Chapter Four: Progress of Automobile

Industry

PAGE NO. Contents of Chapter Four

Chapter IV Progress of Automobile Industry 187-246

4.1) Researcher’s Overview 187

4.2) Introduction 187

4.3) Etymology 188

4.4)History of Automobile Industry in the World 189 4.4.1)History of Automobile Industry in the 192 Japan 4.4.2) History of the Automobile Industry in 192 America 4.4.3.) History of the Automobile Industry in 193 India 4.4.4) Landmark of Indian Automobile 207 Industry 4.5) Classification of Vehicles in India 208

4.5.1) Two-Wheelers 208 4.5.2) Three Wheelers 211 4.5.3) Four Wheelers 212

4.6) Study of the Performance of Indian 216 Automobile Industry 4.6.1) Indian Automobile Production 216 4.6.2) Indian Automobile Export 220 4. 6.3) India's Position in the Global Auto 224 Industry 4.6.4) Where India's auto Industry Scores over 225 the others? 4.6.5) What makes the Indian Auto Market 225 attractive?

4.6.6) The Future of Indian Auto Industry 228

4.6.7) Vision 2020' of ACMA 229 4.6.8) Indian Automobile Industry SWOT Analysis 231

4.6.9) Indian Auto Industry - Joint Ventures 232

4.7) Some of the Salient Recommendations for 234 the Government

4.8) Automobile Industry in Maharashtra 237

4.9) References 243

4.1) Researcher’s Overview This chapter highlights history of Automobile Industry of India and Maharashtra, also the present position of this Industry. The scope of Automobile Industry in the near future is also explained.

4.2) Introduction Transport sector is the backbone of country's economic growth and development. Transportation throughout the world has made possible an unprecedented level of mobility across the geographical boundaries. The mobility has given many people more options about where to live, and work than they had years ago. Similarly, mobility has broadened the access the business to new markets and more choices by increasing the available pool of resources. From the economic point of view, transportation is a vital factor for steady economic growth and development. The trade facilitated by transportation has been a growing component of national income in all the countries. Studies show that the contribution of transportation in GDP has a positive impact. The structure of the economy also influences the transport system because consumer expenditure on transportation contributes to national economy. Transport sector is equally important for both industrialized and developing economies. Transport sector including water transport, aviation and surface transport are major players of Gross Domestic Product (GDP), which includes the value of all goods and services. Being the largest transport networking in the world, particularly in road transportation, automobile industry plays a significant role in the GDP of the country.

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Automobile industry is a major constituent of surface transport. Automobiles as a commodity include passenger cars: Commercial vehicles, three wheelers and two wheelers. India has growing market potential for automobiles due to rise in demand. As a result more and more manufacturers are bringing in new forms of the existing product because diffusion of a new product depends upon demand statistics. Automobile manufactures, particularly car manufacturers are attracting buyers with new model shopping to tap growing demand for automobiles. Utility vehicles also posted significant growth. Further, two and three wheelers industries specially the motor cycle segments have shown a steep jump, while the volume growth of all the players has recorded pretty good market share. Therefore, automobile industry has been selected for this study in order to determine its financial and operational performance during the study period. In this study researcher focuses on automobiles such as commercial vehicles, passenger cars and multiutility vehicles and two and three wheelers.

4.3) Etymology

The word automobile comes, via the French automobile, from the Ancient Greek word autoq (autos, "self") and the Latin mobilis ("movable"); meaning a vehicle that moves itself, rather than being pulled or pushed by a separate animal or another vehicle. The alternative name car is believed to originate from the Latin word carrus or carrum ("wheeled vehicle"), or the Middle English word carre ("cart") (from Old North French), or from the Gaulish word karros (a Gallic Chariot). An Automobile, motor car or car is a wheeled motor vehicle used for transporting passengers, which also carries its own engine or motor. Most

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definitions of the term specify that automobiles are designed to run primarily on roads, to have seating for one to eight people, to typically have four wheels, and to be constructed principally for the transport of people rather than goods. The term motorcar has also been used in the context of electrified rail systems to denote a car which functions as a small locomotive but also provides space for passengers and baggage. These locomotive cars were often used on suburban routes by both interurban and intercity railroad systems. There are approximately 600 million passenger cars worldwide (roughly one car per eleven people). Around the world, there were about 806 million cars and light trucks on the road in 2007; they burn over a billion cubic meters (260 billion US gallons) of petrol/gasoline and diesel fuel yearly. The numbers are increasing rapidly, especially in China and India.

4.4) History of the World's Automobile Industry

The automobile as we know, it was not invented in a single day by a single inventor. The history of the automobile reflects an evolution that took place worldwide. It is estimated that so many patents created the modern automobile. However, we can not to the many firsts that occurred along the way several Italians recorded designs for wind driven vehicles. The first was Guido Da Vigevano in 1335. Vaturio designed a similar vehicle, which was also never built. Later Leonardo Da Vinci resigned clockwork driven tricycle with tiller steering and a differential mechanism between the rear wheels.

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A Catholic priest named Father Ferdinand Verbiest has been said to have built a steam powered vehicle for the Chinese Emperor Chine.' Lung in about 1678. Since James Watt didn't invent the steam engine until 1705 it is guessed that this was possibly a model vehicle powered by a mechanism like Hero's steam engine, and on the cobble stone streets of Pans this was probably as fast anyone wanted to go it. The early steam powered vehicles were so heavy that they were only practical on a perfectly flat surface as strong as Iron. A road thus made out of iron rails became the norm for the next hundred and twenty-five years. The vehicles got bigger and heavier and more powerful and as such they were eventually capable of pulling a train of many cars filled with freight and passengers. Many attempts were being made in England by the 1830's to develop a practical vehicle that didn't need rails. A series of accidents and propaganda from the established railroads caused a flurry of restrictive legislation to be passed and the development of the automobile bypassed England. Several commercial vehicles were built but they were more like trains without tracks the development of the internal combustion engine had to wait until a fuel was available to combust internally. Gunpowder was tried but did not work out. Gunpowder carburetors are still hard to find. The first gas really did use gas. They used coal gas generated by heating coal in a pressure vessel or boiler. A Frenchman named Etienne lenoir patented the first practical gas engine in Paris in 1860 and drove a car based on the design from Paris to Joinville in 1862. His one-half horsepower engine had a bore of 5 inches and a 24 inch stroke. it was big and heavy and turned 100rpm. Lenoir had a separate mechanism to compress the gas before combustion. In 1862, Alphonse bear de Rochas figured out how to burn, which is the way we still do it. This process of bringing the gas into the 190

cylinder, compressing it, combusting the compressed mixture, then exhausting it is known as the Otte cycle, or four cycle engine. Lenoir claimed to have run the car on benzene and his drawings show an electric spark ignition. If so, then his vehicle was the first 1871, Dr. 3. W. Carhart, professor of physics at Wjsconsm University, and the J. I. Case Company built a working steam car. By 1390 Ransom E. Olds had built his second steam-powered car. One was sold to a buyer in India, but the ship it was on was lost at Running by February, 1893 and ready for road trials by September, 1893 the car built by Charles and Frank Duryea, brothers, was the first gasoline powered car in America. The first run on public roads was made on September 21, 1893 in Springfield, MA. Henry Ford had an engine running by 1893 but it was 1896 his first car. By the end of the year Ford had sold is first car which he called a Quadracycte, for $200 a no used the money to build another one with the financial backing of the Mayer of Detraft. William C. Maybury and other we wealthy Detrotters, Ford formed the detroit automobile company in 1899. A few prototypes were built but no production cars were ever made by this company. It was dissolved in january 1901. Ford would not offer a car for sale until 1903. Olds build first petrol-powered car. This car was running by 1856 but production of the olds motor vehicle company of Detriot did not begin until 1899. After an early failure with luxury vehicles they established the first really successful production with the chassis carved Dash old mobile. It sold for $550. In 1901 600 were sold and the next years were 2902-2500, 1903-4,000, and 1904-5000. In august 1904 Kerson olds left the company to form Reo (for Ransom El olds).

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It dos was the first mass producer of gas online powered automobiles in the United states, even though duryer was the first auto manufacturing with their 13 cars. The rolls Royte Silve Ghost of 1906 was a six cylinder car that in production until 1925. It represented the best engineering and technology available at the time and these cars still run smoothly and silently today. This period marked the end of the beginning of the automobile.

4.4.1) History of the Japan Automobile Industry: The first Japanese car manufacturing companies at a full scale was established by Nissan Automobile in 1933 and by Toyota Automobile in 1937. In the fifties and more years since the Japanese began producing cars domestically, Japanese automotive technology has made remarkable progress and come to be one of the international was 1980 Japan became the top automobile-producing country the world The domestic auto industry has grown to the point where it Is today one of the key industries supporting the Japanese economy. Today, looking further toward the twenty-first century, utilizing new materials, high-tech electronics, new power sources, and artificial intelligence, the type of car which automakers are capable of producing cannot even be imagined.

4.4.2) History of the Automobile Industry in America: Charies E. and J. Frank Duryea, two brothers from rural Illinois, were the founders of the American automobile Industry. The Duryea Motor wagon company was the first company organized in the United States for the manufacture of automobiles the automobile has changed the way people live and work all over the world. In America very few people had cars prior to Henry Ford's assembly line this one industrial marvel was 192

instrumental in changing America from a rural, agricultural way of life to an urban, more industrial way of life. Nissans’ production strategy include having suppliers ford features and components in the same sequence as, the vehicle, are focused and the production line, in increasing numbers, suppliers support services also are locating plants adjacent to, or near one new Niasan plant. By late November 2001, Nissan had announced the Intention of nearly a dozen suppliers to build new giants. As well as the development of a supplier logistics center and formation of a transportation services company.

4.4.3) History of the Automobile Industry in India

Inception - 1940s to 1990s

In 1940s the Indian automotive industry was at a very nascent stage. An embryonic automotive industry emerges in India. In the initial years after independence Indian automobile industry was plagued by unfavorable government policies. All it had to offer in the passenger car segment was a 1940s Morris model called the Ambassador. In 1953, government of India and private sector came together to build an automotive component manufacturing industry to meet the rising needs of the automobile industry. Nonetheless the growth was not on the expected lines, rather relatively slow in the 1950s and 1960s due to the prevalence of nationalization and license raj. Jamsetji Tata and the other three also by Parsis. That same year, the first pneumatic tires arrived in Bombay, with Dunlop opening an office in the city. Madras, it would appear, lagged behind, though it is related that a car was seen on Mount Road on a brief outing in 1894. If that unconfirmed appearance is ignored, the first recorded date of a car being in regular use

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in Madras is 1901. The car was owned by A J Yorke, a director of Parry & Co. He drove it daily from Ben's Gardens, Adyar, to Parry's in 'Black Town'. The South's first registered car, MC-1, belonged to Francis Spring, at that time Secretary of the Madras Railway Board and, in 1904, to become the Chairman of the Madras Port Trust and 'father' of the Madras Harbour. The first Indian-owned car was in Madras, MC-3, wag building contractor T Namberumal Chetty's. In 1903, Samuel John Green of Simpson & Co, Madras, built India's first steam car and caused a sensation on the roads of the city. Two years later, Simpson's built the first steam bus. It ran between Bezwada (Vijayawada) and Masulipatam (Machilipatnam) in what was possibly the first motor bus service in the country. When TVS commenced operations in 1912, motor transport received a fillip in South India. The firm was founded by T V Sundram Iyengar to operate a bus service. T V Sundram Iyengar and Sons Ltd (now Sundaram Motors) became a vehicle dealer in 1922 after the lifting of Government restrictions on imported vehicles of all types had been put in place during the Great War (1914-18). By 1920, the number of imported vehicles of all types had grown to nearly 13,500 and two international automobile manufacturers, Ford and General Motors, sensing the potential, set up local companies that year to sell and service their motor cars and trucks. In 1928, General Motors India Ltd commenced assembling trucks and cars in its factory in Bombay, the first car assembled in India rolling off the assembly line on December 4th. Two years later, Ford Motor Co of India Ltd commenced assembly of automobiles in Madras, and the next year in Bombay and Calcutta. And in 1936, Addison & Co Ltd commenced assembly of cars and trucks in Madras. Hindustan Motors Ltd, Calcutta, and Premier Automobiles Ltd, Bombay, were established in 1942 and 1944 respectively to progressively 194

manufacture complete automobiles. Hindustan Motors, a Birla group company, began manufacturing operations in 1948 by assembling Morris Oxford cars and Bedford trucks, gradually indigenizing the components. In 1957, the Morris Oxford, substantially indigenized, was re-introduced as the Hindustan Ambassador. Premier Automobiles Ltd (PAL) was promoted by Walchand Hirachand, in collaboration with the Chrysler Corporation of the US. In March 1947, the company began assembling Chrysler products: Dodge, De Soto, and Plymouth cars and Dodge, De Soto and Fargo trucks. Indigestion started in 1949 with the manufacture of radiators, mufflers, springs, propeller shafts, shock absorbers, etc. In 1950 PAL entered into collaboration with Fiat, SpA of Italy and started assembly of Fiat 1100 cars. In 1953, following the Tariff Commission report, the Government of India granted protection to the automobile industry, thus enabling Premier Automobiles to step up its manufacturing program with full vigour and, in 1954, the first Indian-made 'Fiat 1100' cars rolled out. In the early years of the automotive industry, more attention was paid to manufacturing cars than buses and trucks. The progressive manufacture of Tata-Mercedes-Benz diesel trucks and buses in India began in Poona in October 1954, after Tata Motors and Daimler-Benz had tied up. And the next year Ashok Leyland began manufacture of its Comet trucks. Fords and General Motors, not confident of indigenizing production, may have pulled out, but the Indian manufacturers confidently forged ahead. And the Indian Automobile Industry had by the late 1950s put down firm roots. Starting in the 1950s with the Automobile Products of India (API) that manufactured the Lambrettas and Bajaj Auto Ltd. with its association with Piaggio of Italy (manufacturer of Vespa scooters). 195

Automobile Products of India (AUTOPRD) was founded in 1949. The company manufactured Lambretta scooters and ancillaries under licence but has not been operational since 2002. Most of the scooters were sold under the Lamby brand name while the ancillaries usually bore the API moniker. It was in the year 1954 that the Indian government ordered for total number of 800 motorcycles to man the Pakistani borders. In came the Bullets which were initially launched in England as a 350cc bike and it was upgraded to 500cc a year or so later. These bikes have remained unaltered, barring some cosmetic changes which have undergone over the years. Thus one can say without much of a doubt that the 1955 Bullet was one of the initial hits of the Indian two-wheeler industry and till today it continues to be a darling of the motorcycle enthusiasts. Enfield Bullet had a close competition with another sturdy bike named Rajdoot; as the bike was strong enough to handle the rough Indian roads. The company had roped in Indian He-man Dharmendra for the promotion of the bike. With more than 1.6 million vehicles on the road the Rajdoot motorcycle was one of the initial hits of the earlier years of two-wheeler history in the country.

Ideal Jawa (India) Limited popularly known as JAWA started operations in the year 1960 with the main objective to manufacture motorcycles among other things. The idea was to deliver to the consumers a product that defined value for money. The logo "For Ever Bike For Ever Value" very aptly signifies the ideology behind the product. This motive remains unchanged to this day, even in the face of stiff competition.

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JAWA started commercial production of motorcycles in the year 1961 in technical collaboration with Jawa Limited of erstwhile Czechoslovakia and during the years 1961 to 1985 put up a good performance and achieved good profitability levels. The peak capacity utilization was 85% with 36,000 vehicles on a capacity of 42,000 vehicles per annum. The collaboration agreement with JAWA of Czechoslovakia which, among other things ensured continuous availability of technical knowledge from the said collaborator ended in 1968, by which time JAWA had established an in house expertise for achieving wholly indigenous manufacturing technology and also design of vehicles known under the brand name of "YEZDI". JAWA had established market and had brand loyalty in Southern, Western and Northern regions and till 1985-86, they were in the seller's market. It was now that there was an aggressive entry into the domestic market by Japanese technology backed vehicles of 100cc category which were more fuel efficient, with sophisticated design, and state-of-the-art technology. The Bajaj Group was formed in the first days of India's independence from Britain. Its founder, Jamnalal Bajaj, The precursor to Bajaj Auto had been formed on November 29,1945 as M/s Bachraj Trading Ltd. It began selling imported two- and three-wheeled vehicles in 1948 and obtained a manufacturing license from the government 11 years later. The next year, 1960, Bajaj Auto became a public limited company.

Rahul Bajaj reportedly adored the famous Vespa scooters made by Piaggio of Italy. In 1960, at the age of 22, he became the Indian licensee for the make; Bajaj Auto began producing its first two-wheelers the next year.

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He lived next to the factory in Pune, an industrial city three hours' drive from Bombay. By 1970, the company had produced 100,000 vehicles. The oil crisis soon drove cars off the roads in favor of two- wheelers, much cheaper to buy and many times more fuel-efficient. A number of new models were introduced in the 1970s, including the three-wheeler goods carrier and Bajaj Chetak early in the decade and the Bajaj Super and three-whegled, rear engine Auto rickshaw in 1976 and 1977. Bajaj Auto produced 100,000 vehicles in the 1976-77 fiscal year alone. The technical collaboration agreement with Piaggio of Italy expired in 1977. Afterward, Piaggio, maker of the Vespa brand of scooters, In 1963, the cars had a little more local content. The 2 tone combinations or paint were not offered anymore, and the front sidelights were now of the single bulb design, (62 had larger dual bulb units). The dash now was covered with a wood veneer sheet, and local Yenkay meters were incorporated (separate Speedo, fuel guauge, and amp). The switches were now black. In late 69-70, the factory had indigenously developed a station wagon version, called the Herald Mark III Companion. Extremely rare, it featured a fiberglass tailgate and roof. These cars had bonnets with twin headlights just like the Vitesse. These cars are practically nonexistent today. Finally in 71, the Gazel was indigenously developed. While based on the mk III, it featured the live rear axle and suspension from the Toledo. This was because the herald’s rear suspensions were just not suitable for Indian roads, and were notorious for axles cracking. The car was Indians first indigenous design, designed by Nazir Hussein. Then in 1981, STAMPRO bought the tooling for the Rover SD1, and began production, but with a 1991cc vanguard engine! The car was a miserable failure, with a lot of people putting down deposits, and getting no refunds after production ceased! There were plenty of problems with 198

the employees, who were on strike for years! In fact, just last month there was a tender floated in the newspaper announcing that the banks are auctioning off whatever remains of the factory, the final nail in the coffin. 1980 to 1990 - Japanese Autos Invades India (Maruti and M-800)Maruti Udyog's inception came in the country in 1981 under the provisions of the Indian Companies Act, 1956. During this era, scooters or two-wheelers had a long waiting as industrial production was low in numbers. There were only two car models in the name of Indian car industry, Hindustan Ambassador and Fiat Padmini. Later, Maruti Suzuki made a successful move with its ever running Maruti 800 in 1983. With the launch of Maruti 800, Indian manufacturing and car industry saw a new dawn. 1983 - (Hindustan Contessa)The Hindustan Contessa is a model of car manufactured by Hindustan Motors of India, utilizing the tooling of the British 1972-1978 Vauxhall Victor FE/VX series. It was a popular choice for government limousines. It was one of the few Indian manufactured luxury cars in the market in 80's and early 90's. The production of this car was stopped in 2002.

(Maruti Gypsy) lt was introduced in the Indian market in 1985 with the 970cc F10A Suzuki engine and was an instant hit in the civilian market as well as with law enforcement. It was codenamed MG410 that stood for Maruti Gypsy 4 cylinder 1.0 liter engine - Production and Launch of first light commercial vehicle, Tata 407, indigenously designed Hero Honda - CD 100 and Sleek ,1983 Joint Collaboration Agreement with Honda Motor Co. Ltd. Japan signed Shareholders Agreement signed and 1984 Hero Honda Motors Ltd. Incorporated and 1985 First motorcycle "CD 100" rolled out ,1987 100,000th motorcycle produced and 1989 New motorcycle model - "Sleek" introduced Hero Honda CD 100 was launched in the year 1985. As soon as it was launched, it was a total hit. The design 199

and everything was superb and the fuel consumption was too less which made this bike the best bike in India. 1986 - Fiat 118NE The Fiat 124 was introduced in India by Premier Automobiles in 1986 as the Premier 118NE. At the end of production an improved model called Viceroy was released in collaboration with Peugeot, France. Later on it was outmoded by other modern cars and production was stopped in 2001. A few well maintained versions are still found today. 1981 - Bajaj M-50 & 1986 - Bajaj M-80 Since the mid-1980s, the Bajaj M80 has been the best selling step-thru' even though more technologically advanced and refined rivals were launched in the intervening years. The M80 saw light of day as the M50 back in 1980. Over the twin decades since she has seen a hike in capacity to 80cc and after weathering initial bugbears, claimed market recognition as a strong, rugged product capable of withstanding sustained abuse. This ruggedness was coupled to very good fuel economy that made her the darling of rural folk while at the same time appealing to the urban masses. 1986, Kawasaki Bajaj KB 100 the KB100 was Bajaj Auto's response to the opening up of the Indian markets to Japanese collaboration. Bajaj Auto, had lead in the manufacture of scooters partnered with Kawasaki to bring in the KB100. Production began in 1986-87 and went on till 1996 when the KB125was launched. 1990 - Bajaj Sunny The Bajaj Sunny was a scooter produced and sold in India. Bajaj Auto no longer produces this vehicle. Force Motors - Till 1990 Force Motors founded in 1958 as Bajaj Tempo Ltd. is a manufacturer of three wheelers, multi- utility and cross country vehicles, light commercial

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vehicles, tractors, buses and now heavy commercial vehicles. Abhay N. Firodia is the Chairman & Managing Director. The Maruti 1000 The Maruti 1000, made by Maruti Udyog was the first ever contemporary sedan-type car launched in India. The car was introduced in October, 1990. Sold at Rs. 3.81 lakh, it was back then the costliest car released in the Indian market. With a large waiting list for all Maruti cars, a computerised lottery was used to decide who got a chance to buy a Maruti 1000. The car came with a 970 cc engine whose output was just 45 bhp and proved underpowered for a car that weighed 850 kg.

Indian Auto Industry in 90s

The automobile sector in India underwent a metamorphosis as a result of the liberalization policies initiated in the 1991. Measures such as relaxation of the foreign exchange and equity regulations, reduction of tariffs on imports, and refining the banking policies played a vital role in turning around the Indian automobile industry. Until the mid 1990s, the Indian auto sector consisted of just a handful of local companies. However, after the sector opened to foreign direct investment in 1996, global majors moved in. Automobile industry in India also received an unintended boost from stringent government auto emission regulations over the past few years. This ensured that vehicles produced in India conformed to the standards of the developed world.

Maruti launched a few more models in the form of Maruti 1000 (a sedan, the predecessor of the now-discontinued Esteem) and a super stud, the Gypsy. Meanwhile, PAL (makers of Padmini) had tied up with French car major Peugeot; and HM had given the Amby quite a few nose jobs 201

(ironically Amby still doesn't look far different from the original Morris Oxford despite the facelifts). They also had filler, the Coritessa which didn't make a fortune for them like the Ambassador did. PAL failed with the Peugeot 309 and also failed to keep up the development pace for the Padmini, while Maruti had just discovered another masterpiece, the Zen. Nothing noteworthy happened till 1996, when a few foreign manufacturers decided to set up shop here. The major ones Fiat, Hyundai and Daewoo launched Uno, Santro and Matiz respectively. Ill- fated Fiat India has struggled to make an impression from day one. The Santro became an unbeatable package because of the top-notch quality and service (and partly because of Shahrukh Khan's endorsement!) A new war was waged. We all know it as the "small car war". Everybody wanted to have a piece of the pie, and the Santro was the car to beat. Maruti launched the Wagon R with drastically unconventional looks which took a while to catch up. Improvements in road infrastructure led a few more manufacturers to India. Those were Ford, General Motors (Opel), Honda and Toyota; however none of them tried their luck with a small car. Those who did were going to lead the Indian automobile industry. The Tata Sierra or Tata Sierra Turbo was a sport utility vehicle produced by Tata Motors of lndia.lt was the first automobile fully designed and produced in India. The vehicle also forms the basis for DC Design's Arya Concept vehicle. The Sierra is powered by a 1.9 turbo diesel. Initially it had naturally aspirated engine but latter version were Turbo-charged. The Sierra Turbo is believed to be the first turbo charged engine on cars in India at the time. Being the first automobile from Tata Motors, part of the India's largest industrial house the Tata Group and better known for its dominance in the commercial vehicle segment, the Sierra is a concept suited to Indian conditions of driving. This is the first diesel vehicle to be accepted as a personal car in that country without the derogatory connotations associated 202

with diesels. The design though not class leading is quite acceptable. It featured some firsts in India, such as adjustable steering. Engine noise is also remarkably well suppressed, while cruising in top gear it is difficult to tell that the power train under the hood is a diesel one. Other features included power windows, power steering and a tachometer. The body is very sturdy and so is the chassis. Durability is the hallmark of this machine. The Tata Sierra is no longer in production. 1991: Introduction of Mahindra Commander, 1992 Launch of the Tata Estate. Tata Motors launched Tata Estate in 1992. The car was equipped with coil spring rear suspension and provided a spacious and a comfortable ride. It was the company's first attempt at building a car. The car was considered fairly advanced during its time and had many features which were not common among cars in India at the time including power windows, power steering and a tachometer. The car was a replica of Mercedes-Benz Estate, though in looks it resembled it, an unassailable gap existed in the performance. Tata Estate did better than what many had anticipated it would but not well enough to be continued in the market. The car had the TATA 207 Engine. 1994 Launch of Tata Sumo - the multi utility vehicle This was first launched in 1994 and deluxe version came in 1997 and was one of the first passenger vehicles designed in India. The Sumo received an extensive facelift in 2004 and was renamed the Sumo Victa in face of competition from relatively modern competitors.

The Sumo is based on Tata Motors' 207 pick-up platform and thus, shared most of its other mechanics with other Tata vehicles like the Tata Sierra, Tata Estate, Tata Tata mobile, Tata Telcoline (TL) and Tata .207DI. In 1994, the Tata Sumo originally came with a 1948cc normally aspirated

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diesel engine. Later, an option of a turbo charged version of the same engine was also offered.

1993 - Maruti Zen Maruti Zen has acquired significant popularity in India since the nameplate was first introduced in 1993. The word "ZEN" is an acronym standing for Zero Engine Noise. It also stands for the Japanese word "Zen" which derives from the Sanskrit word "Dhyana" and means "To figure out something by meditation or by a sudden flash of enlightenment." It underwent a facelift in 2003. The production of this model ended in March 2006.

1994 - Maruti Esteem The Esteem was introduced in the global market in 1995 as Suzuki's first attempt in the compact segment. It was pulled from the market in Europe and North American in 2002, after one year of overlapping. The car remained available in many developing countries, including India and Southeast Asia, where it was sold until 2007, when production stopped at the Maruti factory, with the assembly line giving way to the SX4 Sedan.

1995 - Ford Motors and Honda in India J996-Ford Escort Mahindra Ford India Limited, a 50:50 joint venture company between Ford Motor Company and Mahindra & Mahindra Ltd got the government approval in November 1995 and subsequently, the first locally manufactured car Ford Escort was sold in within 10 months of their existence in India.

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1996 - Honda City Honda Siel Cars India Limited (HSCI) is a joint venture between the Honda Motor Company of Japan and Siel Limited, a Siddharth Shriram Group company. It was begun in December 1995. The venture was begun with the aim of delivering Honda's passenger car models and technologies to the Indian market. The third-generation Honda City, codenamed SX8, was based on the EF Civic platform. It was designed for and sold in the South East Asian market only. 1997 - Fiat Uno After an abortive launch in 1996 when its CKD joint partner PAL delivered only 617 cars of the 30,000 ordered, Fiat started its venture as a 50-50 Industrial Joint Venture between Fiat Group Automobiles S. p. A. (Fiat) and Tata Motors Limited in January 1997. 1998 Tata Safari & Indica Launched Tata Safari- India's first sports utility vehicle launched. It was released with a 1.9-litre Turbo Diesel engine.

The Safari had 87 PS (64 kW) power. It came with a synchromesh forward five-speed gearbox, with a 4X4 option. However, it was regarded to be grossly underpowered, with a heavy body rollover.

Tata Indica - India's first fully indigenous passenger car launched. It is the first passenger car vehicle from Tata Motors. The Tata Indica is also considered India's first indigenously developed passenger car. On 30 December 1998, Tata Motors (previously called TELCO) introduced the most modern car ever to be designed by an Indian company: the Indica. Marketed with slogans like "The Big... Small Car" and "More cars per car," the ad campaign focused on roomy interiors and affords ability. Within a

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week of its unveiling in 1999, the company received 115,000 bookings. In two years, the Indica became the number one car in its segment. Hyundai in India 1996 - May 6 - Hyundai Motor India Ltd. incorporated. 1996 - December 10 - Ground-breaking ceremony at the Irrungattukottai plant near Chennai. May 27 - Pilot production of Santro at plant begins within a record 17 months of ground breaking. 1998 - September 23 - Hyundai Santro (Atos Prime) makes its world debut in India. The Hyundai Autos (Arnica in the UK, Santro Xing in India) is a city car produced by the Hyundai Motor Company. The original Autos were introduced in 1997. In 1999, it was joined by the less controversially styled Autos Prime. It uses the G4HC Epsilon straight-4 engine. The mkll version comes with a 1086 cc G4HG engine. It is one of the best selling models in India.

1998, Daewoo Matiz: The Daewoo Matiz started production in 1998 and sold in South Korea and many European markets with the code name Ml00. The Matiz was originally launched with just a 0.8 L 3-cylinder engine. This engine was developed from the TICO unit by Tickford, a UK company based in Milton Keynes. The Tickford connection was acknowledged in the brochures distributed in UK showrooms. 1998- Mitsubishi Lancer It was actually Seventh generation Mitsubishi Lancer, in collaboration with Hindustan Motors.

1999 - Maruti's Baleno and Wagon R_The Suzuki Esteem is an export name plate for the Suzuki Cultus Crescent — also marketed in Europe, Australia and many Asian countries as the Suzuki Baleno — manufactured 206

by Suzuki Motor Corporation. In India, it was manufactured by Maruti Suzuki and sold as the Maruti Baleno. Maruti in 2000

The 5th generation Alto (HA12/22) was introduced in 1998, in India it came in 2000 Suzuki produced two "classic-style" versions: the Alto C with a deep chrome grille and a curious headlamp arrangement by which circular main lamps were joined with ovoid sidelights and indicators, which was shared with the Alto Works and the Alto C2 which had separate headlamps and sidelights and a wider grille.

4.4.4) Landmark of Indian automobile industry 1897 First Person to own a car in India - Mr. Foster of M/s Crompton Greaves Company, Mumbai 1901 First Indian to own a car in India – Jamsetji Tata 1905 First Woman to drive a car in India - Mrs. Suzanne RD Tata 1905 Fiat Motors 1911 First Taxi in India 1924 Formation of traffic police 1928 Che verolet Motors 1942 Hindustan Motors 1944 Premier Automobiles Limited 1945 Tata Motors 1947 Mahindra & Mahindra Limited 1948Ashok Motors 1948 Standard Motors 1974Sipani Motors 1981 Maruti Suzuki 1994 Rover Company 1994Mercedes-Benz 1994 General Motors India -Opel brand launch 1995 Ford Motor Company 1995 Honda Siel Cars India 1995 REVA Electric Car Company 1995 Daewoo Motors

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1996 Hyundai Motor Company 1997 Toyota Kirloskar Motors 1997Fiat Motors (Re-Entry) 1998 San Motors 1998 Mitsubishi Motors 2001 Skoda Auto 2003 General Motors India -Chevrolet brand launch 2005 BMW 2007 Audi

4.5) Classification of Vehicles in India: The companies under automobile industry are classified into below sectors namely; commercial vehicles, passenger car and multi utility vehicles, Two and Three wheelers:

4.5.1) Two-Wheelers

Two wheelers have a special place on the Indian roads. They are extremely popular and versatile not only as passenger carriers but also as good carriers. It comes as no surprise when India is ranked as the second largest two-wheeler market in the world. Hero Honda and Bajaj Auto are the leaders in the two wheeler market in India. In India, the two wheeler segment was the first to secure export others. Motorcycles segment dominates with an 80% market share. The demand is huge for new and powerful variants. The 125cc motorbikes are finding favor with majority of the motor cycle owners. Apart from the motorcycles that are traditionally used by men, the scooters (60cc upwards) have also contributed towards a spurt in two-wheeler sales. These allow the housewives, high-school and college going children, working women and the elderly to be mobile. Then there are mopeds that 208

are nothing but a sophisticated motorized cycle. Your neighborhood green grocer or kirana store may use it for home deliveries these as they are highly affordable.

Why are Two Wheelers so popular in India? The growing middle class population, prosperous rural India and the paucity of reliable public transport system is leading to a large number of two wheelers added to the roads every day. Indian roads in most cities, villages and towns are narrow. Two-wheelers allow people to navigate such roads easily. Fuel-efficiency is a huge advantage. With the cost of petrol increasing steadily, two-wheeler makes the daily travel both affordable and convenient. Easy availability of auto finances at attractive schemes has made a two-wheeler a must in most urban and rural homes.

Two Wheeler Models The two wheelers have played a pivotal role in the surging growth of the Indian automobile industry. Over the years the domestic sale of various brands of two wheelers has grown in large numbers. Even, in exports, the two wheelers have been able to maximize the profit margin of various two wheeler manufacturers. There are mainly three models of two wheelers namely, scooters, motorcycles and mopeds. In recent years, (the two wheeler industry has witnessed a sea change. During the yesteryears the scooters used to have about 50% of the market share and the rest were divided between the motorcycles and mopcds. But now the trend indicates that people are preferring motorcycles more than the scooters. At present there is a huge demand for the motorcycle models in India.

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They are even equipped with more features for faster travel. Based upon the engine displacements and power capacity motorcycles are further classified as: road bikes, trail bikes, racing bikes and touring bikes. Most of the motorcycles in India come with engine capacity of about 100 cc to 250 cc. The engine capacity of scooters usually vary between 100 cc to 150 cc. Mopeds have small engine capacity ranging between 50cc to 100 cc. Most of the automobile companies in this segment are always coming up with newer variants of different models of two wheelers. India also is the largest manufacturer of motorcycles and the second largest manufacturer of scooters in the world.

Two Wheeler Companies There are a number of two wheeler companies in India that produce vehicles of extremely high standard. Some of the leading two wheeler manufacturers in India are Bajaj Auto, TVS Motor, Kinetic Motor, Suzuki Motor Corporation, Royal Enfield Motors India, and Hero Honda Motors, Yamaha Motor India, LML India and Monto Motors. Many of two wheelers manufactured by these companies are exported to countries in South East Asia, Africa and South America. Motorcycles are usually priced higher than that of the scooters and mopeds. To be in the long run these companies are even adding more number of features to these vehicles. Bike models become popular when they are as good in appearance as in the performance. Two wheeler bike models in India also get popular when they are in good price range along with other attractive features.  Bajaj Auto  Hero Honda  Honda Motorcycle & Scooter 210

 Kinetic Motor  Monto Motors  Roval Enfield  Suzuki Motorcycle  TVS Motor  Yamaha Motor

4.5.2) Three Wheelers Over the years, the world has been witnessing fantabulous development in the sector of automobile industry. With their advanced engineering techniques, the major auto giants like Mercedes. Ford Motors. General Motors, Audi, BMW, Hyundai. Mitsubishi etc have come up with some of the most sophisticated vehicles that a human mind could have hardly imagined just a few years ago. The global automobile manufacturers have found huge potential markets in a number of developing countries. It is not only the cars. Consumer vehicles and two wheelers that are sold in these various countries in large numbers, but the three wheeler market are also quite big in these nations. You will get to see innumerable three wheelers running on the roads of various Southeast Asian countries like India, Thailand, Sri Lanka, Pakistan, Philippines, Nepal and Bangladesh etc. There are a number of reasons that have resulted into the proliferation of the three wheelers in umpteen countries. Three wheelers are quite economical in terms of manufacturing and maintenance. They have also earned huge popularity due to their easy maneuvering capabilities through the narrow lanes that are prevalent in most of the developing countries.lt is not that three wheelers are used only in the developing nations.

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Three Wheeler Companies There are various brands of three wheelers in the different parts of US, UK and some of the European nations. Reliant and Morgan Motor Company are the two major three wheeler manufacturers in UK. One of the US based three wheeler manufacturers; ZAP has even come up with eco-friendly three wheelers that operate with battery, Bajaj Auto, Piaggio are the leading players in the three wheeler industry in most of the Southeast Asian nations. The vehicles have also given rise to the three wheeler accessory industry in many countries. It is believed that numerous people have got employed in various countries due to these three wheelers. Apart from serving the daily need of the commuters the three wheelers also play commendable role in the transportation of several commodities. Seeking the increasing demand of three wheelers, more automobile companies are considering manufacturing these vehicles.  Bajaj Auto 3W  Force motors  Scooters India  Piaggio  TVS

4.5.3) Four Wheelers in India Indian roads saw very less of the four wheelers until the 1980s. They were seen as the symbol of those who had arrived. Premier Padminis and the Ambassador were favorites on Indian roads. With liberalization, Government abolished licensing and removed restrictive trade policies. Automobile industry benefited greatly from these measures. Indian manufacturers started to collaborate with international

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companies, invested in research and development and introduced fuel and cost efficient products. Mahindra & Mahindra's Automotive Chief, Pawan Goenka, who is also President of industry body, Society of Indian Automobile Manufacturers (SIAM) says that "The Indian auto industry and the Indian auto market have become internationally very important and therefore, no one can ignore this market,"

A) Passenger Cars The passenger cars segment is has the largest share in the domestic passenger vehicles industry. It contributes to a total volume of 78% and the rest of the share is enjoyed by utility and sports vehicles. Some of the key players in the market are Maruti Udyog Ltd. Tata Motors Ltd, Hyundai, Toyota, Honda, Ford and GM. The newer entrants are the marquee brands like Mercedes-Benz, BMW and Volkswagen.  BMW  Chevrolet  Fiat  Ford  Hindustan Motors  Honda Siel  Hyundai  International cars  Mahindra & Mahindra  Mahindra & Renault  Maruti Udyoq  Mercedes  Mitsubishi Motors 213

 Nissan  Skoda  Tata Motors  Toyota Volvo Cars

Volvo cars will be coming soon to India. But they already make Volvo flgses & Trucks in India- Imported brands Some car brands that are imported and sold in India are:  Audi  Rolls Royce

B) Commercial Vehicle in India

India is the fourth largest commercial vehicle market worldwide. However in spite of such credentials, the commercial vehicles segment has probably grown at the most sedate pace since the de-licensing of Indian auto industry in 1991. However, post-2006 the industry showed a sudden surge in demand. However post 2006. There has been a How According to the IBEF report of 2008. Commercial vehicles segment enjoyed the highest growth rate in the automobile industry.

Types of Commercial Vehicle Commercial vehicles are of two types - Goods vehicles and Passenger vehicle. Good vehicle used for transport are the trucks, tempos, containers, trailers and tankers. In this segments are medium and heavy commercial vehicles goods occupy a maximum market share of 48%. The light commercial vehicles enjoy a market share of 38%. The industrial revolution started post-Independence and contributed to urban migration led to a huge demand for these goods vehicle. In the recent years, with the 214

retail boom all over the country, it has been noticed that the market share of Light Commercial Vehicles (LCVs) is increasing .The boom in the economy has also contributed to increase in passenger, business and leisure travel. These segments have also contributed to the passenger vehicles sales increase. With the expansion of the cities, the travel of die urban dwellers has also increased manifold. This is also one of the prime factors in increasing the passenger travel.

Commercial Vehicle Manufacturers in India There are about nine main manufacturers of commercial vehicles in India. Some of them are Eicher Motors Ltd, Tata Motors Limited, Ashok Leyland, Mahindra and Mahindra Limited and Volvo Motors. The commercial vehicles segment is dominated by leading domestic players like in 2008 Tata Motors with a total market share of 62%, Ashok Leyland Ltd, with a total market share of 15%, M & M Ltd, with a total market share of 11%, Eicher Motors Ltd, with a total share of 6%, and others.

 Ashok Leyland  Eicher Motors  Force Motors (Other products)  Mahindra & Mahindra Trucks  Swaraj Mazda  Tata Motors (Other products)  Volvo Buses & Trucks

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4.6) Study of the Performance of Indian Automobile Industry

4.6.1) Indian Automobile Production The automotive industry of India is categorized into these sectors namely; commercial vehicles, passenger car and multi utility vehicles, Two and Three wheelers. More than 75% of the vehicles sold are two wheelers. Nearly 59% of these two wheelers sold were motorcycles and about 12% were scooters. Mopeds occupy a small portion in the two wheeler market however; electric two wheelers are yet to penetrate. The passenger vehicles are further categorized into passenger cars, utility vehicles and multipurpose vehicles. All sedan, hatchback, station wagon and sports cars fall under passenger cars. Tata Nano is the world's cheapest passenger car, manufactured by Tata Motors, that leading automaker of India. Multi-purpose vehicles or people-carriers are similar in shape to a van and are taller than a sedan, hatchback or a station wagon, and are designed for maximum interior room. Utility vehicles are designed for specific tasks. The passenger vehicles manufacturing account for about 15% of the market in India. Commercial vehicles are categorized into heavy, medium and light. They account for about 5% of the market. Three wheelers are categorized into passenger carriers and goods carriers. Three wheelers account for about 4% of the market in India, the productions obtained for production of commercial vehicles, passenger car and, two and three wheelers listed in table 4-1 shows the amount of the productions by the numbers. And the table no 4-2 shows the rate of the growth of production in the period of study. From these tables we can understand that the automobile industry had the beast rate of growth at 2009-10.the tables 4-3 and 4-4 show the amount of domestic sales and also the rate of growth .so we can understand easily that the automobile industry is growing and has the positive role in

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economic development. It has been shown in table 4-1 that the two-wheelers constitute a major part of total automobile production in number, with gradually expanding share. Two-wheelers form the predominant category of vehicles in India, in terms of sales as well. Cars continue to constitute the major and expanding share in passenger vehicles segment. Light commercial vehicles are expanding their shares in the sales of commercial vehicles segment, though heavy and medium commercial vehicles are still dominant in this segment.

Table 4-1: Automobile Production Trends (nos) category 2005-06 2006-07 2007-08 2008-09 2009-10 Passenger Vehicles 1,309,300 1,545,223 1,777,583 1,838,593 2,351,240

Commercial Vehicles 391,083 519,982 549,006 416,870 566,608

Three Wheelers 434,423 556,126 500,660 497,020 619,093

Two Wheelers 7,608,697 8,466,666 8,026,681 8,419,792 10,512,889

Grand Total 9,743,503 11,087,997 10,853,930 11,172,275 14,049,830 .Source: Society of Indian Automotive Manufacturing (SIAM)

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chart 4-1: Automobile Production Trends

12,000,000

10,000,000

8,000,000

6,000,000 P V C V 4,000,000 Three W Two W 2,000,000

0 2005-06 2006-07 2007-08 2008-09 2009-10

Table 4-2: Analysis of Automobile Production Trends category 2005-06 2006-07 2007-08 2008-09 2009-10 Passenger Vehicles 8.22% 18.02% 15.04% 3.43% 27.88%

Commercial Vehicles 10.57% 32.96% 5.58% -24.07% 35.92%

Three Wheelers 16.02% 28.01% -9.97% -0.73% 24.56%

Two Wheelers 16.52% 11.28% -5.20% 4.90% 24.86%

Grand Total 15.06% 13.80% -2.11% 2.93% 25.76% • Source: Society of Indian Automotive Manufacturing (SIAM)

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Table 4-3 Automobile Domestic Sales Trends (Number of Vehicles) category 2005-06 2006-07 2007-08 2008-09 2009-10

Passenger Vehicles 1,143,076 1,379,979 1,549,882 1,552,703 1,949,776

Commercial Vehicles 351,041 467,765 490,494 384,194 531,395

Three Wheelers 359,920 403,910 364,781 349,727 440,368

Two Wheelers 7,052,391 7,872,334 7,249,278 7,437,619 9,371,231

Grand Total 8,906,428 10,123,988 9,654,435 9,724,243 12,292,770 • Source: Society of Indian Automotive Manufacturing (SIAM)

Chart 4-2: Automobile Domestic Sales Trends

10,000,000

9,000,000

8,000,000

7,000,000

6,000,000 P V 5,000,000 CV Three W 4,000,000 Two W 3,000,000

2,000,000

1,000,000

0 2005-6 2006-7 2007-8 2008-9 2009-10

• Source: Society of Indian Automotive Manufacturing (SIAM)

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Table 4-4: Analysis of Automobile Domestic Sales Trends

2006-07 2007-08 2008-09 2009-10

Passenger Vehicles 20.73% 12.31% 0.18% 25.57%

Commercial Vehicles 33.25% 4.86% -21.67% 38.31%

Three Wheelers 12.22% -9.69% -4.13% 25.92%

Two Wheelers 11.63% -7.91% 2.60% 26.00%

Grand Total 13.67% --4% .72%. 26.41%. Source: Society of Indian Automotive Manufacturing (SIAM)

4.6.2) Indian Automobile Export

In the year 1961 Tata began exporting its product first to Sri Lanka, then called Ceylon. It was named 312. Later they began exporting to African countries. It has been shown in table 4-5 that the two-wheelers and passenger car constitute a major part of total automobile production in number, with gradually expanding share. Two-wheelers form the predominant category of vehicles in India, in terms of export as well. Cars continue to constitute the major and expanding share in passenger vehicles segment. Light commercial vehicles are expanding their shares in the export of commercial vehicles segment, though heavy and medium commercial vehicles are still dominant in this segment. The Chart 4-3 shows that the export of automobile has growing rate in the period of study.

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Table 4-5: Automobile Exports Trends (Number of Vehicles) category 2005-06 2006-07 2007-08 2008-09 2009-10 Passenger Vehicles 175,572 198,452 218,401 335,729 446,146

Commercial 40,600 49,537 58,994 42,625 45,007 Vehicles

Three 76,881 143,896 141,225 148,066 173,282 Wheelers

Two 513,169 619,644 819,713 1,004,174 1,140,184 Wheelers

Grand Total 806,222 1,011,529 1,238,333 1,530,594 1,804,619

• Source: Society of Indian Automotive Manufacturing (SIAM)

Chart 4-3: Automobile Exports Trends

1,200,000

1,000,000

800,000 P C

600,000 C V THREE W 400,000 TWO W

200,000

0 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10

• Source: Society of Indian Automotive Manufacturing (SIAM)

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Table 4-6: Analysis of Automobile Exports Trends category 2005-06 2006-07 2007-08 2008-09 2009-10

Passenger Vehicles 5.51% 13.03% 10.05% 53.72% 32.89%

Commercial Vehicles 35.60% 22.01% 19.09% -27.75% 5.59%

Three Wheelers 15.10% 87.17% -1.86% 4.84% 17.03%

Two Wheelers 40.05% 20.75% 32.29% 22.50% 13.54%

Table 4-7: analysis Automobile Exports Trends bases sales

2004-5 2005-6 2006-7 2007-8 2008-9

Motor 8,467,85 9,743,50 11,087,9 10,853,9 11,175,4 Units Vehicle 3 3 97 30 79 Production3 Industry 24,379 26,969 30,507 32,383 33,342 USD Revenue1 millin Exports3 629,544 806,222 1,011,52 1,238,33 1,530,66 Units (Units) 9 3 0 Exports1 1,915 2,231 2,552 3,008 3,718 USD (Revenue) millin • Source: 'Department of Heavy Industry, 3Society of Indian Automotive Manufacturing (SIAM), 1National Accounts Division, *Imaging More estimates, USD 1 = INR 45 Strengths

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Analysis of Indian Exports: Cost competitiveness in terms of labor and raw material. Established manufacturing base Economics of scale due to domestic market Potential to harness global brand image of the parent company Table 4-8: SWOT analysis for Indian export Strengths • Global hub policy for small car like Hyundai, Suzuki, etc.

Weakness • Perception about quality.

• Infrastructure bottlenecks. Opportunities • Huge export markets such as Europe, America, Africa, and others for Indian cars.

Threats • China, Malaysia, Thailand, etc.

• Many other countries also have strategies for export promotion.

Export Imperatives:

Internal Factors:

• Attaining high quality for global standards.

• Continuous cost reduction for global competitiveness.

• Supply chain management (logistics).

• Attaining economies of scale & scope.

External Factors:

• Improve infrastructure (ports, roads, etc).

• Improve EXIM regulations.

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4.6.3) India's Position in the Global Auto industry The automotive sector is one of the core industries of the Indian economy; Indian industry has come of age only since the complete de-licensing of 1991. Indian auto industry defied global economic recession, and continued to register high sales both in domestic and export markets, In 2007, India was ranked as the 12th fastest growing market in the world. Presently, India is the 2nd largest two wheeler market in the world and 4th largest commercial vehicle market worldwide. India is the 1th largest market in the passenger car segment globally which is expected to hccomc the 7th largest market by 2016. India holds a total of 3% share in global four wheeler production and ranks 9th in the world in the production of cars. There is a huge potential which needs to be tapped through an integrated effort of the government. India is a base for the manufacturing of small cars and has attracted the attention of global giants for investing in this segment. It is expected that Indian automobile industry will be among the world's top five automotive economies by 2025 Due to the huge future potential for growth. Ernst and Young have predicted the Indian passenger car market to grow at 12 percent annually over the next five years to touch 3.75 million units by 2014 from 1.89 million units at present. Analysts with Ernest and Young say that "The industry's turnover is estimated to touch $155 billion by 2016, this would make the Indian auto industry the seventh largest in the world, and the third largest by 2030 Behind China and the US. The government's Automotive Mission Plan also envisages India emerging as the world's seventh largest carmaker by 2016, contributing over 10 percent to the country's $1.2-trillion economy from under live percent at present. 224

4.6.4) Where India's Auto Industry Scores Over the Others? India's Nano (the world's cheapest car) and other small cars are forcing the world to go back to their drawing boards. India's obsession with hatchbacks has led to designs that score high on fuel and cost efficiencies without compromising on the quality. According to Neeraj Garg, Volkswagen India group sales director: '"Car manufacturers are betting on hatchbacks in the B+ segment. We expect the segment to constitute nearly 75 percent of volumes in die coming years.*' India's Reva (electric car) is very popular abroad as its environment friendly. Spark, the compact car from General Motors, will now come in an electric version, thanks to a tie-up with Bangalore's Reva Electric Car Co. With such innovations abound, Indian auto industry is all set to grow strong and become a visible and stronger power in the Global auto industry.

4.6.5) what makes the Indian Auto Market attractive? While the markets in the developed countries reach a maturity point, markets such as India are looking very attractive. As the second largest populous country, with poor public transport and infrastructure, most of the people are depending on their personal transport for comfort, convenience and style. The consumers are being wooed by the manufacturers with attractive finance options and with models at various price points. There is a huge potential for the demand of cars because of the low penetration rates of 11 cars for 1000 people. The tables no 4-8 and 4-9 we can understand it will be beast opportunity for Indian automobile industry for growing and with reflect of GDP the people can get the hub and spoke approach followed by most distributors and suppliers is pushing the demand for commercial vehicles drastically.

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Factors contributing to the increased demand of auto motives and the growth of Indian Auto sector: The convergences of government policies, economy’s growth, and people’s purchasing power have all contributed to the phenomenal growth of Indian Auto industry. Some of the important growth drivers are explained below. Rise in the industrial and agricultural output indirectly helps Indian Auto industry. Industrial and agricultural output increase has reflected higher GDP and overall growth of the economy which is about 9% in the last three years. Higher GDP means more purchasing power. Sales of vehicles for domestic and commercial consumption have seen high growth in these three years too. Table 4-9:vehicle (2 W )penetration

Country 2W / 1000 people Thailand 244 Malaysia 325 Italy 180 Japan 102 Spain 118 Indonesia 159 Switzerland 82 China 87 India 64 US 40 Source: SIAM & JAMA; figures for 2009

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Table 4-10: vehicle (car) penetration Country Cars / 1000 people Germany 565

France 480 US 453 Japan 451

Malaysia 271

South Korea 238

Mexico 145

Brazil 103

Thailand 57

Indonesia 18

Philippines 9

China 27

India 10

Source: WARDS, 2010; all figures for 2009

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4.6.6) The Future of Indian Auto Industry

According to a report from United Nations Industrial Development Organization's (UNIDC) in 'International Yearbook of Industrial Statistics 2008', India enjoys 12th position amongst top 15 automakers in the world. India is at the 4th position amongst the auto makers of developing countries. By 2016 the size of the Indian automobile industry is expected to grow by 13%, to reach a mark of US$ 120-159 billion. Presently, India is the 2nd largest two wheeler market in the world and fourth largest commercial vehicle market worldwide. With allies in a strong economy, rising demand and financial backing, Indian auto industry is standing at the threshold of success. Scope of automobile industry in the near future According to a survey of ASMF International (American Society of Mechanical Engineers), the automobile is the greatest mechanical engineering achievement of the 20th century. The automobile .Sane Apollo and conditioning and other technologies made major contributions to engineering progress and economic and social development in the last two years. The automobile also spurred transportation in the United States and provided a means of efficient and enjoyable travel for the nation's middle class. Most automobile engine manufacturers, like Ford, want to be able to react to new market requirements in a quick, flexible, and cost-saving manner, Ford intends to automate the production of engines with open and manufacturer-Independent control systems, and has decided in favor of the Industrial personal computer (PC) because of its substantial cost advantages compared to conventional PLCs. 228

The automobile brought about many safety and health concerns. Agencies have been developed on the federal and state levels to address environmental problems and automobile safety designs.

4.6.7) Vision 2020' of ACMA The Indian auto component industry can potentially grow to over ' 5 lakh crore (USD 110 billion) by the year 2020 driven in tandem with the surge in vehicle production in the country. Of this, the domestic turnover can grow to 4 lakh crore (USD 80 billion) and exports scale up to another ' 1.4 lakh crore (USD 29 billion). The auto component industry can thus be an engine of India's economic and manufacturing sector growth, potentially contributing 3.6% of GDP by 2020, up from the current 2.1%. To achieve this potential the auto component industry would require investments of over ' 1.6 lakh crore (USD 35 billion) during the period. It will also create employment opportunity for over 1 million skilled people. The Vision 2020 document, created jointly by ACMA and internationally renowned consultancy firm Ernst & Young (EY), in the backdrop of the recent global recession that has shifted the centre of gravity of the auto industry to the east; as also, of the unprecedented growth in the automotive industry in India in the last one year, attempts to capture the future potential of the Indian auto component industry and provides insights into the actions that need to be taken by all stakeholders including the industry, the Government and the industry body. According to the ACMA-EY Vision 2020 study, India is expected to witness strong growth in vehicle production across all segments by 2020.  Passenger vehicles - projected to be 5 million units by 2015 and over 9 million by 2020 driven by domestic demand and as a global hub for exports of small cars

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 Commercial vehicles - volumes of over 1.4 million by 2015 and over 2.2 million by 2020. Small Commercial Vehicles (SCV), a relatively new segment, expected to grow 28% annually over the next few years  Two and three wheelers - expected to double to 22 million units by 2015 and reach 30 million by 2020 driven by low penetration levels, expanding rural sales and growth in exports  Tractors - projected to be over 0.7 million by 2015 and over 1 million by 2020 with steady growth expected in domestic and export volumes  Construction equipment - likely to grow 2.5 times to 0.1 million units by 2015 and almost double to 0.18 million by 2020 driven by the infrastructure sector

Commenting on the outcome of the Vision 2020 study,ACMA President, Jayant Davar: "India is well on its way to be among the top 5 vehicle producing countries in the world by 2020. The high projections of vehicle production in the country will provide traction to the auto component industry, which is expected to grow almost five-fold to over USD 110 billion from its current level of USD 26 billion. Increasing cost pressures is driving OEMs towards low cost country (LCC) souring. In order for the Indian component manufacturers to stay competitive, among other things, they will have to move up the value chain. Many different regions around the world are fast becoming centers for LCC souring; India will have to be wary of these." Elaborating on the need for immediate action by the industry to harness the opportunity and stay ahead of competition, Davar mentioned, "The Indian component industry must raise capital - strengthen balance sheets; scale capacities - manage costs and flexibility of new assets; build R&D competence - product development, design and frugal engineering

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capabilities; and build robust organizations - to manage significantly increased complexities and risks associated with growth."

He further added, "On its part the Indian government needs to provide long-term stable policies to create a conducive ecosystem in which the large numbers of small and medium companies that make up this industry are able to scale up at the rapid pace. Additionally the government needs to continue its efforts to improve the infrastructure especially that of roads, ports and clean & stable power. Internationally, there is strong competition from other countries in both the exports and local market. The growing trend of FTAs with other auto producing nations will further add to the competitive intensity in the industry, we must cautiously tread this path and explore agreements that are advantageous to the local industry." The ACMA-EY Vision 2020 report calls for a significant role to be played by the Government to support the industry.

4.6.8) Indian Automobile Industry SWOT Analysis

Strengths

Domestic Market is large

Government provides monetary assistance for manufacturing units

Reduced Labor cost

Weaknesses

Infrastructural setbacks

Low productivity

Too many taxes levied by government increase the cost of production 231

Low investments in Research and Development

Opportunities

Reduction in Excise duty

Rural demand is rising

Income level is at a constant increase

Threats

Increasing rates of interest

Too much competition

Rising cost of raw materials

4.6.9) Indian Auto Industry - Joint Ventures

Indian auto industry is one of the core industries. Post-independence due to the thrust on industrialization Indian auto industry indirectly benefited as transport of goods across die country increased manifold. Liberalization of the economy that started in 1980 has also had a positive impact on the Indian Auto industry. India is considered as a crucial business destination for reputed automotive players across the globe. The automotive sector in India is growing at around 18 per cent per annum. The collaborative phase with the foreign players started in early 1980s through a joint venture between Maruti (a government of India Undertaking) and Suzuki Motor Corporation, a Japanese corporation to manufacture four wheelers. But during that period even the industry was subject to control and excess of regulations.

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With de-licensing in 1991, the industry witnessed a remarkable growth in the Indian automotive sector. This is because the economy was opened up and was allowed automatic approval up to 51% for foreign ownership in 1997, after the de-licensing of car segment in 1993. The automobile policy of 2002 permitted complete foreign equity investment in manufacturing of automobiles and components. This led to an entry of international-players like Hyundai, Mercedes Benz, Toyota, Ford, General Motors, Mitsubishi, Daewoo and Daimler Chrysler for manufacturing and sourcing components. This took the Indian automobile production front 5-3 Mij"lion Units in 2001-02 to 10.8 Million Units in 2007-08. "

The Joint Ventures in the Indian Auto-Industry Today

At present, the joint ventures in the Indian auto industry are creating records and notching up impressive sales: Hal Motors lies an alliance with Tata Motors for jointly manufacturing cars at its plant in Ranjangaon, Pune. It is estimated that, both will he making around 2.00.000 cars annually and they also have a distribution and a service partnership. The international manufacturers are expanding base and investing more money due to huge cost efficiencies. India lias emerged as one of the world's largest manufacturers of small cars. With the world looking at using small cars for cost and fuel efficiencies, Indian exports of cars will rise significantly after the new and expanded manufacturing facilities of players such as Nissan, Hyundai. Toyota and Suzuki become operational.

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4.7) some of the salient recommendations for the government include:  Facilitate access to cost-effective capital for the industry. The government should provide incentives to retail and private investors, domestic financial institutions, and strategic investors that invest in the domestic auto components sector.  The government should consider setting up a Technology Development & up gradation Fund for the auto components industry to enable significant infusion and absorption of technology to build domestic capability and to support faster product development plans of the OEMs.  Incentivize & institutionalize a R&D environment. Create an environment for R&D through stable and long-term incentives to individual companies and fostering linkages between industry and academic for pre competitive research.  Set up auto supplier parks that provide high quality infrastructure. Such supplier parks can be set up in the regional auto hubs (NCR, Pune, Chennai, etc) with basic facilities for component suppliers like continuous power supply, park-to-port rail tracks, tooling centers technical training centers for workmen skill up gradation, and banks for providing easy access to capital  Accelerate infrastructure project execution. Indian government is undertaking various initiatives with huge budgetary outlays for improving power, logistics and port facilities. The infrastructure initiatives need to be managed efficiently for faster execution.  Reform land acquisition so that new plants can be set up without delays. Many component manufacturers will need to set up new plants to meet rising demand levels. This will require faster land acquisition. The State governments need to play a proactive role in this.

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 Create long-term, stable trade policies that enable auto sector growth. Besides continuing existing FTA negotiations, the Indian government should also consider having FTAs with major auto producing countries such as Brazil, South Africa and Iran. This will help Indian companies to supply their products at competitive prices in these large markets.  Correct the inverted duty structure. The existing inverted duty structure makes value addition less competitive in those components that require raw material imports. The government needs to rectify this anomaly such that Indian component manufacturers remain competitive in domestic and export markets.  Revise labour policies such that they allow manufacturers to maintain a flexible workforce. The existing labor laws also drive manufacturers to set up multiple sub-optimal plants. Improving labor policies would have a significant impact on improving productivity levels and the overall competitiveness of the Indian auto component industry.  Increase the availability of skilled manpower. Increasing interaction levels between education and vocational institutes and the industry would help in minimizing the gap between skills requirement vs. availability.

 Delineating his thoughts on the need for the auto component manufacturers to appropriately position themselves in light of the significant global completion, ACMA Vice President, Srivats Ram, "Auto component suppliers in India should look at how to position their companies over the next decade and would have to develop capabilities accordingly. They could look at one of five possible routes for themselves.  A diversified global supplier would span multiple component groups and geographies and position itself as an integrator to the OEMs 235

 A focused global player would position itself as a global leader in a given component segment. Such a player would be at the forefront in its product category and would actively shape the industry developments  A domestic tier-1 supplier would be mainly an India-based supplier that would focus on the Indian OEM market, exports and the domestic After market  A niche innovator would be a smaller entrepreneurial venture that would focus on product innovation and develop new products at the forefront of technology. Such a player would  leverage India's capabilities in frugal engineering, IT and complex manufacturing

Unique combinations of various business capabilities will define the characteristics of players in each strategic position. "

Sharing his thoughts on the need for action by the industry body as delineated in the Vision 2020 document, to facilitate the development of a healthy environment for the auto component industry in India, ACMA Executive Director Vinnie Mehta , "The association must focus on 'Creating a Joint industry- Government Vision 2020 Taskforce' to monitor the progress of various initiatives with the Government and provide periodic updates to its members on progress and emerging trends in the automotive industry. There is a need to promote the Indian auto component industry domestically as well as internationally to make it more attractive to investors for raising the much-needed capital. ACMA should consider broadening the scope of its existing cluster-based initiatives to include wider array of operational issues faced by component manufacturers including those for improving throughput, productivity, marketing (especially in export markets), and logistics operations and last but not the 236

least, working closely with training and education institutes to help align the curricula with industry requirements."

4.8) Automobile Industry in Maharashtra

Maharashtra State Diamond

The State Competitiveness Report 2010 ranks Maharashtra second (after Delhi) among 29 states in India. Maharashtra's strengths are in factor and demand conditions (figure 4-1) is shows Maharashtra competitiveness diamond. Figure 4-1 Maharashtra competitiveness diamond

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Figure 4-2: Maharashtra automotive cluster: history (1940s-2010)

History and evaluation of Maharashtra automobile Industry The automobile industry in the state of Maharashtra has a relatively long history. As the industry is the largest of its kind of India it is evolution generally coincides with the development of the whole automobile industry in India which was shown in the previous section the origin of the industry date back to as early as 1940s.many of the major domestic

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automakers such as Tata Motors, Bajaj Motors, Force Motors were established in the sate (Mahindra and Mahindra was originally founded in Punjab but later moved to the state). 1980s saw the first major leap of the industry. In the deregulation (de-licensing) by the national government joint ventures with Japanese automakers began. In Maharashtra Swaraj Mazda was created in 1983s, and this lead to growth of supporting industries in the state. Rapid establishment of major foreign automaker assembly plants with in the state. This facilitated technological transfer and further development of local supporting industries.

In Maharashtra state there are so many automobile manufacturers. 21 domestic manufacturers exist in the industry including 2 of the 4 top manufacturers in India. Tata Motors (1st) and Mahindra and Mahindra (4th) for 4 wheel vehicle segment and the 2nd largest manufacturers in 2 and 3 wheelers (i.e. Bajaj Auto) and also 9 out of 18 international major automotive importances in Maharashtra’s economy.

The automobile industry in the Maharashtra is one of the largest and promising industries in the state for example in terms of share in India the industry accounts for 50.97% in net values and 35.1% in output which are higher than any other industry in Maharashtra. The industry also contributes to 10.4% of total employment in the state employment. It is also one of the fastest growing industries at CAGR 3.2% during 1991 – 2007, following wood related industry 6.79% and other manufacturing 6.42% Maharashtra state government, 2009. Manufacturer operating in India located in state indicating that Maharashtra become a favorite location to invest, these companies are a supported by a large number (More than 150 companies) or supporting 239

industries from tier II component specialist to tier III commodity suppliers. Advantage of Automobile industry in domestic and international market The automobile industry in Maharashtra is the strongest in many aspects in the comparison with other automobile industries in India like north automobile Industry around Delhi and south for instance in terms of all segments combined the west cluster (Maharashtra state) enjoys a lion’s share of for 43.6% of gross turnover 81% of R and D expenditure and 53% of cumulative investment in 2008-2009, the cluster is especially strong in the four wheel vehicle segment including passenger vehicles and commercial vehicles with 46.6% of gross turnover 46% of installed capacity 84% of R and D expenditure and 53.2% of investment. Maharashtra is leading to get advantage and challenges in international market with the international comparison like Brazil china and Thailand in the previous section; however the higher percentage of R and D expenditure concentrated on this sector can give the sector advantage of higher productive lower cost and advanced technology.

Context for Firm Strategy and Rivalry: Among India’s states. Maharashtra has attracted the highest amount of FDI, 20.6% of total national FDI (figure 4-4). The most favored sectors are IT industry 20%, Services 17° o, Infrastructure 7%, and Automobiles 6%.

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Chart 4-4: FDI in major states (1991-2008)

75096 80000 70000 60000 50000 40000 27873 30000 21123 19577 20000 5128 10000 0

Source: National Informatics Center Government of India, 2010

The state has an industrial promotion policy to develop Maharashtra as Asia's most competitive manufacturing hub, led by a government established entity, Maharashtra Industrial Development Corporation (MIDC). MIDC promotes the establishment of SEZs, which provides economic incentives (tax exemptions), power and water supply, more diligence in land and administrative processes. There are 72 SEZ in Maharashtra 80% of them located in the Golden Quadrilateral, formed by Mumbai-Pune-Nasik-Aurangabad, which contributes 80% of Maharashtra's GDP and focuses on manufacturing & services industries. SEZs have been used as a means to attract companies to the State. However, recently other states have offered more attracting incentives and some companies and moving there. As the Institute for competitiveness (2010) mentions Maharashtra were only number 4 among 29 states in offering business incentives when it should have been at the top. Although tax incentives in free zones could work in the short term, this is not a

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sustainable policy in the long term, and the state needs to focus on differentiating and providing other advantages for firms to locate there. Maharashtra is one of the two states in India that have octroi taxes, and the only one among the major auto producing states in the country. Thus, firms in this state find it expensive to procure components from other states. In an attempt to develop its backward districts, the State government is providing few incentives to industrial units that are set up in these districts.

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4.9) References 1. Automotive Component Manufacturers Association (2007), Engine of Growth Driving the Indian Manufacturing Sector, Status Report of Indian Automotive Component Industry. 2. Burgess Wise, D. (1970). Veteran and Vintage Cars. London: Hamlyn. 3. Chariot, Steam. (2009) ". History of the Automobile: origin to 1900. Hergé. Retrieved. 4. Directorate of Economics & Statistics. (2010). 5. Eckermann, Erik. (2001), World history of the automobile, USA. 6. Economic survey of Maharashtra 2009-10 (ESM). Mumbai: Planning Department, Government of Maharashtra. 7. ENO Transportation foundation inc., Transportation in America, Lansdowne, VA, 1996. 8. For automobile sales and export data: Society of Indian Automobile Manufacturers (SIAM). 9. Government of India, Ministry of Road Transport and Highways 10. For auto component revenue and export data: The Automotive Component Manufacturers Association of India (ACMA). 11. India Brand Equity Foundation (2006), Automotive, Report by KPMG for IBEF, Gurgaon. 12. Kamdar, Mira. (2007). Planet India: How the Fastest-Growing Democracy is transforming America and the World. Simon & Schuster. p. 113. 13. Khisty, Vasant (2000), Globalization and Competitiveness of Indian Auto Component Industry, Associated with RAHA - World Independent Writers' Home in Exile, World News, Kabul Press.

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14. Krishnan, Viswanathan. (2002), Indian Automotive Industry: Opportunities and Challenges Posed by Recent Developments, IMV Publication No. 0104a. 15. International Motor Vehicle Program at the Massachusetts Institute of Technology, Cambridge. 16. Maharashtra industrial development corporation (MIDC). (2009). Maharashtra and its strengths. Retrieved March 12, 2010, from MIDC Portal: http://www.midcindia.org 17. McKinsey (2005).Vision 2015 for the Indian Automotive Components Industry, Automotive Component Manufacturers Association of India and McKinsey and Company. 18. Ministry of Heavy Industries and Public Enterprises (2006a), Automotive Mission Plan 2006-2016, Government of India, New Delhi. 19. Ministry of Heavy Industries and Public Enterprises (2006b), Automotive Industry, Eleventh Five Year Plan (2007-2012), Report of Working Group, 20. Department of Heavy Industry, Government of India, New Delhi 21. Nakicenovice ,N. (1991). ―Diffusion of pervasive system: a case of transport infrastructures‖, technological forecasting and social change, p. 39. 22. Narayanan, K. (1998). Technology Acquisition, De-regulation and Competitiveness: a Study of Indian Automobile Industry, Research Policy, 27(2), pp. 215-228. 23. Narayanan, K. (2004). Technology Acquisition and Growth of Firms: Indian Automobile Sector under Changing Policy Regimes, Economic and Political Weekly, 39(6), pp. 461-470. 24. Nath, Aditya (2006), India: The Next Automobile Giant, Business Performance Consulting, CGN & Associates Inc. 244

25. Organization Internationals des Constructers’ d'Automobiles (2006). World’s Automotive. 26. Plunkett Research, "Automobile Industry Introduction" (2008) Car". (Etymology). Online Etymology Dictionary. Retrieved 2008-06-02. 27. Setright, L. J. K. (2004). Drive On! A Social History of the Motor Car. Granta Books. 28. Society of Indian Automobile Manufacturers (2004), Automobile Industry: Advantage India Indian Automobile Industry – An Agenda for Global Leadership, Speech by Mukesh D. Ambani, Annual Convention, New Delhi. 29. Society of Indian Automobile Manufacturers (2007), Market Share Analysis Report, Report VII, SOP 11-F-09/01, New Delhi. 30. Srinivas, S. (2010). India's most competitive states. Business world, pp. 40-57. 31. Timeline: India's automotive industry". BBC News. 2007-04-03. 32. Retrieved 2009-01-12.

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http://ww.thomaswhite.com

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