Indian Automobile Industry

The automobile industry in India is the ninth largest in the world with an annual
production of over 2.3 million units in 2008. In 2009, India emerged as Asia's fourth
largest exporter of automobiles, behind Japan, South Korea and Thailand.

Following economic liberalization in India in 1991, the Indian automotive industry

has demonstrated sustained growth as a result of increased competitiveness and
relaxed restrictions. Several Indian automobile manufacturers such as Tata Motors,
Maruti Suzuki and Mahindra and Mahindra, expanded their domestic and
international operations. India's robust economic growth led to the further
expansion of its domestic automobile market which attracted significant India-
specific investment by multinational automobile manufacturers.[3] In February
2009, monthly sales of passenger cars in India exceeded 100,000 units.

History

An embryonic automotive industry emerged in India in the 1940s. Following the

independence, in 1953, the Government of India and the private sector launched
efforts to create an automotive component manufacturing industry to supply to the
automobile industry. However, the growth was relatively slow in the 1950s and
1960s due to nationalisation and the license raj which hampered the Indian private
sector. After 1970, the automotive industry started to grow, but the growth was
mainly driven by tractors, commercial vehicles and scooters. Cars were still a major
luxury Japanese manufacturers entered the Indian market ultimately leading to the
establishment of Maruti Udyog. A number of foreign firms initiated joint ventures
with Indian companies.

In the 1980s, a number of Japanese manufacturers launched joint-ventures for

building motorcycles and light commercial-vehicles. It was at this time that the
Indian government chose Suzuki for its joint-venture to manufacture small cars.
Following the economic liberalisation in 1991 and the gradual weakening of the
license raj, a number of Indian and multi-national car companies launched
operations. Since then, automotive component and automobile manufacturing
growth has accelerated to meet domestic and export demands.

Indian automobile industry has grown leaps and bounds since 1898, a time when a
car had touched the Indian streets for the first time. At present it holds a promising
tenth position in the entire world with being # 2 in two wheelers and # 4 in
commercial vehicles. Withstanding a growth rate of 18% per annum and an annual
production of more than 2 million units, it may not be an exaggeration to say that
this industry in the coming years will soon touch a figure of 10 million units per
year.
Reasons of Growth Economic liberalization, increase in per capita income, various
tax relief policies, easy accessibility of finance, launch of new models and exciting
discount offers made by dealers all together have resulted in to a stupendous
growth of India automobile industry.

Market Share Automobile industry of India can be broadly classified under

passenger vehicles, commercial vehicles, three wheelers and two wheelers, with
two wheelers having a maximum market share of more than 75%. Automobile
companies of India, Korea, Europe and Japan have a significant hold on the Indian
market share. Tata Motors produces maximum numbers of mid and large size
commercial vehicles, holding more that 60% of the market share. Motorcycles tops
the charts of two wheelers with Hero Honda being the key player. Bajaj by far is the
number one manufacturer of three wheelers in India.

Passenger vehicle section is majorly ruled by the car manufacturers capturing over
82% of the total market share. Maruti since long has been the biggest car
manufacturer and holds more that 50% of the entire market.

Global recession has impacted, the Indian automobile industry also and can be seen
clearly in the sales figures of the last financial year. Even then this industry has high
hopes in 2009-2010, as banks have reduced loan interest rates and the major chuck
of automobile customers belong to the middle income group who are becoming
economically stronger with every passing day.

Exports

India has emerged as one of the world's largest manufacturers of small cars.
According to New York Times, India's strong engineering base and expertise in the
manufacturing of low-cost, fuel-efficient cars has resulted in the expansion of
manufacturing facilities of several automobile companies like Hyundai Motors,
Nissan, Toyota, Volkswagen and Suzuki.

In 2008, Hyundai Motors alone exported 240,000 cars made in India. Nissan Motors
plans to export 250,000 vehicles manufactured in its India plant by 2011. Similarly,
General Motors announced its plans to export about 50,000 cars manufactured in
India by 2011.

In September 2009, Ford Motors announced its plans to setup a plant in India with
an annual capacity of 250,000 cars for US$500 million. The cars will be
manufactured both for the Indian market and for export. The company said that the
plant was a part of its plan to make India the hub for its global production business.
Fiat Motors also announced that it would source more than US$1 billion worth auto
components from India.
The automotive industry designs, develops, manufactures, markets, and sells the
world's motor vehicles. In 2008, more than 70 million motor vehicles, including cars
and commercial vehicles were produced worldwide.

In 2007, a total of 71.9 million new automobiles were sold worldwide: 22.9 million in
Europe, 21.4 million in Asia-Pacific, 19.4 million in USA and Canada, 4.4 million in
Latin America, 2.4 million in the Middle East and 1.4 million in Africa. The markets in
North America and Japan were stagnant, while those in South America and other
parts of Asia grew strongly. Of the major markets, Russia, Brazil, India and China
saw the most rapid growth.

About 250 million vehicles are in use in the United States. Around the world, there
were about 806 million cars and light trucks on the road in 2007; they burn over
260 billion gallons of gasoline and diesel fuel yearly. The numbers are increasing
rapidly, especially in China and India. In the opinion of some, urban transport
systems based around the car have proved unsustainable, consuming excessive
energy, affecting the health of populations, and delivering a declining level of
service despite increasing investments. Many of these negative impacts fall
disproportionately on those social groups who are also least likely to own and drive
cars. The sustainable transport movement focuses on solutions to these problems.

In 2008, with rapidly rising oil prices, industries such as the automotive industry,
are experiencing a combination of pricing pressures from raw material costs and
changes in consumer buying habits. The industry is also facing increasing external
competition from the public transport sector, as consumers re-evaluate their private
vehicle usage. Roughly half of the US's fifty-one light vehicle plants are projected to
permanently close in the coming years, with the loss of another 200,000 jobs in the
sector, on top of the 560,000 jobs lost this decade. Combined with robust growth in
China, in 2009, this resulted in China becoming the largest automobile market in
the world.