Introduction to automotive sector

The automotive industry in India is one of the largest in the world with an annual production of
23.96 million vehicles in FY (fiscal year) 201516, following a growth of 2.57 per cent over the
last year. The automobile industry accounts for 7.1 per cent of the country's gross domestic
product (GDP). The Two Wheelers segment, with 81 per cent market share, is the leader of the
Indian Automobile market, owing to a growing middle class and a young population. Moreover,
the growing interest of companies in exploring the rural markets further aided the growth of the
sector. The overall Passenger Vehicle (PV) segment has 13 per cent market share.

India is also a prominent auto exporter and has strong export growth expectations for the near
future. In FY 201415, automobile exports grew by 15 per cent over the last year. In addition,
several initiatives by the Government of India and the major automobile players in the Indian
market are expected to make India a leader in the Two Wheeler (2W) and Four Wheeler (4W)
market in the world by 2020.

Market Size
The industry produced a total 14.25 million vehicles including PVs, commercial vehicles (CVs),
three wheelers (3W) and 2W in AprilOctober 2015, as against 13.83 in AprilOctober 2014,
registering a marginal growth of 3.07 per cent, year-to-year.

The sales of PVs grew by 8.51 per cent in AprilOctober 2015 over the same period in the
previous year. The overall CVs segment registered a growth of 8.02 per cent in AprilOctober
2015 as compared to same period last year. Medium and Heavy Commercial Vehicles
(M&HCVs) registered very strong growth of 32.3 per cent while sales of Light Commercial
Vehicles (LCVs) declined by 5.24 per cent during AprilOctober 2015, year-to-year.

In AprilOctober 2015, overall automobile exports grew by 5.78 per cent. PVs, CVs, 3Ws and
2Ws registered growth of 6.34 per cent, 17.95 per cent, 18.59 per cent and 3.22 per cent,
respectively, in AprilOctober 2015 over AprilOctober 2014.

Investments

In order to keep up with the growing demand, several auto makers have started investing heavily
in various segments of the industry during the last few months. The industry has attracted foreign
direct investment (FDI) worth US$13.48 billion during the period April 2000 to June 2015,
according to data released by Department of Industrial Policy and Promotion (DIPP).
Some of the major investments and developments in the automobile sector in India are as
follows:

Global auto maker Ford plans to manufacture in India two families of engines by 2017, a
2.2 litre diesel engine code-named Panther, and a 1.2 litre petrol engine code-named
Dragon, which are expected to power 270,000 Ford vehicles globally.

The world's largest air bag suppliers Autoliv Inc, Takata Corp, TRW Automotive Inc and
Toyoda Gosei Co are setting up plants and increasing capacity in India.

General Motors plans to invest US$1 billion in India by 2020, mainly to increase the
capacity at the Talegaon plant in Maharashtra from 130,000 units a year to 220,000 by 2025.
 US-based car maker Chrysler has planned to invest Rs 3,500 crore (US$525 million) in
Maharashtra, to manufacture Jeep Grand Cherokee model.

Mercedes Benz has decided to manufacture the GLA entry SUV in India. The company
has doubled its India assembly capacity to 20,000 units per annum.

Germany-based luxury car maker Bayerische Motoren Werke AG's (BMW) local unit has
announced to procure components from seven India-based auto parts makers.

Mahindra Two Wheelers Limited (MTWL) acquired 51 per cent shares in France-based
Peugeot Motorcycles (PMTC).

Government Initiatives

The Government of India encourages foreign investment in the automobile sector and allows 100
per cent FDI under the automatic route.
Some of the major initiatives taken by the Government of India are:

The Government of India aims to make automobile manufacturing the main driver of
"Make in India" initiative, as it expects the passenger vehicles market to triple to 9.4 million
units by 2026, as highlighted in the Auto Mission Plan (AMP) 2016-26.

In the Union budget of 2015-16, the Government has announced plans to provide credit
of Rs 850,000 crore (US$127.5 billion) to farmers, which is expected to boost sales in the
tractors segment.

The government plans to promote eco-friendly cars in the countryi.e. CNG-based

vehicles, hybrid vehicles, and electric vehiclesand also to make mandatory 5 per cent
ethanol blending in petrol.

The government has formulated a Scheme for Faster Adoption and Manufacturing of
Electric and Hybrid Vehicles in India, under the National Electric Mobility Mission 2020, to
encourage the progressive introduction of reliable, affordable, and efficient electric and
hybrid vehicles into the country.

The Automobile Mission Plan (AMP) for the period 20062016, designed by the
government is aimed at accelerating and sustaining growth in this sector. Also, the well-
established Regulatory Framework under the Ministry of Shipping, Road Transport and
Highways, plays a part in providing a boost to this sector.

History

In 1897, the first car ran on an Indian road. Through the 1930s, cars were imports only, and in
small numbers.
An embryonic automotive industry emerged in India in the 1940s. Hindustan Motors was
launched in 1942, long-time competitor Premier in 1944, building Chrysler, Dodge,
and Fiat products respectively.[4] Mahindra & Mahindra was established by two brothers in 1945,
and began assembly of Jeep CJ-3A utility vehicles. Following independence in 1947, the
Government of India and the private sector launched efforts to create an automotive-component
manufacturing industry to supply to the automobile industry. In 1953, an import substitution
programme was launched, and the import of fully built-up cars began to be restricted.
1947-1970
The 1952 Tariff Commission

In 1952, the government appointed the first Tariff Commission, one of whose purposes was to
come out with a feasibility plan for the indigenization of the Indian automobile industry. In 1953,
the commission submitted their report, which recommended categorizing existing Indian car
companies according to their manufacturing infrastructure, with licensed capacity to manufacture
a certain number of vehicles, with capacity increases allowable, as per demands, in the future.
The Tariff Commission recommendations were implemented with new policies that would
eventually exclude companies that only imported parts for assembly, as well as those with no
Indian partner. In 1954, following the Tariff Commission implementation, General Motors, Ford,
and Rootes Group, which had assembly-only plants in Mumbai, decided to move out of India.

The Tariff commission policies, including similar restrictions that applied to other industries, came
to be known as the "license raj", which proved to be the greatest undoing of the Indian
automotive industry, where bureaucratic red tape ended up causing demand to outstrip supply,
with month-long waiting periods for cars, scooters, and motorcycles.

Passenger Cars

Hindustan Motors, Calcutta - technical collaboration with Morris Motors to manufacture

Morris Oxford models that would later become HM Ambassador.

Premier Automobiles, Bombay - technical collaboration with Chrysler to

manufacture Dodge, Plymouth and Desoto models and with Fiat to manufacture the 1100D
models which would later with Premier Padmini range.

Standard Motor Products of India, Madras - technical collaboration from Standard-

Triumph to manufacture Standard Vanguard, Standard 8, 10 and later Standard Herald.
Utility and Light Commercial Vehicles

Vehicle Factory Jabalpur - started manufacturing Jonga Light Utility Vehicles and Vahan
1 Ton (Nissan 4W73 Carriers) in India, under license from Nissan of Japan. They were the
main troop carriers of the Indian Armed Forces and much powerful than any other vehicle of
their class.

Mahindra & Mahindra, Bombay - technical collaboration with Willys to manufacture CJ

Series Jeep.

Bajaj Tempo, Poona now Force Motors - technical collaboration with Tempo (company) to
manufacture Tempo Hanseat, a three-wheeler and Tempo Viking and Hanomag, later known
as Tempo Matador in India.

Standard Motor Products of India - technical collaboration from Standard has licence to
manufacture the Standard Atlas passenger van with panel van and one-tonne one tonne
pickup variants.
Medium and Heavy Commercial Vehicles

Vehicle Factory Jabalpur - started manufacturing Shaktiman trucks with technical

assistance from MAN SE of Germany. The trucks were the main logistics vehicle of
the Indian Army with several specialist variants. VFJ still is the sole supplier of B vehicles to
the Indian Armed Forces.
 Heavy Vehicles Factory - was established in 1965 in Avadi, near Chennai to produce
tanks in India. Since its inception, HVF has produced all the tanks of India,
including Vijayanta, Arjun, Ajeya, Bhishma and their variants for the Indian Army. HVF is the
only tank manufacturing facility of India.

Tata Motors, Poona, then known as TELCO - technical collaboration with Mercedes
Benz to manufacture medium to heavy commercial vehicles both Bus and Trucks.

Ashok Motors, later Ashok Leyland, Madras - technical collaboration with Leyland
Motors to manufacture medium to heavy commercial vehicles both Bus and Trucks. Ashok
Motors also discontinued its Austin venture formed in 1948 to sell Austin A40 and retooled
the factory to make trucks and buses.

Hindustan Motors - technical collaboration with General Motors to manufacture

the Bedford range of medium lorry and bus chassis.

Premier Automobiles - technical collaboration with Chrysler to manufacture

the Dodge, Fargo range of medium lorry, panel vans, mini-bus and bus chassis.

Simpsons & Co, Madras - part of Amalgamations Group (TAFE Tractors)- technical
collaboration with Ford to manufacture medium lorry and bus chassis, but did not utilise that
option until the 1980s.

Scooters, Mopeds and Motorcycles

known as Bajaj Chetak, by Bajaj became the largest sold scooter in the world

Many of the two-wheelers manufacturers were granted licenses in the early 1960s, well
after the tariff commission was enabled.

Royal Enfield (India), Madras - technical collaboration with Royal Enfield, UK to

manufacture the Enfield Bullet range of motorcycles.

Bajaj Auto, Poona - technical collaboration with Piaggio, Italy to manufacture their best
selling Vespa range of scooters and three wheelers with commercial option as well.

Automobile Products of India, Bombay (Better known for API Lambretta - technical
collaboration with Innocenti of Milan, Italy to manufacture their Lambretta range of mopeds,
scooters and three-wheelers. This company was actually the Rootes Group car plant that
was bought over by M. A. Chidambaram family.

Mopeds India Limited, Tirupathi - technical collaboration with Motobcane, France to

manufacture their best selling Mobylette mopeds.

Escorts Group, New Delhi - technical collaboration with CEKOP of Poland to

manufacture the Rajdoot 175 motorcycle whose origin was DKW RT 125

Ideal Jawa, Mysore - in technical collaboration with CZ - Jawa of Czechoslovakia for

its Jawa and Yezdi range of motorcycles.
1970 to 1983
However, growth was relatively slow in the 1950s and 1960s, due to nationalisation and
the license raj, hampered the growth of Indian private sector.
The beginning of the 1970s saw some growth potential and most of the collaboration license
agreements came to an end but with option to continue manufacturing with renewed branding.
Cars were still meant for the elite and Jeeps were largely used by government organizations and
some rural belts. In commercial vehicle segments some developments were made by the end of
the decade to cater improved goods movements. The two-wheeler segment remained
unchanged except for to increased sales in urban among middle class. But more fillip was target
towards farm tractors as India was embarking on a new Green Revolution. More Russian and
eastern bloc imports were done to increase the demand.
But after 1970, with restrictions on the import of vehicles set, the automotive industry started to
grow; but the growth was mainly driven by tractors, commercial vehicles and scooters. Cars still
remained a major luxury item. In the 1970s, price controls were finally lifted, inserting a
competitive element into the automobile market.[6] However, by the 1980s, the automobile market
was still dominated by Hindustan and Premier, who sold superannuated products in fairly limited
numbers.[7] During the eighties, a few competitors began to arrive on the scene.
The OPEC oil crisis saw increase need to installing or redesign some vehicle to fit diesel engines
on medium commercial vehicle. Until the early 1970s Mahindra Jeeps were on Petrol and
Premier commercial vehicles had Petrol model options. The Defence sector too had most trucks
on Pertol engines.

1984 to 1992
From the end of the 1970s to the beginning of the 1980s saw no new models but the country
continued with 2 decade old designs forcing government to encourage and let more
manufacturers into fray.
In 1984, the then Prime Minister of India, Indira Gandhi established the Ordnance Factory
Medak, near Hyderabad. It started manufacturing Infantry Combat Vehicles christened as Sarath,
the backbone of India's mechanised infantry. OFMK is still the only manufacturing facility of ICVs
in India. To manufacture the high-power engines used in ICVs and main battle tanks, Engine
Factory Avadi, near Chennai was set in 1987. In 1986, to promote the auto industry, the
government established the Delhi Auto Expo. The 1986 Expo was a showcase for how the Indian
automotive industry was absorbing new technologies, promoting indigenous research and
development, and adapting these technologies for the rugged conditions of India. The nine-day
show was attended by then Prime Minister Rajiv Gandhi.

Post-1992 liberalisation
Eventually multinational automakers, such as, Suzuki and Toyota of Japan and Hyundai of South
Korea, were allowed to invest in the Indian market, furthering the establishment of an automotive
industry in India. Maruti Suzuki was the first, and the most successful of these new entries, and
in part the result of government policies to promote the automotive industry beginning in the
1980s.[7] As India began to liberalise its automobile market in 1991, a number of foreign firms also
initiated joint ventures with existing Indian companies. The variety of options available to the
consumer began to multiply in the nineties, whereas before there had usually only been one
option in each price class. By 2000, there were 12 large automotive companies in the Indian
market, most of them offshoots of global companies.

Slow export growth[edit]

Exports were slow to grow. Sales of small numbers of vehicles to tertiary markets and
neighbouring countries began early, and in 1987 Maruti Suzuki shipped 480 cars to Europe
(Hungary). After some growth in the mid-nineties, exports once again began to drop as the
outmoded platforms provided to Indian manufacturers by multinationals were not competitive.
[9]
This was not to last, and today India manufactures low-priced cars for markets across the
globe. As of 18 March 2013, global brands such as Proton Holdings, PSA
Group, Kia, Mazda, Chrysler, Dodge and Geely Holding Group were shelving plans for India due
to the competitiveness of the market, as well as the global economic crisis.
Emission norms
In 2000, in tune with international standards to reduce vehicular pollution, the central government
unveiled standards titled "India 2000", with later, upgraded guidelines to be known as Bharat
stages. These standards are quite similar to the stringent European standards, and have been
implemented in a phased manner, with the latest upgrade being implemented in 13 cities and,
later, in the rest of the
nation. Delhi (NCR), Mumbai, Kolkata, Chennai, Bangalore, Hyderabad, Ahmedabad, Pune, Sur
at, Kanpur, Lucknow, Solapur, and Agra are the 13 cities where Bharat Stage IV has been
imposed while the rest of the nation is still under Bharat Stage III.

Local manufacture encouraged

india levies an import tax of 125% on electric cars, while the import tax on components such as
gearboxes, airbags, drive axles, is 10%. Therefore, the taxes encourage cars to be assembled in
India rather than be imported as completely built units.

Manufacturing facilities

The majority of India's car manufacturing industry is evenly divided into three "clusters".
Around Chennai is the southernmost and largest, with a 35% revenue share, accounting for 60%
of the country's automotive exports, and home of the operations of Heavy Vehicles
Factory, Engine Factory Avadi, Ford, Hyundai, Renault, Mitsubishi, Nissan, BMW, Hindustan
Motors, Daimler, Caparo, Mini, and Datsun.[12][13]

Near Mumbai, Maharashtra, along the Chakan corridor near Pune, is the western cluster, with a
33% share of the market. Audi, Volkswagen, and Skoda are located in Aurangabad. Mahindra
and Mahindra has an SUV and engine assembly plant at Nashik. General Motors, Tata
Motors, Mercedes Benz, Land Rover, Jaguar Cars, Fiat, and Force Motors have assembly plants
in the area.[14][15]

The northern cluster is around the National Capital Region, and contributes
32%. Gurgaon and Manesar, in Haryana, are where the country's largest car
manufacturer, Maruti Suzuki, is based.

An emerging cluster is the state of Gujarat, with a manufacturing facility of General

Motors in Halol, and a facility for Tata Nano at their plant in Sanand. Ford, Maruti Suzuki,
and Peugeot-Citroen plants are also planned for Gujarat.[16]

Kolkata with Hindustan Motors (inactive), Noida with Honda, and Bengaluru with Toyota are other
automotive manufacturing regions around the country

Exports

India's automobile exports have grown consistently and reached $4.5 billion in 2009, with the
United Kingdom being India's largest export market, followed by Italy, Germany, Netherlands,
and South Africa.
According to the New York Times, 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 2008, South Korean multinational Hyundai Motors alone exported 240,000 cars made in
India. Nissan Motors plans to export 250,000 vehicles manufactured in its India plant by 2011.
[82]
Similarly, US automobile company, General Motors announced its plans to export about
50,000 cars manufactured in India by 2011.
In September 2009, Ford Motors announced its plans to set up a plant in India with an annual
capacity of 250,000 cars, for US$500 million. The cars will be manufactured both for the Indian
market and for export. The company said that the plant was a part of its plan to make India the
hub for its global production business. Fiat Motors announced that it would source more than
US$1 billion worth auto components from India.

In 2009 India (0.23m) surpassed China (0.16m) as Asia's fourth largest exporter of cars after
Japan (1.77m), Korea (1.12m) and Thailand (0.26m).

In July 2010, The Economic Times reported that PSA Peugeot Citron was planning to re-enter
the Indian market and open a production plant in Andhra Pradesh that would have an annual
capacity of 100,000 vehicles, investing 700M in the operation. PSA's intention to utilise this
production facility for export purposes however remains unclear as of December 2010.

In recent years, India has emerged as a leading center for the manufacture of small
cars. Hyundai, the biggest exporter from the country, now ships more than 250,000 cars annually
from India. Apart from Maruti Exports' shipments to Suzuki's other markets, Maruti Suzuki also
manufactures small cars for Nissan, which sells them in Europe. Nissan will also export small
cars from its new Indian assembly line. Tata Motors exports its passenger vehicles to Asian and
African markets, and is preparing to sell electric cars in Europe in 2010. The firm is planning to
sell an electric version of its affordable car the Tata Nano in Europe and in the U.S. Mahindra &
Mahindra is preparing to introduce its pickup trucks and small SUV models in the U.S.
market. Bajaj Auto is designing a low-cost car for Renault Nissan Automotive India, which will
market the product worldwide. Renault Nissan may also join domestic commercial vehicle
manufacturer Ashok Leyland in another small car project. While the possibilities for the Indian
automobile industry are impressive, there are challenges that could thwart future growth. Since
the demand for automobiles in recent years is directly linked to overall economic expansion and
rising personal incomes, industry growth will slow if the economy weakens.

Electric vehicle and Hybrid vehicle (xEV) industry

During April 2012, the Indian government planned to unveil the road map for the development of
domestic electric and hybrid vehicles (xEV) in the country.[195] A discussion between the various
stakeholders, including Government, industry, and academia, was expected to take place during
2324 February.[195] The final contours of the policy would have been formed after this set of
discussions. Ministries such as Petroleum, Finance, Road Transport, and Power are involved in
developing a broad framework for the sector. Along with these ministries, auto industry
executives, such as Anand Mahindra (Vice Chairman and Managing Director, Mahindra &
Mahindra) and Vikram Kirloskar (Vice-Chairman, Toyota Kirloskar), were involved in this task.
[195]
The Government has also proposed to set up a Rs 740 crore research and development fund
for the sector in the 12th five-year plan during 2012-17. [195] The idea is to reduce the high cost of
key imported components such as the battery and electric motor, and to develop such
capabilities locally.
Electric car manufacturers in India
Ajanta Group

Hero Electric.

Mahindra.

REVA now Mahindra Reva Electric Vehicles.

Tara International.

Tata Motors.

Defunct motor vehicle manufacturers of India

Automobile Products of India or API - founded in 1949 at Bombay (now Mumbai), by the
British company Rootes Group,[201] and later bought over by M. A. Chidambaram of the MAC
Group from Madras (now Chennai).[201] The company manufactured Lambretta scooters, API
Three Wheelers under licence from Innocenti of Italy and Automobile ancillaries, notably
Clutch and Braking systems. API's registered offices were earlier in Mumbai, later shifted
to Chennai, in Tamil Nadu. The manufacturing facilities were located
in Mumbai and Aurangabad in Maharashtra and in Ambattur, Chennai.[202] The company has
not been operational since 2002.

Escorts Yamaha - in 1984 Escorts formed a joint venture with Yamaha to manufacture
motorcycles. In 2008 became India Yamaha Motor.

Hero Motors is a former moped and scooter manufacturer based in Delhi, India. It is a
part of multinational company Hero Group, which also currently owns Hero
Motocorp (formerly Hero Honda) and Hero Cycles, among others. Hero Motors was started
in the 1960s to manufacture 50 cc two-stroke mopeds but gradually diversified into making
larger mopeds, mokicks and scooters in the 1980s and the 1990s. Noteworthy collaborators
and technical partners were Puch of Austria and Malaguti of Italy. Due to tightening emission
regulations and poor sales, Hero motors have discontinued the manufacture of all gasoline
powered vehicles and transformed itself into an electric two-wheeler and auto parts
manufacturer.

Ideal Jawa - motorcycle company based in Mysore, sold licensed Jawa and Z
motorcycles beginning in 1960 under the brand name Jawa and later Yezdi.

Kinetic Honda - a joint venture between Kinetic Engineering Limited, India and Honda
Motor Company, Japan. The JV operated during 1984 - 1998, manufacturing 2-
stroke scooters in India. In 1998, the joint venture was terminated after which Kinetic
Engineering continued to sell the models under the brand name Kinetic until 2008[203] when
the interests were sold to Mahindra.

Mopeds India Limited - produces the Suvega range of Mopeds under technical
collaboration with Motobcane of France.

Standard - produced by Standard Motor Products in Madras from 1949 to 1988. Indian
Standards were variations of vehicles made in the U.K. by Standard-Triumph. Standard
Motor Products of India Ltd. (SMPI) was incorporated in 1948, [204] and their first product was
the Vanguard, which began to be assembled in 1949. The company was dissolved in 2006
and the old plant torn down.