ON

Automobile Industry in India

Submitted under the partial fulfillment for the award of Post Graduate Diploma in Management(IB)

Batch (2006-08)

Submitted To: Mohd. Wamique Hisam (Sr.Lecturer)

Submitted By: Rahul Mani Tripathi PGIB/01/39

DECLARATION

I here by declare that all the information collected is correct in accordance with the findings of dissertation topic. It has been prepared purely for academic purpose.

RAHUL MANI TRIPATHI PGIB/01/39

ACKNOWLEDGEMENT

Research work is a combined effort, so one should be thank all that have helped in making report purposeful. Hence I take this opportunity to thank all that have been instrumental in helping me to prepare this report. It is great honor to be assigned this topic. First of all I would like to thank God who shows his blessing upon me in each and every step I am immensely grateful to Mohd. Wamique Hisam for his continuous support and guidance. I also want to thank Director General Prof Mukund Lal Sir for providing me this opportunity. I also want to thank all teachers, the staff member and library members for their valuable advice and guidance which helped me to make this report purposeful. I specially wish to thank all other people directly or indirectly related with my research and my friend as without their valuable support this report would not have been possible.

RAHUL MANI TRIPATHI

PREFACE
The automobile industry has grown by leaps and bounds in past decades. With every year new milestones have been achieved. With globalization, technological advancement and transfer of technology has revolutionized the sector. This research is carried out to assess the various components of automobile Industry. Also to analyze further opportunities and potential of automobile sector of India.

Index

Chapters 1 2 3 4 5

Particulars Objectives Research Methodology Introduction Opportunities & Challenges Recent Developments in Indian Automobile Industry Strength & Weakness Green Rating for Automobile Sector Current Status of Automobile Industry Auto Component Industry Conclusion Bibliography

6 7 8 9 10 11

OBJECTIVES
To analyze the fundamentals of Automobile Industry of

India.
To

analyze the various dimensions of automobile industry such as production, environmental effects and its competitiveness. industry and its future perspectives.

To analyze the pattern and trends of Indian automobile

To analyze the Opportunities and Challenges Posed by Recent

Developments of Indian Automotive Industry.

To know strengths and weaknesses of the different groups in the

Indian Auto Industry.

RESEARCH METHEDOLOGY Sources of data

Secondary Data:

The secondary data are those, which have already being collected by others for their own purpose.
Data has been collected from various websites as well a

various magazines Research Design: Descriptive and Analytical Research Research Tool Books Internet.

INDIAN AUTOMOBILE INDUSTRY

Overview
Indias automobile sector consists of the passenger cars and utility vehicles, commercial vehicle, two wheelers and tractors segment. The total market size of the auto sector in India is approximately Rs 540 billion and has been growing at around 8 percent per annum for the last few years. Since the last four to five years, the two wheelers segment has driven the overall volume growth on account of the spurt in the sales of motorcycles. However, lately the passenger cars and commercial vehicles segment has also seen a good growth due to high discounts, lower financing rates and a pickup in industrial activity respectively. The automobile industry is fairly concentrated, as in most of the segments two to three players have cornered a major chunk of the total sales. For instance, in passenger cars segment, MSL, Tata Motors and Hyundai Motors control around 85 percent of the total annual sales. Similarly, in the two wheelers segment, the sales volumes of Hero Honda, Bajaj Auto and TVS Motors constitute around 80 percent of the total sales and in the commercial vehicles segment, the market leader Telco controls around 56 percent of the total annual sales. The auto components industry on the other hand is highly

fragmented, though there are dominant players in some of the critical segments.

Investment climate
Given the high growth expectations and a liberal government policy, the investment potential in the India auto sector is huge. CRIS INFAC is forecasting a 12-15% annual growth in the passenger car sales, 6-8% in commercial vehicles and around 10% in two wheelers. Several passenger car makers have already achieved near full capacity utilization and are expanding. Almost all the major automobile manufacturers such as GM, Ford, DaimlerChrysler, Honda, Toyota, Hyundai, and Fiat (with the exception of Volkswagen, which is planning to set up manufacturing shortly) already have made significant investments in India. In the next 2-3 years, the passenger vehicle industry is expected to see investments of more than Rs 30 billion. Similarly, two wheeler industries are expected to attract investment amounting to Rs 10 billion. There has also been a surge in exports of cars, utility vehicles and two wheelers. The expected growth in domestic sales and exports of vehicles also offers significant opportunity for investors to invest in the auto ancillary industry. Already several international suppliers such as Delphi, Visteon, TRW, Johnson Controls, Denso and Dana, have set up manufacturing facilities and are expanding rapidly to serve not only the domestic market but also to supply to their global customers. Another attractive area of investment for vehicle and parts makers is research and design, to take advantage of Indias low cost advantage. However, investment in commercial vehicle manufacturing looks relatively unattractive, given the current size and structure of the Indian market

Outlook
The expected rise in income levels, wide choice of models and easy availability of finance at low interest rates will drive growth in passenger cars segment, which is likely to be over 12 percent per annum for the next four to five years. Two wheelers growth is likely to marginally slow down, but still grow at an average annual growth rate of around 10 percent. The commercial vehicles segment is likely to grow at a trend rate of 6-8 percent driven mainly by the increase in industrial and economic activity on account of the expected growth in the economy, though annual growth rates may fluctuate widely with the cyclical ups and downs of the economy. Tractor industry growth is likely to turnaround and post a growth in volumes in 2004-05. However, it will post a moderate growth of around 4-5 percent annual growth rate over the medium term.

Indian Automotive Industry: Opportunities and Challenges Posed By Recent Developments

The Indian automobile industry is currently experiencing an unprecedented boom in demand for all types of vehicles. This boom has been triggered primarily by two factors: (1) Increase in disposable incomes and standards of living of middle class Indian families estimated to be as many as four million in number; and (2) the Indian government's liberalization measures such as relaxation of the foreign exchange and equity regulations, reduction of tariffs on imports, and banking liberalization that has fueled financing-driven purchases. Industry observers predict that passenger vehicle sales will triple in five years to about one million, and as the market grows and customer's purchasing abilities rise; there will be greater demand for higher-end models which currently constitutes only a tiny fraction of the market. These trends have encouraged many multinational Automakers from Japan, U. S. A., and Europe to enter the Indian market mainly through Joint ventures with Indian firms. This report presents an introduction to the key players in the Indian automotive industry, a summary of the recent developments, and an analysis of the Opportunities and challenges facing the various players (Indian and multi-national assemblers and Component makers) in the areas of product development, production, and distribution. For forty years since India's independence from the British in 1947, the Indian car market was Dominated by two localized versions of ancient European designs -- the Morris Oxford, known as The Ambassador, and a old Fiat. This lack of product activity in the Indian market was mainly due to the Indian government's complex regulatory system that effectively banned foreign-owned Operations. Within this system (referred to informally as the "license raj"), any Indian firm that Wanted to import technology or products needed a license/permit from the government. The difficulty of getting these licenses stifled automobile and component imports, creating a low volume high cost car industry that was inefficient, unprofitable, and technologically obsolete.

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Two dominant products Ambassador and Fiat, although customized to the poor road conditions in India, were based on a stale design concept (with outdated features), and were also fuel inefficient.

1. In the early 1980's, the Indian government made limited attempts at

reforming the automotive industry, and entered into a joint venture with Suzuki of Japan. The joint-venture, called Maruti Udyog Limited, launched a small but fuel efficient model (called "Maruti 100"). Priced at about $5,500, the product became an instant hit. The joint venture now produces three small-car models, A van and a utility vehicle at a rate of more than 250,000 a year. Despite being a late entrant,Maruti's vehicles are estimated to account for as much as 70 per cent of India's car population. In 1991, a newly elected Indian government took over and faced with a balance-ofpayments crisis initiated a series of economic liberalization measures designed to open the Indian economy to foreign investment and trade. These new measures effectively dismantled the license raj which had made it difficult for Indian firms to import machinery and know-how, and had disallowed equity ownerships by foreign firms. In 1993, the government followed up its liberalization measures with significant reductions in the import duty on automobile components. These measures have spurred the growth of the Indian economy in general, and the automotive industry in particular. Since 1993, the automotive industry has been experiencing growth rates of above 25%. Data for the 1995-96 financial years is yet to be released by all the firms, but estimates indicate that passenger vehicle sales may reach or exceed 350,000 for the first time. (Passenger vehicles include cars and vans but not jeeps.) the production data of passenger vehicles for the top four Indian assemblers. Foreign vehicle sales have been insignificant until.

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A Brief Introduction to the Top Four Indian Assembler:

Mauriti Suzuki Limited (MSL) is the number one Indian automotive assembler commanding more than a 70% share of the Indian passenger vehicle market. (It also sells a few thousand jeeps, called Gypsy. Most recent data released by MSL reveals that it produced a total of 277,000 vehicles in 1995/96 resulting in a turnover of approximately $2 billion (Rs. 6673 crore, Source: Financial Express, March 30, 1996). It is also a reasonably profitable venture with after tax profits of about $122 million (a 65 % increase over the previous year). MUL's relatively large production volumes offer scale economies in production and distribution, which pose formidable barriers to entry. It has also established a solid supplierbase located around India (most of its assembly is concentrated in Northern India near New Delhi). Its products enjoy good reputation in fact, Indian automotive industry observers credit Maruti for the rapid improvement in quality and supplier capability advance!) MUL'sproduct line is concentrated in the economy car segment, although it has been moving up recently to cater to the premium market segments by introducing the higher-end Esteem. 1Much of the data presented in this paper has been extracted from the annual reports published by ACMA, and from articles in the business press and trade journals. Occupying the second position in 1994/95 is Bombay-based Premier Automobiles Ltd. (PAL), which edged out Calcutta-based Hindustan Motors Ltd. (HM) from the second place. In fact, PAL produced the Fiat, and HM produces the Ambassador both products that dominated the Indian automotive industry for decades. The advent of Maruti has resulted in the decline of both thesefirms. Pals main products are the Premier Padmini (in the compact car segment) and the NE118 (In the mid-size car segment). Recently, PAL has rejuvenated itself by entering into joint venture with Peugeot (for the Peugeot 309), and with Fiat (for the Fiat Undo). Its close competitor continues to produce Ambassadors in small volumes targeted at the economy/compact car segment.

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HM also offers a higher end product called Contessa Classic, and has entered into joint venture agreements with General Motors (GM) to produce the Opal Astra, and with Mitsubishi to make the Lancer targeted at the higher-end market. Despite occupying the fourth position and producing passenger vehicles only in small volumes, Tata Engage. & Locomotive Company Ltd. (TELCO) is noteworthy, not only because it is a part of the powerful Tata industrial family, but also because it is one of the few firms with indigenous product development capabilities, and has been a dominant player in the commercial vehicles segment. (The author, in fact, worked with TELCO for a brief period in the late 80's in their light commercial vehicles product development group.) TELCO holds about 70% of the heavy commercial vehicles market, and (after entering the market late) has also managed to fend off Japanese competition by gaining about 50% of the light commercial vehicles segment with its in-house product development. It entered the passenger vehicles market only in 1991-92, and has quickly established itself in the higher end of this segment with its Estate and Sierra models. The firm has entered into a joint venture with Mercedes Benz to assemble the E220's, and is also said tube planning an entry into the small/economy car segment challenging Maruti's stronghold. Indian Component Suppliers Component suppliers are the backbone of an emerging automotive industry. By all accounts, the Indian component industry, based mostly in the southern city of Madras, is tiny. The auto component manufacturers association of India (ACMA) estimates that $2.1 billion worth of carports were produced in the financial year 1995, out of which exports amounted to $228 million. To put this in perspective, the entire Indian industry's revenue is roughly one-tenth that of GM'scomponent unit, Delphi automotive systems2. But, the component market has been growing rapidly at about 25% a year, and is expected to quadruple in size by the year 2000. This growth has not only been due to the growing demand for passenger vehicles, but also due to the increasing trend by multi-national OEM's to resort to global sourcing to improve competitiveness. Leading automotive assemblers and component makers are increasingly turning to India for components. One of the now widely-cited examples of this trend is the Indian component firm, Sandarac Fasteners Limited (SFL), which the author has been studying for the last year. SFLbecame GM's largest supplier of radiator caps, and exports about 300,000 caps from its factories in Madras to GM plants around the world. In 1992, when GM was planning to close one of its plants in UK., SFL took advantage of the to 2It is also noteworthy that Delphi is in the process of setting up its own units in India to make steering systems,

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Chassis and electrical systems recognizing the needs of the fast-expanding Indian automobile market invest heavily in quality and productivity improvements, and a tour around SFL's suburban Madras Factory shows a world-class plant with minimal inventory and rework. The company's workers, trained in statistical tools and control charts, keep processes under statistical control due to which radiator cap rejection rate is less than 1% of annual production. The company also has a very skilled managerial and engineering workforce, which has helped it develop in-house product development capabilities. Using these resources and skills, the firm is now seeking to expand its supply to other manufacturers in Europe, US, and Asia, and also diversify into other components. SFL exemplifies the Indian auto components industry, which although small and fragmented has the competitive advantages of a skilled workforce and low labor costs. It is estimated that components can be produced about 30% cheaper in India than in the west. (The top Indian assembler, Maruti, is able to price its cars at about $5,500 because it sources 90% of its components from Indian suppliers.) Rapid growth and tie-ups with foreign firms will help Indian auto components suppliers further invest in capacity and automation and acquisition of the latest know-how, thereby closing the productivity gap with other world-class component makers. shows a few other notable Indian component suppliers and their exports to OEM's. .

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Recent Developments and Issues Facing the Indian Automotive Industry:

In the past two years, more than a dozen multi-national firms have announced plans to enter the Indian market. Most of them have formed joint ventures with Indian firms, while there are exceptions such as Hyundai which plan to form fullyowned units. Exhibit 2 displays most of these firms and their products planned for the Indian market3. Despite the large growth potential of the Indian market (analysts expect the growth to triple in the next five years), no one expects the industry to sustain the fragmentation caused by more than a dozen suppliers. Many of these new firms will not enjoy the scale economies and relationships with suppliers that Maruti does, so they have decided not to challenge Maruti at its price of $5,500 in the smaller car segment. Most are planning to produce between 20,000 and 50,000 higher-end vehicles. The stiffest competition is building up in the mid-sized car range (1,300 cc and above), where several of these multi-national And Indian companies are planning to go head-to-head. Although this newly announced vehicle sat $12,000 or above remain expensive by Indian standards planned capacity exceeds projected demand, new entrants are betting on the rising incomes of middle-class families. Notably, Daewoo's new product Cello, priced at about $15,000 in a joint venture with the Indian firm DCM, drew 76,000 advance bookings last year reflecting the pent-up demand in the market. Amongst the many issues facing the Indian automotive industry, the biggest by far is the poor road infrastructure. India's road network, comprising of a modest national highway system (that is only 2% or less of the total roadway length) is woefully inadequate and dilapidated, and can barely keep pace with the auto industry's rapid growth. Most roads are single-lane roads built in the 1950's and 60's, and are crowded with two-wheelers, bullock carts, and even pedestrian humans and cows. Traffic laws are not well enforced leading to one of the highest per-capita accident rates in the world. It is to be expected that the introduction of bigger and more powerful vehicles will only worsen the situation. Upgrading the existing highway system is itself expected to cost $30 billion

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or more, and resource and land constraints prevent the building of new highways. The Indian 3Conspicuous by its absence from this list of new entrants is Toyota, which initially had an arrangement with the Hinduja group that was called off in March, 1996. Toyota is said to be adopting a wait-and-see attitude. Governments approach to solving this problem is to privatize the road infrastructure, by having Private firms build and operate toll ways. However, it is unclear if this alone will be able to solve this infrastructure problem of enormous proportions, which can severely bottleneck future growth. The significant (about 50%) tariffs imposed on import products and components combined with the vagaries of currency exchange rates make localization an important imperative for foreign companies entering the Indian market. Firms are already making a major effort to localize rapidly; The Daewoo-DCM venture is expected to raise its local content to 90% by the decade's end. GM's Astra will start with 40% labor content, and go up to 75% within three years. One challenge to localization is a shortage of component suppliers with size and sophistication. Another major uncertainty facing the Indian market is the government's policies toward foreign investments and joint ventures. As Amsden and Kang [95] note4, governments play a key role in shaping the growth of the auto industry in emerging economies (as compared with developed countries). Although many observers say the economic reforms initiated by the ruling Congress party are not reversible, the difficulties experienced by Enron Corp. in its investments in the power sector under the hands of the opposition Bharatiya Janta Party (BJP) do not bode well for other foreign investors. With elections in mid-1996 expected to return a coalition group to power, it will be hard for the new government to push the reform measures with the same vigor and paces the previous government did. It is even unclear if the group in power will be as positively inclined to foreign investments and trade as the current governed

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Strengths and Weaknesses of the Various Players:

To analyze the strengths and weaknesses of the various players in the Indian automotive industry, It is useful to classify them into the following four categories: (1) Indian Assemblers, (2) Multinational Assemblers (3) Indian Component Makers, and (4) Multi-national Component Makers. Presents the strengths and weaknesses of each of these groups. The Indian assemblers, typified by Maruti, have built a formidable distribution and after-sales network. They also have an established supplier base, which gives them cost and delivery time advantages, especially in light of import tariffs and currency exchange rate fluctuations/devaluations. Their biggest weakness, with the exception of TELCO, is the lack of product design capability. In the coming years, they should focus on acquiring product design and lean production know-how (as the Korean firms did in the eighties and early nineties [Amsden and Kang 95]). They could acquire know-how with help from their joint-venture partners, and also with investments in research and development which at present are at extremely low levels. Multi-national assemblers could really benefit from their lean production capabilities in India, where production runs are expected to be small due to the large number of players entering the Indian market. They could also set themselves apart by incorporating safety and comfort features not currently included in Indianassembled products. These include seat restraints, airbags, andante-lock brakes, and comfort features such as power windows, and central locks. U. S. assemblers Have a reputation of safety, which they could leverage to their advantage. Close cooperation with 4Amsden, A. H., and J. Kang, "Learning to Be Lean in an Emerging Economy: The Case of South Korea", IMVP Sponsors Meeting, Toronto, 1995.the joint-venture partners can overcome the lack of experience with the Indian market, but the small size of the component supplier base will pose a challenge to their need to localize rapidly. Group Strengths Weaknesses Indian Assemblers Established distribution and After-sales networks, and
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Supplier base. Understanding of the Indian market and ability to liaison With the government Lack of product developmenand PAL). Multi-national Assemblers Lean production capability Ability to design products with differentiating features Deep pockets, brand image. Lack of experience with Indian market, industry, and government. Small component supplier base and high import tariffs. Indian Component Suppliers Low cost, skilled workforce Learning From exports Small Size, Fragmentation Lack of know-how in carat areas. Multi-national Component Suppliers Size, Deep pockets Experience and Know-how in technology. Import tariffs, currency exchange rate fluctuations. Inexperience with India workforce. As mentioned earlier, the Indian component industry is small and fragmented, but is growing and learning fast due to exports. It is also estimated to hold a 20-40% cost advantage over multinational component suppliers who are much larger and are themselves opening up units in India to take advantage of the lower-cost, skilled workforce. The Indian component industry needs to invest in capacity and research and development to stay abreast of competition, when the wage gap closes over time. It is likely that some of the multi-national assemblers or component makers might buy some of the small but niche component makers with a reputation for quality.

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Tractor Industry- Part of Automobile Industry

Company aims to become the market leader of the tractor segment by 2010. ITL is the third largest tractor selling company in India and the number one company in Nepal. These tractors are also exported to various other countries also including France, South Africa, Australia, Zimbabwe, Sri Lanka, Canada, Nepal, and Bangladesh etc. The Company has entered into Technical Collaboration Agreement with MG Rover of UK. With the technical know how from MG Rover, UK, the Company has manufactured MUV with the name of RHINO & the same MUV would boast of Rover engines. At present it is using Japanese Isuzu engine. The Company is developing its own Common Rail Direct injection (CRDi) engines.

Background and History Of The SONALIKA GROUP: Sonalika group is one of the most prominent agriculture equipment manufacturers in India. Sonalika Group is contributing to green revolution in India Since 1969. Initially it started with Farm Equipments and Machinery. Brand name of the group products is "SONALIKA". Market share in Farm Equipments is 80 % in India. Group turnover is 220 Million USD (INR 1000 Crores). Sonalika Group is one of the top five tractor manufacturers in India. An average growth rate of 30% makes it one of the fastest growing corporate in India. It also happens to be one of the very few debt free companies in the world. It employs about 2500 people including some of the renowned names in the industry. The company works on the maxims of low production cost and clean and safe environment. Such efforts have fetched the company the accreditations like ISO 9001:2000 and ISO 14001.

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Sonalika is also an environmentally responsible corporate citizen and has developed in-house, the vehicle engines that confirm to Bharat II Norms. It is now in the process of developing the Bharat III engines for its advanced products. No wonder Sonalika products have created a niche for themselves not only in India but also in foreign markets including France, Zimbabwe and many of the South-Asian countries. The company's marketing efforts are promoted by the network of 600 Dealers ,400 Sub dealers and 50 Stockiest supervised by various regional sales offices. Such a networking has enabled the company to grow like a well-knit family whose roots lie in its customers, who have been providing constant feedback and support to allow the company to turn their dreams into products. Apart from tractors its product line includes multi utility vehicles, three wheelers, engines , Hydraulic Systems , Casting , Forging , Brake System , Automotive components manufacturing and various farm equipments and implements. Sonalika group since the inception has tried to understand customers need to be able to facilitate them with its value for money products. The company has a state of art manufacturing facilities, spread in acres, located in the pollution free suburbs of Punjab and Himachal Pradesh.

There are mainly four business unit of the brand name Sonalika. They are mainly as follows International Tractors Limited International Cars & Motors Limited Sonalika Three Wheelers Sonalika Agro.

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ABOUT INTERNATIONAL TRACTOR LIMITED International Tractors Limited was incorporated on October 17, 1995 for the manufacture of Tractors and has since then built a distinct position for itself in the Tractor industry. ITL is manufacturing various Tractors of Sonalika brand between 30 HP to 75 HP, and CERES brand between 60HP to 90HP. The Tractors manufactured by the company have secured a reputation of performance, quality and reliability in the market because of their maximum pulling power, minimum fuel consumption and Emission. All this makes ITL the fifth largest tractor selling company in India (third now) and the number one company in Nepal. These tractors are also exported to various other countries also including France, South Africa, Australia, Zimbabwe, Sri Lanka, Canada, Nepal, and Bangladesh etc. They are also the first Tractor manufacturers in the country producing 50 & 60 HP Tractors fitted with diesel engines manufactured In-House, meeting Bharat II norms of Smoke & Mass Emission. These engines have been tested and certified by ARAI, Pune. United States Environmental Norms Agency, Washington DC has also certified our Engines. These certifications enabled SONALIKA Tractors to enter into World Market. All the models of Tractors and Combines Harvesters manufactured by us are tested & approved by Central Farm Machinery and Tractors Training & Testing Institute, Budni (MP) India, (the Government of India institute authorized for issuing test reports). Recently SONALIKA Tractors have been awarded "The Best Quality Award (2002-03)" by the Government of India. Sonalika International Tractors have also been approved for subsidy under various schemes by Ministry of Agriculture, Govt. of INDIA. A number of banks have approved Sonalika Tractor for financing and entering into a tie Up for easy financing.

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ITL PRODUCTS The ITL have launched there tractors in number of segment which are classified according to there specifications. ITL is manufacturing various Tractors of Sonalika brand between 30 HP to 75 HP, and CERES brand between 60HP to 90HP. Sonalika D I 732 III Sonalika DI-740 Sonalika DI 735 Sonalika DI 745 III Sonalika D I 750 Sonalika DI 750 III Sonalika D I 60 Senior - 34 HP - 36 HP - 38 HP - 45 HP 50 HP - 50 HP - 60 HP

These tractors range from 30 to 75 HP. ITL is also producing tractors under CERES Brand and exporting them to countries like Sri Lanka Africa Bangladesh South East Asia Indian Subcontinent North America Western Europe

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LATEST ACHIEVEMENTS BY ITL ITLs market share increased to 11% (Approx.) as on 31.03.2006. The company maintained 3rd Rank in the tractor industry in terms of volume and market share. It surpassed Eicher & HMT (old Players), John Deere, New Holland and Escorts (Multinationals having long international standing). The company has developed a diesel engine which is almost smoke free & has been approved by US Environment Protection Agency, Washington D.C.
30000 25000 20000 15000 10000 5000 0 96-97 97-98 98-99 99-00 20002001 20012002 20022003 20032004 20042005

Sales of ITL from 96 to 2005

ITL growth v/s Industrial growth
30000

sales volume

25000 20000 15000 10000 5000 0 96-97 97-98 98-99 99-00 2000-2001 2001-2002 2002-2003 2003-2004 2004-2005

year
Sonalika Indusrty

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Growth pattern of ITL vs. Industry growth

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ITL has many competitors. There is cut throat competition between them. There competitors are as follows: Mahindera Tractors Punjab Tractors Limited New Holland Tractors Tafe Tractors John Deere But in Punjab, Mahindra n Mahindra and Punjab Tractor Limited (PTL, brand name Swaraj) are Sonalikas main rival. Mahindra n Mahindra The origins of M&M's Farm Equipment Sector lie in the formation of a joint venture in 1963 between the Company, International Harvester Inc., and Voltas Limited, christened the International Tractor Company of India (ITCI). This enterprise was a shot in the arm for the green revolution then beginning to sweep the country. The launch of high-performance tractors played a vital role in the mechanization of Indian agriculture. In 1977, ITCI merged with M&M and became its Tractor Division. M&M's Farm Equipment Sector is the largest manufacturer of tractors in India with sustained market leadership of over 19 years. The Farm Equipment Sector is the first Tractor Company in the world to win the Deming Application Prize (given for total quality management). Also, it is the fourth company in India and the 10th in the world, outside Japan, to win this prize. It designs, develops, manufactures and markets tractors as well as implements which are used in conjunction with tractors. The tractor industry in India is segmented by horsepower into the lower segment of 25 HP, mid-segment of 35 HP and higher segment of 45 HP and above. The Company's Farm Equipment Sector has a presence in all these segments across all states. M&M has two main tractor manufacturing plants located at Mumbai and Nagpur in Maharashtra. Both these plants have been certified for ISO 9001, QS-9000 and ISO 14001. Apart from these two main manufacturing units, the Farm Equipment Sector has satellite plants located at Rudrapur in Uttarachal and Jaipur in Rajasthan. M&M tractors have earned goodwill and trust of more than 8, 00,000 customers and the 'Mahindra' tractor has come to be recognised as a powerful symbol of productivity and performance. Products
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Mahindra 265 DI Bhoomiputra 30 HP Mahindra 265 DI Sarpanch 30 HP Mahindra Yuvraj 30 HP Mahindra 275 DI TU Sarpanch - 39 HP Mahindra 275 DI TU Bhoomiputra 39 HP Mahindra 475 DI Sarpanch 40 HP Mahindra 475 DI Bhoomiputra 40 HP Mahindra Arjun 445 DI 42 HP Mahindra 575 DI Bhoomiputra 45 HP Mahindra 575 DI Sarpanch 45 HP Mahindra 585 DI Sarpanch 50 HP Mahindra Arjun 555 DI 52 HP Indian Component Suppliers and Their Exports to OEM's Sundaram Fasteners: Supplies radiator caps to GM, Caterpillar, and others. Wheels India: Supplies wheels to heavy vehicle and automotive manufacturers in Europe. Eicher Goodearth: Supplies machined castings to Mitsubishi and other major automotive firms. Sona Steering: Supplies steering systems to Japanese component makers. Brakes India: Castings and rubber components to Lucas Industries, Germany. Source: ACMA Annual report and India Today (March 93) Exhibit 2: New Entrants to the Indian Automotive Industry as of March 1996 Company Joint Venture Partner Planned Products (Ave. Price) Audi (Volkswagen) Franchise (Imported car) Audi-A4 ($85,000) Daewoo (Korea) DCM Cielo ($15K) Fiat Premier Automobiles (PAL) Fiat Uno 1000 cc ($10,000) Ford Motor Company Mahindra & Mahindra Ford Escort, Festiva ($12K) General Motors Corp. (GM) Hindustan Motors (HM) Opel Astra ($22K average) Honda Shriram Industries Civic ($18K) Hyundai (Korea) Wholly-owned subsidiary Accent Mercedes-Benz TELCO Mercedes E220 ($70K) Mitsubishi Hindustan Motors (HM) Lancer ($15K) Peugeot Premier Automobiles (PAL) Peugeot 309 ($15K) Volkswagen Eicher Ltd. Golf ($20K) Source: Press Reports From India

South Asia
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India's auto industry comes of age

Not long ago, India's auto industry was a laughing stock. Its two best-known cars were a 1940s Morris model called the Ambassador and a 1960s Suzuki-derived model called the Maruti 800. But that was then. Today, for instance, the Mumbai-based Dilip Chhabria Design Pvt Ltd (DC Design) is seeking to take on Pininfarina and Bertone, the Italian standard in international car design, by designing and building concept cars, prototypes and limited-production runs. Nor is DC Design alone. "There can be few more improbable automotive stories than the yarn about the Indian designers creating bespoke concept and prototype cars," said the United Kingdom's auto magazine Autocar in a GREEN RATING FOR AUTOMOBILE SECTOR recent issue. "Yet the hottest ideas in car design are happening right now in the back streets of Sectoral Performance Mumbai." India is now the ninth country in the world to design a vehicle sector own. Is the Indian automobile on its as environmentally conscious as best in the world? In fact, the Indian sector has fared fast becomingthe project rating scale we were to NO! Automobile auto industry is badly. Under an outsourcingleaves award to the best company. But sadly no auto company award five hub for automobile companies worldwide, as honour. The best company gets less than 45 per cent marks getting a deserved this zooming automobile exports from the country indicate. SurinderBut the sector as a whole gets even lesser, scoring 31.4 mere three leaves award. Kapur, the chairman of Sona Koyo Steering, which exports car steering per cent, deserving only two leaves award. assemblies, says, "Car makers over the world have realized that India can design a car onwayown andthe entire automobile segment The passenger car segment leads the its among make itthe only segment which gets three leaves. Mass transport vehicle segment and is globally acceptable." comes second. The two and three wheeler segment, with two leaves, lags behind Passengermassexports have nearly which has four even the car transport vehicles, trebled in performed better due to introduction years, from 28,122 units in 1998-99 to 71,653 of CNG fuelled vehicles. vehicles in 2002-3. The industry expects this to gather steam further ahead because car exports in the first quarter of 2003-4 leapt by 87 percent over the same period in 2002-3. The two-wheeler 28 segment is booming, too, with exports zooming from 100,004 units last year to 179,000 units in

THE GOOD, THE BAD, THE UGLY In terms of overall performance, the three companies, which top the environmental rating, are Daewoo Motor India Ltd., Hyundai Motors India Ltd. and General Motors India. All these three companies have performed well in product usage phase. The companies, which are at the bottom of the pile, are the three non-participating companies, Bajaj Tempo Ltd., Yamaha Motor Escort Ltd. and Swaraj Mazda Ltd. Maximum of the companies in top ten are passenger car manufacturers while most of the two and three wheeler manufacturers have shown a poor performance trailing behind in the ratings. However, there is an exception, Hero Honda Motors, which has not only achieved three leaves rating but also ranks fifth in overall rating. The other two and three wheeler companies lag very far behind. Though Bajaj Auto Ltd. and TVS Suzuki follow Hero Honda Motors as the 2nd and 3rd in the segment but in the overall rating they fare poorly. WINNERS AND LOSERS As far as individual products are concerned, Daewoo's small car Matiz, has been judged as the most environment friendly vehicle overall, scoring high in terms of vehicle and engine design, and also performing well in other aspects such as pollution control equipment installed and emissions. Maruti's most popular vehicle in the country Maruti-800 (Euro II model) is the second most eco-friendly vehicle. It scores less than Matiz in terms of design but scores more in the emissions. The third most eco-friendly vehicle is Hyundai's Santro, which also has the highest fuel efficiency. Small is beautiful--All the top three eco-friendly vehicles are small cars and have inherent advantages over the larger ones in the sense that they emit less pollution and consume less fuel compared to larger vehicles. They also use lesser material during manufacturing stages. Honda City 1.5V-tech gets the recognition of being the most technologically advanced and least polluting vehicle in India with emission as low as 85 per cent lower than the Euro II norms.
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The vehicle with the worst performance environmentally is Mahindra & Mahindra's Armada, which comes last in the passenger car segment. It has scored very low in all criteria. Among the two and three wheelers, both selected models of Hero Honda (Splendor and CD 100) are the most eco friendly two wheelers. They have scored above average in vehicle and engine design and are one of the very few fourstroke two wheeler fitted with any kind of pollution control equipment. Bajaj boxer, the latest model of Bajaj Auto that ranks third, has scored well in vehicle and engine design but lacks in emission control equipment and comparatively poorer emission. The best performing two-stroke model ranks fourth amongst the two wheelers. The lowest score has been obtained by Kinetic Safari moped, which obtained average scores in design and emissions and very poor scores in pollution control equipment and emissions. Among the mass transport vehicles Ashok-Leyland's Viking compressed natural gas (CNG) bus scored above average in design and very high in emissions due to inherent advantages of CNG vehicle making it the best performer in this section. The second position is also taken by another CNG fuelled vehicle, that is, Telco LPO CGS bus. Interestingly, the worst performers in this segment are Ashok Leyland's diesel fuelled Comet 1611 and Tusker Turbo tractor. A total number of 29 automobile manufacturers were selected for the project of which 26 companies participated voluntarily (90 per cent participation). The three companies which refused to participate and chose to continue being nontransparent are Bajaj Tempo Ltd., Yamaha Escorts Motor Ltd. and Swaraj Mazda Ltd. MODUS OPERANDI The Green Rating of Indian Industry project was started by the Centre for Science and Environment (CSE) in 1996 to address an array of environmental issues facing all segments of Indian industries. The project is supported by the United Nations Development Programme (UNDP) and the Ministry of Environment and Forest (MoEF). The first sectoral rating undertaken under the pilot phase of the project was pulp and paper sectoral rating, which was a highly successful exercise and was rated as the best environmental audit project in last 25 years in Asia by 'Asia Week'.
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Spanning over a period of two years, Green Rating of automobile sector was a great challenge owing to diversity between companies in their production processes as well as the products manufactured. Participation of all the major automobile companies in the exercise makes it a unique effort to assess the environmental health of the sector. The project has covered 35 production facilities spread in nine states and almost 80 per cent of the products currently running on Indian roads. Methodology The rating methodology for automobile sector has been developed keeping in mind the life cycle impact of the automobile industry. Thus, the weightages were allotted accordingly with 80 per cent of the score devoted to life cycle analysis (LCA) and remaining 20 per cent for corporate governance. The life cycle assessment included determining the environmental impacts at various steps of the production process right from sourcing of raw materials, to the manufacturing and assembly process, to the pollution caused by use of the vehicle, and finally the impact caused by its disposal. Of the 80 per cent on the life cycle assessment, the highest weightage (56 per cent) was allotted to the product use phase based on the conclusion arrived at by the project that maximum pollution occurs during use phase. "Vehicle are the core of the automobile industry since they alone generate about 80 per cent of the total life cycle pollution," says Chandra Bhushan, Coordinator, Green Rating Project, CSE. "In order to assess the environmental performance of the product, a combination of engine design, pollution control equipment fitted and the emission test data supplied by the test agencies were considered, making this exercise the most comprehensive ever taken anywhere in the world. Even the green automobile ratings done in the US and in Europe only consider emissions and fuel consumption data to rank the vehicles. Green rating project has taken a quantum leap over the existing automobile rating methodology" he adds. Robustness of the Rating methodology 'Engine design analysis should represent the emissions from the vehicles,' was the main focus for arriving at the robustness of the product rating criteria, developed by GRP, since the engine and vehicle rating was given by the project and the emissions rating was given on the basis of the test data of certified test agencies. Therefore, the litmus test for GRP was to correlate the ratings given by two
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separate institutions with no interaction between them. This was very well reflected in high coefficient of correlation found between the scores obtained in engine design and pollution control equipment, and the score obtained in emission. For example, in petrol passenger cars in 78 per cent cases the engine design did represent the emission characteristics of the vehicles. Testing the effectiveness of the rating methodology in replicating the life cycle analysis, the test undertaken by the project was to correlate the overall rating with the vehicle's rating. Since, as per life cycle analysis, a company with poor product should get poor results, however good it may be on other aspects. This too was very well established in the rating with product rating having a very high correlation (97 per cent) with the overall rating. However, the analysis brought out the fact that the other criteria were as important and were seen to have high degree of correlation with the overall ratings. REVELATIONS Green rating project findings draw its process on the principle that root of the cure of any disease lies in the proper diagnosis rather than just medication!!! More miles per litre A fuel-efficient car would be the cheapest vehicle in the long run and an important consideration for the customer as well. The Hyundai Santro was judged the most fuel-efficient petrol passenger vehicle followed by Fiat Uno and Maruti800 Euro-II model. In case of diesel passenger car, Mitsubishi Lancer was judged the most fuel-efficient and Toyota Qualis Euro-I model was most fuel-efficient multi-utility vehicle. Clean fuel, clean vehicle We did a comparative analysis of impact of fuels on emissions. Study based on analysis of three diesel-fuelled mass transport vehicles and two CNG fuelled mass transport vehicles clearly showed that CNG fuelled vehicles are far better in terms of tail pipe emissions than the diesel fuelled mass transport vehicles. CNG-fuelled vehicles have as much as five times lower particulates and overall 73 per cent lower emissions than their diesel counterparts. Overall petrol vehicles show an inherent advantage over the diesel-fuelled vehicles with all the top 14 cars being petrol ones. The best diesel car, which is Mercedes E 220, ranks as low as 15. While the best multi-utility vehicle, Toyota
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Qualis Euro II model ranks a dismal 20th among all the 31 models. Are MNCs better than Indian Companies? Green rating project reveals that contrary to the prevalent belief there is hardly any difference in the overall performance of Indian companies and MNCs. Both of them meet the same environmental standards in each and every aspect. A double standard was perceptible in the business pattern of MNCs as they were following a practice of dumping obsolete products on the pretext of poor fuel and existing regulatory norm in the Indian market. Other than corporate environmental governance and pro-active initiatives, Indian companies are at par with the MNCs. Does cleanliness make business sense? Yes it does. A fairly tangible correlation was observed between the environmental performance and economic performance of companies in the automobile sector. On an average, in total automobile segments it was found that about 67 per cent of time there was direct relation between the environmental rating and profit of company. That is, if a company is good on the environment front, it is also sound in its balance sheet. In specific vehicle segment, this correlation was very high, as high as 81 per cent in two and three wheeler companies. Consumer awareness Although, insufficiently informed consumers contribute to 80 per cent of the pollution generated by automobile companies on road. Yet the sector in itself or through its dealers has not taken any proactive effort to educate these consumers. Two and three wheeler companies are the worst in consumer awareness raising initiatives. Except for giving free servicing not much has been done to educate people. Maintenance of the vehicles The project found that though the maintenance of the vehicle plays a major role in the overall environmental performance during the vehicle use, the strategy adopted by the automobile companies do not provide enough incentive to the consumers to go to the authorised service stations/ workshops. The cost of maintenance at authorised service stations were found to be as high as 50 to 100 per cent than the unauthorised stations, and this was the main reason why consumers avoided going to the authorised stations once their vehicle became a bit old. Automobile companies need to work on economy of scale and provide enough incentive to the consumer to use authorised service stations. This will not
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only reduce the pollution load but will also improve company's bottom line. Companies need to think in terms of annual maintenance contract to facilitate this recommends green rating project. Impact of fuel quality GRP analysis on Indian automobile segment clearly shows that the companies are holding fuel quality responsible for pollution. Whereas, the truth is that current engine design in India is at least a decade old compared to similar type of vehicles manufactured in western countries. Basic initiative towards improving the engine design is lacking. Use of alternative fuels over conventional fuels is yet to take its start in major way and their needs to be a big boost in the development of this concept in India. The automobile sector in general has not taken much effort to establish the impact of fuel quality on emissions. Some studies undertaken by companies have shown that there is hardly any consistent trend to show that the fuels are mainly responsible for the poor emission quality. Role of age factor on the effectiveness of catalytic converters too needs a comprehensive study to establish a relation as it plays a great role in determining the pollution scenario on roads. Impact of various parameters on fuel efficiency Impact of various design parameters of vehicles on the tail pipe emission and fuel efficiency was carried out by the project. Weight of the vehicle and its engine size was found to have inverse relationship with fuel efficiency, though compression ratio had a direct relationship. The project also found that a Indian passenger car switching over to multi point fuel injection system from the carburettor system can expect a reduction in the tail pipe emission in the range of 25 per cent to 40 per cent. Another interesting finding was that majority of the petrol passenger cars running on the Indian roads are using catalytic converters which does not suit their engine design. Which is better? Two stroke or Four Stroke. On the comparative performance undertaken for two-stroke and four-stroke two wheelers, the outcome clearly established that four stroke two-wheelers are better that two stroke two-wheelers with respect to both emission and fuel efficiency.The carbon monoxide (CO) and hydrocarbons and nitrogen oxides
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(HC+NOx) emitted by two-stroke two-wheelers (with catalytic converter) are 23 per cent and 38 per cent, respectively higher than their equivalent four-stroke two-wheelers without catalytic converter. Meeting of regulations While some Indian vehicles are meeting Euro II equivalent norms in the national capital region of Delhi and Euro I equivalent norms in the rest of the country, it was found that overall, automobiles in all the segments are meeting the regulatory norms well. However, GRP found that this is not enough as there are companies that can go much beyond the minimum regulatory requirement but absence of incentives from government discourages them. Government should come out with some incentive mechanism to differentiate between just a good performer and excellent performers. Supply Chain Management Green rating project closely scrutinized the practice of outsourcing by Indian automobile companies and found that majority of pollution during automobile production takes place at the supplier and vendor's site, most of them being small and medium scale companies. Overall automobile companies had a very poor performance on this aspect. The project found a clear trend of transferring of pollution by automobile companies to its supply chain. Companies urgently need to adopt a green procurement policy and green up their supply chain. Importance of ISO 14001 Almost half of the automobile sector has adopted environment management systems (EMS) standards. However ISO 14001 adopted by automobile companies is not the actual reflection of their environment management as these companies are just assembly plants. Most of their processes are outsourced and the major pollution happens at vendor's site and during product use and disposal. Thus, ISO 14001 only takes care of very small percent of pollution generated by the companies. The project has recommended automobile sector to adopt an environment management system, which reflects the environmental aspects of automobile business and not to use the existing system, which is production centric. Some other findings related to production process: 1) The entire sector uses paints that contain heavy metals and are based on solvents. No company uses water based paints 2) The regulatory standards for wastewater characteristic applicable to the
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automobile sector are lax as well as irrational THE WAY AHEAD "Business Planning but with the ingredients of Social, Environmental and above all Ethical consideration imbibed in it will define the future of Indian Automobile Sector", says Sunita Narian, Director, CSE. "We recommend a coherent approach to be adopted by automobile industry, government and consumers. Once the consumer starts including environment in their buying decisions, which they should because environment in automobile actually means economy and savings, companies will be pushed to improve," adds Chandra Bhushan, coordinator of Green Rating Project. Companies cannot afford to loose their market given the kind of cutthroat competition existing in India today. Consumers need to build on the research outcome of green rating project, and ask for emission and fuel efficiency performance of automobiles as their buying criterion along with price. Government on its part should come out with economic instruments as its major tool to regulate automobile companies. Pollution control body too needs a complete rethinking of its regulatory approach to this sector. Wastewater characteristics, solid/hazardous waste management, paint sludge incineration, dioxin and furans are some major aspects of automobile pollution during manufacturing process-regulations for which are either weak or non-existent. Downstream pollution checks and supply chain management are also some issues where regulatory bodies will have to do some soul searching. Automobile companies need to do a lot of rethinking. Extensive research and development, option of alternate fuels, clean technologies and quality control to oversee adherence to product conformance will shape the future of automobile sector in India. Companies must come forward and be more active in shouldering their responsibilities in educating consumers regarding good and bad features of vehicles. Proactive dialogue between this sector and society in general could pave the way for long-term solution to the various pollutions caused by the automobile sector. All stakeholders need to come together to improve the environmental performance of this sector. We have just made a start, a lot more needs to be done.
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Current status of Indian Automotive Industry

On the canvas of the Indian Economy, Auto 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. Although the automotive industry in India is nearly six decades old, until 1982, only three manufacturers - M/s. Hindustan Motors, M/s. Premier Automobiles & M/s. Standard Motors tenanted the motorcar sector. Owing to low volumes, it perpetuated obsolete technologies and was out of sync with the world industry. In 1982, Maruti Udyog Limited (MUL) came up as a Government initiative in collaboration with Suzuki of Japan to establish volume production of contemporary models. After the lifting of licensing in 1993, 17 new ventures have come up, of which 16 are for manufacture of cars. There are at present 12 manufacturers of passenger cars, 5 manufacturers of MUVs, 9 manufacturers of Commercial Vehicles, 12 of two wheelers, 4 of three wheelers and 14 of tractors besides 5 manufacturers of engine. The industry comprising of the automobile and the auto component sectors has shown great advances since deli censing and opening up of the sector to FDI in 1993. The industry has an investment of a sum exceeding Rs. 50,000 crore. During the year 2003-04 the turnover of the automotive sector was around Rs. 1,00,000 crore. The industry provides direct employment to 4.5 lakhs and generates indirect employment of 1 crore. The contribution of the automotive industry to GDP has risen from 2.77% in 1992-93 to 4% in 2005-06. Installed capacity The Automobile Manufacturers have put up a robust manufacturing capacity of 95 lakh plus vehicles per annum since 1993. Today India is the world's second largest
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manufacturer of two wheelers, fifth largest manufacturer of commercial vehicles and manufactures largest number of tractors in the world. The country offers fourth largest passenger car market in Asia today. A supplier driven market, having no more than a handful of vehicular models two decades ago, now offers more than 150 models and variants by way of customer options. The installed capacity of the automobile sector during the year 2003-04 was as under: Production One of the largest industries in India, automotive industry has been witnessing impressive growth during the last two decades. Abolition of licensing in 1991, permitting automatic approval and successive liberalization of the sector over the years have led to all round development of this industry. The freeing of the industry from restrictive environment has, on the one hand, helped it to restructure, absorb newer technologies, align itself to the global developments and realise its potential and on the other hand, this has significantly increased industry's contribution to overall industrial growth in the country. Overall automobile sector bagged a growth of 15.12% in 2003-04. During the year 2004- 05 (upto April-Sept. 2004) the Industry has registered a growth rate of 15.06%. The details of actual production during 2003- 04 and 2004-05 (upto April-Sept.2004) are given below: In no.s S. No. Name of the Sector

1. 2. 3. 4. 5.

No. of units Production 2004-05 2003-04 (April-Sept. 04) Commercial Vehicles 9 275224 156815 Cars 12 842437 465983 Multi-Utility Vehicles 5 146103 114739 2-wheelers 12 5624950 3023805 3-wheelers 4 340729 177554 Total 42 7229443 3938896

Export Automotive industry of India is now finding increasing recognition worldwide and a beginning has been made in exports of vehicles as well as components. The
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automobile industry along with the component industry is also contributing to the export effort of the country. During the year 2005-06 the export of automobile industry had registered a growth rate of 65.35% while it was 55.98% during the year 2006-07. The details of exports during 2005-06 and 2006-07 (upto April-Sept. 2007) are given below:(in Nos.) S. No EXPORT 1. Commercial vehicles 2. Passenger cars 3. Multi- Utility Vehicles 4. 2-wheelers 5. 3-wheelers TOTAL Auto Components Industry Surge in automobile industry since the nineties has led to robust growth of the auto component sector in the country. Responding to emerging scenario, Indian auto component sector has shown great advances in recent years in terms of growth, spread, absorption of newer technologies and flexibility, despite multiplicity of technology platforms and low volumes. India's reasonably priced skilled workforce, large population of technology workers coupled with strengths gained by the country in IT and electronics all build up an environment for significant leap in component industry. The Indian auto component sector is being written up as the next industry, after software that has the potential of becoming globally competitive. Indian Auto Component Industry, with a turn over of an approx Rs. 36,300 crore (200405,prov.) and manufacturing all the key components required for vehicle manufacturing, is an important sector of the Automotive industry. The phased Manufacturing Policy (PMP) followed in the 1980s enabled the component industry to induct new technologies, new products and a much higher level of quality in their operations that enabled quick and effective localization of the component base. The Indian auto component industry over the years has played a key role in the growth and development of the country's automotive industry. The Indian auto component sector today has 420 key players who contribute more than

2005-06 17227 126249 3067 264669 68138 479350

2006-07(April-Sept. 07) 12575 76076 2164 170978 37901 299704

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85% of the output of this sector. The vital statistics of the auto component sector during 2005-06 and 2006-07 are as under: Indicators Investment Output Exports Employment 2005-06 Rs. 12,500 crore Rs. 24,500 crore Rs. 3,800 crore 5,00,000 persons 2006-07 Rs. 13,400 crore Rs. 30,640 crore Rs. 4,550 crore 5,00,000 persons

Indian auto component industry has seen major growth with the arrival of world vehicle manufacturers from Japan, Korea, US & Europe. Due to diversities in the technological profiles of these OEMs, the sector today produces large variety of components. Today, India is emerging as one of the key auto components center in Asia and expected to play a significant role in the global automotive supply chain in the near future. Production Indian auto component industry is wide (over 420 firms in the organized sector producing practically all components and more than 10,000 firms in small unorganized sector, in tierized format) and has been one of the fastest growing segments of automotive industry, growing by over 28%, in nominal terms, between 1995-98. During the year 2003-04, the sector has recorded a growth of 25.06% by recording a production of the order of Rs. 30,640 crore. During the year 2004-05, the output of the Auto Component Industry is expected to be around Rs. 36,300 crore. Export Component exports in the year 2003-04 have already crossed US $ 1 billion. This, however, represents only about 0.8% of global component trade currently estimated at around US $1.2 trillion. This is reflective of significant opportunities that lie ahead. Several export units have reached rejection rate below 5 parts per million (PPM)
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with many of them touching a zero PPM. On export front, auto component industry has registered a growth of 29% in the year 2003-04 which is expected to be around 30% in the year 2004-05. During the year 2003-04, total export was of the order of Rs. 4550 crore as compared to Rs. 3497 crore during the year 2002-03. up in the current year with the reduction in the excise duty and improvement in the credit delivery system for the sector.

CONCLUSION
The Indian automotive industry, although growing rapidly, is in a state of flux. The production capacities planned by the new joint ventures currently exceed most projections, and unless import tariffs come down quickly and the economy grows remarkably, a shake-out may be expected from the current 20 firms to about half a dozen major firms turning out finished products by the end of the decade.
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\ However, if multi-national firms decide to use India as a production base from which vehicles are exported to the rest of the world, more than half a dozen firms may be able to remain profitable in India. Suzuki has already begun to use its Maruti joint-venture production to export a few thousand cars to the Middle East and Europe. However, the production capacities of other emerging economies such as Korea and China is also predicted to grow significantly in the coming years, so exports may also face a highly competitive market situation. In this dissertation, I have presented a brief introduction to the Indian assemblers and component suppliers. We noted that Indian assemblers have a tight hold over the small-car market due to their low cost supplier base and the tariffs levied on import components. Maruti with its production volumes of over 250,000 enjoys scale economies in production, distribution, and service that are hard to challenge. Production volumes do confer several advantages to a firm. However, new entrants can set themselves apart by offering new safety and comfort features that are not currently offered in the Indian market. They can also leverage their low production run (lean) capabilities to stay profitable despite the low production volumes. Further, they can combine their reputation with the Indian industry's lower production costs to produce cars and export them to the global markets. Many multinationals are already said to be planning such an approach. For Indian component makers and assemblers, product development capability is key, in order to rejuvenate their product lines, enhance their reputation, and export their products to the markets in developed countries. The author is currently pursuing a study of product development and production systems in the Indian component industry.

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Since the plants located in India are very far from the developed markets of the USA, Europe, and Japan, component suppliers incur significant transportation and inventory carrying costs in exporting products to global markets. Their situation is worsened by the poor Indian infrastructure, which leads to frequent power interruptions and long delays in supply. These companies are adopting innovative techniques to cope with these uncertainties, which will be a topic of another paper. The Indian automotive industry, as a whole, is also severely bottlenecked by the woefully inadequate road infrastructure. Privatization of the road infrastructure, even if started immediately, can take years to solve this problem. India also experiences an extraordinarily high number of traffic fatalities, and faces severe pollution problems. As of April 1, 1996, the ministry of surface transport has set emission norms (that are modest by international standards), which local automakers say are hard to meet. Multi-national firms can bring their experience and know-how to bear in these areas, and enhance their reputation as well as attract customers who are safety conscious and environmentally aware. This will also result in the gradual reduction of the auto related facilities and pollution (due to the diffusion of these practices), thereby contributing to the further growth of the Indian automotive industry.

BIBLIOGRAPHY
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The times of India

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Books

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