Sailendra Prasanna Mishra>

Automotive industry in India

Automotive industry is the key sector of India, promising a robust growth for many domestic and a lucrative market for global auto industry. If you are thinking of passenger cars in India as a key sector, you are really missing the big opportunities in Heavy vehicle segment.

After garments/apparel and IT industry, India strategic geographical location and growing economy is boosting Automotive sector to acceleration mode.

In 1991 Indian government opened its market for foreign automotive companies to invest with 100% FDI. From that this sector has never turned back and has showed constant growing. Since many companies has opened their facilities in India taking the production from mere 2 million to close 10 million.(9.7million).

Indian road is now shining not with king’s Ambassador but with BMW, Toyota, Ford and now with Renault launching India with its ace model Logan.

At present, India is the world's

Largest tractor and three-wheel vehicle producer.
Second largest two-wheel vehicle producer.
Fourth largest commercial vehicle producer.
Eleventh largest passenger car producer.

This segment of industry is currently is growing at 20% and expecting growing close to that rate from next 10-15 years. No global player has neglected India’s potential in Global Automotive segment.

Sales:

Passenger Vehicles: Growth in sales of passenger vehicles was 18.45% in 2006. This was almost three times the growth witnessed in 2005. Sale of passenger cars expanded by 20.0%. Export of passenger vehicles increased by 12.9%
Utility Vehicles: 12.4%
Two-wheelers, commercial vehicles and three-wheelers: Export growth at a rate of 24%, 26% and 72% respectively

Investment: Among the car companies that are investing in India are US automakers General Motors and Ford, Germany's BMW and DaimlerChrysler AG, France's Renault, Japan's Suzuki, Toyota and Honda, and South Korea's Hyundai.

There is also a boom in auto ancillary companies. India is an attractive outsourcing destination for global auto companies because of its strong engineering skills and low costs. Sourcing parts from India is 10-20% cheaper for US auto makers and about 50% cheaper for their European counterparts.

Auto Components:

This industry grew by over 28 percent between 1995 and 1998, and has been sustaining double digit growth, clocking 16 percent in 2004-05, and 15 percent in 2005-06. The Indian auto component industry is quite comprehensive with around 500 firms in the organized sector producing practically all automotive components; there are more than 10,000 firms total. India’s component industry now has the capability to manufacture the entire range of auto-components, for example, engine parts, drive, transmission parts, suspension and braking parts, electricals, body and chassis parts, equipment, etc

The Industry's Challenge:

Even though the automotive industry is robust, car manufacturers are complaining that the government's frequent change in policies is not encouraging the industry. Changing the policies and guidelines frequently severely hurts the companies’ plans. It also affects investment decisions in the country.