Automobile Industry in India

The effectiveness of media in the automobile industry bagged the position of being
the ninth largest in the world. Following economic liberalization, Indian domestic
automobile companies like Tata Motors Maruti Suzuki and Mahindra and
Mahindra expanded their production and export operations in and across the
country and since then the industry has only shown signs of growth. The
automobile industry comprises of heavy vehicles (trucks, buses, tempos, tractors),
passenger cars, and two-wheelers.

The Indian automobile industry seems to come a long way since the first car that
was manufactured in Mumbai in 1898. The automobile sector today is one of the
key sectors of the country contributing majorly to the economy of India. It directly
and indirectly provides employment to over 10 million people in the country. The
Indian automobile industry has a well established name globally being the second
largest two wheeler market in the world, fourth largest commercial vehicle market
in the world, and eleventh largest passenger car market in the world and expected
to become the third largest automobile market in the world only behind USA and
China.

The growth of the Indian middle class along with the growth of the economy over
the last few years has resulted in a host of global auto giants setting their foot
inside the Indian Territory. Moreover India also provides trained manpower at
competitive costs making the country a manufacturing hub for many foreign
automobile companies. India proves to be a potential market as compared to most
of the other countries which are witnessing stagnation as far as automobile industry
growth is concerned. 

A recent research conducted by the global consultancy firm Deloitte says that at
least one Indian automobile company will feature among the top six automobile
companies that will dominate the car market by 2020. 

The Indian automobile industry proved to be in good shape last year even after the
economic downturn. This was majorly due to the fact of renewed interest shown by
global automobile players like Nissan Motors which consider India to be a
potential market. 

As far as authorized dealer networks and service stations are concerned Maruti
Suzuki is the most widespread. The other automobile companies are also showing
rapid progression in this field.

Indian Automobile Export market

India is a very favorable market for small cars be it production, sales or export.
Since the Indian automobile industry is the largest manufacturer of small cars
companies like Hyundai and Nissan Motors export about 2,40,000 and 2,50,000
annually. India emerged as Asia's fourth largest exporter of automobiles, behind
Japan, South Korea and Thailand. The Indian automobile exports registered a
22.30 percent growth in the year 2009. The growth trend was as follows: Two
Wheelers- 32.31 percent, Commercial Vehicle - 19.10 percent and Passenger Cars
grew by - 19.10 percent. 

Key automobile manufactures in India

 Maruti Udyog
 General Motors
 Ford India Limited
 Eicher Motors
 Bajaj Auto
 Daewoo Motors india
 Hero Motors
 Hindustan Motors
 Hyundai Motors India Limited
 Royal Enfield Motors
 Telco
 TVS Motors
 DC Designs
 Swaraj Mazda Limited

Skoda Auto India

The Czech auto giants entered the Indian subcontinent with their much awaited
Skoda Octavia in 2005. Considering India to be a very prospective market and its
potential for growth in the Indian soil the company came in with a vision of
creating a strong foothold in the Indian automobile industry. Thus setting up their
first manufacturing unit outside the boundaries of Europe ever Skoda Auto set up
its first plant in India. The company tasted instant success in India with its Octavia
model. The company currently produces 3,00,000 units annually with a market
share of 25 % in India. Till date they have introduced 12 models in the luxury cars
segment including their most popular model called the "Skoda Superb". They have
a wide network of 51 dealers spread across the country. 

Latest Launch by Skoda

The Skoda Yeti already creating waves in the Indian automobile market is all set
for its launch this year. The car is likely to be launched in both petrol and diesel
versions with 1.6L to 2.0L petrol engines and a 1.9-litre turbodiesel engine. The
car is said to be a cheaper alternative to Hyundai Tucson, Honda CR-V, Chevrolet
Captiva, Suzuki Grand Vitara and the Mitsubishi Outlander. 

List of Skoda cars

 Skoda Fabia
 Skoda Laura
 Skoda Fabia
 Skoda Superb
 Skoda Octavia
 Skoda Roomster
 Skoda Superb
 Skoda Yeti

Skoda cars specifications

Skoda Cars Prices

Model Technical Specifications Price

Skoda Fabia 4 cylinders with engine displacement Rs. 4,92,043
of 1198cc - Rs.
Maximum Power of 7,71,002
70bhp@5400rpm
 Maximum Torque of 
108nm@3000rpm
Wheelbase of 2462 mm
Front suspension is MacPherson strut
type and rear suspension is
Compound link crank-axle type.
Average mileage is about 14kmpl
Skoda Octavia 4 cylinders with engine displacement Rs. 11,76,000
of 1781cc
Maximum Power of
150bhp@4000rpm
Maximum Torque of 
210 nm@1750rpm
Front suspension is MacPherson strut
type and rear suspension is
Compound link crank-axle type.
Average mileage is about 12.7 kmpl
Skoda Superb 4 cylinders with engine displacement Rs. 22,26,000
of 1798 cc
Maximum Power of
160bhp@4500rpm
Maximum Torque of 250
nm@1500rpm
Wheelbase of 2761 mm
.Average mileage is about 13 kmpl
Skoda Yeti 4 cylinders with engine displacement Rs 13,00,000
of 1798 cc
Maximum Power of 118bhp@
4500rpm
Maximum Torque of 
250 nm@ 1500rpm
Wheelbase of 2462 mm
Front suspension is MacPherson strut
type and rear suspension is Multi
element axle
Average mileage is about 12.6 kmpl
Skoda Cars Reviews

Skoda Fabia: The Fabia is said to be an amazing car with excellent safety

features, boot space and unmatched comfort. It is said to be a small car offering the
luxuries of a Rolls Royce. 

Skoda Octavia: The Octavia is a practical family car which exudes a stylish aura.
With a choice of 6 engines, including the powerful 2.0 TDI, the new Octavia
performs well on both smooth city roads and broken ones. The Octavia with its
stately elegant looks has an all European design, with a smooth, uncluttered
streamlined body.

In recent years the automobile industry in India has grown by leaps and bounds.
This phenomenal growth rate is owing to two factors mainly, which are better
standard of living of the Indian middle class and a subsequent rise in their
disposable income which in turn increases the purchasing power adding to the
growth of the automobile industry as a whole and the automobile companies in
particular. According to a market survey results the sale of passenger cars have
increased by three folds than what it used to be five years down the line.
Apparently there are 1 million passenger cars already on the Indian roads and the
figure only promises to increase as the days go by. Be it small cars, medium cars or
luxury cars all have their target customers and all do well in the market so much so
that global giants from USA and Japan are entering the Indian automobile sector
and working in collaboration with the Indian automobile majors.

Tata Motors : Tata Motors in one of the major players of the automobile
manufacturing companies in India. It has three different manufacturing units in
India they are, Jamshedpur in the East, Pune in the West and Lucknow in the North
and all three manufacturing units specialize in the manufacturing of different
automobile like Jamshedpur unit produces trucks, engines and axles, the Pune unit
caters to the production of Medium Heavy Commercial vehicles and Heavy
Commercial Vehicles, utility vehicles and passenger cars and the Lucknow unit
produces MCVs, Tata Sumos along with a number of spare parts. Some of the well
known cars manufactured by Tata Motors are: Tata Indica, Tata Indigo, Tata
Indigo Marina, Tata Sumo and Tata safari.

Hindustan Motors Limited: Hindustan Motors Limited is one of India's

pioneering companies in manufacturing passenger cars Ambassador, Multi Utility
Vehicles (Trekker, Porter, and Pushpak) and the mid segment premium car
Mitsubishi lancer. It is because of Hindustan Motors that we see the Mitsubishi
Pajero a great sports car on the Indian roads.

Ashoke Leyland: Ashoke Leyland is famous for its world class passenger buses,

along with that it manufactures transport trucks and imported military vehicles.
Ashoke Leyland has definitely left no stone unturned to make its presence felt in
the Indian automobile industry by some of its exquisite Engines with power
ranging from 40 PS to 200 PS, productions like: Cheetah Bus-III, Panther BS-II
Lynx BS-II, Muti-axle Vehicles, Tractors and Ecomet, Diesel and Natural Gas
gensets from 15KVA to 250KVA. Ashoke Leyland also holds to its credit of
providing the largest logistics vehicles to the Indian army.

Maruti Udyog Limited: By far the most trusted and best known car
manufacturer in India. Maruti Udyog manufactures a host of SUVs, Sedans and
passenger cars. Some of Maruti's most popular cars are: Maruti 800, Alto, Omni,
Gypsy, Zen, Wagon R, Versa, Esteem, Baleno and Swift.

Bajaj Auto: The Bajaj Group is amongst the top 10 business houses in India and
its automobile segment known as Bajaj Auto is the largest two wheeler and 3
wheeler manufacturers in India and one of the biggest in the globe. Some of its
popular two wheelers which took the youth completely by surprise are: Pulsar
220DTS and Kawasaki Ninja 250R.

Below is a table representing the net profits of the above automobile companies in
the year 2009.

Company Profit
Tata Motors Rs 400.14 crore
Hindustan Motors Limited 27.42 crore
Ashoke Leyland 104.63 crore
Maruti Udyog Limited 400 crore
Bajaj Auto 403 crore
Bikes in India
The growing middle class population, prosperous rural India and the scarcity of
reliable public transport and fuel economy are the leading causes for the rise of two
wheelers on Indian roads. The Indian two wheeler market is the second largest in
the world and is continuously growing at an alarming rate of 25% annually. India
stands next to Japan and China in terms of two wheelers produced and domestic
sales figures. The Indian two wheeler industry began a modest start in the 1950's
and witnessed spectacular growth over the last 5 years. Bikes constitute 80% of the
two wheelers sold every year. The year 2009 saw a host of new models of
motorcycles like Yamaha Gladiator, Yamaha R 25, TVS Apache 160 cc and the
Kawaskai Ninja. All these bikes created a rage among the youngsters and have
hence forced many of the two wheeler manufacturing companies to produce even
better bikes with engine displacements of more than 150 cc.

The Indian two wheeler manufacturers are specially encouraged by the enthusiasm
exhibited by the youth of the country for heavy and sporty bikes. The introduction
of the Bajaj pulsar witnessed a change in the entire history of biking in India. The
bike turned out to be the highest selling bike in the Indian subcontinent because of
its unmatched looks and powerful engine. India is now becoming a preference for
two wheeler auto giants around the world. 

Sales figures of some of the bikes manufacturing companies

 Hero Honda is the world's largest motorcycle selling company and cracked a
whopping sales figure of 3,89,802 units already in 2010 an increase of 23.57
percent over 3,15,458 units sold in January 2009.

 Bajaj Auto sold 2,33,000 units in January 2010, a rise of a unbelievable 112
percent as compared to 1,09,000 units which they managed to sell in January
2009.

 TVS Motors registered an impressive 5% growth in 2009, registering a total

two-wheeler sales of 1,18,574 units as compared to 1,12,770 units in 2008.

Marketing Strategies In automobile Industry

 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

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 automobilereflects an evolution that took place
worldwide. It is estimated that over 100,000 patents created the modernautomobile.
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 avehicle that they proved a poor design for road
vehicles; however, steam engines were very successfully used in locomotives.
Historians, who accept that early steam-powered 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.
1960's
 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.
1970's
 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 theAutomobile 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.

1990's
 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.

Preview of Automobile Industry

The automobile industry, one of the core sectors, has undergone
metamorphosis with the advent of new business and manufacturing practices in the
light of liberalization and globalization. The sector seems to be optimistic of
posting strong sales in the next couple of years in view of a reasonable surge in
demand.
The Indian automobile market is gearing towards having international
standards to meet the needs of the global automobile giants and become a global
hub.  Players are strategizing to consolidate their position and gradually increase
market penetration with the launch of new models, targeting different segments.
Since the sector is price driven, huge investment is envisaged to remain
competitive through cost advantage, for which indigenization is highly important.
The product becomes dearer if it is manufactured using imported parts. IT in the
automobile sector plays a crucial role.. Some players are working towards
development of efficient production systems that control the entire production
process with high precision and accuracy. Such systems working on real time
operating systems allow efficient control of different parts of manufacturing and
production. It is essential to leverage skills of different engineering disciplines to
build these kinds of integrated systems.
 Analysts foresee high scope in the electronics for auto sector and expect the
retailing of such electronics products to contribute a major chunk of future
revenues. The government is increasing the research and development (R&D) fund
for the automobile industry over and above the Rs 1400 crores earmarked for eight
years. All laboratories in the country researching on automobile technology, such
as BHEL which is developing cell technology as alternative fuel, have also been
brought together through the setting up of  a national R & D working group. 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, and
has become a excellent manufacturing base for global players, because of its high
machine tool capabilities, extremely capable component industry, most of the raw
material locally produced, 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.
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, so
much so that in quality conscious markets such as Europe and America, it is
emerging as a major player, based on its performance. India today exports: Engine
and engine parts, electrical parts, drive transmission & steering pats, suspension &
braking parts among others.
The sector is striding inroads into the rural middle class after its inroads into
the urban markets and rural rich. It is trying to bring in varying products to suit
requirements of different class segments of customers.
States like Rajasthan, Uttar Pradesh, Maharashtra, 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, each state is proposing
to provide all regulatory clearances at express speed.
            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.
            The current policy allows Weighted Tax Deduction under I.T. Act, 1961
for sponsored research and in-house R&D expenditure. This will be improved
further for research and development activities of vehicle and component
manufacturers from the current level of 125%.
            In addition, Vehicle manufacturers will also be considered for a rebate on
the applicable excise duty for every 1% of the gross turnover of the company
expended during the year on Research and Development carried either in-house
under a distinct dedicated entity, faculty or division within the company assessed
as competent and qualified for the purpose or in any other R&D institution in the
country. This would include R & D leading to adoption of low emission
technologies and energy saving devices.
           Government will encourage setting up of independent auto design firms by
providing them tax breaks, concessional duty on plant/equipment imports and
granting automatic approval.
          Allocations to automotive cess fund created for R&D of automotive industry
shall be increased and the scope of activities covered under it enlarged.
Automobile industry – Wheels of Change
              India had its date with this wonderful vehicle first time in 1898. Then for
the next fifty years, cars were imported to satisfy domestic demand. Between 1910
and 20's the automobile industry made a humble beginning by setting up assembly
plants in Mumbai, Calcutta and Chennai. The import/assembly of vehicles grew
consistently after the 1920's, crossing the 30,000 mark in 1930. In 1946, 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.
Hindustan Motors (HM), which started as a manufacturer of auto components
graduated to manufacture cars in 1949. Thanks to the Licence Raj which restricted
foreign competitors to enter the Indian car market, Indian roads were ruled by
Ambassador Car from Hindustan Motors and the Fiat from Premier Auto Ltd. for
many of the initial years.
              In 1952, the GOI set up a tariff commission to devise regulations to
develop an indigenous automobile industry in the country. After the commission
submitted its recommendations, the GOI asked assembly plants, which did not
have plans to set up manufacturing facilities, to shut operations. As a result
General Motors, Ford and other assemblers closed operations in the country. The
year was 1954 and this decision of the government marked a turning point in the
history of the Indian car industry. The GOI also had a say in what type of vehicle
each manufacturer should make. Therefore, each product was safely cocooned in
its own segment with no fears of any impending competition. Also, no new entrant
was allowed even though they had plans of a full-fledged manufacturing program.
The restrictive set of policies was chiefly aimed at building an indigenous auto
industry. However, the restrictions on foreign collaborations led to limitations on
import of technology through technical agreements. In the absence of adequate
technology and purchasing power, the car industry grew at a snail's pace in the
60’s. The demand for cars in 1960 was to the tune of 15,714. In the next two
decades the number increased to 30,989 i.e. a CAGR of only 3.5 per cent. 
            The other control imposed on carmakers related to production capacity and
distribution. The GOI control even extended to fixation of prices for cars and
dealer commissions. This triggered the start of a protracted legal battle in 1969
between some carmakers and GOI. Simply put, the three decades following the
establishment of the passenger car industry in India and leading upto the early
1980s, proved to be the 'dark ages' for the consumer, as his choice throughout this
period was limited to two models viz. Ambassador and Padmini. It was only in
1985, after the entry of Maruti Udyog, that the car makers were given a free hand
to fix the prices of cars, thus, effectively abolishing all controls relating to the
pricing of the end product.
          In the early 80's, a series of liberal policy changes were announced marking
another turning point for the automobile industry. The GOI entered the car
business, with a 74% stake in Maruti Udyog Ltd (MUL), the joint venture with
Suzuki Motors Ltd of Japan. 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. Car sales grew by 42 per cent yoy in 1985 after
Maruti 800 was launched. Thanks to MUL car sales registered a CAGR of 18.6 per
cent i.e. from 1981 to 1990.
          In 1985, the GOI announced its famous broadbanding policy which gave
new licenses to broad groups of automotive products like two and four-wheeled
vehicles. Though a liberal move, the licensing system was still very much intact.
MUL introduced 'Maruti 800' in 1983 providing a complete facelift to the
Indian car industry. The car was launched as a "people’s car" with a price tag of Rs
40,000. This changed the industry's profile dramatically. Maruti 800 was well
accepted by middle income families in the country and its sales increased from
1,200 units in FY84 to more than 200,000 units in FY99. However in FY2000, this
figure came down due to rising competition from Hyundai's 'Santro', Telco's Indica
and Daewoo's 'Matiz'.
         MUL extended its product range to include vans, multi-utility vehicles
(MUVs) and mid-sized cars. The company has single handedly driven the sales of
cars in the country cornering around 79.6% market share. With increasing
competition from new entrants, this market share has plummeted to almost 62% in
FY2000.
           A brief 3-year downturn till 1993 and car sales bounced back to register a
17 per cent growth rate in 1997.Since then, the economy slumped into recession
and sales of cars remained quite stagnant FY97 and FY99. The Financial year 2000
has, however, been the turnaround year for the Auto industry with the economy
looking up. The automobile industry, crossed the half million mark for the first
time in
FY2000.                                                                                      Overwhelmed by
newer models from new and existing players had led to an impressive shift from a
constrained supply situation to a surplus one. Within the past decade, about 30
models have entered the Indian market with a number of models still awaiting
launch. 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. Also the lifting of quantitative restrictions on imports by the recent
policy is expected to add up to the flurry of foreign cars in to the country.
          The Indian Automobile industry registered one of the strongest growth rates
in FY’04. Aided by sustained economic recovery, the industry registered high
growth rates in all major segments.

          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. Passenger cars also registered an impressive
34% growth in FY’04 and total sales volume crossed the 1 million mark for the
first time. Interestingly, two wheelers registered the lowest but healthy growth rate
of 13% in FY’04. While motorcycle volumes tripped on a high base, scooters
registered a 10%
growth after 4 years of continuous decline. Three wheelers grew by 23% in FY’04.
           Apart from strong economic growth in all sectors, low interest rate regime,
normal monsoon, continued infrastructure investment, fiscal measures like cut in
excise duty (in case of cars), etc provided impetus for the growth. The year also
saw a sharp 56% rise in export volumes with all the sectors registering more than
40% growth, signalling the
rising international competitiveness of the industry.
            Profitability improvements were recorded in companies across segments
driven by rise in volumes and lower interest costs to some extent, notwithstanding
the rise in prices of certain inputs like steel.

          Though the peak customs duty had been reduced to 20% in January 2004
and Special Additional Duty was abolished, the domestic industry still enjoys
adequate protection, with no import threats. 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.       
          Many companies have entered the car manufacturing sector, to tap the
middle and premium end of car industry.
Background of Automobile Industry
  The automobiles industry for many years operated in a seller's market. In such a
scenario the manufacturer could offer outdated models and also raise prices at will.
Little or no attempt was made to control costs or to offer new products. Lack of
innovation restricted the consumer’s options to the models offered by these
companies.

  The number of manufacturers (domestic and foreign) increased dramatically after

the de-licensing of the sector. Increased competition has forced companies to focus
on cutting costs, improve technology and styling through research. It has also
constrained them to limit price increases.

  Availability of easy credit facilities also resulted in creating demand for

automobiles. The car financing market has boomed from a turnover of Rs 7,000 m
in FY95 to nearly Rs 35,000 m in FY97.

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:

                      Category                       Models

 Economy segment (upto Rs 0.25mn) Maruti Omni, Maruti 800 etc.

Mid-size segment (Rs 0.25-0.45 mn) Fiat Uno, Hyundai Santro, tata
Indica, Maruti Alto etc.

Luxury car segment (Rs 0.45- 1mn) Tata Indigo, Honda City, Mitsibushi
Lancer, Ford Ikon, Opel Astra,
Hyundai Accent & others

Super luxury segment (above Rs Mercedes Benz & other imported

1mn) models

The economy segment has a very large foothold over the Indian automobile market
as compared to the mid-size and luxury segment.

                      Segment                        Market Share (%)

                    Economy                            90.2

           Mid-size and luxury                              9.8

Source:  SIAM/ Auto Car India

  Increased urbanisation, low pricing policies, improvement in products and

technology have fuelled demand for 4-wheelers. The markets are clearly
segmented between economy models and premium models. The easy availability
of finance and increased levels of disposable incomes has led to higher demand for
premium models. Rural areas have also become an exciting market to cater to.
  The growth of the economy has also resulted in a shift in consumer preferences in
each of the segment. Gradual shift can be seen in buyers from mopeds to economy
scooters, from economy scooters to premium and from premium to motorcycles
  The passenger car segment has seen rapid growth on the back of rise in disposable
income, increased availability of consumer finance, and reduction in excise and
customs duties. Post-1991, this segment has seen maximum foreign investment.
There is a clear segmentation of passenger cars based on price and size. While the
lower and medium range cars (Maruti, Ford, Cielo) have been moderately
successful, luxury cars such as Mercedes have found the going tough.
  The CV segment is directly linked to industrial production and foreign trade and is
therefore subject to cyclical fluctuations of the economy. 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.

  Demand for utility vehicles and tractors come from rural India. These vehicles
have witnessed steady demand growth over the past few years due to successive
monsoons, better procurement prices, improved irrigation facilities, and
availability of finance.
  A strong in-house R&D capability allows a manufacturer to develop and introduce
products at lower prices, thus saving costs of importing technology. However,
Indian companies spend very little on R&D.
Availability of quality components is another factor that determines smooth
production without bottlenecks. High rejection rate of auto components has
prompted several global majors like Ford, to get their international suppliers
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. There are several global automobile
companies who were averse to come and invest in India ten years ago, now have
kept India as a priority destination for their investment. Along with the entry of
multinational auto companies, the profile of domestic auto companies too
witnessed a structural change. The stiff competition to access market prompted
companies to go for different models with differing qualities and efficiency. The
market too expanded at a rapid pace with the entry of soft financial assistance from
several financial institutions to middle income households.
              MNCs need to carefully plan their entry into emerging markets. Early
commitment to a market often results in first mover advantages that are difficult to
replicate. On the other hand, later entrants have the opportunity to learn from the
mistakes of the first entrant. The Indian car market offers useful lessons in this
context. In the 1990s, the Indian Government removed several restrictions in a bid
to attract foreign investors into the automobile industry. Among the first to enter
was Daewoo of South Korea, with its model Cielo, targeted at the upper end of the
market. Other MNCs such as Ford and General Motors also entered the Indian
market, followed by Hyundai, Honda, Toyota, Volkswagen etc.
           Most MNCs began their operations in India as joint ventures with local
partners.  Examples include Suzuki, G.M, Ford and Daewoo.  With the exception
of Suzuki,  these joint ventures have become fully owned subsidiaries of the
foreign partners.  In all these cases, the local partners have just not had enough
resources to chip in whenever the equity base has been expanded.  Consequently,
the foreign partners have pumped in the additional capital and raised their equity
stakes

            With the liberalization of the India economy, the Rs 18,500 crore Indian car
market is being opened up to foreign investors. Several companies are setting up or
have already set up operations in India to cater to the Indian market. There are
several strategies by which a foreign enterprise can set - up Indian operations. This
module aims to give the various entry options available to a foreign investor,
especially for foreign direct investment. This module does not deal with portfolio
investments.
            Broadly, entry strategies may be classified into two major types :-
1. 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 ; or
2. It may do so through an Indian arm i.e. through a subsidiary company set -
up in India under Indian laws.
            Generally, setting up operations through an Indian arm is advisable,
especially if the quantum of investment is huge.
             The impact of India’s initiatives in economic liberalization and
globalization (post 1991) is most apparent in the automotive sector. Automotive
industry is a key driver of economic growth contributing around four to five
percent to the Indian GDP. Introduction of reforms and entry of international
companies has intensified competition in the Indian automotive sector. 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. The changing structure
of this industry has posed many challenges and opportunities to the market
participants.
             Previously, Indian automotive market was characterized by weak air
pollution regulations. In addition, low labor cost of maintenance and the psyche of
Indian consumer to delay the discarding of the old vehicle reduced the scrap rate.
All these factors resulted in prolonged operational existence of vehicle on Indian
roads. The benefit of this practice is the comparatively higher revenues for
automotive component suppliers, due to increased demand in the aftermarket. 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. This will
reduce the average life span of vehicles on road and the overall impact would be
reduced per vehicle parts consumption.
               Two wheelers generate the highest volumes and are more popular in rural
and semi urban markets primarily due to lower income levels and poor road
conditions. Therefore, these could be classified as entry-level vehicles. Within two
wheeler segments, progressively mopeds are likely to be replaced by motorcycles.
With the growth in the family income of these rural and semi-urban buyers and the
option of numerous used cars, it is expected that a significant shift would take
place from two wheelers (mainly scooters) to four wheelers. Lucrative finance
schemes have made the purchase of mid-sized cars really affordable. 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.

               Good performance of the economy has led to higher all round growth
leading to high GDP growth of 8%. Excise duty reduction on passenger vehicles
helped to reduce the ultimate price to the customer. Brisk activities on
infrastructural development will give a boost to the automobile industry. Softening
of interest rates and improved financing of second hand vehicles have made the
purchasing of cars financially viable. Availability of finance in rural and semi-
urban areas have led the low-end customers to put money in the purchase of
vehicles. Emergence of India as a manufacturing hub for the automobile industry is
a good sign for the country’s future prospects.
               The automotive industry performance is closely linked to industrial
growth. It is hoped that industrial growth would be around 7 per cent during the
year 2003-04 as against around 6.5% last year. Agriculture output during the year
2003-04 increased by over 10% as compared to (-)3.2% in the previous year.
Today we are fourth largest economy (USD 2.5 trillion) in the world after USA,
Japan and China in terms of purchasing power parity. 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, which would ensure robust growth in the
automotive sector.
               Good performance of the economy has led to higher all round growth
leading to high GDP growth

The landmarks along the way...

1928- The first imported car was seen on Indian roads
1942- Hindustan Motors incorporated
1944- Premier automobiles started
1948- First car manufactured in India
1953- The Government of India decreed that only those firms which have a
manufacturing program should be allowed to operate
1955- 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.
1960 - 1970 - The two, three wheeler industries established a foothold in the Indian
scenario.
1970 - 1980 - Not much change was witnessed during this period. The major
factors affecting the industry were the implementation of the MRTP Act
(Monopolies and Restrictive Trade Practices Act), FERA (Foreign Exchange
Regulation Act) and the Oil Shock of 1973 and 1979.
1980 - 1990 - The first phase of liberalization was announced by the Govt. -With
the liberalization of the Government's protectionist policies, the advantages
hitherto enjoyed by the Indian car manufacturers like monopoly, oligopoly, slowly
began to disappear.
1991 - Under the Govt.'s new National Industrial Policy, the license raj was
dispensed with, and the automobile industries were allowed to expand freely.
1993 - With the winds of liberalization sweeping the Indian car market, many
multinationals like Daewoo, Peugeot, general Motors, Mercedes-Benz and Fiat
came into the Indian car market.
1997 - The National Highway Policy was announced which will hopefully have a
positive impact on the automobile industry. The Government also laid down the
emission standards to be met by car manufacturers in India in the coming
millennium. There were two successively stringent emission levels to be met by
April 2000 and April 2005, respectively. These norms were benchmarked on the
basis of those already adopted in Europe, hence the names Euro I (equivalent to
India 2000) and the Indian equivalent of Euro II.
1999 - The Hon’ble Supreme Court passed an order directing all car manufacturers
to comply with Euro I emission norms (India 2000 norms) by the 1st of May, 1999
in National Capital Region(NCR) of Delhi. The deadline was later extended to 1st
June, 1999
2004 -  Tata Motors becomes the first Indian auto company to be listed on the New
York Stock Exchange.

Auto policy of the Government of India

VISION
To establish a globally competitive automotive industry in India and to double its
contribution to the economy by 2010.

POLICY OBJECTIVES
This policy aims to promote integrated, phased, enduring and self-sustained growth
of the Indian automotive industry. 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;
 Promote a globally competitive automotive industry and emerge as a global
source for auto components;
 Establish an international hub for manufacturing small, affordable passenger
cars and a key center for manufacturing Tractors and Two-wheelers in the world;
 Ensure a balanced transition to open trade at a minimal risk to the Indian
economy and local industry;
 Conduce incessant modernization of the industry and facilitate indigenous
design, research and development;
 Steer India's software industry into automotive technology;
 Assist development of vehicles propelled by alternate energy sources;
 Development of domestic safety and environmental standards at par with
international standards.
SIAM welcomed the announcement of Auto Policy, and feels that the policy would
serve as a reference document for all stake holders and other interested parties.
The Auto Policy has spelt out the direction of growth for the auto sector in India
and addresses most concerns of the automobile sector, including-
Promotion of R&D in the automotive sector to ensure continuous technology
 upgradation, building better designing capacities to remain competitive;
 Impetus to Alternative Fuel Vehicles through appropriate long term fiscal
structure to facilitate their acceptance;
 Emphasis on low emission fuel auto technologies and availability of
appropriate auto fuels and 
encouragement to construction of safer bus/truck bodies - 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. The terminal life policy for
commercial vehicles and move toward international taxing policies linked to age of
vehicles, are steps in the right direction.
SIAM has always been advocating encouragement of value addition within the
country against mere trading activity. However, this aspect has not been fully
addressed. The Auto Policy allows automatic approval for foreign equity
investment upto 100% in the automotive sector and does not lay down any
minimum investment criteria.
The recommendation of promoting passenger cars of length upto 3.8 meters
through excise benefits is not in line with the free market concept and may lead to
market distortion.
However, with the Auto Policy in place, the automotive industry would get further
fillip to become vibrant and globally competitive. 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

Role of Government in Automobile Industry

The government is making efforts to overcome the constraints at their
research centers for automobile industry. India can also learn from countries like
Japan that are already using these technologies for a wide number of applications.
The Indian auto industry should launch programmes for market development and a
wider acceptance of alternative energy-driven vehicles in India. It should also work
in tandem with the government to make India a world leader in this area.

Indian automobile industry is also consistently trying to meet the emerging

challenges of environmental pollution and better safety standard. According to a
study, automobile exhaust contributes more than 60% of the atmospheric pollution
in metropolitan cities, with the growing number of vehicles, the pollution in the
cities is continuously increasing. Government initiated controls by notifying
emission standard from the year 1992 under which were furthers tightened in April
1996 under the Motor Vehicles Act. Euro-I emission norms have already been
made applicable throughout the country and Indian is poised to induct Euro-II
norms across the country by April 2005. Form that date 7 metropolitan cities are
going to switch over to Euro–III norms. To meet this emerging challenges of
newer emission norms Indian automobile industry has already braced itself up with
new investment and fresh technological induction.

With the growing number of vehicles, the pollution in the cities is ever
increasing. Government initiated controls by notifying emission standards from the
year 1992 which were further tightened under the Motor Vehicle Act. For meeting
these norms, unleaded petrol was also introduced in metropolitan cities from 1995,
which enabled fitments of catalytic convertors on new petrol driven vehicles. The
norms are being further tightened from April,2000 when India’s stage one norm
equivalent to Euro-I will become effective. For 2-wheelers, India has announced
one of the tightest norms in the entire world. In the national capital territory region
of Delhi, India’s stage 2 norms equivalent to Euro-II norms, will be effective from
April, 2000, as per the order of Hon’ble Supreme Court. This would apply to
passenger cars.
The government seems most keen to hand over a huge replacement market
on a platter to the automobile industry without ensuring that manufacturers take
responsibility of the emission performance of the vehicles they produce for its
useful life. 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- wheelers from But ultimately, the government could not muster
enough courage to push the mighty automobile industry and enforce it.

Government will encourage and assist establishment of specialized training

institutes for the automobile sector through the active association of interested
automobile industries. These institutes will be set up in Bidadi Industrial area and
Dharwad Growth center. The Institute will be managed by the participating
automobile industries and will train skilled category of auto workers, in specified
skill areas such as painting, welding, auto mechanical, etc. It also is making an
effort abe to enlist the support of multilateral aid institutions to provide part of the
funding for this project, which promises tremendous environment-improvement
benefits for the vehicle, which create pollution.
            The policy of broadbanding capacities in the eighties led to increased
utilization of capacity for four-wheelers in the industry.
            The liberal policy on foreign participation through technical and financial
collaboration in early eighties led to substantial product upgradation and
introduction of new models. But it was alleged that the policy was discriminatory
in favor of MUL, while others like Telco, PAL, HM were denied permission to
produce cars in collaboration with Japanese companies.
            The GOI controls the car sector by way of framing policies on depreciation
norms, import duty on cars and parts used in it, petrol prices and import duty of
steel.
            During the era of socialist inspired controls, the government protected
the car industry from new entrants by making effective use of licenses. However,
after liberalization and with the consequent opening up of the auto sector in 1992-
93, the license raj ceased to exist .
             The perception of a car as a luxury good lead to heavy excise duty on cars.
The excise duty doubled from 25% in FY87 to 55% in FY91. Till 1987, the GOI
followed a discriminatory policy so as to charge lower duty on fuel efficient car
with engine capacity of less than 1000cc. This helped MUL to price its car at a
lower price in comparison to others. But with lobbying from PAL and HM
government withdrew the provision in 1987.
              But with the onset of the liberalization process in the early nineties, the
government has continually rationalized the excise duty regime. Presently, there is
a duty of 40% (16% + 24%) on motor vehicles, designed for transport of not more
than six persons (excluding the driver). On vehicles designed for transport of more
than six persons, but not more than 12 persons, the duty is 32% (16% + 16%).
Over and above the excise duty, cess by the Central Government, states are now
charging a uniform sales tax of 12%. This came in being after the 15th of May
2000. Earlier, states used to charge sales tax varying from 3 to 14%. But MUL
vehicles receive favorable treatment in terms of sales tax as well.
               In line with its treatment for luxury items import duties for car have been
maintained high. In the 80's, import duties varied between 150 to 200% based on
the engine capacity of a car. The import duty on cars and components has come
down in the last few years in line with general reduction in import tariffs. In the
FY98 budget, the import duty on cars has also been further brought down from
50% to 40% ad valorem. 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. The import duty on catalytic converters and
parts thereof has been reduced from 25% to 5%. The duty on CNG kits and parts
thereof have been reduced from 10% to 5%.
              The import duty on auto components will be a key factor in deciding the
final pricing of cars as new ventures start with about 50% indigenisation levels.
The reduction 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. Even today, all CKD/SKD imports include metal pressed body panels.

The government has pushed for speedy implementation of infrastructure projects,

which is a good sign for the auto industry, especially the CV manufacturers. In line
with the international experience, improvement in road infrastructure will translate
into increased demand for higher tonnage CVs.
Reduction in customs duty on alloy and non alloy steel would have a positive
impact on the auto components and automobile industry. However, it would be
nullified to some extend by increase in excise duty on steel.

R&D sop will also boost investments in technology related areas. Cess of 2% may
result in increase in end product prices if the manufacturers decide to pass on the
hike.

Rural thrust is likely to result in long term increase in demand of automobiles.

Favourable economic scenario, renewed impetus on infrastructure and thrust on
rural economy are likely to sustain healthy growth rates across segments.

Overall, no significant impact for the automobile industry (other than tractors).
Demand
The demand for cars in the past was supply driven as demand did not match
supply. This led to high premium and long waiting periods for the cars. 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.
The demand for cars was suppressed by various supply constraints. The demand
for cars increased from 15,714 in FY60 to 30,989 in FY80 at a CAGR of only
3.5%. 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 18.6% in car
sales from FY81-FY90. 
After witnessing a downturn from FY90 to FY93, car sales bounced back to
register 17% growth rate till FY97. Since then, the economy slumped into
recession and this affected the growth of the automobile industry as a whole. As a
result car sales remained almost stagnant in the period between FY97 and FY99.
CAGR recorded during the FY94-FY99 period was 14.4%, reaching sales of
409,624 cars in FY99. However, during FY2000, with the revival of economy, the
segment went great guns posting a sales growth of 56%yoy. The table below
indicates the past sales trend for cars -

Cars FY94 FY95 FY96 FY97 FY98 FY99 FY2000

Volume 209,203 264,822 345,486 410,992 417,736 409,624 638,815

Growth %yoy 27.0 27.0 30.0 19.0 2.0 -2.0 55.8

Source : SIAM

The demand for cars is dependent on a number of factors. The key variables are
per capita income, introduction of new models, availability & cost of car financing
schemes, price of cars, incidence of duties and taxes, depreciation norms, fuel cost
and its subsidization, public transport facilities etc. The first four factors viz,
increase in per capita income, introduction of new models, availability & cost of
car financing have positive relationship with the demand whereas others have an
inverse   relationship with demand for cars.
The demand for cars in the future can be estimated with the help of making use of
macro economic variables like growth in GDP, per capita income etc. or house
hold penetration technique. 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 cars in the future is expected to come predominantly from
the existing two-wheeler owners who will be upgrading to a four-wheeler, due
to rising income and necessity of car for personal transportation purposes.
Therefore, excluding the owners of mopeds, 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.
But with the release of new models in the higher end of the economy segment, the
supply of second hand economy cars is expected to increase substantially, which
will be costing just about two times the price of premium range two-wheelers. This
could affect the demand for first hand/new cars. Also, with cross demand from
utility vehicles, availability of finance and other factors the above mentioned
potential for cars will be difficult to realize. Growth in the segment thus is
expected to hover around 15-20%yoy.
The dominance of economy segment will continue in the future as it will provide
large volume to Indian car industry. This is because a majority of customers for
cars will graduate from two-wheelers. The demand for mid-sized and premium
cars is   expected to rise as new models enter the market, income levels rise and
present car owners upgrading from the economy segment to higher end cars.
Supply
The supply of cars in Indian industry till 1991 was dependent upon the production
capacity of individual players. The production of cars has increased from 42,475
units to 181,420 units from 1981 to 1991 respectively. 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- 96. The table below gives the production numbers of
passenger cars in the past few years.

Cars FY94 FY95 FY96 FY97 FY98 FY99 FY2000

Production 207,658 264,468 348,146 407,539 401,002 390,355 577,243

Growth %yoy 27.2 27.4 31.6 17.1 (1.6) (2.7) 32.4

Source: SIAM 
The major increase in production of cars in the 80's was due to the entry of MUL in
1983, which helped increase car production by 20,000 to 30,000 cars per annum
till the early nineties.
With the entry of MUL, the face of the passenger car industry changed forever.
Existing producers who had operated in a protected, high margin environment
faced the prospect of not just diminishing market share, but a shift in focus from
producing vehicles to selling them. But MUL made use of the opportunity open to
its technologically superior product and increased its capacity from 100,000 cars in
FY90 to 240,000 cars in FY96 and 350,000 cars in FY98.
The opening of economy in 1993, attracted world majors who joined hands with
existing auto majors, to start their operations at the earliest. The first ones to enter
the field were Mercedes Benz in joint venture with Telco to manufacture E220,
E250D models, Peugeot in JV with PAL to manufacture Peugeot 309L, Fiat in JV
with PAL to manufacture Fiat Uno.
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. This has also helped in reducing
the average waiting period and premium on cars, which were a part and parcel of
car cost in the eighties.
Capacity
The present production capacities is detailed in the table below. This has increased
from an estimated 600,000 units in FY98 to the present 727,000 units in FY2000.

Car Capacity FY2000 Expected

Maruti Udyog 250,000 350,000

Hyundai 110,000 130,000

Telco 100,000 150,000

Daewoo 72,000 130,000

Ford India 50,000 70,000

Fiat India 60,000 60,000

General Motors 25,000 100,000

Honda Siel 30,000 30,000

Hindustan Motors 30,000 50,000

Total 727,000 1,070,000

Thus, capacity utilization in FY2000 stands at 79.4%. This is still better than
utilization levels the world over which stands at around 40%. Production capacities
are expected to increase in the next two years as players introduce new models.
The major increase in supply, as was witnessed in FY2000, will be in the mid-size
and luxury segment. The supply in the future, taking into account the plans
announced by the car majors are expected to grow to 1,070,000 cars by 2002. 
The segment which has seen a number of new entrants in the recent past will see
two new models from the stable of Maruti namely the 'Alto', which will be
available in the 800cc and 1000cc configuration. However, industry sources have
indicated that after the hectic action of the past two years, this segment will slowly
witness some stability in terms of sales volumes and prices. The entry of new
players is expected to create a marketing warfare in the car industry. A start has
already been made by sharp reduction in prices of Daewoo 'Cielo' and Maruti 800.
Lately, the price of Wagon R was also lowered by MUL to face the intensifying
competition. However, with manufacturers having to comply with Euro emission
norms, car manufacturers have sold their products at lowered margins. This is
expected to affect their ability to reduce prices in the future.  
Increased support through finance from auto manufacturers was quite evident in
FY2000. 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. This will also create a platform for upgradation of
existing two-wheeler owners to four-wheelers.
The luxury segment will see more new entrants namely Toyota of Japan, Skoda of
Czech Republic and Proton of Malaysia in the years to come. Recently, companies
like MUL, GM and Hindustan Motors have come out with new models to cover the
present gap in the segment. Therefore, 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, has at
least 85% of its components 'Made in India', by an Indian company. The Indian
passenger car industry as we see today is relatively recent in origins. Except the
ubiquitous Ambassador and the Premier Padmini there was not much moving
around with an Indian tag.
The official mascot of the Indian political system, the Triassic-era
Ambassador has little Indian-ness in it. To start with, the name isn't Indian and
that's only the tip of the iceberg. The design came from Morris Motors and the
present petrol power plant and drive train are Isuzu throwaways. The diesel version
has a BMC engine. Of course everything is made in India now, but do you call a
tree your own if its roots are in someone’s courtyard.
The other pre-Cambrian relic, the Premier Padmini, which till a few months
back was adorning showrooms throughout the country. Its in the market since my
grandpa learnt driving and at the time of its going to grave, the Padmini was a
completely made in India product. But again, there's very little Indian-ness about
the car, except maybe the name Padmini. The entry of Maruti Udyog Ltd, a GoI JV
with Suzuki of Japan, in 1983 with a so-called "peoples" car and a more favorable
policy framework resulted in a growth rate of 18.6% in car sales from FY81-
FY90.  After witnessing a downturn from FY90 to FY93, car sales bounced back
to register 17% growth rate till FY97. Since then, the economy slumped into
recession and this affected the growth of the automobile industry as a whole. As a
result car sales remained almost stagnant in the period between FY97 and FY99.
However, with the revival in the economy, FY2000 turned out to be a significant
year for the industry in which it recorded volume sales of 638,815 units as against
409,951 units in the previous year. Thus, the CAGR for the period FY96 - FY2000
stands at 16.6%.
The present day stunner from HM is the Lancer. As with HM products from
the past, the Lancer is a borrowed from abroad product. The saving grace is only
that this Lancer is a contemporary model and not some. The erstwhile Premier
Auto Ltd. no longer exists. The nearest thing to it in the present is Ind Auto Ltd.
Ind is an acronym for India or Indian, but the products are all borrowed from Italy.
The Uno came to India after the Mafiosi had their fill with it. The Siena is a very
contemporary model. It being a good car and all, but I always wonder why Fiat
doesn't launch it in their motherland. What's this 'special' car for India, Brazil,
Africa, Latin America inc.
Ford did take the pains to design an India specific car, the Ikon. So does the
quest for an Indian car end with the Ikon. No I don't think so. First thing, the
company is American. Secondly, the Ikon's platform is that of the Fiesta, nothing
else. So the only thing Indian about the car is the 'Josh' advertising gimmick.
Starting with the official one, i.e. Maruti, the company, since its inception
has changed the automobile scene in India completely. It's has been the number
one manufacturer, churning out close to 300,000 cars last year. At last count it held
a 64% market share in the passenger car market with four out of every five cars .
on Indian roads being Marutis. Every year it rakes in multi-billion rupee profits,
and, yet the company is nothing more than Suzuki India Ltd.
Telco is a completely Indian carmaker with no major foreign collaborations.
Their Indica was much touted as 'The Indian car', but it was styled by I.D.E.A of
Italy. The engine technology had inputs from 'Moteur Modern' of France. In effect
it was the case of an Italian body being wrapped around Indian mechanicals.
Frankly I would have preferred an Indian body wrapping an Indian platform.
India is also the largest manufacturer of agricultural tractors, motor scooters
and the world's fifth largest commercial vehicle manufacturer.  Each of these
sectors experienced rapid growth during the last three years Demand in these
sectors is  driven by industrial, individual and agricultural consumers respectively.
 The increases have resulted from improved overall economic trends in India
including large doses of foreign investment a more liberalized economy and higher
productivity.
The fortune of the Auto component industry is inextricably linked with that
of the automobile industry which in turn is influenced by the general economic
trends of the country the country's economic growth is projected to grow at more
than six percent per annum in the coming years.  The estimated growth will
automatically emphasize the need for better transport infrastructure facilities. This
means demand for automobiles and hence for auto components, is bound to grow
accordingly. Therefore, good growth prospects are assured for the automobile
industry.
World-wide, cars are segmented on the basis of their size. However, in India,
price is the main factor determining the choice of car. Hence, cars are segmented
on the basis of price into three segments :

Price Range Features of Approximate Market

Segment Main Models
 (Rs. ‘000) the segment Share of the Segment

M-800, Omni,
Price, Fuel
Economy < 250 Uno, 46.9%
Efficiency
Ambassador

Zen, Uno, 118-

NE,Ambassador Price,
1800 ISZ, Performance,
Medium 250-500 43.1%
Contessa, Diesel
Indica, Santro, Option
Matiz

Lancer, Esteem,
Status Value,
Cielo, Accent,
Premium 500 & above Performance, 10.1%
City, Opel
Features.
Astra, Ikon

Sources : various sources

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 semi-urban areas. By international standards however, the Indian car
volumes remain small at just over 1% of the world market with penetration rates of
approximately 3.7 cars per thousand people as against 24 in Thailand, 144 in
Malaysia, 204 in Poland and 90 in Brazil. Cars currently constitute approximately
12% of the total stock of personal vehicles in India.
Rising household income, increased urbanisation, introduction of new models and
availability of cost effective finance are the key demand drivers in the industry.
The premium segment cars are mainly targeted at corporates or businessmen and
are usually bought on consumer finance.
The midsize segment witnessed an increase of around 115% in sales volume
during the period April 1999-March 2000. Currently the economy, medium and
premium segments constitute 46.9%, 43.1% and 10.1% respectively of the market.
Automobile Industry Performance during 2003 – 04
During the year 2003-04 the automobile industry has registered a growth of around
16.5 per cent in numbers and 24 per cent in value terms. 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.

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.  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. However, this is against relatively low and negative growth rates
in the previous years.
Within the passenger vehicle segment, while passenger cars and utility vehicles
have grown at a brisk pace of 28.6% and 27.6% respectively, MPVs have grown at
a lower rate of around 14.5%. However, the growth of MPVs this year is
significant as it was (-) 15.7% in the last year.
Passenger Cars & MUV’s Annual Production
FY 2003 TO 2004 in Nos
MUV -16%;
CARS – 84%
Passenger Cars Sales Segment-Wise Market
Distribution FY 2002 TO 2003 in Nos
Upper C              3% 3%
Misc                    3%
Lower C            10%
Luxury D            2%
A Seg                32%32%%
Upper B            16%%
Lower B            34%

Commercial Vehicles
The performance of the commercial vehicle segment during the course of the year
was very satisfying. It has clocked over 30% growth rate in consecutive years. The
growth rate of all commercial vehicles during the year 2003-04 grew by 36.5%.
M&HCV segment has grown by 39.5% whereas LCVs grew by 32%.
With improved economic performance especially in the agricultural sector besides
expansion of the national highways and expressways, we are also witnessing fleet
rationalisation in the country. This has also led to increased penetration of multi-
axle vehicles on our roads. During the year 1998-99 sale of Multi axle vehicles was
4539. Whereas, in the year 2003-04, 59251 multi-axle vehicles were sold. In
percentage terms an increase of 67% per annum over a five year period. The share
of multi-axle vehicles during the same period has gone up from hardly 5% to
around 40%.
Commercial Vehicles Annual Production
FY 2002 TO 2003 in Nos
BUSES               10%
LCV                   41%
TRUCKS           49%
Exports
The performance of the automobile industry in exports is also encouraging.
Passenger vehicle exports have crossed the hundred thousand mark and clocked
sales of around 1,30,000 and two & three wheelers have crossed three hundred
thousand mark for the first time clocking around 3,33,000. Commercial vehicle
exports have also increased to an all time high of over 17,000. In percentage terms
the growth during the year over the previous year have been almost 80% for
passenger vehicles, over 49% for two & three wheelers and over 40% for
commercial vehicles.
Indian Automobile Market
The Indian market confounds global carmakers simply because of the way it
is segmented. In the West, automobiles are generally segmented according to
platforms -- that is chassis-engine combinations. Price plays a factor but only up to
a point. In India, though, price plays the primary role in segmentation.
Consider first the segments in the European or American market. At the
bottom, you have city cars' -- which include the Daewoo Matiz, the Hyundai
Santro, the Maruti 800, Alto, Fiat Uno, the Zen as well as the Wagon R. Next come
the budget minis -- which would include cars like the Suzuki Swift (our own
Esteem). The next segment, the superminis, would take in cars like the Opel Corsa,
the Ford Ikon. Above the superminis are small family cars -- which include models
like the Opel Astra and the Ford Escort. Medium-sized family cars are bigger and
include cars like the Opel Vectra and Peugeot 406. Compact executive cars are
small but immensely prestigious and include the BMW 3 series and the Mercedes
C class. Executive cars embrace their bigger brothers -- the BMW 5 series and the
Mercedes E class. Only a handful of cars are classified as true-blue luxury cars
 namely-- Jaguar XJ8, the BMW 7 series. And of course there are the niches like
sports, sports utility, and exotics.
The Indian market, of course, is quite differently segmented. The Maruti 800
and Zen fall in a class by their own -- and are referred to as the sub-Rs 2.5-lakh
cars. The next is the Rs 3-4 lakh segment -- which includes all the other cars that
would normally be classified as city cars in Europe. Strictly speaking, the Tata
Indica should fall in the super-mini category because of its specifications -- but
because of price, it competes in the same segment. Above Rs 4 lakh and all the
way up to Rs 10 lakh is the luxury car range. It is loosely divided into two halves --
with Maruti Esteem, Ford Ikon, Hyundai Accent, Daewoo Cielo, Opel Corsa and
Honda City 1.3 falling in the bottom layer, and the Opel Astra, Honda City 1.5 and
Ford Escort in the upper range. The last segment is of premium car segment, which
includes cars like Mercedes Benz and BMW.
Scooters India Ltd (SIL), US-based Amerigon and Bangalore-based Maini
Group are negotiating a joint venture to manufacture an electrical passenger car.
Priced at Rs 1.75 lakhs, the car will target the segment between two-wheelers and
petrol/diesel based cars. Assembly from imported Completely Knocked Down
(CKD) kits will start as soon as an agreement is finalised among the partners. This
venture represents a major manufacturing shift for SIL, a public sector enterprise,
which so far has only produced two- and three-wheelers. It also plans to introduce
an electric three-wheeler model, already in use in Nepal, into the Indian market.
Bajaj Auto has introduced its diesel three-wheeler in Hyderabad. The vehicle
has a 416 cc engine and is priced at Rs 83,000, lower than its nearest competitor
the Greaves Garuda, which is priced at Rs 85,000 (in Hyderabad). Bajaj’s petrol
three-wheelers already account for 85 per cent of the India market. Its new product,
consequentially, could erode its own base.
Indian Automobile industry has become more competitive in the export
market due to its technological and quality advances, so much so that in quality
conscious markets such as Europe and America, Indian automobile industry is
emerging as a major player judging by its performance. India today exports:
Engine and engine parts, electrical parts, drive transmission & steering pats,
suspension & braking parts among others.
Strengths of the Automobile Industry

  Low labor cost:

         India enjoys a comparative cost advantage in labour as compared
to western countries.
  Skilled Manpower:
        India has vast pool of skilled manpower and qualified
engineers among the largest in the world.

       On a scale of 1-10, 1 = low, 10 = high.

Availability of Skilled labour.

Sr No          Country                  Points.
1                   India                           8.5
2                   Brazil                          7.5
3                   US                              7.4
4                   Germany                    6.6
5                   Mexico                       6.6

Availability of Qualified Engineers.

Sr No           Country                 Points.
1                   Germany                   7.5
2                   India                          7.4
3                   US                             7.2
4                   Brazil                        6.4
5                   Mexico                      6.3
 Reference: Competitiveness of Indian automotive industry Feb 2004.
Weaknesses of the Automobile Industry

  Low labor productivity:

          Cost advantage in labor wages is nullified by the fact that we have lower
labor productivity.

  Defect rates high:

         We have a higher defect rate about 10 times the world average.

  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.

  Not reached critical mass:

          Indian companies are in nascent stage and hence not able to cater to the
requirements of OEM’s. Our auto- ancillary industry is of 2.4 bn $ while Ford’s
outsourcing budget is 86 bn $.

  Poor infrastructure :
         Poor infrastructure like roads, ports, railways which lead to
higher logistics cost and lower reliability.
Opportunities for the Automobile Industry
Global automobile companies are setting up manufacturing facilities in
India. Also, many Indian automobile manufacturers have announced their plans to
increase the export of vehicles from India. The year 2002-03 has already seen a
significant 65% increase in export volumes during the period April to March. This
trend is expected to continue with more global OEMs sourcing vehicles from their
Indian plants.
Additionally, the introduction of newer technologies such as Electronic
Diesel Control Systems to reduce emission levels, safety devices such as Air Bags,
Anti-lock Braking Systems, etc. augur well for the Company and the automotive
sector as a whole. These technologies not only offer increased safety for drivers
and passengers, but also result in greater comfort and better drivability.
While there exist many opportunities for growth in business, there are also
quite a few factors, which act as an impediment.
In my last year’s speech I mentioned about the need for a well thought out
and clearly defined policy on emission norms. It is now fairly certain that Bharat
Stage II norms (equivalent of Euro II norms) will be implemented countrywide
starting 2005. It is important that this plan is implemented in time in the interest of
a cleaner environment. Technology is available to meet the advanced emission
norms using gasoline and diesel fuel; Bosch and many other companies have
proved this worldwide. 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.
The spurious and reconditioned goods market, which I also dealt with in
detail in my speech last year, continues to be a worrying factor as it directly affects
our market share. 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. Large quantities of spurious and fake products have been
seized and legal action has been taken against those indulging in such activities.
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 is also
continuously educating the users about the benefits of using genuine spares in
place of spurious and reconditioned spares.
The lack of any significant change in the labor law reforms also continues to
be a matter of concern. 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.
Challenges for the Indian automobile industry
As we move into the new millennium, the Indian Automobile Industry faces
some tremendous opportunities and also great challenges. The growth in
automobile sales has been impressive for the past ten years since liberalization
began. However, with liberalization, the Indian customer has been presented with a
wide range of choices in automobiles, to suit every requirement and budget. 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.
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. Some of the older manufacturers like Premier Automobiles
(manufacturers of Premier cars), Automobile products of India (manufacturers of
Lambretta scooters) and Ideal Jawa (manufacturers of Jawa and Yezdi
motorcycles) have closed shop. Hindustan Motors (manufacturers of Ambassador
and Contessa cars) is in trouble due to the declining sales of its car’s, as most
customers prefer the newer models available in the market. 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.
To add to the problems, come April 2001, under the WTO agreement, India
will have to permit import of fully built automobiles, which hitherto was not
permitted. The foreign manufacturers such as GM, Ford and Daimler Chrysler will
almost certainly import vehicles from their large portfolio of models and makes,
further segmenting the market into niches, although how competitive they are in
terms of price remains to be seen.
The challenge before the industry is to figure out the strategy for survival
and growth. 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. One way
to achieve this will be to go for exports in a big way. Maruti is already exporting
vehicles, as are Mahindra, Telco, Daimler Chrysler and more recently Daewoo.
The overseas markets will have to be exploited more aggressively, but this will
mean the companies will have to invest more in Research and Development of new
models with better features.
The second opportunity is to become contract manufacturers for overseas
companies. A number of Japanese and Korean companies have been following this
strategy very successfully. Hindustan Motors is said to be considering this option.
The third opportunity is to overcome the vulnerability of the automobile market to
oil prices by designing vehicles, which can offer lower fuel consumption. Recent
reports suggest the government is exploring the possibility of introducing Gasohol,
which is a mixture of Petrol and Alcohol. Gasohol has been very successful in
 Brazil. Since Alcohol is a by-product of the Sugar industry (of which India has the
worlds largest), this is a very logical step that should have been taken many years
ago. Even a small percentage reduction in the consumption of petroleum per
vehicle can make a big difference to the balance of payments.
The industry must focus its R&D efforts in line with the global trends, which
is to build vehicles that are considerably more fuel efficient and less polluting.
With growing awareness among the public about pollution and the effective
campaigns carried out by the NGO's, this will increasingly become an important
selling feature. 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. Even Maruti despite its foreign 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. 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. As more vehicles come on the
road, 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.
They will also need to assist government agencies in better road design and in
building of multilevel parking lots. 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.
In terms of the world averages, India's vehicle density is very low and if we
have to achieve those density levels, 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.

The Challenges

  External Level :
  Integrating into Global Supply Chains
  WTO – Multilateral trade regimes
  FTA’s (i.e. Bi-lateral Trade)
  Country Level :
  Infrastructure
  Cascading effect of Taxes
  Cost of Capital
  Cost of Power
  Inflexible labor laws Inflexible labor laws
  Firm Level :
  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

Appropriate Strategies – the key to success:

  Government :

Flexible Labor laws :

            Stringent labor laws in India are hindering the over all

development of the Industry. Changing these archaic laws will help in attracting

investment and lead to expansion of the industry.

Cutting down R.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.

Corpus for R& D & expansion:

           Since most of auto ancillary companies are up coming their range of

operation is limited to a few products. In order to encourage these companies to
venture into new product categories Government should allocate Soft loans.

Auto expo zones:

          On lines on software technology parks, govt. should establish export zones
of auto-ancillary industries, equipping them with infrastructure & offering them tax
sops or holidays.

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.

  Industry :

Marketing and Advertising in potential markets:

           ACMA in collaboration with CII or FICCI should organize Trade fairs
showcasing Indian Auto ancillary industry both in India and abroad.
Acquiring Auto ancillary companies in potential markets:
          Acquiring companies in overseas market gives a direct entry in that market
to Indian companies. For e.g. Bharat Forge acquired one of the largest forging
companies in
Germany, Carl Dan Peddinghaus GmbH (CDP).
Moving up the value chain:
         Automobiles companies are going for aggregate buying, hence company
should try to acquire tier I status and ultimately target OEM status.
Leveraging Software skills
Culture change:
        Auto ancillary industry should adopt concepts like six sigma rather than
continuing with post Morton analysis.
R & D spending:

          Industry should target at allocating at least 5 % of their revenues on R & D

expenditures for achieving cutting edge in technology.
Competitive Scenario
The industry witnessed radical changes and entered a competitive phase with de-
licensing and liberalization in the 1990s. 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, especially in the mid car segment. The attraction
for these companies was the largely untapped Indian market. However, these
companies over-estimated the market in the short term and set up larger than
required capacities. This resulted in price wars and thereby affected the expected
margins.
The global automotive industry is currently undergoing consolidation phase and
the repercussions of this consolidation are likely to be experienced in India, too.
The installed capacity for passenger car production in India is likely to reach
around 1.8mn by end-2004, but the total passenger car sales is expected to be
around 0.9mn. This explains an over-capacity of around 50% as compared to the
global over-capacity of around 30%. The consolidation of the automotive vehicle
industry is likely to have serious implications on the automotive component
industry too.
Most of the foreign companies entered India using the joint venture/collaboration
route. While many of these conglomerates have turned out to be mutually
beneficial few tie-ups weren’t as successful. For example, Mahindra & Mahindra
pulled out of car joint venture with Ford, General Motors bought over the stake of
Hindustan Motors in its Indian car venture. Mercedes Benz has decided to operate
independently after suffering severe losses with Indian partner Telco. Indian
players are trying to maintain their hold on the Indian market, not giving in to
multinationals. But the very fact of Indian company’s reliance on foreign partners
 for technology is likely to drive the trend of collaborations followed by
consolidations.
Foreign companies are now all over the Indian market. There is a need for a level
playing field to bolster Indian auto industry.It is already a level playing field for
companies setting up shop in India. Even in the case of imports, entry barriers in
commercial vehicle industry are among the lowest, with tariff at half that of cars.
However, on the global plane, things are different. Though the Indian industry, in
the last few years especially, has gained considerably in internal efficiencies, in
terms of external factors such as cost of finance, infrastructure and labour
legislation, 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, Bentley, Audi, BMW all set to venture in the Indian
markets. We take a look at the key factors that are vital for gaining a stronghold in
such a competitive scenario.
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 cost-high

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

  T P M

  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

  Most Indian companies have arrangements with major Logistic Providers for JIT
Supplies.

  Adequate Warehousing support and onsite Engineering support

Global Scenario
The passenger car segment has emerged as a major driving force for upstream
industries like steel, iron, aluminum, rubber, plastics, glass, and electronics and
down stream industries like advertising and marketing, transport and insurance.
The car industry generates large amount of employment opportunities in the
economy. For example in the US, every sixth worker is involved in the making of
an automobile.
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. Growth has dropped due to the
increasing levels of saturation in the larger car markets of the world. Worldwide
the trend is towards ensuring that one's products are superior in terms of quality.
This will enhance the useful life of cars and, hence, slow down growth in sales.The
world car production has increased from 44.66 mn in 1996 to an estimated 48.3 mn
cars in 1999. Japan, Canada and USA brought about the major increases, which
contribute to 53% of the world's car production. The largest car market - the US
market expects car sales to decline 8 to 9 per cent to 16 million cars in 2001, as
compared to 17.4 million cars sold in 2000. 
The USA and Japan are the leaders with around 42% of the total world market.
However, since the last two to three years, the international passenger car industry
has been witnessing an over capacity of more than 30%. The trend suggests that
industry volumes may grow by just 2% or around 10 mn vehicles per year. If this
situation continues for the next few years the world car market may witness
shakeout in the near future. Already signs towards this are being observed as the
phenomenon of mergers catches on. The recent mergers in the international car
market are Ford-Volvo, Renault-Nissan, Daimler-Chrysler. 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. Among the top car manufacturing companies General Motors and
Ford Motors group of USA lead with a contribution of 15.8% and 11.6%, of world
car production, respectively. Volkswagen and Toyota stand third and fourth with
more than 9% contribution each to the world car production.

The global domination of the larger automotive manufacturers is slowly on the

wane and the trend in sales is shifting towards more "regio-centric" products.
Automakers that have been enjoying a generally prosperous spell would have to
rethink on the way vehicles are designed, manufactured, distributed or sold.
Already, players like General Motors Volkswagen and Toyota have begun to re-
examine their dealer relationships and pricing strategies. Car makers would now
have to think in terms of a new customer focus and provide better financing and
servicing. Strategic tie-ups, mergers and acquisitions have become the talk of the
day. A few instances are Daimler Benz's tie-up with Chrysler of the US, Ford's
acquiring of Daewoo and tie up with Volvo Car Corporation and Renault acquiring
a stake in Nissan. 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.

With global consolidation in the car industry, it is expected that more international

players will work closely to bring about operational efficiencies. By nature, the car
industry is highly capital-intensive and vast amounts of money are being spent on
R&D. With the players getting together to produce more technologically superior
cars, they can derive greater benefits from their R&D efforts. Profits, which are
under pressure due to wafer thin margins will be boosted due to greater economies
of scale. Moreover, bigger capacities among players means lesser fixed costs per
car produced. 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), technology-sharing and the offering of equity stakes is
inevitable.
In India, the car market has become extremely competitive and come April 2001,
India's automobile market will be thrown open to imports of completely built up
vehicles, which hitherto was prohibited. With the international acquisitions and
alliances, one can expect to see a dramatic change in the auto market. If GM were
to acquire Daewoo in Korea, then GM would be in a commanding position in India
with its alliance with FIAT and Suzuki motors as well. Already Daimler Chrysler
and Ford are contemplating introducing new models in India from their various
associate companies through their local subsidiaries. The situation could become
very difficult for the purely Indian automakers such as Telco, Mahindra and
Hindustan Motors unless they rethink their strategy. 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. 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, but cannot enter full scale
manufacture due to the small market sizes.
Clearly exports will be the big opportunity for Indian automobile companies if they
can control costs and deliver good quality output. Already Maruti, Hyundai and
Ford as well as Mercedes Benz have started exports in a small way and this can
grow. Majors like TELCO and Ashok Leyland are already exporting their products
in reasonable volumes.
Availability of easy financing options has been a major reason for the dramatic
growth the automobile market has witnessed in recent times. Maruti has set up a
separate financing unit in association with banks. GM has one of the largest
financing companies in the US and can easily bring them into India should it so
decide. Clearly the customer is in for some good times with a wide range of
models to choose from, better quality and prices and easy financing options - a far
cry indeed from the days when one had to book a Premier car and wait for years
after paying an advance.
Key Driver – Global Business
Step 1 : CKD/SKD Assembly

Step 2 : Localisation

Step 3 : Future already on horizon

- Natural follow-thru is global sourcing.

Most Global OEMs have Indian operations with global platforms and world cars.
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, & Plans 500 Mill USD outsourcing

Renault: Sourcing Truck Parts

DC: exported Euro 70 Mill to its subsidiaries abroad
Two Chinese Truck OEMs: Sourcing Drive Trains
Different players in Automobile industry
Jagdish Khattar. Y.S. Kim. Ratan Tata. S.G. Awasthi. The four men are peers.
Each has unequivocally established himself as one of the winners in the first round
of the car wars. Between them, they control almost 80% of the Rs 30,500-crore
Indian automobile market.
The battle royale in the Indian car market has entered the next phase. As the dust
and excitement of the dozens of new models introduced in the past one year settles
down, the winners have pulled way ahead of the also-rans. One old assumption has
been vindicated -- that over 80% of the Indian car market is still confined to the
small, sub-Rs 4 lakh models. And those mid-size and bigger models can only
provide the icing on the cake, not the cake itself to any manufacturer.
Maruti found out that price is no longer the most important factor in winning car
battles. Daewoo's Awasthi admits candidly that he learnt precisely the opposite
lesson -- that price does matter. 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. 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. Both the Indica and the
Matiz had to upgrade their engines in less than one year after launch, the Honda
City had to bring in both a new body and a more powerful engine, and Hyundai
had to start offering a new variant with the power steering option barely a year
after it hit the market.
From now on, the battle is expected to get more vicious. In 1999-2000, the car
market bounced back from the recession by showing a 55.83% growth! But now,
no one expects the market to grow by more than 10-15% per annum. The really big
volume gains will come from wresting market share away from rivals rather than
because the market itself is growing exponentially.
Maruti Udyog Ltd.
December 1983 heralded a revolution in the Indian car industry. Maruti
collaborated with Suzuki of Japan to produce the first affordable car for the
average Indian. At this time, the Indian car market had stagnated at a volume of
30,000 to 40,000 cars for the decade ending 1983. This was from where Maruti
took over.
Nineteen years back Maruti introduced the first small car in the Indian auto
market. They started with their model Maruti 800 which was very popular at that
time and still its major cash cow. The models, which were available at that time,
were Premier Padmini and Ambassador. Customers were interested in having some
different types of models with some fashionable looks. That was the perfect time to
enter into market and Maruti took right step to introduce its different models.
Maruti established its monopoly over Indian auto market India's largest
automobile company, Maruti entered the Indian car market with the avowed aim to
provide high quality, fuel - efficient, low - cost vehicles. Its cars operate on
Japanese technology, adapted to Indian conditions and Indian car users. Maruti
comes in a variety of models in the small segment.
The sales figure for the year 1993 reached up to 1,96,820. The company
reached a total production of one million vehicles in March 1994 becoming the
first Indian Company to cross this milestone. It crossed the two million mark in
1997.
To fend off growing competition, Maruti has recently completed a Rs. 4
billion expansion project at the current site, which has increased the total
production capacity to over 3,20,000 vehicles per annum. It has further plans to
modernize the existing facilities and to expand its capacity by 1,00,000 units in the
year 1998-99. The total production of the company will exceed 4,00,000 vehicles
per year.
 Maruti registered sales of 39,838 units in April 2004, up 38.4% yoy from 28,793
vehicle units in April 2003. This includes 2,910 units of exports compared to 3,150
in April 2003, decreasing by 7.6%.
 Sales for April 2004:

Segment Models April April  % April'03 –

2004 2003 change March'04

A1 M800 11,097 10,741 3.3% 167,561

C Omni, Versa 4,816 3,972 21.2% 59,526

A2 Alto, WagonR, 19,296 9,668 99.6% 176,132

Zen

A3 Baleno, Esteem 1,313 952 37.9% 14,173

MUV Gypsy, Vitara 406 310 31.0% 3,555

Domestic 36,928 25,643 44.0% 420,947

Export 2,910 3,150 -7.6% 51,175

Total Sales 39,838 28,793 38.4% 472,122

The A1 segment has grown by 3.3% yoy from 10,741 units in April 2003 to 11,097
units. This is lower compared to some of its other segments. The A2 segment
comprising of the Alto, WagonR and Zen registered a 100% growth from 9,668
units in April 2003 to 19,296 units, mainly driven by rising Alto sales. The A3
segment has grown by 38% yoy to 1,313 in April 2004 from 952 in the same
period last year.
The C segment comprising of the Omni and the Versa has shown a 21.2% growth
yoy from 3,972 in the same period last year to 4,816.
In the multi utility vehicle (MUV) comprising Gypsy and Vitara, it sold 406 units
in April 2004 from 310 units in April 2003, a rise of 31% yoy.
 Models of MUL
  Alto
  Maruti 800
  Zen
  Wagon R
  Omni
  Esteem
  Baleno

Hyundai: Can The Dream Run Continue?

Hyundai has become the undisputed number two in the Indian auto market, and the
only one -- even rivals admit -- 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.
Hyundai got everything right because it got the value-price-technology equation
almost perfectly right from day one. 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, at a highly competitive price. 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. And when it launched mid-size Accent some time later, Hyundai
proved that it could get its value-price equation consistently right across different
segments.
But despite its great start, Hyundai made two mistakes.   The two miscalculations
that Hyundai made? First, while Hyundai Santro was harping on the fact that it was
a new generation car, it hadn't brought its latest engine technology to India. It was
a mistake that rival Matiz capitalised on once Euro-II pollution norms were
announced for the metros. 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. Though the latter moved quickly in a damage-control exercise, the Santro
did lose a bit of its sheen. it miscalculated demand for its cars. The result: when
demand peaked for the Santro, it was in no position to offer the car off-the-shelf
like its rivals. Buyers had to wait for three months to get a Santro after booking it.
Hyundai is moving fast to sort out its capacity problem. Work will soon start on
the second phase of its Sriperumbudur car project, one year ahead of what was
initially planned. An additional investment of $400 million will help expand
capacity from 1.2 lakh cars to 2 lakh cars per annum. This expansion is likely to be
completed by December, 2001, ahead of schedule. 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.
That apart, the big worry for Hyundai is that other than the Santro (the Atos in
Korea), it doesn't have any other small car in its armoury. Unlike Suzuki, which is
primarily a small car specialist, Hyundai can only introduce bigger cars in the
Indian market either from its own product range, or those of Kia Motors, which it
took over last year.
Hyundai is looking a bit vulnerable now because globally it is a minnow in the car
market. It lacks the sheer money power and product muscle to keep fighting the
Fords and GMs in any market. And if Ford does take over Daewoo Motors,
Hyundai's number two position in India could be seriously under threat.

Daewoo Motors India: Life After Death

Daewoo should have been dead in the Indian market a long time ago. Shortly after
it invested over $1 billion to build up a fully integrated plant with a capacity to roll
out 1.20 lakh vehicles per annum, its parent went bankrupt. In India, Daewoo
started out on a disastrous note by introducing the Cielo at a high price, then
slashing its price to gain volumes; and then introducing a higher-priced Cielo-
clone, the Nexia.
Even in the small car segment, its entry was ill planned. It launched the Matiz in a
single variant and at the highest price in its class. The Matiz was introduced with a
sticker price of Rs 3.67 lakh while the bigger Hyundai Santro was selling its base
model at Rs 2.98 lakh. Given that the car was considerably smaller than the Zen,
the Santro and the Indica, the Daewoo Matiz almost sank.

Two things have helped Daewoo bounce back though. First, in the case of the
Matiz, it moved fast to introduce lower-priced, stripped-down variants that got the
price-value-technology equation correct. In May, 1999, it introduced new variants,
including the stripped-down, non-AC Matiz SS, and saw its volumes rise 165% to
1,996 from the previous month's 754. It touched a peak volume of 5,853 in March,
2000, before slipping to 3,500 in July, 2000.

More importantly, 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,
unlike its rivals. And now that the Matiz has been voted the best small car in the
world by several prestigious motoring magazines worldwide, Daewoo image has
got a further boost.

But these problems could vanish overnight if Ford takes over Daewoo. The Ford-
Daewoo combine could be the strongest challenger to Maruti here. Despite the
success of the Ikon, Ford's share in the total passenger car market will still be less
than 5% this year. With no small car in its portfolio, Ford can never dream of
playing the numbers game. Daewoo and Matiz, Ford could become the number
two player in Indian market.

Telco-The HomeGrown Challenger

Telco did not boast a great reputation for developing even world-class commercial
vehicles, forget passenger cars. When the Indica hit the market, the consensus
opinion was that Telco had goofed up again.. The Indica was riddled with quality
problems. A year down the line, almost everyone grudgingly admits that the Indica
has been a success. 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.
The Indica cost $400 million from start to finish whereas the Hyundai Accent is
said to have cost $1.6 billion to develop. But the flip side is that all global giants
can amortise the costs of development by selling the same car across different
world markets, Telco can't afford to capture.At the moment though, the Telco
strategy is to tap the niches first. The Indica, with the diesel engines being pushed
hard, was clearly aimed at a segment none of the rivals was addressing. Similarly,
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. And in the SUV
market, Telco has already introduced the premium Safari, which again focuses on a
small niche.
It is a smart strategy as it avoids taking any of the big guns head on. But in the long
run, Telco knows it has to take on its rivals in the mainstream markets as well. It is
ramping up capacity to 160,000 from the current 120,000 cars anticipating that it
will get the demand. But Telco is also the weakest player in the small car market --
and unless it keeps springing surprises, it could be the first casualty in this round of
the car battles. 

Hindustan Motors
Hindustan Motors Ltd (HML) is the oldest passenger car manufacturer in the
country. It also has a small presence in the multi-utility vehicle and the heavy
commercial vehicle segments. The later is generally manufactured for exports.
Other than the automotive sector, the company has diversified into earth moving
equipments and power products. In the passenger car segment, the company has
the well known ‘Ambassador’ and ‘Contessa’ models. It has recently tied with
Mitsubishi of Japan for manufacturing the ‘Lancer’ range of cars. At present, the
company has a market share of 4.2% in the car segment.
HML, incorporated in 1942, is the flagship company of the C.K. 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 1948, it shifted its activities in Uttarpara
near Calcutta and set up facilities to manufacture cars and trucks. Over the years,
HML has diversified into heavy engineering equipment like excavators, cranes,
presses and steel products under the heavy engineering division (HED). With the
division becoming a loss making one, it was hived off to Hyderabad Industries Ltd,
a group company, in FY92. In 1971, HML further diversified its activities to
include earth-moving equipment such as dumpers, front-end loaders etc by setting
up a plant near Chennai. In 1985, HML set up a plant at Hosur in Tamil Nadu for
manufacturing heavy-duty transmission required for earth moving equipments.
In 1986, a project was undertaken to produce HCV’s at Vadodara. A part of
the assets was later sold to a JV between GM and HML, General Motors India Ltd.
In 1987, HML commenced the production of petrol engines in collaboration with
Isuzu Motor Company, Japan. Recently, the company has entered into a technical
collaboration with Mitsubishi of Japan for the manufacture of the ‘Lancer’
car. Commercial production of the car started in October 1998. HML also entered
into collaboration with OKA Motor Company of Australia to produce custom-
designed rural transport vehicle.
Models of Hindustan Motors
  Ambassador 1800 ISZ
  Ambassador 2000 DSL
  Ambassador Nova Diesel
  Contessa motors

Mitsubishi Motors
In the early 1870s, as Japan emerged from over 300 years of feudal isolation, a
young entrepreneur, Yataro Iwasaki, formed a small shipping company named the
Tsukumo Shokia. Following several name changes this company became
Mitsubishi Mail Steamship Company in 1875, the root of the combined Mitsubishi
Companies of today.
A family owned and directed business, 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, business ventures in addition to shipping included
heavy industries with ship building at its helm, banking, trading, mining real estate,
chemicals and many other.

The history of Mitsubishi as an automobile manufacturer dates back long before

the Motor Vehicles Division of Mitsubishi Heavy Industries Ltd. was incorporated
as Mitsubishi Motors Corporation in 1970. Mitsubishi’s epoch making vehicles,
which rolled off the assembly line in 1917, were the Model-A, Japan’s first series
production passenger cars. Always the innovators, the Mitsubishi Model-A were
the pioneers of vehicles in Japan. In early years, the ship and aircraft-
manufacturing arm of Mitsubishi produced vehicles. Therein the provenance of
Mitsubishi Motor’s engineering excellence and the resultant reputation for
outstanding reliability and all around performance of its vehicles.

Today, Mitsubishi Motors ranks as one of the largest vehicle manufacturer, and
one of the very few that can boast a vehicle lineup which extends from mini cars to
heavy-duty trunk buses and other specialized commercial vehicles.

The all new Mitsubishi Lancer comes to you from two automotive giants:
Hindustan Motors and Mitsubishi Motors. A technical collaboration between the
 two, the project brings together their formidable expertise and experience to
provide you with a whole new automotive experience.

Mitsubishi Motors brings the most contemporary technology on Indian roads. The
Lancer has an impeccable rallying pedigree and has proven it's mettle in the
toughest conditions. The combination of high technology and classic build quality
continues to woo customers the world over. Mitsubishi provided you with a
comfortable and intuitive environment to explore the Lancer. There's virtual reality
so you can view  the car as you would in one of our showrooms, 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. There are useful tools to make your buying process
easier.

Not only has HM cleared any doubts pertaining to the quality of its locally-made
Lancer, but it has also proved that its mid-size car is the one customers like or
appreciate most. The Lancer scores superbly in all but the Ride, Handling and
Braking categories, where customers find comparatively more problems, as a result
of the stiffened and raised suspension.

The Lancer wins hands down in the APEAL study too, scoring a full 33 points
more than its closest rival, the Honda City a substantial lead. 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.

Models of Mitsubishi
   MITSUBISHI MONTERO SPORT 3.5XS
   Montero
   Endeavor
   Montero sports
   Outlander
   Lancer Evolution
   Lancer
   Eclipse
   Eclipse Spyder
   Galant
   Dimant
Ashok Leyland
For five decades, Ashok Leyland has been a major presence in India's
commercial vehicle industry. These decades have been punctuated by a number of
technological innovations by Ashok Leyland that went on to become industry
norms. Ashok Leyland was the first to introduce full-air brakes, multi-axled trucks
and a host of innovations in buses. Ashok Leyland's range of dedicated buses
answer the special needs of urban mass transportation. No wonder then that four
out of five STU buses in the Indian metros come from Ashok Leyland. At 60
million passengers a day, Ashok Leyland buses carry more people than the Indian
rail network.
In 1948, when independent India was one year old, Ashok Leyland was
born. Ashok Motors then, assembling Austin cars at the first plant, at Ennore near
Chennai. In 1950 started assembly of Leyland commercial vehicles and soon local
manufacturing under license from British Leyland. With British Leyland
participation in the equity capital, in 1954, the Company was rechristened Ashok
Leyland. In 1987, the overseas holding by LRLIH (Land Rover Leyland
International Holdings Limited) was taken over by a joint venture between the
Hinduja Group, the Non-Resident Indian transnational group and IVECO Fiat
SpA, part of the Fiat Group and Europe's leading truck manufacturer. Ashok
Leyland embarked on a major product and process technology upgradation to
world-class standards of technology.
Since then Ashok Leyland has been a major presence in India's commercial
vehicle industry. These years have been punctuated by a number of technological
innovations which went on to become industry standards. This tradition of
technological leadership was achieved through tie-ups with international
technology leaders and through vigorous in-house R&D.1994 was also the year,
when international technology changed the way India perceived trucks. The year
when a new breed of world class trucks - technologically superior and eco-friendly
- rolled out on Indian roads.
 Ashok Leyland vehicles have built a reputation for reliability and
ruggedness. The 375,000 vehicles we have put on the roads have shared the
additional pressure placed on road transportation in independent India. The share
of goods movement by road rose from 12% in 1950 to 60% in 1995. In passenger
transportation, the jump is equally dramatic: from 25% to 80%. At 60 million
passengers a day, Ashok Leyland buses carry more people than the entire Indian
rail network. In the populous Indian metros, four out of the five State Transport
Undertakings (STU’s) buses come from Ashok Leyland. Some of them like
double-decker and vestibuled buses are unique models from Ashok Leyland, tailor-
made for high-density routes. From our state-of-the-art manufacturing Plant at
Hosur, near Bangalore. They carried the name Cargo. Cargo brought with it, a new
set of values and an unmatched basket of benefits, ushering in a change Cargo and
the state-of-the-art Rs. 6 billion factory at Hosur were built with IVECO'S global
plan in mind. The Hosur plant servers as a world-class manufacturing base for
IVECO supporting its extra-European markets. To Ashok Leyland, it meant
retaining its technological edge against potential global competition.
The Cargo range of trucks meets contemporary emission norms and have
gained acceptance internationally. Besides fully built vehicles exported to many
markets, Cargo is locally assembled in South Africa, East Africa and Egypt from
SKD/CKD packs exported from Hosur. A recognized trading house, Ashok
Leyland exports to over 40 countries. Ashok Leyland's export turnover touched
Rs.1.5 billion in 1997-98.
Committed to Total Quality Management, Ashok Leyland is the country's
first automotive manufacturer to obtain the coveted ISO 9002 certificate followed
by the more comprehensive ISO 9001: 1994 certification and in late 1998, the
latest version of QS 9000. These are major milestones in the company's TQM
journey.
In the journey towards global standards of quality, Ashok Leyland reached a
milestone in 1993 when it became the first in India's automobile industry to win
the ISO 9002 certification. The more comprehensive ISO 9001 certification came
in 1994 and ISO 14001 certification for all vehicle manufacturing units in 2002.
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
  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
                                              
Swaraj Mazda
Swaraj Mazda limited, formerly known as Swaraj Vehicles Ltd., was promoted in
1983, by Punjab Tractors Limited in technical collaboration with Mazda Motor
Corporation, Japan and Sumitomo Corporation, Japan. The Company is in the
manufacture of Light Commercial Vehicles like Trucks, Buses, Ambulance, Police
Personnel Carriers, Water Tankers and Special Vehicles. It exports to countries
like Nepal, Zambia, Bangladesh, Kenya, Tanzania, Ghana, Ivory Coast, Rwanda,
Seychelles Syria and Jordan.
It’s factory is located at village Asron, Dist. Hosiarpur, Punjab and has a
dealer network of about 128 dealers spread throughout the country. Swaraj Engines
and Punjab Scooters are its associate companies. The Company has laid emphasis
on Research & Development and thus made the range of Company’s product
variants, the widest amongst all new LCV manufacturers and has made it lead the
indigenisation of hi-tech components. The company has made improvement in
product-mix and made wider market segment coverage. It has achieved progress
towards compliance of Bharat State-ll emission norms, for implementation in the
National Capital Region and other 3 Metros.
SML has products like Super, 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, powerful engine and higher payload, which is gaining
increased acceptance in the market. In the passenger segment, the differentiation is
in terms of end use rather than the gross vehicle weight. SML products caters to
intra-city transport for short haulage, covering services like ambulance, post office
delivery vans, school buses etc.
The Company has introduced the CNG bus in the National Capital Region
and also the new `Sartaj` model in the 5-ton range. The happier component of this
growth has been the improvement in product-mix as also the wider market segment
covered.
SML has stayed ahead of competition with respect to cost efficiency and
product customisation. Against odd industry condition and performance, Swaraj
Mazda has been able to achieve a sale of 1,302 vehicles, an improvement of 33%
over previous fiscal.
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, Swaraj
Mazda has been able to achieved a sale of 1,302 vehicles an improvement of 33%
over previous fiscal. The Company introduces the CNG bus in the National Capital
 Region and also the new `Sartaj` model in the 5 ton range. The happier component
of this growth has been the improvement in product-mix as also the wider market
segment covered.
SML is planning to grow by making structural changes in the industry,
meeting the regulatory requirements, privatizing the passenger segment and
replacing demand. 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. 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.
Models of Swaraj Mazda
  4 WD BT
  Swaraj Mazda premium
  Swaraj Mazda fire fighter
  Swaraj Mazda prestige
  Trunks
  Swaraj Mazda Dual cab

Mahindra & Mahindra

M&M sold 10,345 units in April 2004, growing by 43% yoy from 7,235 during the
same period last year.

Segments April 2004 April 2003 yoy (%)

UV 8,309 5,971 39.16

LCV 496 431 15.08

Three-wheelers 1,540 833 84.87

Total 10,345 7,235 42.99

8,309 utility vehicles were sold in April 2004 as compared to 5,971 units during
the same period last year registering a 39% yoy growth. Utility vehicle sales
included 2,007 units of the Scorpio model compared to 1,604 units last year.
It sold 496 LCV units compared to 431 LCV units in April 2003 and 1,540 three-
wheelers from 833 three-wheeler units in April 2003. The LCV segment showed a
15% growth compared to last year, however the company saw a huge growth in its
three-wheeler business, which grew by almost 85% yoy.
Tata Motors
Tata Motors registered a 57.7% increase yoy in total sales at 24,961 units in April
2004, compared to 15,829 units in the same period last year.
The company's sales in the domestic market increased by 60.5% yoy at 24,026
vehicles from 14,966 units in April 2003.

Volumes April 2004 April 2003 yoy (%)

Domestic 24,026 14,966 60.54

Exports 935 863 8.34

Total 24,961 15,829 57.69

The company exported 935 units in April 2004 as compared to 863 vehicles in
April last year, which is an 8.3% yoy growth.
CV segment
Commercial vehicle sales at 12,050 units compared to 7,037 units in April last year
growing by 71.2% yoy.

Segment April 2004 April 2003 yoy(%)

M/HCV 7,975 4,530 76.05

LCV 4,075 2,507 62.54

Total 12,050 7,037 71.24

Medium and heavy commercial vehicles sales grew by 76.1% yoy at 7,975 units
and light commercial vehicle sales showing a growth of 62.5% yoy at 4,075 units.
Passenger cars
The passenger car business reported total sales of 11,976 vehicles in the domestic
market registering an increase of 51% over April 2003.
Indica sales recorded a 43.3% growth yoy at 7,251 units, while Indigo sales grew
84.9% yoy at 2,723 units.
Utility Vehicles
Utility vehicles registered a sale of 2,002 units, showing a 43.4% increase as
compared to the same period last year. Sumo sales grew by 48% and Safari sales
grew by 16% over the April 2003.
Automobile Fashion
Automobile Accessories
India has a good network of manufacturers of Auto accessories spread all
over the country. International standards are also kept in mind while producing
these products. Best quality materials are used so as to meet the international
standards. Automobile Accessories such as Wheel Caps, Car Speakers, Fog Lights,
Car Care Products, CAR AC PARTS, Car AC Condenser, Car Cooling Coil, Car
AC Hoses, Car Reciver Drier, FLCD Kit and Car Batteries are available in India.

Automobile Finance
The availability of finance at lower interest rates, have made car purchase an
affordable option for even young executives. Financing schemes varies from
Margin Money Scheme, Installment in advance scheme, stepped schemes and as
varying as balloon schemes, 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. Businessmen and professionals can treat the
interest amount as a business expense and avail tax deductions against the
depreciation of the Car. Companies can also acquire cars for eligible employees
without affecting cash flows. The interest amount can be claimed as business
expense.
Automobile Insurance
            Taking insurance cover for your vehicle is a must especially in Indian
roads. There is danger at every corner when it comes to Indian roads. There is
 always the chance of your brand new vehicle hit by someone who mistakes a
highway for space. Insurance can pay for your financial loss. There are various
insurance schemes available in India. Major Insurance companies in India offering
Auto insurance include The Oriental Insurance Company Ltd and New India
Assurance Company.
Automobile Services
This is a section where the buyers and sellers meet. Sellers can place details
of their products and buyers can specify details of their requirements in this
section.
Auto technology
The drive is a long one. Or let's put it this way, it's a never-ending driveway.
Since the invention of the wheel, man's quest for automotive mobility led him to
experiment with various kinds of vehicles. Vehicles that have used diverse
technologies to make them function. From the steam - driven engine to the jet
propelled aircraft, we sure have come a long way. And of course, besides the
shapes, it is the technology behind them that has transformed the automotive
landscape.
Different systems like the engine, electrical, cooling etc. combine to make
up a vehicle. Each works on disparate principles, yet collectively, it is on them that
the performance of the vehicle depends. It would need only one of the many
subsystems to dysfunction for the entire automobile to come to a halt.
We drive our cars and our bikes, but seldom know the mechanics involved.
Here, we give detailed explanations on the different systems and sub-systems that
go in the making of an automobile. Read on about those that are being phased out
like the carburetor, and those that are talking its place, the fuel injection system.

Auto consumables
What are the constituents that keep your vehicle moving? Is it the wheels,
the axle, the engine, what? Of course they do. But what keeps them running? It is
actually the fuel that keeps it running. These include fuel, engine oil, and various
other lubricants that are responsible to keep a vehicle 'alive'. It won't be an
exaggeration to term these as the lifeblood of your favorite automobile.
 This is why today consumers in all vehicle segments have grown cautious
about the quality of fuel and lubricants that they use. Unbranded lubricants and
fuel from unauthorized sources is a complete no-no, while big brands are spending
extensively on positioning their products as 'guards for your engine'. The
environment factor is the latest to hit the market and has forced manufacturers and
consumers alike to make and use environment friendly consumables.
Same is the case with the other products like battery, tyres etc. which
account for the running expense of any vehicle. We present a list of such and other
consumables that will aid you in looking after your vehicle.
Auto Maintenance                                
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.

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.
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.
 With developments in the small car segment acquiring a degree of stability
in terms of price competition, the action is shifting to the mid-size car segment.
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.
 What will also drive car sales is the wide availability of finance schemes by
a variety of banks and FI's.
 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 coming in of Euro III
and IV norms will also increase scrap page rates.
 In view of expected surplus in the domestic market, India will emerge as one
of the leading car sourcing point in the Indian subcontinent.
 Consumers will be the beneficiaries as a result of marketing war, as they will
be offered technologically superior products at better prices and terms and
conditions. But the customer has a risk of model discontinuation as a result of
shake-out expected in the industry.
International trend
 The global automotive car market is growing at a rate of only 2% per annum
and is not expected to pick up in the near term. Growth has dropped due to the
increasing levels of saturation in the larger car markets of the world. Worldwide
 the trend is towards ensuring that one's products are superior in terms of
quality. This will enhance the useful life of cars and, hence, slow down growth in
sales.
 The South-East Asian crises has been a dampener to the collective fortunes
of various carmakers worldwide. According to EIU estimates, some countries in
the region have witnessed cumulative falls of 70% this year. In Indonesia record
sales reported in 1997 are not expected to be matched until 2005. In Malaysia it is
expected to be 2003 before peak sales and production volumes are repeated and in
the Philippines the market will take seven years to recover. In Thailand, the market
for cars and commercial vehicles is expected to fall from almost 600,000 units per
year to 125,000 this year.
 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.
Automakers that have been enjoying a generally prosperous spell would have to
rethink on the way vehicles are designed, manufactured, distributed or sold.
Already, players like GM, Volkswagen and Toyota have begun to re-examine their
dealer relationships and pricing strategies. Carmakers would now have to think in
terms of a new customer focus and provide better financing and servicing.
 Strategic tie-ups, mergers and acquisitions have become the order of the day.
A few instances are Daimler Benz's tie-up  with Chrysler of the US, Ford's
acquiring of  Daewoo and tie up with Volvo Car Corporation and Renault
acquiring a stake in Nissan. 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.
Entry Strategies for MNC’s

•FDI
•Joint ventures
•Foreign and local buyers
•Licensing
•Sub-contracting
•Informal means (eg. training, hiring and returnees)
•OEM
•Own Design and Manufacture (ODM)
•Strategic partnership for technology
•Overseas acquisition equity

                These are the ten entry strategies for positioning a country. It could be
through joint ventures, FDI, marketing network, licensing arrangement, sub-
contracting or even by informal means (training, hiring and returnees).
               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. OEM and ODM contracts occur
based on the resource endowments of the countries. 
               It is possible to establish virtuous circle between investment, exports and
growth by investing in sectors with significant productivity and market potential,
and using the export proceeds to finance imports of capital goods and intermediate
inputs required for further productivity increases. 
A Study of Motor Industries Company
Motor Industries Company (MICO) held its 51 st Annual General Meeting on
8th May, 2003 at Bangalore.
MICO is India's largest auto-ancillary company. German-based Robert
Bosch group hold 60.5% after the company brought back its shares in February
2002. The company is the pioneer of automotive Spark Plugs and Diesel Fuel
Injection Equipment in India. It had been bearing the brunt of the recession in the
tractor and commercial vehicle (CV) segment in the past few years. However the,
sharp recovery in sales of CV in FY 2002 has compensated for the continued fall in
tractor sales.
For the full year ended Dec. 2002, the company had registered a growth of
7% in sales to Rs 1550.71 crore. This was achieved mainly due to the better
performance in the quarter ended June 2002 and Sept. 2002. Net profit after
adjusting for EO expenses rose 64% stood at Rs 134.06 crore. Very recently,
Andreas Nobis, managing director of the company has taken over new
responsibility in Robert Bosch GmbH with effect from 1 stMay 2003 to oversee the
recent acquisition and integration of Buderus AG and hence could not attend the
AGM. Robert Bosch has entered into an agreement to buy 30.2% of the share
capital of Buderus AG in addition to 17% already held by the company. The
successor to Andreas Nobis is expected to be known at a later date.
MICO registered a 104% jump in bottom line to Rs 52.29 crore for the first
quarter ended March 2003. Net sales during the quarter rose 17% to 432.08 crore.
In continuation of the strategy to boost exports, focused efforts were made to
get additional business from Robert Bosch, Germany. This led to a significant 29%
growth in exports during the year, accounting for 16% of total turnover. From this,
MICO expects to touch 20% in three years. Its spark plug business is growing in
the US and expects an increase in turnover from new products, from the common
rail system and the Electronic control units, which are based on the Euro II norms
and potential navigation systems from Blaupunkt.
The Union Budget 2003-04 is also positive for the sector as it has increased
its thrust on infrastructure (especially roadway) projects, which is sure to usher in
increased demand for the CV sector especially in the multi-axle segment.
Performance of the Company
The recovery in the automotive sector, led by the strong growth in
commercial vehicles segment has enabled the Company’s sales turnover to
rebound in 2002. The overall sales turnover of the Company grew by around 7%.
Despite sales declining by 7% in the 1st quarter 2002 over the 1st quarter 2001,
quarter 2 and quarter 3 showed an increase of 21% and 14% respectively. This,
together with a steady 4th quarter, enabled the Company to post the 7% growth in
sales for the entire year.
Sales to OEMs, which constitute nearly 45% of the total sales, increased by
6.8%. This growth was mainly due to increase in volumes of Multi Cylinder
Pumps, Nozzle Holder Assemblies, Starters and Alternators.
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 spite of all
counter measures, overall sales in this area declined by 3.6% as compared to 2001.
 In continuation of our strategy to boost exports, focused efforts were made
to get additional business from Robert Bosch, Germany. This has led to a
significant 29% growth in exports during the year, accounting for 16% of total
turnover.
The non-automotive businesses comprising of Power Tools and Packaging
Machines, grew by 18% due to a strategic marketing thrust and introduction of
new products such as "Marble Cutters" and "Terra 25" packaging machines.
Cost cutting has now become integral to staying competitive. During the
year, cost reduction measures such as strict control on additions to fixed assets,
programs for rationalization and reduction of asset base, reduction in material cost
through import substitution, rationalization of supplier base, improvement in
labour productivity, budgetary control on overheads, etc. were further intensified.
This has significantly contributed to an improvement in operational efficiency. As
a result of growth in sales accompanied by the various cost reduction initiatives,
the Profit Before Tax increased by more than 50% and stood at Rs. 200.5 crore.
The Profit After Tax also increased by more than 60%. After taking into account
the proposed dividend and transfer to capital redemption reserve, an amount of Rs.
90 crore is proposed to be transferred to general reserve, retaining a balance of Rs.
29.3 crore in the Profit & Loss Account.
In 2002, the investments in fixed assets amounted to Rs. 94 crore,
accounting for 6.1% of sales, as compared to Rs. 1,13.3 crore in 2001, which
accounted for 7.8% of sales. 94% of the total investments made in 2002 are in
Plant and Machinery. Of this 34% is for new products, 26% for quality
improvement, 9% for R&D activities and the balance 31% for auxiliary and other
services.
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. This will inevitably lead to an increased demand for newer products
such as Electronic Diesel Control systems, Anti-lock braking systems, Air bags,
etc. 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.
Despite the poor agricultural output in the financial year 2002-03, the
growth in industrial production has been quite good at 6.1% in the period Apr-
March 2003 as opposed to 3.3% posted during the same period a year ago. In
addition, the trends in most macro-economic variables such as inflation, interest
rates, development of the rupee against the US dollar, foreign exchange reserves
position, are all positive. These strong fundamentals will help the Indian economy
to post a GDP growth of over 5.5% in the financial year 2003-04 as against 4.4%
achieved in the previous year.
On the other hand there are some key risk factors such as: (i) the continuing
problems in the Middle East; (ii) tension between India and Pakistan; and (iii) a
second consecutive monsoon failure, which may endanger the achievement of the
5.5% GDP growth in the current fiscal year, forecasted at this point of time.
In the automobile sector, the commercial vehicles and passenger car
segments maintained the growth momentum at 34% and 3.6% respectively, in the
first quarter of 2003. However, the slump in the tractor segment continues and is a
cause for concern also this year. Overall, the Company recorded a sales turnover of
Rs. 576.4 crore for the period Jan-Apr 2003, which accounts for an increase of
18% over the same period in the previous year.
Considering this positive performance but also the uncertainties prevailing
in the global economy and its adverse impact on our exports as well as the
uncertainties in the domestic market, the underlying sales in 2003 are expected to
grow by around 7% only.
On the cost front, recent spurt witnessed in the prices of steel, aluminium,
crude oil, fuel and power will exert severe pressure on the profitability of the
Company. The Company will, of course, further intensify its cost reduction
measures and pursue other initiatives to counter the adverse impact of the rise in
input costs and to maintain its profitability.
In the automotive aftermarket the focus areas include aggressive marketing
and promotional initiatives to increase sales turnover, strengthening of 4-wheeler
dealer network, increasing the number of 2-wheeler dealers, expanding the product
range through introduction of Bosch branded products and further intensification
of anti-spurious activities.
Exports continue to be a strategic thrust area for the Company. 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. 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.
 In the Power tools business, our focus will be on gaining additional market
share through expansion of product range, superior service levels and offering
value for money products.
In the Packaging machines business, the Company plans to further
consolidate its position after the successful launch of "Terra 25" packaging
machine.
Automobile industry – at a glance
Key Positives
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.
Exports buoyancy: On account of its low cost technical manpower and ever
increasing focus on quality, the auto industry has emerged as an export hub,
especially for the compact car segment. 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.
Infrastructure thrust: Improvement in road infrastructure has led to increased
movement of goods through roadways. Close to 65% of all the goods movement in
the country takes place by roads as opposed to 55% a decade ago. Also, 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.
Low interest rate regime: Close to 80% of the new cars being purchased in the
country are financed, thus underlying the importance of a low interest rate regime
to the fortunes of the industry. Given that interest rates are unlikely to rise at a
rapid rate in the future, we expect the buoyancy in auto sales to continue over the
medium to long term.
Environment led benefits: Any implementation of pollution norms in metros,
whereby vehicles beyond certain age need to be phased out could further translate
into higher volume growth for all vehicles, courtesy the replacement demand
Key Negatives
Concerning income growth: The per capita income in the country has been
growing at a slow rate. Since the auto industry growth has a strong correlation with
the same, the momentum has to continue to ensure robust automobiles demand.
Reforms need to be accelerated.
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. 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. Also, 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.
Future Prospects look positive
FY04 turned out to be one of the best years for the Indian auto industry. Attractive
finance schemes and buoyant economic growth helped both the passenger and
commercial vehicle industry notch up growth in excess of 30%. 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,
rising fuel prices and hike in interest rates might throw a spanner in the wheels.
India is one of the few countries to post double digit growth in passenger vehicles,
while others like USA and Japan remained lackluster in 2003-04.
India is poised to become the manufacturing hub for the world with cheap and
skilled labor. Maruti Udyog is aiming to become the R&D hub for its parent
Suzuki’s Asia operations.
The passenger vehicles sector is a cyclical one, which posses a question - 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.
Emission norms, infrastructure development, economic growth and low interest
rates are causing change in dynamics.
India:  A value-adding automotive and manufacturing hub
The future of manufacturing in India, including the automobile sector, would
undoubtedly be affected by the outcome of the Non-Agricultural Market Access
(Nama) discussions. The challenge is to get an agreement that would make India a
value-adding automotive and manufacturing hub.
The manufacturing sector is going through a period of revival, growth and
investment. The automobile sector is set to grow from a projected 7.5 million this
year to over 10m in the year 2007. Investment in this sector is over Rs 65,000
crore. The turnover of the component industry is set to double over the current
level of Rs 25,000 crore. By 2012, their combined output would exceed Rs
2,00,000 crore. Indian industry has been able to acquire, assimilate and develop
technology. It is this capability, production capacity, value addition and
employment potential that should be kept in mind during trade negotiations.
For some sectors, including the automotive sector, the treatment for completely
built products and SKD kits would be critical.
Future Outlook
The passenger car segment has continued to report a strong 30%+ growth in the
first month of FY04, partly due to low base effect. The transporters strike had
impacted volumes in April 2003. The car segment is likely to grow by 20-22%
during the current year. 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.
Growth in the short term is likely to be higher following increased consumer
spending (improved economic performance) and launch of new models. The
midsize segment is expected to record the highest growth followed by the premium
and economy segments.
In the economy and medium segments, it is estimated that total capacity is
expected to more or less match the expected demand by 2003-04. The premium
segment of the industry is however expected to witness acute over-capacity. The
premium segment is likely to emerge as the largest segment over the very long
term as people graduate to more expensive models. In the meantime, 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. It is worth mentioning that the car production capacity has
increased significantly in the last three years.

The industry will witness substantial over capacity in the next few years unless
there is a substantial spurt in sales. If not, 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. Consumer will however continue to
remain the KING. 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. There is always a fear of the shakeout eating into your favourite brand
you own, for example discontinuation of a model.
India would have the largest young population of the world in next 20 years - If
India is to achieve a sustainable 7-8% GDP growth and 9-10% growth of industrial
production, we should have 50 million people every year moving up from middle
class to upper middle class. This defines the future vehicle owners of the country.
Based on SIAM analysis, it is estimated that we should have a healthy growth of
sales (including exports) in the automobile sector in 2004-05. Segment wise
growth expectations, provided the Government takes necessary steps that promote
growth are:
 Passenger vehicles                   : 10 – 15%
 Commercial vehicles               : 12 – 15%
 Two wheelers                          : 10 – 15%
 Three wheelers                        : 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. However, 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.
With current penetration level of six cars per thousand people, the potential for
growth is significant.
In view of a couple of positive measures such as the excise duty exemption on
tractors and 150% deduction on R&D expenditure, we remain positive on the
future prospects of the industry. Also, with government pressing for improvement
in road infrastructure, the position of railways as the main carriers of goods such as
food grains and cement has come under significant threat. Since most
manufacturers have a technology tie-up with a foreign major, the incentive to do
R&D with the Indian counterpart has increased. Since operating margins of auto
majors have increased over the last three years, significant further improvement
from the current level is limited and to that extent, we remain cautious.
Firstly, 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. Analysts fromEIU state that this
saturation level may even translate into negative growth, given the recent trend of
carmakers to opt for quality components which will increase the vehicle’s useful
life.
Secondly, the South-East Asian crises has been a dampener to the collective
fortunes of various carmakers worldwide. According to EIU estimates, some
countries in the region have witnessed cumulative falls of 70% this year. In
Indonesia record sales reported in 1997 are not expected to be matched until 2005.
In Malaysia it is expected to be 2003 before peak sales and production volumes are
repeated and in the Philippines the market will take seven years to recover. In
Thailand, the market for cars and commercial vehicles is expected to fall from
almost 600,000 units per year to 125,000 this year.
Thirdly, the global domination by the large automotive players has slowly abated
with local manufacturers getting hold over the market. Japan, Western Europe and
the North American Free-Trade Agreement area comprising USA, Mexico and
Canada are expected to account for 71% of the global park by 2005, down from
almost 77% at the start of the 1990s. This has come about, as the concept of "regio-
centric" cars is becoming popular.
Conclusion
Automobiles have become an indispensable part of our lives, an extension of the
human body that provides us faster, cheaper and more convenient mobility every
passing day. Behind this betterment go the efforts of those in the industry, in the
form of improvement through technological research.
What actually lie behind this betterment of the automobiles are the opinions,
requirements, likes and dislikes of those who use these vehicles.
These wheeled machines affect our lives in ways more than one. Numerous
surveys and research are conducted throughout the world every now and then to
reveal one or the other aspect of automobiles, be it about the pollution caused due
to vehicle population in cities, or rising motor accidents and causes, vehicular
technology, alternative medicine and so on.
 This section keeps you updated on the latest and the most interesting
researches conducted in the field of automobiles, and help you draw the right
conclusion.