INDUSTRY & SERVICES

AUTO INDUSTRY

On the canvas of the Indian economy, automotive industry occupies a prominent place. Due to its
deep forward and backward linkages with several key segments of the economy, automotive
industry has a strong multiplier effect and is capable of being the driver of economic growth. A
sound transportation system plays a pivotal role in the country's rapid economic and industrial
development. The well-developed Indian automotive industry ably fulfils this catalytic role by
producing a wide variety of vehicles: passenger cars, light, medium and heavy commercial vehicles,
multi-utility vehicles such as jeeps, scooters, motorcycles, mopeds, three wheelers, tractors etc.

Automotive Industry comprises of automobile and auto component sectors and is one of the key
drivers of the national economy as it provides large-scale employment, having a strong multiplier
effect. Being one of the largest industries in India, this industry has been witnessing impressive
growth during the last two decades. It has been able to restructure itself, absorb newer technology,
align itself to the global developments and realize its potential. This has significantly increased
automotive industry's contribution to overall industrial growth in the country.

Growth Drivers of Indian Automobile Market

 Rising industrial and agricultural output

 Rising per capita income
 Favourable demographic distribution with rising working population and middle class
Urbanisation
 Increasing disposable incomes in rural agri-sector
 Availability of a variety of vehicle models meeting diverse needs and preferences
 Greater affordability of vehicles
 Easy finance schemes
 Favourable government policies
 Robust production

India's Position in World's Production

 Well-developed, globally competitive auto ancillary industry

 Established automobile testing and R&D centres
 Among one of the lowest cost producers of steel in the world
 World's second largest manufacturer of two wheeler
 Fifth largest manufacturer of commercial vehicles
 Largest manufacturers of tractors in the world
 Fourth largest passenger car market in Asia
 India is the second largest two-wheeler market in the world
 11th largest passenger car market in the world
 Expected to be the seventh largest auto industry by 2016

Automobile Industry

One of the major industrial sectors in India is the automobile sector. Subsequent to the
liberalization, the automobile sector has been aptly described as the sunrise sector of the Indian
economy as this sector has witnessed tremendous growth.
Automobile Industry was delicensed in July 1991 with the announcement of the New Industrial
Policy. The passenger car industry was, however, delicensed in 1993. No industrial licence is
required for setting up of any unit for manufacture of automobiles except
in some special cases. The norms for Foreign Investment and import of technology have also been
progressively liberalized over the years for manufacture of vehicles including passenger cars in order
to make this sector globally competitive. At present 100% Foreign Direct Investment (FDI) is
permissible under automatic route in this sector including passenger car segment. The import of
technology/technological upgradation on the royalty payment of 5% without any duration limit and
lump sum payment of USD 2 million is also allowed under automatic route in this sector. With the
gradual liberalization of the automobile sector since 1991, the number of manufacturing facilities in
India has grown progressively.

The cumulative production data for April-January 2010 shows production growth of 23.07 percent
over same period last year.

Domestic Sales

Passenger Vehicles segment during April-January 2010 grew at 25.21 percent over same period last
year. Passenger Cars grew by 24.75 percent, Utility Vehicles grew by 21.95 percent and Multi
Purpose Vehicles grew by 37.05 percent in this period.

The overall Commercial Vehicles segment registered positive growth at 30.39 percent during April-
January 2010 as compared to the same period last year. Medium & Heavy Commercial Vehicles
(M&HCVs) registered growth at 20.58 percent, Light Commercial Vehicles grew at 39.66 percent.

Three Wheelers sales recorded a growth rate of 25.77 percent in April-January 2010. While
Passenger Carriers grew by 32.54 percent during April-January 2010, Goods Carriers grew at 4.20
percent.

Two Wheelers registered a growth of 23.74 percent during April-January 2010. Mopeds, Scooters
and Motorcycles grew by 31.73 percent, 20.56 percent and 24.32 percent respectively.

Exports

During April-January 2010,overall automobile exports registered a growth rate of 13.24 percent.

Passenger Vehicles segment, Three Wheelers and Two Wheelers segments grew by 33.92 percent,
4.60 percent and 8.84 percent respectively in this period. Commercial Vehicles recorded growth of
(-) 7.52 percent.

Auto Components Industry

Surge in automobile industry since the nineties has led to robust growth of the auto component
sector in the country. In tandem with the industry trends, the Indian component sector has shown
great advances in recent years in terms of growth, spread, absorption of new technologies and
flexibility. Indian auto component industry has seen major growth with the arrival of world vehicle
manufacturers from Japan, Korea, US and Europe. Today, India is emerging as one of the key auto
components center in Asia and is expected to play a significant role in the global automotive supply
chain in the near future. The auto component industry is also expected to drive the growth of the
engineering sector in view of its strong downstream and upstream linkages with many other
segments of the engineering sector like raw materials, capital goods, intermediate products etc.Auto
component industry supports industries like automobiles, machine tools, steel, aluminum, rubber,
plastics, electrical, electronics, forgings and machining.India has also emerged as an outsourcing
hub for auto parts for international companies such as Ford, General Motors, Daimler Chrysler, Fiat,
Volkswagon, and Toyota.

During the year 2008-09,the turnover and export for auto component industry was recorded at US $
15.85 billion and US $ 3.11 billion respectively.

Policy Initiatives

Auto Policy

Vision

To establish a globally competitive Automotive Industry in India and to double its contribution to the
economy by 2010.

Objectives

This policy aims to promote integrated, phased, enduring and self-sustained growth of the Indian
automotive industry. The objectives are to:-

(i) Exalt the sector as a lever of industrial growth and employment and to achieve a high degree of
value addition in the country;

(ii) Promote a globally competitive automotive industry and emerge as a global source for auto
components;

(iii) Establish an international hub for manufacturing small, affordable passenger cars and a key
center for manufacturing Tractors and Two-wheelers in the world;

(iv) Ensure a balanced transition to open trade at a minimal risk to the Indian economy and local
industry;

(v) Conduce incessant modernization of the industry and facilitate indigenous design, research and
development;

(vi) Steer India's software industry into automotive technology;

(vii) Assist development of vehicles propelled by alternate energy sources;

(viii) Development of domestic safety and environmental standards at par with international
standards.

Full text of the policy

Automotive Mission Plan 2016

To accelerate and sustain growth in the automotive sector and to steer,co-ordinate and synergise
the efforts of all stakeholders,Automotive Mission Plan (AMP) 2006-2016 has been prepared in order
to make India a global automotive hub.

The Automotive Mission Plan (AMP) 2006-2016,aims at doubling the contribution of automotive
sector in GDP by taking the turnover to USD 145 billion and providing additional employment to 25
million people by 2016 with special emphasis on export of small cars,MUVs,two and three wheelers
and auto components.

Full text of the policy

Foreign Direct Investment

 Automatic approval for foreign equity investment upto 100 per cent of manufacture of
automobiles and component is permitted.
 The automobile industry is delicensed.
 Import of components is freely allowed.

Major Automotive Players in India

Companies Segments
Ashok Leyland LCVs, M&HCVs, buses
Asian Motor Works M & HCVs
Bajaj Auto Two and three wheelers
BMW India Cars and MUVs
Daimler Chrysler India Cars
Eicher Motors LCVs, M & HCVs
Fiat India Cars
Force Motors MUVs and LCVs
Ford India Cars and MUVs
General Motors India Cars & MUVs
Hero Honda Motors Two wheelers
Hindustan Motors Cars, MUVs and LCVs
Honda Two wheelers, cars and MUVs
Hyundai Motors Cars and MUVs
Kinetic Motor Two wheelers
Mahindra & Mahindra Three wheelers, cars, MUVs, LCVs
Maruti Suzuki Cars, MUVs, MPVs
Piaggio Three wheelers, LCVs
Royal Enfield Motors Two wheelers
Skoda Auto India Cars
Suzuki Motorcycles Two wheelers
Swaraj Mazda Ltd LCVs, M & HCVSs, buses
Tata Motors Cars MUVs, LCVs, M&HCVs, buses
Toyota Kirloskar Cars, MUVs
TVS Motor Co Two wheelers
Volvo India M & HCVs, buses
Volkswagen India Cars
Yamaha Motor India Two wheelers