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AUTOMOTIVE INDUSTRY IN INDIA....STEPS TOWARDS EXCELLENCE
Published on 01 February, 2016
Engineer at
MSME Tool Room (IDTR), Jamshedpur
The Indian automotive industry has emerged as a 'sunrise sector' in the Indian economy. India is emerging as one of the world's fastest growing passenger car markets and second largest two wheeler manufacturer. It is also home for the largest motor cycle manufacturer and fifth largest commercial vehicle manufacturer.
India is emerging as an export hub for sports utility vehicles (SUVs). The global automobile majors are looking to leverage India's cost-competitive manufacturing practices and are assessing opportunities to export SUVs to Europe, South Africa and Southeast Asia. India can emerge as a supply hub to feed the world demand for SUVs.
India also has the largest base to export compact cars to Europe. Moreover, hybrid and electronic vehicles are new developments on the automobile canvas and India is one of the key markets for them. Global and Indian manufacturers are focussing their efforts to develop innovative products, technologies and supply chains.
The automotive plants of global automakers in India rank among the top across the world in terms of their productivity and quality. Top auto multinational companies (MNCs) like Hyundai, Toyota and Suzuki rank their Indian production facilities right on top of their global pecking order.
Key Statistics
The amount of cumulative foreign direct investment (FDI) inflow into the automobile industry during April 2000 to January 2013 was worth US$ 7,653 million, amounting to 4 per cent of the total FDI inflows (in terms of US$), as per data published by Department of Industrial Policy and Promotion (DIPP), Ministry of Commerce.
The Indian small and light commercial vehicle segment is expected to more than double by 2015-16 and grow at 18.5 per cent compound annual growth rate (CAGR) for the next five years, according to a report titled, 'Strategic Assessment of Small and Light Commercial Vehicles Market in India' by Frost & Sullivan.
The light commercial vehicles (LCV) market - both passenger and goods carrier is estimated to register a sales growth of around 20 per cent during FY 2012-FY 2015, as per a RNCOS report titled, "India LCV Market Outlook".
India is the world's second-largest heavy commercial vehicle market. The RNCOS report, "India MCV and HCV Market Outlook", observed that infrastructure boom and emergence of hub and spoke model, among other factors have given a new dimension to the medium and heavy goods carrier commercial vehicles' sector in India. It is anticipated that the sales of medium and heavy commercial (M&HC) goods carriers will increase at a CAGR of more than 10.5 per cent during 2011-12 to 2014-15.
In another RNCOS research report, "Indian Automobile Sector Analysis", the production of passenger vehicle is forecast to grow at a CAGR of around 11 per cent from 2009-10 to 2012-13, and domestic volume sales at a CAGR growth of around 12 per cent.
Major Developments & Investments
- Yamaha Motor Co (YMC) has announced to set up its fifth global research and development (R&D) centre at its Greater Noida facility
- Honda Cars India Ltd (HCIL) plans to invest Rs 2,500 crore (US$ 462.11 million) at its Tapukara plant in Rajasthan. The company plans to set up a new assembly line for car with an installed annual capacity of 120,000 units
- Isuzu Motors plans to set up its greenfield manufacturing facility in Andhra Pradesh (AP), for pickup trucks or LCV and SUV, with an investment of Rs 1,500 crore (US$ 277.26 million) over 5-7 years
- Volvo plans to expand car operations in India. The company looks to drive in new models in the market apart from increasing its sales network
- Global ultra-luxury car maker, Rolls-Royce Motor Cars, plans to launch exclusive 'India Edition' cars in 2013. The car maker would come up with a customised edition of its Phantom and Ghost models for Indian buyers
- Escorts Ltd has inked a partnership with Italy-based BCS SpA to distribute and sell the speciality Ferrari brand of tractors in India
- TVS Motor and BMW AG's motorcycle division have announced a deal to jointly develop bikes that would give the Indian automaker access to BMW technology. TVS Motor and BMW will develop motorcycles in the sub 500 cc segment
- Bajaj Auto and Kawasaki Heavy Industries plan to take their partnership to Indonesia, under which select Bajaj products will be assembled at the Kawasaki facility and distributed through its network
- Bajaj Auto also plans to become the first Indian automobile company to manufacture a street bike, with a made in India motorcycle tag, in the US. The Indian company will manufacture this product for its partner KTM AG
Government Initiatives
The Government of India allows 100 per cent FDI in the automotive industry through automatic route.
Some of the highlights of the Union Budget 2012-13:
- The auto industry is encouraged by 5 years extension of 200 per cent weighted deduction of R&D expenditure under Income Tax Act and also introduced the weighted deduction of 150 per cent for expenditure on skills development. These measures will help the industry improve its products and performance
- The increase in customs duty on cars and multi-utility vehicles (MUVs) valued above US$ 40,000 from 60 per cent to 75 per cent seems to be a step to encourage local manufacturing, value addition and employment
- Also, the concessional import duty on specified parts of hybrid vehicles has been extended to lithium ion batteries and other parts of Hybrid vehicles. This will help the industry to achieve better cost efficiency
The Government of India plans to push the supply of vehicles powered by electricity over the next eight years. It is expected that there will be a demand of 5-7 million electricity-operated vehicles by 2020. The Government also plans to introduce fuel-efficiency ratings for automobiles to encourage sale of cars that consume less petrol or diesel, as per Mr Veerappa Moily, Union Minister for Petroleum and Natural Gas.
The rapid improvement in infrastructure, huge domestic market, increasing purchasing power, established financial market and stable corporate governance framework have made the country a favourable destination for investment by global majors in the auto industry, as per Automotive Mission Plan (AMP) (2006-16). The AMP aims at doubling the contribution of automotive sector in gross domestic product (GDP) by taking the turnover to US$ 145 billion in 2016 with special emphasis on export of small cars, MUVs, two & three wheelers and auto components.
Road Ahead
India is expected to become the 11th largest market for Renault by the end of 2013, as per Mr Carlos Ghosn, Chairman and CEO, Renault. India is expected to be a critical global hub for the firm along with Brazil, Russia and, perhaps, another country in the ASEAN region.
Additionally, the vision of AMP 2006-2016 aims India "to emerge as the destination of choice in the world for design and manufacture of automobiles and auto components with output reaching a level of US$ 145 billion accounting for more than 10 per cent of the GDP and providing additional employment to 25 million people by 2016."
Moreover, the introduction of alternative fuels like hydrogen and bio fuels needs to be promoted to ensure sustainability of the industry over the long term.
By,
Er Sumit Shukla
CAD CAE
Ramesh Tyagi