INDIAN

RESEARCH REPORT

ON

Automobile Industry in India

Submitted under the partial fulfillment for the award of M.B.A.

Batch (2008-10) Submitted To: -

Submitted By:-

Prof. C. lal

PRAVEER SINGH

(Director)

MBA-(VIth sem)

0818470029

Research report

On

Automobile Industry in India

Submitted By:

Praveer singh

In partial fulfilment of the requirement of MBA degree of

U.P. technical University,Lucknow.Session: 2008-10Submitted To:-Prof. C.lal

Enrolment No:Roll No:0818470489110818470029

S

INSTITUTE OF MANAGEMENT SCIENCES-VARANASI

(SHEPA) Nibia bachchaon VRM Bypass Varanasi - 11 Institute of Management sciences (IMS) College code 184 Nibia, Bachchaon, Varanasi

CERTIFICATE

This is to certify that Mr. Praveer singh has completed his research report entitled Automobile industry in India in partial fulfillment of the requirement of Master of Administration of U.P. Technical University, Lucknow.

The report contains the observations and opinion of the student himself .

The project report submitted by Mr. Praveer singh Roll No. 0818470029 is of standards expected of an MBA student of UP technical University.

Signature

(Prof. C.Lal)Nibia, Bachchaon, Mohansarai-Mughalsarai Bypass Road, Varanasi-11

Phone No.: 0542-2230438, 3090984

DECLARATIONI here by declare that all the information collected is correct in accordance with the findings of research topic. It has been prepared purely for academic purpose.

PRAVEER SINGH M.B.A.-(VIth sem) 0818470029

ACKNOWLEDGEMENT

Research work is a combined effort, so one should be thank all that have helped in making report purposeful. Hence I take this opportunity to thank all that have been instrumental in helping me to prepare this report. It is great honor to be assigned this topic. First of all I would like to thank God who shows his blessing upon me in each and every step I am immensely grateful to Mr. A. Pandey for his continuous support and guidance. I also want to thank Director Prof. C. Lal Sir for providing me this opportunity. I also want to thank all teachers, the staff member and library members for their valuable advice and guidance which helped me to make this report purposeful.

I specially wish to thank all other people directly or indirectly related with my research and my friend as without their valuable support this report would not have been possible.

PRAVEER SINGHPREFACE

The automobile industry has grown by leaps and bounds in past decades. With every year new milestones have been achieved. With globalization, technological advancement and transfer of technology has revolutionized the sector. This research is carried out to assess the various components of automobile Industry. Also to analyze further opportunities and potential of automobile sector of India.

Content

Chapter 1page

Industry Profile

Indian automobile industries

Growth in no. Of companies( Investment climate)

Future development expected( Out look )

Opportunities and Challenges Posed By Recent Developments Recent Developments and Issues Facing the Indian Automotive Industry

SWOT Analysis Tractor Industry - Part of Automobile Indu List of Car Manufacturers

Car Sales Statistics India India's auto industry comes of age Green rating for automobile sector Current status of Indian Automotive Industry Production [Green page]Chapter 2 Research Methodology of the project

Problem Formulation

Objective of the project

Scope of the study

Method of Study-Whether universe or sample

Source of information

Statistical tools and techniques

Limitation of the study

Significance of study To the company

To the industry

To the consumer

To the Govt.

To the Academicians etc

Chapter 3 Abstract( outcome thrugh data )

Chapter 4 Conclusion

Suggestion & Recommendation

Annexure Big tables/ Rules etcBibleography

Tata Aria Honda Small Car Concept Maruti R3 Concept

Toyota Etios Small Car Toyota Etios Sedan Mercedes GL Class

Royal Enfield Classic BattleGreen Honda Unicorn Sports Concept Mahindra Concept MotorCycle

Yamaha R15 White Honda CB Twister Honda VFR1200R

Chaptor-1

INDIAN

AUTOMOBILE

INDUSTRY

Overview Indias automobile sector consists of the passenger cars and utility vehicles, commercial vehicle, two wheelers and tractors segment. The total market size of the auto sector in India is approximately Rs 540 billion and has been growing at around 8 percent per annum for the last few years. Since the last four to five years, the two wheelers segment has driven the overall volume growth on account of the spurt in the sales of motorcycles. However, lately the passenger cars and commercial vehicles segment has also seen a good growth due to high discounts, lower financing rates and a pickup in industrial activity respectively.

The automobile industry is fairly concentrated, as in most of the segments two to three players have cornered a major chunk of the total sales. For instance, in passenger cars segment, MSL, Tata Motors and Hyundai Motors control around 85 percent of the total annual sales. Similarly, in the two wheelers segment, the sales volumes of Hero Honda, Bajaj Auto and TVS Motors constitute around 80 percent of the total sales and in the commercial vehicles segment, the market leader Telco controls around 56 percent of the total annual sales. The auto components industry on the other hand is highly fragmented, though there are dominant players in some of the critical segments. Investment climate Given the high growth expectations and a liberal government policy, the investment potential in the India auto sector is huge. CRIS INFAC is forecasting a 12-15% annual growth in the passenger car sales, 6-8% in commercial vehicles and around 10% in two wheelers. Several passenger car makers have already achieved near full capacity utilization and are expanding. Almost all the major automobile manufacturers such as GM, Ford, DaimlerChrysler, Honda, Toyota, Hyundai, and Fiat (with the exception of Volkswagen, which is planning to set up manufacturing shortly) already have made significant investments in India. In the next 2-3 years, the passenger vehicle industry is expected to see investments of more than Rs 30 billion. Similarly, two wheeler industries are expected to attract investment amounting to Rs 10 billion.

There has also been a surge in exports of cars, utility vehicles and two wheelers. The expected growth in domestic sales and exports of vehicles also offers significant opportunity for investors to invest in the auto ancillary industry. Already several international suppliers such as Delphi, Visteon, TRW, Johnson Controls, Denso and Dana, have set up manufacturing facilities and are expanding rapidly to serve not only the domestic market but also to supply to their global customers. Another attractive area of investment for vehicle and parts makers is research and design, to take advantage of Indias low cost advantage.

However, investment in commercial vehicle manufacturing looks relatively unattractive, given the current size and structure of the Indian market

Outlook The expected rise in income levels, wide choice of models and easy availability of finance at low interest rates will drive growth in passenger cars segment, which is likely to be over 12 percent per annum for the next four to five years. Two wheelers growth is likely to marginally slow down, but still grow at an average annual growth rate of around 10 percent.

The commercial vehicles segment is likely to grow at a trend rate of 6-8 percent driven mainly by the Increase in industrial and economic activity on account of the expected growth in the economy, though annual growth rates may fluctuate widely with the cyclical ups and downs of the economy. Tractor industry growth is likely to turnaround and post a growth in volumes in 2004-05. However, it will post a moderate growth of around 4-5 percent annual growth rate over the medium term. If we look into the other economies we find that

Japan Automobile Manufacturers Association, the nation churned out a total of 859,677 cars, trucks and buses in November 2009, up by 0.5% YoY and marking the first YoY rise in 14 months.

China made a sales figure 13 million units this year, including commercial vehicles.

The China Association of Automobile Manufacturers has released a report saying that the countrys auto exports were 40,600 units in November, up 13.43% year on year or 11.87% month on month.

Below is the chart as on September 2009 of global auto productions.

Worldwide Car Sales September 2009Region September 2009Total Sales %Change from September 2008

EU+3*388,136+6.6

China1.33 Million+78.0

US745,997-22.7

Japan321,137+3.5

Brazil308,718+19.6

India129,683+21.0

Russia117,981-58.0

Here also we find comfortable growth figures being posted by Asian economies in automobile sector.

Now a question might come up in the mind of my readers that when US is struggling and have managed to come out of the major downtrend in US auto industry then in 2010 how India and other Asian automobile sectors will sustain.

India is now on e of the hottest destination of auto sector growth.UK and US companies are already in the path of negotiations and various types of partnership projects with Indian companies to enter Indian auto market. At the same time we find that across the globe every one is coming with small car deigns and models to suit the purpose of the common mass of people of any economy. We dont find those days of big cars and luxury cars in the showrooms ofautomobiles.

China is among the leader to bring such car models to the world auto market. The car market is growing at a 16% rate annually, despite the depressed first half of the fiscal. And small car growth is the fastest. We will also find a huge amount of provision in the balance sheet of the companies for research and development in the automobile sector. We already found that companies like Maruti, Hyundai, Tata Motors and GM are looking to leverage their local R&D structure. And all these companies are having their eye on Indian consumers.

Now its hard to say whether all these designs are coming in to play after Nano got launched. Rising crude prices in 2007 have forced the US car makers to bring electric or bio fuel cars in the market. We can be rest assured that in the coming days US will bring these car models if crude prices rises again to the level of 2007 since US have less funding to pay the huge import bill of crude. So are we going to see a new set ofautomobiles in the new decade. The ans goes without any hesitation yes. The automobile sector is now on the path of huge revolution where the next generation cars will travel eco friendly and for small family.

At the same time we will get to see a huge number of mergers and acquisition happening in the global automobile sector is the comings days.

China is focusing on improving the structure of industrial products supply.

2 to 3 large auto enterprise groups with the production and sales volume of over 2 million sets will be established in China auto industry.

As well as 4 to 5 auto enterprise groups with the production and sales volume of over 1 million sets, there are two important activities on merger, acquisition and reorganization finished in Chinas auto industry.

In total what we get to see is that the world automobile sector is on the path of turnaround and India is one of the hottest destinations to find the growth of the auto industry. We will also get new series ofautomobiles which will not be dependent on crude prices.

Among all these we also found some negative shootouts for the Indian automobile sector.

When RBI will go for a hike of interest rates cost of borrowing will affect the auto sales in India.

According to the worlds most precious economist its being expected that US and UK will emerge from the recession shadows and will find growth in economy.

Now economic growth in these two countries will speed up the demand of crude prices, which will carry the crude towards $100 barrell.

So consumers will less prune to buying cars at that point of time.

Commodity prices particularly steel prices are already on the higher tide. This will increase the cost of production of automobiles resulting to increase in prices.

Cost of tire is among them which have already started increasing.

We cannot expect the Indian government to continue the stimulus package declared for automobile sector for a longer time at the cost of rising fiscal deficit of India.

Moreover when so many companies are focusing on India market prices competitiveness will rise to the highest point leading less space for companies to make profit.

It can be said that in 2010 we will get many challenging situation and turn around for the Indian automobile sector followed with US and European economies. The new decade for the automobile sector will bring us a new set of products followed with major hiccups.

Very soon The 2010 Auto Expo will begin in New Delhi which be bigger, brighter and better than the previous shows. The growing number of visitors indicates the rising importance of India as a key automobile destination. One of the prime reasons for such event to become so big is India is a fast-growing market for cars and two-wheelers. Compared with Chinas 27 cars per 1,000 citizens, India has only seven car owners per 1,000 citizens.

Indian Automotive Industry: Opportunities and Challenges Posed By Recent Developments The Indian automobile industry is currently experiencing an unprecedented boom in demand for all types of vehicles. This boom has been triggered primarily by two factors: (1) Increase in disposable incomes and standards of living of middle class Indian families estimated to be as many as four million in number; and

(2) the Indian government's liberalization measures such as relaxation of the foreign exchange and equity regulations, reduction of tariffs on imports, and banking liberalization that has fueled financing-driven purchases. Industry observers predict that passenger vehicle sales will triple in five years to about one million, and as the market grows and customer's purchasing abilities rise; there will be greater demand for higher-end models which currently constitutes only a tiny fraction of the market. These trends have encouraged many multinational Automakers from Japan, U. S. A., and Europe to enter the Indian market mainly through Joint ventures with Indian firms. This report presents an introduction to the key players in the Indian automotive industry, a summary of the recent developments, and an analysis of the Opportunities and challenges facing the various players (Indian and multi-national assemblers and Component makers) in the areas of product development, production, and distribution. For forty years since India's independence from the British in 1947, the Indian car market was Dominated by two localized versions of ancient European designs -- the Morris Oxford, known as The Ambassador, and a old Fiat. This lack of product activity in the Indian market was mainly due to the Indian government's complex regulatory system that effectively banned foreign-owned Operations. Within this system (referred to informally as the "license raj" ), any Indian firm that Wanted to import technology or products needed a license/permit from the government.The difficulty of getting these licenses stifled automobile and component imports, creating a low volume high cost car industry that was inefficient, unprofitable, and technologically obsolete. Two dominant products Ambassador and Fiat, although customized to the poor road conditions in India, were based on a stale design concept (with outdated features), and were also fuel inefficient. 1. In the early 1980's, the Indian government made limited attempts at reforming the automotive industry, and entered into a joint venture with Suzuki of Japan. The joint-venture, called Maruti Udyog Limited, launched a small but fuel efficient model (called "Maruti 100" ). Priced at about $ 5,500, the product became an instant hit. The joint venture now produces three small-car models, A van and a utility vehicle at a rate of more than 250,000 a year. Despite being a late entrant, Maruti's vehicles are estimated to account for as much as 70 per cent of India's car population. In 1991, a newly elected Indian government took over and faced with a balance-of-payments crisis initiated a series of economic liberalization measures designed to open the Indian economy to foreign investment and trade. These new measures effectively dismantled the license raj which had made it difficult for Indian firms to import machinery and know-how, and had disallowed equity ownerships by foreign firms. In 1993, the government followed up its liberalization measures with significant reductions in the import duty on automobile components. These measures have spurred the growth of the Indian economy in general, and the automotive industry in particular. Since 1993, the automotive industry has been experiencing growth rates of above 25%. Data for the 1995-96 financial years is yet to be released by all the firms, but estimates indicate that passenger vehicle sales may reach or exceed 350,000 for the first time. ( Passenger vehicles include cars and vans but not jeeps.) the production data of passenger vehicles for the top four Indian assemblers. Foreign vehicle sales have been insignificant until. A Brief Introduction to the Top Four Indian Assembler : Mauriti Suzuki Limited (MSL) is the number one Indian automotive assembler commanding more than a 70% share of the Indian passenger vehicle market. ( It also sells a few thousand jeeps, called Gypsy .Most recent data released by MSL reveals that it produced a total of 277,000 vehicles in 1995/96 resulting in a turnover of approximately $ 2 billion ( Rs. 6673 crore, Source: Financial Express, March 30, 1996 ). It is also a reasonably profitable venture with after tax profits of about $ 122 million ( a 65 % increase over the previous year ). MUL's relatively large production volumes offer scale economies in production and distribution, which pose formidable barriers to entry. It has also established a solid supplier-base located around India ( most of its assembly is concentrated in Northern India near New Delhi ). Its products enjoy good reputation in fact, Indian automotive industry observers credit Maruti for the rapid improvement in quality and supplier capability advance! ) MUL' sproduct line is concentrated in the economy car segment, although it has been moving up recently to cater to the premium market segments by introducing the higher-end Esteem. 1 Much of the data presented in this paper has been extracted from the annual reports published by ACMA, and from articles in the business press and trade journals. Occupying the second position in 1994/95 is Bombay - based Premier Automobiles Ltd. (PAL), which edged out Calcutta based Hindustan Motors Ltd. ( H M ) from the second place. In fact , PAL produced the Fiat, and HM produces the Ambassador both products that dominated the Indian automotive industry for decades. The advent of Maruti has resulted in the decline of both thesefirms. Pals main products are the Premier Padmini ( in the compact car segment ) and the NE118

( In the mid - size car segment ). Recently, PAL has rejuvenated itself by entering into joint venture with Peugeot ( for the Peugeot 309 ), and with Fiat ( for the Fiat Undo ). Its close competitor continues to produce Ambassadors in small volumes targeted at the economy / compact car segment. HM also offers a higher end product called Contessa Classic, and has entered into joint venture agreements with General Motors ( G M ) to produce the Opal Astra, and with Mitsubishi to make the Lancer targeted at the higher - end market. Despite occupying the fourth position and producing passenger vehicles only in small volumes, Tata Engage. & Locomotive Company Ltd. (TELCO) is noteworthy, not only because it is a part of the powerful Tata industrial family, but also because it is one of the few firms with indigenous product development capabilities, and has been a dominant player in the commercial vehicles segment. ( The author, in fact, worked with TELCO for a brief period in the late 80's in their light commercial vehicles product development group. ) TELCO holds about 70% of the heavy commercial vehicles market, and ( after entering the market late ) has also managed to fend off Japanese competition by gaining about 50% of the light commercial vehicles segment with its in-house product development. It entered the passenger vehicles market only in 1991-92, and has quickly established itself in the higher end of this segment with its Estate and Sierra models. The firm has entered into a joint venture with Mercedes Benz to assemble the E220's, and is also said tube planning an entry into the small / economy car segment challenging Maruti's stronghold. Indian Component Suppliers Component suppliers are the backbone of an emerging automotive industry. By all accounts, the Indian component industry, based mostly in the southern city of Madras, is tiny. The auto component manufacturers association of India ( ACMA ) estimates that $2.1 billion worth of carports were produced in the financial year 1995, out of which exports amounted to $228 million. To put this in perspective, the entire Indian industry's revenue is roughly one-tenth that of GM'scomponent unit, Delphi automotive systems 2 . But, the component market has been growing rapidly at about 25% a year, and is expected to quadruple in size by the year 2000. This growth has not only been due to the growing demand for passenger vehicles, but also due to the increasing trend by multi national OEM's to resort to global sourcing to improve competitiveness. Leading automotive assemblers and component makers are increasingly turning to India for components. One of the now widely - cited examples of this trend is the Indian component firm, Sandarac Fasteners Limited ( SFL ), which the author has been studying for the last year. SFLbecame GM's largest supplier of radiator caps, and exports about 300,000 caps from its factories in Madras to GM plants around the world. In 1992, when GM was planning to close one of its plants in UK., SFL took advantage of the to 2 It is also noteworthy that Delphi is in the process of setting up its own units in India to make steering systems, Chassis and electrical systems recognizing the needs of the fast - expanding Indian automobile market invest heavily in quality and productivity improvements, and a tour around SFL's suburban Madras Factory shows a world class plant with minimal inventory and rework. The company's workers, trained in statistical tools and control charts, keep processes under statistical control due to which radiator cap rejection rate is less than 1 % of annual production. The company also has a very skilled managerial and engineering workforce, which has helped it develop in house product development capabilities. Using these resources and skills, the firm is now seeking to expand its supply to other manufacturers in Europe, US, and Asia, and also diversify into other components. SFL exemplifies the Indian auto components industry, which although small and fragmented has the competitive advantages of a skilled workforce and low labor costs. It is estimated that components can be produced about 30 % cheaper in India than in the west. ( The top Indian assembler, Maruti, is able to price its cars at about $5,500 because it sources 90% of its components from Indian suppliers. ) Rapid growth and tie ups with foreign firms will help Indian auto components suppliers further invest in capacity and automation and acquisition of the latest know-how, thereby closing the productivity gap with other world - class component makers. Shows a few other notable Indian component suppliers and their exports to OEM's. Recent Developments and Issues Facing the Indian Automotive Industry :In the past two years, more than a dozen multi - national firms have announced plans to enter the Indian market. Most of them have formed joint ventures with Indian firms, while there are exceptions such as Hyundai which plan to form fully - owned units. Exhibit 2 displays most of these firms and their products planned for the Indian market 3. Despite the large growth potential of the Indian market ( analysts expect the growth to triple in the next five years ), no one expects the industry to sustain the fragmentation caused by more than a dozen suppliers. Many of these new firms will not enjoy the scale economies and relationships with suppliers that Maruti does, so they have decided not to challenge Maruti at its price of $ 5,500 in the smaller car segment. Most are planning to produce between 20,000 and 50,000 higher - end vehicles. The stiffest competition is building up in the mid sized car range ( 1,300 cc and above ), where several of these multi national And Indian companies are planning to go head to - head. Although this newly announced vehicle sat $12,000 or above remain expensive by Indian standards planned capacity exceeds projected demand, new entrants are betting on the rising incomes of middle class families. Notably, Daewoo's new product Cello, priced at about $ 15,000 in a joint venture with the Indian firm DCM, drew 76,000 advance bookings last year reflecting the pent - up demand in the market. Amongst the many issues facing the Indian automotive industry, the biggest by far is the poor road infrastructure. India's road network, comprising of a modest national highway system ( that is only 2% or less of the total roadway length ) is woefully inadequate and dilapidated, and can barely keep pace with the auto industry's rapid growth. Most roads are single lane roads built in the 1950's and 60's, and are crowded with two - wheelers, bullock carts, and even pedestrian humans and cows. Traffic laws are not well enforced leading to one of the highest per capita accident rates in the world. It is to be expected that the introduction of bigger and more powerful vehicles will only worsen the situation. Upgrading the existing highway system is itself expected to cost $30 billion Or more, and resource and land constraints prevent the building of new highways. The Indian 3Conspicuous by its absence from this list of new entrants is Toyota, which initially had an arrangement with the Hinduja group that was called off in March, 1996. Toyota is said to be adopting a wait and see attitude. Governments approach to solving this problem is to privatize the road infrastructure, by having Private firms build and operate toll ways. However, it is unclear if this alone will be able to solve this infrastructure problem of enormous proportions, which can severely bottleneck future growth. The significant ( about 50 % ) tariffs imposed on import products and components combined with the vagaries of currency exchange rates make localization an important imperative for foreign companies entering the Indian market. Firms are already making a major effort to localize rapidly; The Daewoo - DCM venture is expected to raise its local content to 90 % by the decade's end.

GM's Astra will start with 40 % labor content, and go up to 75 % within three years. One challenge to localization is a shortage of component suppliers with size and sophistication.

Another major uncertainty facing the Indian market is the government's policies toward foreign investments and joint ventures. As Amsden and Kang [95] note 4, governments play a key role in shaping the growth of the auto industry in emerging economies ( as compared with developed countries ). Although many observers say the economic reforms initiated by the ruling Congress party are not reversible, the difficulties experienced by Enron Corp. in its investments in the power sector under the hands of the opposition Bharatiya Janta Party ( B. J. P. ) do not bode well for other foreign investors. With elections in mid - 1996 expected to return a coalition group to power, it will be hard for the new government to push the reform measures with the same vigor and paces the previous government did. It is even unclear if the group in power will be as positively inclined to foreign investments and trade as the current governed New Decade of Auto SectorJan 4, 2010 FinanceThe Indian automobile industry is performing with a consistency cap on its head. It has again plucked off another feather to decorate its growth hat. The automobile sector in India surprisingly did well and outperformed our expectations in terms of sales growth during 2009.When the western economies were struggling to survive their big auto giants Indian economy propelled to the path of growth on strong growth of auto sector in India.

The prominent two reasons that turned the growth wheel of automobile sector of India in 2009 were:

Introduction of stimulus packages

Reduction in prices by auto manufacturers Lower bank interest

Cheap prices of steel and other commodities have also helped the cost of production of automobiles very much cheap resulting to higher sales and higher profits.

Lower crude prices also added fuel among the buyers to buy cars and enjoy the cheap ride.

Festive season was among the most important factor which changed the prospect of the automobile sector.

So in all it can be said that automobile sector had more reasons to smile while others were busy in wiping out the cry.

Production of automobiles increased from about 60,000 units in 2008 to approximately about 80,000 units in 2009.It reveals two stories at the same time one is that Indian auto sector not only managed to maintain the sales figure of 2008 but improved its growth by 33.33%.

Strengths and Weaknesses of the Various Players:To analyze the strengths and weaknesses of the various players in the Indian automotive industry, It is useful to classify them into the following four categories:

(1) Indian Assemblers, (2) Multinational Assemblers (3) Indian Component Makers, and (4) Multi-national Component Makers. Presents the strengths and weaknesses of each of these groups. The Indian assemblers, typified by Maruti, have built a formidable distribution and after sales network. They also have an established supplier base, which gives them cost and delivery time advantages, especially in light of import tariffs and currency exchange rate fluctuations / devaluations. Their biggest weakness, with the exception of TELCO, is the lack of product design capability. In the coming years, they should focus on acquiring product design and lean production know how ( as the Korean firms did in the eighties and early nineties [ Amsden and Kang 95 ]).

They could acquire know - how with help from their joint venture partners, and also with investments in research and development which at present are at extremely low levels. Multi national assemblers could really benefit from their lean production capabilities in India, where production runs are expected to be small due to the large number of players entering the Indian market. They could also set themselves apart by incorporating safety and comfort features not currently included in Indian assembled products. These include seat restraints, airbags, andante - lock brakes, and comfort features such as power windows, and central locks. U. S. assemblers have a reputation of safety, which they could leverage to their advantage. Close cooperation with 4 Amsden, A. H. , and J. Kang, " Learning to Be Lean in an Emerging Economy: The Case of South Korea ", IMVP

Sponsors Meeting, Toronto, 1995. The joint - venture partners can overcome the lack of experience with the Indian market, but the small size of the component supplier base will pose a challenge to their need to localize rapidly. Group Strengths Weaknesses

Indian Assemblers Established distribution and After - sales networks, and Supplier base. Understanding of the Indian market and ability to liaison With the government Lack of product developmenand PAL. Multi - national Assemblers Lean production capability Ability to design products with differentiating features Deep pockets, brand image. Lack of experience with Indian market, industry, and government. Small component supplier base and high import tariffs. Indian Component Suppliers Low cost, skilled workforce

Learning From exports Small Size, Fragmentation

Lack of know how in carat areas. Multi national Component Suppliers

Size, Deep pockets Experience and Know - how in technology. Import tariffs, currency exchange rate fluctuations. Inexperience with India workforce. As mentioned earlier, the Indian component industry is small and fragmented, but is growing and learning fast due to exports. It is also estimated to hold a 20 40 % cost advantage over multinational component suppliers who are much larger and are themselves opening up units in India to take advantage of the lower - cost, skilled workforce. The Indian component industry needs to invest in capacity and research and development to stay abreast of competition, when the wage gap closes over time. It is likely that some of the multi - national assemblers or component makers might buy some of the small but niche component makers with a reputation for quality. Tractor Industry - Part of Automobile Industry Company aims to become the market leader of the tractor segment by 2010. ITL is the third largest tractor selling company in India and the number one company in Nepal. These tractors are also exported to various other countries also including France, South Africa, Australia, Zimbabwe, Sri Lanka, Canada, Nepal, and Bangladesh etc. The Company has entered into Technical Collaboration Agreement with MG Rover of UK. With the technical know how from MG Rover, UK, the Company has manufactured MUV with the name of RHINO & the same MUV would boast of Rover engines. At present it is using Japanese Isuzu engine. The Company is developing its own Common Rail Direct injection (CRDi) engines.

Background and History Of The SONALIKA GROUP: Sonalika group is one of the most prominent agriculture equipment manufacturers in India. Sonalika Group is contributing to green revolution in India Since 1969. Initially it started with Farm Equipments and Machinery. Brand name of the group products is " SONALIKA ". Market share in Farm Equipments is 80 % in India. Group turnover is 220 Million USD (INR 1000 Crores). Sonalika Group is one of the top five tractor manufacturers in India. An average growth rate of 30 % makes it one of the fastest growing corporate in India. It also happens to be one of the very few debt free companies in the world. It employs about 2500 people including some of the renowned names in the industry. The company works on the maxims of low production cost and clean and safe environment. Such efforts have fetched the company the accreditations like ISO 9001 : 2000 and ISO 14001.

Sonalika is also an environmentally responsible corporate citizen and has developed in - house, the vehicle engines that confirm to Bharat II Norms. It is now in the process of developing the Bharat III engines for its advanced products. No wonder Sonalika products have created a niche for themselves not only in India but also in foreign markets including France, Zimbabwe and many of the South Asian countries. The company's marketing efforts are promoted by the network of 600 Dealers , 400 Sub dealers and 50 Stockiest supervised by various regional sales offices. Such a networking has enabled the company to grow like a well knit family whose roots lie in its customers, who have been providing constant feedback and support to allow the company to turn their dreams into products. Apart from tractors its product line includes multi utility vehicles, three wheelers, engines , Hydraulic Systems , Casting , Forging , Brake System , Automotive components manufacturing and various farm equipments and implements. Sonalika group since the inception has tried to understand customers need to be able to facilitate them with its value for money products. The company has a state of art manufacturing facilities, spread in acres, located in the pollution free suburbs of Punjab and Himachal Pradesh.

There are mainly four business unit of the brand name Sonalika. They are mainly as follows International Tractors Limited

International Cars & Motors Limited Sonalika Three Wheelers Sonalika Agro. ABOUT INTERNATIONAL TRACTOR LIMITED

International Tractors Limited was incorporated on October 17, 1995 for the manufacture of Tractors and has since then built a distinct position for itself in the Tractor industry. ITL is manufacturing various Tractors of Sonalika brand between 30 HP to 75 HP, and CERES brand between 60 HP to 90HP. The Tractors manufactured by the company have secured a reputation of performance, quality and reliability in the market because of their maximum pulling power, minimum fuel consumption and Emission. All this makes ITL the fifth largest tractor selling company in India (third now) and the number one company in Nepal. These tractors are also exported to various other countries also including France, South Africa, Australia, Zimbabwe, Sri Lanka, Canada, Nepal, and Bangladesh etc. They are also the first Tractor manufacturers in the country producing 50 & 60 HP Tractors fitted with diesel engines manufactured In - House, meeting Bharat II norms of Smoke & Mass Emission. These engines have been tested and certified by ARAI, Pune.

United States Environmental Norms Agency, Washington DC has also certified our Engines. These certifications enabled SONALIKA Tractors to enter into World Market. All the models of Tractors and Combines Harvesters manufactured by us are tested & approved by Central Farm Machinery and Tractors Training & Testing Institute, Budni (MP) India, (the Government of India institute authorized for issuing test reports ). Recently SONALIKA Tractors have been awarded " The Best Quality Award ( 2002 03 ) " by the Government of India. Sonalika International Tractors have also been approved for subsidy under various schemes by Ministry of Agriculture, Govt. of INDIA. A number of banks have approved Sonalika Tractor for financing and entering into a tie Up for easy financing. ITL PRODUCTS The ITL have launched there tractors in number of segment which are classified according to there specifications. ITL is manufacturing various Tractors of Sonalika brand between 30 HP to 75 HP, and CERES brand between 60 HP to 90 HP.

Sonalika D I 732 III - 34 HP

Sonalika DI-740 - 36 HP

Sonalika DI 735 - 38 HP

Sonalika DI 745 III - 45 HP

Sonalika D I 750 50 HP

Sonalika DI 750 III - 50 HP

Sonalika D I 60 Senior - 60 HP

These tractors range from 30 to 75 HP. ITL is also producing tractors under CERES Brand and exporting them to countries like Sri Lanka

Africa

Bangladesh

South East Asia

Indian Subcontinent

North America

Western Europe

LATEST ACHIEVEMENTS BY ITL ITLs market share increased to 11% (Approx.) as on 31.03.2006.

The company maintained 3rd Rank in the tractor industry in terms of volume and market share. It surpassed Eicher & HMT ( old Players ), John Deere , New Holland and Escorts ( Multinationals having long international standing ).

The company has developed a diesel engine which is almost smoke free & has been approved by US Environment Protection Agency, Washington D. C.

Sales of ITL from 96 to 2005

Growth pattern of ITL vs. Industry growth

ITL has many competitors. There is cut throat competition between them. There competitors are as follows: Mahindera Tractors Punjab Tractors Limited New Holland Tractors

Tafe Tractors

John Deere

But in Punjab, Mahindra & Mahindra and Punjab Tractor Limited ( PTL, brand name Swaraj ) are Sonalikas main rival. Mahindra & Mahindra

The origins of M & M's Farm Equipment Sector lie in the formation of a joint venture in 1963 between the Company, International Harvester Inc., and Voltas Limited, christened the International Tractor Company of India (ITCI). This enterprise was a shot in the arm for the green revolution then beginning to sweep the country. The launch of high performance tractors played a vital role in the mechanization of Indian agriculture. In 1977, ITCI merged with M & M and became its Tractor Division. M & M's Farm Equipment Sector is the largest manufacturer of tractors in India with sustained market leadership of over 19 years. The Farm Equipment Sector is the first Tractor Company in the world to win the Deming Application Prize ( given for total quality management ). Also, it is the fourth company in India and the 10th in the world, outside Japan, to win this prize. It designs, develops, manufactures and markets tractors as well as implements which are used in conjunction with tractors. The tractor industry in India is segmented by horsepower into the lower segment of 25 HP, mid - segment of 35 HP and higher segment of 45 HP and above. The Company's Farm Equipment Sector has a presence in all these segments across all states. M&M has two main tractor manufacturing plants located at Mumbai and Nagpur in Maharashtra. Both these plants have been certified for ISO 9001, QS - 9000 and ISO 14001. Apart from these two main manufacturing units, the Farm Equipment Sector has satellite plants located at Rudrapur in Uttarachal and Jaipur in Rajasthan.

M&M tractors have earned goodwill and trust of more than 8, 00,000 customers and the ' Mahindra ' tractor has come to be recognised as a powerful symbol of productivity and performance. Products

Mahindra 265 DI Bhoomiputra 30 HP

Mahindra 265 DI Sarpanch 30 HP

Mahindra Yuvraj 30 HPMahindra 275 DI TU Sarpanch - 39 HP

Mahindra 275 DI TU Bhoomiputra 39 HP

Mahindra 475 DI Sarpanch 40 HP

Mahindra 475 DI Bhoomiputra 40 HP

Mahindra Arjun 445 DI 42 HP

Mahindra 575 DI Bhoomiputra 45 HPMahindra 575 DI Sarpanch 45 HP

Mahindra 585 DI Sarpanch 50 HP

Mahindra Arjun 555 DI 52 HP

Indian Component Suppliers and Their Exports to OEM's Sundaram Fasteners: Supplies radiator caps to GM, Caterpillar, and others.

Wheels India: Supplies wheels to heavy vehicle and automotive manufacturers in Europe. Eicher Goodearth: Supplies machined castings to Mitsubishi and other major automotive firms. Sona Steering: Supplies steering systems to Japanese component makers.Brakes India: Castings and rubber components to Lucas Industries, Germany.

Source: ACMA Annual report and India Today (March 93)

Exhibit 2: New Entrants to the Indian Automotive Industry as of March 1996

Company Joint Venture Partner Planned Products (Ave. Price) Audi (Volkswagen) Franchise (Imported car) Audi - A4 ($85,000)

Daewoo (Korea) DCM Cielo ($15K) Fiat Premier Automobiles (PAL) Fiat Uno 1000 cc ($10,000)

Ford Motor Company Mahindra & Mahindra Ford Escort, Festiva ($12K)

General Motors Corp. (GM) Hindustan Motors (HM) Opel Astra ($22K average) Honda Shriram Industries Civic ($18K) Hyundai (Korea) Wholly - owned subsidiary Accent Mercedes - Benz TELCO Mercedes E220 ($70K) Mitsubishi Hindustan Motors (HM) Lancer ($15K)

Peugeot Premier Automobiles (PAL) Peugeot 309 ($15K) Volkswagen Eicher Ltd. Golf ($20K) Source: Press Reports From IndiaList of Car Manufacturers

PorscheMahindra & MahindraAudi IndiaBMW India

Hindustan MotorsHyundai Motors Honda India Reva

Nissan MotorsSkoda Auto India Tata Motors Toyota India

Fiat IndiaFord MotorsFiat IndiaMaruti India

General Motors

Dec 2009

% Chg fromDec'08

YTD 2009

% Chg fromYTD 2008

Cars

517,740

22.2

5,494,700

-19.0

Midsize

258,412

29.7

2,644,782

-15.7

Small

162,166

22.5

1,915,654

-20.0

Luxury

88,835

7.4

844,934

-24.5

Large

8,327

-11.7

89,330

-33.0

Light-duty trucks

512,196

8.7

4,934,853

-23.6

Pickup

140,771

-2.2

1,409,468

-29.7

Cross-over

218,566

31.5

2,028,775

-6.3

Minivan

53,426

2.0

583,362

-30.6

Midsize SUV

40,673

-14.0

390,098

-45.7

Large SUV

29,899

-1.3

232,286

-32.7

Small SUV

13,405

-14.5

175,230

-16.8

Luxury SUV

15,456

1.3

115,634

-32.8

Total SUV/Cross-over

317,999

15.7

2,942,023

-18.5

Total SUV

99,433

-8.4

913,248

-36.9

Total Cross-over

218,566

31.5

2,028,775

-6.3

Car Sales Statistics India

India is fast emerging as an important market for cars. In terms of its car market, India ranks third in Asia having recently displaced South Korea from the position. The car sales India have almost doubled in a span of 4 years from 2001-02 to 2005-06.

The following chart explains the growth of India Car Sale during the aforementioned period.

Passengers Vehicles (PVS) From April-November 04-05 From April-November 05-06 Total Market Share (in %) The Net Change between the period

(in %) Total number of exports in April 05-06

Maruti Udyog 2,69360 2,91,182 52.2 8.1 23,043

Hyundai Motors India Ltd. 89,075 1,07, 066 19.2 20.2 68,374

Tata Motors 95,402 24,348 16.6 -2.7 12,105

HondaSiel cars India Ltd. 23,186 24,348 4.4 5.1 31

Ford India Pvt. Ltd 15,026 10,512 1.9 -30% 9,928

Utility Vehicles

Mahindra and Mahindra Ltd. 49,897 51,540 42.7 3.3 1,878

Toyota KirloskarMotorPvt Ltd. 24,404 24,983 20.7 2.4 0

Tata Motors Ltd 19,967 21,610 17.9 8.2 905

General Motors India Pvt Ltd. 7,008 12,027 10 71.6 0

Maruti Udyog Ltd . 2682 2472 2 -7.8 54

Hyundai Motor India Ltd. 255 1,042 0.9 308.2 0

Multi-Purpose Vehicles

Maruti Udyog Ltd. 42,388 43,858 100 3.5 731

Mahindra & Mahindra Ltd 13 0 0 0 0

Medium and Heavy Commercial Vehicles

Tata Motors 79,614 73,538 61.1 -7.6 4,807

Ashok Leyland 27,577 33,406 27.7 21.1 2825

Eicher Motors 8,043 8,700 7.2 8.2 318

Swaraj Mazda 3,573 4,080 3.4 14.2 115

Light Commercial Vehicles

Passenger Carriers

Tata Motors 5,835 6,811 46.8 16.7 1,096

Mahindra and Mahindra 2,305 1,960 13.5 -15 115

Swaraj Mazda 1,178 1,315 9 11.6 12

Force motors Ltd. 2,059 2,877 19.8 39.7 59

Goods Carriers

Tata Motors 30,955 44,380 58.9 43.4 12,461

Mahindra and Mahindra 23,563 23,731 31.5 0.7 1,600

Swaraj Mazda 2,671 2,299 3 -13.9 204

Eicher Motors 3,019 2,954 3.9 -2.1 451

Car StatisticsThe Indian automotive industry is the 2nd fastest growing in the world. About 8 million vehicles are produced annually in this country toady. During 2005-2006, India has emerged as the 3 rd largest market in the Asia Pacific Region. With various car manufacturing companies setting up their units in different parts of the country, the production of the cars will increase at a very fast rate. The car reports indicate that India will soon become one of the top 10 car manufacturing countries , leaving behind the U.K. Car statistics also show that by the end of the fiscal year 2006-2007, the car production capacity in India will exceed the mark of 2 million. Thus, the production of cars will increase by 70% from the present capacity of 1.2 million.

The Indian automotive industry is the 2nd fastest growing in the world. About 8 million vehicles are produced annually in this country toady. During 2005-2006, India has emerged as the 3 rd largest market in the Asia Pacific Region.

With various car manufacturing companies setting up their units in different parts of the country, the production of the cars will increase at a very fast rate. The car statistics indicate that India will soon become one of the top 10 car manufacturing countries , leaving behind the U.K. Car statistics also show that by the end of the fiscal year 2006-2007, the car production capacity in India will exceed the mark of 2 million. Thus, the production of cars will increase by 70% from the present capacity of 1.2 million.

The domestic sale of passenger cars have increased significantly over the years. A graphical representation of the domestic sale of cars will give you an insight about the present market situation prevailing in the country:

In the recent years, India has emerged as one of the major bases for manufacturing small passenger cars. At In the recent years, India has emerged as one of the major bases for manufacturing small passenger cars. At present the Indian automotive industry boasts of being the 3 rd largest manufacturer of small cars . According to the car statistics almost 70 % of the cars sold in this country come under the segment of small cars. A number of car manufacturers like: Maruti Udyog, Tata Motors, Hyundai, Honda, Ford, Hindustan Motors, Fiat, General Motors etc offer various new model of cars now and then. It is expected that the various automobile manufacturers will be investing about $ 5 billion in India, between 2005-2010. Some important statistics about cars also include car insurance statistics, auto insurance statistics, auto accident statistics and car crash statistics. All these data and statistics help in framing the state policies and issuing the guidelines to different auto manufacturers and dealers. As per the car reports , export of passenger cars from India have also grown considerably over the last decade. A graphical representation of car export trend will help you to make an in-depth analysis of the present status of the Indian automotive industry:

With new strategies being implemented and more investments being made in Indian automotive industry the production as well as the domestic sale and exports will increase substantially.

A graphical representation of the total sale trend of passenger cars (including the domestic sale and exports) is given below:

To know more about car statistics and matters related to automobiles, do browse through the pages of automobileindia.com.

SALES TREND (No. of Vehicles)

Category2002-03 2003-042004-052005-062006-072007-08

Passenger Vehicles707,198 902,0961,061,5721,143,0761,379,9791,547,985

Commercial Vehicles 190,682 260,114318,430351,041467,765486,817

Two Wheelers4,812,126 5,364,2496,209,7657,052,3917,872,3347,248,589

Grand Total5,710,0066,526,4597,589,7678,546,5089,720,0789,283,391

BROWSE CARS BY COMPANY

Audi AG BMW Chevrolet Daewoo Motors Fiat India Pvt Ltd Force Motor Ford Motor Co. General Motors Corp. Hindustan Motors Honda Motor Co. Hyundai Motor Co. Lamborghini Maruti Suzuki India Ltd Mahindra & Mahindra Ltd. Mercedes Benz Mitsubishi Motors Nissan Motor Co. Ltd Porsche Reva Electric Car Co. Rolls-Royce Motor San Motors Skoda Auto India Pvt Ltd. Sonalika Tata Motors Toyota Kirloskar Motors Volvo Volkswagen Cars

A lot of interesting surveys and researches are conducted in the field of automobiles. The emergence of global automobile biggies to India has made the government to take notice and sit up so as to drive more investments into this sector. The ministry of heavy industries has recently announced a 10-year mission plan (Automotive

Mission Plan 2016) to make India a global hub for automotive industry.India's auto industry comes of age

Not long ago, India's auto industry was a laughing stock. Its two best - known cars were a 1940s Morris model called the Ambassador and a 1960s Suzuki derived model called the Maruti 800. But that was then. Today, for instance, the Mumbai based Dilip Chhabria Design Pvt Ltd ( DC Design ) is seeking to take on Pininfarina and Bertone, the Italian standard in international car design, by designing and building concept cars, prototypes and limited production runs. Nor is DC Design alone.

"There can be few more improbable automotive stories than the yarn about the Indian designers creating bespoke concept and prototype cars, " said the United Kingdom's auto magazine Autocar in a recent issue. " Yet the hottest ideas in car design are happening right now in the back streets of Mumbai. " India is now the ninth country in the world to design a vehicle on its own.

In fact, the Indian auto industry is fast becoming an outsourcing hub for automobile companies worldwide, as zooming automobile exports from the country indicate. Surinder Kapur, the chairman of Sona Koyo Steering, which exports car steering assemblies, says, "Car makers over the world have realized that India can design a car on its own and make it globally acceptable. "

Passenger car exports have nearly trebled in four years, from 28,122 units in 1998 - 99 to 71,653 vehicles in 2002-3. The industry expects this to gather steam further ahead because car exports in the first quarter of 2003 - 4 leapt by 87 percent over the same period in 2002 - 3. The two wheeler segment is booming, too, with exports zooming from 100,004 units last year to 179,000 units in 2002 - 3. By 2005, the industry expects 400,000 two wheelers on foreign shores.

The Indian made sports utility vehicle Scorpio received a singular response in Detroit early this year, not just for its design but also because of its cheaper price tag. Tata Motors, the country's second largest car maker's small Indica convinced MG Rover of the UK to sell it to the UK market as the City Rover. Others like Ford's mid sized car model Ikon, Maruti's Altos and Toyota's Indian - made multi utility vehicle have found ready buyers in a number of American, European and neighboring countries.

And when cars and two wheeler exports are on a roll, can automobile components be far behind? Pushed to export last year following a two - year domestic slowdown, the auto component exported $850 million worth of the nuts and bolts that go into making an automobile by March 2003, up from $578 million in March 2002. " Indian auto component makers now supply to virtually the best and the biggest in the world, " says Suresh Krishna of Sundaram Fasteners, a leading auto component exporter, adding that he expects the country to export a targeted $2 billion by 2006.

" Indeed, India is well on its way to become an outsourcing hub for global auto manufacturers and the country stands a good chance against China, " says Sundaram Mutual Fund managing director T P Raman, although Joginder Singh, vice president of finance for Ford Motor Company of Canada, thinks that global auto majors can't ignore either China or India.

Already, 15 global car makers - including GM, Ford, Daimler Chrysler, Mercedes - Benz, Audi, Isuzu and Nissan have set up outsourcing offices in the country, with a combined budget of approximately $1.5 billion, industry sources say. Leading component makers like Delphi, Visteon and Caterpillar, too, have found India their best bet. While according to industry estimates the cost of automotive design in Europe ranges as high as $800 per hour, and even higher in the US, costs are as low as $60 per hour in India for equivalent quality.

Whether the next outsourcing wave or simply smart marketing by a local industry, global auto makers are increasingly turning to India for sourcing a wide range of needs that even include designing models meant only for global markets. " To begin with, " says Deep Kapuria, of Automobile Components Manufacturers Association of India, " it's triggered by the overall economic slowdown and large - scale bankruptcies in the global auto sector. And as global giants continue losing money, cost pressures are forcing them to opt for sourcing bases in developing countries."

But more importantly, according to industry analysts, the Indian auto industry has finally come of age, having upgraded itself in the past few years to meet global standards. Dilip Chhabria, the head of DC Designs, makes no bones about taking on the world's best. Earlier this year, the Aston Martin AMV8 Vantage starred at the Detroit Auto Show. Chhabria developed the prototype as part of a Ford contract.

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. By 2002, Hyundai, Honda, Toyota, GM, Ford and Mitsubishi had set up their manufacturing bases here.

" These companies first had to focus on issues like quality, vendors and marketing before they could think big, " says Arindam Bhattacharya, vice president , Boston Consulting Group. Thus , in the past four to five years, these companies have not only fine - tuned their operations but forced transformation on the rest of the industry as well.

" Consequently, " Bhattacharya adds , " India has not only emerged as a low cost base but also a source for producing quality products. "

The sector 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. It also drew technology infusion and investment. " Not surprising then that India is also set to become a preferred research and development [ R & D ] center , " says Ravi Khanna, president and managing director , Delphi India, adding that its Indian facilities are " an integral part of its worldwide engineering and technical footprint " .

Nevertheless, according to managing director Jagdish Khattar of Maruti Udyog Ltd. India's largest car maker and a Suzuki joint venture, India still has a long way to go to become a global force. " Indian companies need to first grow the Indian market to acquire economies of scale, " he says. China, for instance, consumes four times India's 700,000 annual car sales. Moreover, if Indian companies hope to corner a big chunk of the global market they need to ramp up global presence considerably, say others.

Still, Joginder Singh of Ford feels that India's auto industry will continue to make its presence felt, primarily because it is one of the few countries the global auto industry cannot ignore. " Two - thirds of a car is built from suppliers. That's a big cost item and companies can cut costs to a large extent in places like India and China, " he says. "We can't ignore either China or India, which are projected to be so huge that it would be dangerous to look only at one of them. They are showing the highest growth rate of any market in the world. Any auto maker would be on a fool's errand if it ignores any of them. "

Small wonder then that Ravi Khanna of Delphi India is " convinced that with the increasing emphasis on quality, India is fast moving towards becoming a sourcing hub for global automobile makers " .

( Copyright 2003 Asia Times Online Co, Ltd. All rights reserved. Please contact content@atimes.com for information on our sales and syndication policies. )

South Asia

GREEN RATING FOR AUTOMOBILE SECTOR Sectoral Performance

Is the Indian automobile sector as environmentally conscious as best in the world ?

NO! Automobile sector has fared badly. Under the project rating scale we were to award five leaves award to the best company. But sadly no auto company deserved this honour. The best company gets less than 45 per cent marks getting a mere three leaves award. But the sector as a whole gets even lesser, scoring 31.4 per cent, deserving only two leaves award.

The passenger car segment leads the way among the entire automobile segment and is the only segment which gets three leaves. Mass transport vehicle segment comes second. The two and three wheeler segment, with two leaves, lags behind even the mass transport vehicles, which has performed better due to introduction of CNG fuelled vehicles.

THE GOOD, THE BAD, THE UGLY

In terms of overall performance, the three companies, which top the environmental rating, are Daewoo Motor India Ltd., Hyundai Motors India Ltd. And General Motors India. All these three companies have performed well in product usage phase.

The companies, which are at the bottom of the pile, are the three non participating companies, Bajaj Tempo Ltd., Yamaha Motor Escort Ltd. and Swaraj Mazda Ltd.

Maximum of the companies in top ten are passenger car manufacturers while most of the two and three wheeler manufacturers have shown a poor performance trailing behind in the ratings. However, there is an exception, Hero Honda Motors, which has not only achieved three leaves rating but also ranks fifth in overall rating.

The other two and three wheeler companies lag very far behind. Though Bajaj Auto Ltd. and TVS Suzuki follow Hero Honda Motors as the 2nd and 3rd in the segment but in the overall rating they fare poorly.

WINNERS AND LOSERS

As far as individual products are concerned, Daewoo's small car Matiz, has been judged as the most environment friendly vehicle overall, scoring high in terms of vehicle and engine design, and also performing well in other aspects such as pollution control equipment installed and emissions. Maruti's most popular vehicle in the country Maruti - 800 ( Euro II model ) is the second most eco friendly vehicle. It scores less than Matiz in terms of design but scores more in the emissions. The third most eco - friendly vehicle is Hyundai's Santro, which also has the highest fuel efficiency.

Small is beautiful All the top three eco friendly vehicles are small cars and have inherent advantages over the larger ones in the sense that they emit less pollution and consume less fuel compared to larger vehicles. They also use lesser material during manufacturing stages.

Honda City 1.5V - tech gets the recognition of being the most technologically advanced and least polluting vehicle in India with emission as low as 85 per cent lower than the Euro II norms. The vehicle with the worst performance environmentally is Mahindra & Mahindra's Armada, which comes last in the passenger car segment. It has scored very low in all criteria.

Among the two and three wheelers, both selected models of Hero Honda (Splendor and CD 100) are the most eco friendly two wheelers. They have scored above average in vehicle and engine design and are one of the very few four - stroke two wheeler fitted with any kind of pollution control equipment. Bajaj boxer, the latest model of Bajaj Auto that ranks third, has scored well in vehicle and engine design but lacks in emission control equipment and comparatively poorer emission.

The best performing two stroke model ranks fourth amongst the two wheelers. The lowest score has been obtained by Kinetic Safari moped, which obtained average scores in design and emissions and very poor scores in pollution control equipment and emissions.

Among the mass transport vehicles Ashok - Leyland's Viking compressed natural gas (CNG) bus scored above average in design and very high in emissions due to inherent advantages of CNG vehicle making it the best performer in this section. The second position is also taken by another CNG fuelled vehicle, that is, Telco LPO CGS bus. Interestingly, the worst performers in this segment are Ashok Leyland's diesel fuelled Comet 1611 and Tusker Turbo tractor.

A total number of 29 automobile manufacturers were selected for the project of which 26 companies participated voluntarily ( 90 per cent participation ). The three companies which refused to participate and chose to continue being non - transparent are Bajaj Tempo Ltd. , Yamaha Escorts Motor Ltd. and Swaraj Mazda Ltd.

MODUS OPERANDI The Green Rating of Indian Industry project was started by the Centre for Science and Environment ( C S E ) in 1996 to address an array of environmental issues facing all segments of Indian industries. The project is supported by the United Nations Development Programme ( U N D P ) and the Ministry of Environment and Forest ( MoEF ). The first sectoral rating undertaken under the pilot phase of the project was pulp and paper sectoral rating, which was a highly successful exercise and was rated as the best environmental audit project in last 25 years in Asia by ' Asia Week '.

Spanning over a period of two years, Green Rating of automobile sector was a great challenge owing to diversity between companies in their production processes as well as the products manufactured. Participation of all the major automobile companies in the exercise makes it a unique effort to assess the environmental health of the sector. The project has covered 35 production facilities spread in nine states and almost 80 per cent of the products currently running on Indian roads.

MethodologyThe rating methodology for automobile sector has been developed keeping in mind the life cycle impact of the automobile industry. Thus, the weightages were allotted accordingly with 80 per cent of the score devoted to life cycle analysis (LCA) and remaining 20 per cent for corporate governance.

The life cycle assessment included determining the environmental impacts at various steps of the production process right from sourcing of raw materials, to the manufacturing and assembly process, to the pollution caused by use of the vehicle, and finally the impact caused by its disposal.

Of the 80 per cent on the life cycle assessment, the highest weightage ( 56 per cent ) was allotted to the product use phase based on the conclusion arrived at by the project that maximum pollution occurs during use phase. "Vehicle are the core of the automobile industry since they alone generate about 80 per cent of the total life cycle pollution, " says Chandra Bhushan, Coordinator, Green Rating Project, CSE. " In order to assess the environmental performance of the product, a combination of engine design, pollution control equipment fitted and the emission test data supplied by the test agencies were considered, making this exercise the most comprehensive ever taken anywhere in the world. Even the green automobile ratings done in the US and in Europe only consider emissions and fuel consumption data to rank the vehicles. Green rating project has taken a quantum leap over the existing automobile rating methodology " he adds.

Robustness of the Rating methodology 'Engine design analysis should represent the emissions from the vehicles, ' was the main focus for arriving at the robustness of the product rating criteria, developed by GRP, since the engine and vehicle rating was given by the project and the emissions rating was given on the basis of the test data of certified test agencies. Therefore, the litmus test for GRP was to correlate the ratings given by two separate institutions with no interaction between them. This was very well reflected in high coefficient of correlation found between the scores obtained in engine design and pollution control equipment, and the score obtained in emission. For example, in petrol passenger cars in 78 per cent cases the engine design did represent the emission characteristics of the vehicles.

Testing the effectiveness of the rating methodology in replicating the life cycle analysis, the test undertaken by the project was to correlate the overall rating with the vehicle's rating. Since, as per life cycle analysis, a company with poor product should get poor results, however good it may be on other aspects. This too was very well established in the rating with product rating having a very high correlation ( 97 per cent ) with the overall rating. However, the analysis brought out the fact that the other criteria were as important and were seen to have high degree of correlation with the overall ratings.

REVELATIONSGreen rating project findings draw its process on the principle that root of the cure of any disease lies in the proper diagnosis rather than just medication!!!

More miles per litre A fuel efficient car would be the cheapest vehicle in the long run and an important consideration for the customer as well. The Hyundai Santro was judged the most fuel - efficient petrol passenger vehicle followed by Fiat Uno and Maruti - 800 Euro II model. In case of diesel passenger car, Mitsubishi Lancer was judged the most fuel efficient and Toyota Qualis Euro I model was most fuel - efficient multi utility vehicle.

Clean fuel, clean vehicle We did a comparative analysis of impact of fuels on emissions.

Study based on analysis of three diesel fuelled mass transport vehicles and two CNG fuelled mass transport vehicles clearly showed that CNG fuelled vehicles are far better in terms of tail pipe emissions than the diesel fuelled mass transport vehicles. CNG fuelled vehicles have as much as five times lower particulates and overall 73 per cent lower emissions than their diesel counterparts.

Overall petrol vehicles show an inherent advantage over the diesel fuelled vehicles with all the top 14 cars being petrol ones. The best diesel car, which is Mercedes E 220, ranks as low as 15. While the best multi utility vehicle, Toyota Qualis Euro II model ranks a dismal 20th among all the 31 models.

Are MNCs better than Indian Companies?

Green rating project reveals that contrary to the prevalent belief there is hardly any difference in the overall performance of Indian companies and MNCs. Both of them meet the same environmental standards in each and every aspect. A double standard was perceptible in the business pattern of MNCs as they were following a practice of dumping obsolete products on the pretext of poor fuel and existing regulatory norm in the Indian market. Other than corporate environmental governance and pro active initiatives, Indian companies are at par with the MNCs.

Does cleanliness make business sense? Yes it does. A fairly tangible correlation was observed between the environmental performance and economic performance of companies in the automobile sector. On an average, in total automobile segments it was found that about 67 per cent of time there was direct relation between the environmental rating and profit of company. That is, if a company is good on the environment front, it is also sound in its balance sheet. In specific vehicle segment, this correlation was very high, as high as 81 per cent in two and three wheeler companies.

Consumer awareness Although, insufficiently informed consumers contribute to 80 per cent of the pollution generated by automobile companies on road. Yet the sector in itself or through its dealers has not taken any proactive effort to educate these consumers. Two and three wheeler companies are the worst in consumer awareness raising initiatives. Except for giving free servicing not much has been done to educate people.

Maintenance of the vehicles The project found that though the maintenance of the vehicle plays a major role in the overall environmental performance during the vehicle use, the strategy adopted by the automobile companies do not provide enough incentive to the consumers to go to the authorised service stations/workshops. The cost of maintenance at authorised service stations were found to be as high as 50 to 100 per cent than the unauthorised stations, and this was the main reason why consumers avoided going to the authorised stations once their vehicle became a bit old. Automobile companies need to work on economy of scale and provide enough incentive to the consumer to use authorised service stations. This will not only reduce the pollution load but will also improve company's bottom line. Companies need to think in terms of annual maintenance contract to facilitate this recommends green rating project.

Impact of fuel qualityGRP analysis on Indian automobile segment clearly shows that the companies are holding fuel quality responsible for pollution. Whereas, the truth is that current engine design in India is at least a decade old compared to similar type of vehicles manufactured in western countries. Basic initiative towards improving the engine design is lacking. Use of alternative fuels over conventional fuels is yet to take its start in major way and their needs to be a big boost in the development of this concept in India.

The automobile sector in general has not taken much effort to establish the impact of fuel quality on emissions. Some studies undertaken by companies have shown that there is hardly any consistent trend to show that the fuels are mainly responsible for the poor emission quality. Role of age factor on the effectiveness of catalytic converters too needs a comprehensive study to establish a relation as it plays a great role in determining the pollution scenario on roads.

Impact of various parameters on fuel efficiency Impact of various design parameters of vehicles on the tail pipe emission and fuel efficiency was carried out by the project. Weight of the vehicle and its engine size was found to have inverse relationship with fuel efficiency, though compression ratio had a direct relationship.

The project also found that a Indian passenger car switching over to multi point fuel injection system from the carburetor system can expect a reduction in the tail pipe emission in the range of 25 per cent to 40 per cent.

Another interesting finding was that majority of the petrol passenger cars running on the Indian roads are using catalytic converters which does not suit their engine design.

Which is better ? Two stroke or Four Stroke. On the comparative performance undertaken for twostroke and fourstroke two wheelers, the outcome clearly established that four stroke twowheelers are better that two stroke two-wheelers with respect to both emission and fuel efficiency. The carbon monoxide (CO) and hydrocarbons and nitrogen oxides (HC+NOx) emitted by twostroke twowheelers (with catalytic converter ) are 23 per cent and 38 per cent, respectively higher than their equivalent fourstroke two wheelers without catalytic converter.

Meeting of regulations While some Indian vehicles are meeting Euro II equivalent norms in the national capital region of Delhi and Euro I equivalent norms in the rest of the country, it was found that overall, automobiles in all the segments are meeting the regulatory norms well. However, GRP found that this is not enough as there are companies that can go much beyond the minimum regulatory requirement but absence of incentives from government discourages them. Government should come out with some incentive mechanism to differentiate between just a good performer and excellent performers.

Supply Chain Management

Green rating project closely scrutinized the practice of outsourcing by Indian automobile companies and found that majority of pollution during automobile production takes place at the supplier and vendor's site, most of them being small and medium scale companies. Overall automobile companies had a very poor performance on this aspect. The project found a clear trend of transferring of pollution by automobile companies to its supply chain. Companies urgently need to adopt a green procurement policy and green up their supply chain.

Importance of ISO 14001

Almost half of the automobile sector has adopted environment management systems (EMS) standards. However ISO 14001 adopted by automobile companies is not the actual reflection of their environment management as these companies are just assembly plants. Most of their processes are outsourced and the major pollution happens at vendor's site and during product use and disposal. Thus, ISO 14001 only takes care of very small percent of pollution generated by the companies. The project has recommended automobile sector to adopt an environment management system, which reflects the environmental aspects of automobile business and not to use the existing system, which is production centric.

Some other findings related to production process: 1) The entire sector uses paints that contain heavy metals and are based on solvents. No company uses water based paints 2) The regulatory standards for wastewater characteristic applicable to the automobile sector are lax as well as irrational

THE WAY AHEAD

" Business Planning but with the ingredients of Social, Environmental and above all Ethical consideration imbibed in it will define the future of Indian Automobile Sector ", says Sunita Narian, Director, CSE. " We recommend a coherent approach to be adopted by automobile industry, government and consumers. Once the consumer starts including environment in their buying decisions, which they should because environment in automobile actually means economy and savings, companies will be pushed to improve, " adds Chandra Bhushan, coordinator of Green Rating Project.

Companies cannot afford to loose their market given the kind of cutthroat competition existing in India today. Consumers need to build on the research outcome of green rating project, and ask for emission and fuel efficiency performance of automobiles as their buying criterion along with price. Government on its part should come out with economic instruments as its major tool to regulate automobile companies. Pollution control body too needs a complete rethinking of its regulatory approach to this sector. Wastewater characteristics, solid/hazardous waste management, paint sludge incineration, dioxin and furans are some major aspects of automobile pollution during manufacturing process-regulations for which are either weak or non-existent. Downstream pollution checks and supply chain management are also some issues where regulatory bodies will have to do some soul searching.

Automobile companies need to do a lot of rethinking. Extensive research and dev