Auto Industry: Trends over the Years

The country intends of raising the share of manufacturing in its GDP or in its economic output to 25% from the existing level of 14% in next twenty years.

As estimated, one sixth of Indian manufacturing is connected with automobiles.

Over the years, the two Indian car manufacturing companies that had once the monopoly of the car business have almost eclipsed. Manufacturers from all major car producing nations, be it American GM and Ford, German BMW, Mercedes, VW or Audi, French Renault or Italian Fiat, Japanese Suzuki, Toyota, Honda and South Korean Hyundai have set up its manufacturing plants in India. Suzuki was the real pioneer to come with Maruti Udyog in 1982

Interestingly, Suzuki that was skeptical even in as late as 1990s in manufacturing the gears for its transmission in India are not only manufacturing gear boxes and engines but putting in all the critical components manufactured by Indian auto components’ vendors.

Most pf the MNCs have now established its research and development centres in India. Some are developing its platforms in India that are meant for global market.

Some like Hyundai, Suzuki and Ford are exporting from India in pretty large quantities.

Surprisingly, from among the Indian manufacturers, Tata Motors and Mahindra and Mahindra have entered in the passenger car manufacturing and competing well with the MNCs. Tata’s Nano made all the global auto experts to rethink about India’s potential.

Almost seven out of every car manufactured in India are still petrol ones. But the demand of diesel cars is on increase with integration of better technologies making its driving experience closer to that of a petrol car and its superiority related to emission. Further today a diesel car travels 25 to 30 % farther for the same amount of fuel. Many manufacturers such as Hyundai and Suzuki have set up seaparte facilities for manufacturing diesel engines.

The growth of Indian passenger car business was very good till May this year.

Society of Indian Automobile Manufacturers (Siam) estimated the extra addition of 5 million new employees between now and 2012, to support the ever-increasing demand for new vehicles. But sudden upheaval in the global economy and the increase of interest rates and fuel prices may cause a slowdown and revision of growth story. However, that may only be a temporary one.
Labour is still 10 to 20% of the overall cost of manufacturing. While cheap labour has gone in favour of India as manufacturing destination, labour problems including its militancy are the irritants that require careful handling with collective understanding and long term consequences in mind.

MNCs such as General Motors intend to bring in Chinese auto manufacturers through back doors. I think there are already too many players. Following Chinese, further entries must end.

As Americans, Indian younger generation is increasingly buying bigger cars and more SUVs. Inside the habitations, the parking is getting more and more difficult and so is the congestion in market areas.

Cars still remain the status symbol. Perhaps that is one of the reasons for Nano not generating the expected demand. Is it not a malady that a huge SUV or a big car is seen to go for buying few loafs of breads or a bagful of vegetables in this time of energy crisis?

M& M will launch a smaller Xylo and Maruti Suzuki may come out with a mini SUV to satisfy the need of customers who are also to commute on rough roads. Maruti could have used Gypsy platform with a better body work and a little more powerful drive trains.

India is still far behind in hybrid or electric cars. Mandatory and challenging targets for the fuel efficiency of the cars on the line of American may also be coming soon. It, however, may put Indian domestic manufacturers at certain disadvantages.

India’s contribution in innovations and auto design is still limited. I wish there would have been at least two more players in the car manufacturing. I still feel morose about Hindustan Motors disappearance from the race. And that was just because of poor management.

Let me hope India becomes a leader in the auto industry.

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