Introduction:
During the early 60's and 70-ies, most cars come in twos.
In the scooter, you had a Lambretta or Vespa.
In motorcycles, you had a bullet or Java.
in the car, you had to choose between the Ambassador and Fiat.
in the truck, it was Ashok Leyland and Tata.
in the tractor, it is between the government and Mahindra.
This situation is reflected in India yester years. Economic reforms and deregulation have changed the scene. The automotive industry has written a new inspirational story. It is a story about the exciting diversity, unparalleled growth and fun consumer experience - all within a few years. India has already become one of the fastest growing automotive markets in the world. It is a tribute to the leaders and managers in industry and, as policy planners. automotive industry has the ability to go beyond this remarkable achievement. It stands at the doorsteps of a quantum leap.
Indian automobile industry is going through a technological change, where every company is engaged in changing its processes and technologies to maintain competitive advantage and provide customers with optimized products and services. Based on two wheels, trucks and tractors to the multi utility vehicles, trucks and luxury cars, the Indian automobile industry has achieved great success in recent years.
"Opportunity is staring in the face. It comes only once. If you miss it, you will not get it again"
on the canvas of the Indian economy, auto industry maintains a high flying position. Because of its deep rear box and links to several key segments of the economy, the automotive industry has a strong multiplier effect andable of being a driver of economic growth . the sound transport system has an important role in the country's rapid economic and industrial development. well-developed Indian automotive industry skillfully fulfills this catalytic role by producing a wide range of vehicles: passenger cars, light, medium and heavy commercial vehicles, multi-utility vehicles such as jeeps, scooters, motorcycles, mopeds, three-wheel tractors and the like.
automotive sector is one of the key industry of Indian economy, whose perspective is a reflection of the economic resilience of the country. Continuous economic liberalization over the years by the government of India has resulted in making India as a major business destination for many global automotive players. automotive sector in India is growing at a rate of about 18 percent annually.
"automotive industry is just a multiplier, a driver for employment, investment, technology»
Indian automotive industry started its new journey from 1991 to delicensing sector and later open for 100 percent FDI through automatic route. Since then almost all major world set up their facilities in India taking the production of 2 million vehicles in 1991-9700000 in 2006 (nearly 7 percent of global production of cars and 2.4 percent of four-wheel production).
cumulative annual growth rate of production in the automotive industry from the year 2000-2001 to 2005-2006 was 17 percent. cumulative annual growth rate of exports in the period from 2000-01 to 2005-06 was 32.92 percent. production in the automotive industry is expected to achieve a growth rate of over 20 percent in 2006-07, and about 15 percent in 2007-08. exports during the same period is expected to grow by more than 20 percent.
automotive sector is contributing its share to shine economic performance in India in recent years. With the Indian middle class pays a higher income per capita, more people are willing to own private vehicles including cars and two wheels. Product movement and held services boosted the sales of medium and large trucks to transport goods and passengers.
side by side with fresh growth in vehicle sales, auto parts sector has witnessed tremendous growth. domestic auto parts consumption is driven rupees 9000 crore and exports of half the size of that figure.
attractive FDI destination! - INDIA
India is the top foreign direct investment wave. Direct investment in India trebled from 6 billion U.S. dollars in 2004-05 to 19 billion U.S. dollars in 2006-07 and is expected to quadruple to 25 billion U.S. dollars in 2007-08. According to AT Kearney's FDI Confidence Index 2006, India's second most attractive FDI destination after China, pushing the U.S. third. It is commonly believed that India will soon catch up with China. It can also happen as China tries to cool the economy and protectionism measures that are eclipsing the Middle Kingdom attraction. With rising wages and high land prices in eastern regions, China May be losing the edge as a center of low-cost production. India seems to be the natural choice.
India is an up-and-coming major producer, particularly electrical and electronic equipment, automobiles and auto parts. During 2000-2005 the total FDI inflow, electrical and electronic (including computer software) and the car was 13.7 percent and 8.4 percent respectively.
in the service sectors, lead players are the U.S., Singapore and United Kingdom. During 2000-2005, total investment in these three countries account for about 40 percent of foreign direct investment in the services sector. In cars, Japan is a key player. During 2000-2005, Japan make up about 41 percent of total FDI in the automotive, surpassing all its competitors by a large margin.
India's huge domestic market and a large pool of technically qualified manpower are magnetism for foreign investors. So far known for knowledge-based industries, India is an emerging power in the conventional production too. manufacturing sector in the index of industrial production has grown at an annual rate of more than 9 per cent in the last three years.
Korean car-makers think India is a better destination than China. While China provides a growing market for cars, India offers the potential for higher growth. Clearly, manufacturing and services led the growth and increasing consumerisation makes India one of the most important destinations for FDI.
Automotive Mission Plan 2016
bumper to bumper traffic on the global automobile biggies passage to India has finally made the authorities sit up and take notice. In an attempt to drive more investment into the sector, the Ministry of Heavy Industries has decided to put together a 10-year mission plan to make India a global hub for automotive industry.
"ten years of the mission plan will also set up a budget plan for fiscal stimulus"
Government of India is drawing up a plan Moto Mission 2016, which aims to India a global automobile hub. The idea is to draw an innovative plan of action with full participation of stakeholders and to implement it in mission mode to meet the challenges that come in the way of growth in the industry. Through this Automotive Mission Plan, Government also wants to ensure a level playing field players in the sector and identify the foreseeable future direction of growth to allow producers in making more informed investment decisions.
the major players in the automotive sector are:
Daddy O
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
of foreign companies in the Indian auto sector
By the mid-1990s, the automobile industry in India consisted of only a few local companies with small capacity and outdated technology. However, after the sector was thrown open to foreign direct investment in 1996, some of the larger global moved in and, by 2002, Hyundai, Honda, Toyota, General Motors, Ford and Mitsubishi set up its manufacturing base.
In the past four to five years, the country has seen the launch of several domestic and foreign models of passenger cars, multi-utility vehicles (MUVs), commercial vehicle and two wheels and a robust growth in manufacturing all types of vehicles. In addition, because of its low-cost, high quality manufacturing, India has emerged as a significant outsourcing hub for auto components and auto engineering design, dominated Thailand. German car maker Volkswagen AG, also seeking to enter India.
India is expected to be small car hub for Japanese major Toyota. car, hot hatch as the Swift or the Getz is likely to be exported to markets such as Brazil and other Asian countries. The global car is crucial for Toyota, which is looking to improve their sales in the BRIC (Brazil, Russia, India, China) markets.
two multi-national car majors - Suzuki Motor Corporation of Japan and Hyundai Motor Company of Korea - have shown that their production facilities to be used as a global source for small cars. burglary in the in-house product development skills and unique high concentration of small cars will affect the country's ability to become a source node for sub-compact cars.
a significant feature of changing the car scene in India in the past five years the newfound success and confidence of domestic producers. They are no longer afraid of competition from international auto majors.
For example, today, Tata Motor's Indigo leads the popular customer category, while its Indica is neck-to-neck with Hyundai's Santro in the race for the top spot in the B category. In the meantime, M & M's Scorpio beat back a challenge from Toyota Qualis SUV segment run.
Also, a few Indian winners have appeared in the motorcycle market - 150 and 180 cc from Bajaj Pulsar 110 cc and Victor from the TVS stable. 93 cc Bike from Bajaj and 110 cc bike from LML Freedom have also emerged as winners.
Obviously, the Indian players have learned from past mistakes and developed skills to build cheaper cars using `appropriate 'technologies. TVS, for example, pays $ 100,000 overseas source for fine adjustment of the domestic engines, instead of the 1.5 million U.S. dollars to import the entire engine. Similarly, M & M adapted to the available systems and off-the-shelf components from global suppliers to keep costs down and go for aggressive pricing. True, Indian players are still lacking in scale of operation. While economies of scale, undoubtedly plays an important role in the auto sector, a number of Indian producers rely on innovation, rather than the scope of business for competitive advantage. For instance, Sundram Fasteners was able to accomplish a feat that directly supplying radiator caps to General Motors solely on the strength of innovation in product quality. domestic industry tools bagged an order for transfer of Toyota Kirloskar plant in the face of stiff competition from multinational corporations. cost of the whole job turned out to be only a fraction of the original estimates.
As the automotive industry has matured over the past decade, the auto parts industry has also grown at a fast pace and rapidly achieving global competitiveness both in terms of price and quality.
In fact, industry observers believe that while the car market will grow at a measured pace, the components industry is ready for takeoff. For it is among a handful of industries where India has a distinct competitive advantage. International Automobile majors such as Hyundai, Ford, Toyota and GM, which has set its base in India in 1990, at the urging of some of their overseas components suppliers to set up manufacturing facilities in India.
Therefore, the value of the cumulative output of auto parts industry grew rapidly Rs 30 640 crore at end-2003-04 from just Rs 11,475 crore in 1996-97. Foreign companies such as Delphi, which was followed by General Motors in 1995, and Vista, which was followed by Ford Motors in 1998, soon realized substantial cost advantage of manufacturing components in India.
Finding a lower cost by about 30 percent, they begin to explore the possibility of exporting back these low-cost, high-quality components for its global factories, thus, reducing their overall costs. Not surprisingly, the industry exports registered more than four times jump to Rs 4800 crore in 2003-04 from just RS 1033 crore in 1996-97.
Automobile majors such as Maruti Udyog, Toyota, Hyundai is now complete their plans for investment in some of the critical automotive parts. According to Automotive component manufacturers association of India (ACMA) officials, auto component manufacturers are expected to invest around 10,000 Rs crore over the next five years at a rate of Rs 2000 crore annually.
According to analysts, auto component industry could emerge as the next success story after software, pharmaceuticals, BPO and textiles. The size of the global auto component industry is estimated at 1 trillion U.S. dollars and is set to grow further. Against this backdrop, recent McKinsey report estimates that the sector has the potential to increase exports to 25 billion U.S. dollars by 2015 from 1.1 billion U.S. dollars in 2004.
Threat Dream!
expedition to India becoming a global manufacturing center, the car could be seriously challenged by its inability to comply with its low-cost production base. A survey conducted by research firm KMPMG reveals that the Indian auto component manufacturers are becoming increasingly skeptical about the maintenance of low-cost base overhead costs, including labor costs and complex tax regime is constantly growing.
survey said many executives believe that India's cost advantage is grinding down quickly as the cost of labor is increasing and retaining employees is becoming harder and harder. Increased presence of global automotive companies in the country was cited as one reason for the high erosion rate.
Indian auto companies will only flourish if they encourage investment in automation. In the long run, the cost advantage will be retained if the Indian capital may be used to develop low-cost automation in manufacturing. It is a way to preserve our low prices.
Global auto major are also cynical about India, low cost manufacturing base. India taxation remains a major drawback. This is not about tax rates it is only about unnecessary complexity. However, some companies also believe that there is scope for reducing operating costs.
Nevertheless, there are opportunities to use lower costs right across the board. It is true that labor costs are definitely increasing, but they are still five per cent of total operating costs. labor costs can be further reduced if companies are successful in bringing down other costs such as reducing energy costs. Low-cost base can never last long. The company said the Indian industry to date has relied on a very labor intensive model, but it will have to switch to more capital intensive model now.