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Page 1: India - Global Small Car Hub

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‘Global Small Car Hub’?

• In 2009, Tata motors launched the world’s cheapest car ‘Nano’ at a price of less than$2500. A car at that price point was a revolution in the industry, not just in India but evenglobally. The company received an unprecedented response with a total of more than200,000 bookings for Nano, in just a month.4

• By 2009, 72 small car models (including variants in respective models) (Annexure I) werelaunched in India, most of them by Maruti. Along the way, India overtook Brazil and hasbecome the second-largest maker of small cars after Japan.5

“A nation’s competitiveness depends on the capacity of its industry to innovate and upgrade.”1

– Michael E. Porter

“The launch of Nano has further highlighted the capabilities of a low cost automotive manufacturingecosystem in India. It will encourage continued emphasis on product developments in the low costcars category by other manufacturers across the world, with India as a focal point.”2

– Sachin Mathur, Head, CRISIL Research

“India has the foundations in place and is rapidly establishing itself as a global small car manufacturinghub with significant potential to further increase exports and penetration of overseas markets.”3

– Dilip Chenoy, Director General, SIAM

This case study was written by T. Sai Vijay and Saradhi Kumar Gonela under the guidance of Dr. Nagendra V. Chowdary, IBSCDC. Itis intended to be used as the basis for class discussion rather than to illustrate either effective or ineffective handling of a managementsituation. The case was compiled from published sources.

© 2009, IBSCDC.No part of this publication may be copied, stored, transmitted, reproduced or distributed in any form or medium whatsoeverwithout the permission of the copyright owner.

1 Porter E. Michael, “The Competitive Advantage of Nations”, Harvard Business Review, March 19902 “Nano reinforces India as small car hub”, http://www.crisil.com/Ratings/Brochureware/Media/PressRelease/CRISIL-

Research_tata-nano-pr_230309.pdf, March 23rd 20093 “Revving up! Indian automotive industry - a perspective”, http://www.ey.com/Publication/vwLUAssets/

The_Indian_automotive_industry/$FILE/Industry_Automotive_Revving_up.pdf, 20094 “Tata Nano draws over 2.03 lakh bookings”, http://tatanano.inservices.tatamotors.com/tatamotors/

index.php?option=com_content&task=view&id=289&Itemid=207, April 20095 “A small-car hub”, http://www.business-standard.com/india/news/a-small-car-hub/371199/, September 25th 2009

Ref. No.: MEBE0037

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• In 2008-2009, total cars sold in India were 1,551,8806 and small cars represented 80% ofthe domestic sales.7

• According to the Society of Indian Automobile Manufacturers (SIAM), exports of smallcars increased by 53% between April and September 2009 to 197,249 units against 129,090units for the same period in the previous year.8

• H.S. Lheem, chief executive of Hyundai Motor India, the country’s second-largestmanufacturer, told Japanese daily Nihon Keizai Shimbun, that his company is ready tounveil a $5,000 to $6,000 800 cc small car from its Chennai plant. The car will be sold inIndia as well as exported. Nissan, too, is readying with big investment in an export-focusedplant in India and is ready to launch its new mini-car that will debut in India before theEurope, US and even Japanese market, after Honda has launched it Jazz.9

• “We are making a $600 million investment in a second car plant in India and by end ofDecember 2010 or early January 2011, Toyota will be ready to unveil its new compact cardesigned by Toyota Japan and developed for the Indian market. It will be launched in Indiafirst and will have a lot of Indian-ness, including the fact that it will have an Indian platform.It will be manufactured by Indians for Indians.” says, Mr. Sandeep Singh, deputy managingdirector, Toyota Kirloskar Motors. 10

• Small cars from India are gaining in European markets where people are moving from gasguzzlers to fuel-efficient cars and are taking the scrappage incentive launched by variousEuropean governments. The key growth markets include the UK, the Netherlands, Germany,Italy and Spain.11

• According to European Automobile Manufacturers Association, the total passenger carmarket in Europe is over 14 million units. According to their estimates, share of small carmarket would be 2–3% and the total market size for small cars in Europe will be nearly500,000 units, of which over 80% would be met by Hyundai and Maruti alone.12

• According to Stephen R D’Arcy, global head (automotive practices),PricewaterhouseCoopers, “Nearly 75% of the total vehicles sold in the US earlier werebigger cars and trucks. Now 40% of the US population is moving towards more fuel efficientcars and this has forced players like Ford Motors to think of introducing its small car Fiestainto the US market for the first time.”13

6 “Automobile Domestic Sales”, http://www.siamindia.com/scripts/domestic-sales-trend.aspx7 BaggonkarSwaraj, “India’s small car market drives the global biggies”, http://www.business-standard.com/india/news/india%5Cs-

small-car-market-drivesglobal-biggies/375788/, November 9th 20098 Ibid.9 “Driving Ambition: India’s Emergence as a Hub for Compact Cars”, http://knowledge.wharton.upenn.edu/india/

article.cfm?articleid=4417, October 8th 200910 Ibid.11 Arora Simran and Seth Yogima, “Small cars, big haul”, http://www.financialexpress.com/printer/news/535398/, October 31st

200912 Ibid.13 Ibid.

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• Ford Motor Co. has launched its version of a small car – Figo – that will be producedlocally early next year. Ford CEO Alan Mulally, who was in India for Figo’s Septemberlaunch, believes that the Indian small-car segment will double over the next 10 years.“About 60% of the vehicles worldwide will be smaller vehicles like the new one here,”Mulally said at the time. Ford is investing $500 million to double its capacity to 200,000 carsannually at its Chennai plant in southern India.14

With changing customer preferences towards small fuel-efficient cars, in the developed countries,it is clearly an advantage for the developing nations. Every big automobile player in the world isready to invest in the Indian automobile sector, especially the small car segment. This can provideIndia a competitive edge over other nations. But the question to be asked is whether the competitiveadvantage that India has is sustainable over a long period of time. Major concerns, such as risingwages, expensive raw material and inadequate infrastructure, will have to be addressed effectivelyto help the nation thwart competition from other countries in the region. The journey of Indian autoindustry till 2009 suggests that India has the competency to retain competitiveness with properregulatory assistance.

Indian Automobile Industry: Pre-economic LiberalisationIndia’s first car manufacturing facility started its operations in 1942 under the name Hindustan

Motors, headed by C.K.Birla. In order to develop a home-grown automobile industry, the Indiangovernment, on the recommendation of the tariff commission permitted only those firms that wereinto manufacturing and discouraged the ones which were mere assembling units. As a result only sixautomakers namely; Hindustan Motors Ltd., Premier Automobiles Ltd., Standard Automobiles Ltd.,Telco Ltd., Ashok Leyland Ltd., and Mahindra and Mahindra Ltd., dominated the entire automobileindustry. The government also imposed quantitative restrictions (QRs)15 on imports of raw materials,components and equipments. Due to the licence raj16, the Indian automobile industry confronted anumber of challenges, most prominent being production limits. The government fixed the upper limitof production at 40,000 units per annum for nearly three decades.17 These limits severely crippledthe industry for investments and due to less investment India lacked domestic proficiency in R&D toimprove the quality. Importing scientific know–how and advanced components was not possible dueto import restrictions. Employing foreign technical experts was also not possible due to governmentrestrictions.18 All these impositions reduced output to miniscule proportions and customers had towait for months, sometimes years to own a car, after booking. As a consequence car remained aluxury product for the upper strata and prohibitive to middle class. However, situation changed forgood during early 1980s.

14 “Driving Ambition: India’s Emergence as a Hub for Compact Cars”, op.cit.15 Quantitative Restrictions (QRs) are specific limits imposed by countries on the quantity or value of goods that can be

imported or exported.16 Licence Raj, also called as the Permit Raj refers to the elaborate licences, regulations and the accompanying red tapism that

were required to set up, run and even liquidate businesses in India between 1947 and 1990.17 “Automobile Industry”, http://www.tradechakra.com/indian-economy/industries/automobile-industry.html, 200818 Ibid.

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The Indian automobile industry took an extraordinary leap in 1982, when the Indian governmentand Suzuki Motors, Japan, concluded a partnership to form Maruti Udyog Limited (MUL), for massproduction of smaller, cheaper and fuel-efficient cars to capture the burgeoning middle class. Thefirst car that came into market was Maruti 800 (M800), priced at about INR 48,000 and it became aninstant hit. During the period, to provide impetus to the industry, Government of India eased regulationsand norms for licensing and capacity expansion. It also relaxed controls for collaboration with foreigncompanies, import of raw materials and automobile components.19

Hindustan Motors with its only brand Ambassador – the top selling car – lost its position to MULand M800 became India’s largest-selling car in just few months of its launch and continued to be thelargest selling car for over two decades from then. The sales of Maruti 800 were about 2,520,020units till 2008.20 Economic liberalisation, initiated during 1991 and the following regulatory changeschallenged the numero-uno status of Maruti 800, thanks to the entry of foreign auto companies.“Success in the small car segment is imperative for a brand to get visibility in the market”, accordingto Mr. Abdul Majeed, automotive practice leader, PricewaterhouseCoopers (PwC).21

Post-liberalisationThe face of the Indian automobile industry completely changed in the open economy era post

liberalization, which brought a remarkable change in the Indian automobile industry. It was a shiftfrom CLP (controls, licenses and protectionism) to LPG (liberalization, privatization and globalisation).After liberalisation, the government initiated a new automobile policy in 1993 reducing control overthe automobile industry. The new policies dismantled the licence raj and approved an equity investmentof up to 51% by foreign firms.22 Further in 1997, government reformed the policy, according towhich foreign companies were allowed to establish manufacturing plants and the minimum foreignequity was set at $50 million.23

The new automobile policy attracted a large number of automobile companies and almost all theglobal auto companies established facilities in India. These included GM and Ford from US, Toyotaand Honda from Japan, seven (Fiat, BMW, Mercedes-Benz, Audi, Volkswagen, Volvo, and Porsche)European and two (Hyundai and Daewoo) South Korean companies.24 All these measures resultedin tremendous increase in the production levels, from 2 million in 1992 to 9.7 million in 2006.25

19 Narayanan K., “Liberalisation and The Differential Conduct and Performance of Firms: A Study of the Indian AutomobileSector”, http://hermes-ir.lib.hit-u.ac.jp/rs/bitstream/10086/13838/1/DP414.pdf, May 2001

20 “Top 25 Facts about Maruti and its Flagship Model M 800”, http://www.carazoo.com/article/0901200901/Top-25-Facts-about-Maruti-and-its—Flagship-Model-M-800, January 9th 2009

21 Bhanot Shweta, “Setting the beat”, http://www.financialexpress.com/news/Setting-the-Beat/553055/, December 12th 200922 Krishnan Viswanathan, “Indian Automotive Industry: Opportunities and Challenges Posed By Recent Developments”, http:/

/dspace.mit.edu/bitstream/handle/1721.1/1619/Krishnan.pdf;jsessionid=ED18590A4DA61E8895B92EE9EADCDCF9?sequence=1

23 Ibid.24 Mukherjee Avinandan, “The Indian Automobile Industry: Speeding Into The Future?”, http://www.gerpisa.univ-evry.fr/

ancien-gerpisa/actes/28/28-4.pdf25 “FDI Inflows to Automobile Industry”, http://business.mapsofindia.com/fdi-india/sectors/automobile-industry.html

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Again in 2002, the government altered auto policy allowing 100% Foreign Direct Investment(FDI) in Indian automobile industry. With 100% FDI, the Indian auto industry became a level playingfield, with government’s role reduced to providing direction to the industry. The government set goalsfor auto industry in its Automotive Mission Plan (AMP) 2006–2016, which states, “To emerge as thedestination of choice in the world for design and manufacture of automobiles and auto componentswith output reaching a level of $145 billion accounting for more than 10% of the GDP and providingadditional employment to 25 million people by 2016.”26

LPG also had a positive impact on other sectors vital for automobile industry to thrive. In educationsector, thrust on technical education resulted in setting up of numerous engineering colleges andallied technical institutes, between 1991 and 2006, increasing the availability of skilled manpowermanifold. Availability of trained engineers and technical personnel propelled further pursuits –technology improvements, research and development, advanced innovations, benchmarking exercisesand borrowing best practices, etc. Presence of efficient manpower, availability of advanced technology,low-cost labour and availability of raw materials and ancillary units helped in enhancing productioncapacities and reducing cost per unit.

These positive industry related developments coupled with other macro-economic developmentssuch as increase in per capita income, various tax relief policies, availability of finance from banks,increased mobility and improved infrastructural facilities multiplied car owners in India at exponentialrates (Exhibit I).

26 “Automotive Mission Plan”, http://www.dhi.nic.in/Final_AMP_Report.pdf, December 2006

Exhibit IAutomobile Domestic Sales

2002–2003 2003–2004 2004–2005 2005–2006 2006–2007 2007–2008 2008–2009

Passenger 707198 902096 1061572 1143076 1379979 1549882 1551880Vehicles

Source: “Industry Statistics”, http://www.siamindia.com/scripts/domestic-sales-trend.aspx

Though production and also the number of car owners in India multiplied, car penetration is stilllower in comparison with the developed nations. By 2009, India will have just 10–12 cars per 1,000people compared to 750 cars per 1,000 people in the US (Exhibit II).

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To increase the penetration levels, car companies will have to tap the lower middle and uppermiddle class consumers by offering cars that they can afford. Affordable cars for this strata meansfuel-efficient, low on maintenance and lower price – simply put, cars with lower engine capacity andcompact body i.e., small cars. The automobile companies are also aiming to meet the changingdemands and preferences of customers across the globe to leverage their production capacities inIndia.

Changing trends in the Global Automobile IndustryThough automobile industry was invented in Germany and developed in France (hence automobile,

originally a French word) in 19th century, US became trend-setter in the industry during early 20th

century. Till 1909 there were nearly 200 car producers in the US market, but gradually after 1909(with the innovation of assembly line manufacturing and the resulted mass production dynamics)independent car manufacturers were acquired by big companies and the consolidation created anoligopolistic car market dominated by the Big Three namely General Motors (GM), Ford and Chrysler.27

Exhibit IIThe Mobility Threshold

Source: Haddock Ronald and Jullens John, “The Best Years of the Auto Industry Are Still to Come”, http://www.strategy-business.com/article/09204?pg=2, May 26th 2009

27 Klepper Steven, “The Evolution of the U.S. Automobile Industry and Detroit as its Capital”, http://www.druid.dk/conferences/winter2002/gallery/klepper.pdf, November 2001

A country’s threshold of mobility lies near $10,000 GDP per capita, where automobile ownership accelerates. The REEsshown here (Brazil, Russia, China, India, Malaysia, Argentina, Mexico, Turkey, Thailand, Iran and Indonesia) have not yetreached this point, but they will soon, if they follow the example of every country before them. Each line of symbolsrepresents a 19-year progession for one country, from 1990 through 2008.

CanadaAustraliaGermanyUKUSPolandMalaysiaRussiaArgentinaMexicoBrazilTurkeyThailandIranIndonesiaIndiaChina

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Henry Ford adopted the technique of moving assembly line, which marked the birth of massproduction and offered cars at lowest, yet single, price point. However, Alfred Sloan’s idea (at GM)of market segmentation and offering cars at different price points dominated the second half of the20th century. In the post World War II period, the auto companies in the US and in some countries ofWestern Europe served pent-up demand and hence produced big cars with powerful engine capacities.Though, the cars became expensive, both in terms of purchasing and maintaining, sales kept onsoaring. The first jolt for big car sales came in early 1970s, as the oil price quadrupled. Following that,the auto industry found itself under attack from environmentalists outraged by gas-guzzling cars.

Following the 1973 oil crisis consumers were forced to look towards small and fuel-efficient cars.The Japanese and South Korean automakers flourished under these circumstances by offering fuel-efficient cars. This had a severe impact on the ‘Big Three’ as their sales declined drastically. The‘Big Three’, which have virtually invented the industry and framed the rules, had lost significantmarket share. In 1989, GM recorded a biggest loss ever experienced by any automaker; substantialcost-cutting helped it to regain profits, but had to lose its market share. In the consequent period theUS automakers lost their market share from 73.3% in 1986 to 53.5% in 2006, while the Japanesemarket share improved from 21% to 35% during the same period.28 Eventually, only those companiesthat offered premium cars and the ones that were low cost providers were earning sustainablereturns and by 2004 out of the world’s top 17 car companies, only half were earning more than thecost of their capital (Exhibit III).29

Exhibit IIIWho Creates Value?

28 “The Road Ahead”, http://www.trade.gov/wcm/groups/public/@trade/@mas/@man/@aai/documents/web_content/auto_report_roroadahe09.pdf, April 2009

29 “Driving change”, http://www.economist.com/surveys/displaystory.cfm?story_id=E1_PTNSNDG, September 2nd 2004

Source: “Driving change”, http://www.economist.com/surveys/displaystory.cfm?story_id=E1_PTNSNDG, September2nd 2004

Cost Scorecard

Premium-pricedbrands

Value Creation

Mercedes

FordMazda Nissan Honda Toyota

Low-costproviders

KiaPSARenault

FiatMNCGM

VW

Chrysler

BMW

Long-term

ROIC*-WACC**

* Return on invested capital** Weighted average cost of capital

1 High cost 2 3 4 Low cost 5

80,000

60,000

40,000

20,000

0 Ave

rage

rev

enue

per

uni

t, 20

01,

$

Value Destruction

Porsche

Hyundai

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All the major automakers faced a tough time in 2008, as the developed nations were hit by thefinancial crisis. Credit crunch, overcapacity due to collapsing demand, seesawing price of oil andother related factors resulted in the sales decline for all the major carmakers. According to a reportby the consulting firm Deloitte, the 2008 economic crisis will change consumers’ purchasing attitudein developed nations towards fuel-efficient and eco-friendly cars.30 By 2020, the auto industry willwitness striking changes in consumers’ buying preferences and patterns. According to experts fromthe auto industry, the industry is facing tremendous challenges from the changing preferences ofconsumers across the globe (Exhibit IV).

Exhibit IVAnticipated Change in External Forces Impacting the Industry (2008-2020)

Source: Rishi Sanjay, et al., “Automotive 2020 Clarity beyond the chaos”, http://www-935.ibm.com/services/us/gbs/bus/pdf/gbe03079-usen-auto2020.pdf, August 2008

As a result of changes in the buying preferences, by the year 2020, the auto industry will faceconsumers who will be highly informed, smart, demanding and environmentally conscious and willbuy cars based on totally new conditions and new criteria (Exhibit V).

30 “A new era accelerating toward 2020- An automotive industry transformed”, http://www.deloitte.com/assets/Dcom-Global/Local%20Assets/Documents/A%20New%20Era_Online_final.pdf, 2009

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A research by Booz & Company shows that by 2020, automobile industry will have a customerbase that falls into three groups, largely based on the countries they live in.31

• The Rapidly Emerging Economies (REEs) mainly consisting of the BRIC nations(Brazil, Russia, India and China) and group of developing nations, like, Argentina, Indonesia,Turkey, Mexico, Malaysia, Iran, and Thailand. These nations have millions of families whowill be buying their first car.

• The Lower-growth Economies (compared to REEs) are formed by a group of nearly100 nations having considerably impoverished people and poor economic conditions. Thesenations may become markets for motorized transportation after 2020.

• The Mature Economies include the developed and industrialized nations in Europe andNorth America, and Japan in Asia. Substituting old vehicles and growth in population, ratherthan economic growth, will determine the market for automobiles there.

These three categories of customer base tally up to a huge market potential: Booz & Companyestimates suggest that more than 370 million additional vehicles could be sold by 2013 and more than

Exhibit VChange in Vehicle Buying Criteria (2008-2020)

Source: Rishi Sanjay, et al., “Automotive 2020 Clarity beyond the chaos”, http://www-935.ibm.com/services/us/gbs/bus/pdf/gbe03079-usen-auto2020.pdf, August 2008

Fuel efficiencyEco-friendly

Traffic congestionPersonalization

SafetyAlternative transportation modes

Lifetime cost of ownershipReliability

BrandOtherPrice

Values of companyTaxation

Substantial

Moderate

Limited

Unchanged Moderate Significant0 1 2

31 Haddock Ronald and Jullens John, “The Best Years of the Auto Industry Are Still to Come”, http://www.strategy-business.com/article/09204, May 26th 2009

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715 million by 2018.32 The sales of automobiles in the REEs are expected to expand almost six-fold by2018 (Exhibit VI) and most of the purchasers being first time buyers, they would prefer small cars.

Exhibit VIGrowth Projections for Global Automobile Market

Source: Haddock Ronald and Jullens John, “The Best Years of the Auto Industry Are Still to Come”, http://www.strategy-business.com/article/09204?pg=3, May 26th 2009

According to Tim Armstrong, director of market intelligence service IHS Global Insight, 95% ofthe 690,000 cars that will be exported, from India in 2015 will be small cars.33 People still vividlyremember 2008 price spike in oil which resulted in more and more people shifting away from gasguzzlers. Environmental consciousness is increasing, too. With increasing worries about carbonemissions, European governments provided subsidy for exchanging cars that are more than 10 yearsold.34 As the global automobile trends, for the decades to come, point towards surge in small carsales, low cost producing countries – especially India – would have a greater advantage and it canbe a hub for car production in the 21st century like US in the 20th century.

32 “The Best Years of the Auto Industry Are Still to Come”, op.cit.33 “Driving Ambition: India’s Emergence as a Hub for Compact Cars”, op.cit.34 Ibid.

A plausible scenario for a future mobility market most growth between 2008and 2018 taking place in rapidly emerging economies.

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India: A Manufacturing Hub for Small Cars?

Potentials

India has a population of more than 1.1 billion, but the level of car penetration is very low, indicatinghigher growth potential. Among all the REEs, India is expected to have the fastest-growing automobilemarket. As demonstrated by the success of M800, India has always been the home for small carsand there would be a continuous, growing demand for low-cost, fuel-efficient small cars in the pricerange of $3,100–$7,800 (Exhibit VII).

Exhibit VIIGlobal Sales Forecast for Low-Cost Cars

Source: “Pile Them High”, http://www.economist.com/specialreports/displaystory.cfm?story_id=12544923&source=login_payBarrier, November 13th 2008

By 2009, India has an advantage to be a global hub for small cars with both domestic and foreignautomobile manufacturers familiarising themselves with the cost-conscious consumers in a way thatcould very well transform the perception of small cars and the way they are manufactured worldwide.A number of global automakers like Ford, General Motors (GM), Fiat, Nissan, Renault, Volvo,Volkswagen (VW), Suzuki and Hyundai etc. have planned to make India their base for designing andmanufacturing small cars. These automakers have announced to launch new models and variantsand intend to make India a global hub for small cars for exporting their cars to Africa, Latin Americaand Europe.35 A report by Ernst & Young shows that the Indian car market will grow at a CAGR of12% for the next 5 years.36 The report also states that the number of units sold will increase from

35 Yee Amy, “Carmakers turn to India for growth”, http://www.ft.com/cms/s/0/f5707354-bed5-11dc-8c61-0000779fd2ac.html?nclick_check=1, January 9th 2008

36 Anand, “Indian passenger vehicle market to grow at 12% CAGR over next 5 years : E&Y”, http://machinist.in/index.php?option=com_content&task=view&id=2176&Itemid=2, July 1st 2009

* 2007 estimates based on cars in range $3,100–$7,800

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1.89 million units in FY2009 to 3.75 million units by FY2014 (1 million units will be exported and 2.75million units will be for domestic sales).37

On demand side, India offers a huge potential for small cars. On the basis of Purchasing PowerParity (PPP), India is currently world’s fourth largest economy, and will be the third largest economyby 2050.38 It joined the group of $1 trillion economies in 200739 and has since been posting a healthyGDP growth rate of above 8% per annum and is expected to continue in the following decades. Dueto this growth potential; which offers tremendous opportunities, the global automakers have beenshowing keen interest to invest in India. It is estimated that the Indian automobile industry wouldgrow to $40 billion by 2015 from $7 billion in 2008.40

India’s economy has been growing significantly for the last 10 years and also the spending powerof the citizens. According to a McKinsey report, the rising incomes will create a strong base of 583million middle class people (Exhibit VIII).

37 “Indian passenger vehicle market to grow at 12% CAGR over next 5 years : E&Y”, op.cit.38 “India to be third largest economy by 2050: Carnegie Endowment”, http://timesofindia.indiatimes.com/biz/india-business/

India-to-be-third-largest-economy-by-2050-Carnegie-Endowment/articleshow/5253834.cms, November 21st 200939 “Revving up! Indian automotive industry - a perspective”, op.cit.40 “Automobile Industry”, op.cit.

Exhibit VIIIGrowth of Middle Class

Source: “The ‘Bird of Gold’: The Rise of India’s Consumer Market”, http://www.mckinsey.com/mgi/reports/pdfs/india_consumer_market/MGI_india_consumer_full_report.pdf, May 2007

India Will see Further Reduction in Poverty and Growth of its Middle Class

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A report by Booz-Allen Hamilton, a global consulting firm predicts that, “the Indian domesticmarket of 1 million passenger cars will double by 2010 and cross 3.5 million by 2015.”41 The hugeopportunity in the form of number of people in the middle income group represents India’s potentialof being a suitable and growing market for car makers. By the year 2009, more than 78% of motorvehicles on the road will be two-wheelers (Exhibit IX), their popularity driven by low price, high fuelmileage, and an ability to move through India’s traffic congestions. And the owners of two-wheelerswould graduate to cars as incomes grow. Carmakers can target the 65 million two wheeler ownersin India.42

The Government of India has provided tremendous impetus to the Indian automobile industry byframing appropriate policies and regulations, especially for the small car segment. Mr. Dilip Chenoy,director general of the Society of Indian Automobile Manufacturers (SIAM), says, “Look at theIndian government’s Automotive Mission Plan 2006-16, it clearly states that investment assistancewill be provided to support the small-car industry; a suitable domestic environment will be madeavailable in terms of tax differentials; the government will help create and augment related supportinfrastructure in terms of people and technology assistance; and the government will promote big-ticket infrastructure reforms in terms of road connectivity.”43

CompetenciesThe global automobile manufacturers are making India their manufacturing hub because of the

value chain, a developmental path that India offers to the carmakers. A survey of BRIC nations

Exhibit IXCategory-wise Market Share (2008–2009)

Compiled by authors

Passenger Vehicles 15.95%

Commercial Vehicles 3.95%

Three Wheelers 3.60%

Two Wheelers 76.49%

41 “Special Report: India Set to Become a Small Car Hub”, http://www.theindusview.com/vol2Issue11/specialreport.html42 Timmons Heather, “In India, a $2,500 pace car”, http://www.nytimes.com/2007/10/12/business/worldbusiness/12iht-

12cars.7864085.html?_r=1, October 11th 200743 “Driving Ambition: India’s Emergence as a Hub for Compact Cars”, op.cit.

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revealed that there are ways in which a global carmaker can adapt with the local environment of thedeveloping markets.44

• Innovation: In India, low wages for qualified engineers ($3 per hour, compared with $48in Western Europe and $36 in Japan and Korea) make the country attractive as an off-shoring destination for R&D

• Supply base development: India is most likely to become a significant base for componentexports. India’s sheer size and its large market provide distinctive advantages to companieschoosing it as a global supply base

• Assembly: The labor-cost advantage for India will be significant for years to come.Manufacturing companies in India pay as little as $1 or $2 per hour in wages, versus $37 inWestern Europe, $26 in North America, and $19 in Japan and Korea

• Distribution: Given the population of India across urban, suburban, and rural areas, thecarmakers need to improve their distribution networks and strategies. A manufacturer canreduce the shipping cost by shipping the parts and assembling at regional centers, instead ofassembling at factory

• Sales and marketing: Carmakers in India must develop new marketing techniques to selllow-cost car models to the vast rural and urban population.

Most of the global automakers entered Indian market because of its favourable investment policies.“One major advantage provided by India as compared to China to the international auto manufacturersis the favorable investment regime. While India allows for 100% FDI in auto sector, in China you canonly be present through a joint venture with a local partner,” says Rakesh Batra, national automotiveleader for E&Y in India.45

Many of the global auto manufacturers announced their India investment plans (Exhibit X).

44 “The Best Years of the Auto Industry Are Still to Come”, op.cit.45 Doyal Pankaj, “India speeds past China in auto exports”, http://timesofindia.indiatimes.com/news/business/india-business/

India-speeds-past-China-in-auto-exports/articleshow/4984389.cms, September 8th 2009

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The Indian automotive industry has a considerable labour cost advantage. Low-cost skilledworkforce is available in abundance in India. When compared to the China, India’s main competitor;the cost of quality work force in India is much lower (Exhibit XI).

Exhibit XIndia – A Base for Car Manufacturing

Maruti Suzuki To invest $2 billion for a new car plant for manufacturing 250,000cars per annum

Hyundai To establish a new plant at a cost of INR 4,000 crore for increasingcapacity to 600,000 cars per annum by 2009

Nissan Ashok Leyland and Nissan Motor Co. Ltd., signed a bindingMaster Cooperation Agreement (MCA) for the formation of threejoint venture companies supporting the Light Commercial Vehicle(LCV) business at a investment of $500 million

Tata Motors New plant to manufacture INR 100,000 car in Gujarat with aninvestment of $240 million

Toyota To invest INR 3,200 crore for setting up a second plant in Bangaloreto make 200,000 cars per year

General Motors New plant in Talegaon near Pune with a capacity of 140,000 carsper year at an investment of $293 million

Nissan-Renault 50:50 JV with M&M to make 400,000 cars a year with aninvestment of over $1 billion

Volkswagen Investing 400 million euro in a new plant in Pune

Honda Investing $250 million in a new plant in Rajasthan with capacityof 60,000 cars per year

Ford Plans to invest $500 million including the expansion of Ford India’scurrent manufacturing facility in Chennai

Source: “India Automotive Industry”, http://www.osec.ch/internet/osec/de/home/export/countries/in/export/e c o n o m i c _ r e p o r t . - R e l a t e d B o x S l o t - 1 5 1 3 1 - I t e m L i s t - 2 0 0 5 5 - F i l e . F i l e . p d f /bb_India%20Automotive%20Industry%202008.pdf, April 2008

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Because of its high education levels, India also provides the world’s largest pool of qualifiedengineers. Due to the presence of large number of universities and colleges, India turns out nearly400,000 engineering graduates each year and approximately 7 million skilled employees enter theworkforce every year.46 According to Mr. Rakesh Shah (Shah), National chairman, The EngineeringExport Promotion Council (EEPC), “India’s enormous young talent pool is the growth engine that ispowering India forward in this millennium. 54% of India’s workforce is less than 25 years. Thisyoung workforce is producing high quality goods and services for the world’s finest brands and alsodemanding equally high quality goods, services and brands for personal consumption. Imagine thenumber of cars made for the world and the number that is used within the borders of India.”47

According to Mr. Puneet Gupta, an analyst with CSM Worldwide, an automotive market forecastingservice, “Indian labor costs are 90% lower than in the United States and Europe, while raw materialcosts are 11% lower and designing a small car in India would cost $225 million to $250 million, whilethe same process would cost $400 million in Europe.” 48

India has not just the advantage of low-cost quality labour, but it also has abundant mineralresources required to support the automobile industry. “India also has a strong base for production ofraw materials for the Indian engineering industry. Items like steel and aluminum are being producedin India in huge quantities and at competitive prices. India also has a very rich reserve of mineralswhich would sustain production of raw materials for many years to come. Bauxite, iron ore, copper,zinc etc are available in India in abundance to support industries like metal manufacturing, automobileand machine tools. India ranks sixth in the world in iron ore deposits and fifth in terms of bauxitedeposits,” says Mr. Shah.49

For an industry to survive and grow it is necessary that it has adequate support from its rawmaterial as well as component suppliers. A very important aspect that helps India to have a competitiveedge in the automobile industry is the presence of automotive clusters. The Indian automotive industryis largely clustered in four regions, namely, South-Chennai/Bangalore, West-Pune/Mumbai, the NationalCapital Region (North) and East- Kolkata region (Exhibit XII).46 “Automotive -Markets and Opportunities”, http://ibef.org/download/Automotive_250608.pdf47 Shah Rakesh, “Business Seminar on Auto Components Sector in India”, http://www.eepcindia.org/chspeech/hannover-

autocompseminar-250406.doc, April 25th 200648 “Driving Ambition: India’s Emergence as a Hub for Compact Cars”, op.cit.49 “Business Seminar on Auto Components Sector in India”, op.cit.

India* China* India’s Advantage (% Difference)

Middle Mangement (> 5 Years) 1,400 2,500 -44Supervisor (5 Years) 300 800 -63Skilled Worker (I Year) 61 125 -51Unskilled Worker 42 65 -35

Source: “Automotive”, http://www.ibef.org/attachdisplay.aspx?cat_id=110&art_id=5845

Exhibit XIIndia: The Cost and Skills Advantage

* dollar per month

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The presence of automobile manufacturers in these clusters has resulted in the development ofseveral ancillary industries (automobile component manufacturers). Some of these have becomeglobal Original Equipment Manufacturers (OEMs). Each of the regions has its own set of world-class automotive OEMs (Exhibit XIII).

50 Deming Prize is given to companies for major advances in quality improvement51 Krishnan Janaki, “Global auto firms see India as small-car export factory hub”, http://www.livemint.com/2009/09/04161437/

Global-auto-firms-see-India-as.html?d=1, September 4th 200952 “India Automotive Industry”, http://www.osec.ch/internet/osec/de/home/export/countries/in/export/economic_report.-

RelatedBoxSlot-15131-ItemList-20055-File.File.pdf/bb_India%20Automotive%20Industry%202008.pdf, April 2008

Exhibit XIIIAuto Component Manufacturers in India

Region Autocomponent Manufacturerer

West (Mumbai, Pune) Bharat Forge Ltd., Bosch Chassis Systems India Ltd.,Asia Motorworks Ltd.

South (Chennai, Bangalore) Sundaram Fasteners Ltd., Lucas-TVS Ltd., Sona Koyo Ltd.,Brakes India Ltd.

East (Kolkata) Kirloskar Oil Engines Ltd., Hindustan Composites Ltd.

North (Delhi) Amtek Auto Ltd., Rico Auto Ltd., Bharat Seats Ltd.

Prepared by the authors

These automotive clusters have provided India low-cost high quality advantage. The ancillaryunits are located near the automobile manufacturers which reduce the freight charges and facilitatefaster delivery. The quality advantage is reflected by the fact that 11 Indian companies in the automotivesector have received the prestigious Deming prize50. India’s competitiveness indeed lies in high-endmanufacturing as is shown by the success of auto parts maker Bharat Forge, Sundaram Fasteners,Sundaram Clayton etc. More and more automobile supporting firms have been able to advance theirtechnologies and processes to transform into dependable parts suppliers to many of the globalautomobile majors. Deepesh Rathore, Auto analyst with IHS Global Insight says, “Apart from theobvious cost advantages, India has a good base of component suppliers who come with the experienceof having supplied to global car companies.”51 According to the Auto Component ManufacturersAssociation (ACMA), the apex body of component makers in India, “global sourcing of componentsfrom the country will double from $2.95 billion in 2006-07 to $5.9 billion in 2009–10, and is slated tohit $20 billion by 2015-16.”52 With growing success and increasing domestic demand from automobilecompanies, the Indian automobile components industry has become jewel in the crown of Indianmanufacturing sector with its fast growth and global competitiveness (Exhibit XIV).

India is able to achieve the low cost advantage in terms of the auto parts because of the strongbase of auto ancillary manufacturers present in the country which significantly increases its appealas an investment destination for foreign car makers. The automobile supporting industry has the

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Indian Automobile Industry: Is it Going to be the ‘Global Small Car Hub’?

Source: India Automotive Industry”, http://www.osec.ch/internet/osec/de/home/export/countries/in/export/economic_report.-

RelatedBoxSlot-15131-ItemList-20055-File.File.pdf/bb_India%20Automotive%20Industry%202008.pdf, April 2008

Year Turnover ($ billion) Export ($ billion) Investments ($ billion)

2002–2003 5.4 0.8 2.7

2003–2004 6.7 1 3.1

2004–2005 8.7 1.4 3.8

2005–2006 12 2.1 4.4

2006–2007 15 2.9 5.4

2007–2008 18 3.6 7.2

2009–2010* 18.7 5.9 10.1

2015–2016* 40 20 20.9

CAGR**: CAGR: CAGR:

2002–2006: 29% 2002–2006: 38% 2002–2006: 19%

2006–2015: 13% 2006–2015: 24.4% 2006–2015: 16%

* Estimates ** CAGR – Compounded Annual Growth Rate

Exhibit XIVGrowth of Indian Automobile Component Industry

Exhibit XVRange of Auto-Components Manufactured

Engine Parts 31%Electrical Parts 9%Drive Transmission and Steering Parts 19%Suspension and Breaking Parts 12%Equipment 10%Body and Chassis 12%Others 7%

Source: Sharma Deepti, “India Automotive Industry”, http://www.osec.ch/internet/osec/de/home/export/countries/in/export/economic_report.-RelatedBoxSlot-15131-ItemList-20055-File.File.pdf/bb_India%20Automotive%20Industry%202008.pdf, April 2008

competence to produce the complete range of auto-components like engine parts, drive transmissionparts, suspension and braking parts, electrical parts and body and chassis parts, one third of all theexports done is that of engine parts (Exhibit XV), and other critical components for automakers,across the globe.

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The cost of components produced in india are 25%–30% less than that of the parts producedin the western markets. The presence of these large number of auto-component firms which arecapable of producing low cost high quality products ensure that India will be seen as a global hubfor small cars. Worldwide, India is being accepted as a preferred R&D destination, gaining fromthe availability of low-cost skilled and educated workforce, product development capabilities andlocation benefit because of its nearness to emerging markets. Indigenously built Tata ‘Nano’ hasshown India’s outstanding capabilities in R&D, engineering and manufacturing as well as its abilityto innovate. Many global carmakers and component suppliers are setting up their R&D facilities inIndia (Exhibit XVI)

53 “Automotive”, http://www.ibef.org/attachdisplay.aspx?cat_id=110&art_id=5845

Exhibit XVIR&D Plans of Foreign Players

OEMs/Tier 1 suppliers R&D plans in India

Hyundai Plans to make its Indian R&D center a hub for the development ofsmall cars such as the i10 and the i20 for global markets at aninvestment of $50 million.

General Motors Set up an R&D center in Bangalore, the frst outside the US, at aninvestment of over $21 million. This will cater to the needs ofcountries in the Asia Pacifc region.

Volkswagen Plans to set up its global R&D center in India and produce vehiclesfor the global market in fve to six years

Bosch Currently has an R&D facility at Bangalore, its largest technologycenter outside Germany. It plans to set up another center in thecountry and make India its technology hub.

Source: “Revving up! Indian automotive industry - a perspective”, http://www.ey.com/Publication/vwLUAssets/The_Indian_automotive_industry/$FILE/Industry_Automotive_Revving_up.pdf, 2009

The environmental regulations followed by the automobile industry meets the requirements ofdeveloped countries. Primary environmental standards in India are the Euro I and Euro II norms,which control emission from vehicles in terms of pollutants such as carbon monoxide (CO),hydrocarbons, nitrous oxides (NOx) and suspended particulate matter. As per the recommendationof the Mashelkar Committee, the Government has ordered the industry to introduce Euro III equivalentemission norms for all categories of vehicles in all parts of the country, by 2010,53 which is expectedto be a major challenge for the auto makers in India to achieve.

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Small Cars: Big ChallengesOn recommendation from SIAM, Indian government changed the definition of small car. It was

decided that small cars would be defined only on the basis of its length and not on fuel and enginecapacity basis. According to the new definition, the size of small cars has been increased from 3.8mto 4m.54 This alteration in definition has swelled the number of cars that fall in small car category. Allthe carmakers in India have their own variant of small car (Exhibit XVII).

Exhibit XVIIPerceptual Mapping of Indian Small Car Segment

Prepared by the authors

Price (Low)

Price (High)

Engine Displacement(cc) (Low)

Engine Displacement(cc) (High)

Maruti Suzuki Estilo(INR 311,892 – 998cc)

Maruti Suzuki A Star (INR 345,033 – 998cc) Maruti Wagon R

(INR 329,327 – 1061cc)

Hyundai Getz(INR 359,308 – 1086cc)

Chevrolet Aveo U-VA(INR 399,917 – 1150cc)

Hyundai i10(INR 331,981 – 1086cc)

Fiat Palio Stile (INR 335,733 – 1108cc)

Indica Vista (INR 339,544 – 1172cc)

Maruti Suzuki Swift(INR 399,987 – 1298cc)

Hyundai i20(INR 480,508 – 1197cc)

Skoda Fabia(INR 511,438 – 1198cc)

Honda Jazz(INR 698,000 – 1198cc)

Fiat 500(INR 14,82,500 – 1248cc)

Hyundai Santro(INR 263,999 – 1086cc)

Tata Indica Xeta(INR 262,816 – 1193cc)

Tata Nano(INR 115,361 – 624cc)

Maruti Suzuki 800(INR 199,408 – 796cc)

Maruti Suzuki Alto(INR 224,214 – 796cc)

Chevrolet Spark(INR 319,892 – 995cc)

54 “SIAM”, http://www.siamindia.com/scripts/pre-budget-memorandum1.aspx

Maruti Suzuki Ritz(INR 464,999– 1197cc)

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There is a surge in foreign direct investment by foreign automakers in India. All the major carmakers have invested here to make India their manufacturing base, factories have been built, andprojections are being made regarding the future of small cars. The road ahead for small cars is notsmooth; many challenges are there to be met, if India wants to take advantage of its competitiveposition. On one hand carmakers have to satisfy the needs of the people with less disposable income.On the other hand people from upper middle class would like to own small cars which have facilitiesas good as any big car. This poses a very tough challenge for the car manufacturers as they have tospread out their vehicles on the whole spectrum covering low priced small cars to high priced smallcars. The consumers in India are looking for low-cost vehicles which are of high quality, are reliableand represent style. In other words, these consumers are ‘Value Shoppers’. Small cars which canoffer these values to the consumer will have greater advantage. Also since most of the carmanufacturers are making India their export hub for small cars, it is very important that they fulfill allthe safety and emission norms as required by advanced countries. Mr. Majeed says, “Indians arevery picky. If they love a brand they look at it for generations. However, if they hate it then they hateit forever.”55

Spiraling material and labour costs is another challenge to be met. According to Dilip Chenoy,“Challenges of rising wages, expensive raw material and inadequate infrastructure such as portcapacity could wreck India’s small-car dream.”56 He further added that “the challenge certainly iswhether economic environment is able to support competitive small car manufacturing.”57 All theautomakers (global and domestic) in India have expanded their production base, but it is very importantto find out if the market will be ready to absorb all the cars that will be manufactured. The automakershave to depend on exports to clear the excess car manufactured, but with European governmentslikely to withdraw the stimulus (that were announced in the wake of 2008 financial crisis), exportsare most likely to decline by 2010.

The future – from automobile manufacturing to changes in working patterns to impact onenvironment – will depend on trends which are interrelated, but moving at different pace.58

• Social Mobility: In developing nations, particularly if the construction of roads and otherinfrastructure continues, individual mobility and job opportunities will increase. This in turnwill enhance domestic demand for small cars

• Environmental Impact: Environmentally clean cars will become the order of the day asthe nations will be accountable to impact on environment, particularly for greenhouse gasemissions and their impact on global climate change. Green technologies are too expensiveand might prohibit the usage of them in small cars

55 Bhanot Shweta, “Setting the beat”, http://www.financialexpress.com/news/Setting-the-Beat/553055/, December 12th 200956 Kumar Siddhartha, “India squeezes prices to mount small-car challenge”, http://www.monstersandcritics.com/lifestyle/autos/

features/article_1399989.php/India_squeezes_prices_to_mount_small-car_challenge, April 15th 200857 Ibid.58 Jackson Bill and Sehgal Vikas, “One Billion New Automobiles”, http://www.strategy-business.com/article/06409, November

30th 2006

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• An Expanding Lower-End Auto Market: The cars that are accepted in emergingmarkets will provide necessities rather than comforts. A car manufactured in India mayhave a plastic shell, rudimentary motor, good brakes, and a stout suspension to handleunpaved roads, but no airbags.59 In adapting cars for the narrow streets of emerging nations,manufacturers could change the world’s conception of what a car looks like, down towhether it must even have four wheels

• New Pressures on the Auto Industry: As manufacturers are developing in India toserve the millions of new vehicle owners, they could follow the Japanese and Koreancarmakers’ path to bring their vehicles to established markets. The basic car model used inIndia could be adapted for other nations, offering fuel-efficiency and unprecedented lowprices, with a few extra provisions like the additional safety features that established marketsrequire.

Infrastructure must grow at the same speed with which the small cars are growing on the road.Presently, India has only 3,700 miles of highways, against 25,000 miles in China and 46,000 miles inthe US.60 The Indian government has decided to develop the country’s infrastructure by investing innew projects. According to Mr. Kamal Nath, Minister of Road Transport and Highways, “Thegovernment has established a new financial body, the Roads Finance Corporation, to increase roadconstruction through securitizing the required income and possibly list on the Bombay Stock Exchange(BSE) to raise funds. The new government has earmarked $92 billion for road and highway constructionwith immediate effect until 2012.”61 Though the government promises to improve infrastructuralfacilities to facilitate mobility, many doubt the implementation due to hurdles in execution. Redtapismis a major problem that might mar the potential of small cars on India, which can delay all theinfrastructural changes that needs to take place quickly. This type of delay will hurt India’s prospectsfor being a global manufacturer and it will lose its competitive edge.

In contradiction to all the optimistic views given by various people, Mr. Dinesh Mohan, professorin the transportation research and injury prevention program at the Indian Institute of Technology(IIT) Delhi, had some different opinion about the Indian manufacturing ability. He says, “If Indiacompletes its transformation to a small-car hub; it won’t be because of engineering. India will flourishas a hub primarily because of the cost arbitrage that it offers. What is bringing all the global majorsto India is simply the fact that research is dominated by OEMs (original equipment manufacturers),and they are combining to bring about cost efficiencies, be it in power trains, transmissions, brakes,seat belts, you name it.”62

59 “One Billion New Automobiles”, op.cit.60 Sehgal Vikas,et al., “Revving the Growth Engine India’s Automotive Industry Is on a Fast Track”, http://www.booz.com/

media/uploads/Revving_the_Growth_Engine.pdf, 200961 “India Road Infrastructure to Develop Tenfold, Foreign Investment Welcome”, http://www.india-briefing.com/news/india-

road-infrastructure-develop-tenfold-foreign-investment-635.html/, June 25th 200962 “Driving Ambition: India’s Emergence as a Hub for Compact Cars”, op.cit.

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He further says, “India doesn’t have vertically integrated automobile plants; all our car projectsare vendor-based. Maruti Suzuki used to be vertically integrated, but even that has changed. Thereis no fluid assembly line process here; it is putting together and sourcing from various vendors. Inmany ways, like the after-shave lotions and perfumes at the lower end of the pyramid, the small carsare all the same. There is no differentiating factor in them. There might be varied product perceptions,but in reality they are the same.”63

63 “Driving Ambition: India’s Emergence as a Hub for Compact Cars”, op.cit.

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Annexure IVariants of small cars available in India

Contd...

Annexure I Variants of small cars available in India

Company Year of Launch

Variants Price* (INR) Displacement (cc)

Manufact-uring

Export

2009 Nano 115361.00 624 Nano CX 140361.00 624

Tata Nano

Nano LX 172361.00 624 India

2012

1983 STD LPG 199408.02 796 Maruti Suzuki 800 AC LPG 218965.82 796 India

Yes 2000 Alto 224214.36 796

Alto LX 255018.35 796 Maruti Suzuki Alto

Alto LXI 272202.89 796 India

Yes

2007 Spark 1.0 319892.00 995 Spark 1.0 PS 332154.00 995 Spark 1.0 LS 349252.00 995 Spark 1.0 LT 379186.00 995

Chevrolet Spark

Spark LPG 370251.00 995

India

Yes

2006 LX 311892.35 998 LXI 339892.35 998

Maruti Suzuki Estilo

VXI 394892.35 998 India

Yes

2008 LXI 345033.72 998 VXI 372018.84 998

Maruti Suzuki A-Star

ZXI 406885.14 998 India

Yes

2002 LX 329327.88 1061 LXI 354949.21 1061 VXI 385644.78 1061

Maruti Suzuki WagonR

AX 422954.51 1061

India Yes

1998 Non A/C 263999.00 1086 GL 328801.00 1086 GLS-LPG 369499.00 1086

Hyundai Santro

GLS 348800.00 1086

India Yes

2007 1.1 D-Lite 331981.00 1086 1.1 Era 366981.00 1086 1.2 Magna 392981.00 1197 1.2 Sportz GLS 419980.00 1197

Hyundai i10

1.2 Asta 477980.00 1197

India

Yes

2004 GLE 1.1 359308.00 1086 GVS 1.1 389309.00 1086 GVS 1.3 409309.00 1341 GLS 1.3 429309.00 1341

Hyundai Getz

GLX 1.3 459308.00 1341

India

Yes

2007 U-VA 1.2 399917.00 1150 U-VA 1.2LS 430070.00 1150

Chevrolet Aveo U-VA

U-VA 1.2LT 496577.00 1150 India

No

2008 Terra Safire 339544.00 1172 Aqua Safire 364914.00 1172 Aura Safire 389051.00 1172 Terra Quadrajet 425000.00 1248 Aqua Quadrajet 447355.00 1248 Aura Quadrajet. 476264.00 1248 Terra TDI 372799.00 1405

Tata Indica Vista

Aqua TDI 393168.00 1405

India Yes

2008 Magna 480508.00 1197 Asta 560509.00 1197

Hyundai i20

Asta (O) 582508.00 1197 India Yes

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Compiled by the authors

Active 1.2 511438.00 1198 Classic 1.2 548160.00 1198 Ambiente 1.2 609545.00 1198

Skoda Fabia

Elegance 1.4 714425.00 1390

India No

2007 1.1 SL 335733.00 1108 1.1SLE 352693.00 1108 1.1 SLX 371529.00 1108

Fiat Palio Stile

1.6 Sport 443630.00 1596

India Yes

2009 Base 698000.00 1198 Mode 728000.00 1198

Honda Jazz

Active 733000.00 1198 India –

2009 LDI 464999.93 1197 VDI 498999.93 1197 VXI 419999.92 1197 LXI 389999.93 1197

Maruti Suzuki Ritz

ZXI 479999.92 1197

India Yes

2008 Lounge 1479499.00 1248 Fiat 500 Sports 1479499.00 1248 Mexico No

2005 LXI 399987.00 1298 VXI 456519.00 1298

Maruti Suzuki Swift

ZXI 515822.00 1298 India Yes

* Ex-Showroom price at Delhi ($1 = INR 46)


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