The Indian Driveway

AutomobileA well-developed transport network is an image of a well-developed economy. As India’s transport network is developing at a fast pace, Indian Automobile Industry is growing too. The Automobile Industry will play a prime role in Indian Economy.

Following India’s growing openness, the arrival of new and existing models, easy availability of finance at relatively low rate of interest and price discounts offered by the dealers and manufacturers all have stirred the demand for vehicles and a strong growth of the Indian automobile industry. Government has liberalized the norms for foreign investment and import of technology and that appears to have benefited the automobile sector. The production of total vehicles increased from 4.2 million in 1998- 99 to 7.3 million in 2003-04. It is likely that the production of such vehicles will exceed 10 million in the next couple of years.

The data obtained from ministry of commerce and industry, shows high growth obtained since 2001- 02 in automobile production continuing in the first three quarters of the 2004-05. Annual growth was 16.0% in April-December, 2004; the growth rate in 2003-04 was 15.1 per cent. The automobile industry grew at a compound annual growth rate (CAGR) of 22 per cent between 1992 and 1997.

With investment exceeding Rs.50, 000 crore, the turnover of the automobile industry exceeded Rs.59, 518 crore in 2002-03. Including turnover of the auto-component sector, the automotive industry’s turnover, which was above Rs. 84,000 crore in 2002-03, is estimated to have exceeded Rs.1, 00,000 crore (US$ 22.74 bn) in 2003-04.

All the major automobile companies have set their eyes on India as their potential market. Rolls Royce and Porsche have already opened stores in India and are soon expanding their marketing base in India. Nissan is also going ahead with its India plan after car sales in Japan have stagnated. From marketing to manufacturing Indian automobile industry has drawn interest likewise. After the much sensational announcement of Tata Motors’ 1lakh car many global players have set up R&D centers in India to find out the ways to reduce costs and outsource parts. Hyundai has dedicated one of its plants in India for export-oriented production and recently Maruti Udyog announced the launch of “A-Star” a Euro 5 passenger car model designed for overseas markets.

It’s not only the global biggies getting their share of the Indian automobile pie but also the other way round. The joint venture between Renault and Mahindra & Mahindra and their successful launch of luxury sedan “Logan” are just the initial stages. Recently Tata Motors made news by setting aside all the bidders for Ford’s “Jaguar” and “Land Rover” and then there was a twist in the tale when Mahindra & Mahindra made a higher bid than Tata Motors.

The wheels have just started to roll and there seems to be a great distance to cover. The journey ahead could be bumpy with more and more global players getting prepared to burn some rubber on Indian roads.

Namit Agarwal