AUTOMOTIVE

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AUTOMOTIVE

ADVANTAGE INDIA

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GOVERNMENT INITIATIVES

5

MARKET
Size and Growth

9

OPPORTUNITIES

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CONTACT FOR INFORMATION

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and is expected to maintain robust growth in the future • At the back of this phenomenal automotive growth is the success of the Indian auto component industry.000 million units (with a registered CAGR of 68 per cent over the past 4 years) during financial year 2004 • The Indian two-wheeler Industry is one of the largest in the world. Presently a US$ 6.7 billion industry. it is expected to almost treble in less than eight years time to US$ 17 billion by 2012 • India offers a distinct technological and cost-competitive advantage. • The domestic Indian passenger car market (including utility vehicles) totalled 900.000 units (with a CAGR of 10 per cent over the past 4 years) while the exports were 130. which global Original Equipment Manufacturers (OEMs) and automotive suppliers are leveraging for both manufacturing and research facilities.The Indian automotive industry has been witnessing dynamic growth over the years. .

The country with its high education levels also provides the world’s largest pool of qualified engineers. 2003 Scale of 1 to 10 with 1 = Low and 10 = High. India’s automotive sector has the world’s second largest pool of skilled labour.A U T O M O T I V E PAGE 3 ADVANTAGE INDIA The Indian automotive industry has a significant labour cost advantage. enabling work on long-term design and engineering projects with overseas customers. a widely spoken language in the country . Global comparisons: availability of skilled manpower. Competitive cost advantage Global growth in working-age population (15-64) Source: UN. Souce: IMD Competitiveness Yearbook 2003 English. Morgan Stanley English is a widely spoken language in India that provides an edge to the local workforce.

India can supply auto parts for their global requirements as well as play a role in design and development of auto components. systems and aggregates. India: The cost and skills advantage India China India’s Advantage (%Difference) MIDDLE MANAGEMENT (> 5 YRS) 1. 2003 Scale of 1 to 10 with 1 = Low and 10 = High. Visteon and Denso plan to leverage India’s technological advantage over other competing Asian countries by setting up manufacturing units in the country to produce the most complex auto components. A mature Indian auto industry The Indian auto component manufacturers are well-positioned to integrate with the global automotive supply chain. placing it ahead on the vehicle quality curve. located in US and Europe to India via its local partner. Product quality already at par with global standards India’s emission norms based on Euro II norms are stringent. Delphi. Dana Corporation is relocating four of its plants. either as Tier 2 or 3 suppliers or as value providers through engineering and software services backed by high quality and state-of-the-art technological products.500 -44% SUPERVISOR (5 YRS) 300 800 -63% SKILLED WORKER (I YR) 61 125 -51% UNSKILLED WORKER 42 65 -35% US$ per Month Source: World Bank Development Indicators . Global Tier 1 auto component makers like Dana Corporation. the Anand Group. India has a well-developed and reliable financial and legal system. Souce: IMD Competitiveness Yearbook 2003 India is already the IT outsourcing destination of the world India’s global reputation in IT instils confidence in global OEMs and Tier 1 companies.Global comparisons: availability of qualified engineers.400 2.

It abolished the requirement of licences to set up an auto manufacturing plant in India. either to import cars in the kit form or as completely built units (CBU). • With effect from April 1. The MoU policy has been replaced by a new three-tiered tariff structure. Import Tariffs Product Basic Customs Duty CBU 60% CKD/SKD* 20% Components 20% *Completely Knocked Down Units / Semi Knocked Down Units PAGE 5 . automobile manufacturers do not need import licences. the First Automobile Policy was announced.A U T O M O T I V E GOVERNMENT INITIATIVES The Indian automobile regulatory policy has undergone progressive change over the last decade. • In June 1993. • In 1995. 2001 Quantitative Restrictions (QRs) on import of automobiles have been removed. which was the first step to allow private and foreign investment in the automobile industry. The policy allowed investments in the automobile industry with a capitalisation restriction of at least US$ 50 million over a three-year period. With the removal of QRs. the Government introduced a company-specific Memorandum of Understanding (MoU) route for manufacturers of cars and multi-utility vehicles. thereby phasing out the MoU policy.

seeks to: • make India an international hub for manufacturing small. For motor cars and multi-utility vehicles (MUVs). 2002 The Government of India approved a comprehensive automotive policy in the year 2002. inter alia.Auto Policy. Government of India. Automatic approval has been granted to foreign equity investment up to 100 per cent for the manufacture of automobiles and components. Import tariff. affordable passenger cars and a key centre for manufacturing tractors and two-wheelers for sales worldwide • ensure a balanced transition to open trade at minimal risk to the Indian economy and the local industry • provide a conducive environment for modernisation and facilitate indigenous design. the import tariff has been designed to give maximum fillip to manufacturing without extending undue protection. the policy proposes a set of measures: Foreign direct investment. to promote an integrated automotive sector that can achieve sustainable growth. Import tariffs have been fixed in a manner to facilitate development of manufacturing capabilities as opposed to mere assembly. research and development • assist development of vehicles propelled by alternative energy sources • develop safety and environmental standards at par with international standards Identifying the lack of volumes (both in the automotive and components sectors) as a major impediment constraining efficient production. The policy. .

The auto policy states the Government’s intent to align domestic policy with the international practice of imposing higher road tax on used old vehicles to discourage their use. the policy states the need to provide fiscal incentives to this segment. PAGE 7 . The Finance Bill 2005 provides a weighted deduction of 150 per cent for in-house R&D expenditure in the auto component industry. the policy emphasises the need to spur growth in this segment through fiscal incentives. Recognising the need to support the development and introduction of vehicles propelled by alternate fuels (hybrid vehicles.A U T O M O T I V E Incentives for Research and Development (R&D). Other measures. the policy proposes a long-term fiscal structure to be put in place to facilitate their acceptance.80 meters in length) in the domestic market and the potential India holds to become an international hub for the manufacture of small cars. vehicles operating with batteries and fuel cells). Recognising the importance of small cars (cars not exceeding 3. Further. Environmental aspects. Considering the importance of the MUV segment in the rural and semi-urban areas. the policy proposes to include vehicle manufacturers for a rebate on the applicable excise duty for every 1 per cent of the gross turnover of the company expended during the year on R&D. Adequate fiscal incentives have been given to promote use of low emission auto fuel technology (in line with the Auto Fuel Policy).

2005 onwards. Kolkata. Pune. Mumbai. 2005.Environmental standards: The National Auto Fuel Policy The principal environmental standards in India are the Euro I and Euro II norms. These norms are in place in Delhi. Kanpur and Agra. and subsequently extended to other parts of the country from 2010. The Government of India announced the National Auto Fuel Policy. The Mashelkar Committee has recommended that Euro III equivalent emission norms for all categories of vehicles should be introduced in seven megacities April 1. Bangalore. nitrous oxides (NOx) and suspended particulate matter. Hyderabad. which regulate vehicular emission in terms of pollutants such as carbon monoxide (CO). Surat. Chennai. Estimates suggest that the automobile industry would require investments in the range of US$ 5-7 billion for manufacturing vehicles compatible with the proposed emission norms. The Policy also suggested that the norms be further extended to the entire country from April 1. which recommended Euro II (Bharat II) norms. . hydrocarbons. Ahmedabad.

with the remaining 22 per cent being shared between scooters and mopeds.3 per cent over the next few years. the two-wheeler market in India has grown at a CAGR of 10 per cent and is projected to maintain this robust growth rate in the future.4 million units a year. October 2003 The Indian two-wheeler market is one of the largest two-wheeler markets in the world. Annual Passenger Car. Two-wheelers on a robust growth path . • Over the last five years.207 Source: CRIS INFAC.696.A U T O M O T I V E PAGE 9 MARKET Size and Growth The passenger car market is projected to grow at a CAGR of 12. Motorcycles comprise approximately 78 per cent of the two-wheeler market. Growth in the mid-size and premium car segments is expected to outpace the overall market growth. with the present estimated size of 5. Passenger car market growing at a sustained pace 2003-04 (A): Total units .

7 billion industry. covering 78 per cent of the demand. AT Kearney). Presently a US$ 6. The remaining demand is met by the fragmented unorganised sector.Auto ancillary industry to strengthen Nearly two-thirds of the auto component production is consumed directly by OEMs. Indian auto ancillary industry: revenue shares of various component categories. The market is dominated by the organised sector that comprises nearly 400 players. It is expected to almost treble in eight years to US$ 17 billion by 2012 (Source: Automotive Component Manufacturers Association of India (ACMA) quoted in a “Study of the Indian Automobile Industry”. the Indian auto component industry is projected to grow at a CAGR of 15 per cent. fiscal year 2003 Source: CRIS INFAC . around one-fifth goes to after-market sales and the remaining is exported.

A U T O M O T I V E Indian auto ancillary industry: revenue shares of various component categories FY1999 FY2000 FY2001 FY2002 FY2003 CAGR ENGINE PARTS 696 870 804 848 1000 8. FY: Financial Year Sales break-up: Indian auto component industry. fiscal year 2003 Source: CRIS INFAC P A G E 11 . & BRAKING 370 435 413 435 457 6.2% TOTAL ORGANISED SECTOR 2174 2739 2978 3522 4239 18.9% ELECTRICAL PARTS 152 217 261 283 304 20.4% TOTAL COMPONENTS 2826 3565 3869 4565 5522 18.3% EQUIPMENT 152 174 217 239 348 23.2% SSI SECTOR ESTIMATED 652 826 891 1043 1283 18.7% OTHER 370 543 848 1152 1521 43.1% TRANS & STEERING 435 478 457 565 609 9% SUSPEN.3% Source: CRIS INFAC All values in US$ million.

highly regulated and government-controlled during this period. This resulted in several new players entering the Indian automobile industry. Ford. government-decontrol and deregulation of various sectors of the economy. a joint venture of Suzuki Motor Corporation. and several others. The industry was licensed. Hyundai. The early 1990s witnessed several reforms initiated by the Indian Government aimed at encouraging private and foreign investment through delicensing. the Indian automobile industry comprised only two automobile companies. including General Motors. Japan and the Government of India. Market shares of players in the domestic passenger car market (April 2003 .March 2004) . a new automobile policy was formulated allowing foreign investment in the automobile sector. In June 1993. Hindustan Motors and Fiat. abolition of licences and a reduction in duties across the board to enable the sector to become globally competitive. Honda. Maruti Suzuki.Market Structure Changing laws… …attracted numerous players in the passenger car segment For nearly three decades after independence. The early 1980s saw the entry of a new player.

90% 1997 . Italy 100% 1997 Ford India Limited Mahindra & Mahindra Ford Motor Company.. Limited None Fiat Auto SPA.10% 1995 General Motors India Limited None General Motors Corporation. Japan 54.A U T O M O T I V E P A G E 13 Foreign players in India Name India Partner Collaborator Foreign equity Year of Incorporation DaimlerChrysler India Private Limited None DaimlerChrysler AG 100% 1995 Fiat India Automobiles Pvt. USA 84. Japan 88. USA 100% 1995 Hindustan Motors C K Birla Group None - 1940s Honda Siel Cars India Limited Siel Limited Honda Motor Company Limited. Japan 99% 1995 Hyundai Motor India Limited None Hyundai Motor Company.20% 1982 Tata Motors Limited Tata Group None - 1945 Toyota Kirloskar Motors Limited Kirloskar Group Toyota Motor Corp. Korea 100% 1996 Maruti Udyog Limited Government of India Suzuki Motor Company.

Tata Motors has followed this up with the launch of its sedan Indigo and its variant the Indigo Marina. It has acquired Daewoo Commercial Vehicle Co. facilitate and support its diverse range of business activities. South East Asia. These include engineering. Tata Motors vehicles currently sell in over 70 countries. the Middle East and Africa.000 heavy-duty trucks in the 200-400 horse power range. the largest and the only fully integrated automobile manufacturer in India. It ranks among the world’s top ten producers of commercial vehicles.8 billion in 2003-04. the truck making arm of Daewoo.the Indica V2 . Tata Motors is the foremost. One of its oldest and most prominent companies is Tata Motors. earlier known as Tata Engineering. communications and information systems. DWCV produces around 20. Tata Motors is spreading its wings abroad. Over the years Tata Motors has made substantial investments in building companies that add value. dumper. .which has been a phenomenal success. standing testimony to the company’s research and engineering expertise. With this deal the company gets access to Daewoo’s 93 models in cargo. energy. mixer and tractor categories that it can introduce in other markets. This deal will help Tata Motors diversify into higher horse-power ranges. (DWCV) Korea. The company enjoys a significant demand in export markets such as Europe. medium and heavy commercial vehicles for goods and passenger transport. Its product range covers passenger cars. Seven out of ten medium and heavy commercial vehicles in India bear the Tata mark.Tata Motors – an indigenous success story Tata Group is among India’s largest business houses. The group has interests in seven key industry sectors. It holds a leading position in many of these sectors. materials and services. chemicals. Australia. It launched India’s first indigenously designed and manufactured passenger car . Tata Motors registered an annual turnover of US$ 2. consumer products. multi-utility vehicles and light.

TVS Motor Company is the third largest player with a 20. India is the two-wheeler capital of Asia with an average of 27 two-wheelers per thousand people. with a majority of its sales coming from the southern states of India. Two-wheelers are used extensively in the country. with an estimated size of 5. compared to China’s 8 two-wheelers per thousand people (Source: World Bank). a joint venture between Honda Motors. Bajaj Auto is the second largest player in the two-wheeler market with a 22.A U T O M O T I V E India represents one of the largest two-wheeler markets in the world.4 million units a year.March 2004) Source: SIAM P A G E 15 Two-wheelers market. both at the rural and semi-urban level.9 per cent market share. The company uses indigenously developed technology for its two-wheelers. is the largest manufacturer of two-wheelers in the world with a 38 per cent market share of the domestic 5. with the top three companies accounting for over 80 per cent of the total industry sales. one of the largest in the world and still growing . Japan and the Indian-based Hero Group.4 million units two-wheeler market. The Indian two-wheeler market in India is oligopolistic in nature. Hero Honda Motors Limited.3 per cent share. Market shares of players in the domestic two-wheeler market (April 2003 .

generated a need for high quality. Carl Dan Peddinghaus. quality conscious industry catering to the requirements of the growing domestic automobile industry. namely: • Globalisation of Indian companies: Several leading Indian companies have acquired international auto component companies as part of their strategy to expand their markets globally and acquire new technology. Phase I (1980s): Prior to the 1980s. For example. Phase III (2000 onwards): This period has seen the emergence of three trends in the industry.7 billion. low technology small-scale sector. Bharat Forge. Robert Bosch. Europe. Phase II (1990s): The auto component industry in India witnessed a transformation in the 1990s to a high technology. Large players like Delphi. Koyo and Denso. reliable auto components that met the stringent emission standards set for Maruti cars.Auto ancillary. each marked by substantive developments. transforming through the years The Indian auto parts industry is significantly fragmented with a large number of players having a turnover of less than US$ 10 million per year. This led to the entry of several Japanese auto component majors like Sumitomo. the second largest forging manufacturer in the world has acquired German forging company.000 people and has an annual turnover of over US$ 6. . Sundaram Fastners acquired a precision forging unit of Dana Spicer. Amtek Auto acquired two UK-based auto component companies. the auto ancillary industry had been primarily dominated by the unorganised. Visteon Corporation etc entered the market to tap the huge potential created by the strong domestic and export demand. The evolution of the Indian auto ancillary industry can be traced through three distinct phases. The setting up of Maruti Suzuki in 1983. The industry directly employs about 250.

Sona Koyo Steering Systems Limited. Visteon. Brakes Division. Cummins etc consider India their manufacturing as well as research base and are sourcing components from India for their global requirements. • Outsourcing: Global auto component companies like Delphi. P A G E 17 . By investing in quality.A U T O M O T I V E • Global Quality Benchmarking: Today the Indian automotive industry has six Deming Award winners which include Rane Brake Linings Limited. Sundaram Brake Linings Limited and SundaramClayton Limited. Foundry Division. Brakes India Limited. TVS Motor Company Limited. local component manufacturers are becoming the hub for global sourcing of international automotive companies.

OPPORTUNITIES India offers twin advantages… …scaling costs and optimising revenues India is a market that offers new avenues for growth in the automotive sector and also provides opportunities to global companies to compete more effectively in their home markets. which global OEMs and component manufacturers are leveraging to drive down costs and build growth options. OEMs are eyeing India in a big way to source products and components at significant discounts to home markets. OEMs are active in the booming passenger car market in India. OEMs and suppliers alike are under pressure to optimise their cost levels and simultaneously drive growth. to export an estimated 100. • A testimony to India’s emergence as a future auto export base of the world. • Passenger vehicle exports have grown over five times in the last four years. This is borne out by the phenomenal auto export growth witnessed by the country over the last 3-4 years. reliability and technology.000 cars over the next five years from India. India represents a substantial cost advantage. On the revenue side. touching 129. Exports from India India becoming an export hub The Indian automotive exports industry has covered significant ground to reach international standards in quality. Given the present downturn in developed markets. is UK-based MG Rover Group’s recent alliance with an Indian automobile major. .316 cars in 2003-04. On the cost front. In this context. Tata Motors.

Japan is using India as the sourcing base for its small cars.000 cars for 2005.000th vehicle from its Chennai plant. mid-size. and has a current manufacturing capacity of 250. The company currently is the second largest player in the passenger car market in the country with a present market share of 20 per cent and a turnover of approximately US$ 1 billion. The company caters to all segments (small and compact. • Suzuki. Hyundai has made India the global sourcing base for its small cars and targets exports volumes of 70. and plans to roll out its millionth vehicle by 2006. Korea. Santro has been a runaway success in India. premium) of the car market in India. Export of passenger cars Source: CRIS INFAC. SIAM Hyundai Motor India Limited (HMIL) HMIL was set up in late 1996 as a wholly owned subsidiary of Hyundai Motors.000 units. The company’s small and compact model. The company recently rolled out its 500. P A G E 19 .A U T O M O T I V E • Korean car manufacturer.

As per the latest McKinsey & Co. The Hyundai plant has a capacity to make 250. which is priced at over US$ 10. 000 cars and 350. report on auto The .000 engine transmission units per annum.Hyundai Motor India Limited Source: CMIE HMIL’s strategy has been to penetrate the Indian passenger car market with low price offering (‘Santro’ priced between US$ 6000-8000) targeting the burgeoning middle class market segment. Auto ancillary exports have multiplied over the last five years.000 and targets the upper middle class and upper class market segments. The company has been able to keep costs down by outsourcing most of its parts to its vendors. It also exports engines and transmission parts to its operations in Korea and Turkey. its breakeven level is low. growing at a CAGR of 26 per cent between 1999-2000 to 2003-04. Due to a low fixed cost structure. The company has replicated the ‘Santro’ success story with its Accent model.

Examples of world-class players fulfilling such demand today are companies like Sundaram Fastners. Cummins. PT DaimlerChrysler. global buyers save between 10-20 per cent by sourcing components from India. attracted by the country’s availability of low-cost. Indonesia. superior design and engineering capabilities. Cummins etc) have set-up teams in India to explore such opportunities. Robert Bosch. backed by a large domestic market and government regulations has emerged as a preferred outsourcing destination. Brazil.A U T O M O T I V E P A G E 21 components. According to Automotive Component Manufacturers Association of India (ACMA). oil filters) sourced from India is typically 20-30 per cent lower than a US manufactured one. Volvo. Proton. Sweden. Ford. which compares favourably with even markets like Mexico and is almost at par with China. could potentially scale up to US$ 25 billion in the coming decade. which may be utilised to fulfil global demands. Both OEMs and their Tier I vendors (Delphi. Sundaram Clayton. UK. USA. Experience of several e-procurement platforms indicates that. Bharat Forge and Rico Auto. Germany. Ford. UK. RVI. Land Rover. which supply to DaimlerChrysler. all these factors are expected to contribute towards an export growth of over 30 per cent per annum until 2010. The average fully loaded cost of a component (for example. Outsourcing opportunity India offers a low-cost manufacturing base for auto components. Tier-I vendors scouting for sources in India . Global automobile companies are aggressive in the Indian market to find sourcing partners in India to meet their ambitious cost-cutting plans. Explore the cost-competitive advantage India’s auto component industry with its high product quality. France: General Motors. skilled engineering manpower. Malaysia. Indian auto ancillary exports currently pegged at US$ 1 billion. Volvo. USA & UK. on an average. Ford.

3 million. for a consideration of Euro 6. computer-aided engineering and call centre/e-mail processing. Ashok Leyland. The company has recently acquired Carl Dan Peddinghaus AT.Large OEMs setting up purchase offices recent trend of OEMs setting up IPOs (international purchasing offices) in the country is an indication of the huge opportunity for Indian auto component manufacturers. Bharat Forge Ltd Bharat Forge Ltd. design. Catering primarily to the commercial vehicle segment. e-business applications. Ford Information Technology Services India (FITSI) is delivering high-quality solutions in business software. Mahindra & Mahindra and Maruti in India and DaimlerChrysler. Ford expects to have annual labour cost savings of US$ 30-60 million. and engineering services. was set up in 1961. its client list includes Tata Motors. supply chain management. Renault & Volvo. It is the largest forging company in Asia and one of the largest and most technologically advanced commercial forge shops in the world. IT and other back-office related operations by remote sourcing to India on account of its low cost yet highly skilled labour market. . overseas. information systems. Minimising costs of operations OEMs can also reduce the cost of engineering services. the flagship company of the Kalyani Group. a German aluminium forging company. Arvin Meritor. TRW has a strategic alliance with Satyam for outsourcing enterprise resource management. Dana.

The company is also looking at de-risking its revenues by increasing its presence in new and existing overseas markets and expanding its product lines to cater to other segments of the automotive market. it being a one-stop shop for all forging requirements (including several critical products. where it enjoys a near monopoly). With revenues of approximately US$ 150 millon. where it has a small presence till date.A U T O M O T I V E Bharat Forge has an annual forging capacity of 102. Bharat Forge Limited Source: CMIE Bharat Forge’s strength lies in its long-standing relationships with its clients.000 units and front-axle beams capacity of 413. front-axle capacity of 500.966 MT. deriving 39 per cent of its revenues from overseas clients.000 units. Its manufacturing facilities are rated very highly and its flexibility to scale operations helps it in structuring its deliveries in a cost-effective manner. the company has a major focus on exports. P A G E 23 .

The company has won the coveted “Best of the Best Suppliers of the Year” award for five consecutive years from General Motors. Sundaram Fastners Limited Source: CMIE SFL’s strength lies in its premium quality products. It has a keen focus on R&D. Looking at the vast scope of the Chinese market the company has set up a 100 per cent subsidiary. The company manufactures about 7000 different types of bolts and nuts. Sundaram Fastners (Zhejiang) Ltd with an initial investment of US$ 5 million and plans to invest US$ 12. It also has a technical collaboration with Dura Automotive. . is one of the pioneers and most respected names in the auto component industry in India.Sundaram Fastners Limited Sundaram Fastners.5 million more over the next two-three years. SFL would be looking at strategic acquisitions to fuel growth in the future. which includes not only expansion of product lines but also improving quality of existing products. Cummins and General Motors are its major customers. powder metal parts and radiator caps. Its product range includes high-tensile (premium quality) fasteners. DaimlerChrysler. a member of the TVS group (the largest automotive component group in India) since 1965. USA for gear shifter assemblies.

Motor Industries Company Limited Source: CMIE MICO has seen sales grow by nearly three times and profits by over five times in the last 10 years. The company derives 45 per cent of its revenues from domestic sales mainly to OEMs and the replacement market. The company’s strategy has been to introduce. Currently. manufacture and sell hightechnology products in the country. This backed with its strong distribution network has been key to its success in India. MICO pioneered the manufacture of automotive spark plugs and diesel fuel injection equipment in India. Robert Bosch GmbH. the company is the largest manufacturer of diesel fuel injection equipment in the country and one of the largest in the world. electric power tools. P A G E 25 .A U T O M O T I V E Bosch Group Motor Industries Company (MICO) founded in 1951 is a 61 per cent subsidiary of the German auto components maker. Exports comprise the remaining 55 per cent of its revenue. car audio systems and packaging machines. In recent years the company has widened its product range by introducing a large number of automotive accessories as well as special purpose machines.

Ford has recently entered into a strategic tie-up with Hindustan Motors to manufacture 20. . Kawasaki has announced plans to outsource parts for sub 200 cc motorcycles from Bajaj. compared with ninety cars per thousand people for other developing countries like South Africa and Brazil in 2001 (Source: Ward’s Automotive Data book). Product penetrations Large latent demand for passenger cars India’s current car penetration is one of the lowest in the world at five cars per thousand persons. Mitsubishi has been successful in using Hindustan Motors to manufacture its Lancer. This represents a huge latent demand for a large economy like India. Greenfield projects are a viable option Global Tier 1 suppliers like Delphi and Visteon have also set up greenfield projects in India. and in some cases. which is projected to grow at a phenomenal rate over the next five years. The global OEMs in this case allow the local player to assemble a globally developed. with which it has a technical tie-up. locally modified vehicle in one of the existing local plants. Car penetration ratio is projected to double by 2007-08.000 petrol engines and transmissions for its Ford Ikon cars. Such projects tend to have longer gestation periods but allow the manufacturer to set-up and manage the entity in line with its global policies and standards.Contract manufacturing OEMs are also leveraging the capabilities of the local manufacturers for contract manufacturing.

Hyundai has capitalised on this strategy by positioning all its cars. from the Santro to the Sonata. The market has its own unique characteristics and ‘one-size fits all’ approach may not work. establishing a beachhead could prove useful for the long-term. Building the appropriate relationships and transferring best practices into this market can yield significant benefits in the long run. Offering value for money and adapting to local conditions spells success .A U T O M O T I V E P A G E 27 Innovating for the domestic market India’s domestic passenger car market is poised to grow at an impressive rate in the near future. A ‘value for money’ proposition is usually a good starting point. Despite a market still smaller than several other global markets. as most OEMs are doing now. could also lead to success in the domestic market. Moving into the local market by leveraging some of the existing global platforms and styling them to suit local tastes. on this platform. Indian consumers are not only cost-conscious but also look for good vehicle performance.

These associations can be contacted directly for information on market and opportunities for investment/collaboration in the automobile and auto components sectors. 2618 4479 Fax: + 91 11 2616 0317 E-mail: acma@vsnl.110 003 India Tel: + 91 11 2464 7810-12.siamindia. Automotive Component Manufacturers Association of India (ACMA) 6th Floor The Capital Court Olof Palme Marg. 2464 8555 Fax: + 91 11 2464 8222 Email: siam@vsnl.com Website: www.acmainfo.Explore.com .com Society of Indian Automobile Manufacturers (SIAM) Core 4B. 2617 5873. domestic and international investors. government. Munirka New Delhi .110 067 India Tel: + 91 11 2616 0315. creating a symbiotic interface between industry. 5th Floor India Habitat Centre Lodi Road New Delhi .com Website: www. invest and partner with India to profit and advantage CONTACT FOR INFORMATION Two premier associations in India represent the automobile and auto components industry respectively.

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