MIT International Journal of Mechanical Engineering, Vol. 5, No. 1, January 2015, pp.

30-36 30
ISSN 2230-7680 © MIT Publications

A Review: Present Indian

Automobile Industry

Pankaj Gupta Rajdeep Gupta Pulkit Maheshwari

Department of Mechanical Krishna Institute of Krishna Institute of
Engineering, Faculty of Engineering & Engineering and Technology Engineering and Technology
Technology (R.B.S.E.T.C. Agra) Modinagar, U.P., India Modinagar, U.P., India
U.P., India

ABSTRACT

As India’s economy continues to grow at a rapid pace, the automobile industry will be a key beneficiary. This is widely true
across automotive markets—from those serving customers with two-wheelers and four-wheelers to those offering commercial
vehicles. The main factors behind such growth are the increasing affluence of the average consumer, overall GDP growth, the
arrival of ultra-low-cost cars, and the increasing maturity of Indian original equipment manufacturers (OEMs).The automotive
Industry in India is now working in terms of the dynamics of an open market. In India, automobile sector is one of the largest
growing industries. Many joint ventures have been set up in India with foreign collaboration. India also has one of the fastest
growing economies, and many U.S. companies view India as a potentially lucrative market. It is expected that the automotive
industry will play an important role in helping the economy to continue this growth. This paper gives an overview of Indian
Automobile Industry.

Introduction is driven by a sustained increase in vehicle population and an

Universally, the automotive industry has been accepted as a
major driver of growth of a nation’s economy and is a significant
contributor to the global economy. The automobile has been
described as ‘both a form and function’ based product involving
high level of engineering as well as being positioned as a fashion
product [1]. The industry has rightly been called as “the industry
of industries”, since it uses outputs of nearly all manufacturing
industries [2] and supports upstream (mining, steel etc.) and
downstream industries (finance, insurance, after – market etc.)
[3].The Indian automobile sector is one of its most vibrant
industries. The industry accounts for 22 per cent of the country’s
manufacturing gross domestic product (GDP). It comprises
passenger cars, two-wheelers, threewheelers and commercial
vehicles. India is currently the seventh-largest in the world with
an average annual production of 17.5 million vehicles, of which
2.3 million are exported. According to the Society for Indian
Automobile Manufacturers (SIAM), the automobile industry
has already invested Rs. 70,000 crores in the past four years in
building new factories, adding fresh capacity and bringing out
new products. The auto components industry too is gearing up
to compliment the vehicle industry’s growth. About $6 billion
has been invested in the past 4 years according to Automotive
Component Manufacturers Association of India (ACMA)[4]. It
increasing preference towards higher-end vehicles with rising
consumer aspirations (Volvo registered 155% increased growth
of its luxury segment in 2013). The Indian auto market has
the potential to dominate the global auto industry, provided a
conducive environment is created for potential innovators to
come up with new pilot projects.
The evolution of the automotive component industry predictably
followed the evolution of the auto industry itself. With the start-
up of local production of cars, trucks, and two-wheelers in the
1950s, many of the associated component manufacturers (mainly
from Europe) started operations in India. Over a period of time,
many of the major manufacturers had established plants for
manufacture or assembly of parts. These included companies
like Bosch (fuel injection systems and spark plugs) and Mahle
(pistons) from Germany; Lucas (auto electricals), Girling
(brakes), and Lockheed (clutches) from the United Kingdom;
and Champion (spark plugs), Armstrong (shock absorbers), and
Union Carbide-Exide (batteries) from the United States. From
the Indian perspective, these units were primarily intended to aid
import substitution. In the process, there was gradual transfer of
technology from the parent company[6]. The motorcycle segment
continues to dominate the market. Entry-level bikes (engine
power below 125cc and price in the range of US$ 850–1,000)
MIT International Journal of Mechanical Engineering, Vol. 5, No. 1, January 2015, pp. 30-36 31
ISSN 2230-7680 © MIT Publications
account for around 80 per cent of sales. The cost of ownership
and economics of operations are key purchase criteria. The
premium-bike segment (engine power above 150cc and price
in the range of US$ 1,200–2,000) is growing at a faster pace
than entry-level vehicles; this is an indication of the increasing
affluence of customers.
Recent trends indicate that 100cc bikes are being preferred over
125cc bikes by the market [7]. Fig. 1 shows the Segment wise
Market Share.
Fig. 1: Segment-wise market share[8]
Fig. 2: Rising GDP Per Capita (US $)[9]
Literature Review
Every major shift in policies made by the Indian government, the
automotive industry has come out stronger and better. While the
shift in policies seems to have mostly been brought by chance
events, the Indian government has at least to be credited for
making the right decisions and implementing them correctly. It
is paradoxical that the Indian middle class, the most attractive
feature for foreign investment in the liberalization phase, was
an outcome of the statist ideologies in the regulatory phase.
The product innovations of domestic firms like Tata Motors and
Bajaj Auto today are the fruits of indigenization and protection
policies of the regulatory phases[10]. Buyer decision processes
are the decision-making processes undertaken by consumers
in regard to a potential market transaction before, during, and
after the purchase of a product or service. Consumers have to
make different kinds of decisions everyday according to their
different needs. Some of the decisions are playing critical roles
in consumers’ daily life, for example, purchasing a new home
or purchasing a car, whereas sometimes the decisions are made
on a virtually automatic basis[11].
Present Scenario Indian Auto Industry
Although the Indian automotive industry has its genesis in the
40’s, it has seen considerable growth in the last two decades
mainly due to economic liberalization including 100% FDI in the
sector[12]. Global auto and component manufacturing companies
are motivated to establish manufacturing and R&D facilities in
the country due to availability of large pool of skilled workers,
low production costs, faster design and development process
and emerging market status[13]. Presently, there are more than
30 OEMs offering more than 75 options in all categories of
vehicles. India’s automotive industry is the world’s sixth largest
producer of automobiles in terms of volume and value and has
grown 14.4% in the last decade. The industry contributes 7% to
India’s GDP, 7-8% of the total employed population (about 13
million people), 4% of exports [13] [14], 39% of FDI inflows
(USD 5.5 billion between (2010-14) and contributes 17% to
total indirect taxes collected. Overall domestic sales are led by
two wheelers, (77.4% of total sales in 2012-13) followed by
passenger vehicles (15.1%) and commercial vehicles (4.45%)
[14].In the last five years there has been an overall growth in
automobile production (from 10.85 million vehicles in 2007-8
to 20.63 million vehicles in 2012-13). Although 2012-13 has
seen almost stagnant sales, exports have increased by 10% in the
same period. However, in global terms, even with export earnings
of 4 billion USD (including 1.8 billion USD as exports of auto
component sector), the automotive sector contributes only 2.37%
of world production and is ranked a low 26th in rank in the world
auto export market with a share of 0.53%. The quest of Indian
automotive industry in striving for global competitiveness is
evident from the fact that major automotive manufacturers are the
second-largest number of recipients (after Japan) of the Deming
award for quality.[15] Significantly, India has the best-in-class
fuel economy rates as well as affordable total cost of ownership
.[16] The above scenario indicates that the Indian automotive
industry has potential for substantial growth.
India is a global hub of automobile industry having:
15 Manufacturers of passenger cars and multi-utility vehicles.
9 Manufacturers of commercial vehicles.
16 Manufacturers of 2/3 wheelers.
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14 Manufacturers tractors. 5 Manufacturers of engine.[17]
At present, India is the:
• Second largest two-wheeler market in the world.
• Fourth largest commercial vehicle market in the world.
• 11th largest passenger car market in the world.[18]
The main automobile focuses in India are based at Chennai,
Gurgaon, Manesar, Pune, Ahmedabad, Halol, Aurangabad,
Kolkata, Noida and Bangalore. Chennai is the biggest centre
accounting for 60% of Indian auto exports. The auto components
industry, although largely concentrated near automobile hubs, is
fairly widespread in other parts of the country too.[18]

Automobile Domestic Sales Trends [19]

Category Number of Vehicles

Year 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13

Passenger Vehicles 1,549,882 1,552,703 1,951,333 2,501,542 2,618,072 2,686,429

Commercial
490,494 384,194 532,721 684,905 809,532 793,150
Vehicles

Three Wheeler 364,781 349,727 440,392 526,024 513,251 538,291

Four Wheeler 7,249,278 7,437,619 9,370,951 11,768,910 13,435,769 13,797,748

Grand Total 9,654,435 9,724,243 12,295,397 15,481,381 17,376,624 17,815,618

Fig. 3: Automobile current trends and performance in domestic market[20]

Automobile Companies in India Company started its India operations in February 2006 through
Hero Honda: Largest two-wheeler manufacturer in the world. this fully-owned subsidiary.
Bajaj Auto: Second-largest two-wheeler manufacturer and Following are the Top Automobile Companies in India:
largest three-wheeler manufacturer in India. TVS Motor Co.
Third-largest two-wheeler manufacturer in India; has established Audi
a manufacturing facility in Indonesia. Honda Motorcycle & Bajaj Auto
Scooter India (Pvt.) Ltd. (HMSIL): Has recently entered the
BMW
Indian market through its own subsidiary (in addition to its joint
venture Hero Honda). Suzuki Motorcycle India Pvt. Ltd.[21]. The Chevrolet
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DaimlerChrysler (Mercedes) 3. The global automotive game will be pretty much decided by
Fiat twin forces for China and India.[17]
Ford
General Motors
Hindustan Motors
Hero Honda Motors
Hyundai Motors
Mahindra & Mahindra
Maruti SUZUKI
San Motors
Skoda
Tata Motors
Yamaha Motor Fig. 6: Percentage Market Share of Passenger Vehicles in 2013[11]

Passenger vehicle market of India will even cross Japan by selling

about 5 million vehicles by 2017-18.
India’s passenger vehicle production projections:
In 2010: 2.6 Million Vehicles
By 2015: 5.1 Million Vehicles
By 2020: 9.7 Million Vehicles
There are top 12 countries which are the sales destination. Top
12 Car sales Destinations at present till 2014 are given in table
below.
Fig. 4: Percentage Market Share of Two Wheelers in 2013[11] Sr. No. Country Sales in 2013(10^7)

1 China 2.2
2 U.S.A. 1.1
3 Japan 0.9
4 Germany 0.57
5 South Korea 0.45
6 India 0.39
7 Brazil 0.37
8 Mexico 0.305
9 Thailand 0.25
10 Canada 0.23
11 Russia 0.22
Fig. 5: Percentage Market Share of Commercial Vehicles in 2013[11] 12 Spain 0.21

Forecast of Indian Auto Industry Role OF FDI

According to reports from IHS Automotive, sales of cars and
light CVs are believed to reach 6-7 million by 2020, up from a
predicted 3.7 million this year. Based on these numbers, it can be
predicted that by 2016, India is most likely overtake Germany,
Japan and Brazil to become the world’s 3rd largest automotive
market. India is expected to become the world’s third largest
automobile market by 2030 behind only China and the US. India
will be part of global automotive triumvirate – the global BIG
The automobile sector in the Indian industry is one of the high
performing sectors of the Indian economy. This has added largely
in creating India an important intention for many international
players in the automobile industry who desire to deposit up
their businesses in India. The automobile industry in India is
increasing by 18 percent per year. The automobile sector in India
was opened up to foreign investments in the year 1991. 100%
Foreign Direct Investment (FDI) is allowed in the automobile
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industry in India. According to the Department of Industrial
Policy and Promotion (DIPP), the auto sector accounts for 4%
of total foreign direct investment (FDI) inflow into India. As per
the DIPP’s FDI figures for May 2012, FDI inflow into the auto
sector for the period April 2011 to March 2012 totalled US$ 923
million; cumulative FDI into the sector for the period April 2000
to May 2012 stood at US$ 6,853 million. [18]
Fig. 7: Much earlier than 2020, India will exceed the major EU
market (West Europe and India in (2015)[22]
The Indian government promotes foreign investment through:
1. The automobile sector and allows 100% FDI under the
automatic route.
2. It is a fully de-licensed industry.
3. Free imports of automotive components are allowed.
4. The government has not laid down any minimum
investment criteria for the automobile industry.[18]
Foreign Direct Investment (FDI) in India is upward. FDI is
extremely favourable for a country like India. The major
obstacles to investment in this sector are inadequate infrastructure
and a lack of governance and transparency.
OPPORTUNITIES IN THE INDIAN MARKET
A growth spurt in any industry presents an opportunity to shape
a market for long-term prosperity. Motorbikes, the prime driver
of two-wheeler growth, carry fairly high margins in a rapidly
growing market. High-value sports and luxury motorbikes boast
fat margins, too, yet global market leaders such as Harley-
Davidson, BMW, and Ducati are not aggressively investing
in the Indian market, which leaves an opening for domestic
manufacturers. Sales of lower-margin scooters have increased
somewhat, whereas sales of mopeds, with the thinnest margins,
have declined.
Mainstream consumers use two- wheelers for personal or family
transport. New engine technologies that increase horsepower
while maintaining the high fuel efficiency of the four-stroke
engine have strong potential to further boost sales. To sustain
sales growth, manufacturers, dealers, and consumer finance
groups must work together to build innovative financing options
for consumers.
The four-wheel passenger vehicle market has grown impressively
at the hands of the new middle class, although market penetration
remains low. Four-wheel automobiles are still too expensive for
the vast majority of Indian motor vehicle buyers, although the
Tata Nano and other Sub-A segment automobiles will bridge a
significant gap in the automotive ladder.
While the small-car market continues to develop, local players
like Tata and Maruti are also aggressively pushing into the
compact and entry midsize segments. The entry midsize market
represents particularly fertile ground, expected to grow 27
percent over the next five years. At present, the Honda City,
Hyundai Accent, and Maruti Esteem are the leading models in
this segment.[22]
To become a global player in small cars for both domestic and
export markets, Indian manufacturers will need new innovations
in power-train and manufacturing technologies to drive down
costs and compete with two-wheelers.
There are opportunities on the cost side of the entry midsize
segments as well, as automakers utilize India’s worldclass
engineering and low-cost manufacturing labour. Global OEMs
now have an opportunity to develop cars in India and even
manufacture them for export to the Western markets. Even
in a moderate economic scenario, we expect the four-wheel
passenger market to reach at least 2.5 million units by 2015. [22]
India’s commercial vehicle industry, although one of the largest in
the world, is nascent by Western standards. Only 20 percent of the
nation’s commercial vehicles are in fleet ownership, compared
with about 70 percent in the Western markets. An increase in
fleet ownership will make the market more regulated, more
consolidated, less price sensitive, and more apt to be driven by
economics than by emotion.
Current trends in Indian automobile
industry
Indian automotive market is full of tremendous opportunities
and is capable of scaling to greater heights.[19]
Some of the technology drivers for car sales in the year 2014-15
would be:
1. Connected Cars: Connected cars and infotainment are the
future. Auto manufacturers are increasingly focusing (and
should continue to focus) on connected cars to significantly
advance the driving experience of drivers. A connected
vehicle could also have Predictive Diagnostic Tools to
check vehicle’s health and accordingly warn the driver
in case there are any issues with the vehicle, eliminating
any unexpected breakdowns. With additional features
like parking assistance, driver warning systems, weather
and traffic reports, and music streaming, connected cars
promise to make driving more safe, convenient and
enjoyable.
However, this trend is not restricted to passenger vehicles
alone and is applicable to public transportation as well.
2. Intelligent Public Transportation: State transport
buses funded under the Indian government’s JnNURM
II (Jawaharlal Nehru National Urban Renewal Mission)
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program are required to have On-Bus Intelligent Transport
Systems. The first ARAI approved (ITS), which is
compliant to JNNURM II standards has been recently
developed and launched by KPIT. The On-Bus (ITS)
comes with features like automatic vehicle location,
vehicle health monitoring and diagnostics along with back-
end support from KPIT via cloud and remote diagnostics.
The console displays information about the passengers,
routes and vehicle health, ensuring the safety and security
of both the bus driver and passengers.
3. Green Cars: Indian Government is on a serious mission
to go green. Rising fuels costs and pollution levels are
some of the reasons for this endeavour. In fact, the India
National Electric Mobility Mission Plan 2020 envisages
that by 2020, there will be 5-7 million electric vehicles
(EVs) on the roads. There has also been a conscious shift
by auto manufacturers to move towards energy efficient
vehicles and hybrid/ electric vehicles.
4. Cloud and Big Data: Indian auto industry has usually
carried out processes for marketing and sales manually.
Cloud and big data has the potential to not just bring in
operational efficiency in the automotive functions but
also drive down IT applications and infrastructure costs.
Adopting cloud-based solutions will enable Indian auto
manufacturers to standardize processes and automate
data-heavy transactions that come in the form of invoices,
purchase orders and shipping notices, and so on, thereby
eliminating delays and human errors.
Challenges : Indian Automobile Industry
As we move into millennium, Indian Automobile Industry faces
more tremendous opportunities and also great challenges. These
challenges should be overcome and the challenges are listed
below:
• Low R&D: In India Research and Development program
is in automotive sector is very low compared to other
countries.
• Fuel price volatility: It is one of the major factor. As price
of fuel increases, rate of vehicle purchasing decreases.
• Slowdown in demand: There is slowdown in demand of
vehicles India due to high price of vehicles.
• Skilled manpower: Auto industry, like many other
industries is facing severe shortage of skilled technical as
well as managerial manpower. This challenge becomes
all the more daunting because of lack of adequate training
infrastructure. There is also an urgent need to improve the
quality of skilled and semiskilled manpower working in
the auto industry.
• Growing competition: There is fierce competition among
the automobile players in India. Everyone wants to have a
share in the domestic market. Manufacturers’ margins have
been squeezed severely and they are all under pressure to
cut costs to be profitable and competitive.
• Taxation Complexity: Tax laws in India are believed to
be one of the most complex laws across the globe. The
complexity is due to a plethora of associated processes.
• The inadequacy of road infrastructure in India is a
big bottleneck in the Indian automotive sector. This is
compounded by the fact that traffic management is very
poor non-existent. Also, port capacity is not adequate to
ship exports from India. in a number of locations.
• Infrastructural constraint Land acquisition norms, processes,
and timelines: Due to lack of proper implementation of
standardized processes relating to land acquisition as well
as difficulty in approaching the concerned department/
ministry/organisation or at the right time, it becomes
difficult to acquire required land and
• Other challenges includes Environmental issue, changing
customer preferences, growth in input cost,
CONCLUSION
The automotive industry is at the core of India’s manufacturing
economy. India is positioned to become one of the world’s
most attractive automotive markets for both manufacturers
and consumers. The resulting benefits to society—in economic
growth, increased jobs, and stability for families employed by the
automotive industry—are considerable. All in all, India is set to
become one of the biggest automobile industry in coming time.
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