Article-Export Potential of Indian Automobile Industry

Export Potential of Indian Automobile Industry Abhinav Bannurkra

∗

 The international automobile industry was taken aback when Honda Siel Cars India (HSCI) announced that it would begin exporting engine components to Honda’s parent company in Japan. The Indian automobile industry always carried the potential of exporting; but to technologically giant country like  Japan its news. It is expected that around 60,000 engine units from Honda India will be exported by the end of April 2010.

Automo Automobil bile e indust industry ry of India India can be broadl broadly y classi classifie fied d under under passen passenger ger vehicles, commercial vehicles, three wheelers and two wheelers, with two whee wheele lers rs havi having ng a maxi maximu mum m mark market et sh shar are e of more more than than 75 75%. %. From From nati nation onal aliz izat atio ion n

of auto automo mobi bile le indu indust stry ry in 19 1950 50 than thankf kful ully ly the the Indi Indian an

government switched over to economic liberalization in July 1991 from the then existing license raj1 that resulted into increased competitiveness and relaxed xed

restrictions

wherein

the

Indian

automotive

industry

has

demons demonstra trated ted sus sustai tained ned growt growth. h. Till Till 19 1970 70s s when when the Maruti Maruti Udyog Udyog was establishe established, d, car was a luxury way far away from the reach of common common man; wherein tractors, commercial vehicles and scooters were on the rise. After liberalization several automobile giants like Matuti, Mahindra and Mahindra,   Tat Tata a

Moto Motors rs,,

and and

Suz Suzuki uki,

expa expand nded ed the their wings ngs

into into dom domesti estic c

and and

inte intern rnati ation onal al oper operat atio ions ns and many many a big big and smal smalll indu indust stri ries es star starte ted d exporting automobile components and parts.

  

Abhinav Bannurkar, Department of Mechatronics, Mechatronics, School of Mechanical Engineering, SRM University, Kattankulathur, Kattankulathur, Kancheepuram, Kancheepuram, TN 1

No one might have predicted that Indian automobile industry would grow leaps and bounds since 1898, a time when a car had touched the Indian streets for the first time. India stands at fifth place in the world for commercial vehicles manufacturing. Starting in 2000 several landmark policy changes like removal of Quantitative Restrictions and 100% FDI through automatic route were introduced thus, indigenously developed (Made in India) automotives were pioneered in the domestic market and exports were given a thrust. More than 60% of the auto components are exported to Europe and USA, indicating the high level of maturity in quality and technology that Indian Automobile Industry has achieved. With an annual production of over 2.3 million units in 2008; Indian Automobile Industry was the ninth largest in the world thereupon emerged as Asia’s fourth largest exporter of automobiles surpassing China; next to Japan, South Korea and   Thailand. According to New York Times India has emerged as one of the world's largest manufacturers of small cars because of its strong engineering base and expertise in the manufacturing of low-cost, fuel-efficient cars.

Automobile Industry was not an exemption to the Global recession. The society of Indian Automobile Manufacturers reported that though the Twowheelers registered a negative growth rate of 7.92 percent during 2007-08, the cumulative growth of the Passenger Vehicles segment during this period was 12.17 percent; wherein Passenger Cars grew by 11.79 percent, Utility Vehicles by 10.57 percent and Multi Purpose Vehicles by 21.39 percent.  There was a decline of all segments of vehicles during this period wherein   Three-wheelers exports declined by 1.85 percent as compared to 9.71 percent of sales in India. The sales of Goods Carriers also declined drastically by 20.49 percent and Passenger Carriers by 2.13. By 2008-09 Automobile Exports registered a growth of 22.30 percent. The growth was led by two wheelers segment which grew at 32.31 percent; Commercial vehicles and Passenger Vehicles grew by 19.10 percent and 9.37 percent respectively.   The month of February 2009, recorded sales of passenger cars exceeding

100,000 units, indicating high hopes for the current fiscal year; this prompted the banks to offer low interest rates to the automobile customers of middle income group: the major chuck becoming economically stronger with every passing day.

Sri Santosh Mohan Dev, Hon’ble minister of Heavy Industries and Public Enterprises states that “In order to accelerate and sustain growth in the automotive sector a roadmap was to be needed to steer coordinate and  synergize the efforts of all the stake holders. As such the ministry has  prepared a document  Automotive Mission Plan 2006-2016’ ”. The vision ‘ 

of the document states “India has to emerge as the destination of choice in the world for design and manufacture of automobiles and auto components with exports to reach a level of US$ 35 billion accounting for more than 10% of the GDP and providing additional employment to 25 million people by 2016”.

In spite of tremendous growth in figures Indian automotive constitute only 0.3% of global automotive trade; so a lot more is to be done? Exploring into new geographies beyond traditional market and focus on Small Car Segment could be key-points for increase of exports as Indian companies have gained expertise in manufacturing such vehicles, compared to multi utility vehicles such as Two-wheeler and Three-wheeler that are expected to become substantial in the coming year. Because of its tremendous growth needs of  the industry are to be regularized and separate automobile hubs in the ports of Indian metro cities may be establishing to handle the potential vehicles in the coming few years.

Retrieved References: 1. Kamala, T.N. & Doreswamy, A.G. (2007). Strategies for Enhancing Competitiveness of  Indian Auto Component Industries. Indian Institute of Management Kozhikode. 2. Tiku, P. (2008). Six Sizzling Markets: How to Profit from Investing in Brazil, Russia, India, China, South Korea, and Mexico. United States of America: John Wiley & Sons, Inc. ISBN 978-0-470-17888-1.

3. Report of the minister of Heavy Industries and Public enterprises on “Automotive Mission Plan 2006-2016” [81 pages] Retrieved on 07.11.2009 from: 1. driveinside.com (News headlines September 9, 2009) [2 pages] 2. siam.co.in (official website of Society of Indian Automobile Manufacturers) [160 pages] 3. wikipedia.com [26 pages] 4. mapsofindia.com [2 pages]