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The Indian automobile industry has come a long way since the first car touched the Indian streets
in 1898. Currently it is the tenth largest in the world, being the second largest market for two-
wheeler industry and fourth largest market for commercial vehicle market. Due to the increasing
development of the transportation system there is a rapid advancement in this industry, which in
turn is boosting the growth of the Indian economy.
Automobile Industry of India can be classified under two-wheelers, three-wheelers, passenger
vehicles and commercial vehicles. Two-wheelers occupy the highest market share of more than
75 percent with Hero Honda being the key player, Bajaj being the top manufacturer for three
wheelers and Tata Motors for commercial vehicles. Maruti is the biggest car manufacturer and
holds more than 50 percent of the market share in the passenger vehicle section.

Increasing consumer demand due to the increasing per capita income, launch of new models and
exciting discount offers made by dealers is one of the reasons is resulting in stupendous growth
of Indian automobile industry.
Economic liberalization in 1991, which included opening for international trade and
investment, deregulation, initiation of privatization, tax reforms and inflation-controlling measures,
allowed for production of passenger cars without licenses resulted in Hero Honda and Maruti
Udyog becoming the major operators in motorcycle and passenger car market.
The Indian Auto Policy 2002 provided investment incentives and low cost entry barriers by
allowing for 100 percent foreign equity investment. It also harmonized the regulatory standards
with the rest of the world to keep the emissions under check and paid more emphasis on
Research and Development (R&D).

The Indian automobile industry crossed a landmark with total vehicle production of 10 million
units. There has been an overall growth of 63.6 percent in the sales of vehicles in the industry
over the past 7 years. The passenger vehicles sector has seen the maximum growth of 119.4
percent followed by commercial vehicles at 101.4 percent, two-wheelers at 54.5 percent and
three-wheelers at 51 percent over the past 7 years.
YOY growth in sales of vehicles





2003-04 2004-05 2005-06 2006-07 2007-08 2008-09


Passenger Vehicles Commercial Vehicles
Three Wheelers Tw o Wheelers

The Year Over Year growth for the various sectors of the industry has been shown in the graph
above. The highest growth for passenger vehicles, commercial vehicles and three-wheelers was
recorded in 2003-04 and for two-wheelers in 2004-05. The sales in all the sectors has been
declining drastically over the past two years with the highest decline noted in commercial vehicles
in 2008-09.
With motorcycles occupying 80 percent of the market share, it dominates the two-wheeler sector.
Passenger cars, occupying 78 percent of the market share in the passenger vehicle sector
dominate the market. In the commercial vehicle sector, the heavy commercial vehicles occupy
the major market share at 48 percent and in the three-wheeler sector the passenger carriers
dominates with 64 percent market share.


The Indian automotive industry contributes 5 percent to the nation’s Gross Domestic Product
(GDP), which is expected to rise to 10 percent by 2016. The manufacturers are investing in R&D,
engineering and design capabilities. They are coming up with new innovations, such as the Nano
by Tata Motors, which is the cheapest car in the world costing $2500. The manufacturing
companies are boosting their overseas sales and are buying foreign companies for technology,
customer base and physical assets.
Due to the easy availability of manpower, large and growing domestic market, stable economic
policies, competitive manufacturing cost, high export potential, high quality standards in India,
global passenger car companies are investing in manufacturing units in the country. The Indian
Auto Industry is witnessing more joint ventures and acquisitions than ever such as the Tata
Motors’ acquisition of Jaguar-Land Rover from Ford for US $2.3 billion.

Indian automobile industry faces a major competition from other low-cost countries such as
China, Thailand and Brazil. The abolishment of all the taxes like the Central Sales Tax in the near
future will further give an advantage to India, since it will reduce the impact of taxes to some
Various other steps being taken by the Indian government to improve the infrastructure would
reduce the disadvantages such as project delays, delays in deliveries etc. that India faces due to
poor infrastructure.
These steps would increase the demand for road transport in India which would boost the Indian
Automobile Industry and would lead to the growth of the Indian economy.
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