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Automobile Industry in India Essay

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Chennai accounts for 60% of the country’s automotive exports. 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.

The Automotive Industry has flourished in Pune Region in Maharashtra, What were the special conditions were there for this development.

Still Indian cars are not considered as a class in itself compared to European cars.

India’s strong engineering base and expertise in the manufacturing of low-cost, fuel-efficient cars has resulted in the expansion of manufacturing facilities of several automobile companies like Hyundai, Nissan, Toyota, Volkswagen and Maruti Suzuki In recent years, India has emerged as a leading center for the manufacture of small cars. Indian brands: AMW(Asian motor works- Commersial vehicles), Eicher Motors(tractors, Buses, components), Force(Bajaj Tempo), Hindustan motors(Birla, Ambassador car, Joint venture with Mitsubishi), Premier(Padmini, Moved from Mumbai to Pune), Tata, Mahindra, BharatBenz.

Per capita penetration at around nine cars per thousand people is among the lowest in the world. While the industry is highly capital intensive in nature in case of four-wheelers, capital intensity is a lot less for two-wheelers. Though three-wheelers and tractors have low barriers to entry in terms of technology, four wheelers is technology intensive. Costs involved in branding, distribution network and spare parts availability increase entry barriers. With the Indian market moving towards complying with global standards, capital expenditure will rise to take into account future safety regulations.

Automobile majors increase profitability by selling more units. As number of units sold increases, average cost of selling an incremental unit comes down. This is because the industry has a high fixed cost component. This is the key reason why operating efficiency through increased localization of components and maximizing output per employee is of significance. Maruti Suzuki, which is the market leader in PVs, had to deal with labour strikes at its plant at Manesar as a result of which production was severely hit.

As petrol prices firmed up, the differential between petrol and diesel widened. Thus, there was a surge in demand for diesel cars. Most companies faced pressure at the operating level as margins declined due to rise in input costs. Steep depreciation of the rupee also took its toll. Tractors: While good monsoon is a positive for the sector, given the fact that non-farm incomes have continued to climb up, volumes should still hold up well in the longer run despite a year or two of poor monsoons. privatisation of select state transport undertakings bodes well for the bus segment.

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