INDIAN AUTOMOBILE INDUSTRY
Size of the Industry 2.6 Million Units
Geographical
distribution
Jamshedpur, Pune, Lucknow, Gurgoan,
Delhi, Mumbai, Bangalore, etc
Output per annum Rs 2,000 crore per annum
Percentage in
world market
6-8%
Market
Capitalization
5% of the share
History
Indian market before independence was seen as a market
for imported vehicles while assembling of cars
manufactured by General Motors and other brands was
the order of the day. Indian automobile industry mainly
focused on servicing, dealership, financing and
maintenance of vehicles. Later only after a decade from
independence manufacturing started. India's
Transportation requirements were met by Indian Railways
playing an important role till the 1950's. Since
independence the Indian automobile industry faced
several challenges and road blocks like manufacturing
capability was restricted by the rule of license and could
not be increased but still it lead to growth and success it
has achieved today.
For nearly three decades the total production of passenger cars was limited to 40,000 yearly. Even
the production was confined to three main manufacturers Hindustan Motors, Premier Automobiles and
Standard Motors. There was no expertise or research & development initiative taking place. Initially
labor was unskilled and had to go through a process of learning through trial and error. In the 1950's,
The Morris Oxford, became the Ambassador, the Fiat 1100 became the Premier Padmini. Then in
1960's nearly 98% of the product was developed indigenously.There were significant changes
witnessed by the end of 1970's in the automobile industry. Strong and huge initiatives like joint
ventures for light commercial vehicles did not succeed. Contessa, the Rover and the Premier 118NE,
which were the new models, hit the market. Till later part of 1980's India by and large followed a
socialist system. The main focus of the government was development through heavy, long gestation,
capital intensive projects like steel manufacturing. Priority was to the quality of the finished good and
customer feedback.
Brief introduction
The Indian Automobile industry includes two-wheelers,
trucks, cars, buses and three-wheelers which play a
crucial role in growth of the Indian economy. India has
emerged as Asia's fourth largest exporter of automobiles,
behind Japan, South Korea and Thailand. The country is
expected to top the world in car volumes with
approximately 611 million vehicles on the nation's roads
by 2050.The Economic progress of this industry is
indicated by the amount of goods and services produced
which give the capacity for transportation and boost the
sale of vehicles. There is a huge increase in automobile
production with a catalyst effect by indirectly increasing
the demand for a number of raw materials like steel,
rubber, plastics, glass, paint, electronics and services.
Market capitalization
Total contribution to the economy/ sales
The share of Automobile industry in the last
decade in the Indian economy was around
5% of GDP. The Indian Automobile industry
has become the seventh largest in the world
with an annual production of over 2.6 million
units in 2009.
Domestic and Export Share
Passenger Car -- 25468121478
Multi Utility Vehicles -- 26543892
Commercial Vehicles -- 1010819931
Two Wheelers -- 100002256765
Three Wheelers -- 2113851535
Percentage Growth -- 16.632.8
According to the research of Society of Indian Automobile Manufacturers (SIAM), the overall vehicle
sales grew by 30 % in May 2010 to 1,208,851 units, and 8 per cent over the previous month of April
2010. Two wheeler sales rose 29 %, with motorcycle sales increasing 26% to 725,311 units, and
scooter sales rising% to 157,509 units in May 2010. Commercial vehicle sales rose 58 % in May
2010. The medium and heavy commercial vehicle (M&HCV) segment grew to 33.5 % at 245,058 units
and total commercial vehicle (CV) sales went up to 38.3 % to 531,395 units in 2009-10. At an
estimated 25 % growth, the M&HCV segment would be about 306,000 units; total CV sales would be
about 664,000 units in 2010-11. Mahindra and Mahindra (M&M) is the world's number one tractor
company by selling a record of 1.59 lakh tractors in 2009 surpassing John Deere of the US.
Top & Major Manufacturers in Automobile Industry
Maruti Udyog Ltd.
General Motors India
Ford India Ltd.
Eicher Motors
Bajaj Auto
Daewoo Motors India
Hero Motors
Hindustan Motors
Hyundai Motor India Ltd.
Royal Enfield Motors
Telco
TVS Motors
DC Designs
Swaraj Mazda Ltd
Employment opportunities
India today is well known as a potential emerging automobile market and jobs in the automobile
industry are rising. Several foreign investments are pouring into Indian automobile industry. It has
become a major three-wheeler market and two-wheeler manufacturer in the world. India is also the
second largest manufacturer of tractors. Candidates with bachelor's degree in mechanical, electrical
or automobile engineering are eligible to get good job opportunities in automobile companies.
For the candidates with diploma courses and ITI courses there are many opportunities in this industry.
Automobile companies even require IT specializations. While technical education is offered by plenty
of engineering and polytechnic colleges in India,. the eligible candidates are selected by the
companies. The considerable wide scope of Automobile sector, it is not that surprising that more and
more candidates are dreaming to develop a career in Automobile Industry. With foreign automobile
companies like Volkswagen, Audi, Renault etc coming in and targeting India as a base for
manufacturing cars, the scope for a career in Automobile Industry is rising rapidly.
Year of commencement & periods of development
The Automobile Industry of India has come a long way since in 1898 the first car rolled out on the
streets of Mumbai (then Bombay). Indian auto industry, is currently growing at the pace of around 18
% per annum, has become a hot destination for global auto manufacturers like Volvo, General Motors
and Ford. The Indian Automobile industry has adopted global standards which are manifested in the
increasing exports of this sector. After a temporary decline in the years 1998- 99 and 1999-00, exports
increased with robust growth rates of well over 50 per cent in 2002-03 and 2003-04 each to exceed
two and- a-half times the export figure for 2001-02.
The research of ministry of commerce and industry, shows high growth obtained since 2001- 02 in
automobile production which continued for the first three quarters of the 2004-05. The Annual growth
of the industry was 16.0 per cent in April-December, 2004; the growth rate in 2003-04 was 15.1 per
cent. The compound annual growth rate (CAGR) of Indian Automobile Industry is of 22 per cent
between 1992 and 1997. While the investments exceeding to Rs. 50,000 crore, the turnover of the
industry was Rs. 59,518 crore in 2002-03. It even estimated to have exceeded Rs.1, 00,000 crore
(USD 22. 74 billion) in 2003-04.
Pollution
The category for Indian Automobile Industry is "Red" which represents the highly polluting industries
Several Automobile exhaust pollutants are as follows:
Hydrocarbons - are emissions caused by partially burnt fuel molecules and they react in the
presence of nitrogen oxides and sunlight to from ground level ozone.
Nitrogen Oxides are the gases of precursors to the formation of ozone and also contribute in
the formation of acid rain. Ironically the catalytic converters are designed to break down
nitrogen gases are generally forming nitrous oxide which is more potent as pollutant than
carbon dioxide as greenhouse gas.
When a vehicle starts Carbon Monoxide is emitted without proper air supply, when the
tuning of the vehicle is not proper and when a vehicle is driven at high altitudes where the
oxygen content is lesser than in the plains. Carbon monoxide emissions great share comes
from the commercial vehicles especially the heavier ones.
Carbon Dioxide in greater quantities traps the earth's heat and contributes to global
warming.
Pollution handling and environmental issues faced by the industry.
If it is believed that smoking is harmful then there is a need to take a break from the personal
automobile as the favorite set of wheels could be harming the environment and even the health more.
As rest of the world is catching up with the concept of personal cars in the country, where days back
having a car for the entire family will soon become a thing of the past as each bread winner of the
family wants his or her personal set of wheels. Hence it is would not be surprising that the pollution
levels in several metros of the country like Delhi, Mumbai, Kolkata and Bangalore are on the increase.
In the cars the pollution comes from the process of the evaporation of the fuel and from the byproducts of the combustion process.
Cars use Petrol and Diesel which are a mixture of Hydrocarbons and compounds usually contain
Hydrogen and carbon items. In simple terms the Oxygen in the air converts all the Hydrogen in the
fuel to water and Carbon in the fuel would be converted to Carbon Dioxide. Nitrogen is supposed to
remain unaffected in this whole process. However things are not that good as they look and engines
are not that perfect either. Several types of harmful gases are emitted in the whole process of
combustion which leaves the air polluted.
The government is taking and has taken steps to introduce catalytic converters in the country a few
years back to reduce air pollution. In addition to this petrol with lead has been phased out from
several parts of the country to cut down on lead particles in the exhaust.
In addition to this several cars and two wheeler companies are striving hard themselves to provide
pollution free environment. Companies like Tata Motors and Mahindra are fine tuning their Diesel
engines for optimum performance and reduced emission. In the two-wheelers category the companies
like Hero Honda is providing pollution free vehicles.
With all this support from the companies, Government has to take a proactive role to reduce the
pollution levels in the country and should try phasing out old vehicles and impose heavy fines on cars
and heavy vehicles that pollute the environment. It should provide tax benefits to electric cas like
Reva as they don't pollute the environment and take very little space on the already congested Indian
roads. Today in India several new trends are emerging to tackle the problem of pollution like people
are opting for car pools while a small number are cycling their way to work.
Achievements
The development story of the Indian automobile industry cannot be complete without mentioning the
Pioneer Mr. J.R.D Tata's role in setting up the Tata group with high standard Engineering Research
Centre (ERC) in 1965 to facilitate technological advancement. Pioneering the indigenization of
scientific knowledge for trucks in collaboration with Mercedes Benze and launched Maruti 800 in the
year 1983 which changed the dynamics of the passenger car sector in India. It was also known as the
people's car. 60% of the Indian commercial vehicle market is dominated by Tata Motors.
The first automobile was launched in India in the year 1897 in Bombay.
Today India is being recognized as a potential emerging auto market.
The industry adds up foreign players to their investments.
80% of the segment size is contributed by two-wheelers & motorcycles.
Indian passenger vehicle market is dominated by cars (79%) unlike the USA.
India is the largest three-wheeler & two-wheeler market in the world. It is second largest
tractor manufacturer in the world, fifth largest commercial vehicle manufacturer in the world.
India crossed the 1 million mark as the fourth largest car market in Asia recently.
The industry is expected to grow to US$ 40 billion by 2015 from the current level of US$ 7
billion in 2008. By the year 2016 the industry is expected to contribute 10% of the nation's
GDP.
Very recently history has been created in the world of Automobile Industry by Ratan Tata,
Chairman (Tata Motors) by launching the world's cheapest car NANO. The price of the car
was around one lakh which gained instant recognition in the automobile industry across the
globe. It heralded the coming to age of the Indian Automobile Industry.
India is the second Largest Producer of Motorcycles in the world (5.2 Mln) after China which
has a production volume of 12 Mln
INDIAN AUTOMBILE INDUSTRY AT A GLANCE IN 2012 - 2013
The automobile industry in India reported a robust growth rate of 26 percent in the last two years
(2010-2012). The BSE AUTO Index outperformed the benchmark Nifty by 79%, 12% and 19% in
FY10, FY11 and FY12, respectively. However, the sector has shown a sluggish growth of 12 percent
in 2012. The trend is likely to stay with a 10 percent growth outlined for 2013 due to rising fuel costs
and slow income growth.A cautious growth is expected over the next few years. However, from a
long-term perspective, rising incomes, improved affordability and untapped markets present promising
opportunities for the automobile industry in India. According to a research report, sale of passenger
vehicles is expected to double in the next four years and growth anticipated is higher than the 16
percent achieved in the past 10 years. Two-wheeler vehicle segment is expected to show slow growth
of 10 percent CAGR over the period of 2012-2016 according to the report
The Automotive Mission Plan 2016 launched by the Indian Government seeks to grow the industry to
a size of US $145bn by 2016 and make it contribute 10 percent to the nations GDP.India is emerging
as a strong automotive R&D hub with foreign players like Hyundai, Suzuki, General Motors setting up
base in India. This move is further enhanced by the Indian Governments support towards setting up
centres for development and innovation. Also there are opportunities of growth available in alternative
segments like electric cars, vehicles run on natural gas, etc.
Key Statistics
The cumulative production for financial year April 2011 to March 2012 registered a growth of 13.83% per cent
over April 2010 to March 2011, manufacturing 20.3 million vehicles during the period
While Passenger vehicle segment grew at 4.72% during April 2011 to March 2012, overall commercial vehicle
segment registered an expansion of 19.83% per cent year-on-year (y-o-y)
The industry exported 2.9 million units registering a growth of 25.44% in April 2011 to March 2012.
As per the 2011-12 data released by the Society of Indian Automobile Manufacturers (SIAM), domestic vehicle
market is dominated by two-wheelers segment with 76.9% of the pie. Passenger vehicles, commercial vehicles
and three-wheelers account for 15.3%, 4.5% and 4.3% of the market, respectively.
Hero MotorCorp rules the two-wheeler market with 56% of the share. Maruti Suzuki holds its leader position
in passenger vehicle segment with 38% of the pie, while Hyundai follows with 15% of the share.
For passenger vehicle segment, the share of the entry-compact segment (that consists of cars like the Tata
Nano, Maruti Alto, Ford Figo, Maruti WagonR, Hyundais Santro, i10 and Eon and GMs Beat) stood at 47% in
2011, while premium compacts (like Maruti Swift, Hyundai i20 and VW Polo) maintained their share of 11%.
Sports-utility vehicle (SUV) segment registered the fastest growth rate (32%) to capture over 18% of the market
share, while Sedans had 19% of the pie.
Opportunity for Investors:
While multiple routes are available for international players to enter India, Joint ventures or partnerships have
been more attractive as both the international and Indian partners are able to leverage each others strengths
to joint ventures advantage. Some of the opportunities that Indias automotive sector offers to a foreign
investor include:
Leveraging India as a global manufacturing hub for small cars and components.
Utilizing India as an innovation hub for new/emerging vehicle categories given specific Indian market
requirements has led to the introduction of Small Commercial Vehicles (sub 1 ton), alternate fuel vehicles
(CNG/LPG), and alternate mobility options such as fleet taxis, etc.
Tapping the huge auto component demand-supply equation to their advantage (given that automotive OEMs
have already committed huge investments in the Indian market).
A lot of auto grade steel is currently imported. Investors keen on setting up plants for manufacture of auto
grade steel will find a huge market opportunity in India.
Initiatives:
The government of India has identified the automotive industry as a focus industry for Foreign Direct
Investment (FDI) given its importance from an employment generation perspective. To accelerate and sustain
growth in the automotive sector, the Automotive Mission Plan (AMP): 2006-2016 has been prepared in order
to make India a global automotive hub. The Plan, aims at doubling the contribution of automotive sector to
GDP by taking the turnover to USD 145 billion (with special emphasis on export of small cars, MUVs, two and
three wheelers and auto components) and providing employment to 25 million people by 2016.
Foreign Direct Investment (FDI) up to 100% is allowed under automatic route in the automotive sector.
Government to introduce new fuel mileage standards and labeling for new cars beginning 2015, giving
manufacturers time to introduce and invest in new technology.
