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India͛s automobile sector consists of the passenger cars and utility vehicles, commercial vehicle, two
wheelers and tractors segment. The total market size of the auto sector in India is approximately Rs
540 billion and has been growing at around 8 percent per annum for the last few years. Since the
last four to five years, the two wheelers segment has driven the overall volume growth on account
of the spurt in the sales of motorcycles. However, lately the passenger cars and commercial vehicles
segment has also seen a good growth due to high discounts, lower financing rates and a pickup in
industrial activity respectively.

The automobile industry is fairly concentrated, as in most of the segments two to three players have
cornered a major chunk of the total sales. For instance, in passenger cars segment, MUL, Tata
Motors and Hyundai Motors control around 85 percent of the total annual sales. Similarly, in the two
wheelers segment, the sales volumes of Hero Honda, Bajaj Auto and TVS Motors constitute around
80 percent of the total sales and in the commercial vehicles segment, the market leader Telco
controls around 56 percent of the total annual sales. The autocomponents industry on the other
hand is highly fragmented, though there are dominant players in some of the critical segments.

Investment climate

Given the high growth expectations and a liberal government policy, the investment potential in the
India auto sector is huge. CRIS INFAC is forecasting a 12-15% annual growth in the passenger car
sales, 6-8% in commercial vehicles and around 10% in two wheelers. Several passenger car makers
have already achieved near full capacity utilisation and are expanding. Almost all the major
automobile manufacturers such as GM, Ford, DaimlerChrysler, Honda, Toyota, Hyundai, and Fiat
(with the exception of Volkswagen, which is planning to set up manufacturing shortly) already have
made significant investments in India. In the next 2-3 years, the passenger vehicle industry is
expected to see investments of more than Rs 30 billion. Similarly, two wheeler industry is expected
to attract investment amounting to Rs 10 billion.

There has also been a surge in exports of cars, utility vehicles and two wheelers. The expected
growth in domestic sales and exports of vehicles also offers significant opportunity for investors to
invest in the auto ancillary industry. Already several international suppliers such as Delphi, Visteon,
TRW, Johnson Controls, Denso and Dana, have set up manufacturing facilities and are expanding
rapidly to serve not only the domestic market but also to supply to their global customers. Another
attractive area of investment for vehicle and parts makers is research and design, to take advantage
of India͛s low cost advantage.

However, investment in commercial vehicle manufacturing looks relatively unattractive, given the
current size and structure of the Indian market.
Recently, government has liberalised the investment norms for the auto sector. Local content
requirements and export obligations have been scrapped, and minimum investment requirements
also have been diluted. Import duties on vehicles and parts have been gradually coming down and
are expected to decline further in the next two years. Several state governments also offer attractive
incentives, such as sales tax relaxations and concessional land, to potential investors. However,
manufacture of certain components continues to be reserved for the small-scale sector. This
reservation is also expected to lifted gradually over the medium term.


The expected rise in income levels, wide choice of models and easy availability of finance at low
interest rates will drive growth in passenger cars segment, which is likely to be over 12 percent per
annum for the next four to five years. Two wheelers growth is likely to marginally slow down, but
still grow at an average annual growth rate of around 10 percent.

The commercial vehicles segment is likely to grow at a trend rate of 6-8 percent driven mainly by the
increase in industrial and economic activity on account of the expected growth in the economy,
though annual growth rates may fluctuate widely with the cyclical ups and downs of the economy.
Tractor industry growth is likely to turnaround and post a growth in volumes in 2004-05. However, it
will post a moderate growth of around 4-5 percent annual growth rate over the medium term.

The Indian automobile industry is currently experiencing an unprecedented

boom in demand for all types of vehicles. This boom has been triggered primarily by two factors:

(1) increase in disposable incomes and standards of living of middle class Indian families estimated

to be as many as four million in number; and

(2) the Indian government's liberalization measures

such as relaxation of the foreign exchange and equity regulations, reduction of tariffs on imports,

and banking liberalization that has fueled financing-driven purchases. Industry observers predict

that passenger vehicle sales will triple in five years to about one million, and as the market grows

and customer's purchasing abilities rise, there will be greater demand for higher-end models which

currently constitute only a tiny fraction of the market. These trends have encouraged many
multinational automakers from Japan, U. S. A., and Europe to enter the Indian market mainly
through joint ventures with Indian firms. This paper presents an introduction to the key players in
the Indian automotive industry, a summary of the recent developments, and an analysis of the

opportunities and challenges facing the various players (Indian and multi-national assemblers and

component makers) in the areas of product development, production, and distribution.

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For forty years since India's independence from the British in 1947, the Indian car market was

dominated by two localized versions of ancient European designs -- the Morris Oxford, known as

the Ambassador, and a old Fiat. This lack of product activity in the Indian market was mainly due

to the Indian government's complex regulatory system that effectively banned foreign-owned

operations. Within this system (referred to informally as the "license raj"), any Indian firm that

wanted to import technology or products needed a license/permit from the government. The

difficulty of getting these licenses stifled automobile and component imports, creating a low

volume high cost car industry that was inefficient, unprofitable, and technologically obsolete. The

two dominant products Ambassador and Fiat, although customized to the poor road conditions in

India, were based on a stale design concept (with outdated features), and were also fuel inefficient.

In the early 1980's, the Indian government made limited attempts at reforming the automotive

industry, and entered into a joint venture with Suzuki of Japan. The joint-venture, called Maruti

UdyogLimited, launched a small but fuel efficient model (called "Maruti 100"). Priced at about

$5,500, the product became an instant hit. The joint venture now produces three small-car models,

a van, and a utility vehicle at a rate of more than 250,000 a year. Despite being a late entrant,

Maruti's vehicles are estimated to account for as much as 70 per cent of India's car population.

In 1991, a newly elected Indian government took over and faced with a balance-of-payments crisis

initiated a series of economic liberalization measures designed to open the Indian economy to

foreign investment and trade. These new measures effectively dismantled the license raj which had

made it difficult for Indian firms to import machinery and know-how, and had disallowed equity

ownerships by foreign firms. In 1993, the government followed up its liberalization measures with

significant reductions in the import duty on automobile components. These measures have spurred

the growth of the Indian economy in general, and the automotive industry in particular. Since

1993, the automotive industry has been experiencing growth rates of above 25%. Data for the

1995-96 financial year is yet to be released by all the firms, but estimates indicate that passenger

vehicle sales may reach or exceed 350,000 for the first time. (Passenger vehicles include cars and
vans but not jeeps.) Table 1 presents the production data of passenger vehicles for the top four

Indian assemblers. Foreign vehicle sales have been insignificant until the 1994-95 years.

Company Main Products 1992/93

Market Share


Market Share

MarutiUdyog Limited


Maruti 100, Esteem,

Omni (Minivan)

74.8% 73%

Premier Automobiles

Limited (PAL)

Premier Padmini

NE118 (Higher end)

9.4% 11%

Hindustan Motors (HM) Ambassador

Contessa (Higher end)

13.4% 10.7%

Tata Engg. & Locomotive

Company Ltd. (TELCO)

Tata Sierra

Tata Estate

2.4% 4.9%

Total Passenger Vehicles 163,300 280,000 (est.)

Table 1: Estimated Production of Passenger Vehicles By the Top Firms in the Indian

Automotive Industry; Source: Association of Indian Automobile Manufacturers (AIAM),

Automotive Components Manufacturers Association of India (ACMA) and other press reports1.

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As seen in Table 1, MarutiUdyog Limited (MUL) is the number one Indian automotive assembler

commanding more than a 70% share of the Indian passenger vehicle market. (It also sells a few

thousand jeeps, called Gypsy, which are not included in the passenger vehicle data of Table 1.)

Most recent data released by MUL show that it produced a total of 277,000 vehicles in 1995/96

resulting in a turnover of approximately $2 billion (Rs. 6673 crore, Source: Financial Express,

March 30, 1996). It is also a reasonably profitable venture with after tax profits of about $122

million (a 65 % increase over the previous year). MUL's relatively large production volumes offer

scale economies in production and distribution, that pose formidable barriers to entry. It has also

established a solid supplier-base located around India (most of its assembly is concentrated in

Northern India near New Delhi). Its products enjoy good reputation ʹ in fact, Indian automotive

industry observers credit Maruti for the rapid improvement in quality and supplier capability in

this industry. (Until last year, new Maruti's have to be booked several months in advance!) MUL's

product line is concentrated in the economy car segment, although it has been moving up recently

to cater to the premium market segments by introducing the higher-end Esteem.

1Much of the data presented in this paper has been extracted from the annual reports published by
ACMA, and from articles in the business press and trade journals.

Occupying the second position in 1994/95 is Bombay-based Premier Automobiles Ltd. (PAL),

which edged out Calcutta-based Hindustan Motors Ltd. (HM) from the second place. In fact, PAL

produced the Fiat, and HM produces the Ambassador ʹ both products that dominated the Indian

automotive industry for decades. The advent of Maruti has resulted in the decline of both these

firms. PAL's main products are the Premier Padmini (in the compact car segment) and the NE118

(in the mid-size car segment). Recently, PAL has rejuvenated itself by entering into joint ventures

with Peugeot (for the Peugeot 309), and with Fiat (for the Fiat Uno). Its close competitor HM

continues to produce Ambassadors in small volumes targeted at the economy/compact car segment.

HM also offers a higher end product called Contessa Classic, and has entered into joint venture
agreements with General Motors (GM) to produce the Opel Astra, and with Mitsubishi to make

the Lancer targeted at the higher-end market.

Despite occupying the fourth position and producing passenger vehicles only in small volumes,

Tata Engg. & Locomotive Company Ltd. (TELCO) is noteworthy, not only because it is a part of

the powerful Tata industrial family, but also because it is one of the few firms with indigenous

product development capabilities, and has been a dominant player in the commercial vehicles

segment. (The author, in fact, worked with TELCO for a brief period in the late 80's in their light

commercial vehicles product development group.) TELCO holds about 70% of the heavy

commercial vehicles market, and (after entering the market late) has also managed to fend off

Japanese competition by gaining about 50% of the light commercial vehicles segment with its

product development. It entered the passenger vehicles market only in 1991-92, and has

quickly established itself in the higher end of this segment with its Estate and Sierra models. The

firm has entered into a joint venture with Mercedes Benz to assemble the E220's, and is also said to

be planning an entry into the small/economy car segment challenging Maruti's stronghold.

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Component suppliers are the backbone of an emerging automotive industry. By all accounts, the

Indian component industry, based mostly in the southern city of Madras, is tiny. The auto

component manufacturers association of India (ACMA) estimates that $2.1 billion worth of car

parts were produced in the financial year 1995, out of which exports amounted to $228 million. To

put this in perspective, the entire Indian industry's revenue is roughly one-tenth that of GM's

component unit, Delphi automotive systems2. But, the component market has been growing

rapidly at about 25% a year, and is expected to quadruple in size by the year 2000. This growth

has not only been due to the growing demand for passenger vehicles, but also due to the increasing

trend by multi-national OEM's to resort to global sourcing to improve competitiveness.

Leading automotive assemblers and component makers are increasingly turning to India for

components. One of the now widely-cited examples of this trend is the Indian component firm,
Sundaram Fasteners Limited (SFL), which the author has been studying for the last year. SFL

became GM's largest supplier of radiator caps, and exports about 300,000 caps from its factories in

Madras to GM plants around the world. In 1992, when GM was planning to close one of its

plants in UK., SFL took advantage of the liberalized economic environment in India, bought the

machinery from GM, and relocated them to its plant in Madras. The company has continued to

2It is also noteworthy that Delphi is in the process of setting up its own units in India to make
steering systems,

chassis, and electrical systems recognizing the needs of the fast-expanding Indian automobile

invest heavily in quality and productivity improvements, and a tour around SFL's suburban

Madras Factory shows a world-class plant with minimal inventory and rework. The company's

workers, trained in statistical tools and control charts, keep processes under statistical control due

to which radiator cap rejection rate is less than 1% of annual production. The company also has a

very skilled managerial and engineering workforce, which has helped it develop in-house product

development capabilities. Using these resources and skills, the firm is now seeking to expand its

supply to other manufacturers in Europe, US, and Asia, and also diversify into other components.

SFL exemplifies the Indian auto components industry, which although small and fragmented has

the competitive advantages of a skilled workforce and low labor costs. It is estimated that

components can be produced about 30% cheaper in India than in the west. (The top Indian

assembler, Maruti, is able to price its cars at about $5,500 because it sources 90% of its

components from Indian suppliers.) Rapid growth and tie-ups with foreign firms will help Indian

auto components suppliers further invest in capacity and automation and acquisition of the latest

know-how, thereby closing the productivity gap with other world-class component makers.

Exhibit 1 shows a few other notable Indian component suppliers and their exports to OEM's.

  # c!%cc 
In the past two years, more than a dozen multi-national firms have announced plans to enter the

Indian market. Most of them have formed joint ventures with Indian firms, while there are

exceptions such as Hyundai which plan to form fully-owned units. Exhibit 2 displays most of

these firms and their products planned for the Indian market3. Despite the large growth potential

of the Indian market (analysts expect the growth to triple in the next five years), no one expects the

industry to sustain the fragmentation caused by more than a dozen suppliers. Many of these new

firms will not enjoy the scale economies and relationships with suppliers that Maruti does, so they

have decided not to challenge Maruti at its price of $5,500 in the smaller car segment. Most are

planning to produce between 20,000 and 50,000 higher-end vehicles. The stiffest competition is

building up in the mid-sized car range (1,300 cc and above), where several of these multi-national

and Indian companies are planning to go head-to-head. Although these newly announced vehicles

at $12,000 or above remain expensive by Indian standards and planned capacity exceeds projected

demand, new entrants are betting on the rising incomes of middle-class families. Notably,

Daewoo's new product Cielo, priced at about $15,000 in a joint venture with the Indian firm DCM,

drew 76,000 advance bookings last year ʹ reflecting the pent-up demand in the market.

Amongst the many issues facing the Indian automotive industry, the biggest by far is the poor road

infrastructure. India's road network, comprising of a modest national highway system (that is only

2% or less of the total roadway length) is woefully inadequate and dilapidated, and can barely keep

pace with the auto industry's rapid growth. Most roads are single-lane roads built in the 1950's

and 60's, and are crowded with two-wheelers, bullock carts, and even pedestrian humans and cows.

Traffic laws are not well enforced leading to one of the highest per-capita accident rates in the

world. It is to be expected that the introduction of bigger and more powerful vehicles will only

worsen the situation. Upgrading the existing highway system is itself expected to cost $30 billion

or more, and resource and land constraints prevent the building of new highways. The Indian

3Conspicuous by its absence from this list of new entrants is Toyota, which initially had an
arrangement with the
Hinduja group that was called off in March, 1996. Toyota is said to be adopting a wait-and-see

government's approach to solving this problem is to privatize the road infrastructure, by having

private firms build and operate tollways. However, it is unclear if this alone will be able to solve

this infrastructure problem of enormous proportions, which can severely bottleneck future growth.

The significant (about 50%) tariffs imposed on import products and components combined with

the vagaries of currency exchange rates make localization an important imperative for foreign

companies entering the Indian market. Firms are already making a major effort to localize rapidly;

The Daewoo-DCM venture is expected to raise its local content to 90% by the decade's end.

GM's Astra will start with 40% labor content, and go up to 75% within three years. One challenge

to localization is a shortage of component suppliers with size and sophistication.

Another major uncertainty facing the Indian market is the government's policies toward foreign

investments and joint ventures. As Amsden and Kang [95] note4, governments play a key role in

shaping the growth of the auto industry in emerging economies (as compared with developed

countries). Although many observers say the economic reforms initiated by the ruling Congress

party are not reversible, the difficulties experienced by Enron Corp. in its investments in the

power sector under the hands of the opposition BharatiyaJanata Party (BJP) do not bode well for

other foreign investors. With elections in mid-1996 expected to return a coalition group to power,

it will be hard for the new government to push the reform measures with the same vigor and pace

as the previous government did. It is even unclear if the group in power will be so positively

inclined to foreign investments and trade as the current government.

To analyze the strengths and weaknesses of the various players in the Indian automotive industry,

it is useful to classify them into the following four categories: (1) Indian Assemblers, (2)

Assemblers (3) Indian Component Makers, and (4) Multi-national Component Makers.

Table 2 presents the strengths and weaknesses of each of these groups.

The Indian assemblers, typified by Maruti, have built a formidable distribution and after-sales

network. They also have an established supplier base, which gives them cost and delivery time

advantages, especially in light of import tariffs and currency exchange rate fluctuations/

devaluations. Their biggest weakness, with the exception of TELCO, is the lack of product design

capability. In the coming years, they should focus on acquiring product design and lean production

know-how (as the Korean firms did in the eighties and early nineties [Amsden and Kang 95]).

They could acquire know-how with help from their joint-venture partners, and also with

investments in research and development which at present are at extremely low levels.

Multi-national assemblers could really benefit from their lean production capabilities in India,

where production runs are expected to be small due to the large number of players entering the

Indian market. They could also set themselves apart by incorporating safety and comfort features

not currently included in Indian-assembled products. These include seat restraints, airbags, and

anti-lock brakes, and comfort features such as power windows, and central locks. U. S. assemblers

have a reputation of safety, which they could leverage to their advantage. Close cooperation with

4Amsden, A. H., and J. Kang, "Learning to Be Lean in An Emerging Economy: The Case of South
Korea", IMVP

Sponsors Meeting, Toronto, 1995.

the joint-venture partners can overcome the lack of experience with the Indian market, but the

size of the component supplier base will pose a challenge to their need to localize rapidly.

Group Strengths Weaknesses

Indian Assemblers ͻ Established distribution and

after-sales networks, and

supplier base.

ͻ Understanding of the Indian

market and ability to liaison

with the government

ͻ Lack of product development

capabilities (except TELCO)

ͻ Brand image (especially HM

and PAL).

Multi-national Assemblers ͻ Lean production capability

ͻ Ability to design products

with differentiating features

ͻ Deep pockets, brand image.

ͻ Lack of experience with the

Indian market, industry, and


ͻ Small component supplier

base and high import tariffs.

Indian Component Suppliers ͻ Low cost, skilled workforce

ͻ Learning From exports

ͻ Small Size, Fragmentation

ͻ Lack of know-how in certain


Multi-national Component


ͻ Size, Deep pockets

ͻ Experience and Know-how in


ͻ Import tariffs, currency

exchange rate fluctuations.

ͻ Inexperience with Indian


Table 2 Strengths and Weaknesses of the Different Groups in the Indian Auto Industry

As mentioned earlier, the Indian component industry is small and fragmented, but is growing and

learning fast due to exports. It is also estimated to hold a 20-40% cost advantage over multinational

component suppliers who are much larger and are themselves opening up units in India to

take advantage of the lower-cost, skilled workforce. The Indian component industry needs to

invest in capacity and research and development to stay abreast of competition, when the wage gap

closes over time. It is likely that some of the multi-national assemblers or component makers might

buy some of the small but niche component makers with a reputation for quality.

h $#
The Indian automotive industry, although growing rapidly, is in a state of flux. The production

capacities planned by the new joint ventures currently exceed most projections, and unless import

tariffs come down quickly and the economy grows remarkably, a shake-out may be expected from

the current 20 firms to about half a dozen major firms turning out finished products by the end of

the decade. However, if multi-national firms decide to use India as a production base from which

vehicles are exported to the rest of the world, more than half a dozen firms may be able to remain

profitable in India. Suzuki has already begun to use its Maruti joint-venture production to export a

few thousand cars to the Middle East and Europe. However, the production capacities of other

emerging economies such as Korea and China are also predicted to grow significantly in the coming

years, so exports may also face a highly competitive market situation.

In this paper, we have presented a brief introduction to the Indian assemblers and component

suppliers. We noted that Indian assemblers have a tight hold over the small-car market due to their

low cost supplier base and the tariffs levied on import components. Maruti with its production

volumes of over 250,000 enjoys scale economies in production, distribution, and service that are

hard to challenge. As Amsden and Kang [95] (cited before) and Womack et al.5 note, production

volumes do confer several advantages to a firm. However, new entrants can set themselves apart

by offering new safety and comfort features that are not currently offered in the Indian market.

They can also leverage their low production run (lean) capabilities to stay profitable despite the

low production volumes. Further, they can combine their reputation with the Indian industry's

lower production costs to produce cars and export them to the global markets. Many multinationals

are already said to be planning such an approach.

For Indian component makers and assemblers, product development capability is key, in order to

rejuvenate their product lines, enhance their reputation, and export their products to the markets in

developed countries. The author is currently pursuing a study of product development and

production systems in the Indian component industry. Since the plants located in India are very

far from the developed markets of the USA, Europe, and Japan, component suppliers incur
significant transportation and inventory carrying costs in exporting products to global markets.

Their situation is worsened by the poor Indian infrastructure, which leads to frequent power

interruptions and long delays in supply. These companies are adopting innovative techniques to

cope with these uncertainties, which will be a topic of another paper.

The Indian automotive industry, as a whole, is also severely bottlenecked by the woefully

inadequate road infrastructure. Privatization of the road infrastructure, even if started immediately,

can take years to solve this problem. India also experiences an extraordinarily high number of

traffic fatalities, and faces severe pollution problems. As of April 1, 1996, the ministry of surface

transport has set emission norms (that are modest by international standards), which local

automakers say are hard to meet. Multi-national firms can bring their experience and know-how to

bear in these areas, and enhance their reputation as well as attract customers who are

and environmentally aware. This will also result in the gradual reduction of the autorelated

facilities and pollution (due to the diffusion of these practices), thereby contributing to the

further growth of the Indian automotive industry.

5Womack J. P., D. T. Jones, and D. Roos, "The Machine That Changed The World: The Story of Lean

Production", Harper Publishers, 1990.

Exhibit 1: Notable Indian Component Suppliers and Their Exports To OEM's

Sundaram Fasteners: Supplies radiator caps to GM, Caterpillar, and others.

Wheels India: Supplies wheels to heavy vehicle and automotive manufacturers in Europe.

EicherGoodearth: Supplies machined castings to Mitsubishi and other major automotive firms.

Sona Steering: Supplies steering systems to Japanese component makers.

Brakes India: Castings and rubber components to Lucas Industries, Germany.

Source: ACMA Annual report and India Today (March 93)

Exhibit 2: New Entrants To The Indian Automotive Industry as of March 1996

Company Joint Venture Partner Planned Products (Ave. Price)

Audi (Volkswagen) Franchise (Imported car) Audi-A4 ($85,000)

Daewoo (Korea) DCM Cielo ($15K)

Fiat Premier Automobiles (PAL) Fiat Uno 1000 cc ($10,000)

Ford Motor Company Mahindra & Mahindra Ford Escort, Festiva ($12K)

General Motors Corp. (GM) Hindustan Motors (HM) Opel Astra ($22K average)

Honda Shriram Industries Civic ($18K)

Hyundai (Korea) Wholly-owned subsidiary Accent

Mercedes-Benz TELCO Mercedes E220 ($70K)

Mitsubishi Hindustan Motors (HM) Lancer ($15K)

Peugeot Premier Automobiles (PAL) Peugeot 309 ($15K)

Volkswagen Eicher Ltd. Golf ($20K)

Source: Press Reports From India

Not long ago, India's auto industry was a laughing stock. Its two best-known cars were a 1940s
Morris model called the Ambassador and a 1960s Suzuki-derived model called the Maruti 800. But
that was then. Today, for instance, the Mumbai-based DilipChhabria Design Pvt Ltd (DC Design) is
seeking to take on Pininfarina and Bertone, the Italian standard in international car design, by
designing and building concept cars, prototypes and limited-production runs. Nor is DC Design alone.

"There can be few more improbable automotive stories than the yarn about the Indian designers
creating bespoke concept and prototype cars," said the United Kingdom's auto magazine Autocar in
a recent issue. "Yet the hottest ideas in car design are happening right now in the back streets of
Mumbai." India is now the ninth country in the world to design a vehicle on its own.

In fact, the Indian auto industry is fast becoming an outsourcing hub for automobile companies
worldwide, as zooming automobile exports from the country indicate. SurinderKapur, the chairman
of Sona Koyo Steering, which exports car steering assemblies, says, "Car makers over the world have
realized that India can design a car on its own and make it globally acceptable."

Passenger car exports have nearly trebled in four years, from 28,122 units in 1998-99 to 71,653
vehicles in 2002-3. The industry expects this to gather steam further ahead because car exports in
the first quarter of 2003-4 leapt by 87 percent over the same period in 2002-3. The two-wheeler
segment is booming, too, with exports zooming from 100,004 units last year to 179,000 units in
2002-3. By 2005, the industry expects 400,000 two-wheelers on foreign shores.
The Indian-made sports utility vehicle Scorpio received a singular response in Detroit early this year,
not just for its design but also because of its cheaper price tag. Tata Motors, the country's second-
largest car maker's small Indica convinced MG Rover of the UK to sell it to the UK market as the City
Rover. Others like Ford's mid-sized car model Ikon, Maruti's Altos and Toyota's Indian-made multi-
utility vehicle have found ready buyers in a number of American, European and neighboring

And when cars and two wheeler exports are on a roll, can automobile components be far behind?
Pushed to export last year following a two-year domestic slowdown, the auto component exported
$850 million worth of the nuts and bolts that go into making an automobile by March 2003, up from
$578 million in March 2002. "Indian auto component makers now supply to virtually the best and
the biggest in the world," says Suresh Krishna of Sundaram Fasteners, a leading auto component
exporter, adding that he expects the country to export a targeted $2 billion by 2006.

"Indeed, India is well on its way to become an outsourcing hub for global auto manufacturers and
the country stands a good chance against China," says Sundaram Mutual Fund managing director T P
Raman, although Joginder Singh, vice president of finance for Ford Motor Company of Canada,
thinks that global auto majors can't ignore either China or India.

Already, 15 global car makers - including GM, Ford, DaimlerChrysler, Mercedes-Benz, Audi, Isuzu and
Nissan ʹ have set up outsourcing offices in the country, with a combined budget of approximately
$1.5 billion, industry sources say. Leading component makers like Delphi, Visteon and Caterpillar,
too, have found India their best bet. While according to industry estimates the cost of automotive
design in Europe ranges as high as $800 per hour, and even higher in the US, costs are as low as $60
per hour in India for equivalent quality.

Whether the next outsourcing wave or simply smart marketing by a local industry, global auto
makers are increasingly turning to India for sourcing a wide range of needs that even include
designing models meant only for global markets. "To begin with," says Deep Kapuria, of Automobile
Components Manufacturers Association of India, "it's triggered by the overall economic slowdown
and large-scale bankruptcies in the global auto sector. And as global giants continue losing money,
cost pressures are forcing them to opt for sourcing bases in developing countries."

But more importantly, according to industry analysts, the Indian auto industry has finally come of
age, having upgraded itself in the past few years to meet global standards. DilipChhabria, the head
of DC Designs, makes no bones about taking on the world's best. Earlier this year, the Aston Martin
AMV8 Vantage starred at the Detroit Auto Show. Chhabria developed the prototype as part of a Ford
Until the mid 1990s, the Indian auto sector consisted of just a handful of local companies. However,
after the sector opened to foreign direct investment in 1996, global majors moved in. By 2002,
Hyundai, Honda, Toyota, GM, Ford and Mitsubishi had set up their manufacturing bases here.

"These companies first had to focus on issues like quality, vendors and marketing before they could
think big," says Arindam Bhattacharya, vice-president, Boston Consulting Group. Thus, in the past
four to five years, these companies have not only fine-tuned their operations but forced
transformation on the rest of the industry as well.

"Consequently," Bhattacharya adds, "India has not only emerged as a low-cost base but also a
source for producing quality products."

The sector also received an unintended boost from stringent government auto emission regulations
over the past few years. This ensured that vehicles produced in India conformed to the standards of
the developed world. It also drew technology infusion and investment. "Not surprising then that
India is also set to become a preferred research and development [R&D] center," says Ravi Khanna,
president and managing director, Delphi India, adding that its Indian facilities are "an integral part of
its worldwide engineering and technical footprint".

Nevertheless, according to managing director JagdishKhattar of MarutiUdyog Ltd. India's largest car
maker and a Suzuki joint venture, India still has a long way to go to become a global force. "Indian
companies need to first grow the Indian market to acquire economies of scale," he says. China, for
instance, consumes four times India's 700,000 annual car sales. Moreover, if Indian companies hope
to corner a big chunk of the global market they need to ramp up global presence considerably, say

Still, Joginder Singh of Ford feels that India's auto industry will continue to make its presence felt,
primarily because it is one of the few countries the global auto industry cannot ignore. "Two-thirds
of a car is built from suppliers. That's a big cost item and companies can cut costs to a large extent in
places like India and China," he says. "We can't ignore either China or India, which are projected to
be so huge that it would be dangerous to look only at one of them. They are showing thehighest
growth rate of any market in the world. Any auto maker would be on a fool's errand if it ignores any
of them.

" Small wonder then that Ravi Khanna of Delphi India is "convinced that with the increasing
emphasis on quality, India is fast moving towards becoming a sourcing hub for global automobile
cc  c ! c 
Is the Indian automobile sector as environmentally conscious as best in the world?

NO! Automobile sector has fared badly. Under the project rating scale we were to award five leaves
award to the best company. But sadly no auto company deserved this honour. The best company
gets less than 45 per cent marks getting a mere three leaves award. But the sector as a whole gets
even lesser, scoring 31.4 per cent, deserving only two leaves award.

The passenger car segment leads the way among the entire automobile segment and is the only
segment which gets three leaves. Mass transport vehicle segment comes second. The two and three
wheeler segment, with two leaves, lags behind even the mass transport vehicles, which has
performed better due to introduction of CNG fuelled vehicles.


In terms of overall performance, the three companies, which top the environmental rating, are
Daewoo Motor India Ltd., Hyundai Motors India Ltd. and General Motors India. All these three
companies have performed well in product usage phase.

The companies, which are at the bottom of the pile, are the three non-participating companies, Bajaj
Tempo Ltd., Yamaha Motor Escort Ltd. and Swaraj Mazda Ltd.

Maximum of the companies in top ten are passenger car manufacturers while most of the two and
three wheeler manufacturers have shown a poor performance trailing behind in the ratings.
However, there is an exception, Hero Honda Motors, which has not only achieved three leaves rating
but also ranks fifth in overall rating.

The other two and three wheeler companies lag very far behind. Though Bajaj Auto Ltd. and TVS
Suzuki follow Hero Honda Motors as the 2nd and 3rd in the segment but in the overall rating they
fare poorly.


As far as individual products are concerned, Daewoo's small car Matiz, has been judged as the most
environment friendly vehicle overall, scoring high in terms of vehicle and engine design, and also
performing well in other aspects such as pollution control equipment installed and emissions.

Maruti's most popular vehicle in the country Maruti-800 (Euro II model) is the second most eco-
friendly vehicle. It scores less than Matiz in terms of design but scores more in the emissions. The
third most eco-friendly vehicle is Hyundai's Santro, which also has the highest fuel efficiency.

Small is beautiful--All the top three eco-friendly vehicles are small cars and have inherent
advantages over the larger ones in the sense that they emit less pollution and consume less fuel
compared to larger vehicles. They also use lesser material during manufacturing stages.

Honda City 1.5V-tech gets the recognition of being the most technologically advanced and least
polluting vehicle in India with emission as low as 85 per cent lower than the Euro II norms.

The vehicle with the worst performance environmentally is Mahindra & Mahindra's Armada, which
comes last in the passenger car segment. It has scored very low in all criteria.

Among the two and three wheelers, both selected models of Hero Honda (Splendor and CD 100) are
the most ecofriendly two wheelers. They have scored above average in vehicle and engine design
and are one of the very few four-stroke two wheeler fitted with any kind of pollution control

Bajaj boxer, the latest model of Bajaj Auto that ranks third, has scored well in vehicle and engine
design but lacks in emission control equipment and comparatively poorer emission.

The best performing two-stroke model ranks fourth amongst the two wheelers. The lowest score has
been obtained by Kinetic Safari moped, which obtained average scores in design and emissions and
very poor scores in pollution control equipment and emissions.

Among the mass transport vehicles Ashok-Leyland's Viking compressed natural gas (CNG) bus scored
above average in design and very high in emissions due to inherent advantages of CNG vehicle
making it the best performer in this section. The second position is also taken by another CNG
fuelled vehicle, that is, Telco LPO CGS bus. Interestingly, the worst performers in this segment are
Ashok Leyland's diesel fuelled Comet 1611 and Tusker Turbo tractor.

A total number of 29 automobile manufacturers were selected for the project of which 26
companies participated voluntarily (90 per cent participation). The three companies which refused
to participate and chose to continue being non-transparent are Bajaj Tempo Ltd., Yamaha Escorts
Motor Ltd. and Swaraj Mazda Ltd.


The Green Rating of Indian Industry project was started by the Centre for Science and Environment
(CSE) in 1996 to address an array of environmental issues facing all segments of Indian industries.
The project is supported by the United Nations Development Programme (UNDP) and the Ministry of
Environment and Forest (MoEF). The first sectoral rating undertaken under the pilot phase of the
project was pulp and paper sectoral rating, which was a highly successful exercise and was rated as
the best environmental audit project in last 25 years in Asia by 'Asia Week'.

Spanning over a period of two years, Green Rating of automobile sector was a great challenge owing
to diversity between companies in their production processes as well as the products manufactured.
Participation of all the major automobile companies in the exercise makes it a unique effort to
assess the environmental health of the sector. The project has covered 35 production facilities
spread in nine states and almost 80 per cent of the products currently running on Indian roads.


The rating methodology for automobile sector has been developed keeping in mind the life cycle
impact of the automobile industry. Thus, the weightages were allotted accordingly with 80 per cent
of the score devoted to life cycle analysis (LCA) and remaining 20 per cent for corporate governance.

The life cycle assessment included determining the environmental impacts at various steps of the
production process right from sourcing of raw materials, to the manufacturing and assembly
process, to the pollution caused by use of the vehicle, and finally the impact caused by its disposal.

Of the 80 per cent on the life cycle assessment, the highest weightage (56 per cent) was allotted to
the product use phase based on the conclusion arrived at by the project that maximum pollution
occurs during use phase. "Vehicle are the core of the automobile industry since they alone generate
about 80 per cent of the total life cycle pollution," says Chandra Bhushan, Coordinator, Green Rating
Project, CSE. "In order to assess the environmental performance of the product, a combination of
engine design, pollution control equipment fitted and the emission test data supplied by the test
agencies were considered, making this exercise the most comprehensive ever taken anywhere in the
world. Even the green automobile ratings done in the US and in Europe only consider emissions and
fuel consumption data to rank the vehicles. Green rating project has taken a quantum leap over the
existing automobile rating methodology" he adds.
Robustness of the Rating methodology

'Engine design analysis should represent the emissions from the vehicles,' was the main focus for
arriving at the robustness of the product rating criteria, developed by GRP, since the engine and
vehicle rating was given by the project and the emissions rating was given on the basis of the test
data of certified test agencies. Therefore, the litmus test for GRP was to correlate the ratings given
by two separate institutions with no interaction between them. This was very well reflected in high
coefficient of correlation found between the scores obtained in engine design and pollution control
equipment, and the score obtained in emission. For example, in petrol passenger cars in 78 per cent
cases the engine design did represent the emission characteristics of the vehicles.

Testing the effectiveness of the rating methodology in replicating the life cycle analysis, the test
undertaken by the project was to correlate the overall rating with the vehicle's rating. Since, as per
life cycle analysis, a company with poor product should get poor results, however good it may be on
other aspects. This too was very well established in the rating with product rating having a very high
correlation (97 per cent) with the overall rating. However, the analysis brought out the fact that the
other criteria were as important and were seen to have high degree of correlation with the overall


Green rating project findings draw its process on the principle that root of the cure of any disease
lies in the proper diagnosis rather than just medication!!!

More miles per litre

A fuel-efficient car would be the cheapest vehicle in the long run and an important consideration for
the customer as well. The Hyundai Santro was judged the most fuel-efficient petrol passenger
vehicle followed by Fiat Uno and Maruti-800 Euro-II model. In case of diesel passenger car,
Mitsubishi Lancer was judged the most fuel-efficient and Toyota Qualis Euro-I model was most fuel-
efficient multi-utility vehicle.

Clean fuel, clean vehicle

We did a comparative analysis of impact of fuels on emissions.

Study based on analysis of three diesel-fuelled mass transport vehicles and two CNG fuelled mass
transport vehicles clearly showed that CNG fuelled vehicles are far better in terms of tail pipe
emissions than the diesel fuelled mass transport vehicles. CNG-fuelled vehicles have as much as five
times lower particulates and overall 73 per cent lower emissions than their diesel counterparts.

Overall petrol vehicles show an inherent advantage over the diesel-fuelled vehicles with all the top
14 cars being petrol ones. The best diesel car, which is Mercedes E 220, ranks as low as 15. While the
best multi-utility vehicle, Toyota Qualis Euro II model ranks a dismal 20th among all the 31 models.

Are MNCs better than Indian Companies?

Green rating project reveals that contrary to the prevalent belief there is hardly any difference in the
overall performance of Indian companies and MNCs. Both of them meet the same environmental
standards in each and every aspect. A double standard was perceptible in the business pattern of
MNCs as they were following a practice of dumping obsolete products on the pretext of poor fuel
and existing regulatory norm in the Indian market. Other than corporate environmental governance
and pro-active initiatives, Indian companies are at par with the MNCs.

Does cleanliness make business sense?

Yes it does. A fairly tangible correlation was observed between the environmental performance and
economic performance of companies in the automobile sector. On an average, in total automobile
segments it was found that about 67 per cent of time there was direct relation between the
environmental rating and profit of company. That is, if a company is good on the environment front,
it is also sound in its balance sheet. In specific vehicle segment, this correlation was very high, as
high as 81 per cent in two and three wheeler companies.

Consumer awareness

Although, insufficiently informed consumers contribute to 80 per cent of the pollution generated by
automobile companies on road. Yet the sector in itself or through its dealers has not taken any
proactive effort to educate these consumers. Two and three wheeler companies are the worst in
consumer awareness raising initiatives. Except for giving free servicing not much has been done to
educate people.

Maintenance of the vehicles

The project found that though the maintenance of the vehicle plays a major role in the overall
environmental performance during the vehicle use, the strategy adopted by the automobile
companies do not provide enough incentive to the consumers to go to the authorised service
stations/ workshops. The cost of maintenance at authorised service stations were found to be as
high as 50 to 100 per cent than the unauthorised stations, and this was the main reason why
consumers avoided going to the authorised stations once their vehicle became a bit old. Automobile
companies need to work on economy of scale and provide enough incentive to the consumer to use
authorised service stations. This will not only reduce the pollution load but will also improve
company's bottom line. Companies need to think in terms of annual maintenance contract to
facilitate this recommends green rating project.

Impact of fuel quality

GRP analysis on Indian automobile segment clearly shows that the companies are holding fuel
quality responsible for pollution. Whereas, the truth is that current engine design in India is at least a
decade old compared to similar type of vehicles manufactured in western countries. Basic initiative
towards improving the engine design is lacking. Use of alternative fuels over conventional fuels is yet
to take its start in major way and their needs to be a big boost in the development of this concept in

The automobile sector in general has not taken much effort to establish the impact of fuel quality on
emissions. Some studies undertaken by companies have shown that there is hardly any consistent
trend to show that the fuels are mainly responsible for the poor emission quality. Role of age factor
on the effectiveness of catalytic converters too needs a comprehensive study to establish a relation
as it plays a great role in determining the pollution scenario on roads.

Impact of various parameters on fuel efficiency

Impact of various design parameters of vehicles on the tail pipe emission and fuel efficiency was
carried out by the project. Weight of the vehicle and its engine size was found to have inverse
relationship with fuel efficiency, though compression ratio had a direct relationship.

The project also found that a Indian passenger car switching over to multi point fuel injection system
from the carburettor system can expect a reduction in the tail pipe emission in the range of 25 per
cent to 40 per cent.

Another interesting finding was that majority of the petrol passenger cars running on the Indian
roads are using catalytic converters which does not suit their engine design.

Which is better? Two stroke or Four Stroke.

On the comparative performance undertaken for two-stroke and four-stroke two wheelers, the
outcome clearly established that four stroke two-wheelers are better that two stroke two-wheelers
with respect to both emission and fuel efficiency.The carbon monoxide (CO) and hydrocarbons and
nitrogen oxides (HC+NOx) emitted by two-stroke two-wheelers (with catalytic converter) are 23 per
cent and 38 per cent, respectively higher than their equivalent four-stroke two-wheelers without
catalytic converter.

Meeting of regulations

While some Indian vehicles are meeting Euro II equivalent norms in the national capital region of
Delhi and Euro I equivalent norms in the rest of the country, it was found that overall, automobiles
in all the segments are meeting the regulatory norms well. However, GRP found that this is not
enough as there are companies that can go much beyond the minimum regulatory requirement but
absence of incentives from government discourages them. Government should come out with some
incentive mechanism to differentiate between just a good performer and excellent performers.

Supply Chain Management

Green rating project closely scrutinised the practice of outsourcing by Indian automobile companies
and found that majority of pollution during automobile production takes place at the supplier and
vendor's site, most of them being small and medium scale companies. Overall automobile
companies had a very poor performance on this aspect. The project found a clear trend of
transferring of pollution by automobile companies to its supply chain. Companies urgently need to
adopt a green procurement policy and green up their supply chain.

Importance of ISO 14001

Almost half of the automobile sector has adopted environment management systems (EMS)
standards. However ISO 14001 adopted by automobile companies is not the actual reflection of their
environment management as these companies are just assembly plants. Most of their processes are
outsourced and the major pollution happens at vendor's site and during product use and disposal.
Thus, ISO 14001 only takes care of very small percent of pollution generated by the companies. The
project has recommended automobile sector to adopt an environment management system, which
reflects the environmental aspects of automobile business and not to use the existing system, which
is production centric.

Some other findings related to production process:

1) The entire sector uses paints that contain heavy metals and are based on solvents. No company
uses water based paints
2) The regulatory standards for wastewater characteristic applicable to the automobile sector are lax
as well as irrational


"Business Planning but with the ingredients of Social, Environmental and above all Ethical
consideration imbibed in it will define the future of Indian Automobile Sector", says SunitaNarian,
Director, CSE. "We recommend a coherent approach to be adopted byautomobile industry,
government and consumers. Once the consumer starts including environment in their buying
decisions, which they should because environment in automobile actually means economy and
savings, companies will be pushed to improve," adds Chandra Bhushan, coordinator of Green Rating

Companies cannot afford to loose their market given the kind of cutthroat competition existing in
India today. Consumers need to build on the research outcome of green rating project, and ask for
emission and fuel efficiency performance of automobiles as their buying criterion along with price.

Government on its part should come out with economic instruments as its major tool to regulate
automobile companies. Pollution control body too needs a complete rethinking of its regulatory
approach to this sector. Wastewater characteristics, solid/hazardous waste management, paint
sludge incineration, dioxin and furans are some major aspects of automobile pollution during
manufacturing process-regulations for which are either weak or non-existent. Downstream pollution
checks and supply chain management are also some issues where regulatory bodies will have to do
some soul searching.

Automobile companies need to do a lot of rethinking. Extensive research and development, option
of alternate fuels, clean technologies and quality control to oversee adherence to product
conformance will shape the future of automobile sector in India.

Companies must come forward and be more active in shouldering their responsibilities in educating
consumers regarding good and bad features of vehicles.

Proactive dialogue between this sector and society in general could pave the way for long-term
solution to the various pollutions caused by the automobile sector. All stakeholders need to come
together to improve the environmental performance of this sector. We have just made a start, a lot
more needs to be done.

Current status of Indian Automotive Industry

On the canvas of the Indian Economy, Auto Industry occupies a prominent place. Due to its deep
forward and backward linkages with several key segments of the economy, automotive industry has
a strong multiplier effect and is capable of being the driver of economic growth. A sound
transportation system plays a pivotal role in the country's rapid economic and industrial
development. The well-developed Indian automotive industry ably fulfils this catalytic role by
producing a wide variety of vehicles: passenger cars, light, medium and heavy commercial vehicles,
multi-utility vehicles such as jeeps, scooters, motorcycles, mopeds, three wheelers, tractors etc.

Although the automotive industry in India is nearly six decades old, until 1982, only three
manufacturers - M/s. Hindustan Motors, M/s. Premier Automobiles & M/s. Standard Motors
tenanted the motorcar sector. Owing to low volumes, it perpetuated obsolete technologies and was
out of sync with the world industry. In 1982, MarutiUdyog Limited (MUL) came up as a Government
initiative in collaboration with Suzuki of Japan to establish volume production of contemporary
models. After the lifting of licensing in 1993, 17 new ventures have come up, of which 16 are for
manufacture of cars. There are at present 12 manufacturer of passenger cars, 5 manufacturers of
MUVs, 9 manufacturers of Commercial Vehicles, 12 of two wheelers, 4 of three wheelers and 14 of
tractors besides 5 manufacturers of engine.

The industry comprising of the automobile and the auto component sectors has shown great
advances since delicensing and opening up of the sector to FDI in 1993. The industry has an
investment of a sum exceeding Rs. 50,000 crore. During the year 2003-04 the turnover of the
automotive sector was around Rs. 1,00,000crore. The industry provides direct employment to 4.5
lakhs and generates indirect employment of 1 crore. The contribution of the automotive industry to
GDP has risen from 2.77% in 1992-93 to 4% in 2003-04.

Automobile Industry

Installed capacity

The Automobile Manufacturers have put up a robust manufacturing capacity of 95 lakh plus vehicles
per annum since 1993. Today India is the world's second largest manufacturer of two wheelers, fifth
largest manufacturer of commercial vehicles and manufactures largest number of tractors in the
world. The country offers fourth largest passenger car market in Asia today. A supplier driven
market, having no more than a handful of vehicular models two decades ago, now offers more than
150 models and variants by way of customer options. The installed capacity of the automobile sector
during the year 2003-04 was as under:


One of the largest industries in India, automotive industry has been witnessing impressive growth
during the last two decades. Abolition of licensing in 1991, permitting automatic approval and
successive liberalisation of the sector over the years have led to all round development of this
industry. The freeing of the industry from restrictive environment has, on the one hand, helped it to
restructure, absorb newer technologies, align itself to the global developments and realise its
potential and on the other hand, this has significantly increased industry's contribution to overall
industrial growth in the country. Overall automobile sector bagged a growth of 15.12% in 2003-04.
During the year 2004- 05 (upto April-Sept. 2004) the Industry has registered a growth rate of
15.06%. The details of actual production during 2003- 04 and 2004-05 (upto April-Sept.2004) are
given below:

In no.s

S. No. Name of the Sector No. of units Production

2003-04 2004-05

(April-Sept. 04)

1. Commercial Vehicles 9 275224 156815

2. Cars 12 842437 465983

3. Multi-Utility Vehicles 5 146103 114739

4. 2-wheelers 12 5624950 3023805

5. 3-wheelers 4 340729 177554

Total 42 7229443 3938896


Automotive industry of India is now finding increasing recognition worldwide and a beginning has
been made in exports of vehicles as well as components. The automobile industry along with the
component industry is also contributing to the export effort of the country. During the year 2002-03
the export of automobile industry had registered a growth rate of 65.35% while it was 55.98% during
the year 2003-04. The details of exports during 2003-04 and 2004-05 (upto April-Sept. 2004) are
given below:-

(in Nos.)

S. No EXPORT 2003-04 2004-05(April-Sept. 04)

1. Commercial vehicles 17227 12575

2. Passenger cars 126249 76076

3. Multi- Utility Vehicles 3067 2164

4. 2-wheelers 264669 170978

5. 3-wheelers 68138 37901

TOTAL 479350 299704

Auto Components Industry

Surge in automobile industry since the nineties has led to robust growth of the auto component
sector in the country. Responding to emerging scenario, Indian auto component sector has shown
great advances in recent years in terms of growth, spread, absorption of newer technologies and
flexibility, despite multiplicity of technology platforms and low volumes. India's reasonably priced
skilled workforce, large population of technology workers coupled with strengths gained by the
country in IT and electronics all build up an environment for significant leap in component industry.

The Indian auto component sector is being written up as the next industry, after software, that has
the potential of becoming globally competitive. Indian Auto Component Industry, with a turn over of
an approxRs. 36,300 crore (2004-05,prov.) and manufacturing all the key components required for
vehicle manufacturing, is an important sector of the Automotive industry. The phased
Manufacturing Policy (PMP) followed in the 1980s enabled the component industry to induct new
technologies, new products and a much higher level of quality in their operations that enabled quick
and effective localization of the component base. The Indian auto component industry over the
years has played a key role in the growth and development of the country's automotive industry.
The Indian auto component sector today has 420 key players who contribute more than 85% of the
output of this sector. The vital statistics of the auto component sector during 2002-03 and 2003-04
are as under:

Indicators 2002-03 2003-04


Rs. 12,500 croreRs. 13,400 crore

Output Rs. 24,500 crore

Rs. 30,640 crore


Rs. 3,800 croreRs. 4,550 crore

Employment 5,00,000 persons

5,00,000 persons

Indian auto component industry has seen major growth with the arrival of world vehicle
manufacturers from Japan, Korea, US& Europe. Due to diversities in the technological profiles of
these OEMs, the sector today produces large variety of components. Today, India is emerging as one
of the key auto components center in Asia and expected to play a significant role in the global
automotive supply chain in the near future.


Indian auto component industry is wide (over 420 firms in the organized sector producing practically
all components and more than 10,000 firms in small unorganized sector, in tierized format) and has
been one of the fastest growing segments of automotive industry, growing by over 28%, in nominal
terms, between 1995-98. During the year 2003-04, the sector has recorded a growth of 25.06% by
recording a production of the order of Rs. 30,640 crore. During the year 2004-05, the output of the
Auto Component Industry is expected to be around Rs. 36,300 crore.

Component exports in the year 2003-04 have already crossed US $ 1 billion. This,

however, represents only about 0.8% of global component trade currently estimated

at around US $1.2 trillion. This is reflective of significant opportunities that lie ahead.

Several export units have reached rejection rate below 5 parts per million (PPM) with many of them
touching a zero PPM. On export front, auto component industry has registered a growth of 29% in
the year 2003-04 which is expected to be around 30% in the year 2004-05. During the year 2003-04,
total export was of the order of Rs. 4550 crore as compared to Rs. 3497 crore during the year 2002-
03. up in the current year with the reduction in the excise duty and improvement in the credit
delivery system for the sector.