This section Covers..
01. Top techniques
02. Successful Techniques
[Provided by Santhoshrajan. S, Chennai, Tamilnadu (11.05.09)]
The Indian automobile industry has come a long way since in the first car ran on the streets of Bombay (now Mumbai) in 1898. The initial years of the industry were characterized by unfavorable government policies. The real big change as we see in the industry today, started to take place with the liberalization policies that the government initiated in the 1991. The liberalization policies had a salutary impact on the Indian economy and the automobile industry in particular.
The automobile industry in the country is one of the key sectors of the economy in terms of the
employment opportunities that it offers. The industry directly employs close to around 0.2 million people and indirectly employs around 10 million people. The prospects of the industry also has a bearing on the auto-component industry which is also has a bearing on the auto-component industry which is also a major sector in the Indian economy directly employing 0.25 million people.
All is not well with the automobile industry the world over currently with the slowdown that has gripped most of the major economies of the world. The incidents of 9/11 have also contributed to an already ailing global economy. The gap between the manufacturing capacity volume and the assembly volume is growing by the day and has worried the manufacturers. This state of affairs has triggered a lot of cutthroat competition and consolidation in the industry. Cost reduction initiatives have come to be the main thing in the global industry today. Towards this direction, many automobile factories are being closed down.
The Indian automobile industry is a stark contrast to the global industry due to many of the characteristics, which are peculiar to India. The Indian automobile industry is very small in comparison to the global industry. The growth of big volumes is not as that of two wheelers and tractor segment.
Indian Automobile Industry-Recent Trends
The Indian automotive industry has flourished like never before in the recent years. This extra-ordinary growth that the Indian automotive industry has witnessed is a result of a two major factors namely, the improvement in the living standards of the middle class, and an increase in their disposable incomes.
Moreover, the liberalization steps, such as, relaxation of the foreign exchange and equity regulations, reduction of tariffs on imports, and refining the banking policies, initiated by the Government of India, have played an equally important role in bringing the Indian Automotive industry to great heights. It is estimated that the sale of passenger cars have tripled compared to their sale in the last five years. Thus, the sale of cars has reached a figure of 1 million users and is expected to increase further. It's also to be noted that the demand for luxurious models, SUVs, and mini-cars for family owners, have shot up, largely due to increase in the consumer's buying capacity.
The increased demand for Indian automobiles has resulted in a large number of multinational auto companies, especially from Japan, U.S.A., and Europe, entering the Indian market and working in collaboration with the Indian firms. Also, the institutionalization of automobile finance has further paved the way to sustain a ling-term high growth for the industry.
The increasing role of auto finance is also scrutinized by proving a series of surveys conducted across the country covering all categories of private and commercial vehicles' finance. The report also examines the region-wise demand and growth trends for the selected vehicles, and how they influenced India's GDP growth.
The Indian automotive industry has grown at a staggering pace over the last few years. The US$ 6.8 billion industry has registered a CAGR of 17% between 1998 and 2003 and is projected by ACMA (Auto Components Manufacturers Association of India) to grow at a 15% CAGR till fiscal 2012.
The opening up of the sector over the last decade has caught the attention of global auto majors as the only market rivaling China in terms of potential market size and growth opportunity. As the automobile industry has grown and matured, the Indian auto components industry has also grown tremendously, and is rapidly achieving global competitiveness both in terms of cost and quality. Infact, industry observers think that while Indian automobile market will grow at a measured pace, the auto components industry is poised for a take-off and is one of the handfuls of industries where India has a distinct competitive advantage.
In the 1990s, economic liberalization allowed foreign automakers such as Hyundai, Ford, Toyota and GM set up base in India. The local component manufacturers did not have the requisite size, technology or quality to meet the needs of these big carmakers. On the other hand, the high import tariffs and price sensitiveness of the Indian car buyer made it unviable for these companies to import components from their global suppliers. Therefore, the carmakers had to persuade their overseas components suppliers to set up local manufacturing base in India. For example, Delphi followed after General Motors opened its plant in the state of Gujarat in 1995 and Visteon followed Ford in 1998.
As these companies developed and stabilized their Indian operations, they realized the cost advantage of manufacturing components in India-typically lower by about 30%. They began to explore the possibility of exporting back these low cost, high components to their global factories and thus reduce their overall costs.
 |
Back to Finance Section |
