Automobile Industry in India Essay

The automotive industry in India is one of the larger markets in the world and had previously been one of the fastest growing globally, but is now seeing flat or negative growth rates. India’s passenger car and commercial vehicle manufacturing industry is the sixth largest in the world, with an annual production of more than 3. 9 million units in 2011.

According to recent reports, India overtook Brazil and became the sixth largest passenger vehicle producer in the world (beating such old and new auto makers as Belgium, United Kingdom, Italy, Canada, Mexico, Russia, Spain, France, Brazil), grew 16 to 18 per cent to sell around three million units in the course of 2011-12. In 2009, India emerged as Asia’s fourth largest exporter of passenger cars, behind Japan, South Korea, and Thailand. In 2010, India beat Thailand to become Asia’s third largest exporter of passenger cars. As of 2010, India is home to 40 million passenger vehicles.

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More than 3. 7 million automotive vehicles were produced in India in 2010 (an increase of 33. 9%), making the country the second (after China) fastest growing automobile market in the world in that year. According to the Society of Indian Automobile Manufacturers, annual vehicle sales are projected to increase to 4 million by 2015. The majority of India’s car manufacturing industry is based around three clusters in the south, west and north. The southern cluster consisting of Chennai is the biggest with 35% of the revenue share.

The western hub near Mumbai and Pune contributes to 33% of the market and the northern cluster around the National Capital Region contributes 32%. Chennai, with the India operations of Ford, Hyundai, Renault, Mitsubishi, Nissan, BMW, Hindustan Motors, Daimler, Caparo, and PSA Peugeot Citroen is about to begin their operations by 2014. Chennai accounts for 60% of the country’s automotive exports. Gurgaon and Manesar in Haryana form the northern cluster where the country’s largest car manufacturer, Maruti Suzuki, is based.

The Chakan corridor near Pune, Maharashtra is the western cluster with companies like General Motors, Volkswagen, Skoda, Mahindra and Mahindra, Tata Motors, Mercedes Benz, Land Rover, Jaguar Cars, Fiat and Force Motors having assembly plants in the area. Nashik has a major base of Mahindra & Mahindra with a UV assembly unit and an Engine assembly unit. Aurangabad with Audi, Skoda and Volkswagen also forms part of the western cluster. Another emerging cluster is in the state of Gujarat with manufacturing facility of General Motors in Halol and further planned for Tata Nano at their plant in Sanand.

Ford, Maruti Suzuki and Peugeot-Citroen plants are also set to come up in Gujarat. Kolkata with Hindustan Motors, Noida with Honda and Bangalore with Toyota are some of the other automotive manufacturing regions around the country. ACCORDING TO SOCIETY OF INDIAN AUTOMOBILE MANUFACTURERS: | | Overview of the Automobiles Industry Industry performance in 2011-12 Production The cumulative production data for April-March 2012 shows production growth of 13. 83 percent over same period last year. In March 2012 as compared to March 2011, production grew at a single digit rate of 6. 3 percent. In 2011-12, the industry produced 20,366,432 vehicles of which share of two wheelers, passenger vehicles, three wheelers and commercial vehicles were 76 percent, 15 percent, 4 percent and 4 percent respectively. Domestic Sales The growth rate for overall domestic sales for 2011-12 was 12. 24 percent amounting to 17,376,624 vehicles. In the month of only March 2012, domestic sales grew at a rate of 10. 11 percent as compared to March 2011. Passenger Vehicles segment grew at 4. 66 percent during April-March 2012 over same period last year.

Passenger Cars grew by 2. 19 percent, Utility Vehicles grew by 16. 47 percent and Vans by 10. 01 percent during this period. In March 2012, domestic sales of Passenger Cars grew by 19. 66 percent over the same month last year. Also, sales growth of total passenger vehicle in the month of March 2012 was at 20. 59 percent (as compared to March 2011). For the first time in history car sales crossed two million in a financial year. The overall Commercial Vehicles segment registered growth of 18. 20 percent during April-March 2012 as compared to the same period last year.

While Medium & Heavy Commercial Vehicles (M&HCVs) registered a growth of 7. 94 percent, Light Commercial Vehicles grew at 27. 36 percent. In only March 2012, commercial vehicle sales registered a growth of 14. 82 percent over March 2011. Three Wheelers sales recorded a decline of (-) 2. 43 percent in April-March 2012 over same period last year. While Goods Carriers grew by 6. 31 percent during April-March 2012, Passenger Carriers registered decline by (-) 4. 50 percent. In March 2012, total Three Wheelers sales declined by (-) 9. 11 percent over March 2011.

Total Two Wheelers sales registered a growth of 14. 16 percent during April-March 2012. Mopeds, Motorcycles and Scooters grew by 11. 39 percent, 12. 01 percent and 24. 55 percent respectively. If we compare sales figures of March 2012 to March 2011, the growth for two wheelers was 8. 27 percent. Exports During April-March 2012, the industry exported 2,910,055 automobiles registering a growth of 25. 44 percent. Passenger Vehicles registered growth at 14. 18 percent in this period. Commercial Vehicles, Three Wheelers and Two Wheelers segments recorded growth of 25. 5 percent, 34. 41 percent and 27. 13 percent respectively during April-March 2012. For the first time in history car exports crossed half a million in a financial year. In March 2012 compared to March 2011, overall automobile exports registered a growth of 17. 81 percent. ISSUES CURRENTLY FACED BY COMPANIES DUE TO GOVERNMENT POLICIES: EMMISSION NORMS: In tune with international standards to reduce vehicular pollution, the central government unveiled the standards titled ‘India 2000’ in 2000 with later upgraded guidelines as ‘Bharat Stage’.

These standards are quite similar to the more stringent European standards and have been traditionally implemented in a phased manner, with the latest upgrade getting implemented in 13 cities and later, in the rest of the nation. Delhi(NCR), Mumbai, Kolkata, Chennai, Bangalore, Hyderabad, Ahmedabad, Pune, Surat, Kanpur, Lucknow, Solapur, and Agra are the 13 cities where Bharat Stage IV has been imposed while the rest of the nation is still under Bharat Stage III. BHARAT STAGE EMMISSION STANDARDS: Bharat stage emission standards are emission standards instituted by he Government of India to regulate the output of air pollutants from internal combustion engine equipment, including motor vehicles. The standards and the timeline for implementation are set by the Central Pollution Control Board under the Ministry of Environment & Forests. The standards, based on European regulations were first introduced in 2000. Progressively stringent norms have been rolled out since then. All new vehicles manufactured after the implementation of the norms have to be compliant with the regulations. Since October 2010, Bharat stage III norms have been enforced across the country.

In 13 major cities, Bharat stage IV emission norms are in place since April 2010. The phasing out of 2 stroke engine for two wheelers, the stoppage of production of Maruti 800 & introduction of electronic controls have been due to the regulations related to vehicular emissions. While the norms help in bringing down pollution levels, it invariably results in increased vehicle cost due to the improved technology & higher fuel prices. However, this increase in private cost is offset by savings in health costs for the public, as there is lesser amount of disease causing particulate matter and pollution in the air.

CHALLENGES FACED BY AUTOMOBILE INDUSTRY AND THE INITIATIVES TAKEN BY GOVERNMENT TO OVERCOME THEM- Ashok Kolaskar, advisor to National Knowledge Commission, INDIA The Indian auto industry is changing rapidly. During the last decade, many international auto manufacturers, either by themselves or in partnership with Indian companies, have started manufacturing activities in India. The ancillary industries have also grown in tandem. The quality of production in small- and medium-scale industries has improved to such an extent that they started exporting products to international manufacturers.

The major breakthrough of recent years is the unveiling of “Nano” by Tata Motors during the auto expo 2007. This has received worldwide attention and proved that India can not only design an automobile of international standards but also execute the project at a much lower cost through innovative choice of components, materials, engine design etc. These developments in the auto sector have given new confidence to everyone related to the auto industry and specifically to the government which resulted in the announcement of the Auto Policy 2006-2016 by the Ministry of Heavy Industries.

According to the Auto Policy, the Indian auto sector is expected to grow to US$ 216 billion by 2016 and add 2. 5 million new jobs to the economy. Every year two to three million people are expected to purchase new vehicles. Several million vehicles and components are expected to be exported to both developed and developing nations. To achieve these goals, it is important that the present GDP growth rate, which is more than 8 per cent, continues to remain at the same level for the next 8-10 years. The government is also giving some concessions to the auto industry.

To realise the above growth predictions, it is important to overcome various challenges the industry is facing currently. Two of the foremost challenges are the spiralling cost of fuel and the paucity of highly skilled manpower. Rising oil price International price of crude oil has crossed US$ 120 per barrel and is rising at an alarming rate. The forecast of market experts that the crude oil price will plateau around US$ 100 per barrel has been proved wrong. The skyrocketting crude oil price rise will affect the economic growth of most of the nations of the world including India.

The prospects of India and China of becoming economic superpower will be seriously affected. Also, the rise in oil prices will impact the growth of global automotive industry. Unless the use of alternative fuels increases, it is very unlikely that the situation will change for the better. This necessarily means that more and more investments should be directed towards R&D, establishing mechanisms to translate R&D results into products and their efficient manufacturing. This will also require radical redesigning of engines. Human resources

The second major challenge is the creation of highly skilled human resource required for the auto industry. Auto industry, like many other industries is facing severe shortage of skilled technical as well as managerial manpower. This challenge becomes all the more daunting because faults lie at a more fundamental level of training infrastructure and the social perception. In India, engineering colleges and technology institutions impart engineering education. Many of these institutions used to provide training in automotive engineering through well-established Internal Combustion Engineering (ICE) and Mechanical Engineering departments.

However, the new wave of IT, electronics and communication technology has forced these institutions to close down ICE departments and also reduce the number of Mechanical Engineering departments. The well-known ICE department of the Indian Institute of Science that produced high quality research and trained manpower is a sad example of these developments. It is true that more than 50 per cent of the total components of the current automobiles are electronic and that the importance of communication technology is also increasing.

However, the advances and training in these areas cannot be at the cost of the fundamental aspects of auto engineering including thermodynamics. Therefore, we need to redesign our automotive engineering courses and brand them properly to attract good students. This will help in not only increasing the number of auto engineers, which is crucial to the growth of the auto industry, but also getting the human resources to carry out research in the auto sector and achieve breakthroughs necessary for designing the next-generation vehicles.

There is also an urgent need to improve the quality of skilled and semi skilled manpower working in the auto industry. To do this the existing vocational educational institutions have to be upgraded and more number of such institutes should be started. Today, most of our vocational educational institutes have poorly trained, unmotivated and uninspiring teaching faculty, and outdated equipment, machines, syllabus and governance system. National Knowledge Commission, in its recent report has given several recommendations to improve vocational training in this country.

The Central Government has accepted all the recommendations. Two major recommendations are rebranding the vocational education by updating the syllabus and public-private partnership (PPP) in the establishment and governance of vocational educational institutes. Accordingly, the finance minister has allotted an initial amount of Rs. 1,000 crores in this year’s budget to establish a corporation of Rs. 15,000 crore outlay through PPP model. It is hoped that this corporation will help immensely in revolutionising and making the vocational education more relevant to the contemporary needs.

The third area that needs to be addressed immediately is the shortage of human resources in auto design. The government as well as the professionals have realised that creative people in India need to be given training by which they can come into the mainstream and design contemporary products in general and autos in particular. National Institute of Design at Ahmedabad is playing a seminal role in producing good designers. However, the output of the institute is very small. Therefore, in the first of its kind National Policy of Design, the Government has suggested to establish four such institutes, immediately.

Even these institutes will not be able to meet the current demand for designers. Therefore, many more institutes need to be established either through public-private partnership or solely by private sector. Conclusion The growth of auto industry in India will be contingent not just on domestic demand, but also equally on exports. Therefore, the present projections will become a reality if thrust is given to original research that will yield breakthrough results. These results help in addressing the current global concerns such as environment, fuel efficiency, need for alternate and renewable fuels and materials etc.

This can happen only through a consortium approach where various auto companies and academic institutions work together as in the case of IT hardware industry. The consortium approach should be extended to address the trained human resource shortage as well. The government should act as a facilitator by bringing about necessary changes in the current laws that will encourage private participation. Finally, there should be mechanisms in place that will ensure that there is a balance in the pool of human resources comprising research scientists, managers, engineers, designers, technicians, and skilled and semiskilled workers.

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