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http://www.iaeme.com/IJMET/index.asp 916 [email protected]
International Journal of Mechanical Engineering and Technology (IJMET)
Volume 9, Issue 7, July 2018, pp. 916–931, Article ID: IJMET_09_07_099
Available online at http://www.iaeme.com/ijmet/issues.asp?JType=IJMET&VType=9&IType=7
ISSN Print: 0976-6340 and ISSN Online: 0976-6359
© IAEME Publication Scopus Indexed
EMERGENCE OF AUTOMOBILE INDUSTRY IN
INDIAN CONTEXT - A CONCEPTUAL STUDY
Krishna Reddy
Research Scholar, K L Business School, K L deemed to be University, KLEF
Guntur, Andhra Pradesh, India
P V Vijay Kumar Reddy
Assistant Professor, K L Business School, K L deemed to be University, KLEF, Guntur,
Andhra Pradesh, India
ABSTRACT
Automobile Industry today is one of the Profitable Industry. India is one of the
fastest growing economies in the world. Automobile industry had seen many ups and
downs in India prior to liberalization. The liberalization of Indian economy enabled
India to advance itself in many sectors. Automobile is one such sector wherein India
has seen tremendous improvements. The Indian auto industry is one of the largest in
the world. The industry accounts for 7.1 per cent of the country's Gross Domestic
Product (GDP).
Keywords: Automobile industry and Indian economy
Cite this Article: Krishna Reddy and P V Vijay Kumar Reddy, Emergence of
Automobile Industry in Indian Context - A Conceptual Study, International Journal of
Mechanical Engineering and Technology, 9(7), 2018, pp. 916–931.
http://www.iaeme.com/IJMET/issues.asp?JType=IJMET&VType=9&IType=7
1. INTRODUCTION
Automobile Industry today is one of the Profitable Industry. India is one of the fastest
growing economies in the world. Automobile industry had seen many ups and downs in India
prior to liberalization. The liberalization of Indian economy enabled India to advance itself in
many sectors. Automobile is one such sector wherein India has seen tremendous
improvements. The Indian auto industry is one of the largest in the world. The industry
accounts for 7.1 per cent of the country's Gross Domestic Product (GDP). The overall
Passenger Vehicle (PV) segment has 14 per cent market share. The Indian Automobile market
owing to a growing middle class and a young population. Moreover, the growing interest of
the companies in exploring the rural markets further aided the growth of the sector (1)
.[https://www.ibef.org]
By 2026 the Indian automotive industry will be among the top three of the world in
engineering, manufacturing and export of vehicles and auto components and will encompass
Emergence of Automobile Industry in Indian Context - A Conceptual Study
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safe, efficient and environment friendly conditions for affordable mobility of people and
transportation of goods in India Comparable with global standards, growing in value to over
12% of India’s GDP and generating an additional 65 million jobs (2) [Automotive Mission
Plan 2016-26 ]
1.1. Passenger car sales Domestic/Export sales
Figure 1 Passenger Car Penetration
Source: SIAM,,May 2018
2. AUTOMOTIVE PROFILE
Automobile industry, the business of producing and selling self-powered vehicles, including
passenger cars, trucks, farm equipment, and other commercial vehicles. By allowing
consumers to commute long distances for work, shopping, and entertainment, the auto
industry has encouraged the development of an extensive road system, made possible the
growth of suburbs and shopping centers around major cities, and played a key role in the
growth of ancillary industries, such as the oil and travel businesses. The auto industry has
become one of the largest purchasers of many key industrial products, such as steel. The large
number of people the industry employs has made it a key determinant of economic growth.
Automobile is self-propelled vehicle which is used for the transportation of passenger and
good upon the ground. A vehicle is machine which is used for the transportation of passengers
and goods. Car, bus truck, jeep, tractor, scooter, motor cycles are the example of automobiles.
2.1. Auto Mobile Overview
The Automotive Industry is comprised primarily of the world’s largest passenger automobile
and light truck manufacturers. Through broad dealership networks, most members of the
industry sell vehicles in the global market, covering developed and emerging countries.
Automotive manufacturers offer a variety of makes and models, though there tends to be
limited brand integration at the marketing, advertising, and dealership levels. The bulk of
these companies operate production facilities in multiple geographic regions.
The price of gasoline (and diesel fuel) is an important factor influencing customer
demand. Indeed, the rise and fall of gas prices since the 1970s has caused buyers to place
varying degrees of emphasis on vehicle fuel efficiency, durability, engine power, and quality.
Accordingly, market categories and product lineups evolve to meet customer preferences.
Examples are crossovers, which combine the features of an SUV and the traditional car, and
hybrids, utilizing the benefits of gasoline and alternative power (electric) sources. In order to
stay profitable, manufacturers and dealers must properly gauge demand and carry the optimal
mix of autos for each period in the business cycle. To assist customers with purchases, and
support sales, many companies offer low-rate financing programs and attractive incentives,
such as discounts and cash back. Warranties, covering defects and repairs, are another means
to lure drivers into showrooms. The auto industry is both capital and labor-intensive. These
Krishna Reddy and P V Vijay Kumar Reddy
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companies have to manage numerous costs and expenses associated with facilities, materials,
parts, equipment, product development, and employment. At times, the prices of key raw
materials, such as steel, can surge to record levels, requiring a nimble hedging strategy.
Research & development and marketing and advertising expenses will have a discernible
impact on the cost budget, as well. Too, given the seasonal nature of demand and new product
launches, effective working capital management is crucial in supporting sales and controlling
costs and expenses.
The Automotive Industry is an important segment of the global economy, and its
performance often tracks that of the broader business cycle. Investors seeking above-average
price appreciation need to accurately time that cycle when taking a stake in this industry.
Some of the group’s stocks offer a modest dividend to support investor loyalty. According
value line.com caution that many of these equities carry low marks for Stock Price Stability
and Earnings Predictability (3).
www.valueline.com/tocks/Industries/Industry_Analysis__Automotive) Dated September
11, 2015.
2.2. Car Segments
Car segments as per SIAM (Society of Indian Automobile Manufacturers) Common people
like me always confuse between the car type and car segment. It has always been a difficult
situation to identify a car type and to guess which segment it falls in. Following are the
specific categories of all vehicles sold in India as outlined by the Society of Indian
Automobile Manufacturers (SIAM). Using the SIAM classification ensures that no vehicle
type will slip through the net. These classifications help consumers to compare and identify
similar vehicles and makes car buying process as easy as possible. It also helps identify other
similar vehicles for consumers to compare against, to help make the car-buying process much
easier (4).
The classification of segment is done on the basis of the length of the vehicle (Passenger
car segment)
Table 1 Car Segments and Classifications
Segment Classification & Length Car Models
A1 Segment Mini – Up to 3400mm M800, Nano
A2 Segment Compact – 3401mm~4000mm Alto, wagon r, Zen,i10,A-star,Swift,i20,palio,indica etc
A3 Segment Midsize : 4001 to 4500mm City, Sx4, Dzire, Logan, Accent, Fiesta, Verna etc)
A4 Segment Executive : 4501 to 4700mm Corolla, civic, C class, Optra, Octavia etc)
A5 Segment Premium : 4701 to 5000mm Camry, E class, Accord, Sonata, Laura, Superb etc)
A6 Segment Luxury : Above 5000mm Mercedes S class, 5 series etc
B1 Segment Van : Omni, Versa, Magic etc Omni, Versa, Magic etc
B2 Segment MUV/MPV Innova, Tavera, Sumo etc
SUV Segment
SUV CRV, Vitara etc
Source: Society of Indian Automobile Manufacturers (SIAM). 2018
2.3. Classification of Cars based on body shape
2.3.1. According SIAM Classification of Cars based on body Shape describe as below
1. Box (Van/Mpv) – It means Engine area, Passenger area & luggage area all in one box.
There wont be separate compartment. For eg. Omni, Ace Magic, Versa
2. Two Box (Hatchback) – It means Engine are has a separate cabin while Passenger area
and luggage area are together. For eg. M800, Alto, Santro, i10, A*, Swift etc.
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3. Three Box (Sedan/Saloon/Notchback) – It means Engine area, Passenger area &
luggage area all are having different cabin. For eg. SX4, City, Fiesta, Dzire,
Ambassador, Indigo CS etc.
4. Estate/Station Wagon – Its nothing but sedan whose roof is extended till the rear to
create more boot space. For eg. Indigo Marina, Octavia Combi, etc.
5. SUV (Sports Utility Vehicle) – These vehicles have large tyres, higher seating, higher
ground clearance. The engine area is separate, but the passenger & luggage area are
enclosed together. Most of these vehicles are equipped with either 4 wheel drive
system or has the option for that. For eg. CRV, SAFARI, GRAND VITARA,
PAJERO etc.
6. Semi Notchback – Its a sedan whose boot door can be opened like a hatchback (wagon
r, swift), where the rear wind shield too opens along with the boot door. Unlike sedan
whose rear wind sheild is always fixed. There are only few examples for SEMI
NOTCHBACK – Skoda Octavia, Accent Viva.
2.4. Automobile Market Segmentation
The automobile market is split into four main segments, viz., two-wheelers, passenger
vehicles, commercial vehicles & three-wheelers
Figure 2 Automobile market Segmentation
3. WORLD AUTO MOBILE INDUSTRY
The automobile as we know, it was not invented in a single day by a single inventor. The
history of the automobile reflects an evolution that took place worldwide. It is estimated that
over 100,000 patents created the modern automobile. However, we can point to the many
firsts that occurred along the way. Several Italians recorded designs for wind driven vehicles.
The first was Guido da Vigevano in 1335. Vaturio designed a similar vehicle, which was also
never built. Later Leonardo da Vinci designed clockwork driven tricycle with tiller steering
and a differential mechanism between the rear wheels. A Catholic priest named Father
Ferdinand Verbiest has been said to have built a steam powered vehicle for the Chinese
Emperor Chien Lung in about 1678. Since James Watt didn't invent the steam engine until
1705 it is guessed that this was possibly a model vehicle powered by a mechanism like Hero's
steam engine, a spinning wheel with jets on the periphery. The first vehicle to move under its
own power for which there is a record was designed by Nicholas Joseph Cugnot and
constructed by M. Brezin in 1769. A second unit was built in 1770, which weighed 8000
pounds and had a top speed on 2 miles per hour 68 and on the Cobble Stone Streets of Paris
this was probably as fast as anyone wanted to go it. The early steam powered vehicles were so
heavy that they were only practical on a perfectly flat surface as strong as iron. A road thus
made out of iron rails became the norm for the next hundred and twenty-five years. The
vehicles got bigger and heavier and more powerful and as such they were eventually capable
of pulling a train of many cars filled with freight and passengers. Many attempts were being
made in England by the 1830's to develop a practical vehicle that didn't need rails. A series of
Krishna Reddy and P V Vijay Kumar Reddy
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accidents and propaganda from the established railroads caused a flurry of restrictive
legislation to be passed and the development of the automobile by passed England. Several
commercial vehicles were built but they were more like trains without tracks. The
development of the internal combustion engine had to wait until a fuel was available to
combust internally. Gunpowder was tried but didn't work out. Gunpowder carburetors are still
hard to find. The first gas really did use gas. They used coal gas generated by heating coal in a
pressure vessel or boiler. A Frenchman named Etienne Lenoir patented the first practical gas
engine in Paris in 1860 and drove a car based on the design from Paris to Joinville in 1862.
His one-half horsepower engine had a bore of 5 inches and a 24-inch stroke. It was big and
heavy and turned 100 rpm. Lenoir had a separate mechanism to compress the gas before
combustion. In 1862, Alphonse Bear de Rochas figured out how to compress the gas in the
same cylinder in which it was to burn, which is the way we still do it. This process of bringing
the gas into the cylinder, compressing it, combusting the compressed mixture, then exhausting
it is known as the Otto cycle, or four-cycle engine. Lenoir claimed to have run the car on
benzine and his drawings show an electric spark ignition. If so, then his vehicle was the first
to run on petroleum based fuel, or petrol, or what we call gas, short for gasoline.
Siegfried Marcus, of Mecklenburg, built a car in 1868 and showed one at the Vienna
Exhibition of 1873. His later car was called the Strassenwagen had about ¾ horse power at
500 rpm. It ran on crude wooden wheels with iron rims and stopped by pressing wooden
blocks against the iron rims, but it had a clutch, a differential and a magneto ignition. One of
the four cars, which Marcus built, is in the Vienna Technical Museum and can still be driven
under its own power.
In 1876, Nokolaus Otto patented the Otto cycle engine, de Rochas had neglected to do so,
and this later became the basis for Daimler and Benz breaking the Otto patent by claiming
prior art from de Rochas. In 1885, Gottllieb Daimler's in Bad Cannstatt built the wooden
motorcycle. Daimler's son Paul rode this motorcycle from Cannstatt to Unterturkheim and
back on November 10, 1885. Daimler used a hot tube ignition system to get his engine speed
up to 1000 rpm. On 29th January 1886, Karl Benz was granted a patent on it and on 3rd July
1886, he introduced the first automobile in the world to an astonished public. Also in August
1888, William Steinway, owner of Steinway & Sons piano factory, talked to Daimler about
US manufacturing right and by September had a deal. By 1891 the Daimler Motor Company,
owned by Steinway, was producing petrol engines for tramway cars, carriages, quadric cycles,
fire engines and boats in a plant in Hartford, CT. Steam cars had been built in America since
before the Civil War but the early one was like miniature locomotives. In 1871, Dr. J. W.
Carhart, professor of physics at Wisconsin State University, and the J. I. Case Company built
a working steam car. By 1890 Ransom E. Olds had built his second steam-powered car. One
was sold to a buyer in India, but the ship it was on was lost at sea. Running by February, 1893
and ready for road trials by September, 1893 the car built by Charles and Frank Duryea,
brothers, was the first gasoline powered car in America. The first run on public roads was
made on September 21, 1893 in Springfield, MA. Henry Ford had an engine running by 1893
but it was 1896 before he built his first car. By the end of the year Ford had sold his first car,
which he called a Quadra cycle, for $200 and used the money to build another one. With the
financial backing of the Mayor of Detroit, William C. Maybury and other wealthy Detroiters,
Ford formed the Detroit Automobile Company in 1899. A few prototype were built but no
production cars were ever made by this company. It was dissolved in January 1901. Ford
would not offer a car for sale until 1903. Eli Olds built first petrol-powered car. This car was
running by 1896 but production of the Olds Motor Vehicle Company of Detroit did not begin
until 1899. After an early failure with luxury vehicles they established the first really
successful production with the classic Curved Dash Oldsmobile. It sold for $650. In 1901 600
were sold and the next years were 1902 - 2,500, 1903 - 4,000, and 1904 - 5,000. In August
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1904 Ransom Olds left the company to form Reo for Ransom Eli Olds. E. Olds was the first
mass producer of gasoline-powered automobiles in the United States, even though Duryea
was the first auto manufacturer with their 13 cars. The Rolls Royce Silver Ghost of 1906 was
a six cylinder car that stayed in production until 1925. It represented the best engineering and
technology available at the time and these cars still run smoothly and silently today. This
period marked the end of the beginning of the automobile.
4. GLOBAL AUTO INDUSTRY 2018: AT A CROSSROAD
According Standards & Poors Ratings Direct, dated October 10th
2017 global automotive
demand is likely to remain stable, largely in line our previous expectations. That is, we see
China's outlook remaining stable to positive, the U.S. showing some signs of softening, and
European markets (mostly) continuing on a moderate growth trend. Visibility remains low in
markets such as Brazil, Russia, and India because of likely volatility and macroeconomic
uncertainty. We note that these markets account for less than 8% of the global vehicle sales,
while China alone represents one-third.
In the U.S., auto growth is clearly falling behind our earlier expectations in 2017, with a
sales decline of 2%-3%. Following a modest year-to-date drop, we expect sales to weaken
slightly year over year in the fourth quarter of 2017, despite the need for replacement vehicles
following recent natural disasters in key markets such as Texas and Florida. In 2018 and
2019, think sales could weaken slightly from 2017 levels (relative to their prior expectations)
but stay at a relative healthy total of 16.5 million-17 million units based on their expectation
for steady U.S. GDP growth, housing starts, and gasoline prices. Other supportive factors
include still-satisfactory data on vehicle affordability, an upturn in homeownership among
young adults, and single-family building permits being at a 10-year high. If these trends are
sustained in 2018 and 2019, it could support steady demand for autos in the U.S. In Asia-
Pacific (APAC), the overall market trend is broadly in line with our expectations, however
higher risk in China's market than at the beginning of 2017. The credit quality of Japan's
automobile and auto components industries is likely to stay on a stable path for the next year
or two, in our view. New-car sales in Japan have been expanding over the last 10 months,
resulting in 8.1% growth through August 2017. Fueling this trend has been solid demand for
small vehicles, which we believe results from strategic new-model launches from key
manufacturers. Thanks to the prospect of a steady economy and low interest rates, expect the
recent steadiness in Japan's new-car sales to continue over the next one to two years. The
Association of Southeast Asian Nations' (ASEAN's) six major countries--Indonesia, Thailand,
Malaysia, Philippine, Vietnam, and Singapore--posted steady auto sales growth at 6% during
2017.
Considering stabilized commodity prices and a steady regional economy, As per S&P
Ratings Direct solid growth is likely to continue in ASEAN. Conversely, slowdown in China.
New-car sales during the first eight months of 2017 were 17.5 million units. While that's a
4.3% growth pace over the same period last year, it's notably lower than the 13.7% increase
achieved in full-year 2016 and 11.4% over the first eight months of last year. What potentially
deserves more attention, though, is a faster decline in average selling prices during 2017,
according to some original equipment manufacturers (OEMs), and the likely negative impact
on profitability. Although we expect sustained auto volume growth in China over the next two
to three years at a pace close to or in line with GDP growth, ongoing competitive pressure due
to industry overcapacity and increasingly sophisticated consumer tastes will likely continue.
In addition, various regulations, for example the corporate average fuel consumption target,
will likely force OEMs to increase capital spending.
Krishna Reddy and P V Vijay Kumar Reddy
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Nevertheless, we do expect Chinese auto market leaders to keep registering robust growth
in volume and profit. Japanese companies have generally been outperformers on the Chinese
market due to new-model launches in SUVs and small cars, while South Korea's Hyundai is
losing significant market share. Thus, each individual company's strategic efforts are also
important analytical factors. (www.standardandpoors.com/ratingsdirect October 10 2017)
Europe's auto market performance to date has been stronger than we previously expected,
surpassing projection of sales growth in the 1%-2% range for 2017. Instead, light vehicles
sales growth exceeded 4% in Europe in the first eight months, thanks to improved
performance in key Western Europe markets, mainly Germany, France, Italy, and Russia.
Overall sales are trending in excess of 20 million units for 2017, making 2017 the fourth
consecutive year of growth. Europe's strong performance is linked to improving economic
conditions in the area. Economic environment for car sales will remain favorable in Europe,
where we estimate GDP growth at 1.9% in 2018 and 2019. We thus expect demand for cars to
remain soundly in the 2%-3% range in the next two years (5). Sales growth is reported in all
European markets except for the U.K., as anticipated. This is a result of the uncertainties
surrounding Brexit and lower real salaries mainly linked to a weaker British pound. U.K.
auto market's prospects tied to ongoing negotiations with the EU. Any form of trade
restriction would be detrimental for cars produced in the U.K., which on average heavily
depend on imported parts. In the worst case, such restrictions could over time lead to British
production relocating to the Continent. Diesel car engines have become a key part of the
engine mix in Western Europe, as they help meet stringent carbon dioxide emissions targets
in the EU of 95 grams per kilometer by 2021 on average for the sector, while providing a
better fuel economy. However, these engines emit high levels of harmful nitrogen oxide, and
political and public pressure to lower excessive air pollution levels is increasing. In a sharp
reversal of European auto sales trends up until recently, diesel-powered cars' share of new-
vehicle sales continues to drop. In Western Europe, diesel's market share fell to 42.7% in
August 2017 from 48.3% the year before according to LMC Automotive. In the main
markets, the largest declines are reported in Spain, the U.K., and Germany. Continue to
expect diesel's market share to decline gradually, being replaced by gasoline and electric
vehicles (EV). We expect volumes and market share will continue dropping, and will make up
less than 40% of the market by 2020 and about 30% by 2025, as bad publicity continues to
weaken customer confidence.
4.1. Cars Production top 10 countries wise (6)
Table 2 Cars Production top 10 countries
S.no Country No of Units (Production)
1 China 24,806,687
2 Japan 8,347,836
3 Germany 5,645,581
4 India 3,952,550
5 South Korea 3,735,399
6 USA 3,033,216
7 Spain 2,291,492
8 Brazil 2,269,468
9 Mexico 1,900,029
10 France 1,748,000
Source: www.oica.net/category/production-statistics/2017-statistics
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4.2. Car sales world wide
This statistic represents the number of cars sold worldwide from 1990 through 2017.
Additionally, it presents a Forecast for 2018. Some 81.6 million automobiles are expected to
be sold by the end 2018 number of cars sold (7)
Worldwide from 1990 to 2018 (in million units)
Table 3 Car sales world wide
Period No of cars sold in Million Units
1990 to 1999 39.2
2000 to 2014 54.89
2015 72.61
2016 77.25
2017 79.02
2018 81.57
Source: www.statista.com/statistics/200002/international-car-sales-since-1990
5. INDIAN AUTO MOBILE INDUSTRY HISTORY
From the policy standpoint, the Indian automobile industry can be viewed in terms of the pre-
1991 (before liberalization) and post-1991 (after liberalization) phase. 1880's & early 1900's:
About hundred years ago the first motorcar was imported and Import duty on vehicles was
introduced. Indian Great Royal Road (Predecessor of the Grand Trunk Road) was conceived.
First car brought in India by a princely ruler in 1898. Simpson & Co established in 1840.
They were the first to build a steam car and a steam bus, to attempt motorcar manufacture, to
build and operate petrol driven passenger service and to import American Chassis in India.
Railways first came to India in 1850's. In 1865 Col. Rookes Crompton introduced public
transport wagons strapped to and pulled by imported steam road rollers called streamers. The
maximum speed of these buses was 33 kms/hr. From 1888 Motors Spirit attracted a
substantial import duty. In 1919 at the end of the war, a large number of military vehicles
came on the roads.
In 1928 assembly of CKD Trucks and Cars was started by the wholly owned Indian
subsidiary of American General Motors in Bombay and in 1930-31 by Canadian Ford Motors
in Madras, Bombay and Calcutta.
In 1935 the proposals of Sir M Visvesvaraya to set up an Automobile Industry were
disallowed. 78 1942 Hindustan Motors Ltd incorporated and their first vehicle was made in
1950.
In 1944 Premier Automobiles Ltd incorporated and in 1947 their first vehicle was
produced. In 1947 the Government of Bombay accepted a scheme of Bajaj Auto to replace the
cycle rickshaw by the auto and assembly started in a couple of years under a license from
Piaggio. Manufacturing Program for the auto and scooter was submitted in 1953 to the Tariff
Commission and approved by the Government in 1959. In 1953 the Government decreed that
only firms having a manufacturing program should be allowed to operate and mere
assemblers of imported CKD units be asked to terminate operations in three years. Only seven
firms namely Hindustan Motors Limited, Automobile Products of India Limited, Ashok
Leyland Limited, Standard Motors Products of India Limited, Premier Automobiles Limited,
Mahindra & Mahindra and TELCO received approval. M&M was manufacturing jeeps. Few
more companies came up later. Government continued with its protectionism policies towards
the industry. Automobile Products of India (API) and Enfield India had already commenced
the manufacture of scooters, motorcycles, mopeds and autos from 1955.
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In 1956, Bajaj Tempo Ltd entered the Indian market with a program of manufacturing
Commercial Vehicles, and Simpson for making engines. AIA&AIA (association of the
component manufacturers) came into being in 1959 and Government approved Bajaj Auto
Ltd's plans for domestic manufacture of Vespa scooters and granted permission to produce
6000 units annually. 1960’s: In sixties 2 and 3 Wheeler segment established a foothold in the
industry. Escorts and Ideal Jawa entered the field in the beginning of sixties. Association of
Indian Automobile Manufacturers formally established in 1960. Between 1955 and 1960 only
API was producing Mopeds. During the first half of the sixties three companies namely
Mopeds India Ltd (1965), SZUL Gwalior (1964) and Pearl Scooters Ltd (1962) entered the
arena. Standard Motors Products of India Ltd. moved over to the manufacture of Light
Commercial Vehicles in 1965. Escorts and Enfield closed their scooter division and continued
only with Motorcycle manufacturing. Entire scooter market was occupied by Bajaj Auto Ltd.
and API in the sixties.
1970`s:
Major factors affecting the industry's structure were the implementation of MRTP Act,
FERA and Oil Shocks of 1973 and 1979. During this decade there was not much change in
the four-wheeler industry except the entry of Sipani Automobiles in the small car market.
In 1983 Maruti Udyog Ltd was started in collaboration with Suzuki, a Japanese firm.
Other three Car manufacturers namely, Hindustan Motors Ltd., Premier Automobiles Ltd.,
Standard Motor Production of India Ltd. also introduced new models in the market. At the
time there were five Passenger Car manufacturers in India - Maruti Udyog Ltd., Hindustan
Motors Ltd., Post-1991, After Liberalization, the Freedom to Grow.
Beginning with mid-1991 the government of India has made some radical changes in its
polices bearing on trade, foreign investment, exchange rate, industry, fiscal affairs and so on.
Mass Emission Norms were introduced for in 1991 for Petrol Vehicles and in 1992 for Diesel
Vehicles. In 1991 new Industrial Policy was announced. It was the death of the License Raj
and the Automobile Industry was allowed to expand.
Further tightening of Emission norms was done in 1996. In 1997 National Highway
Policy has been announced which will have a positive impact on the Automobile Industry.
The Indian Automobile market in general and Passenger Cars in particular have witnessed
liberalization. Many multinationals like Daewoo, Peugeot, General Motors, Mercedes-Benz,
Honda, Hyundai, Toyota, Mitsubishi, Suzuki, Volvo, Ford and Fiat entered the market.
Various companies are coming up with state-of-art models of vehicles. TELCO has
diversified in Passenger Car segment with Indica. Despite the adverse trend in the growth of
the industry, it is resolutely trying to meet the challenges. Various issues of critical
importance to the industry are being dealt with forcefully. In 1999 The Hon’ble Supreme
Court passed an order directing all car manufacturers to comply with Euro I emission norms
(India 2000 norms) by the 1st of May 1999 in National Capital Region (NCR) of Delhi. The
deadline was later extended to 1st June 1999. The 90s have become the melting point for the
car industry in India. The consumer is king. He is being constantly wooed by both the Indian
and foreign manufacturers. Though sales had taken a 83 dip in the first few months of 1999, it
is back to boom time. New models like Maruti’s Classic, Alto, Station Wagon, Ford’s Ikon
and the new look Mitsubishi Lancer have all been launched with an eye on the emerging
market.
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6. AUTO MOBILE INDUSTRY IN INDIA PRESENT STATUS
The Indian auto industry is one of the largest in the world. The industry accounts for 7.1 per
cent of the country's Gross Domestic Product (GDP). The Two Wheelers segment with 80 per
cent market share is the leader of the Indian Automobile market owing to a growing middle
class and a young population. Moreover, the growing interest of the companies in exploring
the rural markets further aided the growth of the sector. The overall Passenger Vehicle (PV)
segment has 14 per cent market share (www.ibef.org) India is also a prominent auto exporter
and has strong export growth expectations for the near future. Overall automobile exports
grew 15.81 per cent year-on-year between April-February 2017-18. In addition, several
initiatives by the Government of India and the major automobile players in the Indian market
are expected to make India a leader in the 2W and Four Wheeler (4W) market in the world by
2020.(8)
6.1. Market Size
Production of passenger vehicles, commercial vehicles, three wheelers and two wheelers grew
at 14.41 per cent year-on-year between April-February 2017-18 to 26,402,671 vehicles. The
auto industry is set to witness major changes in the form of electric vehicles (EVs), shared
mobility, Bharat Stage-VI emission and safety norms. Electric cars in India are expected to
get new green number plates and may also get free parking for three years along with toll
waivers. India's electric vehicle (EV) sales increased to 25,000 units during FY 2016-17 and
are poised to rise further on the back of cheaper energy storage costs and the Government of
India’s vision to see six million electric and hybrid vehicles in India by 2020.
6.2. Investments
In order to keep up with the growing demand, several auto makers have started investing
heavily in various segments of the industry during the last few months. The industry has
attracted Foreign Direct Investment (FDI) worth US$ 18.413 billion during the period April
2000 to December 2017, according to data released by Department of Industrial Policy and
Promotion (DIPP). (9) [Media Reports, Press Releases, Department of Industrial Policy and
Promotion (DIPP), Automotive Component Manufacturers Association of India (ACMA),
Society of Indian Automobile Manufacturers (SIAM), Union Budget 2015-16, Union Budget
2017-18]
Some of the recent/planned investments and developments in the automobile sector in
India are as follows:
1. The only electric automaker in India, Mahindra and Mahindra Ltd, has partnered
with Uber for deploying its electric sedan e-Verito and hatchback e2o Plus on
Uber platforms in New Delhi and Hyderabad.
2. Mahindra & Mahindra (M & M) is planning to make an additional investment of
Rs 500 crore (US$ 77.23 million) for expanding the capacity for electric vehicles
in its plant in Chakan.
6.3. Road Ahead
The automobile industry is supported by various factors such as availability of skilled labour
at low cost, robust R&D centres and low cost steel production. The industry also provides
great opportunities for investment and direct and indirect employment to skilled and unskilled
labour.
The Indian automotive aftermarket is estimated to grow at around 10-15 per cent to reach
US$ 16.5 billion by 2021 from around US$ 7 billion in 2016. It has the potential to generate
Krishna Reddy and P V Vijay Kumar Reddy
http://www.iaeme.com/IJMET/index.asp 926 [email protected]
up to US$ 300 billion in annual revenue by 2026, create 65 million additional jobs and
contribute over 12 per cent to India’s Gross Domestic Product 10 [As per the Automotive
Mission Plan 2016-26 prepared jointly by the Society of Indian Automobile Manufacturers
(SIAM) and government, @ - as per the draft policy on e-vehicles prepared by NITI Aayog,
Government of India] Exchange Rate Used: INR 1 = US$ 0.015 as of March 1, 2018
7. CARMAKERS IN INDIA AND THEIR MARKET SHARE SOLD IN FY
2017-2018
The financial year 2017-18 has seen car sales in India crossing 3.28 million units for the first
time in India and very soon is set to overtake Germany to become the third largest car market
globally. Overall 3,287,965 units were sold in India in the domestic market last financial year
at a growth rate of 7.89 percent. While many expected the passenger vehicle sales in India
(Cars, SUVs, Vans) to report a double-digit growth, frequent changes to the tax structure
post-GST and addition of cess of SUVs and premium cars did have an adverse effect that
resulted in slowing down the pace. Sales of premium automakers like BMW India, Audi
India, Mercedes-Benz India and Jaguar Land Rover are not included in this list.
Figure 3 Carmakers Market share in India (FY2017-18)
Source: Financial Express, Dated 11 April, 2018, Ronak Shah
According to Ronak shah (Financial Article dated 11 April 2018) All car makers
combined saw a total production of cars crossing the 4 million manufacturing milestone and
Utility vehicle (UV) dominated by SUVs production crossing 1 million. These are also the
highest ever sales and production numbers ever registered in India. There are about 16 major
mass-market car manufacturers in India (excluding premium carmakers) out of which 15 sell
cars in India.
India’s largest automaker Maruti Suzuki continues its strong domination on the Indian car
market and sold a total of over 1.64 million vehicles in the domestic market bringing its
market share very close to 50 percent. The company has not only managed to sustain its huge
sales but have also increased its market share in both urban and rural buyers. New car
launches like Maruti Suzuki Dzire, all-new Swift along with the constant demand of Maruti
Suzuki Baleno and Vitara Brezza helped the company to achieve this huge growth. Maruti
Suzuki Alto continues to remain the most sold car in India. The company also exported about
1.23 lakh units to its export markets. (11)
Indian-arm of the Korean carmaker, Hyundai Motor India has also grown by over 5
percent in India and overall managed to sell over 5.36 lakh cars and grabbing a market share
of 16.30 percent in India. The launch of facelifts of Hyundai Grand i10 and Hyundai i20
Emergence of Automobile Industry in Indian Context - A Conceptual Study
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along with all-new Verna backed by strong sales of Hyundai Creta has seen its manufacturing
units in Chennai running full houses to cope up with the increasing demand. The company
also exported over 1.53 lakh cars to various countries especially middle-east.
Indian automakers, Mahindra & Mahindra and Tata Motors too have increased its market
share in India. While for Mahindra it was a year of consolidation and despite no all-new
launches by the company, it secured the number 3 spot in the Indian market by selling over
2.48 lakh cars and a market share of over 7.56 percent. Mahindra will launch a range of new
vehicles this year which will further see more sales in India. Tata Motors’ aggression and
launching new products like Tigor and Neon has proved to be extremely successful with Tata
Tiago sales reaching all-time high, Tata overtook Honda Cars India to become the fourth
largest automaker in India. The company has sold 210,200 cars in the recently concluding
fiscal.
Other Japanese automakers’ including Honda Cars India and Toyota Kirloskar have seen
some decline in its sales over last few months. However, Honda Cars India finished the year
at industry growth rate and sold 170,026 units and the launch of its Honda WR-V SUV played
a crucial role for the company to sustain sales. The company will launch its new Honda
Amaze in May 2018 and will be followed by the return of Honda Civic and Honda CR-V
SUV. Toyota in India sold about 1,40,645 units last year and expect it to gain market share by
launching the new Toyota Yaris that will take on the likes of Maruti Suzuki Ciaz, Honda City
and Hyundai Verna. Toyota owns about 4.27 percent market share in India.
Renault’s sales in India has dropped by a massive 25 percent but still recorded a sales of
over a lakh cars which is more than what Nissan and Volkswagen sold in India. Renault’s
market share stands at 3.10 percent. Ford India’s sales are reported at 90,061 units declining
marginally by about 1.4 percent. However, Ford’s exports have gone up by 15 percent and the
company exported over 1.81 lakh cars out of India overtaking Hyundai to become the number
1 exporter in the financial year 2017-18.
Over 7 carmakers in India including the likes of Fiat Chrysler India, Nissan India,
Volkswagen India, Skoda Auto India, General Motors (sales before stopping domestic
operations) Force Motors and Isuzu combined together have a market share of 4.41 percent.
Strong sales of Jeep Compass SUV helped FCA India to sell over 19,358 units. With no new
products, Nissan-Datsun and Volkswagen sales in India continue to decline and stood at
52,796 units and 45,329 units respectively. Skoda Auto’s sales in India have gone up by over
21 percent at 17,387 units.
8. AUTOMOTIVE REVOLUTION – PERSPECTIVE TOWARDS 2030
According to McKinsey, report Automotive revolution – perspective towards 2030 dated Jan
2016 Today’s economies are dramatically changing, triggered by development in emerging
markets, the accelerated rise of new technologies, sustainability policies, and changing
consumer preferences around ownership. Digitization and new business models have
revolutionized other industries, and automotive will be no exception. For the automotive
sector, these forces are giving rise to four disruptive technology-driven trends: diverse
mobility, autonomous driving, electrification, and connectivity.
Eight key perspectives on the “2030 automotive revolution” to provide insights into the
kind of changes that are coming and how they will affect traditional OEMs and suppliers,
potential new players, regulators, consumers, national car markets, and the automotive value
chain. (12)
Krishna Reddy and P V Vijay Kumar Reddy
http://www.iaeme.com/IJMET/index.asp 928 [email protected]
8.1. Shifting markets and revenue pools
Driven by shared mobility, connectivity services, and feature upgrades, new business models
could expand automotive revenue pools by ~30 percent, adding up to ~USD 1.5 trillion
Despite a shift towards shared mobility, vehicle unit sales will continue to grow, but likely at
a lower rate of ~2 percent p.a.
8.2. Changes in mobility behavior
Consumer mobility behavior is changing, leading to up to one out of ten cars sold in 2030
potentially being a shared vehicle and the subsequent rise of a market for fit-for-purpose
mobility solutions. City type will replace country or region as the most relevant segmentation
dimension that determines mobility behavior and, thus, the speed and scope of the automotive
revolution. Automotive revolution perspective towards 2030.
8.3. Diffusion of advanced technology
Once technological and regulatory issues have been resolved, up to 15 percent of new cars
sold in 2030 could be fully autonomous. Electrified vehicles are becoming viable and
competitive; however, the speed of their adoption will vary strongly at the local level. New
competition and cooperation within a more complex and diversified mobility industry
landscape, incumbent players will be forced to simultaneously compete on multiple fronts and
cooperate with competitors. New market entrants are expected to initially target only specific,
economically attractive segments and activities along the value chain before potentially
exploring further fields. According to Arnab Basu joint leader Technology Consulting of
PwC India, seeing the elements of Industry 4.0 becoming Key forces in reshaping the
automotive manufacturing factories. Factories are becoming more digital and always
connected. Also we are anticipating that industry 4.0 will create a flat form for nontraditional
players to enter and compete in this sector.
9. SUPPLY CHAIN MANAGEMENT IN AUTOMOBILE
According Sunil Chopra, Peter Meindl, and DV Kalra a supply chain consist of all parties
involved, directly or indirectly on full filling a customer request. The supply chain includes
not only the manufacture and suppliers, but also transporter, where houses, retailers and even
customers themselves. Within each organization such as a manufacture, the supply chain
includes all functions involved in receiving and filling a customer request. This fiction
includes new product development, marketing, operations, and distribution, finance, and
customer services.
Supply chain stages:
Figure 4 SMDRC flow of goods
The term supply chain management refers to cooperative management of materials and
information flows between supply chain partners, to reach goals that cannot be achieved
acting individually (Eric Sucky, 2005). The purpose of supply chain management is to
improve trust and collaboration among supply chain artners, thus improving inventory
visibility and the velocity of inventory movement (Choi and Hong, 2002). Emergence of new
technologies and the ever increasing intensity of competition are forcing organizations, firms
and industries to reexamine how they do business, meet new customer-driven challenges,
companies are re-thinking, restructuring and re-investing their supply chains in order to
survive, succeed, excel and even in some specific cases targeting to spearheading
Emergence of Automobile Industry in Indian Context - A Conceptual Study
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competitiveness (Drucker, 1998) Indian Automotive industry has been facing major
challenges due to fierce competition, increasing operational complexity, technology changes,
shortened product lifecycle and frequently changing customer needs. Despite high stocks, the
performance of the supply chain has failed to meet customer expectations in terms of
delivering the exact specification desired within an acceptable timescale. Today Indian
automotive industry is completely capable of producing various kinds of vehicles and can be
divided into three broad categories: two-wheelers, cars and heavy vehicles. Vast scope exists
for Indian automobile and auto component manufacturers to reduce their logistics costs with
the implementation of SCM solutions. As India is a developing country, and fascinatingly,
there has been an upward trend of realization of supply chain optimization. SCM solution
market has been making inroads in India and it is being established widely by many
automobile industries in the country, particularly manufacturing ones where inventory
carrying cost is very high. Several automobile manufacturers in India have taken positive
actions to manage their logistics cost and get better customer services and measures have been
undertaken by Indian companies to develop their supply chain (Kamala and Doreswamy,
2007). According Dharamvir Mangal, and Tarun Gupta was given conclusion Indian
automobile and auto components industry is on a roll and there is a massive scope for
improvement and augmentation of supply chain in this sector. India has become a most
sought after destination for foreign companies to establish their facilities and form alliances
with domestic companies. The Indian economy is now gaining momentum in the world of
free trade and liberal movements of goods and services between countries. Low cost of
manufacturing and conducive government support have been the major drivers for foreign
companies investing in India. Therefore efficiency in supply chain will be critical for India’s
automobile success.
9.1. Building world class automotive supply chains in India
According to The Confederation Indian Industry (CII) and AT Kearney conducted jointly
survey report the Indian Auto Motive Industry is experiencing an interesting evolutionary
phase. The long term growth story is strong, but short term volatility is creating a
environment of uncertainty. Most global OEM’s view India as strategic market of the future,
and as a result competence is intensifying.
Based on A.T. Kearney’s extensive experience in the Indian automotive sector and
detailed conversations with C level executives and supply chain professionals, there are seven
industry trends that are likely to have an impact on the evolution of the automotive supply
chain.
The Following tends are likely to be affect India’s automotive supply chain
Long Term secular growth and volatility
Escalating costs if supply chain operations
Growth of export
Shortage and talent to fill key roles
Regulatory challenges and Opportunities
Fast growing after market
Accelerate collaboration across the value chain
Innovate in cost management
Krishna Reddy and P V Vijay Kumar Reddy
http://www.iaeme.com/IJMET/index.asp 930 [email protected]
9.2. Logistics costs are high for India’s automotive supply chain
The cost logistics has a big impact on the supply chain because of India’s predominant use of
road transport. Logistics costs as a percent sales are about 1 to 1.5 % higher than the other
Asian markets. Fuel and wages, which drive up road transport cost are expected increase cost.
(13)
Figure 5 Logistics costs as % of sales
(Source: Annual reports: A.T. Kearney Analysis)
9.3. Key supply chain challenges
According to National Highway administration (http://www.inspirage.com/2016/07/)supply-
chain-challenges-automotive-industry/) some of the most common supply chain challenges
within the automobile industry have to do with keeping inventories well-stocked but not
overstocked. IndustryWeek contributor Vincent Pavlak noted that because the growth in the
automotive industry over the last few years has been optimistic, it's harder to keep up with
increased volumes. This difficulty has led to some supply shortages, and the problem is
compounded by capacity loss and the loss of employee knowledge that occurred when the
industry experienced its downturn in 2008 and 2009.
Another important issue facing automotive manufacturers is the sheer amount of recalls
that have been issued in recent years. The National Highway Traffic Safety Administration
has estimated that a staggering 51 million vehicles were recalled in 2015 alone. All of these
recalls present a key problem to manufacturers, besides the obvious loss of revenue from the
actual vehicles themselves: They have to change their products to fix the issues brought to
light by the recalls, and they have to re-engineer their operations – sometimes their entire
supply chain – to reflect these changes.
Further challenges of this global marketplace lie in the volatility of demand. Different
markets will have different tastes in cars, so automotive suppliers have to find ways to
account for the demand for various brands and, complicating things further, for the differing
tastes within one brand (for instance, the demand for a blue vehicle versus a red one).(14),
(15), (16), (17), (18).
REFERENCES
[1] https://www.ibef.org
[2] Automotive Mission Plan 2016-26 (A Curtain raiser) “ AMP Plan 2026 is the collective
vision of Government of India
[3] www.valueline.com/tocks/Industries/Industry_Analysis__Automotive Dated September
11, 2015
[4] Society of Indian Automobile Manufacturers (SIAM). 2018
[5] S&P Global ratings, Global Auto Industry 2018: At a Crossroad
(www.standardandpoors.com)
Emergence of Automobile Industry in Indian Context - A Conceptual Study
http://www.iaeme.com/IJMET/index.asp 931 [email protected]
[6] www.oica.net/category/production-statistics/2017-statistics
[7] www.statista.com/statistics/200002/international-car-sales-since-1990
[8] Indian Brand Equity Foundation Reports, Feb-2018
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Automotive Component Manufacturers Association of India (ACMA), Society of Indian
Automobile Manufacturers (SIAM), Union Budget 2015-16, Union Budget 2017-18
[10] Automotive Mission Plan 2016-26 prepared jointly by the Society of Indian Automobile
Manufacturers (SIAM) and government, @ - as per the draft policy on e-vehicles prepared
by NITI Aayog, Government of India
[11] Financial Express, Dated 11 April,2018, Ronak Shah
[12] McKinsey, report Automotive revolution – perspective towards 2030 dated Jan 2016
[13] The Confederation Indian Industry (CII) and AT Kearney conducted jointly survey report
[14] http://www.inspirage.com/2016/07Supply chain challenges in the automotive industry
[15] S.N. Teli, Dr.V.S. Majali, Dr.U.M. Bhushi and Sunil Gaikwaid, Daily Management
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[16] Madhuranjan Vatsa, Milindo Chakrabarti and Rajesh Kumar, Analysis of Green
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[17] B.Asha and Dr. Jayasree Krishnan. An Examination of Emotional Intelligence (EI)
Factors on Work-Related Outcome among Employees of Automobile Industry.
International Journal of Management, 7(3), 2016, pp. 293–297.
[18] Dr. Nirzar Kulkarni. A Study on Relationship Between Employee Performance with High
Performance HR System in Automobile Industry of Nagpur. Journal of Management,
4(2), 2017, pp. 74–80.