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The automotive sector, comprising of the automobile and auto component sub
sectors, is one of the key segments of the economy having extensive forward
and backward linkages with other key segments of the economy. It contributes
about 4 per cent in India's Gross Domestic Product (GDP) and 5 per cent in
India's industrial production. The well -developed Indian automotive industry
ably fulfils this catalytic role by producing a wide variety of vehicles like
passenger cars, light, medium and heavy commercial vehicles, multi -utility
vehicles such as jeeps, scooters, motorcycles, mopeds, three wheelers, tractors
etc.

The auto component industry, which is an important part of automotive sector,

comprises about 500 firms in the organized sector and more than 10,000 firms
in the small and unorganized sector has been one of the fastest growing
segments of Indian manufacturing. It has the capability to manufacture the
entire range of auto parts and has rapidly added to its capacity base. Indian
auto components industry has an important place at the global level.

Advantage India:
India holds huge potential in the automobile sector including the automobile
component sector owing to its technological, cost and manpower advantage.
Further, India has a well developed, globally competitive Auto Ancillary
Industry and established automobile testing
and R&D centres. The country enjoys natural advantage and is among the lowest
cost producers of steel in the world. The Indian automobile industry today
boasts of being the second largest two wheelers manufacturers in the world,
second largest tractor manufacturer in the world, fifth largest commercial
vehicle manufacturer in the world and fourth largest Car market in Asia. World
largest Motorcycle manufacturer is in India.
India has largest three wheeler market in the world, second largest two wheeler
market in the world, fourth largest passenger vehicle market in Asia, fourth
largest tractor market in the world, fifth largest commercial vehicle market in
the world. India became fastest growing car market in the world in 2004.
Installed Capacity:
The automobile industry including passenger cars, over a period of time and
particularly after liberalization, has installed a robust capacity in different
segments of automobile industry is as under:

Investment Opportunities:
In India, lots of investment opportunitie s exist in the following areas:
_ Establishing Research and Development Centres
_ Establishing Engineering Centres
_ Passenger Car Segment
Segment Installed Capacity
(Nos.)
Four Wheelers 1,590,000
Two & Three
Wheelers
7,950,000
Total 9,540,000
_ Two Wheeler Segment
_ Heavy truck Segment

Total production:

The automobile industry produces a wide variety of vehicles including 17

lakh four wheelers and over 80 lakhs two and three wheelers in 2005 -06. The
turn over of auto components industry has grown from US $3.1 billion to US $10
billion between 1997 -98 and 2005-06.

Automobile Industry in India has witnessed a tremendous growth in recent

years and is all set to carry on the momentum in the foreseeable future. Indian
automobile industry has come a long way since the first car ran on the streets
of Bombay in 1898. Today, automobile sector in India is one of the key sectors
of the economy in terms of the employment. Directly and indirectly it employs
more than 10 million people and if we add the number of peo ple employed in the
auto-component and auto ancillary industry then the number goes even higher.

The automobile industry comprises of heavy vehicles (trucks, buses, tempos,

tractors); passenger cars; and two-wheelers. Heavy vehicles section is
dominated by Tata-Telco, Ashok Leyland, Eicher Motors, Mahindra and
Mahindra, and Bajaj. The major car manufacturers in India are Hindustan
Motors, Maruti Udyog, Fiat India Private Ltd., Ford India Ltd., General Motors
India Pvt. Ltd., Honda Siel Cars India Ltd., Hy undai Motors India Ltd., and
Skoda India Private Ltd., Toyota Motors, Tata Motors etc. The dominant players
in the two-wheeler sector are Hero Honda, Bajaj, TVS, Honda Motorcycle &
Scooter India (Pvt.) Ltd., Yamaha etc.

In the initial years after independ ence Indian automobile industry was plagued
by unfavourable government policies. All it had to offer in the passenger car
segment was a 1940s Morris model called the Ambassador and a 1960s Suzuki -
derived model called the Maruti 800. The automobile sector i n 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 vita l
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.

Indian automobile industry has matured in last few years and offers
differentiated products for different segments of the society. It is currently
making inroads into the rural middle class market after its inroads into the
urban markets and rural rich. In the recent years Indian autom obile sector has
witnessed a slew of investments. India is on every major global automobile
player's radar. Indian automobile industry is also fast becoming an outsourcing
hub for automobile companies worldwide, as indicated by the zooming automobile
exports from the country. Today, Hyundai, Honda, Toyota, GM, Ford and
Mitsubishi have set up their manufacturing bases in India. Due to rapid
economic growth and higher disposable income it is believed that the success
story of the Indian automobile industry is not going to end soon.

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^c Maruti Udyog Ltd.

^c General Motors India
^c Ford India Ltd.
^c Eicher Motors
^c Bajaj Auto
^c Daewoo Motors India
^c Hero Motors
^c Hindustan Motors
^c Hyundai Motor India Ltd.
^c Royal Enfield Motors
^c Telco
^c TVS Motors
^c DC Designs
^c Swaraj Mazda Ltd

The Indian automobile industry is going through a technological change where

each firm is engaged in changing its processes and technologies to sustain the
competitive advantage and provide customers with the optimized p roducts and
services. Starting from the two wheelers, trucks, and tractors to the multi
utility vehicles, commercial vehicles and the luxury vehicles, the Indian
automobile industry has achieved tremendous amount of success in the recent
years.
The automobile industry had a growth of 15.4 % during April -January 2007,
with the average annual growth of 10 -15% over the last decade or so. With the
incremental investment of $35-40 billion, the growth is expected to double in
the next 10 years.

Consistent growth and dedication have made the Indian automobile industry the
second- largest tractor and two-wheeler manufacturer in the world. It is also
the fifth-largest commercial vehicle manufacturer in the world. The Indian
automobile market is among the largest in Asia.

The key players like Hindustan Motors, Maruti Udyog, Fiat India Private Ltd,
Tata Motors, Bajaj Motors, Hero Motors, Ashok Leyland, Mahindra & Mahindra
have been dominating the vehicle industry. A few of the foreign players like
Toyota Kirloskar Motor Ltd., Skoda India Private Ltd., Honda Siel Cars India
Ltd. have also entered the market and have catered to the customers· needs to
a large extent.

Not only the Indian companies but also the international car manufacturing
companies are focusing on compact cars to be delivered in the Indian market at
a much smaller price. Moreover, the automobile companies are coming up with
financial schemes such as easy EMI repayment systems to boost sales.

There have been exhibitions like Auto -expo at Pragati Maidan, New Delhi to
share the technological advancements. Besides, there are many new projects
coming up in the automobile industry leading to the growth of the sector.

The Government of India has liberalized the foreign exchange and equity
regulations and has also reduced the tariff on imports, contributing significantly
to the growth of the sector. Having firmly established its presence in the
domestic markets, the Indian automobile sector is now penetrating the
international arena. Vehicle exports from India are at their highest levels. The
leaders of the Indian automobile sector, such as Tata Motors, Maruti and
Mahindra and Mahindra are leading the exports to Europe, Middle East and
African and Asian markets.
 The Ministry of Heavy Industries has released the Automotive Plan
2006-2016, with the motive of making India the most popular manufacturing
hub for automobiles and its components in Asia. The plan focuses on the removal
of all the bottlenecks that are inhibiting its growth in the do mestic as well as
international arena.

The Indian automobile industry is going through a phase of rapid change and
high growth. With new projects coming up on a regular basis, the industry is
undergoing technological change. The major players are expanding their plants
and focusing on mass customization, mass production, etc.

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Nearly every automobile company is investing at a higher rate than ever before
to achieve a high growth trajectory. The overall investment in the sector has
been increasing quite rapidly. It is expected that by the end of 2010 Indian
automobile sector will be investing a huge amount as Rs. 30,000 crores.

For example, Maruti Udyog has plans of investing Rs. 6,500 crores; the Tata
Motors is coming up with mor e investment of Rs. 2,000 crores in its compact car
project. Not only the Indian companies but also foreign players like Hyundai are
coming up with the investment of more than Rs. 3,800 crores in India.

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At present the industry is enjoying a growth rate of 14-17% per annum, with
domestic sales growth at 12.8%. The growth rate is predicted to double by
2015.

As it is seen, the total sales of passenger vehicles - cars, utility vehicles and
multi-utility vehicles - in the year 2005 reached the mark of 1.06 million. The
current growth rate indicates that by 2012 India will overtake Germany and
Japan in sales volumes.

Financing schemes have become an important factor in the growth of automobile

sales. More and more financial schemes are coming up with easy instalment plans
to lure the customers.

Apart from domestic production, the industry is consistently focusing on the

automobile exports. The auto component segment is contributing a lot in the
export arena. The liberalized policies of the government are now making the
companies go for more and more exports.
The automobile exports are increasing year by year. According to the Society
of Indian Automobile Manufactures (SIAM) automobile exports in the last five
years are as follows:

Export trend over the last five years

NEW LAUNCHES
The Indian automobile sector is experiencing changes in every arena. Changes in
the looks of the vehicles are taking place; the vehicles are being made more
user-friendly. Each and every firm is compet ing to give the customers more
customized vehicles with respect to speed, mileage, and maintenance. At
present there are many new models entering the Indian market. To name a few,
Suzuki Heat 125 and Suzuki Zeus 125X are the two bikes in the motorcycle
segment; Kinetic Blaze and Honda DIO in the scooter segment; Maruti's Zen
Estillo in the car segment, so on and so forth.

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Investment is leading to the employment growth in the sector. With the
emergence of new projects and introduction of technol ogical advancements, the
focus is more on the skilled and experienced human resource. The companies are
looking for skilled and hard working people who can give their best to the
organization.

The engineers in the automotive or electrical or mechanical f ield are in demand.

Some of the firms going for automation, i.e. planning for CAD (Computer Aided
Designs) systems, are also recruiting people with IT specializations.
 

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Individual parts of the car are constructed in various plants around

the country. The parts are shipped to the construction plant via trains or
trucks, and it is here that the car is actually assembled.

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Cars are constructed from the ground up. The car's frame is secured to the
assembly line, and from here, the car will be pieced together.

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The frame moves down the line, and installation of parts begins. The suspension,
gas tank, axles, drive shafts, wheel drums, steering boxes, gear boxes and
breaking systems are all installed at this phase.

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The engine and transmission are paired together and hoisted into place in the
car. This is usually done by robots, as the parts can be extremely heavy. The
parts are bolted into place by workers.

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The shell of the car is built next. The floor pan is laid down, and the quarter
panels are attached. The front and rear door pillars are attached. Robots a re
also generally used in this phase.

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The final body components are installed, including, doors, hood, fenders, trunk
lid and bumpers.

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The body of the car is brought into an inspection area, where it is c hecked for
any dents or damages. Once it is approved, the entire body is washed thoroughly
to remove residual oils.
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Calibrated robots apply the paint job, and the car is then put into a baking area
where the paint dries into the typical sheen.

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Workers take the car's shell and install all of the electrical wiring, lights,
seats, door trim, brake pedals, gas pedals, carpeting and all the glass, except
for the windshield.

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Robots suction cup onto the windshield and put it in place on the car. The
shell of the car is then mounted on top of the car frame. Once properly
connected, the car receives its battery, tires, anti -freeze and gasoline.

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The vehicle is started and driven to a test area to make sure it meets the
proper quality standards of the manufacturer.


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ëc The production of two wheelers in India increased from 3.76 million

vehicles in 2001 to 6.53 million vehicles in 2005.

ëc The domestic sales have been increasing a t a CAGR of 14.3 per cent for
the past 4 years.

ëc Motorcycles constituted 79.5 per cent of the domestic sales of two

wheelers inIndia and have been growing at nearly 24 per cent CAGR.

ëc In the scooter segment, overall domestic sales grew by1.3 per cent CAGR,
driven primarily by ungeared scooters and scooters with automatic gears.

ëc The sales of mopeds have declined at a CAGR of 15.9 per cent for the
past four years.

ëc The motorcycle segment clearly drives the growth of the two wheeler
segment in India.
 ëc The two wheeler segment is being shaped by changing demographics and
lifestyles. An increasing number of working women and greater affluence
among college goers have led to an increase in demand for ungeared/auto
geared scooters.

ëc As with the case of passenger vehicles, there is a rising demand for

higher-end models that combine style and performance in this capacities
(125cc, 150cc or above) are proving very popular.

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^c Increasingly Stringent Emission & Safety Regulations

Úc Technological capability

Úc Cost

^c Increase in input prices

Úc Ferrous & Non-Ferrous Metals

Úc Crude oil & derivatives

Úc Natural rubber

^c Rising Customer Expectations

Úc Product features

Úc Quality & reliability

^c Integration with Global Markets

Úc Lowering product life cycles

Úc Reducing time-to-market for new products

Úc Threat of new competition