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The Indian Automobile Industry is manufacturing over 11 million vehicles and exporting about

1.5 million every year [18]. The dominant products of the industry are two wheelers with a market
share of over 75% and passenger cars with a market share of about 16%[19]. Commercial
vehicles and three wheelers share about 9% of the market between them. About 91% of the
vehicles sold are used by households and only about 9% for commercial purposes[20]. The
industry has attained a turnover of more than USD 35 billion and provides direct and indirect
employment to over 13 million people[21].

The supply chain of this industry in India is very similar to the supply chain of the automotive
industry in Europe and America. This may present its own set of opportunities and threats. The
orders of the industry arise from the bottom of the supply chain i. e., from the consumers and
goes through the automakers and climbs up until the third tier suppliers. However the products,
as channelled in every traditional automotive industry, flow from the top of the supply chain to
reach the consumers.

Interestingly, the level of trade exports in this sector in India has been medium and imports have
been low. However, this is rapidly changing and both exports and imports are increasing. The
demand determinants of the industry are factors like affordability, product innovation,
infrastructure and price of fuel. Also, the basis of competition is the sector is high and increasing
and the life cycle stage is growth. With a rapidly growing middle class, all the advantages of this
sector in India are yet to be leveraged.

Note that, with a high cost of developing production facilities, limited accessibility to new
technology and soaring competition, the barriers to enter the Indian Automotive sector are high
and these barriers are study. On the other hand, India has
a well-developed tax
structure. The power to levy taxes and duties is distributed among
the three tiers of Government. The cost structure of the industry is
fairly traditional, but the profitability of motor vehicle
manufacturers has been rising over the past five years. Major
players, like Tata Motors and Maruti Suzuki have material cost of
about 80% but are recording profits after tax of about 6% to
11%[22].
The level of technology change in the Motor vehicle Industry has
been high but, the rate of change in technology has been
medium. Investment in the technology by the producers has been
high. System-suppliers of integrated components and sub-
systems have become the order of the day. However, further
investment in new technologies will help the industry be more
competitive. Over the past few years, the industry has been
volatile. Currently, India’s increasing per capita disposable income
which is expected to rise by 106% by 2015[23] and growth in
exports is playing a major role in the rise and competitiveness of
the industry.
Tata Motors is leading the commercial vehicle segment with a
market share of about 64%[24]. Maruti Suzuki is leading the
passenger vehicle segment with a market share of 46%[25].
Hyundai Motor India and Mahindra and Mahindra are focusing
expanding their footprint in the overseas market. Hero Honda
Motors is occupying over 41% and sharing 26%[26]of the two
wheeler market in India with Bajaj Auto. Bajaj Auto in itself is
occupying about 58% of the three wheeler market.
Consumers are very important of the survival of the Motor Vehicle
manufacturing industry. In 2008-09, customer sentiment dropped,
which burned on the augmentation in demand of cars. Steel is the
major input used by manufacturers and the rise in price of steel is
putting a cost pressure on manufacturers and cost is getting
transferred to the end consumer. The price of oil and petrol affect
the driving habits of consumers and the type of car they buy.
The key to success in the industry is to improve labour
productivity, labour flexibility, and capital efficiency. Having quality
manpower, infrastructure improvements, and raw material
availability also play a major role. Access to latest and most
efficient technology and techniques will bring competitive
advantage to the major players. Utilising manufacturing plants to
optimum level and understanding implications from the
government policies are the essentials in the Automotive Industry
of India.
Both, Industry and Indian Government are obligated to intervene
the Indian Automotive industry. The Indian government should
facilitate infrastructure creation, create favourable and predictable
business environment, attract investment and promote research
and development. The role of Industry will primarily be in
designing and manufacturing products of world-class quality
establishing cost competitiveness and improving productivity in
labour and in capital. With a combined effort, the Indian
Automotive industry will emerge as the destination of choice in the
world for design and manufacturing of automobiles.
The Automotive industry in India is one of the largest in the world and one of the fastest
growing globally. India manufactures over 17.5 million vehicles (including 2 wheeled and 4
wheeled) and exports about 2.33 million every year.[1] It is the world's second largest
manufacturer ofmotorcycles, with annual sales exceeding 8.5 million in 2009.[2] India's
passenger car and commercial vehicle manufacturing industry is theseventh largest in the
world, with an annual production of more than 3.7 million units in 2010.[3] According to recent
reports, India is set to overtake Brazil to become the sixth largest passenger vehicle producer in
the world, growing 16-18 per cent to sell around three million units in the course of 2011-12.[4] In
2009, India emerged as Asia's fourth largest exporter of passenger cars, behind Japan, South
Korea, andThailand.[5]

As of 2010, India is home to 40 million passenger vehicles and more than 3.7 million automotive
vehicles were produced in India in 2010 (an increase of 33.9%), making the country the second
fastest growing automobile market in the world.[6][7] According to the Society of Indian
Automobile Manufacturers, annual car sales are projected to increase up to 5 million vehicles by
2015 and more than 9 million by 2020.[8] By 2050, the country is expected to top the world in car
volumes with approximately 611 million vehicles on the nation's roads.[9]

A chunk of India's car manufacturing industry is based in and around Chennai, also known as
the "Detroit of India"[10] with the India operations
of BMW, Ford, Hyundai and Nissan headquartered in the city. Chennai accounts for 60 per cent
of the country's automotive exports.[11]Gurgaon and Manesar in Haryana are hubs where all of
the Maruti Suzuki cars in India are manufactured.[12] The Chakan corridor
near Pune,Maharashtra is another vehicular production hub with companies like General
Motors, Volkswagen, Skoda, Mahindra and Mahindra, Tata Motors, Mercedes
Benz, Fiat and Force Motors[13][14] having assembly plants in the area. Ahmedabad with the Tata
Nano plant, Halol withGeneral Motors, Aurangabad with Audi, Kolkatta with Hindustan
Motors, Noida with Honda and Bengaluru with Toyota are some of the other automotive
manufacturing regions around the country.[15][16][17]
The production of automobiles has greatly increased in the last decade. It passed the 1 million
mark during 2003-2004 and has more than doubled since.[37]
Car % % %
Year Commerci Total Vehicles
Production Change Change Change
al Prodn.

2010 2,814,584 29.39 722,199 54.86 3,536,783 33.89

2009 2,175,220 17.83 466,330 -4.10 2,641,550 13.25

2008 1,846,051 7.74 486,277 -9.99 2,332,328 3.35

2007 1,713,479 16.33 540,250 -1.20 2,253,999 10.39

2006 1,473,000 16.53 546,808 50.74 2,019,808 19.36

2005 1,264,000 7.27 362, 755 9.00 1,628,755 7.22

2004 1,178,354 29.78 332,803 31.25 1,511,157 23.13

2003 907,968 28.98 253,555 32.86 1,161,523 22.96

2002 703,948 7.55 190,848 19.24 894796 8.96

2001 654,557 26.37 160,054 -43.52 814611 1.62

2000 517,957 -2.85 283,403 -0.58 801360 -2.10

1999 533,149 285,044 818193

2004- 2005- 2006- 2007- 2008-


Year
2005 2006 2007 2008 2009

Motor Vehicle 11,087,99 10,853,93 11,175,47


8,467,853 9,743,503
Production[38] 7 0 9

Industry Revenue[39] 24,379 26,969 30,507 32,383 33,342*

Exports (Units)[40] 629,544 806,222 1,011,529 1,238,333 1,530,660

Exports (Revenue)[41] 1,915 2,231 2,552 3,008 3,718*


[edit

]Automobile Production
2004- 2005- 2006- 2007- 2008-
Type of Vehicle
2005 2006 2007 2008 2009

Passenger
1,209,876 1,309,300 1,545,223 1,777,583 1,838,697
Vehicles [42]

Commercial
353,703 391,083 519,982 549,006 417,126
Vehicles [43]

[44]
Three Wheelers 374,445 434,423 556,126 500,660 501,030

[45]
Two Wheelers 6,529,829 7,608,697 8,466,666 8,026,681 8,418,626

11,087,99 10,853,93 11,175,47


Total 8,467,853 9,743,503
7 0 9

[edit]Automobile Sales
2004- 2005- 2006- 2007- 2008-
Type of Vehicle
2005 2006 2007 2008 2009

Passenger
1,061,572 1,143,076 1,379,979 1,549,882 1,551,880
Vehicles [46]

Commercial
318,430 351,041 467,765 490,494 384,122
Vehicles [47]

[48]
Three Wheelers 307,862 359,920 403,910 364,781 349,719

[49]
Two Wheelers 6,209,765 7,052,391 7,872,334 7,249,278 7,437,670

10,123,98
Total 7,897,629 8,906,428 9,654,435 9,723,391
8

[edit]Automobile Exports
2004- 2005- 2006- 2007- 2008-
Type of Vehicle
2005 2006 2007 2008 2009

Passenger
166,402 175,572 198,452 218,401 335,739
Vehicles [50]

Commercial 29,940 40,600 49,537 58,994 42,673


[51]
Vehicles

[52]
Three Wheelers 66,795 76,881 143,896 141,225 148,074

[53]
Two Wheelers 366,407 513,169 619,644 819,713 1,004,174

Total 629,544 806,222 1,011,529 1,238,333 1,530,660

[edit]Product and Service Segmentation

Source: Society of Indian Automotive Manufacturing (SIAM)

The automotive industry of India is categorised into passenger cars, two wheelers, commercial
vehicles and three wheelers, with two wheelers dominating the market. More than 75% of the
vehicles sold are two wheelers. Nearly 59% of these two wheelers sold were motorcycles and
about 12% were scoters. Mopeds occupy a small portion in the two wheeler market however;
electric two wheelers are yet to penetrate.

The passenger vehicles are further categorised into passenger cars, utility vehicles and multi-
purpose vehicles. All sedan, hatchback, station wagon and sports cars fall under passenger
cars. Tata Nano, is the world’s cheapest passenger car, manufactured by Tata Motors - a
leading automaker of India. Multi-purpose vehicles or people-carriers are similar in shape to a
van and are taller than a sedan, hatchback or a station wagon, and are designed for maximum
interior room. Utility vehicles are designed for specific tasks. The passenger vehicles
manufacturing account for about 15% of the market in India.
The production of automobiles has greatly increased in the last decade. It passed the 1 million
mark during 2003-2004 and has more than doubled since.

The production of automobiles has greatly increased in the last decade. It passed the 1 million
mark during 2003-2004 and has more than doubled since.[37]

The production of automobiles has greatly increased in the last decade. It passed the 1 million
mark during 2003-2004 and has more than doubled since.

Year Car Production % Change Commercial % Change Total Vehicles % Change

Prodn.
2010 2,814,584 29.39 722,199 54.86 3,536,783 33.89
2009 2,175,220 17.83 466,330 -4.10 2,641,550 13.25
2008 1,846,051 7.74 486,277 -9.99 2,332,328 3.35
2007 1,713,479 16.33 540,250 -1.20 2,253,999 10.39
2006 1,473,000 16.53 546,808 50.74 2,019,808 19.36
2005 1,264,000 7.27 362, 755 9.00 1,628,755 7.22
2004 1,178,354 29.78 332,803 31.25 1,511,157 23.13
2003 907,968 28.98 253,555 32.86 1,161,523 22.96
2002 703,948 7.55 190,848 19.24 894796 8.96
2001 654,557 26.37 160,054 -43.52 814611 1.62
2000 517,957 -2.85 283,403 -0.58 801360 -2.10
1999 533,149 285,044 818193

Year 2004-2005 2005-2006 2006-2007 2007-2008 2008-2009


Motor Vehicle Production [38]
8,467,853 9,743,503 11,087,997 10,853,930 11,175,479
Industry Revenue [39]
24,379 26,969 30,507 32,383 33,342*
Exports (Units)[40] 629,544 806,222 1,011,529 1,238,333 1,530,660
Exports (Revenue)[41] 1,915 2,231 2,552 3,008 3,718*

Automobile Production
2004- 2005- 2006- 2007- 2008-
Type of Vehicle
2005 2006 2007 2008 2009

Passenger
1,209,876 1,309,300 1,545,223 1,777,583 1,838,697
Vehicles [42]

Commercial
353,703 391,083 519,982 549,006 417,126
Vehicles [43]

[44]
Three Wheelers 374,445 434,423 556,126 500,660 501,030

[45]
Two Wheelers 6,529,829 7,608,697 8,466,666 8,026,681 8,418,626

11,087,99 10,853,93 11,175,47


Total 8,467,853 9,743,503
7 0 9

Automobile Sales

2004- 2005- 2006- 2007- 2008-


Type of Vehicle
2005 2006 2007 2008 2009

Passenger
1,061,572 1,143,076 1,379,979 1,549,882 1,551,880
Vehicles [46]

Commercial
318,430 351,041 467,765 490,494 384,122
Vehicles [47]

[48]
Three Wheelers 307,862 359,920 403,910 364,781 349,719

[49]
Two Wheelers 6,209,765 7,052,391 7,872,334 7,249,278 7,437,670

10,123,98
Total 7,897,629 8,906,428 9,654,435 9,723,391
8
Automobile Exports
2004- 2005- 2006- 2007- 2008-
Type of Vehicle
2005 2006 2007 2008 2009

Passenger
166,402 175,572 198,452 218,401 335,739
Vehicles [50]

Commercial
29,940 40,600 49,537 58,994 42,673
Vehicles [51]

[52]
Three Wheelers 66,795 76,881 143,896 141,225 148,074

[53]
Two Wheelers 366,407 513,169 619,644 819,713 1,004,174

Total 629,544 806,222 1,011,529 1,238,333 1,530,660

Domestic Sales
The cumulative growth of the Passenger Vehicles segment during April 2007 – March 2008 was 12.17
percent. Passenger Cars grew by 11.79 percent, Utility Vehicles by 10.57 percent and Multi Purpose
Vehicles by 21.39 percent in this period.
The Commercial Vehicles segment grew marginally at 4.07 percent. While Medium & Heavy
Commercial Vehicles declined by 1.66 percent, Light Commercial Vehicles recorded a growth of 12.29
percent.
Three Wheelers sales fell by 9.71 percent with sales of Goods Carriers declining drastically by 20.49
percent and Passenger Carriers declined by 2.13 percent during April- March 2008 compared to the
last year.
Two Wheelers registered a negative growth rate of 7.92 percent during this period, with motorcycles
and electric two wheelers segments declining by 11.90 percent and 44.93 percent respectively.
However, Scooters and Mopeds segment grew by 11.64 percent and 16.63 percent respectively.
Exports
Automobile Exports registered a growth of 22.30 percent during the current financial year.
The growth was led by two wheelers segment which grew at 32.31 percent. Commercial vehicles and
Passenger Vehicles exports grew by 19.10 percent and 9.37 percent respectively. Exports of Three
Wheelers segment declined by 1.85 percent.

The Automotive Industry in India is one of the largest industries and a key
sector of the economy.

The Indian automotive industry started from 1991with the government’s de-
licensing of the sector and subsequent opening up for 100 per cent FDI
through automatic route. Since then many large global companies have set
up their facilities in India taking the production of vehicle from 2 million in
1991 to 9.7 million in 2006.

At present, India is the world's


• Largest tractor and three-wheel vehicle producer.
• Second largest two-wheel vehicle producer.
• Fourth largest commercial vehicle producer.
• Eleventh largest passenger car producer.
Production: According to the Society of Indian Automobile Manufacturers,
the Indian automobile industry has reached double-digit growth for the past
three years in a row. In 2006, the industry produced 10.9 million vehicles,
an increase of 16.22% over 2005. In 2005, production grew 14.5% over the
previous year. The production of the automotive industry is expected to
achieve a growth rate of over 20 per cent in 2006-07 and about 15 per cent
in 2007-08.

Exports: the cumulative annual growth rate of automotive exports during


the period 2000-01 to 2005-06 was 32.92 per cent. Exports during 2006-
2006 and 2007-2008 are expected to grow over 20 per cent.

Imports: Europe is the biggest importer of cars from India, while African
nations largely account for the import of buses and trucks. China is most
recently making inroads into this market. The South-East Asian region is the
prime destination for Indian two wheelers.

Sales:
• Passenger Vehicles: Growth in sales of passenger vehicles was 18.45%
in 2006. This was almost three times the growth witnessed in 2005.
Sale of passenger cars expanded by 20.0%. Export of passenger
vehicles increased by 12.9%
• Utility Vehicles: 12.4%
• Two-wheelers, commercial vehicles and three-wheelers: Export growth
at a rate of 24%, 26% and 72% respectively.
Investment: Among the car companies that are investing in India are US
automakers General Motors and Ford, Germany's BMW and DaimlerChrysler
AG, France's Renault, Japan's Suzuki, Toyota and Honda, and South Korea's
Hyundai.

There is also a boom in auto ancillary companies. India is an attractive


outsourcing destination for global auto companies because of its strong
engineering skills and low costs. Sourcing parts from India is 10-20%
cheaper for US auto makers and about 50% cheaper for their European
counterparts.

Auto Components:

This industry grew by over 28 percent between 1995 and 1998, and has
been sustaining double digit growth, clocking 16 percent in 2004-05, and 15
percent in 2005-06. The Indian auto component industry is quite
comprehensive with around 500 firms in the organized sector producing
practically all automotive components; there are more than 10,000 firms
total. India’s component industry now has the capability to manufacture the
entire range of auto-components, for example, engine parts, drive,
transmission parts, suspension and braking parts, electricals, body and
chassis parts, equipment, etc

The Industry's Challenge:

Even though the automotive industry is robust, car manufacturers are


complaining that the government's frequent change in policies is not
encouraging the industry. Changing the policies and guidelines frequently
severely hurts the companies’ plans. It also affects investment decisions in
the country

Future Plans:

The Government has prepared a ten-year Automotive Mission Plan (AMP) to


draw a future plan of action and remove obstacles in the way of competition,
such as that required infrastructure be put in place well in time to alleviate
its constraining impact on the growth.

The plan envisages a tax holiday for the industry on investments exceeding
$225,000, 100% tax deductions of export profits, and deductions of 50% on
foreign-exchange earnings. It also calls for a one-stop clearance for foreign-
direct-investment proposals in the sector and deductions of 30% of net
income for 10 years for new industrial undertakings.

To bring down the cost of power and fuel, which accounts for 6% of the
manufacturing costs in the auto sector, captive power generation would be
encouraged to enable industries to access reliable, quality and cost-effective
power.