Impact of Globalization on Indian Automobile Industry over last 20 Years

Pre-Liberalization Phase- Before 1991:

Until 1930s cars were imported and that to very small in numbers. Hindustan Motors
Ambassador, Premier Padminis Fiat and Mahindra & Mahindras Jeep were only 3 major Car
producers in India and these companies dominated Car Industry from 1940s to mid 80s.
In 1955 Royal Enfield from UK was the first company to export motorcycle to India. This
happened due to the requirement of rough, strong motorcycle by Indian Army. Bullet and
Rajdoot were 2 dominating motorcycles in India before liberalization. Among Scooters Bajaj
Chetak and LML Vespa were popular.
Over the last 20 years, Indian Auto industry has got the global business opportunities to grow
and at the same time there have been threats from giant global competitors.

From the above figure we can prominently observe that Globalization has attracted many
foreign brands to India, but we are lagging in producing indigenous vehicles. We have only 3 or 4
major companies producing indigenous cars. (Mahindra, HM, Tata Motors, Force Motors).
Role of Policy Reforms over last 20 years:
Decrease in import restrictions and reduced tariff levels.
Smooth licensing and approval process to encourage FDI in automobile sector.
Robust legal system and stable foreign exchange regime.
FDI and cross border trade has accelerated since 1991 in many industries including automobile
sector. The WTO has been facilitating trade and investment liberalization. Availability of skilled
and low cost labour has made foreign countries to invest in emerging countries like India.
Government has promoted NATRIP (National Automotive Testing and R & D Infrastructure
Project) to increase the growth of automobile industry in India.
Segmentation of market share: Passenger Vehicle: 15.96%, Commercial Vehicle: 3.95%, Three
wheelers: 3.60%, Two wheelers: 76.49%. In 2009, India came out to be the 4
th
largest exporter
of automobile.
Success of LPG (Liberalization, Privatization, and Globalization): The Indian economy was in
severe crisis in 1991 when foreign currency reserves came down to 1 billion $ and inflation was
as high at around 17%. . Through LPG model India overcame this economic hurdle. The below
figure shows 10 years (96-2006) growth rate of motor vehicle production at 13.2 % which was
not possible without globalization considering the economic scenario in 1991.

Impact of Globalization on Indian Automobile Industry over last 20 Years



Current Scenario: SWOT Analysis :
Strengths:
Availability of cheap labour cost.
Due to globalization many automobile industries in India are adopting
effective measures like assembly line manufacturing, JIT (Just in Time)
inventory management to increase productivity significantly.
Weaknesses:
Due to weak R & D, Indian auto sector lags behind global competitors in
the technology aspect.
After sales service is not up to the global standards.
Opportunities:
Penetration into rural market due to increased demand.
Globalization helps introducing new technology; goal should be to design
eco-friendly vehicles.
Threats:
RBI has increased interest rates 13 times over the last 4 years.
Increasing cost of raw materials due to inflation.
Global crisis can possess a threat.


Demand of automobile types across the world: The picture illustrates the population wise
distribution of automobile users. Indians predominantly use motorcycles than cars where as
Americans and Europeans use mostly cars.
From the above all discussions, we can draw an inference that Indian
automobile sector has been hugely benefited by globalization.