Automobile industry globally is one of the largest

industries and is a key driver of economy. Owing to

its deep linkages with several key segments of
industry, automobile industry has a strong multiplier
effect on the economy. A well developed Indian
automobile industry ably fulfills the catalytic role by
producing a wide variety of vehicles such as
passenger cars, light, medium and heavy commercial
vehicles, multi-utility vehicles , scooters, motor
cycles, mopeds, three wheelers, etc.
Automobile industry did not exist in India in the
real sense before Independence. Only assembly work
was done from the imported parts. General Motors
(India) Ltd. started assembling trucks and cars in
1928 in their factory at Mumbai. Ford Motor Co.
(India) Ltd. started assembling of cars and trucks _at
Chennai in 1930 and at Mumbai in 1931. The real
development of the industry began wi(h the
establishment of the Premier Automobiles Ltd. at
Kurla (Mumbai) in 1947 and the Hindustan Motors
Ltd. at Uttarpara (Kolkata) in 1948. Automobile
industry in India has made considerable progress
during the last three decades. Today, it is one of the
most vibrant sectors of economy.
With gradual liberalisation of the automobile
industry since 1991, more and more players have set
up manufacturing facilities in India. At present there
are 15 manufacturers of passenger cars and multi-
utility vehicles, 9 manufacturers of commercial
vehicles, 14 of two/three wheelers and 14 of tractors
besides 5 manufacturers of engines. This industry
currently employs 13 .1 million people both directly
and indirectly and contributes nearly 6 per cent to the
national GDA. The industry is also making a hefty
contribution of nearly 20 per cent to kitty of indirect
taxes of the government.
- MANIJ.f:ACTURING INDUSTRIES
TABLE 2515 .
. Prod ct·
u l000f mot orve h"cles
,--- Na,118 18&0- 1980- 1878- 1980- 1880- 2000-
51 81 71 81 81
01
Commercial 8.6 28.2 41.2 71.7 145.5 152.0 391 .I
vehicles*
~,jeeps and 7.9 26.6 46.7 49.4
land savers
(passenger cars)
-Motor Cycles NA 0 .9 97 .0 447.2
Tractor.. N.A. N.A. N.A. 71.0
(Complete)
•includes buses, trucks and tempos, 3 and 4 wheelers.
Source : Economic Survey 2012-13, p. A-31.
manufacture ' City ' . General Motors has launched
Opel Astra. It has tie-up with Hindustan Motors. Ford
in collaboration with Mahindra has introduced Ford.
Hindustan Motors in collaboration with Mitsubishi of
Japan has launched 'Lancer'. Mercedes Benz of
German y in collaboration with Telco is
manufacturing E220 and 250D for upper strata of
society . Premier Automobiles in collaboration with
Fiat-India Auto Limited is manufacturing a number of
models.
Table 25 .15 shows that car manufacturing
industry made rapid progress particularly after Maruti
Udyog Limited (MUL) started production in the mid-
1980s. The production of passenger cars increased
from 220 .8 thousands in 1990-91 to 2,513.2
thousands in 2011-12 thereby registering more than
ten times increase in a short span of two decades.
Several factors have made it a buoyant industry
in the recent past and the industry has a bright future .
Reduction in excise duty on passenger cars has led to
reduced car prices and created the potential for an
increase in demand. This has helped in growth of the
industry to a great extent. The government's Auto
Policy also has the stated aim of making India an
'Asian hub' for the manufacture of small cars. The
small car segment, which refers to the A and B
segments, accounts for over 65 per cent of the market.
?iving further push to this segment, therefore, adds
impetus to a movement that is already underway• For
lndi~ to become a large manufacturer of small cars ,
quality and price are the two basic deciding factors.
Introduction of NANO car by the Tata Motors
was a big leap forward in popularizing small cars at
affordable process to middle class buyers in India It
935
I in India (Thousands)
2005- 2006- 2007- 2008- 2009- 2010- 2011-
08 ft7 08 ,. 09 10 1t 12
520.0 545.1 416.5 565.6 752.6 910.2
220.8 6322 1,047.5 1,238.7 1,422.0 1,516.8 1,910.5 2,452.8 2,513.2
1,842.8 3,756.1 6,201.2 7,J 12.2 6,503.5 6,802.0 8,444.9 10,527.1 12.()06.9
142.2 284.4 2·36.4 3,060.5 295 .0 293.6 373 .7 465.4 648.7
became a big craze in the beginning but lost much of
its sheen partly due to some technical problems and
partly because of tough competition from other
manufacturers of small cars .
The potential for growth is good considering that
passenger car penetration in India is a mere 6 car per
1,000 population whereas it is much higher in other
developing countries . Even in neighbouring countries
like Pakistan and Sri Lanka the penetration is 12
vehicles per 1,000 population. The market is projected
to grow at a rate of around 7 per cent annually.
Over the years car sales in A and B segments
category as a whole have registered a steady growth
because these cars are available in wide range of
models and at affordable price. The mid-size category
normally pertains to C segment cars. This segment
accounts for 15-16 per cent of local car market. In
addition to varied models and affordable price,
various finance options have also grown with
automobile industry. There were times when a car
loan meant tedious trips to bank, reams of paper work
and long waiting periods for requisite approvals from
the sanctioning authority. Today the scenario is quite
different, with customers having fast access to very
flexible financing options that suit their different
needs. Attractive automobile financing schemes have
definitely boosted sales of passenger cars . Today,
almost 70 per cent of new cars are financed through
auto-loans.
Jeeps. Almost the entire production of jeeps
comes from Mahindra, Mumbai. It has a capacity to
produce about 13,000 jeeps per annum.
Two Wheelers. Two wheeler industry mainly
comprises of motor cycles, scooters , mopeds and
 936
scooterettes. The Indian two~wheeler industry made a
humble beginning in the early 1950s when
Automobile Products of India (API) started
manufacturing scooters in the country. Until 1958,
API and Enfield were the sole producers . In I 960,
Bajaj Auto set up a plant in collaboration with
Pioggio of Italy. Two wheeler industry has also made
rapid strides. It came a long way from an insignificant
production of 0.9 thousand units in 1960-61 to
12,006.9 thousand units in 2011-12 (Table 25.15).
The two-wheeler market was opened to foreign
competition in the mid-l 980s. Practically , all the
global giants have been present in India for quite
some time. First to come was Suzuki Motor
Corporation with TVS in 1984. Honda followed
within a year, in a joint venture with Hero Group.
Then Kawasaki and Yamaha entered into licence
agreement with Bajaj Auto and Escorts respectively.
Piaggio has joined up with LML which is planning to
expand its capacity to six lakh vehicles per annum.
Bajaj Auto is expanding its capacity to two million
vehicles per annum. Hero Honda is expanding its
Dharuhera plant capacity to over 2,52 ,000 vehicles a
year and has set up a plant at Gurgaon with an
investment of f 160 crore. TVS Suzuki plans to
invest f 200 crore to expand its production capacity
to one million vehicles per annum. Yamaha-Escorts, a
joint venture has also announced plans to introduce
new range of products and expansion facilities in its
Surajpur plant. Mumbai , Pune , New Delhi and
Kanpur are main centres of scooter manufacturing.
Public sector units are located at Hyderabad ,
Bengaluru, Satara, Lucknow and Alwar. Motorcycle
producing units are located at New Delhi , Chennai,
Mysore and Gurgaon.
The dynamics of two-wheeler industry in India
makes a fascinating reading. From a semi luxury
product for the urban middle class in 1980s and
earlier, the two wheeler has now become not only the
favourite form of personal transport but also the most
coveted personal possession among various consumer
classes except perhaps the most affluent. Leading this
emergent boom has been the stylish, fuel-efficient and
sturdy four stroke motorcycle that seems to be equally
at home on highways and rural byways. In addition ,
economically active and ambitious consumer class,
the relative youth of the population, the substantially
lower cost of two-wheeler (as compared to cars) as
INDIA-A COMPREHENSIVE GEOGRAPIIY
well as its inherent attractiveness, especially to youn
male population have played crucial role. g
Today with annual sales of over 12 million units
the Indian two-wheeler market is the second larges;
market in the world after that of China (annual sales
of 25 million units). Technically, the two-wheeler
industry is divided into five major classifications :
mopeds, motorcycles , scooters, step thrus and
ungeared scooters . Of all the two-wheelers
motorcycles have registered the maximum growth. J~
fact motor cycles are the fastest growth segment, with
scooter and moped volumes seeing steady decline.
Like passenger car industry , the two wheeler
industry has also gained a lot from the availability of
easy finance. Financing was a rare of phenomenon till
early 1990s but there has been phenomenal growth in
this facility and loans are freely available now.
Two wheelers are the most effective safety valve
which relieves pressure on urban personal
transportation. More than 65 per cent of the two
wheeler population is concentrated in urban and semi-
urban areas . With public transport being scarce in
most cities of India, the two wheelers offer a
convenient alternative.
The demography of Indian population is skewed
in favour of younger generation, which prefers two
wheelers. Therefore, scope of further growth of the
industry is great. The younger generation in the age
group of 15-34 years comprises more than one-third
of the total population and this is expected to increase
in the near future. The office-going middle class
(typically in the age group of 25 and 59 years) which
prefers motorcycle on account of fuel economy,
formed 23 .5 per cent of the population in 20 I 1, and
this is expected to increase further in the near future.
Consequently, this segment in expected to progress
rapidly in the next ten years.
Although India is the second largest two-wheeler
market in the world after China, the penetration levels
are low at 38 per thousand people, compared to
Indonesia (75), Thailand (150) and Malaysia (220).
Thus there is ample scope for this industry to grow
fast.
SHIP BUILDING INDUSTRY
India ranks second among the Asian countries next
only to Japan in terms of shipping tonnage. However,