Abstract
The aim of this chapter is to draw a broad overview of the Indian automotive industry so as to lend a preliminary step for the empirical investigation to be carried later in the Book. Indian automotive industry has attracted a great deal of attention from industry, academia, and policy circles alike due to its sheer potential and gradual but notable performance in the recent decades. The industry has evolved as a dynamic one being chiseled by India’s liberalizing trade and investment regimes on the one hand, and the structural readjustments from within (propelled mostly by the changes in global automotive industry), on the other. In light of this, the present chapter critically documents the recent changes in the Indian auto industry vis-à-vis the global industry trends and discuses its current status. Since the core of this research centers on the auto component segment of the automotive industry, a major part of this chapter will deal with the discussion of this segment with a purpose of evaluating the current state of the industry from the perspective of advanced technology usage.
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Notes
- 1.
The component segment of automotive industry is considered to be a big industry in itself, and is generally separated from automobile industry in economic studies and for various other practical purposes. Other important facts requiring a thorough treatment of this segment is highlighted later in the Chapter. We therefore use the term ‘segment’ and ‘industry’ interchangeably in the text.
- 2.
This differential of growth between world regions has been discussed in the literature earlier (see e.g., Humphrey 2000; Humphrey and Memedovic 2003; Veloso and Kumar 2003 etc.). As reported in Humphrey and Memedovic (2003), global vehicle production rose by nearly seven million units between 1990 and 1997 but much of this growth was concentrated in developing countries. It is argued that the attention of the auto industry was focused on the potential of the emerging markets to offset the industry’s maturity and stagnation in the Triad economies and, in this way, to achieve increased economies of scale and spread the costs of developing new models.
- 3.
Source: “Indian automotive industry: Current Status”, 2004 (Auto Component Manufacturers Association, ACMA, India).
- 4.
Approximately 45 million Indian Rupees = US $1 million.
- 5.
To note, in 1953 the Government terminated the mere assembling of the imported CKD kits and allowed only those firms having manufacturing program. Only seven firms namely, Hindustan Motors Limited, Automobile Products of India Limited, Ashok Leyland Limited, Standard Motors Products of India Limited, Premier Automobiles Limited, Mahindra & Mahindra, and TELCO received approval. Few more firms came up later (source: SIAM, India). Moreover, foreign firms like General Motors and Ford had to withdraw from the market as a result of this policy, as they were mere assemblers of the imported CKD units.
- 6.
For example, it was stipulated that imported item must not be produced by any of the domestic producers. Moreover, in the case of intermediate goods the phased manufacturing condition was imposed which implied that firms had to substitute at least 90 % of imported inputs with the domestic ones within 5 years of import. Furthermore, most of the intermediate and capital imports were placed in restricted list of imports. Import licenses were issued based on the foreign exchange availability at that time. After satisfying all the conditions the importer had to pay tariffs, which were higher than international standards (Das and Rao 2004).
- 7.
Earlier there were three producers of passenger cars viz., Hindustan Motors, Premier Automobiles and Standard Motors Products India Limited. However, Standard Motors Products India Limited, switched over to the manufacture of light commercial vehicles in 1965.
- 8.
The reform policies were adopted as part of the macroeconomic adjustment, which was induced by an acute balance-of-payments crisis in the 1980s.
- 9.
Though the reform process started in the 1980s, it only followed partial decontrol. Hence, tighter government policies prevailed until 1991 when the economy was set for full decontrol. Among others, customs duties were cut; import restrictions on raw materials and capital goods were removed. Number of items reserved for small-scale units was also reduced and phased manufacturing program was abolished.
- 10.
The process of removal of import restrictions, which began in 1991, has been completed in a phased manner in the year 2001–2002 with removal of restrictions on 715 items. Out of these 715, 342 are textile products, 147 are agricultural products including alcoholic beverages and 226 are other manufactured products including automobiles (EXIM Policy 2001–2002, Director General of Foreign Trade- DGFT, Government of India).
- 11.
In fact, the rapid growth in 1994–1996 period attracted international producers to make their bases in India. Some of the important entries included Suzuki, Honda, Mitsubishi and Toyota of Japan; General Motors and Ford of US; Mercedes Benz, BMW, Opel and Volkswagen of Germany; Peugeot of France; Fiat of Italy and Hyundai and Daewoo of South Korea.
- 12.
The component sector grew by 21 % per annum, much faster than the average annual growth rate of 8 % for the automobile sector (Okada 2004).
- 13.
In addition, there are approximately 6000 small-scale firms in the unorganized sector. Out of the firms in the organized sectors, over 430 firms are members of a single association representing component manufacturers called ACMA, India (Source: http://www.indiainbusiness.nic.in).
- 14.
For example, as per ACMA statistics, just 41 firms contributed to 60 % of the total turnover (US$ 4470 million) in the year 2001–2002.
- 15.
The relatively large number of small firms was partially encouraged by the government’s policy of promoting small scale firms through several fiscal and non-fiscal incentives (see Lall 1987, Government of India, 1994 on more on these policies).
- 16.
By international standards also the Indian auto components industry is fairly small. As reported in a study by Mckinsey (1995), the industry as a whole stands at about the same scale as a single fairly large tier-one automotive supplier (Sumitomo Electric, Japan), and one-tenth the size of the world’s largest component company, Delphi, US.
- 17.
The next Chapter explores the spatial aspects of the industry and analyses the inter-regional differences.
- 18.
Among the component groups, engine parts generally require high precision and adherence to very high level of quality norms. Similarly Drive transmission and steering parts are also technology intensive segment.
- 19.
For instance, studies note that MUL consolidated its supplier base from 404 to about 300 first-tier suppliers in a period of just 2 years in late nineties while TELCO followed the suit by reducing the number of suppliers from 1200 to about 500 in 1997 (Okada 2004).
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Appendix
Appendix
Structure of Indian automotive industry
Types of vehicles produced in India
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Diebolt, C., Mishra, T., Parhi, M. (2016). A Synoptic Review of the Indian Automotive and Auto Components Industry. In: Dynamics of Distribution and Diffusion of New Technology. India Studies in Business and Economics. Springer, Cham. https://doi.org/10.1007/978-3-319-32744-0_4
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