new models. The demand for cars increased from 15. 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. After witnessing a downturn from FY90 to FY93. availability & cost of car financing schemes. public transport facilities etc. This led to high premium and long waiting periods for the cars.0 FY97 410.0 FY98 417.624 cars in FY99.203 27. The table below indicates the past sales trend for cars Cars Volume Growth %yoy Source : SIAM FY94 209.0 FY99 FY2000 409.
33 .positive relationship with the demand whereas others have an inverse relationship with demand for cars. with cross demand from utility vehicles. due to rising income and necessity of car for personal transportation purposes. the supply of second hand economy cars is expected to increase substantially. The dominance of economy segment will continue in the future as it will provide large volume to Indian car industry. 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. But with the release of new models in the higher end of the economy segment. excluding the owners of mopeds. income levels rise and present car owners upgrading from the economy segment to higher end cars. availability of finance and other factors the above mentioned potential for cars will be difficult to realize. Also. 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. which will be costing just about two times the price of premium range two-wheelers. per capita income etc. 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. The demand for mid-sized and premium cars is expected to rise as new models enter the market. Therefore. The demand for cars in the future can be estimated with the help of making use of macro economic variables like growth in GDP. This is because a majority of customers for cars will graduate from two-wheelers. or house hold penetration technique. This could affect the demand for first hand/new cars. Growth in the segment thus is expected to hover around 15-20%yoy.
658 27. 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 1983.2 FY95 264. high margin environment faced the prospect of not just diminishing market share.475 units to 181.002 (1.539 17.1 FY98 401. but a shift in focus from producing vehicles to selling them.6 FY97 407.000 to 30.468 27. attracted world majors who joined hands with existing auto majors.96. Fiat in JV with PAL to manufacture Fiat Uno. The table below gives the production numbers of passenger cars in the past few years.7) 32.000 cars in FY90 to 240. The first ones to enter the field were Mercedes Benz in joint venture with Telco to manufacture E220. With the entry of MUL.Supply The supply of cars in Indian industry till 1991 was dependent upon the production capacity of individual players.6) FY99 FY2000 390. Existing producers who had operated in a protected. But MUL made use of the opportunity open to its technologically superior product and increased its capacity from 100. 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. Peugeot in JV with PAL to manufacture Peugeot 309L. which helped increase car production by 20.420 units from 1981 to 1991 respectively. E250D models.000 cars per annum till the early nineties.4 34 .000 cars in FY98.146 31. The opening of economy in 1993. The production of cars has increased from 42. FY94 207.355 577. the face of the passenger car industry changed forever.4 FY96 348. to start their operations at the earliest.243 (2.000 cars in FY96 and 350.
000 60.000 Thus.000 60. as was witnessed in FY2000. this segment will slowly witness some stability in terms of sales volumes and prices.000 100. will be in the mid-size and luxury segment.000 1.000 30. capacity utilization in FY2000 stands at 79. The major increase in supply. The supply in the future.000 130.4%. industry sources have indicated that after the hectic action of the past two years.000 72.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.000 70. The entry of new players is expected to create a marketing 35 . This has increased from an estimated 600. Production capacities are expected to increase in the next two years as players introduce new models.000 727. taking into account the plans announced by the car majors are expected to grow to 1.000 cars by 2002.070.000 Expected 350.070. 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'. Car Capacity Maruti Udyog Hyundai Telco Daewoo Ford India Fiat India General Motors Honda Siel Hindustan Motors Total FY2000 250.000 100.000 50. Capacity The present production capacities is detailed in the table below.000 units in FY98 to the present 727. However. which were a part and parcel of car cost in the eighties.000 50.000 110.000 30. which will be available in the 800cc and 1000cc configuration.000 25.000 30.000 150.000 units in FY2000.000 130. This is still better than utilization levels the world over which stands at around 40%. This has also helped in reducing the average waiting period and premium on cars.
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. Therefore. This is expected to affect their ability to reduce prices in the future. by an Indian company. with manufacturers having to comply with Euro emission norms.warfare in the car industry. car manufacturers have sold their products at lowered margins. The luxury segment will see more new entrants namely Toyota of Japan. has at least 85% of its components 'Made in India'. This will also create a platform for upgradation of existing two-wheeler owners to four-wheelers. companies like MUL. 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. Skoda of Czech Republic and Proton of Malaysia in the years to come. Increased support through finance from auto manufacturers was quite evident in FY2000. Recently. The Indian passenger car 36 . A start has already been made by sharp reduction in prices of Daewoo 'Cielo' and Maruti 800. However. Lately. GM and Hindustan Motors have come out with new models to cover the present gap in the segment. the price of Wagon R was also lowered by MUL to face the intensifying competition.
After witnessing a downturn from FY90 to FY93. the Premier Padmini. car sales bounced back to register 17% growth rate till FY97. Brazil. The diesel version has a BMC engine. The Uno came to India after the Mafiosi had their fill with it. Africa. Its in the market since my grandpa learnt driving and at the time of its going to grave. Latin America inc. The saving grace is only that this Lancer is a contemporary model and not some. the Padmini was a completely made in India product.815 units as against 409. The entry of Maruti Udyog Ltd. the economy slumped into recession and this affected the growth of the automobile industry as a whole. As with HM products from the past. But again. The erstwhile Premier Auto Ltd. there's very little Indian-ness about the car. Except the ubiquitous Ambassador and the Premier Padmini there was not much moving around with an Indian tag. in 1983 with a so-called "peoples" car and a more favorable policy framework resulted in a growth rate of 18. The official mascot of the Indian political system. Of course everything is made in India now.6% in car sales from FY81-FY90. It being a good car and all. However. but the products are all borrowed from Italy. The Siena is a very contemporary model. The present day stunner from HM is the Lancer. which till a few months back was adorning showrooms throughout the country. Thus. the CAGR for the period FY96 FY2000 stands at 16. the Lancer is a borrowed from abroad product. the name isn't Indian and that's only the tip of the iceberg. Since then. FY2000 turned out to be a significant year for the industry in which it recorded volume sales of 638. The other pre-Cambrian relic. no longer exists. As a result car sales remained almost stagnant in the period between FY97 and FY99. 37 . What's this 'special' car for India. Ind is an acronym for India or Indian. the Triassic-era Ambassador has little Indian-ness in it. The design came from Morris Motors and the present petrol power plant and drive train are Isuzu throwaways. To start with.industry as we see today is relatively recent in origins.6%. a GoI JV with Suzuki of Japan. The nearest thing to it in the present is Ind Auto Ltd. with the revival in the economy. except maybe the name Padmini. but I always wonder why Fiat doesn't launch it in their motherland.951 units in the previous year. but do you call a tree your own if its roots are in someone’s courtyard.
churning out close to 300. good growth prospects are assured for the automobile industry. on Indian roads being Marutis.E. the company. Maruti.e. yet the company is nothing more than Suzuki India Ltd. the Ikon's platform is that of the Fiesta. Each of these sectors experienced rapid growth during the last three years Demand in these sectors is driven by industrial.Ford did take the pains to design an India specific car. i. So does the quest for an Indian car end with the Ikon. since its inception has changed the automobile scene in India completely. the company is American. 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. Therefore.A of Italy.D. 38 . Telco is a completely Indian carmaker with no major foreign collaborations. The engine technology had inputs from 'Moteur Modern' of France. So the only thing Indian about the car is the 'Josh' advertising gimmick. At last count it held a 64% market share in the passenger car market with four out of every five cars . In effect it was the case of an Italian body being wrapped around Indian mechanicals. No I don't think so. nothing else. This means demand for automobiles and hence for auto components. Their Indica was much touted as 'The Indian car'.000 cars last year. Starting with the official one. India is also the largest manufacturer of agricultural tractors. It's has been the number one manufacturer. but it was styled by I. individual and agricultural consumers respectively. The estimated growth will automatically emphasize the need for better transport infrastructure facilities. Frankly I would have preferred an Indian body wrapping an Indian platform. and. is bound to grow accordingly. the Ikon. Every year it rakes in multi-billion rupee profits. Secondly. First thing. motor scooters and the world's fifth largest commercial vehicle manufacturer. The increases have resulted from improved overall economic trends in India including large doses of foreign investment a more liberalized economy and higher productivity.
Performance. Uno. However. Diesel Indica. price is the main factor determining the choice of car. Accent. 144 in Malaysia. Hence. Santro.1% Contessa. cars are segmented on the basis of their size. 500 & Cielo.1% above City. Fuel Economy < 250 Uno. Option Matiz Lancer. the Indian car volumes remain small at just over 1% of the world market with penetration rates of approximately 3. Status Value. Medium 250-500 43. Opel Features. ‘000) the Segment M-800. 46. By international standards however. 118NE.Ambassador Price.9% Efficiency Ambassador Zen. Cars currently constitute approximately 12% of the total stock of personal vehicles in India. in India. Price. Esteem. 1800 ISZ. Omni. cars are segmented on the basis of price into three segments : Price Approximate Features of Range Main Models Market Share of the segment (Rs. Rising household income.World-wide. Astra. Premium Performance. increased urbanisation. 204 in Poland and 90 in Brazil. introduction of new models and availability of cost effective finance are the key demand drivers in the industry.7 cars per thousand people as against 24 in Thailand. 10. 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. The 39 .
40 .premium segment cars are mainly targeted at corporates or businessmen and are usually bought on consumer finance. Currently the economy.9%. The midsize segment witnessed an increase of around 115% in sales volume during the period April 1999-March 2000. medium and premium segments constitute 46.1% respectively of the market.1% and 10. 43.
Passenger Cars & MUV’s Annual Production FY 2003 TO 2004 in Nos MUV -16%. while passenger cars and utility vehicles have grown at a brisk pace of 28.6% respectively. However.5%. Within the passenger vehicle segment. However. the growth of MPVs this year is significant as it was (-) 15. this is against relatively low and negative growth rates in the previous years. 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. CARS – 84% 41 .6% and 27.2: Automobile Industry Performance during 2003 – 04 During the year 2003-04 the automobile industry has registered a growth of around 16. MPVs have grown at a lower rate of around 14.5 per cent in numbers and 24 per cent in value terms.7% in the last year. 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.4.
This has also led to increased penetration of multi-axle vehicles on our roads. Whereas. It has clocked over 30% growth rate in consecutive years. M&HCV segment has grown by 39. Commercial Vehicles Annual Production FY 2002 TO 2003 in Nos BUSES LCV 10% 41% 42 . 59251 multi-axle vehicles were sold.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. In percentage terms an increase of 67% per annum over a five year period. in the year 2003-04.5%. The growth rate of all commercial vehicles during the year 2003-04 grew by 36. The share of multi-axle vehicles during the same period has gone up from hardly 5% to around 40%.5% whereas LCVs grew by 32%. we are also witnessing fleet rationalisation in the country. During the year 1998-99 sale of Multi axle vehicles was 4539. With improved economic performance especially in the agricultural sector besides expansion of the national highways and expressways.
In percentage terms the growth during the year over the previous year have been almost 80% for passenger vehicles.000 and two & three wheelers have crossed three hundred thousand mark for the first time clocking around 3.000. Commercial vehicle exports have also increased to an all time high of over 17. over 49% for two & three wheelers and over 40% for commercial vehicles.TRUCKS Exports 49% The performance of the automobile industry in exports is also encouraging.33. Passenger vehicle exports have crossed the hundred thousand mark and clocked sales of around 1. 4.3: Indian Automobile Market 43 .000.30.
price plays the primary role in segmentation. At the bottom. The last segment is of premium car segment. the superminis. The Indian market. In India. Strictly speaking. the car will target the segment between two-wheelers and petrol/diesel based cars. The next segment.5-lakh cars. Executive cars embrace their bigger brothers -.3 falling in the bottom layer. the Zen as well as the Wagon R.The Indian market confounds global carmakers simply because of the way it is segmented. you have city cars' -.but because of price. and exotics. of course. US-based Amerigon and Bangalore-based Maini Group are negotiating a joint venture to manufacture an electrical passenger car. the BMW 7 series. The Maruti 800 and Zen fall in a class by their own -. though. automobiles are generally segmented according to platforms -that is chassis-engine combinations. sports utility.which includes all the other cars that would normally be classified as city cars in Europe.and are referred to as the sub-Rs 2. Hyundai Accent. Price plays a factor but only up to a point. Alto. Scooters India Ltd (SIL). the Tata Indica should fall in the super-mini category because of its specifications -. Consider first the segments in the European or American market. This venture represents a major 44 . Opel Corsa and Honda City 1.Jaguar XJ8. Above Rs 4 lakh and all the way up to Rs 10 lakh is the luxury car range.the BMW 5 series and the Mercedes E class. Daewoo Cielo. which includes cars like Mercedes Benz and BMW. the Hyundai Santro. In the West. Medium-sized family cars are bigger and include cars like the Opel Vectra and Peugeot 406. and the Opel Astra. Only a handful of cars are classified as true-blue luxury cars namely-. would take in cars like the Opel Corsa.5 and Ford Escort in the upper range. Ford Ikon. Compact executive cars are small but immensely prestigious and include the BMW 3 series and the Mercedes C class. And of course there are the niches like sports. Fiat Uno. the Ford Ikon. Honda City 1.75 lakhs. Above the superminis are small family cars -. Next come the budget minis -which would include cars like the Suzuki Swift (our own Esteem). Assembly from imported Completely Knocked Down (CKD) kits will start as soon as an agreement is finalised among the partners. is quite differently segmented. it competes in the same segment. Priced at Rs 1.which include the Daewoo Matiz.with Maruti Esteem.which include models like the Opel Astra and the Ford Escort. the Maruti 800. The next is the Rs 3-4 lakh segment -. It is loosely divided into two halves -.
lower than its nearest competitor the Greaves Garuda. consequentially. could erode its own base. which so far has only produced two. 45 . The vehicle has a 416 cc engine and is priced at Rs 83. so much so that in quality conscious markets such as Europe and America. Indian Automobile industry has become more competitive in the export market due to its technological and quality advances.1: Strengths of the Automobile Industry Low labor cost: India enjoys a comparative cost advantage in labour as compared to western countries. electrical parts. It also plans to introduce an electric three-wheeler model. Indian automobile industry is emerging as a major player judging by its performance. Its new product. suspension & braking parts among others. drive transmission & steering pats. Bajaj Auto has introduced its diesel three-wheeler in Hyderabad.000 (in Hyderabad). which is priced at Rs 85.manufacturing shift for SIL. into the Indian market. already in use in Nepal. a public sector enterprise.and three-wheelers. 5. India today exports: Engine and engine parts. Bajaj’s petrol three-wheelers already account for 85 per cent of the India market.000.
6 Availability of Qualified Engineers.2 6. 46 . Sr No 1 2 3 4 5 Country India Brazil US Germany Mexico Points.5 7. On a scale of 1-10.4 6. Skilled Manpower: India has vast pool of skilled manpower and qualified engineers among the largest in the world.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.4 6. 5.3 Reference: Competitiveness of Indian automotive industry Feb 2004.4 7. Sr No 1 2 3 4 5 Country Germany India US Brazil Mexico Points. 10 = high.6 6. Availability of Skilled labour.5 7. 1 = low. 8.5 7. 7.
The year 2002-03 has already seen a significant 65% 47 . Also.3: Opportunities for the Automobile Industry Global automobile companies are setting up manufacturing facilities in India. Not reached critical mass: Indian companies are in nascent stage and hence not able to cater to the requirements of OEM’s. Defect rates high: We have a higher defect rate about 10 times the world average.ancillary industry is of 2. many Indian automobile manufacturers have announced their plans to increase the export of vehicles from India.4 bn $ while Ford’s outsourcing budget is 86 bn $. railways which lead to higher logistics cost and lower reliability. Our auto. Poor infrastructure : Poor infrastructure like roads. ports. 5. 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.
Additionally. In my last year’s speech I mentioned about the need for a well thought out and clearly defined policy on emission norms. 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 Company on its part has intensified the anti-spurious operations by conducting several raids across the country with the help of local regulatory authorities. Anti-lock Braking Systems. augur well for the Company and the automotive sector as a whole. but also result in greater comfort and better drivability. The lack of any significant change in the labor law reforms also continues to be a matter of concern. etc. Technology is available to meet the advanced emission norms using gasoline and diesel fuel. there are also quite a few factors.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. Large quantities of spurious and fake products have been seized and legal action has been taken against those indulging in such activities. safety devices such as Air Bags. which act as an impediment. These technologies not only offer increased safety for drivers and passengers. This trend is expected to continue with more global OEMs sourcing vehicles from their Indian plants. It is now fairly certain that Bharat Stage II norms (equivalent of Euro II norms) will be implemented countrywide starting 2005. which I also dealt with in detail in my speech last year. It is important that this plan is implemented in time in the interest of a cleaner environment. 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. continues to be a worrying factor as it directly affects our market share. While there exist many opportunities for growth in business. The spurious and reconditioned goods market. 48 . The Company is also continuously educating the users about the benefits of using genuine spares in place of spurious and reconditioned spares. Bosch and many other companies have proved this worldwide.
Hindustan Motors (manufacturers of Ambassador and Contessa cars) is in trouble due to the declining sales of its car’s. The growth in automobile sales has been impressive for the past ten years since liberalization began. Financing has become so easy that an automobile is within every aspirant's reach. 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. the Indian Automobile Industry faces some tremendous opportunities and also great challenges. 49 . to suit every requirement and budget. However. Automobile products of India (manufacturers of Lambretta scooters) and Ideal Jawa (manufacturers of Jawa and Yezdi motorcycles) have closed shop.4: Challenges for the Indian automobile industry As we move into the new millennium. as most customers prefer the newer models available in the market. Some of the older manufacturers like Premier Automobiles (manufacturers of Premier cars). the Indian customer has been presented with a wide range of choices in automobiles. 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. 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.5.
Since Alcohol is a byproduct of the Sugar industry (of which India has the worlds largest). this will increasingly become an important selling feature. A number of Japanese and Korean companies have been following this strategy very successfully. which is to build vehicles that are considerably more fuel efficient and less polluting. Ford and Daimler Chrysler will almost certainly import vehicles from their large portfolio of models and makes. which hitherto was not permitted. The second opportunity is to become contract manufacturers for overseas companies. Gasohol has been very successful in Brazil. Telco. The foreign manufacturers such as GM. The third opportunity is to overcome the vulnerability of the automobile market to oil prices by designing vehicles. Even a small percentage reduction in the consumption of petroleum per vehicle can make a big difference to the balance of payments. as are Mahindra. The challenge before the industry is to figure out the strategy for survival and growth. Recent reports suggest the government is exploring the possibility of introducing Gasohol. but this will mean the companies will have to invest more in Research and Development of new models with better features. come April 2001. under the WTO agreement. Daimler Chrysler and more recently Daewoo. Hindustan Motors is said to be considering this option. Even Maruti despite its foreign 50 . One way to achieve this will be to go for exports in a big way. 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. although how competitive they are in terms of price remains to be seen. The overseas markets will have to be exploited more aggressively. India will have to permit import of fully built automobiles. further segmenting the market into niches.To add to the problems. which can offer lower fuel consumption. which is a mixture of Petrol and Alcohol. With growing awareness among the public about pollution and the effective campaigns carried out by the NGO's. Maruti is already exporting vehicles. 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. this is a very logical step that should have been taken many years ago. The industry must focus its R&D efforts in line with the global trends.
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. They will also need to assist government agencies in better road design and in building of multilevel parking lots. India's vehicle density is very low and if we have to achieve those density levels. In terms of the world averages. this will become a major bottleneck. The industry will need take initiatives firstly to train all drivers in safe driving and proper road discipline and manners. 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 . The Challenges External Level : Integrating into Global Supply Chains WTO – Multilateral trade regimes FTA’s (i.affiliation was caught off guard when the Supreme Court finally ruled that all new vehicles should strictly adhere to the Euro II norms. The inadequacy of road infrastructure in India is well known.e. 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 industry can look forward to a bright future. However in the industry's interest care must be taken to see that we also achieve the safety and convenience levels of using automobiles. 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 .
govt.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. • Corpus for R& D & expansion: Since most of auto ancillary companies are up coming their range of operation is limited to a few products. • Auto expo zones: On lines on software technology parks.5.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. 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. • Cutting down R. Industry : • Marketing and Advertising in potential markets: 53 . should establish export zones of autoancillary industries. • 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. In order to encourage these companies to venture into new product categories Government should allocate Soft loans.
ACMA in collaboration with CII or FICCI should organize Trade fairs showcasing Indian Auto ancillary industry both in India and abroad. 54 . • Acquiring Auto ancillary companies in potential markets: Acquiring companies in overseas market gives a direct entry in that market to Indian companies. 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. Carl Dan Peddinghaus GmbH (CDP).g. • R & D spending: Industry should target at allocating at least 5 % of their revenues on R & D expenditures for achieving cutting edge in technology. For e. Bharat Forge acquired one of the largest forging companies in Germany. • Leveraging Software skills • Culture change: Auto ancillary industry should adopt concepts like six sigma rather than continuing with post Morton analysis.
General Motors bought over the stake of Hindustan Motors in its Indian car venture. Mahindra & Mahindra pulled out of car joint venture with Ford. However. The attraction for these companies was the largely untapped Indian market.9mn. 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. This resulted in price wars and thereby affected the expected margins.8mn by end2004. but the total passenger car sales is expected to be around 0. While many of these conglomerates have turned out to be mutually beneficial few tie-ups weren’t as successful. The installed capacity for passenger car production in India is likely to reach around 1.1: Competitive Scenario The industry witnessed radical changes and entered a competitive phase with de-licensing and liberalization in the 1990s.6. not giving in to multinationals. The consolidation of the automotive vehicle industry is likely to have serious implications on the automotive component industry too. But the very fact of Indian company’s 55 . Indian players are trying to maintain their hold on the Indian market. Most of the foreign companies entered India using the joint venture/collaboration route. This explains an over-capacity of around 50% as compared to the global over-capacity of around 30%. especially in the mid car segment. too. The global automotive industry is currently undergoing consolidation phase and the repercussions of this consolidation are likely to be experienced in India. these companies over-estimated the market in the short term and set up larger than required capacities. Mercedes Benz has decided to operate independently after suffering severe losses with Indian partner Telco. For example.
reliance on foreign partners for technology is likely to drive the trend of collaborations followed by consolidations. on the global plane. in the last few years especially. Bentley. BMW all set to venture in the Indian markets. with tariff at half that of cars. We take a look at the key factors that are vital for gaining a stronghold in such a competitive scenario.It is already a level playing field for companies setting up shop in India. There is a need for a level playing field to bolster Indian auto industry. infrastructure and labour legislation. However. Though the Indian industry. Even in the case of imports. 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. in terms of external factors such as cost of finance. Foreign companies are now all over the Indian market. 56 . entry barriers in commercial vehicle industry are among the lowest. things are different. has gained considerably in internal efficiencies. Audi.
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. Just-In-Time Delivery & Logistics Indian Auto Companies have proven capability to supply on JIT basis out of Warehouses situated near the Customers 57 .6.
3 mn cars in 1999. as compared to 17. The car industry generates large amount of employment opportunities in the economy. Renault-Nissan. For example in the US. transport and insurance. The trend suggests that industry volumes may grow by just 2% or around 10 mn vehicles per year. Canada and USA brought about the major increases. However. Adequate Warehousing support and onsite Engineering support 7. Daimler- 58 .1: Global Scenario The passenger car segment has emerged as a major driving force for upstream industries like steel. plastics. the international passenger car industry has been witnessing an over capacity of more than 30%. rubber. The USA and Japan are the leaders with around 42% of the total world market. Already signs towards this are being observed as the phenomenon of mergers catches on. aluminum. hence. If this situation continues for the next few years the world car market may witness shakeout in the near future. The recent mergers in the international car market are Ford-Volvo. and electronics and down stream industries like advertising and marketing. Most Indian companies have arrangements with major Logistic Providers for JIT Supplies.4 million cars sold in 2000. Growth has dropped due to the increasing levels of saturation in the larger car markets of the world. The largest car market .66 mn in 1996 to an estimated 48. iron. This will enhance the useful life of cars and. Japan. which contribute to 53% of the world's car production. slow down growth in sales.the US market expects car sales to decline 8 to 9 per cent to 16 million cars in 2001. glass.The world car production has increased from 44. 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. every sixth worker is involved in the making of an automobile. since the last two to three years. Worldwide the trend is towards ensuring that one's products are superior in terms of quality.
Automakers that have been enjoying a generally prosperous spell would have to rethink on the way vehicles are designed. of world car production. the car industry is highly capital-intensive and vast amounts of money are being spent on R&D. it is expected that more international players will work closely to bring about operational efficiencies. manufactured. Already. 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. A few instances are Daimler Benz's tie-up with Chrysler of the US. By nature. Moreover. respectively.Chrysler. With global consolidation in the car industry. Strategic tie-ups. bigger capacities among players means lesser fixed costs per car produced. they can derive greater benefits from their R&D efforts. technology-sharing and the offering of equity stakes is inevitable. Among the top car manufacturing companies General Motors and Ford Motors group of USA lead with a contribution of 15. Car makers would now have to think in terms of a new customer focus and provide better financing and servicing. players like General Motors Volkswagen and Toyota have begun to re-examine their dealer relationships and pricing strategies. Profits. which are under pressure due to wafer thin margins will be boosted due to greater economies of scale. 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). 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. 59 . mergers and acquisitions have become the talk of the day. With the players getting together to produce more technologically superior cars. Volkswagen and Toyota stand third and fourth with more than 9% contribution each to the world car production. distributed or sold. Ford's acquiring of Daewoo and tie up with Volvo Car Corporation and Renault acquiring a stake in Nissan.6%.8% and 11. 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.
Already Maruti. better quality and prices and easy financing options . If GM were to acquire Daewoo in Korea. India's automobile market will be thrown open to imports of completely built up vehicles. Mahindra and Hindustan Motors unless they rethink their strategy. which hitherto was prohibited. The situation could become very difficult for the purely Indian automakers such as Telco. one can expect to see a dramatic change in the auto market. Maruti has set up a separate financing unit in association with banks. With the international acquisitions and alliances. but cannot enter full scale manufacture due to the small market sizes. Clearly the customer is in for some good times with a wide range of models to choose from. Clearly exports will be the big opportunity for Indian automobile companies if they can control costs and deliver good quality output.In India. Availability of easy financing options has been a major reason for the dramatic growth the automobile market has witnessed in recent times. GM has one of the largest financing companies in the US and can easily bring them into India should it so decide. 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. the car market has become extremely competitive and come April 2001. 60 . Hyundai and Ford as well as Mercedes Benz have started exports in a small way and this can grow. Already Daimler Chrysler and Ford are contemplating introducing new models in India from their various associate companies through their local subsidiaries. Majors like TELCO and Ashok Leyland are already exporting their products in reasonable volumes. then GM would be in a commanding position in India with its alliance with FIAT and Suzuki motors as well.a far cry indeed from the days when one had to book a Premier car and wait for years after paying an advance. 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.
Natural follow-thru is global sourcing. Most Global OEMs have Indian operations with global platforms and world cars. & Plans 500 Mill USD outsourcing Renault: Sourcing Truck Parts 61 .7.2: Key Driver – Global Business Step 1 : CKD/SKD Assembly Step 2 : Localisation Step 3 : Future already on horizon .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.
One old assumption has been vindicated -. The battle royale in the Indian car market has entered the next phase. S. Both the Indica and the Matiz had to upgrade their engines in less than one year after launch. Kim. Maruti found out that price is no longer the most important factor in winning car battles.500-crore Indian automobile market. Y. The four men are peers.that price does matter. The really big volume gains will come from wresting market share away from rivals rather than because the market itself is growing exponentially. the Honda City had to bring in both a new body and a more powerful engine.G.that over 80% of the Indian car market is still confined to the small. they control almost 80% of the Rs 30. 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.S. In 1999-2000. From now on. Between them.DC: exported Euro 70 Mill to its subsidiaries abroad Two Chinese Truck OEMs: Sourcing Drive Trains 8: Different players in Automobile industry Jagdish Khattar. 62 . and Hyundai had to start offering a new variant with the power steering option barely a year after it hit the market. As the dust and excitement of the dozens of new models introduced in the past one year settles down. Awasthi. the car market bounced back from the recession by showing a 55.83% growth! But now. Each has unequivocally established himself as one of the winners in the first round of the car wars. not the cake itself to any manufacturer. 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 winners have pulled way ahead of the also-rans. no one expects the market to grow by more than 10-15% per annum. sub-Rs 4 lakh models. Ratan Tata. Daewoo's Awasthi admits candidly that he learnt precisely the opposite lesson -. And those mid-size and bigger models can only provide the icing on the cake. the battle is expected to get more vicious.
The company reached a total production of one million vehicles in March 1994 becoming the first Indian Company to cross this milestone. which were available at that time.20. Its cars operate on Japanese technology. The models.efficient.1: Maruti Udyog Ltd. 63 . The sales figure for the year 1993 reached up to 1. They started with their model Maruti 800 which was very popular at that time and still its major cash cow. This was from where Maruti took over.96. adapted to Indian conditions and Indian car users. Maruti collaborated with Suzuki of Japan to produce the first affordable car for the average Indian. which has increased the total production capacity to over 3.00.000 vehicles per year. fuel .000 units in the year 1998-99. 4 billion expansion project at the current site.cost vehicles. Customers were interested in having some different types of models with some fashionable looks. To fend off growing competition.000 cars for the decade ending 1983. At this time.000 to 40. It has further plans to modernize the existing facilities and to expand its capacity by 1.000 vehicles per annum. the Indian car market had stagnated at a volume of 30. Nineteen years back Maruti introduced the first small car in the Indian auto market. Maruti established its monopoly over Indian auto market India's largest automobile company. Maruti has recently completed a Rs.00. December 1983 heralded a revolution in the Indian car industry. The total production of the company will exceed 4. were Premier Padmini and Ambassador.8. Maruti entered the Indian car market with the avowed aim to provide high quality. That was the perfect time to enter into market and Maruti took right step to introduce its different models.820. It crossed the two million mark in 1997. low . Maruti comes in a variety of models in the small segment.
910 39.150 28. Zen Baleno.947 51.972 9.838 2003 10.838 units in April 2004.526 176.296 1. Versa Alto. WagonR and Zen registered a 100% growth from 9.150 in April 2003. a rise of 31% yoy. In the multi utility vehicle (MUV) comprising Gypsy and Vitara.668 952 310 25.561 59.6% 38.4% yoy from 28.6% 37. it sold 406 units in April 2004 from 310 units in April 2003.2% 99.9% 31. Models of MUL 64 .313 in April 2004 from 952 in the same period last year.097 units.816 19. The A2 segment comprising of the Alto.668 units in April 2003 to 19.741 3.816. The A3 segment has grown by 38% yoy to 1.173 3.097 4. Sales for April 2004: Segment A1 C A2 A3 MUV Domestic Export Total Sales Models M800 Omni. This is lower compared to some of its other segments.643 3. WagonR. Esteem Gypsy.3% 21. This includes 2.Maruti registered sales of 39.972 in the same period last year to 4.313 406 36.793 vehicle units in April 2003.3% yoy from 10.4% April'03 – March'04 167. The C segment comprising of the Omni and the Versa has shown a 21.6%.928 2. up 38.555 420. decreasing by 7. mainly driven by rising Alto sales.0% -7.910 units of exports compared to 3.741 units in April 2003 to 11. Vitara April April % change 2004 11.296 units.175 472.132 14.2% growth yoy from 3.0% 44.122 The A1 segment has grown by 3.793 3.
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. But despite its great start. at a highly competitive price. Hyundai proved that it could get its value-price equation consistently right across different segments. Though the latter moved quickly in a damage-control exercise. it 65 . 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 -. Alto Maruti 800 Zen Wagon R Omni Esteem Baleno 8. 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 was a mistake that rival Matiz capitalised on once Euro-II pollution norms were announced for the metros. while Hyundai Santro was harping on the fact that it was a new generation car. Hyundai made two mistakes. The two miscalculations that Hyundai made? First. And when it launched mid-size Accent some time later. Hyundai got everything right because it got the value-price-technology equation almost perfectly right from day one.2: Hyundai: Can The Dream Run Continue? Hyundai has become the undisputed number two in the Indian auto market.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. and the only one -. the Santro did lose a bit of its sheen. it miscalculated demand for its cars. The result: when demand peaked for the Santro. it hadn't brought its latest engine technology to India.
Daewoo started out on a disastrous note by introducing the Cielo at a high price. it doesn't have any other small car in its armoury. which is primarily a small car specialist.3: Daewoo Motors India: Life After Death Daewoo should have been dead in the Indian market a long time ago.20 lakh vehicles per annum. one year ahead of what was initially planned. 8. its parent went bankrupt. Even in the small car segment. Hyundai can only introduce bigger cars in the Indian market either from its own product range. An additional investment of $400 million will help expand capacity from 1. which it took over last year. its entry was ill planned. 2001.67 lakh while the bigger Hyundai Santro was selling its base 66 . Buyers had to wait for three months to get a Santro after booking it. The Matiz was introduced with a sticker price of Rs 3. It launched the Matiz in a single variant and at the highest price in its class. It lacks the sheer money power and product muscle to keep fighting the Fords and GMs in any market. In India. And if Ford does take over Daewoo Motors. Unlike Suzuki. the big worry for Hyundai is that other than the Santro (the Atos in Korea). the Nexia. Hyundai is moving fast to sort out its capacity problem. 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. Hyundai is looking a bit vulnerable now because globally it is a minnow in the car market. or those of Kia Motors. This expansion is likely to be completed by December. That apart. Work will soon start on the second phase of its Sriperumbudur car project. then slashing its price to gain volumes. and then introducing a higher-priced Cielo-clone. Shortly after it invested over $1 billion to build up a fully integrated plant with a capacity to roll out 1.2 lakh cars to 2 lakh cars per annum.was in no position to offer the car off-the-shelf like its rivals. Hyundai's number two position in India could be seriously under threat. ahead of schedule.
unlike its rivals. it moved fast to introduce lower-priced. non-AC Matiz SS.98 lakh. Ford can never dream of playing the numbers game. it introduced new variants. in the case of the Matiz. stripped-down variants that got the pricevalue-technology equation correct. 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. But these problems could vanish overnight if Ford takes over Daewoo. the Santro and the Indica. Given that the car was considerably smaller than the Zen. 67 .model at Rs 2. before slipping to 3. More importantly. The FordDaewoo combine could be the strongest challenger to Maruti here. With no small car in its portfolio. Daewoo image has got a further boost. First. Despite the success of the Ikon. and saw its volumes rise 165% to 1.500 in July. 2000. 2000. In May. Daewoo and Matiz.996 from the previous month's 754. 1999. Ford's share in the total passenger car market will still be less than 5% this year. Ford could become the number two player in Indian market.853 in March. It touched a peak volume of 5. And now that the Matiz has been voted the best small car in the world by several prestigious motoring magazines worldwide. Two things have helped Daewoo bounce back though. the Daewoo Matiz almost sank. including the stripped-down.
with the diesel engines being pushed hard. When the Indica hit the market.000 from the current 120. the Telco strategy is to tap the niches first. A year down the line.000 cars anticipating that it will get the demand. 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. Similarly. the consensus opinion was that Telco had goofed up again.. almost everyone grudgingly admits that the Indica has been a success. The Indica was riddled with quality problems. it could be the first casualty in this round of the 68 .6 billion to develop. The Indica cost $400 million from start to finish whereas the Hyundai Accent is said to have cost $1. It is ramping up capacity to 160. The Indica. forget passenger cars. It is a smart strategy as it avoids taking any of the big guns head on. Telco has already introduced the premium Safari. which again focuses on a small niche. But Telco is also the weakest player in the small car market -. 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 the flip side is that all global giants can amortise the costs of development by selling the same car across different world markets. And in the SUV market.4: Telco-The HomeGrown Challenger Telco did not boast a great reputation for developing even world-class commercial vehicles.and unless it keeps springing surprises.8. Telco knows it has to take on its rivals in the mainstream markets as well. But in the long run.At the moment though. Telco can't afford to capture. was clearly aimed at a segment none of the rivals was addressing.
At present. it was hived off to Hyderabad Industries Ltd.K. HML further diversified its activities to include earth-moving equipment such as dumpers. In the passenger car segment. HML also entered into collaboration with OKA Motor Company of Australia to produce custom-designed rural transport vehicle. it shifted its activities in Uttarpara near Calcutta and set up facilities to manufacture cars and trucks. cranes. a project was undertaken to produce HCV’s at Vadodara. HML set up a plant at Hosur in Tamil Nadu for manufacturing heavy-duty transmission required for earth moving equipments. General Motors India Ltd.5: Hindustan Motors Hindustan Motors Ltd (HML) is the oldest passenger car manufacturer in the country. Over the years. In 1948. is the flagship company of the C. HML commenced the production of petrol engines in collaboration with Isuzu Motor Company. In 1987. in FY92. the company has diversified into earth moving equipments and power products. presses and steel products under the heavy engineering division (HED). It also has a small presence in the multi-utility vehicle and the heavy commercial vehicle segments. Other than the automotive sector. A part of the assets was later sold to a JV between GM and HML. front-end loaders etc by setting up a plant near Chennai. It has recently tied with Mitsubishi of Japan for manufacturing the ‘Lancer’ range of cars. 8. the company has entered into a technical collaboration with Mitsubishi of Japan for the manufacture of the ‘Lancer’ car. With the division becoming a loss making one. The later is generally manufactured for exports. HML has diversified into heavy engineering equipment like excavators. 69 . Commercial production of the car started in October 1998. the company has the well known ‘Ambassador’ and ‘Contessa’ models. Japan.2% in the car segment. a group company.car battles. the company has a market share of 4. HML. 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. In 1985. In 1986. Recently. incorporated in 1942. In 1971.
formed a small shipping company named the Tsukumo Shokia.6: Mitsubishi Motors In the early 1870s. business ventures in addition to shipping included heavy industries with ship building at its helm. banking. the company quickly expanded into other fields of endeavor and became one of the largest combines in pre-world war II Japan. By the end of 1945. as Japan emerged from over 300 years of feudal isolation.Models of Hindustan Motors Ambassador 1800 ISZ Ambassador 2000 DSL Ambassador Nova Diesel Contessa motors 8. Mitsubishi’s epoch making vehicles. trading. a young entrepreneur. the root of the combined Mitsubishi Companies of today. Yataro Iwasaki. The history of Mitsubishi as an automobile manufacturer dates back long before the Motor Vehicles Division of Mitsubishi Heavy Industries Ltd. Japan’s first series production 70 . chemicals and many other. A family owned and directed business. which rolled off the assembly line in 1917. mining real estate. was incorporated as Mitsubishi Motors Corporation in 1970. were the Model-A. Following several name changes this company became Mitsubishi Mail Steamship Company in 1875.
The combination of high technology and classic build quality continues to woo customers the world over. Handling and 71 . Mitsubishi Motors brings the most contemporary technology on Indian roads. The Lancer scores superbly in all but the Ride. but it has also proved that its mid-size car is the one customers like or appreciate most. Mitsubishi provided you with a comfortable and intuitive environment to explore the Lancer. There are useful tools to make your buying process easier. the ship and aircraft-manufacturing arm of Mitsubishi produced vehicles. The Lancer has an impeccable rallying pedigree and has proven it's mettle in the toughest conditions. In early years. and one of the very few that can boast a vehicle lineup which extends from mini cars to heavyduty trunk buses and other specialized commercial vehicles. Not only has HM cleared any doubts pertaining to the quality of its locally-made Lancer. the Mitsubishi Model-A were the pioneers of vehicles in Japan. Mitsubishi Motors ranks as one of the largest vehicle manufacturer. The all new Mitsubishi Lancer comes to you from two automotive giants: Hindustan Motors and Mitsubishi Motors. There's virtual reality so you can view the car as you would in one of our showrooms.passenger cars. Therein the provenance of Mitsubishi Motor’s engineering excellence and the resultant reputation for outstanding reliability and all around performance of its vehicles. the project brings together their formidable expertise and experience to provide you with a whole new automotive experience. 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. Today. A technical collaboration between the two. Always the innovators.
Models of Mitsubishi MITSUBISHI MONTERO SPORT 3. where customers find comparatively more problems. No wonder then that four out of five STU buses in the Indian metros come 72 . Ashok Leyland's range of dedicated buses answer the special needs of urban mass transportation. 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.7: Ashok Leyland For five decades. These decades have been punctuated by a number of technological innovations by Ashok Leyland that went on to become industry norms.Braking categories.5XS Montero Endeavor Montero sports Outlander Lancer Evolution Lancer Eclipse Eclipse Spyder Galant Dimant 8. multi-axled trucks and a host of innovations in buses. the Honda City a substantial lead. The Lancer wins hands down in the APEAL study too. Ashok Leyland was the first to introduce full-air brakes. as a result of the stiffened and raised suspension. scoring a full 33 points more than its closest rival. Ashok Leyland has been a major presence in India's commercial vehicle industry.
Cargo brought with it.rolled out on Indian roads. when international technology changed the way India perceived trucks. Ashok Leyland was born. 6 billion factory at Hosur were built with IVECO'S global plan in mind.000 vehicles we have put on the roads have shared the additional pressure placed on road transportation in independent India. the Non-Resident Indian transnational group and IVECO Fiat SpA. In 1950 started assembly of Leyland commercial vehicles and soon local manufacturing under license from British Leyland. a new set of values and an unmatched basket of benefits. In the populous Indian metros. Some of them like double-decker and vestibuled buses are unique models from Ashok Leyland. assembling Austin cars at the first plant. the jump is equally dramatic: from 25% to 80%. at Ennore near Chennai. These years have been punctuated by a number of technological innovations which went on to become industry standards. Ashok Leyland buses carry more people than the entire Indian rail network. in 1954. four out of the five State Transport Undertakings (STU’s) buses come from Ashok Leyland. Ashok Leyland buses carry more people than the Indian rail network.1994 was also the year. The year when a new breed of world class trucks . Since then Ashok Leyland has been a major presence in India's commercial vehicle industry. At 60 million passengers a day. The 375. Ashok Leyland embarked on a major product and process technology upgradation to world-class standards of technology. Ashok Leyland vehicles have built a reputation for reliability and ruggedness.from Ashok Leyland. the Company was rechristened Ashok Leyland. The share of goods movement by road rose from 12% in 1950 to 60% in 1995. near Bangalore. With British Leyland participation in the equity capital. They carried the name Cargo. The 73 . In passenger transportation. part of the Fiat Group and Europe's leading truck manufacturer. At 60 million passengers a day. This tradition of technological leadership was achieved through tie-ups with international technology leaders and through vigorous in-house R&D.technologically superior and eco-friendly . From our state-of-the-art manufacturing Plant at Hosur. In 1987. the overseas holding by LRLIH (Land Rover Leyland International Holdings Limited) was taken over by a joint venture between the Hinduja Group. In 1948. Ashok Motors then. ushering in a change Cargo and the state-ofthe-art Rs. when independent India was one year old. tailor-made for high-density routes.
Hosur plant servers as a world-class manufacturing base for IVECO supporting its extraEuropean markets. 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. Committed to Total Quality Management. it meant retaining its technological edge against potential global competition. The Cargo range of trucks meets contemporary emission norms and have gained acceptance internationally. Ashok Leyland reached a milestone in 1993 when it became the first in India's automobile industry to win the ISO 9002 certification. Besides fully built vehicles exported to many markets. 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 . The more comprehensive ISO 9001 certification came in 1994 and ISO 14001 certification for all vehicle manufacturing units in 2002. Ashok Leyland's export turnover touched Rs. To Ashok Leyland.1. East Africa and Egypt from SKD/CKD packs exported from Hosur. These are major milestones in the company's TQM journey.5 billion in 1997-98. the latest version of QS 9000. Ashok Leyland exports to over 40 countries. In the journey towards global standards of quality. Cargo is locally assembled in South Africa. A recognized trading house.
the widest amongst all new LCV manufacturers and has made it lead the indigenisation of hi-tech components. 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.. Seychelles Syria and Jordan. Ghana. Tanzania. by Punjab Tractors Limited in technical collaboration with Mazda Motor Corporation. The Company is in the manufacture of Light Commercial Vehicles like Trucks. Dist. Japan.8: Swaraj Mazda Swaraj Mazda limited. Rwanda. Zambia. Japan and Sumitomo Corporation. Hosiarpur. Police Personnel Carriers. Punjab and has a dealer network of about 128 dealers spread throughout the country. The company has made improvement in product-mix and made wider 75 . The Company has laid emphasis on Research & Development and thus made the range of Company’s product variants. It exports to countries like Nepal. Kenya. Water Tankers and Special Vehicles. It’s factory is located at village Asron. Ambulance. Bangladesh. formerly known as Swaraj Vehicles Ltd. Ivory Coast. Swaraj Engines and Punjab Scooters are its associate companies. Buses. was promoted in 1983.
76 . school buses etc. It has achieved progress towards compliance of Bharat State-ll emission norms. SML has stayed ahead of competition with respect to cost efficiency and product customisation. 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. Against odd industry condition and performance.market segment coverage. In the passenger segment. The happier component of this growth has been the improvement in product-mix as also the wider market segment covered. powerful engine and higher payload. Swaraj Mazda has been able to achieved a sale of 1. privatizing the passenger segment and replacing demand. for implementation in the National Capital Region and other 3 Metros. the differentiation is in terms of end use rather than the gross vehicle weight. which is gaining increased acceptance in the market. an improvement of 33% over previous fiscal. meeting the regulatory requirements. 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.302 vehicles an improvement of 33% over previous fiscal. 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. The Company has introduced the CNG bus in the National Capital Region and also the new `Sartaj` model in the 5-ton range. covering services like ambulance. The Company introduces the CNG bus in the National Capital Region and also the new `Sartaj` model in the 5 ton range. Swaraj Mazda has been able to achieve a sale of 1.302 vehicles. SML products caters to intra-city transport for short haulage. The happier component of this growth has been the improvement in product-mix as also the wider market segment covered. post office delivery vans. 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. Against odd industry condition and performance. SML has products like Super. SML is planning to grow by making structural changes in the industry.
540 10.007 units of the Scorpio model compared to 1. It sold 496 LCV units compared to 431 LCV units in April 2003 and 1.10: Tata Motors 77 .971 units during the same period last year registering a 39% yoy growth. which grew by almost 85% yoy. Utility vehicle sales included 2.16 15.604 units last year.309 496 1. 8.235 during the same period last year.540 threewheelers from 833 three-wheeler units in April 2003. The LCV segment showed a 15% growth compared to last year.08 84. growing by 43% yoy from 7.235 yoy (%) 39.971 431 833 7.99 8. however the company saw a huge growth in its threewheeler business.87 42.345 units in April 2004.345 April 2003 5. Segments UV LCV Three-wheelers Total April 2004 8.9: Mahindra & Mahindra M&M sold 10.309 utility vehicles were sold in April 2004 as compared to 5.Models of Swaraj Mazda 4 WD BT Swaraj Mazda premium Swaraj Mazda fire fighter Swaraj Mazda prestige Trunks Swaraj Mazda Dual cab 8.
CV segment Commercial vehicle sales at 12. Volumes Domestic Exports Total April 2004 24.026 vehicles from 14.2% yoy.975 units and light commercial vehicle sales showing a growth of 62.5% yoy at 4.050 April 2003 4.24 Medium and heavy commercial vehicles sales grew by 76.54 71.026 935 24.530 2.1% yoy at 7.037 yoy(%) 76.Tata Motors registered a 57.037 units in April last year growing by 71.966 units in April 2003.7% increase yoy in total sales at 24.966 863 15.075 12. compared to 15.829 yoy (%) 60.829 units in the same period last year.961 units in April 2004.69 The company exported 935 units in April 2004 as compared to 863 vehicles in April last year. Passenger cars The passenger car business reported total sales of 11.5% yoy at 24. The company's sales in the domestic market increased by 60.3% yoy growth.075 units.961 April 2003 14. 78 .34 57.976 vehicles in the domestic market registering an increase of 51% over April 2003.54 8. which is an 8.050 units compared to 7.975 4.05 62.507 7. Segment M/HCV LCV Total April 2004 7.
79 .002 units. International standards are also kept in mind while producing these products. showing a 43.723 units. Sumo sales grew by 48% and Safari sales grew by 16% over the April 2003.9% yoy at 2. Utility Vehicles Utility vehicles registered a sale of 2.1: Automobile Fashion Automobile Accessories India has a good network of manufacturers of Auto accessories spread all over the country.4% increase as compared to the same period last year.Indica sales recorded a 43.251 units. while Indigo sales grew 84.3% growth yoy at 7. 9.
Automobile Finance The availability of finance at lower interest rates. CAR AC PARTS. 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. Automobile Services This is a section where the buyers and sellers meet. Car AC Condenser. Financing schemes varies from Margin Money Scheme. stepped schemes and as varying as balloon schemes. Car Cooling Coil. Automobile Accessories such as Wheel Caps. FLCD Kit and Car Batteries are available in India. Automobile Insurance Taking insurance cover for your vehicle is a must especially in Indian roads. Car Care Products. Businessmen and professionals can treat the interest amount as a business expense and avail tax deductions against the depreciation of the Car. Car AC Hoses. There is always the chance of your brand new vehicle hit by someone who mistakes a highway for space. 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. early in Life. Insurance can pay for your financial loss. Auto technology 80 . Fog Lights. have made car purchase an affordable option for even young executives. Sellers can place details of their products and buyers can specify details of their requirements in this section. Car Speakers. Car Reciver Drier. The interest amount can be claimed as business expense. There are various insurance schemes available in India.Best quality materials are used so as to meet the international standards. There is danger at every corner when it comes to Indian roads.
This is why today consumers in all vehicle segments have grown cautious about the quality of fuel and lubricants that they use. But what keeps them running? It is actually the fuel that keeps it running. engine oil. These include fuel. Or let's put it this way. It won't be an exaggeration to term these as the lifeblood of your favorite automobile. the engine. besides the shapes. Here. the fuel injection system. combine to make up a vehicle. while big brands are spending extensively on positioning their products as 'guards for your engine'. tyres etc. we give detailed explanations on the different systems and sub-systems that go in the making of an automobile. man's quest for automotive mobility led him to experiment with various kinds of vehicles. Each works on disparate principles. yet collectively. it is the technology behind them that has transformed the automotive landscape. and those that are talking its place. Different systems like the engine. but seldom know the mechanics involved. We present a list of such and other consumables that will aid you in looking after your vehicle. we sure have come a long way. Since the invention of the wheel. what? Of course they do. The environment factor is the latest to hit the market and has forced manufacturers and consumers alike to make and use environment friendly consumables. It would need only one of the many subsystems to dysfunction for the entire automobile to come to a halt. Unbranded lubricants and fuel from unauthorized sources is a complete no-no. it's a never-ending driveway. We drive our cars and our bikes. Vehicles that have used diverse technologies to make them function. From the steam .driven engine to the jet propelled aircraft. Read on about those that are being phased out like the carburetor. it is on them that the performance of the vehicle depends. Same is the case with the other products like battery. and various other lubricants that are responsible to keep a vehicle 'alive'.The drive is a long one. 81 . electrical. And of course. the axle. which account for the running expense of any vehicle. Auto consumables What are the constituents that keep your vehicle moving? Is it the wheels. cooling etc.
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.
as they will be offered technologically superior products at better prices and terms and conditions. • What will also drive car sales is the wide availability of finance schemes by a variety of banks and FI's. some countries in the region have witnessed cumulative falls of 70% this year. the action is shifting to the mid-size car segment. hence. Worldwide • the trend is towards ensuring that one's products are superior in terms of quality. India will emerge as one of the leading car sourcing point in the Indian subcontinent. Growth has dropped due to the increasing levels of saturation in the larger car markets of the world. This will enhance the useful life of cars and. In Indonesia record sales 85 • . According to EIU estimates. But the customer has a risk of model discontinuation as a result of shake-out expected in the industry. The coming in of Euro III and IV norms will also increase scrap page rates. 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. The South-East Asian crises has been a dampener to the collective fortunes of various carmakers worldwide. • 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. Consumers will be the beneficiaries as a result of marketing war. slow down growth in sales. • • In view of expected surplus in the domestic market. 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.• With developments in the small car segment acquiring a degree of stability in terms of price competition.
9. distributed or sold.reported in 1997 are not expected to be matched until 2005. players like GM. In Thailand. hiring and returnees) 86 .000 this year. A few instances are Daimler Benz's tie-up with Chrysler of the US. 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.4: Entry Strategies for MNC’s •FDI •Joint ventures •Foreign and local buyers •Licensing •Sub-contracting •Informal means (eg. • 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. mergers and acquisitions have become the order of the day. Already. • Strategic tie-ups. Carmakers would now have to think in terms of a new customer focus and provide better financing and servicing. Ford's acquiring of Daewoo and tie up with Volvo Car Corporation and Renault acquiring a stake in Nissan.000 units per year to 125. the market for cars and commercial vehicles is expected to fall from almost 600. training. 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. manufactured. 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.
•OEM •Own Design and Manufacture (ODM) •Strategic partnership for technology •Overseas acquisition equity These are the ten entry strategies for positioning a country. OEM and ODM contracts occur based on the resource endowments of the countries. The company is the pioneer of automotive Spark Plugs and Diesel Fuel Injection Equipment 87 . sub-contracting or even by informal means (training. German-based Robert Bosch group hold 60. FDI. licensing arrangement. MICO is India's largest auto-ancillary company.5% after the company brought back its shares in February 2002. 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. and using the export proceeds to finance imports of capital goods and intermediate inputs required for further productivity increases.1: A Study of Motor Industries Company Motor Industries Company (MICO) held its 51st Annual General Meeting on 8th May. 2003 at Bangalore. It could be through joint ventures. It is possible to establish virtuous circle between investment. 10. hiring and returnees). marketing network. exports and growth by investing in sectors with significant productivity and market potential.
2002.in India. Germany. MICO expects to touch 20% in three years. from the common rail system and the Electronic control units. The successor to Andreas Nobis is expected to be known at a later date. For the full year ended Dec. 2002.2% of the share capital of Buderus AG in addition to 17% already held by the company. Robert Bosch has entered into an agreement to buy 30. Andreas Nobis. led by the strong growth in commercial vehicles segment has enabled the Company’s sales turnover to rebound in 2002. Net sales during the quarter rose 17% to 432. Its spark plug business is growing in the US and expects an increase in turnover from new products. Very recently. Despite sales declining by 7% in the 1st quarter 2002 over the 1st quarter 2001. focused efforts were made to get additional business from Robert Bosch. However the. Performance of the Company The recovery in the automotive sector. accounting for 16% of total turnover. managing director of the company has taken over new responsibility in Robert Bosch GmbH with effect from 1 st May 2003 to oversee the recent acquisition and integration of Buderus AG and hence could not attend the AGM. which is sure to usher in increased demand for the CV sector especially in the multi-axle segment. It had been bearing the brunt of the recession in the tractor and commercial vehicle (CV) segment in the past few years. sharp recovery in sales of CV in FY 2002 has compensated for the continued fall in tractor sales. From this. This led to a significant 29% growth in exports during the year. In continuation of the strategy to boost exports. The Union Budget 2003-04 is also positive for the sector as it has increased its thrust on infrastructure (especially roadway) projects. MICO registered a 104% jump in bottom line to Rs 52. which are based on the Euro II norms and potential navigation systems from Blaupunkt.06 crore. This was achieved mainly due to the better performance in the quarter ended June 2002 and Sept.71 crore.08 crore. The overall sales turnover of the Company grew by around 7%. Net profit after adjusting for EO expenses rose 64% stood at Rs 134. quarter 2 and quarter 3 showed an 88 . the company had registered a growth of 7% in sales to Rs 1550.29 crore for the first quarter ended March 2003.
89 . 26% for quality improvement. increased by 6. Starters and Alternators. programs for rationalization and reduction of asset base. reduction in material cost through import substitution. improvement in labour productivity. retaining a balance of Rs. Sales to OEMs. 200. accounting for 6. the investments in fixed assets amounted to Rs.13. which accounted for 7.1% of sales. Of this 34% is for new products. In spite of all counter measures. cost reduction measures such as strict control on additions to fixed assets. This. enabled the Company to post the 7% growth in sales for the entire year. This has led to a significant 29% growth in exports during the year. This growth was mainly due to increase in volumes of Multi Cylinder Pumps. 94% of the total investments made in 2002 are in Plant and Machinery.3 crore in 2001. together with a steady 4th quarter. Germany. The non-automotive businesses comprising of Power Tools and Packaging Machines.3 crore in the Profit & Loss Account. which constitute nearly 45% of the total sales.increase of 21% and 14% respectively. the Profit Before Tax increased by more than 50% and stood at Rs. During the year. Nozzle Holder Assemblies. In 2002. Cost cutting has now become integral to staying competitive. grew by 18% due to a strategic marketing thrust and introduction of new products such as "Marble Cutters" and "Terra 25" packaging machines. 94 crore.8%. budgetary control on overheads. The Profit After Tax also increased by more than 60%. 90 crore is proposed to be transferred to general reserve. were further intensified. overall sales in this area declined by 3. The general decline in the service business of the transport sector led to a fall in demand for fuel injection components in the Aftermarket. In continuation of our strategy to boost exports.8% of sales.6% as compared to 2001. focused efforts were made to get additional business from Robert Bosch. 1. rationalization of supplier base. This has significantly contributed to an improvement in operational efficiency. 9% for R&D activities and the balance 31% for auxiliary and other services. 29. After taking into account the proposed dividend and transfer to capital redemption reserve. as compared to Rs. etc.5 crore. an amount of Rs. accounting for 16% of total turnover. As a result of growth in sales accompanied by the various cost reduction initiatives.
fuel and power will exert severe pressure on the profitability of the Company. 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. Anti-lock braking systems. foreign exchange reserves position. the trends in most macro-economic variables such as inflation. which accounts for an increase of 18% over the same period in the previous year. Overall.3% posted during the same period a year ago. On the cost front. recent spurt witnessed in the prices of steel. This will inevitably lead to an increased demand for newer products such as Electronic Diesel Control systems. further intensify its cost reduction measures and pursue other 90 .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. forecasted at this point of time. the growth in industrial production has been quite good at 6. 576. the slump in the tractor segment continues and is a cause for concern also this year. In addition.6% respectively. However. Air bags. of course. 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. In the automobile sector. are all positive. in the first quarter of 2003. On the other hand there are some key risk factors such as: (i) the continuing problems in the Middle East. the commercial vehicles and passenger car segments maintained the growth momentum at 34% and 3. etc. (ii) tension between India and Pakistan. Despite the poor agricultural output in the financial year 2002-03. These strong fundamentals will help the Indian economy to post a GDP growth of over 5. crude oil. the Company recorded a sales turnover of Rs. the underlying sales in 2003 are expected to grow by around 7% only. development of the rupee against the US dollar. The Company will. interest rates. which may endanger the achievement of the 5. aluminium.1% in the period Apr-March 2003 as opposed to 3.4 crore for the period Jan-Apr 2003.5% GDP growth in the current fiscal year.5% in the financial year 2003-04 as against 4.
however big he or she may be. Exports continue to be a strategic thrust area for the Company. 91 . 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. the Company plans to further consolidate its position after the successful launch of "Terra 25" packaging machine. In the automotive aftermarket the focus areas include aggressive marketing and promotional initiatives to increase sales turnover. In the Power tools business. expanding the product range through introduction of Bosch branded products and further intensification of antispurious activities.initiatives to counter the adverse impact of the rise in input costs and to maintain its profitability. increasing the number of 2-wheeler dealers. In the Packaging machines business. strengthening of 4-wheeler dealer network. in itself does not guarantee sales. our focus will be on gaining additional market share through expansion of product range.Maruti Versa Improper positioning Associating with a star. 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. superior service levels and offering value for money products.2: Case study. 10.
” In the words of Ravi Bhatia. In spite of Maruti signing up superstar Amitabh Bachchan and his son Abhishek Bachchan as brand ambassadors for Versa.The most it can do is generate interest in the product or create a buzz around it. 10. To be fair. General Manager of Marketing at Maruti.3: Case study – Fiat Palio 92 . with the core proposition being. the brand’s sales remained sluggish. the average sales were 80-100 vehicles a month. Now they are selling 450 vehicles a month. drawing people into the showroom. the Big B magic did work and the ads created significant interest. Last year. just like the brand’s ambassador. But perhaps the positioning itself was faulty as people were expecting a larger than life car. we saw Versa being repositioned as a family car. Take the case of Maruti Versa. Versa has started doing well and has witnessed an upswing since the new positioning. Last year. “the joy of travelling together. which was launched amidst a lot of fanfare about three years ago.
In this case. Sachin’s presence could’ve worked wonders but for the poor performance of the car in a market that is highly performance conscious. its sales took a beating.1: Automobile industry – at a glance Key Positives 93 . Sachin Tendulkar’s endorsement of Fiat Palio was quite a success initially. But as word about the poor fuel efficiency of Palio spread. In fact.Dissatisfaction with product quality/performance A company cannot sell an ordinary product just by making a celebrity endorse it. Unfortunately using a celebrity seems to be the easy way out of a parity product situation. 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. if anything. 11.
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. Also. the auto industry has emerged as an export hub. the 94 .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. Given that interest rates are unlikely to rise at a rapid rate in the future. Low interest rate regime: Close to 80% of the new cars being purchased in the country are financed. Since the auto industry growth has a strong correlation with the same. Infrastructure thrust: Improvement in road infrastructure has led to increased movement of goods through roadways. we expect the buoyancy in auto sales to continue over the medium to long term. especially for the compact car segment. courtesy the replacement demand Key Negatives Concerning income growth: The per capita income in the country has been growing at a slow rate. Exports buoyancy: On account of its low cost technical manpower and ever increasing focus on quality. 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. demand for HCVs is expected to grow by a robust rate in the long term. Environment led benefits: Any implementation of pollution norms in metros. thus underlying the importance of a low interest rate regime to the fortunes of the industry. Close to 65% of all the goods movement in the country takes place by roads as opposed to 55% a decade ago.
momentum has to continue to ensure robust automobiles demand. Also. Reforms need to be accelerated. 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. However.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. 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. Already a number of companies are introducing vehicles in the CKD route. 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. while others like USA and Japan remained lackluster in 2003-04. Maruti Udyog is aiming to become the R&D hub for its parent Suzuki’s Asia operations. rising fuel prices and hike in interest rates might throw a spanner in the wheels. Competition from imports: With India coming under the WTO purview. competition is expected to rise multifold. Indian companies also have to contend with imports in the future. 95 . India is one of the few countries to post double digit growth in passenger vehicles. which posses a question . Future Prospects look positive FY04 turned out to be one of the best years for the Indian auto industry. India is poised to become the manufacturing hub for the world with cheap and skilled labor. The passenger vehicles sector is a cyclical one. Attractive finance schemes and buoyant economic growth helped both the passenger and commercial vehicle industry notch up growth in excess of 30%.
economic growth and low interest rates are causing change in dynamics. infrastructure development.Emission norms. India: A value-adding automotive and manufacturing hub 96 .
11. the treatment for completely built products and SKD kits would be critical. The manufacturing sector is going through a period of revival. The challenge is to get an agreement that would make India a value-adding automotive and manufacturing hub. including the automotive sector. The automobile sector is set to grow from a projected 7.2: Future Outlook 97 . The turnover of the component industry is set to double over the current level of Rs 25. It is this capability.000 crore. growth and investment. Indian industry has been able to acquire.00.000 crore. assimilate and develop technology. value addition and employment potential that should be kept in mind during trade negotiations. would undoubtedly be affected by the outcome of the Non-Agricultural Market Access (Nama) discussions. Investment in this sector is over Rs 65.000 crore. their combined output would exceed Rs 2. For some sectors. including the automobile sector. production capacity.5 million this year to over 10m in the year 2007. By 2012.The future of manufacturing in India.
The passenger car segment has continued to report a strong 30%+ growth in the first month of FY04. It is worth mentioning that the car production capacity has increased significantly in the last three years.If India is to achieve a sustainable 7-8% GDP growth and 9-10% growth of industrial production. The midsize segment is expected to record the highest growth followed by the premium and economy segments. it is estimated that total capacity is expected to more or less match the expected demand by 2003-04. If not. 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. 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. Consumer will however continue to remain the KING. 98 . There is always a fear of the shakeout eating into your favourite brand you own. In the economy and medium segments. Growth in the short term is likely to be higher following increased consumer spending (improved economic performance) and launch of new models. 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. partly due to low base effect. The premium segment is likely to emerge as the largest segment over the very long term as people graduate to more expensive models. The premium segment of the industry is however expected to witness acute over-capacity. The car segment is likely to grow by 20-22% during the current year. The transporters strike had impacted volumes in April 2003. 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. In the meantime. India would have the largest young population of the world in next 20 years . for example discontinuation of a model.
the position of railways as the main carriers of goods such as food grains and cement has come under significant threat. the potential for growth is significant. Since most manufacturers have a technology tie-up with a foreign major. 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. Since operating margins of auto majors have increased over the last three years. we remain cautious. Also. In view of a couple of positive measures such as the excise duty exemption on tractors and 150% deduction on R&D expenditure. significant further improvement from the current level is limited and to that extent. it is estimated that we should have a healthy growth of sales (including exports) in the automobile sector in 2004-05. we remain positive on the future prospects of the industry. 99 . Segment wise growth expectations. With current penetration level of six cars per thousand people. with government pressing for improvement in road infrastructure. Based on SIAM analysis. This defines the future vehicle owners of the country.we should have 50 million people every year moving up from middle class to upper middle class. However. the incentive to do R&D with the Indian counterpart has increased. 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. Mr Khattar concluded that the passenger vehicle manufacturers would easily cross a domestic sale of one million vehicles during the year excluding exports.
down from almost 77% at the start of the 1990s. Mexico and Canada are expected to account for 71% of the global park by 2005. given the recent trend of carmakers to opt for quality components which will increase the vehicle’s useful life. some countries in the region have witnessed cumulative falls of 70% this year. 100 . 11. the market for cars and commercial vehicles is expected to fall from almost 600. the global domination by the large automotive players has slowly abated with local manufacturers getting hold over the market.000 units per year to 125. According to EIU estimates. the South-East Asian crises has been a dampener to the collective fortunes of various carmakers worldwide. an extension of the human body that provides us faster. Thirdly. Japan.3: Conclusion Automobiles have become an indispensable part of our lives. Analysts from EIU state that this saturation level may even translate into negative growth. Western Europe and the North American Free-Trade Agreement area comprising USA. In Indonesia record sales reported in 1997 are not expected to be matched until 2005. the international car market is growing by around 2% pa and this set to continue for the next few years. This slow down is due to the increasing level of saturation in the largest car markets of the world. In Thailand. Secondly. This has come about. as the concept of "regio-centric" cars is becoming popular. cheaper and more convenient mobility every passing day.000 this year.Firstly. 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.
Bibliography 101 . in the form of improvement through technological research. alternative medicine and so on. likes and dislikes of those who use these vehicles. This section keeps you updated on the latest and the most interesting researches conducted in the field of automobiles. Numerous surveys and research are conducted throughout the world every now and then to reveal one or the other aspect of automobiles. and help you draw the right conclusion. What actually lie behind this betterment of the automobiles are the opinions. or rising motor accidents and causes. requirements. be it about the pollution caused due to vehicle population in cities. vehicular technology.Behind this betterment go the efforts of those in the industry. These wheeled machines affect our lives in ways more than one.
hindustan.com www.aol.indiainfoline.com www.com www.projecthubs.com Newspapers Times of India The Economic Times 102 .askjeeva.Websites www.google.com www.altavista.com www.com www.
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