1

Intorduction:

Indian automobile industry has grown leaps and bounds since 1898, a time when car

touched the Indian streets for the first time. Now it is the one of the major industrial sector in

India.Subsequent to the liberalization , the automobile sector has been aptly described as the

sunrise sector of the Indian aconomy as this sector has witnessed tremendous growth. It

contributes about 4% in India’s GDP and 5% in India,s industrial production. This sector has

generated about 4.5 Lack of direct employment and about 1 crore of indirect employment.

The Indian automobile segment can be divided into six segments . two-wheelers

(motorcycles, geared and ungeared scooters and mopeds), three wheelers, commercial vehicles

(light, medium and heavy), passenger cars, utility vehicles and tractors.

At present it holds a promising tenth position in the entire world with being No. 1 in Two

wheelers and No. 4 in commercial vehicles.According to the industrial policy 1991 no industrial

licence is required for setting of any unit for manufacture of automobiles except in some special

cases.Now 100% Foreign Direct Investments permissible.The technology on royalty payment of

5% without any duration limit.

Given the breadth of the automotive industry (from backward linkages to raw materials

such as metals and logistics to forward linkages with dealerships and gas stations), it is one of the

largest industries by manpower, directly or indirectly employing managers, scientists, mechanics,

technicians, salespeople and marketers, amongst others.

Current scenario:

The cumilative production data for April ’09 to January 2010 shows production growth

of 23.07 percent over same period last year. Passenger vehicle segment during April ‘09 –

January ’10 grew at 25.2% over same period last year.Passenger cars grew by 24.75 %. Utility

vehicles grew by 21.95 % multi purpose vehicles grew by 37.05% in this period.Three wheeler

growth of 25.77%.

Auto component industry supports industries likeautomobiles, machine tools, steel,

electrical , electronics, forgings and machining.

2

India has also emerged as an outsourcing hub for auto parts for international companies

such as Ford ,General motors ,Fiat, Volkswagon and Toyota.During the year 2008-09 the

turnover and export for auto component industry was recorded at US $3.11 billion respectively

to U.S. and other countries in international market at high prices. The automobile sector is also

playing very vital role in growth of Indian economy. The increasing demands of bikes, cars and

various heavy vehicles for transport and carriage purpose respectively are very essential

requirement for today's business era and especially then, when we are facing big challenges by

mode of competition in the era of globalization. If we go through the concept of National Income

and considering the per-capita-income of Indians, we are getting that it is increasing in a speedy

and in proper growth oriented way.

Indian automobile industry has matured in last few years and offers differentiated

products for different segments of the society. It is currently making inroads into the rural middle

class market after its inroads into the urban markets and rural rich. In the recent years Indian

automobile sector has witnessed a slew of investments. India is on every major global

automobile player's radar. Indian automobile industry is also fast becoming an outsourcing hub

for automobile companies worldwide, as indicated by the zooming automobile exports from the

country.

1. Automotive Components Industry:

According to the Auto Component Manufacturers Association (ACMA), the apex body of

component makers in India, global sourcing of components from the country will double from

US$ 2.95 billion in 2009-10 to US$ 5.9 billion to US$ 20 billion by 2015-16.

3

Investments related details:

Chrysler is setting up a local sourcing unit in Chennai and is expected to start sourcing

for its global plant .

Palfinger AG, the Austrian hydraulic lifting, loading and handling systems manufacturer,

has joinedhands with Western Auto LLC, Dubai, the vehicle dealership arm of ETA Star

group, have invested US$ 1.7 million to set base in India.

IFCI Venture Capital Funds Ltd is launching a private equity fund in association with

German consultancy UBF-B worth US$ 144.67 million focussed entirely on domestic

automotive components industry.

The world’s third largest auto components maker, Magna International Inc., plans to

bring two more group companies to India and is considering the Gurgaon, Chennai and

Pune regions for these manufacturing facilities.

Auto parts maker Robert Bosch of Germany will invest US$ 201.4 million in its Indian

subsidiaries over the next two years.

Ashok Leyland and Nissan Motor have invested US$ 500 million in three joint ventures

to manufacture light commercial vehicles (LCVs), LCV engines and power train

components. Not only global investors, Indian component companies are also pumping in

huge sums into expanding operations

Bharat Forge invested US$ 135 million in its Pune plant for increasing domestic capacity

to 240’000 tons.

Amtek Auto is expanding capacity of its castings unit to 70,000 tonnes per annum (tpa)

from 30’000 tpa.

Sona Koyo plans to have capacity of three million pieces of manual steering gears,

500’000 units of hydraulic power steering and 250’000 units of electronic power steering

(EPS), apart from doubling the capacity of steering columns from one million parts.

Rico Auto is investing US$ 23 million to expand capacity.

Opportunities for large scale auto component manufacturing in India is driven by the fact that

India is being seen as a global compact car hub, as a centre for skill based manufacturing and

4

engineering and increasingly companies in US/Europe are seeking partnerships in low cost

countries like India. Besides the burgeoning demand from global auto majors, there is also the

domestic car industry, which is growing at a sparkling rate of over 20 per cent, driven by a rising

consumer base and affordable loans.

Automobile exports of India:

While India has managed to be the 7th largest producer of vehicles in the world but it

remains a small player in the global market, observed FICCI Study on Indian Automobile

Exports. The share of India in global automobile exports is a meager 1% in 2009 and India ranks

22nd in automobile exports falling behind countries like Thailand, China, Mexico, Argentina,

Brazil and Turkey, noted FICCI Study. Despite this, Indian automobile industry is confident of

achieving its export target of $12 billion 2013-14 itself, which will be good two years ahead of

the target year of 2016 laid-out in Automotive Mission Plan 2006-16. Currently, India exports $

4.5 billion of automobiles which include tractors, passenger vehicles, commercial vehicles and

two-wheelers.

Share of India in global exports was 1% in 2009, whereas that of Japan, the largest

exporter of automobile, the share was around 19%. Some of the other major countries ahead of

India in automobile exports are UK, USA, Germany, Italy, Netherland, South Korea and Canada.

FICCI said that there is a need to revisit the targets set in Automotive Mission Plan and perhaps

there is also a need to scale-up the targets in the background of robust growth of this industry in

last few years. Government should aim at achieving a share of at least 3% within the Automotive

Mission Plan (AMP) by 2016, FICCI pointed-out. As per the AMP, Indian automobile industry

aims to achieve an output level of $145 billion by 2016, which would imply a domestic market

of $82-119 billion and export market of $ 12 billion. Indian automobile exports have been

growing at a CAGR of more than 25% in last 5 years and with this rate of growth it will achieve

a size of $17.7 billion by 2016. In terms of segments, FICCI study observed passenger vehicles.

In terms of segments, passenger vehicle constitutes the major portion of total automobile

exports of India. Around 76% of India’s automobile exports are that of passenger vehicle. The

second important category of our automobile exports is two wheelers. The CAGR of passenger

5

vehicle and two wheeler exports of India was 31% and 24% for the last five years. The share of

commercial vehicle and tractors has been falling for the last five years inIndia’s automobile

exports.

In terms of export destinations, UK is the largest export destination for India’s

automobile exports. Our automobile exports to UK have grown by over 8 times in the last years

from $52 million in 2006-07 to $481 million in 2009-10. And, passenger vehicle alone accounted

for 98% of our total automobile exports to UK. The other top destinations of India’s automobile

exports are Italy, Germany, Netherland and South Africa.

The major characteristics of Indian automobile sector are:

•   Indian automobile is the second largest two-wheeler market in the world

•   Indian automobile is the fourth largest commercial vehicle market in the world

•   Indian automobile is the 11th largest passenger car market in the world

•   The Indian automobile will be the world's third largest automobile market by 2030

Trend of Growth of the automobile industry in India:

•   Growth of exports of 32.8 % in commercial vehicles as against passenger cars

•   Output of commercial vehicles has grown 2.8 times compared to the 2.2 times increase in

Passenger cars

•   Two-wheeler output continues to dominate the figures of the sector

6

•   In 2003-04, for every passenger car turned out, there were 7 two-wheelers produced

•   In the two wheeler segment, there is a greater preference for motorcycles followed by scooters

•   Mopeds have registered low or negative growth

•   Export growth rates have been high both for motorcycles and scooters

Growth Potential:

The automotive industry remains one of the highest revenue-earning industries in India

and contributed over 5% to India’s GDP in 2009, providing direct and indirect employment to

more than 13 million people. The market outlook for the industry remains promising, especially

in the small car segment. The Indian automobile market is currently dominated by the two-

wheeler segment but with an expanding middle class population, growing earning power and

industrial development, the demand for passenger cars and commercial vehicles will increase

exponentially.

Also, the low vehicle presence (with passenger car stock of only around 11 per 1,000

population in 2008) indicates a very low base with significant growth potential. As per ‘Just-

Auto’ analyst reports, sales of passenger cars in 2008-2016 are expected to grow at a CAGR of

around 10%.

In addition to increased domestic demand, there is also likely to be increased investment

by global auto manufacturers to India due to its strong technological capability and availability

of trained manpower at competitive prices. Currently, the foreign auto companies with assembly

plants in India include, General Motors, Ford, Hyundai, Honda, Suzuki, Nissan Motors, Toyota,

Volkswagen, Audi, Škoda, BMW, Fiat and Mercedes Benz.

With the introduction of the Tata Nano, the cheapest car in the world at USD 2200, and

FDI from Suzuki Motor Corp, Hyundai Motor Co, and Nissan Motor Co to make India their

manufacturing hub for small cars, India has made huge inroads in the compact car segment. In

fact, in 2009, India overtook China in the global auto exports of compact cars for the first time.

Future prospect of indian automobile sector :

1.Automobile industry expert predicts that by 2050 every 6th car in the world will be from India.

7

2. By end of 2010 India will take over Germany in sales volume and Japan by 2012.

3.The Indian automobile component industry is estimated to triple from USD 63 billion to USD 190 billion within a span of six years by 2012.

4.Industry analysts predict this industry to touch USD 13000 million mark by 2010, a cumulative growth of 9.5% annually.

5.It is said that for every `1 spent, the auto sector returns `2 .2 4 to the Indian economy