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.

The automotive industry (including components & tyres) has already attained a turnover of
US$ 48.86 billion. The industry provides direct and indirect employment to 13.1 million
people.The contribution of the automotive industry to GDP has risen from 2.77% in 1992-93
to 4.14% in 2008-09.The industry is also making a contribution of 17% to the kitty of indirect
taxes of the Government.

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 wheelers
• Fifth largest manufacturer of commercial vehicles
• Manufactures largest number of tractors in the world
• Ninth largest car manufacturer in world

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 US$ 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.

According to the data provided by Society of Indian Automobile Manufacturers (SIAM),the

cumulative sales data for April-February 2011 shows domestic sales growth of 26.92 percent
over same period last year. In February 2011 as compared to February 2010, domestic sales
grew at 21.32 percent.

Domestic Sales

Passenger Vehicles segment grew at 29.85 percent during April-February 2011 over same
period last year. Passenger cars grew by 30.34 percent, Utility Vehicles grew by 19.69 percent
and Multi-Purpose Vehicles grew by 43.28 percent in this period. February 2011 figures for
domestic sales of Passenger Cars show a growth of only 22.63 percent over the same month
last year. However, in absolute numbers, this segment recorded highest ever sales. Total
passenger vehicle sales figures for February 2011 compared to February 2010 shows growth
stands at 20.88 percent.

The overall Commercial Vehicles segment registered growth of 28.65 percent during April-
February 2011 as compared to the same period last year. While Medium & Heavy Commercial
Vehicles ( M&HCVs ) registered growth of 34.18 percent, Light Commercial Vehicles grew at
24.08 percent. In contrast to the last February sales figures, February 2011 registered a
growth of 10 percent.

Three Wheelers sales recorded a growth rate of 19.96 percent in April-February 2011. While
Passenger Carriers grew by 22.39 percent during April-February 2011, Goods Carriers
registered growth of 10.31 percent.

Two Wheelers registered a growth of 26.55 percent during April-February 2011. Mopeds,
Motorcycles and Scooters grew by 23.79 percent, 23.30 percent and 44.40 percent
respectively.

If we compare February 2011 to February 2010, the growth figures for three and two wheelers
are at 24.03 percent and 22.04 percent respectively.

Exports

During April-February 2011, overall automobile exports registered a growth rate of 30.62
percent. Passenger Vehicles registered decline and the growth rate was (-) 0.86 percent in this
period. Commercial Vehicles, Three Wheelers and Two Wheelers segments recorded growth of
72.82 percent, 59.29 percent and 36.97 percent respectively during April-February 2011. In
February 2011 compared to February 2010, overall automobile exports registered a growth of
27.57 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.

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