Automobile Sector – The Indian Scenario!


During the early ’60s & ’70s, automobiles came largely in twos.

In scooters, you had a Lambretta or a Vespa.

In motorcycles, you had a Bullet or a Java.

In cars, you had to choose between an Ambassador and a Fiat.

In trucks, it was either an Ashok Leyland or a Tata.

In tractors, it was between a Swaraj and a Mahindra.

This situation reflected the India of yesteryears. Economic reforms and deregulation have transformed that scene. The automobile industry has written a new inspirational tale. It is a tale of exciting multiplicity, unparalleled growth, and amusing consumer experience – all within a few years. India has already become one of the fastest-growing automobile markets in the world. This is a tribute to leaders and managers in the industry and, equally, to policy planners. The automobile industry has the opportunity to go beyond this remarkable achievement. It is standing on the doorsteps of a quantum leap.

Automobile Sector - The Indian Scenario! 1

The Indian automobile industry is going through a technological change where each firm changes its processes and technologies to maintain its competitive advantage and provide customers with optimized products and services. From two-wheelers, trucks, and tractors to multi-utility, commercial, and luxury vehicles, the Indian automobile industry has achieved splendid achievements in recent years. The opportunity is staring in your face. It comes only once. If you miss it, you will not get it again.


On the canvas of the Indian economy, the auto industry maintains a high-flying place. Due to its deep frontward and rearward linkages with several key segments of the economy, the automobile industry has a strong multiplier effect. It is capable of being the driver of economic growth. A sound transportation system is essential to the country’s rapid economic and industrial development. The well-developed Indian automotive industry skillfully fulfills this catalytic role by producing various vehicles: passenger cars, light, medium, and heavy commercial vehicles, multi-utility vehicles such as jeeps, scooters, motorcycles, mopeds, three-wheelers, tractors, etc.

The automotive sector is one of the core industries of the Indian economy, whose prospect reflects the country’s economic resilience. Continuous economic liberalization over the years by India’s government has made India one of the prime business destinations for many global automotive players. As a result, the automotive sector in India is growing at around 18 percent per annum.

The auto industry is just a multiplier, a driver for employment, investment, and technology.

The Indian automotive industry started its new journey in 1991 by delicensing the sector and opening up for 100 percent FDI through the automatic route. Since then, almost all the global majors have set up their facilities in India, taking the vehicle from 2 million in 1991 to 9.7 million in 2006 (nearly 7 percent of global automobile production and 2.4 percent of four-wheeler production). The cumulative annual growth rate of automotive industry production from 2000-2001 to 2005-2006 was 17 percent.

The cumulative annual growth rate of exports from 2000-01 to 2005-06 was 32.92 percent. The production of the automotive industry is expected to achieve a growth rate of over 20 percent in 2006-07 and about 15 percent in 2007-08. The export during the same period is expected to grow over 20 percent. The automobile sector has been contributing its share to the shining economic performance of India in recent years.

With the Indian middle class earning higher per capita income, more people are ready to own private vehicles, including cars and two-wheelers. Product movements and operated services have boosted sales of medium and sized commercial vehicles for passenger and goods transport Stump Blog. Side by side with fresh vehicle sales growth, the automotive components sector has witnessed big growth. The domestic auto components consumption has crossed rupees 9000 crores and an export of one-half size.

Eye-Catching FDI Destination – INDIA!

India is at the peak of the Foreign Direct Investment wave. FDI flows into India trebled from $6 billion in 2004-05 to $19 billion in 2006-07 and is expected to quadruple to $25 billion in 2007-08. By AT Kearney’s FDI Confidence Index 2006, India is the second most attractive FDI destination after China, pushing the US to the third position. It is commonly believed that soon, India will catch up with China. This may also happen as China attempts to cool the economy and its protectionism measures, eclipsing the Middle Kingdom’s attractiveness.

With rising wages and high land prices in the eastern regions, China may lose its edge as a low-cost manufacturing hub. India seems to be a natural choice. India is an up-and-coming significant manufacturer, especially of electrical and electronic equipment, automobiles, and auto parts. During 2000-2005, of the total FDI inflow, electrical and electronic (including computer software) and cars accounted for 13.7 percent and 8.4 percent. In the services sectors, the lead players are the US, Singapore, and the UK.

During 2000-2005, the total investment from these three countries accounted for about 40 percent of the FDI in the services sector. In automobiles, the key player in Japan. During 2000-2005, Japan accounted for about 41 percent of the total car FDI, surpassing all its competitors by a big margin. India’s vast domestic market and the large pool of technically skilled workforce were the magnetism for foreign investors. Hitherto, known for knowledge-based industries, India is also emerging as a conventional manufacturing powerhouse.

The manufacturing sector in the Index for Industrial Production has grown by over 9 percent over the last three years. Korean auto-makers think India is a better destination than China. Though China provides a bigger automobile market, India offers the potential for higher growth. Manufacturing and service-led development and increasing consumerization make India one of the most important destinations for FDI.

Roberto Brock
the authorRoberto Brock
Snowboarder, traveler, DJ, Swiss design-head and HTML & CSS lover. Doing at the nexus of art and purpose to develop visual solutions that inform and persuade. I'm a designer and this is my work. Introvert. Coffee evangelist. Web buff. Extreme twitter advocate. Avid reader. Troublemaker.