Automotive Overview: The automotive sector, comprising of the automobile and auto component sub sectors, is one of the key segments of the economy having extensive forward and backward linkages with other key segments of the economy. It contributes about 4 per cent in India's Gross Domestic Product (GDP) and 5 per cent in India's industrial production. The well-developed Indian automotive industry ably fulfils this catalytic role by producing a wide variety of vehicles like passenger cars, light, medium and heavy commercial vehicles, multi-utility vehicles such as jeeps, scooters, motorcycles, mopeds, three wheelers, tractors etc. The auto component industry, which is an important part of automotive sector, comprises about 500 firms in the organized sector and more than 10,000 firms in the small and unorganized sector has been one of the fastest growing segments of Indian manufacturing. It has the capability to manufacture the entire range of auto parts and has rapidly added to its capacity base. Indian auto components industry has an important place at the global level. Advantage India: India holds huge potential in the automobile sector including the automobile component sector owing to its technological, cost and manpower advantage. Further, India has a welldeveloped, globally competitive Auto Ancillary Industry and established automobile testing and R&D centres. The country enjoys natural advantage and is among the lowest cost producers of steel in the world. The Indian automobile industry today boasts of being the second largest two wheelers manufacturers in the world, second largest tractor manufacturer in the world, fifth largest commercial vehicle manufacturer in the world and fourth largest Car market in Asia. World largest Motorcycle manufacturer is in India. India has largest three wheeler market in the world, second largest two wheeler market in the world, fourth largest passenger vehicle market in Asia, fourth largest tractor market in the world, fifth largest commercial vehicle market in the world. India became fastest growing car market in the world in 2004. Installed Capacity: The automobile industry including passenger cars, over a period of time and particularly after liberalization, has installed a robust capacity in different segments of automobile industry is as under: Segment
Installed Capacity (Nos.)
Four Wheelers
1,590,000
Two & Three Wheelers
7,950,000
Total
9,540,000
Investment Opportunities: In India, lots of investment opportunities exist in the following areas:
Establishing Research and Development Centres Establishing Engineering Centres Passenger Car Segment
Two Wheeler Segment Heavy truck Segment
Total production: The automobile industry produces a wide variety of vehicles including 17 lakh four wheelers and over 80 lakhs two and three wheelers in 2005-06. The turn over of auto components industry has grown from US $3.1 billion to US $10 billion between 1997-98 and 2005-06. Production trend: Installed capacity of this sector has been growing at a compound annual rate of over 16 per cent since 2001-02. Automobile industry grew by 14.83 per cent in April 2006-Feburary 2007.Cumulative growth of some important segments in April 2006-December 2007 was
Passenger Vehicles: 22.91% Passenger cars: 24.76% Utility Vehicles: 12.69% Multi Purpose Vehicle: 28.38% Commercial Vehicle: 36.12% Medium and heavy Commercial Vehicle: 36.74% Light Commercial Vehicle : 35.25% Automobile Production Category
2000- 2001- 2002- 2003- 2004- 2005- 2006-07 01 02 03 04 05 06 (till Sept'06)
Passenger Cars
513
564
609
842
961
1,046
594
Multi Utility Vehicles
128
106
112
146
249
263
144
Commercial 157 Vehicles
163
204
275
350
391
237
Two Wheelers
3,759
4,271
5,076
5,625
6,527
7,600
4,155
Three Wheelers
203
213
277
341
374
434
264
Total
4,759 5,316 6,280 7,229 8,461 9,735 5,394
Growth in per cent
-2
11.7
18.6
15.12
16.8
14.97
18.04
*Source: Ministry of Heavy Industries & Public Enterprises (Department of Heavy Inuustries), Government of India Some of the major companies: There are 15 manufacturers of passenger cars and multi utility vehicles, 9 manufacturers of commercial vehicles, 14 of two-three wheelers and 14 of tractors besides 5 manufacturers of engines. In passenger car segment, Maruti Udyog Ltd. Is on the top, followed by Hyundai and Tata Motors. Some of the major players of Automobile industry are:
Maruti Udyog Ltd. M/s Hyundai Tata Motors General Motors India Ford India Ltd. Eicher Motors Bajaj Auto Daewoo Motors India Hero Motors Hindustan Motors Hyundai Motor India Ltd. Royal Enfield Motors Telco TVS Motors DC Designs Swaraj Mazda Ltd
Size of some major companies: Company
Industry
Market Capitalization( Rs Crore), January 2007
Maruti Udyog Ltd.
Automobile
26711
Hero Honda Motors
Automobile
14925
Bharat Forge Co.
Auto Ancillaries
8090
Ashok leyland
Automobile
6,011
Amtek Auto
Auto Ancillaries
4549
Exide Industries
Auto Ancillaries
2981
Sundaram Clayton
Auto Ancillaries
2497
TVS Motor Company
Automobile
1944
Sundaram Fasteners
Auto Ancillaries
1756
Fag Bearings India
Auto Ancillaries
1124
Bosch Chassis Systems India
Auto Ancillaries
1044
Eicher Motors
Automobile
1005
Automotive Axies
Auto Ancillaries
957
Total investment & turnover: The automobile industry had an investment of nearly 50,000 crore in 2002-03 and it is estimated to go up to Rs. 80,000 crore by the year 2007.The turnover of this sector exceeded Rs. 144,000 crore in 2003-04 including nearly 92,500 crore of automobile industry. In 2004-05, total turnover of this sector was estimated to exceed Rs. 1,65,000 crore Presence of foreign firms:
After liberalization of Indian Economy in general and automobile industry in particular, considerable number of Multinational Companies are operating in India either as wholly owned subsidiaries or in collaboration with their Indian partners. This automotive sector has taken benefit of liberalization of Indian economy to a large extent and made available various international brands in India for Indian consumers. Firms like Hyundai are supplying manufactures cars in the international market using its manufacturing facility in India in a big way. These firms are using locally available efficient and cost competitive huge pool of human resource in India. Employment generated: This sector has generated about 4.5 lakh of direct employment and about one crore of indirect employment. The auto component and ancillary industry has huge forward and backward linkages in terms of employment generated. Huge number of firms in auto component and ancillary industry in India are in small scale and unorganized sector employing large number of human resources. Geographical concentration of firms: Firms of this sector are in clusters scattered all over India. Some clusters with heavy concentration of firms are Chennai and around, National Capital Region (NCR), Pune, and Hoogli Region of West Bengal. An upcoming cluster for this sector is Rudra pur and surrounding areas in Uttarakhand. Government support:
Current Industrial Policy: The New Industrial Policy of 1991 delicensed the Automobile Industry in India, but passenger car was delicensed in 1993. Now, no license is required for setting up of any unit for manufacture of Automobiles except in some special cases. Further, 100 per cent Foreign Direct Investment (FDI) is permissible under automatic route in this sector including passenger card segment. The import of technology or technological upgradation on the royalty payment of 5 per cent without any duration limit and lump sum payment of US $ 2 million is also allowed under automatics route in this sector. This liberalization has helped this sector to restructure itself, absorb newer technologies, and keep pace with the global developments realizing its full potential. Exim Policy: Removal of Quantitative Restrictions (QRs) from April 1, 2001 has allowed the import of vehicle, including passenger car segment freely subject to certain conditions notified by DGFT. To protect India from becoming a dumping ground for old and used vehicles produced abroad, the custom duty on the import of second hand vehicles including passenger cars has been raised to 105 per cent. The custom duty rate on new Completely Built Units (CBUs) has also been increased to a level of 60 per cent to allow Indian countries to a fully competitive environment.
Recent policy initiatives:
In order to develop and realize the growth potential of this sector both at domestic and global level, and to optimize its contribution to the national economy, the Department of Heavy Industry has decided to draw up a 10 year Mission Plan for the development of Indian Automotive Sector and creation of global hub. To put Indian Auto Industry at the global map, National Automotive Testing and R&D Infrastructure Project (NATRIP) at the total cost of Rs. 1718 crore has been initiated. This project principally aims to: create critically needed automotive testing infrastructure to enable the government in ushering in global vehicular safety, emission and performance standard, deepen manufacturing in India, promote larger value addition and
performance standards and facilitates convergence of India's strength and IT and electronics with automotive engineering, enhance India's abysmally low global outreach in this sector by debottlenecking exports, and provide basic product testing, validation and development infrastructure so that Indian automotive sector would not face any export obstacle in the foreign market In the Union Budget 2007-08, import duty on raw material had been reduced to 57.5 per cent from the earlier 10 per cent.
Contribution in exports: Automotive sector in India has great potential to play a significant role in export from India. This potential is being tapped to some extent after liberalization of Indian Economy. During the last two years, the export in this sector has grown mainly to the export of cars, two/three wheelers. Automobile Export (Numbers in thousand) Category
200001
200102
200203
200304
200405
200506
2006-07 (till Sept. 06)
Passenger cars
23
50
71
126
161
170
98
Multi utility vehicles
4
3
1
3
6
5
3
Commercial vehicles
14
12
12
17
30
41
23
Two wheelers
111
104
180
265
367
513
332
Three wheelers
16
15
43
68
67
77
62
Total
168
185
307
479
620
806
519
Growth in per cent
20.24
9.74
65.35
55.98
31.25
28.03
27.43
Source: Ministry of Heavy Industry & Public Enterprises (Department of Heavy Industries) Future prospects: Future prospect of Indian Automotive Sector is looking bright. A Customer Satisfaction Ranking done by TNS Automotive in April 2007 revealed that indigenous automobile companies are replacing foreign multinational companies in terms of consumer satisfaction. For the first time since 2002, the year on which TNS started this kind of survey, home grown companies displaced MNCs from the top. This trend shows that automotive sector has much to deliver in the years to come.