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Dissertation Report
On
“EXPORT-IMPORT POTENTIAL IN AUTOMOBILE
INDUSTRY”
1
DECLARATION
This is to certify that this project work is an authentic and genuine
work done by me , student of , Uttar Pradesh declare that this
report is original to the best of my knowledge and belief. The
report is a record of original project work done by me from
January during the period of my Dissertation under the guidance
of
2
ACKNOWLEDGEMENT
Completion of any project report is the milestone in the life of
every management student and the success of live project then
enhances the self confidence of the student. A successful and
satisfactorily completion of any task is the outcome of the
invaluable aggregate contribution of the different personal effort
in all the direction, explicitly or implicitly.
I am extremely grateful to for his continuous support and
precious inputs that added value to this project at every step of it.
I also wish sincere and humble thanks to all my who encouraged
and inspired me from time to time. It is only because of them that
I did not lose the sight of my track and completed the research
3
AN EXECUTIVE SUMMARY
The automobile industry world over has been an important component of
economics, though the determinants vary in different countries. India has been
substantially dependent upon transfer of technology and import of raw materials
and components of advance nations to initiate imperatives of export
competitiveness pose major challenges in respect of import dependent sectors
such as the automobile sectors.
Given that the Indian automobile industry has had an export led development
and is marked by low and medium scales of operations and high degree of
industry concentration, export performance of individual firm’s gains importance.
According to experts even if necessary product attributes exist propensity to take
risk and continuous market development costs are essential to sustain effective
export market performance. While the Indian automotive firms were not placed in
respect of the above factors, some manufacturers took up exports of
automobiles in right earnest. Such willingness was more pronounced in the jeep
and commercial sectors while Indian products fulfilled the needs of certain
markets for low priced functional models.
With the de-licensing of the automobile industry in 1993, the industry moved into
top gear. There is a rush in automobile majors to tie up with local producers both
as a growing market and as a part of their global operations. Most foreign
producers coming in India have chalked out plans to use India as a major
procurement platform for their world wide operations both for cars and auto
components. This certainly augurs well for the Indian automobile industry.
4
INTRODUCTIONThe early phase of the evolution of the motor vehicle industry in India has many
similarities with some of the the late entrants into the industry. The subsequent
development however has been significantly different in India with its emphasis
on high level of indigenization and ancillary development.
The origin of the automobile industry in India can be tracked to 1942 when
Hindustan limited was established in Baroda. This was followed by the
establishment of Premier Automobiles Limited in 1949 and Standard Motors
Private Limited.
There were nine units engaged in the manufacture of Motor Vehicles:
i. Hindustan motors
ii. Premier Automobiles
iii. Standard Motor Products
iv. Ashok Leyland
v.Telco
vi. Bajaj Tempo
vii. Mahindra & Mahindra
viii.Simpson & Company Limited
ix. Enfield Motor Limited
5
EVOLUTION OF THE INDUSTRY
INITIAL YEARS
Cars regarded as luxuries
Manufacturing was licensed ; capacity expansion restricted
Imports of cars was restricted to State Trading Corporations & Foreign
Diplomats
High customs duty
Steep excise duty & sales tax
Market dominated by two players = Premier auto & Hindustan motors
1980's
Entry of Maruti Udyog ltd. better product at lower price ; enjoyed Govt.
support
Sellers market
Long waiting periods
Limited choice
Restrictions on capacities
License requirements
High import duties
Auto finance becomes available but is limited to a few players
MUL captured a major market share; PAL and HM were able to maintain
volumes
1990's
Cars perceived as necessities
Still a sellers market
Long waiting periods continue
Development of the mid price & luxury segment
6
Increase in competition with the entry of foreign manufacturers especially
after the mid 90's
Superior models & more choice
Auto finance booms = more players (foreign banks & NBFC); better schemes
De-licensing in 1993
Removal of capacity restrictions
Decrease in custom & excise duties
2000 onwards
Buyer's market
Drop in waiting period
Market segmentation to change from being price based to being size based
Shake out in the industry
Increase in indigenization
Technologically superior & more comfortable models , internationally
comparable models.
Regulatory framework to be completely relaxed
NDIAN AUTOMOBILE INDUSTRY: A REVIEW
7
The Automobile Industry in India, since the inception in 1948 has faced
several constrains and problems but has resolutely bounced back to
emerge as them.
Engine of Growth in the national economy
With its far reaching forward and backward linkages the automobile
industry has come to play a very important role in the economic
development of the country. The following table showing collective
turnover of automobile and auto component industry during the last five
years gives a measure of the impressive growth achieved its importance in
the Indian economy.
Indian Automobile Industry showed a growth rate of +20% in the period
form 1993 to 1996. Thereafter especially from the second half of 1996
there has been a slow down in the growth rate.
This has aggravated further in 1997-98 and the down turn countries in the
1st quarter of 1998-99.
The new joint venture like Daewoo, General Motors, Mahindra Ford,
Hyundai, Honda Siel, Volvo, Mitsubishi are slowing settling down and
planning to invest substantiated amounts in the forthcoming years. Existing
manufacturers are also planning to expand their capacity. A conducive
business environment is essential for the success of their venture.
Manufacturers are looking forwards a revival in the industry. With a support
promised by the government, industry hopes that it has revive its position in
the market at least in the forthcoming months.
8
GROWTH RATE FOR 2007-08
Category % Rate
M&HCV 10
LCV -4
Cars 50
Jeeps -34
Scooters 41
Motorcycles 41
Mopeds -27
3 wheelers 30
RESEARCH METHODOLOGY
RESEARCH DESIGN
9
To conclude with the answers to the various Questions like:
Strategies needed to be effective in automobile industry.
Level of importance of each of these strategies
Identification of how these strategies can be applied
Identification of how companies are capable of applying these
strategies
DESCRIPTIVE RESEARCH
An exploratory study is generally based on secondary data that
are readily available.
The research that was conducted was essentially internet based and literature based.
Various RSS feeds, books and news were interpreted and an incessant look was kept at the Google alerts
LIMITATIONS OF THE RESEARCH
There was a lot of difficulty in conducting the research.
The secondary data is not always correct so a lot of cross
checking had to be done to find the correct data.
All the books were not accessible for secondary research so
online downloading the books had to done.
PROFILE
10
The Automobile Industry in India since its inception in1942 has faced several
constraints and problems but has resolutely bounced back to emerge as the
engine of the growth in national economy.
With its far reaching forward and backward linkages the automobile industry has
come to play a very important role in the economic development of the country.
Indian Automobile industry showed a growth rate of +20% in the period from
1993 to1996. Thereafter especially from the second half of 1996 there has been
a slow down in the growth rate.
This has aggravated further in 1997-98 and the down turn countries in the first
quarter of 1998-99.
The few joint ventures like Daewoo, General Motors, Mahindra Ford, Hyundai,
Honda, Volvo, and Mitsubishi are slowly setting down and planning to invest
substantiated amounts in the forthcoming years. Existing manufacturers are also
planning to invest substantiated amounts in the forthcoming years. Existing
manufacturers are also planning to expand their capacity. A conducive business
environment is essential for the success of their venture. Manufactures are
looking forward a revival in the industry. With a support promised by the
government, industry hopes that it has revive its position at least in the upcoming
months.
CURRENT SCENERIO
11
2000 onwards
Emergence of a new Automobile industry
1. Manufacturing Technologies: Flexible Manufacturing
2. New Generation of Engines: Turbo Charging, Catalytical converter
3. Safety emissions norms
4. Material: Low weight Synthetic composites
5. New Collaboration: Entry of Foreign Manufacturers
6. Regulatory Frame: Deregulations and De-licensing
7. Changing Structure of Demand
8. Distribution System: Changing relation between Manufacturers and
Dealers.
12
THE INDIAN INDUSTRY
THE AUTOMOBILE CORPORATE HOUSES OF INDIA
1. ASHOK LEYLAND LIMITED
Products Manufactured: a. Light, Medium & HeavyDuty Commercial Vehicles
b. Spare Partsc. Diesel Enginesd. Ferrous Castings
Details of Collaborations
Name of Collaborator : Iveco SpA, ItalyProducts : Engines, Commercial Vehicles
2. BAJAJ AUTO LIMITED
Products Manufactured : Automobile Two Wheelers and Three Wheelers & Spare parts thereof.
Details of Collaborations1) Name of Collaborator: Kawasaki Heavy Industries Japan
Products : Motorcycles
2) Name of Collaborator: Orbital Engine Australia
Products : Fuel Injection System
3) Name of Collaborator: AVL, Austria
Products : Engine Optimization
4) Name of Collaborator: Kubota Corporation
Products : Diesel Engine for 3-Wheelers
5) Name of Collaborator: Tokyo R & D Co. Ltd. Japan
Products : Development of New Scooter
13
6) Name of Collaborator : CAGIVA Motor SpA., Italy
Products : Development of new Scooters
3. BAJAJ TEMPO LIMITED
Products manufactured : Light commercial Vehicles under brand names : Matador, Trax, Traveller, 3-Wheeler Hanseat, Minidor, Tractors & Diesel Engines
Details of Collaborations
1) Name of Collaborator : Mercedes Benz (AG) Germany
Products : Engine & Light Commercial Vehicles
2) Name of Collaborator : ZF Passau GmbH Germany
Products : Tractor Transmission
3) Name of Collaborator : Robert-Bosch GmbH, Germany
Products : Tractor Hydraulics
4. DAEWOO MOTORS (INDIA) LIMITED
Product Manufactured : Passenger Cars & Light Commercial Vehicles
Details Collaborations
1) Name of Collaborator : Daewoo Corporation South Korea
Products : Passenger Cars & Commercial Vehicles
5. EICHEER MOTORS LIMITED
Products Manufactured : Commercial VehiclesName of Collaborator: Missubishi Motors Corporation/Mitsubishi Corporation, JapanProducts : LCV
14
6. ESCORTS YAMAHA MOTOR LIMITED
Products Manufactured : EYML - Faridabad : Motorcycle (Rajdoot)Moped(Toro Jazz & Toro Rosa)EYML - Surajpur : Motorcycle (Yamaha RXG,
RXZ)
Details of Collaboration : Motori Minarelli, Italy
Products : 50CC, Moped Engine
7. GENERAL MOTORS INDIA LIMITED
Product Manufactured : Passenger Cars
Details Collaborations
Name of Collaborator : General Motors Corporation
Products : Passenger Cars
8. GREAVES LIMITED
Products Manufactured : Three Wheelers
Details of Collaborations : Nil
9. HERO HONDA MOTORS LIMITED
Product Manufactured : Motorcycles
Details of Collaborations
Name of Collaborator : Honda Motor Co. Japan
Products : Motorcycles
15
10. HINDUSTAN MOTORS LIMITED
Products Manufactured : Passenger Cars, Trekker & Commercial Vehicles
Details of Collaborations
1) Name of Collaborator : Mitsubishi Motors Corporation Japan
Products : Passenger Cars
2) Name of Collaborator : Oka Motor Company Ltd. Australia
Products : Rural Transport Vehicles (RTV)
11. HONDA SIEL CARS INDIA LTD.
Products Manufactured : Passenger Cars
Details of Collaborations1) Name of Collaborator : Honda Motor Co. Japan
Products : Passenger Cars
12. KINETIC ENGINEERING LIMITED
Product Manufactured : Motorised Two Wheelers and Three Wheelers upto 350cc Engine Capacity
Details of Collaborations
1) Name of Collaborator : Nil
13. HYUNDAI MOTOR INDIA LTD.
Product Manufactured : Passenger Cars
Details Collaborations
1) Name of Collaborator : Hyundai Motor Company
Products : Cars and Commercial Vehicles
16
14. KINETIC HONDA MOTOR LIMITED
Product Manufactured : Two Wheelers
Details of Collaborations
Name of Collaborator : Honda Motor Co. Ltd, Japan
Products : Two Wheelers
15. LML LIMITED
Product Manufactured : Two Wheelers
Details of Collaborations
Name of Collaborator : M/s Piaggio V. E. SpA, Italy
Products : Two Wheelers
16. MAHARASHTRA SCOOTERS LIMITED
Product Manufactured : Scooters
Details of Collaborations
Name of Collaborator : Bajaj Auto Limited
Products : Scooters
17. MAHINDRA & MAHINDRA LIMITED
Products Manufactured : Vehicles, Tractors, Clutch Assemblies, propeller Shafts Universal Joint Kit, Pressed Metal Components & Assemblies
Details Collaborations
1) Name of Collaborator : Automobiles Peugeot, France
Products : (a) XDP 4.90 Diesel Engine(b) XD3 P Diesel Engine
17
(c) Peugeot 504 Pick-up
2) Name of Collaborator : AVL, Austria
Products : Design & Development of Engines
3) Name of Collaborator : Mitsubishi, Japan, & Samcor, South Africa
Products : Mini-Van
4) Name of collaborator : Fuji Technical, Japan
Products : Mini-Van
5) Name of Collaborator : Victoria Luzuriaga S.A. Spain
Products : Raw Castings of Cylinder Blocks, Cylinder Heads and Transmission Cases
Joint Ventures (Established) : Mahindra Ford India Limited
1) Name of Partner : Ford Motor Co., U.S.A.
Products : Automobiles
18. MAHINDRA FORD INDIA LIMITED
Products Manufactured : Passenger Cars
Details of Collaborations :
1) Name of Collaborator : Ford Motor Car Company,
19. MAHINDRA FORD INDIA LIMITED
Products Manufactured : Passenger CarsDetails of Collaborations :1) Name of Collaborator : Ford Motor Car Company, USA Products : Cars20. MAJESTIC AUTO LIMITED
Product Manufactured : Step thru Motorcycles, Mopeds,Fit Kit Exerciser, Heavy Motorcycles (650 cc), Scooter Chain Wheel, Strokers
18
Details of Collaborations1) Name of Collaborator : BMW + AG : Germany
Products : Heavy Motorcycles
2) Name of Collaborator : Malaguti ItalyProducts : Scooter
3) Name of Collaborator : Streyr Daimler, Puch, AustriaProducts : Step thru mobikes
21. MARUTI UDYOG LIMITED
Product Manufactured : Passenger Cars & Light Duty Utility Vehicles
Details of CollaborationsName of Collaborator : Suzuki Motor Corporation JapanProducts : Passenger Cars & Light Duty Utility Vehicles
22. MERCEDES-BENZ INDIA LTD.
Product Manufactured : Passenger Cars
Details of CollaborationsName of Collaboration : Daimler-Benz AG & TELCOProducts : Mercedes-Benz Passenger Cars
23. THE PREMIER AUTOMOBILES LIMITED
Product Manufactured : Cars and Machine Tools
Details of Collaborations
Name of Collaborator : FIAT, Auto, ItalyProducts : Passenger Cars
24. PAL-PEUGEOT LIMITED
Product Manufactured : Passenger Cars
Details of Collaborations
19
Name of Collaborator : Automobile Peugeot of FranceProducts : Passenger Cars
25. ROYAL ENFIELD MOTORS
Product Manufactured : Motorcycles
26. SIMPSON & COMPANY LIMITED
Product Manufactured : Diesel Engines
Details of Collaborations
Name of Collaborator : Perkins International Ltd.Products : Phaser/1000 Series Engines
27. SWARAJ MAZDA LIMITED
Product Manufactured : Light Commercial Vehicles
Details of Collaborations
Name of Collaborator : Mazda Motor Corpn. & Sumitomo Corpon. Japan.Products : Light & Medium Commercial Vehicles
28. TATA ENGINEERINGS & LOCOMOTIVE CO. LIMITED
Product Manufactured : On road automobiles having 4 or more wheels - Medium & Heavy Commercial Vehicles & Light Commercial Vehicles Passenger Cars.
Details of Collaborations
1) Name of Collaborator : International Automotive Design, UKProducts : Design and Body styling of Four Wheeled Drive,
Five Door
2) Name of Collaborator : Nachi-Fujikoshi Corporation Japan Products : Spot and Arc Welding Robots and Automotive
Applications
20
3) Name of Collaborator : Nachi-Fujikoshi Corporation JapanProducts : SA/SC Series Robots for automotive applications
4) Name of Collaborator : Schaudt Maschinenbau GmbH GermanyProducts : CNC Cylindrical Grinding Machines for Auto
Components
5) Name of Collaborator : AVL List GmbH AustriaProducts : Improvement in performance of 4 DL engine and
development of 4 PL engine
6) Name of Collaborator : Robert Bosch GmbH GermanyProducts : Application work on Engine Management System
of 4 PL engine
7) Name of Collaborator : Institute of Development in Automobile Engineering S.p.A Italy
Products : Design and engineering of body for passenger car
8) Name of Collaborator : Le Moteur Moderne, France Products : Development of petrol and diesel engine for
passenger car.
29. TATA CUMMINS LIMITED
Product to be Manufactured: Diesel Engines and its components
Details of Collaborations
Name of Collaborator : Cummins Engine, Co. Inc. USA and TELCO, IndiaProducts : Diesel Engines and its components
30. TVS SUZUKI LIMITED
Product Manufactured : Modedsd (50/60 cc)Motorcycles (100/110 cc)Scooter (60 cc)
Details of Collaborations
21
Name of Collaborator : Suzuki Motor Corporation JapanProducts : Motorcycles
22
THE GLOBAL AUTOMOBILE MARKET
The auto industry is predominant in North America, Japan and Europe. The US
has one of the largest market in the world, with 16 million light motor vehicles
sold in 1996, besides those exported. The major car manufacturers in the US
are General Motors with a market share of 36% and Ford Motors with a 23%
share. The second largest market for cars in the world is Western Europe. In
terms of number of cars manufactured, India has a share of only 0.6 per cent of
the world’s production.
The automobile sector is a vital sector for any developed economy. It drives
upstream industries like steel, iron, alluminium, rubber, plastics, glass and
electronics and downstream industries like advertising and marketing, transport
and insurance. What is good for the automobile sector is beneficial for the
economy as well. However, in India the correlation between the automobile
industry and economic growth is low, with the automobiles industry and
economic growth is low, with the automobiles industry contribution to the GNP
being only 3%. In the US it accounts for over 5% of the GNP. Every with worker
in the US is involved in making of an automobile.
Moreover, the linkages with the associate industries are still tenuous.
Considering two critical inputs: steel and plastics. Poor quality steel compels
OEMs to import skin panels. And making sophisticated plastic parts -- which
most cars sport today -- is beyond the ken of Indian Industry.
India is considered a good potential market by the major world car
manufacturers as they foresee a large demand in the Indian car market. In
terms of number of persons per car, the US has an average of 1.4 persons per
car, Canada has 1.8, Australia and New Zealand 2.2 persons each, the
European Community has 2.5, Thailand 25, whereas India has 275 persons per
car. Also, it takes an average 21 weeks income in the US, 15 weeks in Japan,
27 weeks in European Community, whereas the ratio is very high in India.
23
The automobile industry the world over has been important components of
economic, through the determinants of development vary in different countries.
India has been substantially dependent upon transfer of technology and import
of raw materials and components from advanced nations to initiate and sustain
development. In this context, the national imperatives of export competitiveness
pose major challenges in respect of import-dependent sectors such as the
automobile sector.
Given that the Indian automobile industry has had an import-led development
and is marked by low and medium scales of operation and high degree of
industry concentration, export performance of individual firm’s gains importance.
According to experts even if individual firms gains importance. According to
experts even if necessary product attributes exist propensity to take risk and
continuous market development costs as essential to sustain effective export
market performance. While the Indian automotive firms were not ideally placed
in respect of the above factors, export of automobiles was taken up in the right
earnest by some manufacturers. Such willingness was more pronounced in the
Jeep and CV sectors where Indian products fulfilled the needs of certain markets
for low priced functional models.
Government policies also constitute a major influence on export orientation of
the industry. Though the Indian government did seek some kind of commitment
at the time of issue of licenses in the 60s and 70s, it was not until the foreign
exchange crisis in 1990 that they concerted effort was made to this end.
The international automobile manufacturers have a well entrenched presence in
most world markets for historical as well as technological reasons. Changes in
the exchange parity have not effected significantly the established market
presence. This is of relevance to the Indian context as devaluation is seen as a
“quick fix” solution in some quarters for achieving greater exports. The exporting
24
success of countries has rested more on the product strengths rather than on
pricing.
The share of Indian CV exports has a better track record than other vehicle
exports, though even this has been very low. In the world trade of buses and
trucks India’s share is as low as 0.13% (1988). In 1988, less developed countries
imported from 9 advanced countries, a total of 1, 26, 91,992 cars and 30, 12,699
buses and trucks. India in contrast could only export 1,530 jeeps and utility
vehicles, 65 cars and 4,194 CV’s. This could be attributed partly to the inward
orientation of a protected and regulated industrial economy.
HISTORY OF INDIAN EXPORTS
India began exporting CV's in the early 1950's. Telco and Ashok Leyland
initiated serious efforts for export of vehicles in the early 1960's and could secure
a serious foothold in the countries of South Africa, Middle East and other third
world countries. Continuous upgradation of technologies to suit Indian and Third
World operating conditions, coupled with steadily increasing domestic volumes
enabled these firms to sustain their export presence in the face of international
competition. HM also initiated export initiative in 1968 but eventually focused on
exports to Bangladesh. The inability to sustain a wider export presence has
been due to obsolescence of technology and collapse of domestic volumes.
Mahindra and Mahindra made a modest beginning in 1968. Besides South Asia
and the Middle East Countries, M & M targeted East European countries and
Oceania. M & M is strategy was to export through CKD assembly activities in
such markets. Potential markets in New Zealand, Sri Lanka, Indonesia, Greece
and Iran were tapped through the CKD exports and the local assembly route in
1970. M & M also set up a subsidiary in Greece in the 1980's to cater to CKD
assembly in Greece and also to supply to other European countries. The
company also obtained approvals for homologation in Australia, were efforts
were on for similar approvals in some EEC countries.
25
In the car sector MUL achieved a major breakthrough by exporting its 800 cc
cars and vans to France and other European countries. More recently it has
successfully exported the new Maruti ZEN or ALTO which now contributes
around 40% to Maruti's exports.
The export performance of the individual manufacturers has been inconsistent.
Though a high level of exports was achieved by exporting manufacturers during
1975-80, the momentum could not be sustained in the 80's. The basic reason
for this was a basic instability in export markets with repeat purchases being
irregular.
In the MCV sector both Telco and Ashok Leyland have operated in the export
markets against stiff international of their technology strategy.
HM exports were confined to Bangladesh of the Bedford range of trucks. This
was due to the low price, suitability for loading conditions, proximity of
manufacturing works at Calcutta, to Bangladesh and extensive parts network
through Bedford dealership.
Both Telco and Ashok Leyland targeted increase in exports as a strategic
objective. Telco encouraged its associate concern, Automobile Corporation of
Goa. Limited, to enter into technical collaboration with Fuji Heavy Industries of
Japan for export of quality bus bodies. Telco also envisaged that its new range
of indigenously developed utility vehicles would mark its new thrust in global
markets.
Ashok Leyland had also stated that- their overseas links with shareholders would
support a greater export thrust.
26
In the wake of the recent changes and liberalization of the automobile sector, the
new joint ventures have greater export thrusts. There is however a number of
stumbling blocks in faster export growth. Firstly, the vehicles require
conformance to emission norms and safety standards. This requires
upgradation in the quality of present vehicles, e.g. four stroke engine two-
wheelers need to be produced as they are best suited to meet the above norms.
Secondly, the models being produced under joint ventures are outdated in the
world market, e.g. Peugeot plans to manufacture its 309 model which has been
phased out in France. Though there are joint ventures like that between DCM
and Daewoo which will produce the widely accepted Cielo. Daewoo plans to
shift’ it’s production base for Daewoo in the near future.
Thirdly Indian exports need to become cost in competitive in order to face
foreign competition.Maruti's ZEN model is an example of the company's success
in facing competition.
27
EXPORTS
Indian Vehicle has driven into the export market at a rapid pace. In five years,
exports have increased from 38,000 vehicles to 190,000. Export earnings are up
from Rs. 4 billion to Rs. 16.7 billion.
Exports of Vehicles 1990-91 1996-97
Nos. in 000 Rs. Bn. Nos. in 000 Rs. Bin.
Cvs 6 1.9 15 7.8
Cars & Utilities 6 1.1 39 6.0
Two & Three Wheelers 26 0.8 146 2.9
Total 38 3.8 190 16.7
Source: AIAM
28
Source: AIAM
Such an attractive growth of 80% per annum in terms of numbers and 68% per
annum in terms of casings has been possible through four routes.
The Vehicles have met the technical requirements of road worthiness, safety
and emission norms in the destination countries.
The users have accepted the quality and performance of these vehicles.
The collaborators or the distributor’s networks in those countries have provided
channels for display and sales of Indian vehicles.
The relative currency, values and cost of production have made them
extremely competitive in the world markets.
The destinations have been spread over all the continents from Australia and
New Zealand to South East Asia, South America, Middle East, Africa and
Europe. These exports have added stability to the product portfolios of vehicle
manufacturers and has facilitated diversification' into every engine and tonnage
segment.
29
Latest scenario in automobile sector
De-licensing in 1991 has put the Indian automobile industry on a
new growth track, attracting foreign auto giants to set up their production
facilities in the country to take advantage of various benefits it offers. This took
the Indian automobile production from 5.3 Million Units in 2001-02 to 10.8 Million
Units in 2007-08. The other reasons attracting global auto manufacturers to India
are the country’s large middle class population, growing earning power, strong
technological capability and availability of trained manpower at competitive
prices.
In 2006-07, the Indian automotive industry provided direct employment to more
than 300,000 people, exported auto component worth around US$ 2.87 Billion,
and contributed 5% to the GDP. Due to this large contribution of the industry in
the national economy, the Indian government lifted the requirement of forging
joint ventures for foreign companies, which attracted global to the Indian market
to establish their plants, resulting in heightened automobile production.
The Indian automobile market is currently dominated by two-wheeler segment
but in future, the demand for passenger cars and commercial vehicles will
increase with industrial development. Also, as India has low vehicle presence
(with passenger car stock of only around 11 per 1,000 population in 2008), it
possesses substantial potential for growth.
30
DESTINATION OF EXPORTS
Destination Value (Rs. '000)
Africa Rs. 542,147South East Asia Rs. 231,825West Asia Rs. 69,758West Europe Rs. 2,039,905East Euiope Rs. 338,293America Rs.105,212Others Rs. 313,015
Exports are profitable and all manufacturers are entering the export market to a
varying extent, offering a different product range. The prices of Indian products
are one third to one half of other vehicles in the world markets. They would be
even more competitive now with the changing, currency rates.
91-92
92-93
93-94
94-95
95-96
96-97
70%
4%
12% 14%
Cars
MUVs
M&HCV
LCV
31
Source: AIAM
All category of vehicles nave contributed to this growth. Cars exports have been
largely by Maruti. The objectives of the new car joint ventures are not only to
capitalize on the opportunities in the Indian market but also to use the production
facilities and infrastructure in India as a major supplier to their global operations.
PAL-Peugeot. Mercedes-Benz India and General Motors India are planning to
export sizeable portion of their cars. MBI is also supplying gears and diesel
engines to TELCO and TELCO are supplying to MBI engine components, axles,
transmission gears, sheet metal parts and painting facilities. Both are mutually
helping each other in promoting exports. Daewoo Motors will export a large
number of vehicles and, in addition transmission and engines to other Daewoo
facilities world-wide. All players in the commercial vehicles sector have
contributed their share in building up exports. Among the utilities exports, Maruti
has been the leader.
Escorts are the largest exporter of motor cycles, followed by Hero Honda and
Bajaj Auto. Majestic Auto are the largest exporter of mopeds. It exports, CKD
kits to forty two countries including Brazil, Mauritius. Iran, Egypt and Argentina
and are now exploring North America and Europe. Bajaj Auto is the largest
exporter of Scooters, followed by Kinetic Honda who use Honda's export network
to access exports markets. for Bajaj Auto Limited (BAL), exports are becoming a
focus area. In last four years, exports have gone up from 1% to 4%. Bajaj
exports to fifty countries and has major presence in fifteen of them.
Despite such an encouraging export performance, the volumes have been small
and marginal compared to world standards. Most of these exports by the
manufacturers and joint ventures are pioneering efforts and have yet to grow in
volumes and market shares.
While vehicles have met statutory and technical standards, they have to achieve
a breakthrough in finish and offer comfort and convenience features to which
customers in the export markets are accustomed. Large scale exports of four
wheelers is not possible without world class products, know how and
32
engineering or access to the foreign market network, and unless domestic base
is large enough.
Quality Control & Pre-shipment Inspection Formalities
The quality control and pre-shipment inspection procedure applicable to
transport equipments is In-Process and Quality Control. Under this system the
exporter is required to get the goods inspected at various stages of manufacture.
Industrial units approved as export worthy by the specified panel of the
inspection agency are required to keep a record of the process undertaken
during manufacture for constantly monitoring the quality of the product at every
stage of production, beginning from the procurement of raw materials till the
stage of packaging of the finished products. The officer of the export inspection
agency inspects from time to time the systems of quality controls being
introduced and followed by such units and ultimately the units get the certificate
of inspection without in depth inspection at the final stage, depending upon the
record of steps for quality control taken by them from time to time.
The exporter of the manufacturing units has to apply for registration as export-
worthy units. The certificate of registration is granted by the Export Inspection
Agency after being satisfied that the industrial unit or the exporter has proper
facilities for undertaking manufacture of the product to be exported and
maintains appropriate testing laboratory to control the quality of the product to be
exported at each stage of processing. The Export Inspection Agency after
receiving the application for recognition as export-worthy unit normally collects
information and data as the production facilities of the unit and nominates a
panel of experts for inspection of the unit. Once the production unit has been
declared export-worthy the procedure for receiving export inspection certificate
becomes very easy for such units. The exporter has to send the notice of
intimation to the council along with:
(i) inspection form (or the pass book for debiting the fee)
(ii) an export contract
33
(iii) an invoice
(iv) a copy of the certificate of export-worthiness issued by the agency.
The exporter receives the inspection certificate in triplicate for his use. The
certificates are now issued in the aligned format as per the new standardized
pre-shipment export documents.
To encourage more units to adopt PQC system, the units are now being
provided the necessary technical assistance by the Export inspection Agencies.
IMPORT REGULATIONS POLICIES1.FRANCE
I. General
II. Languages on Documents - French
III. Other Requirements
- Dutiable goods temporarily imported. Deposit or normal duties
refundable on re-expedition unless an international CARNOTATA
from chamber on commerce in country of export ensuring freedom
of duties can be produced.
Documentary Requirements
(i) Commercial Consignments
Value FRF 125,000 or less: 2 commercial invoices value over FRF 125,000.
Commercial invoice domiciled by bank. The commercial invoice must contain
detailed description of goods’ quality or grade, unit price and total value,
statement whether term of sale is CIF, FOB etc, and declaration signed by
shipper:
- Import licence, certificate or authorisation dependent on nature of
goods.
- Certificate of Origin required in certain cases: But in case of
transport equipment not required in France.
- SAD form for goods from EU countries.
34
(ii) Sample Consignments
- No payment due: 2 Proforma Invoices or if sample made unfit for
sale ... no documents.
- Payment due: Same as in case of commercial consignments.
- If from EU countries with commercial value, whether payment due
or not: SAD form,
- Authorisation from the “Sce Central de la Pharmacie” required for
samples of pharmaceutical products prohibited by the tariff law.
2. UNITED STATES OF AMERICA (USA)
General
i) Packing: Hay, straw and willow twigs prohibited Wooden cases and jute
sacks must be new. Containers of elm wood must be free from bark.
ii) Marking: All articles must be legally marked in English with country of
origin. When for any reason the marking is impossible the containers
must be marked accordingly.
iii) Language on Documents: English
iv) Other Requirements:
- Dutiable goods temporarily imported (except for finishing and
repairing) the deposit for duties and/or taxes is not necessary if an
international CARNET ATA (Temporary Admission) from local
chamber of commerce in country of export is present.
- AWB: Address must show name of place and name of state.
Documentary Requirements
(i) Consolidations:
US customs the name and address of shipper and consignee for each and every
shipment in every consolidation. This procedure is in force, whatever the point
of entry, the carrier or the Origin of goods.
35
Consequently, for all consolidated shipments through units for a single
consignee or shipments made up of various parcels for different consignees - a
closed envelope prepared by the forwarder and containing a copy of each house
AWB and House Manifest must be attached to the master AWB.
This envelope should show the following information:
- For Custom use only
- Carrier code
- Master AWB number.
The procedure is compulsory, otherwise consolidation will be held up by customs
in carriers’ warehouses. The consignment will not even be permitted to be
transferred to a container station without these details.
Commercial Consignments
(i) Statement of Invoice for goods:
- Valued USD 1000 or less
- not intended for sale in the condition at the time of clearance
provided value is less than USD 1250.
- finished in a foreign trade zone.
(ii) Customs Invoices for goods valued over USD 1000.
- any consignment valued over USD 1000 requires a special Invoice
whether for sale or not, except those listed under 1.
- conditionally free from duties.
- Subject to an Import licence.
(iii) Commercial Invoices for goods not falling under 1 and 2, containing: all
marks, numbers and symbols appearing on the goods and ... where
required for the classification of goods ... the material of the component
parts, their purpose and their kinds, additional changes (commission
transportation charges, insurance premium) also when these changes are
included in the unit prices. Import licence for a large range of goods.
36
37
3. UNITED KINGDOM
General
i) Language on Document - English
ii) Packing: Hay and straw prohibited. Any wood packaging materials must
have the bark removed before shipment.
iii) Routing via Belfast to all places in Northern Ireland.
* Via Birmingham to Conventry, Nuneaton, Radditch, Smithwick,
Walsall, West Bromwick Wolvohampton.
* Via Glasgow to places in Scotland except to/from Glasgow or
London for Aberdian.
* Via London to places of south of the imaginary line Stoke-on-Trent
to Notingham with the exception of towns designated under
Birmingham.
* Via Manchester to places south of the countries of Cumbria, drawn
across country from Stoke-on-Trent to Nottingham.
* Via Newcastle to places in the country of Northumbra or in the
country of Cleveland.
iv) Other Requirements - Dutiable goods temporarily imported: the deposit
for duties and/or taxes is not necessary if an international CARNET ATA
from local chamber of commerce in country of export is present.
i) Documentary Requirements
Commercial Consignments
- Invoice: In triplicate for all merchandise.
- Packing List: Indicating contents of individual packages when a
consignment consists of more than one package.
- Certificate of Origin or Export Certificate from country of Origin
where a UK Import licence or Permit is required.
38
- Certificate of Origin or Movement Certificate where a preferential
rate of duty may be claimed.
- Community Transit forms as appropriate for goods in transit within
the EC.
ii) Unaccompanied baggage:
Will be documented and carried as cargo. At the departure station
passenger sign customs declaration Form C.3 and/or C 104 which must
accompany the baggage attached to the AWB.
(4) ITALY
General
i) Packing : Hay and straw prohibited
ii) Routing : Via Rome
iii) Other Requirements
- Traffic documents required.
General Declaration.... 10 copies
Cargo Manifest ... 10 copies
AWB 5 copies
- Dutiable goods temporarily imported (except for finishing and
repairing) the deposit for duties and/or taxes is not necessary if an
international CARNET ATA (Temporary Admission) from local
Chamber of Commerce in country of export is present.
- Consolidated consignments must be accompanied by a
consolidated manifest also showing house waybill number, number
of pieces, nature of goods. gross weight, point of loading and final
destination.
Documentary Requirements
i) Commercial Consignments
- Commercial Invoice
39
- Import Licence for certain commodities originating from specific
non-EC countries (third countries), dependent on trade agreement.
- EUR 1 or ELIR 2 certificate for goods from specific non-EC
countries, dependent on trade agreements and subject to
preferential duties.
- Certificate of Origin for goods from non-EC countries, visaed by
local consulate. Certificate of Origin is not required when origin
can be determined by customs from normal commercial
documentation and by physical examination of the merchandise
(trade marks, typical products of a certain country etc Customs can
at any time require the official certificate of origin whenever the
origin is doubtful.
- Exchange Formality Document “Benestare Bancario” if value of
goods exceeds ITL 500.000. It should bear a Bank visa when value
exceeds ITL 50.000.000.
ii) Sample Consignments
- Value ITL 40.000 or less for goods from non-EC-countries: Invoice
for customs clearance.
40
(5) NETHERLANDS
General
i) Language on documents : Dutch. English, French or German.
ii) Other Requirements :
Valuable consignments (NLG 2000.00 or more per kg): only to
Amsterdam for clearance at Amsterdam International Airport. Reforwarding to
final destination for account and risk of consignee.
DOCUMENTARY REQUIREMENTS
i) Commercial Consignments
- One Commercial invoice.
- Certificate for goods subject to preferential duties.
- Import regulation for; (a) strategic and agricultural goods;
b) Consignments from Albania, Armenia, Azerbaijan, Bulgaria,
Byelerussia, China, Georgia, Hong kong, Hungary, Japan,
Kozakhstan, Kyrgystan, Moldova, Mongolia, North Korea,
Romania, Russian Fed., Tajikistan, Turkmenistan, Ukraine,
Uzbekistan, Vietnam.
ii) Sample Consignments:
Payment due : Same as commercial consignments.
No payment due : One proforma Invoice. Commercial travellers
samples (temporarily imported): List in duplicate giving exact
description of the goods value of each of the separate article.
Security deposit, equalling two times the import duty, which will be
re-funded on exportation of the goods.
41
6) SINGAPORE
General
i) Marking: Goods bearing marks suggestive of Singapore make must show
a counter indicator of their true origin.
ii) Language on documents: English.
iii) Other Requirements: Documents must show weights and measures
according to the metric system.
42
Export AnalysisRailways, Tramways, Locomotives etc Equipment and parts thereof: Indian
exports of the above category of items have been falling at the rate of 7.60 per
cent annually for last three years. This is due to the fact that India is mainly
exporting spare parts and components of old equipment, which is in the process
of being phased out in most of the developed countries and hence is not
economically viable for them to manufacture. Such items are therefore imported
from countries like India where similar equipment is still being used and
manufactured extensively. As years pass export of these components is bound
to fall and we safely conclude that the future export potential to the developed
world are some-what bleak whereas in the developing world the export potential
still exists. For instance in countries in the CIS region they are still using the
outmoded technology to a large extent because the existing manufacturing
facilities are very nearly closed due to coordination problems after the break up
of USSR. These countries could therefore turnout to be major destinations for
India’s exports atleast in near future. Indian locomotives (current) are of an
advanced category as compared to some countries like Vietnam, Bangladesh
etc. This future potential should be fully exploited by Indian companies, who
have a relatively low cost per unit as compared to their competitors. As an
industry, the transport sector has three challenges:
The investment challenge, the quality challenge and the technology challenge.
43
IMPORTANT TRADE FAIRS AND EXHIBITIONS
European Union
1) International Bicycles Motorcycle Exhibition
Venue : Cologne, Germany
Contact : Koln Messe Platz
P.O. Box 216760 D - 5000
Koln 21
Germany
Frequiency : Every 2 Years in October
Phone : + 49-221-8210
Fax : + 49-221-8212574
2) Equip Auto - an Intl Exhibitions of Car Components and General Equipment.
Venue : Parc-Des Exposition de Paris.
Paris, France.
Contact : Comite des Expositions de Paris
55, Duai Alphonse and Gallo
BP 317, F-92107
Baulogue Cedex France.
Frequency : Every 2 years in October. Last Fair
in ’93.
Phone : 39-334-4096088
Fax : 39-334-9096107
44
3) Automechanika
Venue : Frankfurt, Germany
Contact : Messe Frankfurt
Ludwig Erhard Aulage ID-60327
Frankfurt Am.
Phone : 69-75-75-0
Telex : 411558
Frequency : Every alternate year in Septernber
4) International Motor Show
Venue : Hanover, Germany
Contact : Deutshe Mens AG
Messegelandi
D-3000, Hanover 82
Germany
Telephone : 49-511-890
Fax : 49-511-8932626
Frequency : Every year in May
USA
1) Automotives Parts and Accessories Association Show APAA
Venue : McCormick Park, Chicago
Fair Organiser : William T. Glasgow Inc.
2) National Tyre Dealers and Retreaders Association Convention and Trade
Show. (NTDRA)
Venue : McCormick Place, Dallas
Fair Organiser : National Tire and Retreaders
Association.
3) Detroit Cyclerama Motorcycle and ATV Exposition.
Venue : Cobo Hall, Detroit
45
Fair Organiser : Advanstar Exposition
4) The Atlanta Journal and Constitution Intemational Auto Show
Venue : Georgia World Congress Center
Fair Organiser : Reed Exhibition Companies
5) National Tire Dealers and Retreaders Association Convention and Trade
Show (NDTRA)
Atlanta
Venue : Georgia World Congress Center
Fair Organiser : National Tire Dealers and Retreaders
Association
6) East Coast Truck Show
Venue : Convention Centre, Baltimore
Fair Organiser : Southex Exhibitions
7) New England Truck and Truck Equipment Show
Venue : Bayside Exposition Centre, Boston
Fair Organiser : North American Exposition Co.
8) New England Intemational Auto Show
Venue : Bayside Exposition Centre, Boston.
Fair Organiser : Reed Exhibition Companies
46
LIST OF SELECT IMPORTERS IN MAJOR MARKETS
France
1) SNECI
P.O. Box 218 92300 Levallois-Perret Ph : 033-1-47590600
033-47571135
2) Coffi
6, Rue Alponse Daudet F-69007 Lyon
Ph : 033-1-78615859
033-1-7895858
3) AEDA
33, Avenue De Marechal De-Lattre De Tassing
F-94120 Fontemay-5005 Bens
Ph : 033-1-4876 2439
033-1-4876 1130
U.K.
1) South London Pistons Ltd
191-202 Old -Kurt Road
GB 0 London, SE 1504
Ph : 144-71-7032156
Italy
RHIAG Viale A De Gasperi
20151 Milane
Ph : 039-2-30781
039-2-38001382
47
INDIA’S EXPORT CLASSIFIED UNDER INDIAN EXPORT AND WORLD
IMPORT GROWTH RATE COMBINATIONS
Type of
combination
SITC Code Name of the item Remarks
High-Low 781* Passenger motor vehicle excluding
buses
India’s growth rate of
exports high or very
high, while world
782* Lorries special motor vehicles export growth rate is
low, negligible or
negative. India’s
784* Motor vehicle parts accessories expansion mainly at the
expense of competitors.
895* Office supplies
RECOMMENDATIONS48
RESEARCH & DEVELOPMENT
The expenditure incurred by the automobile manufacturers on R & D is not
significant. One of the reasons could be that most of the technology is obtained
through transfer from foreign manufacturers through collaborations. The amount
of royalty payments being high, the manufacturers do not intend to spend time or
money on R & D as all the least technology reaches them through their foreign
counterparts.
But if the automobile industry people want to get their product accepted in the
world market, they will have to develop their R&D facilities. For this cause the
Government of India should give some benefits in the form of tax rebates to
those who work for the cause of R&D or open workshop for carrying on the
research process.
INTERNATIONAL ADVERTISEMENT
The Indian Automobile manufacturer should go for a thorough advertisement,
while keeping world standard in the cognigence i.e. the Peugeot 306 T.V.
commercial many times seen during the Grand Slam, a beautiful female stopping
her car, opting for hitch hiking just to sit in that marvously designed car. Then
there was an advertisement of BMW a rat walking on the steering and enable to
stop it free movement, depicting the extent of luxury it provide. Another
internationally acclaimed T.V. commercial was of Rolls-Royce made by
advertising king Ogilvy & Mather showing a car running at 60 miles an hour and
the only audible voice was of the electronic clock.
49
TESTING TRACKS
Indian testing tracks and reliability test equipment are not up to world standards.
The automobile industry collecting should make world standard tracks and
maintain them. If these are made no doubt the export of vehicles from India will
get a major boost. Along with the test track some good race track should also be
made. The only good tracks available for racing is in Chennai and one in
Calcutta is under process. These depict in the kind of performance the vehicles
are capable of giving.
EXPORT STRATEGY
The following action plan is suggested to increase India’s share of automotive
components:
1) The Indian manufacturers should approach the OEMs of vehicles and try to
convince them about the quality and reliability of their products as the
replacement markets also mostly depend on the success achieved in
supplying original equipment to the vehicle manufacturers. In order to make a
dent in the market, a workshop on automotive components from India should
be organized. The Indian companies should also bring with the samples to
display their capabilities.
2) The directives and exhaust emission regulations for automobiles are being
enforced in many Member States. Indian manufacturers would be required to
obtain type approvals, particularly in the field of automotive safety,
environment protection and fuel efficiency. Indian testing laboratories are to
be upgraded and institutional linkages among the identified Indian testing
laboratories (i.e. Automobile Research Association of India. Central Institute
of Road Transport and Vehicle Research Development) have to be
established with their counterpart agencies.
3) Indian standards on automobiles and the technical standards are to be
compared and explained to the Indian manufacturers. Ways and means of
achieving these standards are to be explained to the industry. A workshop
50
should be held in India to inform the Indian manufacturers of the technical
developments in the world market.
4) Focus on our participation in the international trade fairs has to be sharpened
to project the capabilities of the Indian manufacturers and to place them in
the appropriate market slot. Participation in Autoauslung (FranKfurt).
Automechanica (Frankfurt),Auto Partec (Birmingham), SITEV (Geneva), etc.
has to be organized in a more coordinated manner.
5) The Indian firms having collaborations with the European firms should make
use of these arrangements to enter the markets as the products
manufactured under such collaborations would find an easy entry.
6) Indian companies should organize a well coordinated distribution system to
meet the quick delivery schedules, large workshops and garages,
warehousing facilities should be utilized for effecting quick deliveries.
51
GOVERNMENT POLICYIndia has made significant strides in the field of industry and technology over
nearly four decades. Large investments in the industrial and infrastructural
sectors with emphasis on heavy and basic industries have brought about an
enormous transformation in the industrial scene. India’s progress in the fields of
power generation, fertilizer, petrochemical, steel, cement, sugar, space research
and transport industries has been remarkable and mainly due to the efforts of
both the Government and the industry by way of inducting and adopting modern
technology best suited for the purpose.
Due to induction of modern technology in the automobile sector, the component
industry has grown sustainability and today auto components are manufactured
not only to cater to the domestic requirements but also for international makes
and models. Extensive use of international makes and models. Extensive use of
computer integrated design and manufacturing has resulted in quality precision
components. Automobile components are also being developed to specific
buyers’ requirements and exported to all countries in the world.
The Indian industry has been freed of many controls and the present
industrial policy of the Govt. of India has among others, made foreign investment
very conducive. Foreign ownership of upto 51% of a venture has been approved
for high priority industries ranging from machinery to chemical and metals. The
advent of the 51% equity limit coupled with faster approval processes has
significantly increased foreign investments in India particularly for development
of machinery and component for the export market.
52
PROSPECTS
Perception of Growth
The market for automobiles in Europe is likely to reach 23.9 million units in 2006
for cars and 2.1 million units in 2006 for light trucks. India’s exports of complete
range of vehicles were negligible. A few cars arrived in France during 1999. UK
imported motor vehicles from India. Homologation for pick-up vans is under
progress. EEC market for motor vehicles’ parts and accessories is growing at a
rate of 6% EEC imported ECU 8.4 billion of automotive components from Extra-
EEC sources in 2005 and ECU 4.25 billion in Jan-Sept. 2006. India’s share was
0.38%.
As automobile components account for a major share of India’s market in the
EEC recommendations have been made for capturing a bigger share. Keeping
in view the production, the Indian export performance to EEC and size of the
EEC market, it should be possible for India companies to increase their exports
to ECU 60 million by 2000 and ECU 90 million by 2000.
Passenger car production in India is projected to cross three million units in
2014-15. Sales of passenger cars during 2008-09 to 2015-16 are expected to
grow at a CAGR of around 10%. Export of passenger cars is anticipated to rise
more than the domestic sales during 2008-09 to 2015-16. Motorcycle sales will
perform positively in future, exceeding 10 Million units by 2012-13.
Value of auto component exports is likely to attain a double digit figure in 2012-
13. Turnover of the Indian auto component industry is forecasted to surpass US$
50 Billion in 2014-15.
53
SWOT ANALYSIS
STRENGTHS OF THE AUTOMOBILE COMPONENTS INDUSTRY
I) The Indian automobile components’ industry has been associated since 3
decades with a wide spectrum of technology originating from different
countries through collaborations. This enabled the industry to build a very
strong technological base.
2) The industry possesses sophisticated manufacturing technologies and
employs CAD/CAM and other production technologies.
3) The industry manufacturers a wide range of products such as engine parts,
electronic parts & equipment, drive transmission and steering parts,
suspensions and braking parts.
4) The industry uses batch production techniques to cater to one time
requirements made to order.
5) Raw materials are available at international prices under the new policies.
WEAKNESSES OF THE AUTOMOBILE COMPONENTS INDUSTRY
1) Access to European technical norms and obtaining of certification.
2) Indian companies hesitate to invest in developing new products, stemming
from the designing stage.
3) European manufactures lack confidence in the Indian capability to supply
automobile parts of consistent quality over a period of time.
4) Indian manufacturers are unable to adhere to the quick delivery schedules.
5) Few of the Indian manufacturers have their own distribution network.
54
OPPORTUNITIES OF THE AUTOMOBILE COMPONENTS INDUSTRY
Market opportunities in Europe have been analyzed above. Indian companies
could capture a fair share of the EEC market if they pursue an aggressive
marketing strategy.
THREATS OF THE AUTOMOBILE COMPONENTS INDUSTRY
Indian companies will face growing competition for the East European countries
as a large investment is being channelized by the European companies to East
Europe for manufacturing a variety of automotive components and parts.
Moreover, the European companies are forging a strategic alliance with
American and Japanese companies for manufacturing and distributing a wide
range of automotive components. Further, the EEC regulations on safety and
emission control will pose a growing challenge to the Indian manufacturers.
55
CONCLUSION
The question that has often been asked is "Does the Indian Industry have the
power to compete internationally: There is no simple answer to this. Rather one
would have to make a detailed analysis often strengths weaknesses of the
Indian industry with a specific focus on what Indian Industry is and should be
doing to cope with the ride of global competition. Although it would be very
difficult to analyse all aspects of exports an attempt has been made of highlights
the issue relevant to in Indian automobile industry exports.
Historically production of Indian Automobile Industry was controlled monitored by
various policies resulting in shortage of vehicles in the market. Automobile
industry was considered as a luxury item and therefore controlled by various
policies and measures. For some of the model the customer had to wait for
years not months to get his vehicle.
Most often vehicles were enjoying high premium and it continued little
liberalization. Moreover the policy was worse of import substitution taken than
export promotion.
In this context, manufacturer had a limited opportunity or incentives to export
from Indian market. It was very difficult to meet even the domestic demand due
to limited licensed capacities. Further the manufacturers had problems like:
Low volume and high cost of production
Difficult to access the technology capital goods and production aids
Cumbersome export procedure
Low margin in export market
Lack of international network
Lack of infrastructure like loads
However with the liberalization July '91, some of these problems were taken care
by the government. But some of the problems either aggravated or remained
unsolved. It was expected that with the liberalization and with more
industrialization, the government may allocate more funds or privatize source of
56
the infrastructural activities like rods, railway, telecom it I to augment the growth
process.
However even after 5 year of liberalization some of the decision has been either
postponed or policies are not clear or supportive to attract investment.
Further in most of the countries exports activity is being considered or priority
activity and the --- who the most successful exporter carried a high regard in the
country. In India we have not yet identified or given the importance of exports
from India. It is worth mentioning that in the past India was ahead of countries
like Korea in exports. The analysis shows that on India, exports have been a
marginal activity.
We are still concentrating more on the issue how to make imports rather than to
promote exports. Keeping in these constraints of carefully analyse some of the
automobiles companies, performance of exports over the last 5 year, one will
conclude that the performance has been reasonable.
There has been a substantial increase in exports volume in 1997-98 as
compared to 1992-93. In just 5 years, overall exports increased from 73891
vehicles to 189684 vehicles an increase of 256%. Exports as a percentage of
total sales increased from 3.9% in 1992-93 to 4.8% in 1997-98.
Within the liberalization of foreign investment technology, vehicle and vehicle
and component manufacturing have easier access to the latest technology which
is essential to meet international quality of performance standards. It is also easy
to import machines and tooling. While these while these are no longer serious
hurdles, further liberalization simplification of procedures and reduction of taxes
and duties, buildings, up of proper infrastructure like ports, roads etc. and threat
on export by the government are necessary to augment exports India. If these
are implemented, with the volume advantage in some segment, there is no
doubt that Indian automobiles manufacturing can increase their share in export
market many times in the next 5 to 50 years.
ANNEXURE
57
EXPORTS
The buzzword in Industry today is Exports!
The Automotive Industry in India has passed through a variety of phases
during the last forty years. Initially content with only products like Ambassador
and Padmini manufacturers felt quite comfortable by their turn-over. Both these
cars-at one time enjoyed a wait-list running into years which also explains why
little attention was paid to R & D and upgraded technology.
Over the years the very working pattern of this Industry changed. This was
more pronounced after the advent of Maruti on the Indian scene. It brought
about a total transformation in this segment and when overseas manufacturers
like. Suzuki set shop in India joining hands with the Government, it opened up
opportunities for those belonging to component Industry to explore possibilities
to step out in Exports revenue which - apart from attractive revenue - also gave
them a distinct identity as earners of Foreign Exchange!
What added even more to export drives was the advent of a number of
International Automotive Shows. The most important in this class is
Automechanika in Frankfurt. It had a modest start with barely a dozen
participants initially joining in to try their luck in Germany. Subsequently, the
Show picked up to enormous promotions and India today ranks as the largest
participant in it outside of Europe. The Show has gained in strength through the
staunch support of your publication - AET - which also brought together ACMA
and IGEP to promote the Show in India.
The extent of achievement of the Show is reflected in the decision of
Frankfurt to choose India as one of the countries in Asia where regional editions
of Automechanika would be held : the two other important points being China
and Singapore. The Indian edition of Automechanika would be held in Delhi in
conjunction with ACMA and CII next February: it will form a parallel Show with
IETF.
58
Over the years many more International Shows have also come up and the one
which draws many participants from India is the one held in Las Vegas. Even
Shows like Equip Auto in France tried to lure India into participation but
somehow it did not click for the simple reason that exhibitors from India would
any time opt for Automechanika which is widely seen as the World's Largest
Show for Automotive Components.
India has also had a close look at the Automotive Show in Leipzig in
Germany. Auto Mobil International as it is called is essentially a Motor Show like
IAA in Frankfurt or the British Motor Show. To widen its base to cater to wider
circle of exhibitors Messe Leipzig have since accepted the suggestion by ACMA
to add an Auto Component wing to the main Show where India could also
participate. Happily, Leipzig Messe have not only accepted the suggestion but
have already added AMITEC to the Auto Mobil International from 1998. We
would naturally be happy to see the Indian Auto Component Industry making its
mark in the Leipzig Show next April: this would certainly widen the business
horizons of Indian Industry.
59
REFERENCES
WWW.GOOGLE.COM
WWW.EEPCINDIA.COM
WWW.IEPORT.COM
“A PRACTICAL HANDBOOK FOR EXPORTERS” BY
Rajkumar S Adukia.
WWW.JUST-AUTO.COM
Ford Motor Company:
60
Six Sigma initiatives streamline operations
Summary
Ford Motor Company, one of the world’s largest automotive manufacturers, has
worked with Penske on several Six Sigma initiatives. As its lead logistics provider
(LLP), Penske’s quality team of associates are trained in Six Sigma practices
and work closely with Ford to streamline operations and create and maintain a
more centralized logistics network. Together, they uncovered several areas for
real cost savings as a result of reducing inbound carrier discrepancies,
eliminating unnecessary premium costs and reducing shipment overages. Plus,
Penske implemented accountability procedures and advanced logistics
management technologies to gain more visibility of its overall supply network.
Challenges Solutions/Results
To develop, implement and operate a centralized logistics network for Ford To streamline supplier and carrier operations for improved performance and accountability To provide Ford with real-time supply chain and financial visibility
Penske established 10 Order Dispatch Centers (ODCs) and consolidated shipments to plants. Approximately 1,200 trailers now ship to and from Ford’s ODCs per day, with most trucks at 95 percent capacity. Penske has reduced plant inventory by 15 percent. Penske trained more than 1,500 suppliers on a uniform set of procedures and logistics technologies. Stringent carrier requirements and a Carrier Rating System were implemented to measure carrier performance. Penske implemented strict accountability procedures and advanced logistics management technologies to gain real-time visibility of delivery status, routing schedules and productivity. A new freight billing system was designed to immediately capture logistics costs.
61
Getting Started
Today, Ford owns and produces automobiles under several major brands: Ford,
Lincoln, Mercury, Mazda, Land Rover, Aston Martin and Volvo. They maintain
one of the automotive industry's most complex manufacturing, transportation and
distribution networks. Penske Logistics began its relationship with Ford as lead
logistics provider (LLP) for Ford's assembly plant in Norfolk, Va. At the time,
each of Ford's 20 North American assembly plants managed its own
Penske Case Study: Ford Motor Company Page 2 of 4
logistics operations. A decentralized approach provided
total control of logistics at the plant level, but presented
costly redundancies in materials handling and
transportation. Ford conducted studies to determine the
benefits of transitioning the company's decentralized
logistic operations to a centralized approach. The
decision was quickly apparent – centralization of the
company's logistics operations would increase both
velocity and visibility throughout the network, as well as
reduce supply chain costs.
Shortly thereafter, Ford selected Penske as its North
American LLP. Under the contract, Penske would
centralize and manage all inbound materials handling
for 19 assembly plants and seven stamping plants.
Consolidating Logistics Operations
Penske immediately developed an aggressive logistics
transition program with Ford. Penske would provide
Ford with a single point of contact for all logistics
operations. By working with individual plants and
corporate management, Penske established a baseline
of current operations and outlined the proposed
solutions. The new logistics program would establish a
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Penske Logistics Center that included the following core
functions:
Network Design Optimization – implement a more
efficient inbound materials strategy through order
dispatching centers (ODC)
Carrier and Premium Freight Management – manage all
carriers and logistics companies, while reducing
premium freight costs
Information Technology System Integration – achieve
real-time visibility of supply chain shipments, schedules
and orders
Finance Management – improve freight bill payment,
claim processing and resolution throughout the supply
chain
Upon development of this new plan, the Penske/Ford
team began evaluating Ford's existing network design.
Under the plant-centric approach, suppliers would make
multiple deliveries of the same parts to different plants.
A supplier would pick up a small load, deliver it to one
plant, pick-up another small load of the same parts and
deliver it to another plant. Carriers with half-empty
trucks would often cross routes with each other en route
to the same plant. Aside from being highly inefficient,
this design allowed for excessive inventory and storage
costs at the plant level. To centralize transportation and
distribution operations, Penske implemented a new
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network design consisting of 10 new ODCs. The ODCs
would be a central delivery point for suppliers. Different
supplier shipments going to the same plant would now
be cross-docked into trailers at the ODC. Loads would
be consolidated and delivered on a scheduled basis to
reduce the amount of milkruns, less than truckload
shipments (LTL) and premium freight charges. To meet
Penske's new transportation and distribution standards,
more than 1,500 suppliers were trained on new uniform
procedures. For carrier and premium freight
management, Penske's goal was simply stated:
maximize carrier service, minimize carrier costs.
Penske refined Ford's carrier bidding process by
placing more stringent requirements on carrier partners.
Carriers were now required to meet specific safety,
equipment and technological specifications; provide
experienced and certified drivers; and show proven
experience of on-time delivery/pickups. Penske's new
procedures required carriers to meet established route
pick up and delivery windows within 15 minutes of the
scheduled time. Additionally, carriers would supervise
loading and unloading operations to verify order
accuracy, adequate packaging and labeling, and freight
damage. With new stringent carrier requirements in
place, Penske closed the accountability loop by
implementing
Penske Case Study: Ford Motor Company Page 3 of 4
a Carrier Rating System. All incidents would be
recorded and reported. Carriers would issue corrective
action reports for actions that negatively impacted
Ford's operations. If a carrier accumulated an excessive
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amount of incidents on their "scorecard," Penske would
issue a low carrier rating, thus jeopardizing the carrier's
ability to participate in future bids. Penske also
implemented several information technology solutions
throughout the logistics network, including its
proprietary Logistics Management System and
RouteAssist, an advanced routing tool. Other programs
included a Web-based metric reporting system and
order tracking software. Drivers were provided with PDA
scanners and an electronic driver log. Carriers were
now required to have satellite communications and
engine monitoring systems on all trucks for load
tracking. ODCs were provided with integrated RF cross-
dock scanners that tracked the delivery of individual
parts. Prior to implementing a centralized approach,
Ford was unable to gain a clear view of the financial
status of logistics operations. With approximately 1,500
suppliers handling more than 20,000 shipments per
week, freight billing was complicated. As part of its
carrier management system, Penske would now provide
drivers with a single set of paperwork procedures to
ensure delivery documentation was collected and
submitted to accounting. Penske developed a new
freight billing system that would capture freight costs
and allocate those costs by plant. As a result, Ford
could see which plants had the highest and lowest
freight costs and which carriers were most cost
effective.
Penske & Ford: Entering a New Century of Automotive
Achievement
65
In approximately 18 months, Penske had completely
transitioned Ford's logistics operations to a centralized
network design. More than 700 inbound and 500
outbound trailers now move to and from Ford's ODCs
per day, with most loads carrying at 95 percent
capacity. Shipments are consolidated at the ODC, and
previously unused cross-docking space is now in high
demand. Fourteen million pounds of freight are cross-
docked each day, resulting in an inventory reduction of
15 percent. Suppliers and carriers currently operate
under a single set of transportation and distribution
procedures, enabling better service throughout the
supply chain. The level of accountability established
with Penske's Carrier Rating System has enabled Ford
to rid its distribution network of costly, ineffective
carriers. With uniform technologies, ODCs are able to
monitor shipments, identify inefficiencies and address
materials handling issues in a real-time environment.
Furthermore, logistics costs now enter the supply chain
immediately. This allows Ford to see overall supply
chain costs and per plant allocations at any given point
in time. Penske met its logistics program objectives six
months ahead of schedule – a testament to the joint-
team approach established between Penske and Ford.
More importantly, as Ford continues to evolve, the
Penske Logistics Center provides Ford with a single
point of contact for all logistics operations.
"Having a single point of contact delivers more than cost
benefits. Penske allows us to clearly understand how
our logistics operations impact the entire company.
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From the assembly line to the end-consumer, the
efficiencies provided by Penske are realized at virtually
every level throughout Ford." Grant Belanger, Director
of Material Planning and Logistics, Ford Motor
Company Penske continues to deliver significant cost
savings to Ford by continuous process improvement.
And, to keep pace with assembly plant requirements,
Penske closed six of its ODCs due to a change in
shipping frequency strategy. With four ODCs operating
at full capacity, Penske once again streamlined
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logistics strategy to reduce costs for Ford. Ford has honored Penske
with several awards, including the Q1award, its highest recognition
of superior supplier quality. Today, with a century of automotive
achievement behind them, Ford and Penske continue to redefine
the highest standards for logistics and operational efficiency.
