Automobile Sector – The Indian Scenario!


During aboriginal 60s & 70s, automobiles came abundantly in twos.

In scooters, you had a Lambretta or a Vespa.

In motorcycles, you had a Bullet or a Java.

In cars, you had to accept amid an Ambassador and a Fiat.

In trucks, it was either an Ashok Leyland or a Tata.

In tractors, it was amid a Swaraj and a Mahindra.

This bearings reflected the India of yester years. Bread-and-butter reforms and deregulation accept acclimatized that scene. Auto industry has accounting a new adorning tale. It is a account of agitative multiplicity, unparalleled advance and agreeable chump acquaintance – all aural a few years. India has already become one of the fastest growing auto markets in the world. This is a accolade to leaders and managers in the industry and, appropriately to activity planners. The auto industry has the befalling to go above this arresting achievement. It is continuing on the doorsteps of a breakthrough leap.

The Indian auto industry is traveling through a abstruse change area anniversary close is affianced in alteration its processes and technologies to advance the advancing advantage and accommodate barter with the optimized articles and services. Starting from the two wheelers, trucks, and tractors to the multi account vehicles, bartering cars and the affluence vehicles, the Indian auto industry has accomplished baroque accomplishment in the contempo years.

“The befalling is staring in your face. It comes alone once. If you absence it, you will not get it again”

On the canvas of the Indian economy, auto industry maintains a high-flying place. Due to its abysmal frontward and aback linkages with several key segments of the economy, auto industry has a able multiplier aftereffect and is able of getting the disciplinarian of bread-and-butter growth. A complete busline arrangement plays an basic role in the country’s accelerated bread-and-butter and automated development. The well-developed Indian automotive industry cautiously fulfils this catalytic role by bearing a advanced array of vehicles: commuter cars, light, average and abundant bartering vehicles, multi-utility cars such as jeeps, scooters, motorcycles, mopeds, three wheelers, tractors etc.

The automotive area is one of the amount industries of the Indian economy, whose anticipation is cogitating of the bread-and-butter animation of the country. Continuous bread-and-butter liberalization over the years by the government of India has resulted in authoritative India as one of the prime business destination for abounding all-around automotive players. The automotive area in India is growing at about 18 per cent per annum.

“The auto industry is just a multiplier, a disciplinarian for employment, for investment, for technology”

The Indian automotive industry started its new adventure from 1991 with delicensing of the area and consecutive aperture up for 100 per cent FDI through automated route. Since again about all the all-around majors accept set up their accessories in India demography the assembly of car from 2 actor in 1991 to 9.7 actor in 2006 (nearly 7 per cent of all-around automobiles assembly and 2.4 per cent of four wheeler production).

The accumulative anniversary advance amount of assembly of the automotive industry from the year 2000-2001 to 2005-2006 was 17 per cent. The accumulative anniversary advance amount of exports during the aeon 2000-01 to 2005-06 was 32.92 per cent. The assembly of the automotive industry is accepted to accomplish a advance amount of over 20 per cent in 2006-07 and about 15 per cent in 2007-08. The consign during the aforementioned aeon is accepted to abound over 20 per cent.

The auto area has been accidental its allotment to the animated bread-and-butter achievement of India in the contempo years. With the Indian average chic earning college per capita income, added humans are accessible to own clandestine cars including cars and two-wheelers. Artefact movements and manned casework accept additional in the sales of average and sized bartering cars for commuter and appurtenances transport.

Side by ancillary with beginning car sales growth, the automotive apparatus area has witnessed big growth. The calm auto apparatus burning has beyond rupees 9000 crore and an consign of one bisected admeasurement of this figure.

Eye-Catching FDI Destination – INDIA!

India is on the aiguille of the Adopted Absolute Investment wave. FDI flows into India trebled from $6 billion in 2004-05 to $19 billion in 2006-07 and are accepted to quadruple to $25 billion in 2007-08. By AT Kearney’s FDI Aplomb Index 2006, India is the additional a lot of adorable FDI destination afterwards China, blame the US to the third position. It is frequently believed that anon India will bolt up with China. This may aswell appear as China attempts to air-conditioned the abridgement and its protectionism measures that are eclipsing the Average Kingdom’s attractiveness. With ascent accomplishment and top acreage prices in the eastern regions, China may be accident its bend as a bargain accomplishment hub. India seems to be the accustomed choice.

India is advancing a cogent manufacturer, abnormally of electrical and cyberbanking equipment, automobiles and auto-parts. During 2000-2005 of the absolute FDI inflow, electrical and cyberbanking (including computer software) and auto accounted for 13.7 per cent and 8.4 per cent respectively.

In casework sectors, the advance players are the US, Singapore and the UK. During 2000-2005, the absolute investment from these three countries accounted for about 40 per cent of the FDI in the casework sector. In automobiles, the key amateur is Japan. During 2000-2005, Japan accounted for about 41 per cent of the absolute FDI in automobile, before all its competitors by a big margin.

India’s all-inclusive calm bazaar and the ample basin of technically accomplished manpower were the allure for the adopted investors. Hitherto, accepted for knowledge-based industries, India is arising a assertive of accepted accomplishment too. The accomplishment area in the Index for Automated Assembly has developed at an anniversary amount of over 9 per cent over the endure three years.

Korean auto-makers anticipate India is a bigger destination than China. Though China provides a bigger bazaar for automobiles, India offers a abeyant for college growth. Clearly, accomplishment and service-led advance and the accretion consumerisation makes India one of the a lot of important destinations for FDI.

Automotive Mission Plan 2016

The bumper-to-bumper cartage of all-around auto biggies on the access to India has assuredly fabricated government sit up and yield notice. In a bid to drive greater investments into the sector, admiral of abundant industries has absitively to put calm a 10-year mission plan to accomplish India a all-around hub for automotive industry.

“The ten year mission plan will aswell set the roadmap for bread-and-butter budgetary incentives”

The Government of India is cartoon up an Automotive Mission Plan 2016 that aims to accomplish India a all-around automotive hub. The abstraction is to draw an avant-garde plan of activity with abounding accord of the stakeholders and to apparatus it in mission approach to accommodated the challenges advancing in the way of advance of industry. Through this Automotive Mission Plan, Government aswell wants to accommodate a akin arena acreage to the players in the area and to lay a anticipated approaching administration of advance to accredit the manufacturers in authoritative a added abreast investment decision.

Major players in the auto area are:

o Tata

o Mahindra

o Ashok Leyland

o Bajaj

o Hero Honda

o Daimler Chrysler

o Suzuki

o Ford

o Fiat

o Hyundai

o General Motors

o Volvo

o Yamaha

o Mazda

Foreign Companies in the Indian auto-sector

Until the mid-1990s, auto industry in India consisted of just a scattering of bounded companies with baby capacities and anachronistic technologies. Nevertheless, afterwards the area was befuddled accessible to adopted absolute investment in 1996, some of the all-around majors confused in and, by 2002, Hyundai, Honda, Toyota, General Motors, Ford and Mitsubishi set up their accomplishment bases.

Over the accomplished four to 5 years, the country has apparent the barrage of several calm and adopted models of commuter cars, multi-utility cars (MUVs), bartering cars and two-wheelers and a able-bodied advance in the assembly of all kinds of vehicles. Moreover, attributable to its low-cost, high-quality manufacturing, India has aswell emerged as a cogent outsourcing hub for auto apparatus and auto engineering design, allusive Thailand. German auto-maker Volkswagen AG, too, is searching to access India.

India is accepted to be the baby car hub for Japanese above Toyota. The car, a hot bear like the Swift or Getz is acceptable to be exported to markets like Brazil and added Asian countries. This all-around car is acute for Toyota, which is searching to advance its sales in the BRIC (Brazil, Russia, India, China) markets.

Two multi-national car majors — Suzuki Motor Corporation of Japan and Hyundai Motor Aggregation of Korea — accept adumbrated that their accomplishment accessories will be acclimated as a all-around antecedent for baby cars. The access in centralized artefact development abilities and the abnormally top absorption of baby cars will access the country’s adeptness to become a sourcing hub for sub-compact cars.

A auspicious affection of the alteration auto arena in India over the accomplished 5 years is the newfound success and aplomb of calm manufacturers. They are no best abashed of antagonism from the all-embracing auto majors.

For instance, today, Tata Motor’s Indigo leads the accepted chump category, while its Indica is neck-to-neck with Hyundai’s Santro in the chase for the top-slot in the B category. Meanwhile M&M’s Scorpio has baffled aback the claiming from Toyota’s Qualis to advance the SUV segment.

Similarly, a few Indian winners accept emerged in the motorbike bazaar — the 150 and 180 cc Pulsar from Bajaj and 110 cc Victor from the TVS stable. The 93 cc Bike from Bajaj and 110 cc Freedom bike from LML accept aswell emerged as winners.

Evidently, Indian players accept learnt from accomplished mistakes and developed the abilities to body cheaper automobiles application `appropriate’ technologies. TVS, for instance, paid an beyond antecedent $100,000 to fine-tune civil engines rather than $1.5 actor to acceptation the absolute engine. Similarly, M&M acclimatized accessible systems and off-the-shelf apparatus from all-around suppliers to accumulate costs down and go for advancing pricing. True, Indian players are still defective in calibration of operation. While economies of calibration no agnosticism play an important role in the auto sector, a few Indian manufacturers relied on addition rather than calibration of operation for advancing advantage. For instance, Sundram Fasteners was able to accomplish the accomplishment of anon bartering radiator caps to General Motors absolutely on the backbone of addition in artefact quality. The calm applique industry bagged the adjustment for the Toyota Kirloskar manual bulb in the face of annealed antagonism from bunch corporations. The amount of the absolute job angry out to be alone a atom of the aboriginal estimate.

As the auto industry has accomplished over the accomplished decade, the auto apparatus industry has aswell developed at a accelerated clip and is fast accomplishing all-around competitiveness both in agreement of amount and quality.

In fact, industry assemblage accept that while the auto bazaar will abound at a abstinent pace, the apparatus industry is assertive for a take-off. For it is a part of the scattering of industries area India has a audible advancing advantage. All-embracing auto majors, such as Hyundai, Ford, Toyota and GM, which set up their bases in India in the 1990s, abiding some of their beyond basic suppliers to set up accomplishment accessories in India.

Consequently, the amount of accumulative achievement of the auto apparatus industry rose rapidly to Rs 30,640 crore at end-2003-04 from just Rs 11,475 crore in 1996-97. Adopted companies such as Delphi, which followed General Motors in 1995, and Visteon, that followed Ford Motors in 1998, anon realised the abundant amount advantage of accomplishment apparatus in India.

Finding the amount lower by about 30 per cent, they began exploring the achievability of exporting aback these low-cost, high-quality apparatus to their all-around factories and, thus, abbreviation their all-embracing costs. Not surprisingly, the industry’s exports registered a added than four-fold jump to Rs 4,800 crore in 2003-04 from just Rs 1,033 crore in 1996-97.

Automobile majors such as Maruti Udyog, Toyota, Hyundai accept now finalised their affairs to advance in some of the analytical auto components. According to the Automotive Basic Manufacturers Association of India (ACMA) officials, auto basic manufacturers are accepted to advance about Rs 10,000 crore over the next 5 years at the amount of Rs 2,000 crore per annum.

According to analysts, the auto basic industry could appear as the next success adventure afterwards software, pharmaceuticals, BPO and textiles. The admeasurement of the all-around auto basic industry is estimated at $1 abundance and is set to abound further. Against this backdrop, McKinsey’s latest address has estimated that the area has the abeyant of accretion its exports to $25 billion by 2015 from $1.1 billion in 2004.

Threat to the Dream!

India’s campaign to become a all-around auto accomplishment hub could be actively challenged by its disability to advocate its bargain assembly base. A analysis conducted by the research, KMPMG close reveals that the Indian auto basic manufacturers are added acceptable agnostic about comestible the bargain abject as overheads including labour costs and circuitous tax administration are consistently rising.

The analysis said abounding admiral accept that India’s amount advantage is cutting down fast as labour costs are consistently accretion and application advisers is acceptable added and added difficult. Increased attendance of all-around automotive companies in the country was cited as one of the affidavit for the top abrasion rate.

Indian auto businesses will alone curl if they addition investments in automation. In the best term, amount advantage will alone be retained if Indian basic can be acclimated to advance bargain automation in manufacturing. This is the way to bottle our low cost.

Global auto majors are aswell contemptuous about India’s low amount accomplishment base. India taxation charcoal a big disadvantage. This is not about tax ante it is just about accidental complexity. But some companies aswell accept there is ambit for abbreviation the amount of accomplishing business.

In animosity of this there are opportunities to accomplishment lower costs appropriate beyond the board. It’s accurate that labour costs are absolutely accretion but they are still 5 per cent of the absolute operational costs. The labour costs can be added bargain if companies are acknowledged in bringing down added costs like abbreviation ability costs. Bargain abject can never endure long. The aggregation said Indian industry has till now relied on actual labour accelerated archetypal but it would accept to about-face to a added basic accelerated archetypal now.