Report On Auto Industry

Report on
Auto
Industry
A Holistic Overview
PGDM (IB) 2009-11

Report on Auto Industry
Contributors 2
The following are the Members who contributed in this report
S.No. Name of the Member Course Roll No.

1 Deepkiran Matta PGDM (IB) 214
2 Gautam Gulati PGDM (IB) 219
3 Keyoor Prashant Diwaker PGDM (IB) 224
4 Monica Virbhan PGDM (IB) 229
5 Nikhil PGDM (IB) 231
6 Nikita Aggarwal PGDM (IB) 232
7 Pallavi Chhabra PGDM (IB) 236
8 Pragya Agarwal PGDM (IB) 238
9 Upasana Singh PGDM (IB) 265
10 Urooj Ansari PGDM (IB) 266
11 Ankit Khandelwal PGDM (IB) 268
12 Mohit Motwani PGDM (IB) 270
13 Shivansh Sharma PGDM (IB) 275
BIMTECH - Strategic Management

ACKNOWLEDGEMENT 3
First and Foremost, we would like to thank our faculty,

Professor R.J.Masilamani, (Strategic Management
Course) at BIMTECH, Gr. Noida for the valuable
guidance and advice. His foresight for creating an in-
house industry report repository has motivated us to
produce this report.
Besides, we would also like to thank the authority of
college for providing us with a good learning environment
and facilities to complete this project.
This report has helped us in getting an overall overview
about the Automobile Sector in Global Market along with
India. W are sure that this report will find useful for
many who would be seeking a collective information
about the industry prior to their Final Placement
Process.

TABLE OF CONTENT 4
S.No. Topic Page No.

1 History of Automobile 5
2 Growth of Automobile Industry across the globe 7
3 Technological shift in Automobile Industry 21
4 Indian Automobile Sector - History 32
5 Indian Automobile Sector – Growth 36
6 Indian Automobile Sector - Case Study 37
7 Indian Automobile Sector - Financial Growth 41
8 Indian Automobile Sector - Recent Development 48
9 Indian Automobile Sector – Innovations 52
10 Indian Automobile Sector – Opportunity 57

History of Automobile 5
In the year 1769, a French engineer by the name of Nicolas J. Cugnot invented the
first automobile to run on roads. This automobile, in fact, was a self-powered, three-
wheeled, military tractor that made the use of a steam engine. The range of the
automobile, however, was very brief and at the most, it could only run at a stretch for
fifteen minutes. In addition, these automobiles were not fit for the roads as the steam
engines made them very heavy and large, and required ample starting time. Oliver
Evans was the first to design a steam engine driven automobile in the U.S.
A Scotsman, Robert Anderson, was the first to invent an electric carriage between
1832 and 1839. However, Thomas Davenport of the U.S.A. and Scotsman Robert
Davidson were amongst the first to invent more applicable automobiles, making use
of non-rechargeable electric batteries in 1842. Development of roads made travelling
comfortable and as a result, the short ranged, electric battery driven automobiles
were no more the best option for travelling over longer distances.
Charles Kettering's invention of the electric starter in 1912, turned the process of
starting automobiles more faster and easier at the same time, doing away with the
hand tools. Crude oil being discovered in Texas, the automobiles driven by engines
that ran on gasoline became even more affordable, as the prices of gasoline
reduced. The prices of electric automobiles were going through a constant rise, in
spite of the fact that these were less efficient than the gasoline automobiles.
Jean Joseph Étienne Lenoir was the first to invent an

internal combustion engine that ran on petroleum and attached it to a three-wheeled
carriage, and successfully traversed a distance of fifty miles in 1863.
Karl Benz manufactured the first automobile ( a three-wheeled car) that was
affordable and compatible for travelling over long distances for its internal
combustion engine that ran on gas, in 1886.Later in 1887, Gottlieb Daimler was the
first to invent the predecessor of the modern automobile with an engine that had a

vertical cylinder in addition to a gasoline driven carburetor. First building a two-

6
wheeled automobile (―Reitwagen‖) , Daimler was again the first to build a four-
wheeled automobile in 1886. The engines manufactured by Daimler were improved
upon and these portable and fast engines made automobiles the way we see them
today.
The advanced engines turned the slow, expensive automobiles of the yesteryears, a
thing of the past, and cars became more affordable as both the prices of gasoline
and petroleum as well as the manufacturing costs reduced through their mass
manufacture at the assembly lines of factories. Penhard and Levassor in 1889, and
Peugeot in 1991 became the earliest mass manufacturers of the modern
automobiles.
The Automobile Industry finally came of age with Henry Ford in 1914 for the bulk
production of cars. This lead to the development of the industry and
assembly lines ofcar factory came into existence. The several methods adopted by
Ford, made the new invention (that is, the car) popular amongst the rich as well as
the masses.
According the History of Automobile Industry US, dominated

the automobile markets around the globe with no notable competitors. However,
after the end of the Second World War in 1945, the Automobile Industry of other
technologically advanced nations such as Japan and certain European nations
gained momentum and within a very short period, beginning in the early 1980s, the
U.S Automobile Industry was flooded with foreign automobile companies, especially
those of Japan and Germany.
The current trends of the Global Automobile Industry reveal that in the developed
countries the Automobile Industries are stagnating as a result of the drooping car
markets, whereas the Automobile Industry in the developing nations, such as, India
and Brazil, have been consistently registering higher growth rates every passing
year for their flourishing domestic automobile markets.

Global Growth of Automobile Industry 7
Europe Auto Industry
Europe relies on a strong automotive sector. Further financial and economic

pressure on the sector will affect the European economy as a whole; 2.2 million
people are employed directly in automotive
Manufacturing; an additional 9.8 million rely on it for their jobs in closely related
sectors. The real multiplier, in terms of employment in the wider economy, is still
higher. ACEA members generate a turnover of €551 billion, and total industry
exports are worth €77 billion. Around €378 billion in taxes come from vehicles,
reinforcing the sector‘s reputation as the engine room of Europe.
Vehicle Production
In 2008, 18.4 million vehicles were made in Europe, 7% fewer than the 19.7 million
produced in 2007. Of the five major vehicle producing countries, Italy reported the
worst decline (-20.3%), followed by France (-14.9%), Spain (-12%), the UK (-5.8%)
and Germany (-2.8%). Car production fell 7%, from 17.1 to 15.9 million units. Output
in Austria fell most dramatically (-37.3%), followed by Italy (-27.6%) and Finland (-
25%). New member states, which account for 18% of EU production fared better;
Poland and Hungary, reported output increases of 20.9% and 18.9% respectively.
Van and truck production reflected a dramatic decline in the economy in the final
quarter. From January to June 2008, light commercial vehicle production had risen
6.5%; by quarter four, it crashed 7% or
138,481units. Heavy truck production also rose in quarter two by 15%, only to fall
20% from September to December. Bus and coach production reported growth in
output last year, rising 7%, however markets showed signs of faltering by December.

In 2009, New passenger car production in the EU recorded a rebound of 34% three
months into the year, compared to the first quarter of 2009. However, production was
still 13% down when compared to the first quarter of 2008. The same picture
emerged in the segment of vans. Despite a 51% increase three months into the year
2010, production of vans remained 35% below the pre-crisis level of
2008. Truck production decreased by 5% until April this year, and by 63% compared
to the first quarter of 2008. The segment of buses declined by 22% three months into
the year compared to the same period in 2009.
In units produced, Germany remained the largest auto manufacturing country in the
EU (1.4 million units, +33%), while the UK saw its car production pick up most
(+72.7%) compared to the first quarter of the previous year. Except for Finland (-
59.5%), Belgium (-10.5%), the Netherlands (-7.5%) and Italy (-0.1%), all countries
posted growth.

Market Demand
In Western Europe, only five countries posted new car growth, Finland (+11.2%),
Portugal (+5.7%), Belgium (+2.1%), Luxembourg (+2.0%) and Switzerland (+1.0%).
Among the five major markets, Spain reported the steepest fall in demand in its
history (-28.1%), while Italy (-13.4%) and the UK (-11.3%) fell by more than 10%.
Across Europe, new car demand fell 7.8% to 14.7 million units. In the final quarter it
crashed 19.3%. Consumer choices reflected concerns about the economy. Market
penetration of small cars was the highest ever at 38.8%; SUVs penetration which
had peaked in 2007 at 9.9.% fell back to 9%, with the most dramatic fall in France
from 7.2 to 4.6%. Average engine size fell to 1706cc, from 1740cc a year earlier,
while average power output, which had risen steadily since 1990, fell to 86 from 87
KW. More than half of all new cars sold were diesel models (52.7%).

Commercial vehicle registrations were down 9% across Europe, the sharpest

downturn since 1993. Truck registrations, down 4% overall, suffered most in new 10
member states (-21.1%). Light commercial vehicle demand (LCVs), up 5.1% in new
member states, was dragged down by performance in Western Europe (-12%) to
end 10.4% down overall. Bus and coach registrations rose 12.1% over the year, but
in December they fell 7.5%. By March 2009, government fleet renewal schemes had
been introduced in 11 countries to boost flagging markets and help sustain the
transition to ‗greener‘ cars. In Germany, new car sales rose by an encouraging
21.5% in February. Effects were also notable in other markets, such as France, Italy
and Slovakia.
In 2010, demand for new passenger cars in the EU continued to grow until a 7.4%
decline was noted in April. In May, new registrations further decreased by 9.3%. The
recent drops reflect both the end to government support schemes as well as the
continuing challenging economic situation in the EU.
From January to May, small cars* (segments A and B) accounted for 44.6% of the
total market for new cars compared to 45.3% in the same period of 2009. Half of all
new cars registered had a diesel engine, compared to 46.3% over January – May
last year.
Demand for commercial vehicles cautiously points towards recovery, although the
segment of vans was the only one to record positive figures since February.

11
* based on AAA data for the EU15 + EFTA
Vehicles in Use
There are more than 250 million vehicles on the European roads –
 About 6% of them are new vehicles
 The average age of the European car fleet is about 8 years*.

 About 34% of the cars on EU roads are older than 10 years

12
 The average annual distance travelled by a car in the EU is about 22 000 km/year*.
 Car density per 1000 inhabitants in Western Europe in 2007 was 458.
 The European vehicle fleet reached over 256 million units in 2008, an increase of
1.2% compared to the previous year. With 224 million vehicles, passenger cars
accounted for the highest share of the vehicle fleet (87%). he European car fleet is
mainly concentrated in Western Europe, with over 7 out of 10 cars registered in
Germany, Italy, France, the UK and Spain. The number of diesel cars on the roads
increased by 7%* in 2008, compared to 2007.

13
US Auto Industry
The decline in production and sales of motor vehicles accelerated in the winter and
spring of 2009. This section analyzes the factors behind the nosedive in U.S. auto
sales and production during the past year and near-term projections for a possible
revival of auto sales and production. It also discusses the fallout of the recession in
the auto industry on auto suppliers and the unions that represent Detroit 3 auto
workers, primarily the United Auto Workers (UAW).
Vehicle production
In 2009, U.S. motor vehicle production declined dramatically, as shown in Table 1,

with overall U.S. output of cars and light trucks dropping by 34% from the previous
year. Chrysler and GM sales dropped by 57% and 48%, respectively. Toyota, BMW,
and Honda each fell by over 25%. Ford‘s performance, with sales dropping by only
13% year over year, was better than other automakers.
In January 2009, U.S. automobile production bottomed out. In that month, U.S.
production at a seasonally adjusted annual rate (SAAR)10 fell to only 3.7 million
vehicles (cars and light trucks), compared to a SAAR of 10.7 million units in January
2008. Production in the first two quarters of 2009 fell by more than 50%, compared
to 2008 levels.11 The U.S. ―cash for clunkers‖ program, which began on July 24,
2009, increased the production of vehicles in July and August to 6.2 and 5.9 million
SAAR, respectively. After the clunkers program ended, many automakers faced
depleted inventories. Increased production in the fall resulted in a 1.2% increase in
production during the fourth quarter of 2009 over the same quarter in 2008. For all of
2009, 5.8 million vehicles were produced.12 According to IHS Global Insight, U.S.
production performance in 2009 was the lowest in nearly 50 years, with the previous

production low having been recorded in 1961, when 5.5 million light vehicles were
manufactured (in a United States with a population of 179 million). 14
U.S. production is forecast to rise by nearly 23% to 6.9 million in 2010, to reach 8.1
million in 2011, and climb thereafter to reach more than 10 million light vehicles in
2014, for the first time in nearly a decade.14 In the near term, production will remain
below pre-recession levels. As automakers have moved to rebuild depleted
inventory, new production plans have emerged. GM, Ford, and others raised their
production levels during the fourth quarter of 2009. For the Detroit 3, SUVs and
pickup trucks remain a staple of their business plans. In 2009, 82% of Ford‘s U.S.
production and 83% of Chrysler‘s was light trucks (i.e., pickup trucks and SUVs). By
contrast, 44% of Honda‘s and 37% of Toyota‘s 2009 production in the United States
was light trucks.15 While neither Honda nor Toyota are generally perceived to be
dependent on SUV and light truck sales, these vehicles are rapidly becoming a large
part of their businesses, demonstrating how potent the market for these products can
be.
Vehicle Sales
In addition to the slide in production, the first months of 2009 were the low point in
motor vehicle sales: the seasonally adjusted annual rate (SAAR) of car sales
bottomed out in February 2009, at 9.11 million units. But the cash for clunkers
program in summer 2009 and strong sales in December 2009 helped cushion results
for the year, with greater than expected sales of 10.4 million vehicles in 2009. Still,
for 2009, GM‘s U.S. sales fell by 30%, Chrysler‘s by 36%, and Toyota‘s and Honda‘s
by 20% each. (see Table 2.) Toyota posted its first annual net loss since 1950.
Table 2 shows the change in auto sales by manufacturer in terms of year-over-year

sales for 2008 to 2009 and for 2007 to 2009 (2007 was the last full year of sales
before the recession hit the industry in 2008), and the shift in market share from
2008 to 2009. GM‘s share fell from 22.2% to 19.8%, while Ford‘s share rose to
15.5% and Hyundai/Kia‘s to more than 7%. The turmoil and bankruptcies of GM and
Chrysler have likely been a boon to Ford. Federal ownership of GM and Chrysler
became a distinguishing factor that apparently led to a preference for Ford among
many buyers. Ford‘s top marketing executive said, ―Ironically, the debate around the
industry was the best thing that happened to Ford. We‘re finally relevant in North
America.‖16 The attention on the Detroit 3 during 2009 also allowed Ford to
introduce consumers to its new lines of trucks and automobiles and its new, more
fuel-efficient engines. A national survey of online auto shoppers conducted during
the summer of 2009 showed that 22% were actively looking at Ford vehicles, equal
to the number looking for Toyotas.17 During the fourth quarter of 2009, Ford closed
the gap with Toyota and during January and February 2010, sold 55,301 more
vehicles than Toyota. February also marked the first time that Ford outsold GM since
1998.
Hyundai‘s increase in market share demonstrates that a once little-known Asian

automaker— whose early vehicles, introduced in the U.S. market 20 years ago,
rated poorly in terms of quality—can transform itself. ―For years, Hyundai enjoyed a
protected home market in Korea. This ensured its prosperity there, but the lack of
competition meant the company didn‘t develop the product quality or consistency to
compete effectively in international markets. The result: Hyundai‘s initial U.S.

success in 1986 was undercut quickly by quality problems.‖19 More recently,

Hyundai opened a U.S. plant in Alabama and a nearby Kia plant in Georgia. It has 15
also improved its product quality and offers one of the longest warranties in the
business, which is luring new customers away from both U.S. and Japanese
manufacturers.
The three automakers with the largest U.S. market shares in 2009 were GM, Toyota,
and Ford. During 2009, Honda surpassed Chrysler to become the fourth-largest
seller of vehicles in the United States. Hyundai‘s surge to a 7% market share placed
it within striking range of Chrysler‘s diminished 8.9% share.

16

Japan Auto Industry 17
Automobiles are the focus of an extremely wide range of industrial and related
activity, from materials supply and vehicle production and distribution to sales,
servicing and other auto-centered operations. Auto-related employment in Japan at
present totals 5.15 million people.
Vehicle Production
In 2009, motor vehicle production in Japan decreased for the second consecutive
year, totalling 7.93 million units, down 31.5% from the previous year. Passenger car
production fell 30.9% to 6.86 million units. Within that category, standard car
production declined 40.2% to a total of 3.46 million units, small car production
dropped 21.0% to 2.15 million units, and mini car production decreased 11.9% to
1.26 million units. Truck and bus production also showed a decline from 2008,
plunging 34.7% and 37.3%, to 985,000 and 87,000 units respectively.

Vehicle Sales
18
Passenger car and commercial vehicle demand in Japan in 2009 totalled 4.61 million
units, a decline of 9.3% from the previous year. Total passenger car sales dropped
7.2% to 3.92 million units, with the standard car segment decreasing 7.3% to 1.16
million units, small cars falling 4.5% to 1.48 million units, and mini cars sliding 10.1%
to 1.28 million units. Sales of trucks and buses declined 19.8% and 18.0% from
2008, to 673,000 and 13,000 units respectively.
International Comparison

19

20

Global Technological Shift in 21
Automobiles Industry
The automobile is a technology that has changed society dramatically over the last
century. But not only society changed, the technology of the motorcar itself has
changed significantly: an automobile of the 1900's has almost only the concept of
four wheels and an engine in common with today's modern cars. The academic
world has given little attention to the history of the car, but the last couple of decades
the body of literature is growing. Still there is little attention to the technical history of
the motorcar itself.
Theory of technical change in automotive history
Technological change has been the field of study for more than seventy years now.
Technology has been studied from several different directions, but mainly from an
economical perspective because technology is seen as the driving factor behind
economic growth. In the 1970's however technology as a theme of study has also
come under the attention of sociologists, philosophers and historians.
One of the main questions in this emerging field of Science and Technology Studies
is how technological change occurs. Overtime two different main directions of
explanations for technological change have emerged.
First is Technological Determinism, best expressed by the work of Lewis Mumford. 1

The premium assumption of Technological Determinism is that technology has its
own intrinsic power that steers the direction of future developments. Opposite to this
view the SCOT (Social Construction of Technology) approach emerged in the late
1970's and beginning of the 1980's.2 SCOT emphasizes the role society, existing out
of different groups with different powers, plays in the development of technology.
The opposition between Technological Determinism and SCOT has many forms and
gradations. The polarized difference between the intrinsic powers of technology

versus the external or contextual powers are expressed differently in different fields
22
of technology and therefore have a broader scope than simply the Science and
Technology field. In studying history of technology it makes sense to at least beware
of this ongoing discussion to analyze technical developments. This research will
continue from the basic viewpoint that technology has a dual nature: it contains an
intrinsic power to shape the future path of development, but also is submitted to
external forces that create or limit new opportunities. Furthermore the two
discussions in the field of history of technology will serve as a theoretical
background. Technological determinism versus Social Construction of Technology
and Narrative history versus Theoretical history are interesting oppositions for further
research. The hypothesis is that both are extreme oppositions and the best view lays
somewhere in the middle. But this is of course oversimplified. The main purpose is to
understand more about technical change on the artefact level and the discussion will
be kept in mind in looking into the technical specifications of the artefacts.
All three layers (artefacts, human activities and knowledge) of technology as

introduced by Bijker (1995) will be studied. The artefacts will be the automobiles and
there technological components. For studying the artefacts a structural model as
developed by Gijs Mom will serve as a tool to analyze technological change on
different levels (see figure 2.1). The second layer (human activities) is the broadest
and will involve the engineers and users of the technology. In the case of the car, the
users are of course the drivers and passengers, but also people who are affected by
cars. Although it is not the idea to explain how automobiles have changed the lives
of people in general (I would suggest to read Flink or Sachs), it is important to look at
users and non-users to investigate motives for technological changes. The
knowledge about automobiles, in a large variety of forms (books, papers, tacit,
manuals) is also shared by users and non-users. In this case users are not merely
car users, but more car engineers; people who are involved in technological
developments of cars.
The three levels of technology corresponded partly with three other levels of
analysis: artefact, system and society. Here the main focus is upon the artefacts, but
this study also tries to make a link with the car as a system and the role of
automobiles in society. An automobile is a complex structure of components varying
in complexity and dependency. Studying technical change in automotive technology

23
requires a hierarchical structural model that makes it possible to analyze changes on
different levels. The model used here is developed by Gijs Mom and it consists of a
hierarchical division on the level of artefact, subsystems, main functional groups,
auxiliary functional groups, component assemblies and basic components.
The artefact here is a passenger car that has a propulsion system (subsystem) that
consists of a number of parts. For instance the engine and gearbox (main functional
group) with a gear system (auxiliary functional group)
The artefact here is a passenger car that has a propulsion system (subsystem) that
consists of a number of parts. For instance the engine and gearbox (main functional
group) with a gear system (auxiliary functional group) and synchromesh (component
assembly) and finally a number of nuts and bolts (basic component). The argument
is that changes can occur on different levels of the structural model and these
changes differ in impact they have on other components, the artefact as a whole and
on society. Using this particular model will give insight in the nature of technological
change by showing not only the important revolutionary changes, but also the small
evolutionary developments.

24
In fact the assumption here is that most revolutionary changes start as a small
change on a lower level and thus could be called an evolutionary development. The
level of analysis in this part of the research is the automobile as an artefact. In his
book The productivity Dilemma Abernathy puts the theme of innovation in
automobile technology in the perspective of production factors.
Basically he argues that the automotive industry has grown to such a proportion
major innovations do not take place anymore since the Second World War, as these
innovations would be far too costly to implement in the whole production process.
His focus is mainly on the American automotive industry where indeed the
production process causes inflexibility in design options. However, in Europe and
especially in Japan other production methods have led to different design processes,
allowing more innovation.
Artefacts consist of a nested hierarchy of subsystems, although there has not been
sufficient attention to this in empirical research on dominant design, some however
do. Henderson and Clark distinguish between incremental, modular, architectural
and radical innovations the hierarchical structure has an important implication: a
modular change at one level in the hierarchical system can be an architectural or
radical change at a lower level in the hierarchy.

25
The concepts used by Henderson and Clark prove to be useful in analyzing

automotive technology. The concepts can be coupled to specific levels in the
automobile as an artefact (described in figure 2.1), where the architecture could be a
change in vehicle platform (the basis of a motorcar, consisting of its underbody
construction), the modular level can be compared with e.g. a engine or gearbox and
incremental level can be any small change. What an radical innovation would be
remains the question, because on this level the step from the horse drawn chariot to
the automobile would be the last radical change that occurred.
Peter Hugill goes into the architectural innovation of the automobile in his analysis of
drive systems.5 Hugill defines the placement of the engine, transmission, driveshaft
and final drive as the main characteristic of an automobile (See Appendix A). By
using these limited amounts of components he is able to track the major innovations
in 100 years of automobile technology as they are simply coupled to the variations of
placing the core components.

Problem however is that all incremental changes are overlooked and thus this
26
analysis has rather limited explanation power. For instance the Issigonis/Christie
system would not have been a technical possibility without developments that
allowed engineers to limit the size of the engine and gearbox. This system was used
in the famous Mini of the British Motor Corporation (BMC) from 1960-2000.6 For a
further explanation on technical change we need to look beyond these general
architectural concepts and look at incremental changes as well. Before doing that I
will discuss some problems that one runs into while researching automobiles in
history.
Engine size and horsepower 1950-1980
The main analysis in this paper consists of data for cars on the European Market in
the period 1950-1980. The data used is derived from catalogues and automotive
journals, which are also used as qualitative sources for consumer behavior. Finally
engineering journals and conference proceedings are used to research producer
behavior. The importance of the specific period 1950-1980 is shown in figure 4.1:

It is clear to see the rapid growth of density of cars per inhabitant in The Netherlands
27
in both large and small municipalities for this period (the graph is based on a study of
diffusion of the motorcar in The Netherlands). Such a rapid growth could well imply
some major changes in the technology, as a great number of new users start to
adopt the automobile. The following data on engine capacity was taken from
yearbooks for each second year (1960, 1962, 1964 and so on) that contains prices
and technical data of all the vehicles available on the Dutch market.8 For each
specific model an average type was chosen, as some car models are available in
different configurations. For instance a Golf Mark I was available as a 1100, 1300,
1500, GTI and 1600 Diesel version, with L, S or LS specifications. In this case all the
different engine variants are included, but leaving the trim level (L, S or LS) out of
consideration.9
The graph shows some distinctive developments. The average engine size of cars
on the market in The Netherlands is floating between 2 litres and 3.7 litres, which is
quite large. This is caused by the relatively high number of American automobiles
that were sold in The Netherlands, a long-standing tradition dating back before the

Second World War. The rapid growth of the maximum engine size in the late fifties
28
can also be explained by the growth of American cars in both vehicle size and
engine size. The period from halfway through the fifties until the beginning of the
sixties which show a drop of the minimum engine size can be explained by the
numbers of small engine vehicles from Eastern Europe.
One of the biggest problems in making an analysis is the lack of concurrent sales
data that specifies the make and model for each year. Only from the seventies
onwards these figures were documented in The Netherlands. Figure 4.3 shows the
minimum, maximum and average horsepower of the 20 best selling cars in The
Netherlands. From 1970 onwards these are based on actual sales numbers, but
earlier figures are derived from journal articles and loose information in yearbooks.
It is clear that the maximum, minimum and average power of the 20 best selling
vehicles in The Netherlands went up during the period 1950-205, although we can
see some variance in the figures. The drop after halfway through the seventies in
maximum engine power could easily be coupled to the oil crises in that period, but
this drop has no significant meaning for the average power of the best selling
vehicles. The maximum and minimum are however slowly closing up to each other
when one looks at the trend lines.

The two graphs are not fully comparable, but they do however raise a number of
29
questions. We can assume from both graphs that engineers were able the retrieve
slightly more horsepower from the same engine size. The engine size tells a lot
about the characteristics of an automobile. Coupled to the horsepower it could be
used as an efficiency measurement of developments of in engine technology. So the
engines became more efficient, but we need to look deeper into the technology to
see why this could happen. New technologies like turbo chargers, superchargers
and improvements in fuel quality may well have contributed to this development. So
we need to analyse the work of the engineers some further and with different, more
qualitative, tools.
Conclusion
A car is an artefact that consists of a complex hierarchy of different components and
that is used in a specific context. Some components change over time, the
hierarchical value changes, and the context changes, while other components
remain the same or are rediscovered after a few years time. Analyzing this world of
changes is difficult but with the help of the structural model and concepts of change
like radical and incremental change, it should be possible to investigate the nature of
technical change in automotive history and technological change in general.
For explaining technical change in general, without only putting up narratives on
engineering or artefact histories, the challenge is to work systematically to cover as
much ground as possible. For this a model or scheme can be useful to keep track of
all the developments and relations that surround the technical artefact. In figure 5.1
such a framework is shown.

30
This framework allows us to study both the production side of the artefact and the
use side. As one of the assumptions is that users have a lot of influence on the
design of an artefact, either directly or trough mediating agencies. The application
(the use) and the expectation (the pictured use) are both strong driving forces for
engineers to work on new technologies, which they express in the properties of the
artefact. They do this through routinized processes, or by breaking through these
processes, which we can call practices. The same goes for users. In the simplified
scheme (figure 5.2), the importance of practices is more put forward.

31
The next step is to try to put this schemes to work in a number of case studies partly
derived from analysis of the technical shown in part 4 (the European car, shock
absorbers) and partly taken from some general developments in the automotive
culture (the safety debate and the car as consumer good/symbol).
Advantage of understanding change in automotive technology
First of all, a gap in the existing knowledge and literature will be filled. Second, a
general knowledge of the past can help to understand more about current and future
developments. It is possible to prevent mistakes in development processes by
comparing and understanding at similar processes in the past and projecting them to
the future. The possible adoption of hydrogen cars is an interesting case in that
respect, as it shares some similarities with the steam cars and gasoline cars
competition. Third point is more general as this research tries to contribute to the
history of technology as an academic field by jointly studying society and technology
thoroughly and try to link the two of them on different levels. So this research aims
further than merely show developments in automotive technology, it also tries to
explain historical developments in society and show patterns of technological
development in general.

Indian Automobile Sector - History 32
1950
Premier Automobiles was established in 1944 as a result of successful negotiations

with Chrysler Corporation in 1939, resulting in licenses to build a Plymouth car and
a Dodge truck, sold under the Dodge, Plymouth, DeSoto, and Fargo names starting
around 1949. In the early years, quality was considered good by both Chrysler and
the Indian Department of Defense. In 1949, parts were being made in India, starting
with simpler components and gradually building up to more complex pieces. Two
companies made parts: Premier and Hindustan Motors of Calcutta. The early years
of Premier and Hindustan were marked by very low sales, due to the size of the
market; only about 20,000 vehicles per year were made in India, in 65 different
models. To prevent foreign companies from dominating by mass-producing parts to
be assembled into cars in India, the government set up steep import duties on
imported parts in 1954, allowing Indian parts-makers to survive.
1954
Tata Motors: Collaboration with Daimler Benz AG, West Germany, for manufacture
of medium commercial vehicles. The first vehicle rolled out within 6 months of the
contract which ended in 1969.
1958
The Hindustan Ambassador is a car manufactured by Hindustan Motors of India. It

has been in production since 1958 with few modifications or changes and is based
on the Morris Oxford III model first made by the Morris Motor Company at Cowley,
Oxford in the United Kingdom from 1956 to 1959.
Despite its British origins, the Ambassador is considered as a definitive Indian car
and is fondly called "The king of Indian roads". The automobile is manufactured by
Hindustan Motors at its Uttarpara plant near Kolkata, West Bengal. It was the most
popular car in India and is perceived to be best suited to the harsh Indian terrain due
to its very good suspension.

33
1960
Government of India decided to set up an expert committee to consider the feasibility

of manufacturing a low-cost car in the range of Rs 6500
1961
Bharat Forge Ltd is one of the most innovative and exciting companies to emerge in
the history of the forging industry .The Indian Automotive Industry in the 50‘s was
more like the story of imported kits. Ancillaries were nominal and infrastructure was
scarce and inadequate. It was then, that Bharat Forge came into existence in 1961
to meet the forging needs of the Indian Automotive Industry.
1962
Fiat 1100 launched. In 1962, the third generation Fiat 1100 was introduced. Changes
and redesigns continued until 1969, when the Fiat 1100 was finally replaced by the
new middle-class Fiat 128.
1977
Tata motor‘s R&D center was started at Pune in 1966 to support automobile
research which produced the first commercial vehicle in 1977. Tata Motors began
the production and sale of heavy commercial vehicles by 1983
1980
1. Maruti Udyog launch set up by Sanjay Gandhi revived through a Joint Venture
with Suzuki Motor Corporation.
2. From this point the decline of Hindustan Motors and Premier Automobiles
began.
3. Major trend could be seen when the Japanese automakers started teaming up
with Indian motorcycle and car and commercial vehicle factories. 1982
License and Joint Venture Agreement(JVA) signed between Maruti Udyog
Ltd. and SMC of Japan

34
4. The collaborative phase with the foreign players started in early 1980s
through a joint venture between Maruti (a government of India Undertaking)
and Suzuki Motor Corporation, a Japanese corporation to manufacture four

wheelers. But, during that period even the industry was subject to control and
excess of regulations.
5. Component manufacturer by Bharat Forge started expanding overseas by

forming Joint Venture with European and US firms.
1983
1. Maruti 800 was launched
2. DCM- Joint ventured with Toyota motors to manufacture and assemble

commercial vehicles.
1990
1. Liberalization policy allows passenger car to be produced without license.
2. Maruti Udyog became the leading manufacturer in the automobile industry.
3. Foreign car manufacturers entered India.
4. Advanced technology was also introduced.
5. Stringent environment and safety guidelines came into enforcement.
6. Auto financing came up.
7. Technology upgraded. Maruti launched 3 box car with 1000 cc engine.
1994
Tata launched Sumo and entered Joint Venture with Mercedes Benz for cars in
India.
1995
South Korea‘s Hyundai Motor Company entered India and established wholly owned
subsidiary. They launched their first car Santro.

1998
35
Technology up gradation – Tata launched the first indigenously designed car- Safari
and Indica.
2001
The first electric car REVA was launched.
2005
Tata launched India‘s first mini truck the ace and rolled out 500,000 passenger cars
from its factory in Pune. The company also acquired 21% in Spanish bus maker
Hispano Carrocerra and launched the Novus range of medium- duty trucks in India.
2008
Tata signed a bond with the Gujarat government for setting up Nano manufacturing
plant.
Tata acquired Jaguar Land Rover from Ford motors. It was the first Indian company
to acquire foreign brand.
2009
Nano the cheapest car was launched by Tata motors.

Indian Automobile Sector – Growth 36
 India is the second fastest growing automobile market in the world after
China.
 Over 2 million passenger vehicles were produced from April 2009 to Feb
2010, representing growth of nearly 25%.
 India is emerging as a major production base for small cars, with output
expected to reach 3 million units by 2016. The country is building a reputation
in designing and manufacturing low cost cars.
 Production of trucks and buses increased more than 35% between April
2009 and Feb 2010. An expanding highway network and overall economic
growth is pushing up demand.
 India is the second largest market for motorcycles worldwide. Output of

nearly 10 million units was registered during April 2009 – Feb 2010, marking
growth of nearly 25%.
 The auto parts industry is also scaling up, as global car manufacturers are
increasing their component sourcing from India, due to cost and
engineering competencies.
 Competition is set to intensify as more global firms enter the market.

Indian Automobile Sector - Case Study 37
MAHINDRA & MAHINDRA AND RENAULT JOINT VENTURE
In February 2005, Mahindra & Mahindra and Renault decided to join forces to
produce and commercialize the Logan in India. The joint venture was a 51:49
partnership between Mahindra & Mahindra and Renault. The state-of-the-art Logan
facility in Nasik offered a body shop, stamping shop, a paint shop with a top quality
pre-treatment and an assembly line specific for the Logan.
Logan was launched in India in 2007 with the concept to challenge the ―price Value‖
equation existing in the midsize car category. Soon it became one of the most
successful car in the midsize category and now is synonymous to comfort and
performance. The Logan drives in loads of refinement in comfort, style and
technology. Built around the Renault‘s famous Space Optimization Design, it
redefines space and luxury. With the widest backseat, maximum legroom and 3
separate headrests, it makes sure even the third passenger enjoys the drive as
much. Logan is one of the safest drives on the road. It‘s geared to protect you with a
honeycomb dashboard and the front unit that‘s designed to resist even a head-on
impact.
Logan failed to attract consumers due to its length of fractionally — more than 4
meters — that required a factory gate duty of 22% compared to 10% for the less-
than-4 meter cars. The sedan‘s sales plummeted to 5,332 units in the last fiscal year
ended March 31, 2009. Consequently, the JV lost about INR5 billion ($110 million)
during the fiscal year.
In an interview Anand Mahindra said ―He will 'never again' go for a JV 'where we
don't control changes in the product‖ Mahindra wanted engineering changes made to
the under-performing Logan, but these were refused by Renault.

38
DAEWOO BANKRUPTCY STORY
Daewoo or the Daewoo Group was a major South Korean chaebol (conglomerate). It
was founded on 22 March 1967 as Daewoo Industrial and was dismantled by the
Korean government in 1999. Prior to the Asian financial crisis of 1998, Daewoo was
the second largest conglomerate in Korea after Hyundai Group, followed by LG
Group and Samsung Group. There were about 20 divisions under the Daewoo
Group, some of which survive today as independent companies.
CRISIS AND COLLAPS
Daewoo Group ran into deep financial trouble in 1998 due to the Asian financial
crisis, increasingly thin relationships with the Korean government under
President Kim Dae Jung, and its own poor financial management. With the Korean
government in deficit, traditional reliance on access to cheap and nearly unlimited
credit was severely restricted.
In 1998, when the economic crisis forced most of the chaebol to cut back, Daewoo
brazenly added 14 new firms to its existing 275 subsidiaries, in a year where the
group lost a total of 550 billion won ($458 million) on sales of 62 trillion won ($51
billion). At the end of 1997, South Korea‘s four biggest chaebol had a debt of nearly
five times their equity. While LG and Samsung cut back in the midst of the economic
crisis, Daewoo took on 40% more debt."
By 1999, Daewoo, the second largest conglomerate in South Korea with interests in
about 100 countries, went bankrupt, with debts of about 80 billion won ($84.3
million).
Factors that affected Daewoo's performance
 Government intervention: Government policy served as a double edged sword: it

protected the chaebol, providing them with massive subsidies, unlimited cheap
credit, and protection against foreign competition. However, the price for these
services was total loyalty to the government. Chaebol were forced to take over
industries against their will. The government was constantly involved in their
businesses and stifled their creativity.

39
 Labor market: The traditional work ethic that helped Korea reach economic
prosperity has been threatened as workers have begun increasingly violent
protests against years of long hours and low pay. Daewoo shipbuilding suffered
heavy losses due to workers' demands for pay raises.
 Operating in a global economy: International demand for free trade is forcing the
Korean government to open its market. The chaebol will lose its protectionist
import controls. Most recently, the North American Free Trade Agreement and
the European Economic Community imposed trade limitations.
 Product quality from Korea: Korean products were considered to be of low
quality.
 By the 1990s, Daewoo Group was heavily leveraged, major markets were
stagnant, expenditures on R&D were increasing, labor unrest was continuing,
and government policy was turning against the company.
 Kim was most recently charged with allegedly paying campaign contributions to
former president Roh Tae Woo in exchange for a large government contract to
build a submarine base.

40
SINGUR CONTROVERSY
The delay in the launch of Tata Nano was caused largely due to the Singur
controversy. Singur is present in the state of West Bengal and about 997 acres had
been allotted to Tata Motors for building the Nano. The construction for this factory
on which the Nano was supposed to be coming up started in the month of July 2007
but soon faced opposition from a political party. The Trinamool congress led by
Mamata Banerjee protested against the manufacture of the car and the plant saying
that the land was to be used for agrarian purposes and was wrongfully allotted to
Tata Motors for making the Nano. There were protests all over the state and even in
the capital city of New Delhi. Activists of the Trinamool congress stood outside the
main gate of the plant and protested against any work in the plant.
On 2nd October 2008, Tata Sons Chairman Ratan Tata officially announced that Tata
Motors would be pulling out of Singur for the security of their officers was of
paramount importance to them and the states of Karnataka, Maharashtra as well as
Gujarat were being looked at as viable options for the setting up of the Tata motors
factory. Finally Gujarat was taken up as the apt place for building a new factory

41
Indian Automobile Sector - Financial
Growth
Eye-Catching FDI Destination - INDIA
India is on 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 are 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 that are eclipsing the Middle Kingdom's attractiveness. With rising wages
and high land prices in the eastern regions, China may be losing its edge as a low-
cost manufacturing hub. India seems to be the natural choice.
India is up-and-coming a 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 automobile
accounted for 13.7 per cent and 8.4 per cent respectively.
In 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
per cent of the FDI in the services sector. In automobiles, the key player is Japan.
During 2000-2005, Japan accounted for about 41 per cent of the total FDI in
automobile, surpassing all its competitors by a big margin.
India's vast domestic market and the large pool of technically skilled manpower were
the magnetism for the foreign investors. Hitherto, known for knowledge-based
industries, India is emerging a powerhouse of conventional manufacturing too. The
manufacturing sector in the Index for Industrial Production has grown at an annual
rate of over 9 per cent over the last three years.
Korean auto-makers think India is a better destination than China. Though China
provides a bigger market for automobiles, India offers a potential for higher growth.
Clearly, manufacturing and service-led growth and the increasing consumerisation
make India one of the most important destinations for FDI.

Automotive Mission Plan 2016

42
The bumper-to-bumper traffic of global automobile biggies on the passage to India
has finally made government sit up and take notice. In a bid to drive greater
investments into the sector, ministry of heavy industries has decided to put together
a 10-year mission plan to make India a global hub for automotive industry.
"The ten year mission plan will also set the roadmap for budgetary fiscal incentives"
The Government of India is drawing up an Automotive Mission Plan 2016 that aims
to make India a global automotive hub. The idea is to draw an innovative plan of
action with full participation of the stakeholders and to implement it in mission mode
to meet the challenges coming in the way of growth of industry. Through this
Automotive Mission Plan, Government also wants to provide a level playing field to
the players in the sector and to lay a predictable future direction of growth to enable
the manufacturers in making a more informed investment decision.
Major players in the automobile sector are:
o Tata
o Mahindra
o Ashok Leyland
o Bajaj
o Hero Honda
o Daimler Chrysler
o Suzuki
o Ford
o Fiat
o Hyundai
o General Motors
o Volvo
o Yamaha
o Mazda
Foreign Companies in the Indian auto-sector
Until the mid-1990s, automobile industry in India consisted of just a handful of local
companies with small capacities and obsolete technologies. Nevertheless, after the
sector was thrown open to foreign direct investment in 1996, some of the global
majors moved in and, by 2002, Hyundai, Honda, Toyota, General Motors, Ford and
Mitsubishi set up their manufacturing bases.
Over the past four to five years, the country has seen the launch of several domestic
and foreign models of passenger cars, multi-utility vehicles (MUVs), commercial
vehicles and two-wheelers and a robust growth in the production of all kinds of
vehicles. Moreover, owing to its low-cost, high-quality manufacturing, India has also
emerged as a significant outsourcing hub for auto components and auto engineering
design, rivaling Thailand. German auto-maker Volkswagen AG, too, is looking to
enter India.

India is expected to be the small car hub for Japanese major Toyota. The car, a hot
hatch like the Swift or Getz is likely to be exported to markets like Brazil and other 43
Asian countries. This global car is crucial for Toyota, which is looking to improve its
sales in the BRIC (Brazil, Russia, India and China) markets.
Two multi-national car majors -- Suzuki Motor Corporation of Japan and Hyundai
Motor Company of Korea -- have indicated that their manufacturing facilities will be
used as a global source for small cars. The spurt in in-house product development
skills and the uniquely high concentration of small cars will influence the country's
ability to become a sourcing hub for sub-compact cars.
A heartening feature of the changing automobile scene in India over the past five
years is the newfound success and confidence of domestic manufacturers. They are
no longer afraid of competition from the international auto majors.
For instance, today, Tata Motor's Indigo leads the popular customer category, while
its Indica is neck-to-neck with Hyundai's Santro in the race for the top-slot in the B
category. Meanwhile M&M's Scorpio has beaten back the challenge from Toyota's
Qualis to lead the SUV segment.
Similarly, a few Indian winners have emerged in the motorbike market -- the 150 and
180 cc Pulsar from Bajaj and 110 cc Victor from the TVS stable. The 93 cc Bike from
Bajaj and 110 cc Freedom bike from LML have also emerged as winners.
Evidently, Indian players have learnt from past mistakes and developed the skills to
build cheaper automobiles using `appropriate' technologies. TVS, for instance, paid
an overseas source $100,000 to fine-tune home-grown engines rather than $1.5
million to import the entire engine. Similarly, M&M adapted available systems and
off-the-shelf components from global suppliers to keep costs down and go for
aggressive pricing. True, Indian players are still lacking in scale of operation. While
economies of scale no doubt play an important role in the auto sector, a few Indian
manufacturers relied on innovation rather than scale of operation for competitive
advantage. For instance, Sundram Fasteners was able to achieve the feat of directly
supplying radiator caps to General Motors purely on the strength of innovation in
product quality. The domestic tooling industry bagged the order for the Toyota
Kirloskar transmission plant in the face of stiff competition from multinational
corporations. The cost of the entire job turned out to be only a fraction of the original
estimate.
As the automobile industry has matured over the past decade, the auto components
industry has also grown at a rapid pace and is fast achieving global competitiveness
both in terms of cost and quality.
In fact, industry observers believe that while the automobile market will grow at a
measured pace, the components industry is poised for a take-off. For it is among the
handful of industries where India has a distinct competitive advantage. International
automobile majors, such as Hyundai, Ford, Toyota and GM, which set up their bases
in India in the 1990s, persuaded some of their overseas component suppliers to set
up manufacturing facilities in India.

Consequently, the value of cumulative output of the auto components industry rose
rapidly to Rs 30,640 crore at end-2003-04 from just Rs 11,475 crore in 1996-97. 44
Foreign companies such as Delphi, which followed General Motors in 1995, and
Visteon, that followed Ford Motors in 1998, soon realised the substantial cost
advantage of manufacturing components in India.
Finding the cost lower by about 30 per cent, they began exploring the possibility of
exporting back these low-cost, high-quality components to their global factories and,
thus, reducing their overall costs. Not surprisingly, the industry's exports registered a
more than four-fold jump to Rs 4,800 crore in 2003-04 from just Rs 1,033 crore in
1996-97.
Automobile majors such as Maruti Udyog, Toyota, Hyundai have now finalised their
plans to invest in some of the critical auto components. According to the Automotive
Component Manufacturers Association of India (ACMA) officials, auto component
manufacturers are expected to invest about Rs 10,000 crore over the next five years
at the rate of Rs 2,000 crore per annum.
According to analysts, the auto component industry could emerge as the next
success story after software, pharmaceuticals, BPO and textiles. The size of the
global auto component industry is estimated at $1 trillion and is set to grow further.
Against this backdrop, McKinsey's latest report has estimated that the sector has the
potential of increasing its exports to $25 billion by 2015 from $1.1 billion in 2004.

Threat to the Dream

45
India's expedition to become a global auto manufacturing hub could be seriously
challenged by its inability to uphold its low-cost production base. A survey conducted
by the research, KMPMG firm reveals that the Indian auto component manufacturers
are increasingly becoming skeptical about sustaining the low-cost base as
overheads including labour costs and complex tax regime are constantly rising.
The survey said many executives believe that India's cost advantage is grinding
down fast as labour costs are constantly increasing and retaining employees is
becoming more and more difficult. Increased presence of global automotive
companies in the country was cited as one of the reasons for the high erosion rate.
Indian auto businesses will only flourish if they boost investments in automation. In
the longer term, cost advantage will only be retained if Indian capital can be used to
develop low-cost automation in manufacturing. This is the way to preserve our low
cost.
Global auto majors are also cynical about India's low cost manufacturing base. India
taxation remains a big disadvantage. This is not about tax rates it is just about
unnecessary complexity. But some companies also believe there is scope for
reducing the cost of doing business.
In spite of this there are opportunities to exploit lower costs right across the board.
It's true that labour costs are definitely increasing but they are still five per cent of the
total operational costs. The labour costs can be further reduced if companies are
successful in bringing down other costs like reducing power costs. Low-cost base
can never last long. The company said Indian industry has till now relied on very
labour intensive model but it would have to switch to a more capital intensive model
now.

46
Factors contributing to the increased demand of automotives and the growth of

Indian Auto sector
The convergence of government policies, economy‘s growth, people‘s purchasing power

have all contributed to the phenomenal growth of Indian Auto industry. Some of the
important growth drivers are explained below.
Rise in the industrial and agricultural output indirectly helps Indian Auto industry
Industrial and agricultural output increase has reflected in higher GDP and overall growth
of the economy which is about 9% in the last three years. Higher GDP means more
purchasing power. Sales of vehicles for domestic and commercial consumption have seen
high growth in these three years too.
Growth in the road infrastructure increases demand for vehicles
Indian highways and roads have improved a lot in quality and connectivity in the last 20
years. Projects like the Golden Quadrilateral aim to make even remote areas accessible by
road. Some of the National Highways are of international standards. This has made road
transport a viable, cost effective and speedy option both for goods and passenger traffic.
Rise in the Per capita income increases two/four wheeler sales
Industrial growth in the 70s, IT boom in the 1980s and BPO boom in the 1990s have
transformed the Indian middle class. The present generation is able to earn the same
levels of salary that their parents were earning after years of work. This has pushed up the
demand for two and four wheelers. A rise in per capita income is also indirectly responsible
for the retail boom and industrial boom for consumer durables. This has pushed up the
demand for commercial vehicles to enable efficient distribution.
Urbanization changes the face of Indian auto industry
Joint families in towns and villages have given away to migration of the younger generation
to cities in search of better opportunities. The new-age educated migrants and nuclear
families (many with double income couples) have a higher purchasing power. Presently,
the rate of spread of urbanization is 30% which is likely to increase by 40% in 2030 (UN).
Urbanization has promoted infrastructural development and it is estimated to spread at a
rate of $500 billion in the next 5-6 years

47
Rising working class and middle class contribute to increased demand of

automotives
Post 1980s, a surging economy has created millions of new jobs in the private sector. This
has lead to a lot of prosperity in the working class and the middle income households.
They are able to provide for food, clothing and education and also are able to think of
owning luxuries like vehicles. According to the Planning Commission report, between the
year 2003 and 2009, 130 million people would have been added to the working population.
According to a finding from McKinsey, the middle income group will grow from 50 million to
550 million by 2025.
Exhaustive range of options in price and models of automotives
Indian consumer in 70s and 80s had to choose between and Premier Padmini or an
Ambassador. Now there are at least 123 different models of cars from 30 odd
manufacturers available. The prices of the compact cars like Tata‘s Nano has made the
world sit up and take note of the truly unbeatable price points.
Attractive Finance Schemes for purchase of automotives
Most nationalized and foreign banks have very tempting finance options and low interest
rates for purchase of cars and two wheelers. There are specialized companies that finance
the commercial vehicles. All this has made the dream of owning a vehicle an easy reality

Indian Automobile Sector - Recent 48
Development
VW Polo’s long waiting period affecting sales
The average monthly demand for the Volkswagen Polo stands at approximately
2,500 units – something that the German company did not anticipate when it
launched the car in February 2010. Also, the company had not foreseen the
relatively higher demand for the car‘s top-end variant. VW‘s inability to meet the high
demand for the Polo has now stretched the car‘s waiting period to 4 months, forcing
potential customers to settle for alternative options like the Ford Figo and the
Hyundai i10, thus affecting the Polo‘s sales.
Fifty-five percent of the Polo‘s components are sourced locally, and, with the
company looking to ramp up production, vendors are under pressure to increase
supply. This has also led to some quality concerns, especially regarding components
that are manufactured in India, such as tyres.
In spite of production constraints, VW has decided to launch a new 1.6-litre petrol

variant of the small car. It is also getting ready to launch the Vento – which is a
sedan built on the Polo‘s platform. The Vento will be available in both petrol and
diesel versions.
Maruti, Volkswagen discuss synergies in manufacturing, product design
Officials from auto companies Maruti Suzuki and Volkswagen India met recently to
explore the possibility of a tie-up in production and vehicle design. German car
maker Volkswagen had bought a 20 percent stake in Japan‘s Suzuki Motor in 2009.
Industry analysts say that VW may now employ Maruti‘s low-cost manufacturing
expertise in its own projects, and also work with it in areas such as product design
and testing. The two companies, however, will not share distribution networks, and
will continue to compete with each other in the retail market.
Media reports say that Maruti Suzuki‘s top officials were present at the meeting, as
were senior officials from VW headed by VW India President Joerg Mueller. The
German carmaker can gain a lot from a tie-up with Maruti in India. While the former
is yet to make its mark in the country, the latter leads the auto industry with a 50
percent-plus market share even at a time when the country if flooded with global car
companies. A Maruti Suzuki India (MSI) spokesperson told reporters that the issue
was being handled by its parent company, Suzuki Motor, and that MSI could not
comment on it.

49
Bajaj-Renault to launch ultra low cost car in 2012
Carlos Ghosn, chief executive of French car maker Renault and Japan's Nissan
Motor Co. said on Tuesday an agreement had been signed with India's Bajaj Auto for
a low-cost car which would come to India in 2012. Nissan Renault CEO Carlos
Ghosn met Bajaj Auto MD Rajiv Bajaj Monday evening to settle issues relating to
branding and the basic concept of the car that were delaying the project.
The design, manufacturing and sourcing for the car would be done by Bajaj, and
Renault-Nissan will look after marketing in India and overseas, Ghosn told reporters
at a media conference in New Delhi.
Bajaj and Renault-Nissan had announced the formation of a joint venture in May
2008, to develop, produce and market a car code-named ULC. The project ran into
hiccups over branding, product detail and concept issues. This summer Rajiv Bajaj
went on record to say he had asked for all the work done on the project to be
scrapped. He wanted major modifications on design, positioning and other details.
The new concept that the team came up with has now met with Mr Ghosn‘s approval
as well.
Nissan has a joint venture with Ashok Leyland for light trucks and Renault with
Mahindra & Mahindra for the Logan sedan. Both these joint ventures are facing
problems and Mr Ghosn had last month said it was possible that his group would
end up with only one partner in India.
Mr Ghosn‘s India strategy has come under pressure lately because of the poor
performance of the Logan sedan which Renault makes and markets in India in
partnership with Mahindra & Mahindra.
Relations between Renault and M&M became strained with the Indian partner
unhappy over its lack of control on product design. His other JV between Nissan and
Ashok Leyland will also see a significant reduction in investment from the earlier
announced $500 million.
At the ongoing World Economic Forum summit, Mr Ghosn admitted that there were
problems with his partnerships in India but added that he was gung ho about the
$2500 car which will compete with the Rs 1 lakh Tata Nano when it rolls out in 2011.
He told ET Now on Sunday that Renault, which had earlier frozen overseas
investments during the financial crisis, will now resume its investments in India
including its share of the $1 billion new factory in Chennai which it will share with
Nissan.
"We had suspended the second phase of Chennai investment until we could see
where the global car market would end up," Mr Ghosn had said. "Now that the
estimate is that the year will end with around 60 million units, up from around 55
million last year, we seem to have hit a plateau. So all plans of expansion can be
resumed with a more solid understanding of the future. The Chennai plant will be 50
inaugurated early 2010 and I will be there for it."
Toyota's small car to be 10% more fuel efficient than Maruti, Hyundai
The world's biggest carmaker by sales, Toyota Motor Corp, is developing a 10 per
cent more fuel-efficient small car for launch in India by early 2011 to beat market
leaders Maruti Suzuki and Hyundai.
"For our upcoming small car we have set the benchmark with Maruti's Swift and
Hyundai's i20. We are targeting to develop the car with 10 per cent more fuel
efficiency than the Swift and i20," Toyota Motor Corporation Chief Engineer (Product
Planning for Passenger Vehicle) Yoshinori Noritake told a group of visiting Indian
journalists here.
The company would introduce the car with a four-cylinder engine that will be Bharat
Stage IV emission norm compliant. Asked about engine specifications, Noritake said:
"Though we have not decided, we are finalising the engine capacity to make it
suitable for enjoying the excise duty benefits for the small car."
Currently, small cars -- 1.2 litre for petrol and 1.5 litre for diesel engine -- are charged
only 8 per cent excise duty compared with 20 per cent for bigger cars in the Indian
market. He said besides fuel efficiency, pricing is a big challenge that Toyota is trying
to overcome to be successful in the price-sensitive Indian market.
"Pricing is very important. Toyota is looking very positively with this small car to mark
a strong presence in the country," Noritake said. In order to reduce cost of
production, he said the company is looking at sharing components from other
models with the proposed compact car.
"It is very important to reduce the cost. Commonalisation of components of various

models is helpful and now we are assessing this aspect," he said, adding a major
portion of the components will be sourced locally. "But we are also considering to
supply parts from the ASEAN countries such as Thailand and Indonesia to bring
down the cost of the car," he said.
The company is planning to launch both the hatchback and sedan versions of the
car. The base model of the car will also have options to select various high-end
safety features like ABS (anti braking system).

51
First Tata Nano to roll out of Sanand on June 2nd
Tata Nano's production plant at Sanand, Gujarat would roll out its first product on
June 2nd. The plant at Sanand is Tata Motor's unbroached project in Gujarat after
facing severe land disputes in West-Bengal. There have been speculations going on
in the automobile industry from quite some time now regarding the inauguration of
this plant, which finally would be concluded on June 2nd 2010. The inauguration
ceremony would take place in the esteem presence of Gujarat's chief minister
Narendra Modi and Tata group's chairman Mr. Ratan Tata, the soul behind Nano.
Immediately after the plant is inaugurated the delivery of cars that have already been
booked would commence, company sources informed. Tata Nano has received
unprecedented response since the launch its launch was announced. The
commercial production had already started at the plant and the inauguration would
take the plunge to the next level that is car delivery.
The plant at Sanand has a production capacity of 250,000 units annually, and can be
expanded to approximately five lakh units per annum, a company statement said.
The investment drawn by this plant is close to Rs 2,000 cr.
The company had announced in 2009 that the first 100,000 deliveries of Nano would
be achieved by December 2010 and with this news hovering around, the
announcement seems close to completion.

Indian Automobile Sector – Innovations 52
Going Green Ideas
The rising number of automobiles has one negative fallout: air pollution, however on
a positive note one must add that the emission in motor vehicles has seen a steady
decrease over the years. According to SIAM (Society of automobile Manufacturers in
India) the country has seen an 86% reduction in pollution levels over the last decade
or so. It has to be noted that India has some of the stringent standards for two-
wheeler prevalent anywhere in the world. With the introduction of Euro III (Bharat III
in the Indian context) in select cities and the rest of the country moving to Euro II
standards, Indians could breathe easy and breathe cleaner air. All car manufacturers
have already started phasing out Euro I cars because they won't be allowed to be
sold in the country because of these new emission norms.
The emission norms in India came into force from 1991 for Petrol vehicles and in the
following year it was extended to Diesel vehicles that were playing in the country.
From the year 1995 it was made mandatory for all petrol vehicles in the four metros
to use catalytic converters. Unleaded petrol was also made available to these four
cities then, which was later extended to other parts of the country by the year 2000.
The Central Pollution Control Board (CPCB) has taken some steps to reduce air
pollution in the country
 Establishment of Ambient air quality monitoring throughout the country.

 Notification of Ambient air quality standards under the Environment Protection
Act.
 Notification of Air pollution norms
 Improving the fuel quality
 Introduction of cars that run on alternative fuel like CNG/LPG etc.
 Improvement of public transport system
 Phasing out old and polluting commercial vehicles
 Creating awareness and public campaigns
In the wake of making the country pollution free various car companies have taken
steps to improve the situation. Maruti Suzuki which is one of the oldest car
manufacturers in the country organizes free pollution check camps and is also
pushing aggressively for CNG kits for its cars. Recently it has launched a Wagon R
which comes fitted with LPG kit; it also has a LPG version of its popular car OMNI in
its kitty.
Hyundai Motor Company globally has been in the forefront of innovating
environmental friendly vehicles like Hybrid Electric Vehicle and Fuel Cell Electric
Vehicles.
Companies like Tata Motors and Mahindra and Mahindra are also working hard to
meet the stringent Bharat III or the Euro III standards in their diesel engines. It has
been able to meet the standard with a conventional diesel engine; however it is also

working on a CRDI engine to stay in the competition. Mahindra on the other hand
has straightway introduced a CRDI version of its flagship vehicle Scorpio. 53
Not to be left behind the two-wheeler manufacturers have already taking steps to
meet the strict emission standards that are prevalent in the country. Hero Honda
which is one of the largest two wheeler manufacturer in the country has a philosophy
of continuously innovating new products to improve environmental compatibility.
Similarly automobile users have a key role to play to keep the environment pollution
free, they should maintain their vehicles and drive responsibly to make the country a
better place to drive about.
It is just unimaginable how things have changed around us in a matter of a decade
or less. Let‘s speak here on the advent of the Electric vehicles in the Indian context.
The concept for Electric Vehicles was impossible about a couple of years ago. The
scene in India changed after Maini Reva, the first Indian electric car maker put up a
bold face and entered the Indian market. Yes, the going was certainly tough for Reva
initially, thanks to the overly priced car which was limited only to the city use. It
seemed highly impractical when the car was first launched in India.
But those were the days and now these are the days. Times do change. Reva surely
set up as a pioneer in safeguarding the environment with its non-polluter electric
cars. Picking up the cues, even bigger and environment-conscious car makers also
joined the fray in a big way after the great recession of 08-09. This was a decisive
moment as the mindset of billions of people suddenly started changing in the wake
of Copenhagen summit.
India almost suddenly became a hot spot for the car manufactures to try out their
new electric wares and cars that spat less smoke. This year‘s Auto Expo certainly
will be serving as a launch pad for more and more electric vehicles to hit India. This
could prove a hit provided the practicality issues are sorted out soon.
At the Auto Expo, almost all the car manufactures are showcasing their electric car
portfolio. Staring from General Motors‘s EV‘s, Electric vehicles like that of Honda EV-
N, Renault Twizy ZE and Toyota‘s Prius Hybrid will be showcased. Toyota has been
making this hybrid since 1997 but India will see the third generation version of Prius
on the roads pretty soon which will have a 1.5 litre petrol engine mated with an
electric motor and will give around 20 kilometers a litre.
GM will have the concept Chevy Volt and the Chevy Spark Electric prototype at the
show. The Chevy Spark Electric will have the same look at the petrol version but the
engine will be replaced by an electric motor. The electric power train will be sourced
from REVA. It must be recalled that GM and Reva Electric had signed an agreement
recently to develop electric cars for the Indian market. The car is expected to debut
commercially this year. The Chevrolet Volt is an electric vehicle with extended-range
capability. It is said to be designed to drive up to 40 miles on electricity without using
gasoline or producing tail-pipe emissions.
Tata Motors in the meanwhile is not lagging behind and we are anticipating that Tata
showcases an electric/hybrid version of its Nano and also an electric version of its
Indica, which has been in development in Norway. Tata had bought Norway-based
electric vehicle maker Miljo Grenland/Innovasjon in 2008.

The Norwegian firm will manufacture super polymer lithium ion batteries and electric 54
vehicles based on Tata Motors‘ range of products as well as conduct research and
development in allied technologies. Tata Motors will soon roll out its Rs 160 crore
electric car project in Norway and later scale it up for other Scandinavian markets.
The Indica Vista EV has been designed and developed by Tata Motors' UK
subsidiary, Tata Motors European Technical Centre.
India‘s largest car maker Maruti Suzuki is displaying its hybrid sedan amongst other
concept cars at the Auto Expo 2010. The company is working on clean fuel
technologies as part of a public-private partnership ahead of the Commonwealth
Games, 2010.
Reva, which is India‘s first electric car, showed off its NXR and NXG range of small
EVs at the Frankfurt Auto Show last year. Though these cars will not be showcased
at the Auto Expo, the India launch is expected soon.
Hyundai too has joined the EV bandwagon and will be showcasing an i10 EV at the
Auto Expo. The launch though will be at a later date.
Mahindra is not falling behind of the schedule and has a couple of EVs which is all
set to be unveiled at the show.

Bharat Forge India unveil retrofit REVOLO hybrid kits; on sale in India in six
months 55
In what seems to be one of the best inventions of recent times, Bharat Forge and
KPIT Cummins (a new JV has been formed) claim to have developed a retrofit hybrid
system that can be installed in vehicles in under six hours with an 80% boost in fuel
economy. This is the first of its kind ever in the world where we do very well know the
difficulties of ‗Hybrid‘sing a car. Somehow, Bharat Forge and KPIT Cummins seem
to have found a solution to take hybrid to the masses.
The JV says that that system is similar to a retrofit CNG kit and that al the required
mechanicals and electrical are included in the package. The best part about the
innovation is that both petrol and diesel vehicles can be hybridized using this kit
within a short span of time. While those are tall claims, the two firms have gone as
far as filing 15 patents for its ‗ReVOLO‘ hybrid drive system. The system has
undergone trials at ARAI who have confirmed a 40% improvement in fuel efficiency
(60% improvement in city cycle) and 30% reduction in green house gases. Add
some electronics and you have a parallel hybrid system for cars and ultra light LCVs.
The company is bullish about the kit‘s prospects in India that will hit markets within
six months after being approved by the government. According to the deal, KPIT will
license the tech to Bharat Forge who will manufacture them. The company is
working aggressively to bring down costs further as well as find a partner in the OEM
segment in order to offer this new product at a reasonable rate. The company also
intends on offering this technology as an aftermarket solution.

ADVANTAGES OF CNG KIT

56
 Due to the absence of any lead or benzene content in CNG, the lead fouling
of spark plugs is eliminated. CNG-powered vehicles have lower maintenance
costs when compared with other fuel-powered vehicles.
 CNG fuel systems are sealed, which prevents any spill or evaporation losses.
 Another practical advantage observed is the increased life of lubricating oils,
as CNG does not contaminate and dilute the crankcase oil. CNG mixes easily
and evenly in air being a gaseous fuel. CNG is less likely to auto-ignite on hot
surfaces, since it has a high auto-ignition temperature (540 °C) and a narrow
range (5%-15%) of flammability
CNG produces significantly lesser emissions of pollutants like carbon

dioxide, hydrocarbons, carbon monoxide, nitrogen oxides, sulphur oxides
and particulate matter (PM), as compared to petrol.

Indian Automobile Sector – 57
Opportunity
Underlying many of the responses from our interviews is the idea that the success of
the Indian automotive industry depends on the strong partnership of India‘s
government with India‘s automobile manufacturers, suppliers,and dealers. There are
challenges that the industry can solve, others that only the government can solve,
and some they can solve only by working together. Build India’s domestic vehicle
market To meet India‘s ambitious goals for its domestic automotive industry, India‘s
government needs to build more and better roads to support future not just current
growth, and hasten the vehicle friendliness of India‘s cities including wider roads and
more parking spaces. Improved air quality is also critical. At the same time, the
automotive manufacturers and suppliers need to understand and capture the small
car segment of the domestic market, improve India‘s automotive supply base, and
raise quality levels across all suppliers while keeping costs low.
Become a global player To become major players in the global automotive

industry, India‘s manufacturers and suppliers need to accelerate the perception that
―quality vehicles‖ and ―quality automotive components‖ come from India, and find
their niches in the world vehicle market (perhaps small, inexpensive cars), and
manage their businesses on a worldwide scale, which includes global logistics,
sales, and distribution. In addition, India‘s government needs to expand the country‘s
port capabilities even faster. As India‘s auto companies continue to grow, they need
to increase their scale while remaining financially strong – strong enough, for
example, to withstand a global recall. Furthermore, the automotive industry and the
government need to work in partnership to boost skilled labor availability and
strengthen India‘s own R&D capabilities. The automotive executives and experts we
interviewed are optimistic about India‘s ability to reach its goals. Recent growth has
been impressive. Some manufacturers and suppliers are already reaching global
levels of quality, and the government seems committed to supporting the industry.
However, India‘s domestic market is still relatively small; India‘s manufacturers and
suppliers are not yet universally recognized as strong global players; and India‘s

government has yet to complete its domestic infrastructure of roadways and ports.
58
Despite these challenges, the recent industry growth and development, along with
the government‘s commitment of support, are strong reasons for optimism about
India‘s future automotive success.
The auto industry is a highly concentrated one. About 10 global automakers account
for over 77% of the production worldwide. Among them, Toyota Motors leads with a
13.3% market share, while its domestic rivals including Nissan and its alliance with
Renault account for 8.4% of the auto market, Honda Motor 5.6% and Suzuki 3.8%.
Among the Detroit automakers, General Motors holds 11.9% of the auto
market, Ford 7.8% and Chrysler-Fiat 6.4% of the auto industry.
The recent economic crisis has provided an impetus to a massive structural change
in the auto industry, setting the stage for growth over the next decade. Given the
high barriers to entry and need for scale economies (in operations, supply chain and
marketing), the global auto industry landscape is expected to be ruled by global
automakers and suppliers based in the six major auto markets of China, India,
Japan, Korea, Western Europe and the U.S.
To remain competitive, automakers will need to design vehicles that will meet the
requirements of consumers in both mature and emerging markets. Automakers will
focus on more user-friendly and low-cost vehicles that are also the most advanced
technologically.
The automakers will continue to shift their production facilities from high-cost regions
such as North America and the European Union to lower-cost regions such as
China, India and South America. For example, Greater China and South America is
projected to represent more than 50% of growth in global light vehicle production in
the auto industry from 2008 to 2015.
There are two underlying factors behind this location shift in the auto industry. The
first is the cost factor. The cost of labor in emerging auto markets continues to be a
fraction of that in the developed world. The second is the demand factor. Many low
cost regions, including the emerging auto markets, have high potential for growth.
Thus, the shift in auto industry production facilities will lead to a localization of the

manufacturing base that will bring down transportation costs. The emergence of
59
trading blocs is also giving this process a push in the auto market. It is likely that
over time there will be fewer car imports from outside a trade zone.
Further, automakers have started to reduce the number of technological platforms

with a greater diversity of models produced from each platform in order to remain
cost competitive in the auto industry. For example, Honda, with its flexible common
platform, has developed three dimensionally distinct versions of the Accord, allowing
for designs where 60% of the components are common. Ford aims to build 680,000
vehicles per core global platform within five years, up from current levels of 345,000
units. After emerging from its bankruptcy, General Motors has started focusing solely
on four core brands – Chevrolet, Cadillac, Buick and GMC.
Higher fuel prices and concerns over global warming have pooled attention on the
auto industry that either rely less on traditional fossil fuels or use renewable sources
of less expensive energy. Thus, ―green‖ alternatives such as fuel-efficient electric
vehicles (EVs) and hybrids will attract consumers in the wealthier countries while
flex-fuels such as ethanol and natural gas will be highly sought-after in the emerging
auto markets where the local climate or resource base favors their usage by
automakers over petroleum.
Consequently, there will be a variety of powertrain technologies in the auto industry

by the next decade. It is likely that ―green‖ cars will represent up to a third of total
global sales in developed auto markets and up to 20% in urban areas of emerging
auto markets by 2020. Some of the ―green‖ cars have already generated a huge
response in the auto industry. These include the Ford Focus, GM Volt, Daimler
Smart, Nissan Leaf and Toyota Prius.
The role of governments must not be overlooked. Governments in all major countries
have become active auto industry players. Their investments through emergency
loans and incentive packages, such as ―Cash for Clunkers‖ in the U.S., are a good
example of this. Moreover, governments‘ energy and environmental policies will be
highly responsible in molding the auto industry in the coming years.

REFERENCES 60
 Mint 28 August'2010 Saturday- Article " India- From Amby to Jaguar"

 http://en.wikipedia.org/wiki/Daewoo
 http://www.tatanano.in/tata-nano-singur-controversy.html
 http://www.mahindra.com/OurBusinesses/mahindra-renault.html
 http://www.dailymarkets.com/stocks/2010/04/19/renault-and-mahindra-break-up/
 http://en.wikipedia.org/wiki/Premier_Automobiles_Limited
 http://india-reports.in/transitions/indian-auto-industry-–-joint-ventures/
 http://economictimes.indiatimes.com/Toyotas-new-small-car-to-be-the-most-fuel-
efficient/articleshow/5148235.cms
 http://www.driveinside.com/News/Headlines/5BYAAZ/Maruti-Volkswagen-discuss-synergies-
in-manufacturing-product-design.aspx
 http://economictimes.indiatimes.com/articleshow/5214939.cms
 http://www.driveinside.com/News/Headlines/4F9DUP/VW-Polo%E2%80%99s-long-waiting-
period-affecting-sales.aspx
 http://www.jama-english.jp/publications/MIJ2010.pdf
 http://www.fas.org/sgp/crs/misc/R41154.pdf
 http://www.clevelandfed.org/research/trends/2009/0309/02ecoact.cfm
 http://www.acea.be
 http://www.acea.be/index.php/collection/statistics

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Report on

PGDM (IB) 2009-11

The following are the Members who contributed in this report

S.No. Name of the Member Course Roll No.

BIMTECH - Strategic Management

First and Foremost, we would like to thank our faculty,

BIMTECH - Strategic Management

S.No. Topic Page No.

BIMTECH - Strategic Management

Jean Joseph Étienne Lenoir was the first to invent an

BIMTECH - Strategic Management

vertical cylinder in addition to a gasoline driven carburetor. First building a two-

According the History of Automobile Industry US, dominated

BIMTECH - Strategic Management

Global Growth of Automobile Industry 7

Europe Auto Industry

Europe relies on a strong automotive sector. Further financial and economic

BIMTECH - Strategic Management

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Commercial vehicle registrations were down 9% across Europe, the sharpest

BIMTECH - Strategic Management

* based on AAA data for the EU15 + EFTA

BIMTECH - Strategic Management

 About 34% of the cars on EU roads are older than 10 years

BIMTECH - Strategic Management

In 2009, U.S. motor vehicle production declined dramatically, as shown in Table 1,

BIMTECH - Strategic Management

Table 2 shows the change in auto sales by manufacturer in terms of year-over-year

Hyundai‘s increase in market share demonstrates that a once little-known Asian

BIMTECH - Strategic Management

success in 1986 was undercut quickly by quality problems.‖19 More recently,

BIMTECH - Strategic Management

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Japan Auto Industry 17

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Global Technological Shift in 21

Theory of technical change in automotive history

First is Technological Determinism, best expressed by the work of Lewis Mumford. 1

BIMTECH - Strategic Management

All three layers (artefacts, human activities and knowledge) of technology as

in complexity and dependency. Studying technical change in automotive technology

BIMTECH - Strategic Management

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The concepts used by Henderson and Clark prove to be useful in analyzing

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Engine size and horsepower 1950-1980

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Advantage of understanding change in automotive technology

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Indian Automobile Sector - History 32

Premier Automobiles was established in 1944 as a result of successful negotiations

The Hindustan Ambassador is a car manufactured by Hindustan Motors of India. It

BIMTECH - Strategic Management

Government of India decided to set up an expert committee to consider the feasibility