An Overview of the Indian Automobile Industry Starting its journey from the day when the first car

rolled on the streets of Mumbai in 1898, the Indian automobile industry has demonstrated a phenomenal growth to this day. Today, the Indian automobile industry presents a galaxy of varieties and models meeting all possible expectations and globally established industry standards. Some of the leading names echoing in the Indian automobile industry include Maruti Suzuki, Tata Motors, Mahindra and Mahindra, Hyundai Motors, Hero Honda and Hindustan Motors in addition to a number of others. During the early stages of its development, Indian automobile industry heavily depended on foreign technologies. However, over the years, the manufacturers in India have started using their own technology evolved in the native soil. The thriving market place in the country has attracted a number of automobile manufacturers including some of the reputed global leaders to set their foot in the soil looking forward to enhance their profile and prospects to new heights. Following a temporary setback on account of the global economic recession, the Indian automobile market has once again picked up a remarkable momentum witnessing a buoyant sale for the first time in its history in the month of September 2009. The automobile sector of India is the seventh largest in the world. In a year, the country manufactures about 2.6 million cars making up an identifiable chunk in the world s annual production of about 73 million cars in a year. The country is the largest manufacturer of motorcycles and the fifth largest producer of commercial vehicles. Industry experts have visualized an unbelievably huge increase in these figures over the immediate future. The figures published by the Asia Economic Institute indicate that the Indian automobile sector is set to emerge as the global leader by 2012. In the year 2009, India rose to be the fourth largest exporter of automobiles following Japan, South Korea and Thailand. Experts state that in the year 2050, India will top the car volumes of all the nations of the world with about 611 million cars running on its roads. At present, about 75 percent of India s automobile industry is made up by small cars, with the figure ranking the nation on top of any other country on the globe. Over the next two or three years, the country is expecting the arrival of more than a dozen new brands making compact car models. Recently, the automotive giants of India including General Motors (GM), Volkswagen, Honda, and Hyundai, have declared significant expansion plans. On account of its huge market potential, a very low base of car ownership in the country estimated at about 25 per 1,000 people, and a rapidly surging economy, the nation is firmly set on its way to become an outsourcing platform for a number of global auto companies. Some of the upcoming cars in the India soil comprise Maruti AStar (Suzuki), Maruti Splash (Suzuki), VW Up and VW Polo (Volkswagen), Bajaj small car (Bajai Auto), Jazz (Honda) and Cobalt, Aveo (GM) in addition to several others. History of the Automobile industry in India The economic liberalization that dawned in India in the year 1991 has succeeded in bringing about a sustained growth in the automotive production sector triggered by enhanced competitiveness and relaxed restrictions prevailing in the Indian soil. A number of Indian automobile manufacturers including Tata Motors, Maruti Suzuki and Mahindra and Mahindra, have dramatically expanded both their domestic and international operations. The country s active economic growth has paved a soli d

road to the further expansion of its domestic automobile market. This segment has in fact invited a huge amount of India-specific investment by a number of multinational automobile manufacturers. As a significant milestone in its progress, the monthly sales of passenger cars in India exceeded 100,000 units in February 2009. The beginnings of automotive industry in India can be traced during 1940s. After the nation became independent in the year 1947, the Indian Government and the private sector launched their efforts to establish an automotive component manufacturing industry to meet the needs of the automobile industry. The growth of this segment was however not so encouraging in the initial stage and through the 1950s and 1960s on account of nationalization combined with the license raj that was hampering the private sector in the country. However, the period that followed 1970s, witnessed a sizeable growth contributed by tractors, scooters and commercial vehicles. Even till those days, cars were something of a sort of a major luxury. Eventually, the country saw the entry of Japanese manufacturers establishing Maruti Udyog. During the period that followed, several foreign based companies started joint ventures with Indian companies. During 1980s, several Japanese manufacturers started joint-ventures for manufacturing motorcycles and light commercial-vehicles. During this time, that the Indian government selected Suzuki for a joint-venture to produce small cars. Following the economic liberalization in 1991 and the weakening of the license raj, several Indian and multi-national car companies launched their operations on the soil. After this, automotive component and automobile manufacturing growth remarkably speeded up to meet the demands of domestic and export needs. Experts have an opinion that during the early stages the policies and the treatment by the Indian government were not favorable to the development of the automobile industry. However, the liberalization policy and various tax reliefs announced by the Indian government over the recent past have pronounced a significantly encouraging impact on this industry segment. Estimates reveal that owing to several boosting factors, Indian automobile industry has been growing at a pace of about 18% per year. Therefore, global automobile giants like Volvo, General Motors and Ford have started looking at India as a prospective hot destination to establish and expand their operations. Like many other nations India s highly developed transportation system has played a very important role in the development of the country s economy over the past to this day. One can say that the automobile industry in the country has occupied a solid space in the platform of Indian economy. Empowered by its present growth, today the automobile industry in the country can produce a diverse range of vehicles under three broad categories namely cars, two-wheelers and heavy vehicles.

HINDUSTAN MOTORS
Hindustan Motors Limited (HML), India's pioneering automobile manufacturing company and Flagship Company of the C.K. Birla Group, was established in the year 1942 at Port Okha in Gujrat. Hindustan Motors which is known in the country for its most popular product Ambassador, fondly called "The king of Indian roads, is also involved in the manufacturing of heavy engineering equipments, other passenger cars, trucks, Multi utility vehicles, Power Shift Transmission Products which it sells in the domestic as well as foreign markets. HM continued to be the leading automobile manufacturer in the country till 1980s when the Indian Automobile Industry was opened from protection, thereby permitting the entry of foreign players.

HINDUSTAN MOTORS LIMITED # PLANTS STATE YEAR STARTED 1. Uttarpara (Kolkata) West Bengal 1948 Passenger Vehicles (Ambassador) 2. Pithampur (Indore) Madhya Pradesh 1987 Isuzu Motor OKA Company, Japan Motor Company, Australia 3. Tiruvallur (Chennai Tamil Nadu 1998 Mitsubishi Motors Japan Fuel-efficient engines and COLLABORATION PRODUCTS

transmissions; RTV trucks Mitsubishi Lancer, Pajero, Outlander, Montero.

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PESTEL ANALYSIS
POLITICAL : * Govt. policies lay emphasis on R&D activities carried out by companies in India by giving a weighted tax deduction of up to 150 and R&D activities. * * It assists in the development of vehicle propelled by alternate energy source. Auto policy of Indian govt. allows automatic approval for foreign equity investment up to 100 * with no minimum investment criteria. for in house research

Auto fuel policy has been formulated to ensure availability of adequate amount of appropriate fuel to meet emission norms.

Auto policy also aims at establishing an international hub for manufacturing small, affordable passenger cars as well as tractor and two wheelers.

It ensures a balanced transition to open trade at minimal risk to the Indian economy and local industry.

Govt. emphasis on mass rapid transport system.

ECONOMIC : * * The manufacturing sector has grown at 8-10 per annum in the last few years

Govt. has granted concessions, such as reduced interest rates for export

financing. * Weighted tax deduction of up to 150 for in-house research and R & D

activities. * Several Indian firms have partnered with global players. While some have formed joint ventures with equity participation, others have also entered into technology tie-ups. * Establishment of India as a manufacturing hub, for mini, compact cars and for auto components.

SOCIAL : * Since changed lifestyle of people, leads to increased purchase of automobiles, so automobile sector have a large customer base to serve. * * The average family size is 4, which makes it favorable to buy a four wheeler. 85 of cars are financed in India i.e. obtained at loans from the various

Financial and Non Financial organizations * Cars priced below Rs6,00,000 account for nearly 80 automobile market. * Indian customers are highly discerning, educated and well informed. They are price sensitive and put a lot of emphasis on value for money. * Preference for small and compact cars. They are socially acceptable even amongst the well off. * Preference for fuel efficient cars with low running costs. of the passenger

TECHNOLOGICAL : * More and more emphasis is being laid on R & D activities carried out by Companies in India. * activities. * The Government of India is promoting National Automotive Testing and R&D Infrastructure industry in India. * Technological solutions helps in integrating the supply chain, hence reduce losses and increase profitability. Project (NATRIP) to support the growth of the auto Weighted tax deduction of up to 150 for in-house research and R&D

Customized solutions (designer cars etc.) can be provided with the proliferation of technology

* *

Internet makes it easy to collect and analyze customer feedback. With the entry of global companies into the Indian market, advanced technologies, both in product and production process have developed.

With the development or evolution of alternate fuels, hybrid cars have made entry into the market.

Major global players like Audi, BMW, Hyundai etc have setup their manufacturing units in India.

Technological solutions helps in integrating the supply chain, hence reduce losses and increase profitability.

ENVIRONMENTAL : * If there is good availability of roads or the roads are smooth then it will affect the use of automobiles (reduce maintenance costs). * Environmental pollution is a growing cause of concern because of the internal combustion engines which work on fossil fuels and generate considerable amounts of CO and CO2 gases.

LEGAL : * * * Legal provision relating to environmental pollution by automobiles. Legal provisions relating to safety measures. Indian governments auto policy aimed at promoting an integrated, phased and conducive growth of the Indian automobile industry.

Hindustan Motors: SWOT Analysis

STRENGTHS : 1. First Indian car company to start automobile manufacturing in India in 1942. 2. Company was the largest manufacturer of cars in India before Maruti Udyog Limited entered during the 1980s. 3. Manufacturer of Ambassador which is widely used by the Indian government both state and central government level. 4. The ambassadors testing by the people of India has made it the true Indianised car.

WEAKENESS : There has been no fundamental change in the design of the cars that have been manufactured by the Hindustan Motors like Ambassador, which some critics feel has been a major factor behind retarding its demand. 1. The company i.e. Hindustan Motors diversified very lately which is with the launch of new vehicles after entering into Joint venture with different foreign companies. 2. There are strict emission norms that are being enforced by the government. 3. The company is having a very niche market which mostly related to government vehicles or as city cabs.

OPPORTUNITIES : 1. Adapt to the market demands and come up with products aimed to strengthen its position in the Indian Automobile Sector, in collaboration with the expertise from reliable partners like Mitsubishi. 2. Make use of the rapidly growing Indian Automobile customer base and try to develop products that appeal to the masses and hence be able to tap the market resources. 3. The technology available is quite advanced so it can help both the company and the industry to have a good growth. 4. The growing market also provides an opportunity for the industry to raise their sales.

THREATS : 1. Due to stringent Government norms regarding emission control there is a threat that has been posed before the industry. 2. The rise in the prices of the fuel also acts as a threat for the company to manufacture better mileage vehicle. 3. Stiff competition from existing players