Evolution of Indian Automobile Sector.
Changes in Indian Automobile Industry Supply Chain System.
Role of each contributor to supply chain.
• The automotive industry in India is one of the largest in the
world with an annual production of 23.96 million vehicles in FY
(fiscal year) 2015–16, following a growth of 2.57 per cent over
the last year.
• Accountable for the contribution of 7.1% to the GDP.
• Export grew at a CAGR of 14.65% over last five years(2010-
• FDI received worth US$ 13.48 billion during period April 2000
to June 2015( Data released by DIPP).
• GOI encourages FDI upto 100% in the automobile sector under
4. • The key to success in the industry is to improve labour
productivity, labour flexibility, and capital efficiency. Having
quality manpower, infrastructure improvements, and raw
material availability also play a major role. Access to latest and
most efficient technology and techniques will bring competitive
advantage to the major players.
• The role of Industry is and will primarily be in designing and
manufacturing products of world-class quality establishing cost
competitiveness and improving productivity in labour and in
capital. With a combined effort, the Indian Automotive industry
will emerge as the destination of choice in the world for design
and manufacturing of automobiles .
• The Indian market offers endless possibilities for investors.
• The first car ran on India's roads in 1897. Until the 1930s, cars were
imported directly, but in very small numbers.
• Embryonic automotive industry emerged in India in the 1940s.
Mahindra & Mahindra was established by two brothers as a trading
company in 1945, and began assembly of Jeep CJ-3A utility vehicles
under license from Willys. The company soon branched out into the
manufacture of light commercial vehicles (LCVs) and agricultural
• Following the independence, in 1947, the Government of India and the
private sector launched efforts to create an automotive component
manufacturing industry to supply to the automobile industry. However,
the growth was relatively slow in the 1950s and 1960s due to
nationalisation and the license raj which hampered the Indian private
6. • After 1970 the automotive industry started to grow, but the growth was
mainly driven by tractors, commercial vehicles and scooters. Cars
were still a major luxury. Japanese manufacturers entered the Indian
market ultimately leading to the establishment of Maruti Udyog.
• In the 1980, a number of Japanese manufacturers launched joint-
ventures for building motorcycles and light commercial-vehicles. It was
at this time that the Indian government chose Suzuki for its joint-
venture to manufacture small cars.
• Following the economic liberalisation in 1991 and the gradual
weakening of the license raj, a number of Indian and multi-national car
companies launched operations. Since then, automotive component
and automobile manufacturing growth has accelerated to meet
domestic and export demands.
7. • Economic liberalization in India in 1991, the Indian automotive industry
has demonstrated sustained growth as a result of increased
competitiveness and relaxed restrictions.
• Several Indian automobile manufacturers such as Tata Motors, Maruti
Suzuki and Mahindra and Mahindra, expanded their domestic and
international operations. India's robust economic growth led to the
further expansion of its domestic automobile market which has
attracted significant India-specific investment by multinational
• In February 2009, monthly sales of passenger cars in India exceeded
100,000 units and has since grown rapidly to a record monthly high of
182,992 units in October 2009.
• From 2003 to 2010, car sales in India have progressed at a CAGR of
13.7%, and with only 10% of Indian households owning a car in 2009
• SIAM is the apex industry body representing all the vehicle
manufacturers, home-grown and international, in India.
9. CHANGES IN INDIAN AUTOMOBILE INDUSTRY
SUPPLY CHAIN SYSTEM
• Supply Chain of Automobile Industry: The supply chain of automotive
industry in India is now very similar to the supply chain of the
automotive industry in Europe and America.
• The orders of the industry arise from the bottom of the supply chain i.e,
from the consumers and goes through the automakers and climbs up
until the third tier suppliers.
• Main components of achieving this supply chain system are:
• Third Tier Suppliers.
• Second Tier Suppliers.
• First Tier Suppliers.
10. ROLE OF EACH OF THE CONTRIBUTORS TO THE
SUPPLY CHAIN ARE DISCUSSED BELOW:-
• Third Tier Suppliers: These companies provide basic products like rubber, glass,
steel, plastic and aluminium to the second tier suppliers.
• Second Tier Suppliers: These companies design vehicle systems or bodies for
First Tier Suppliers and OEMs. They work on designs provided by the first tier
suppliers or OEMs. They also provide engineering resources for detailed
designs. Some of their services may include welding, fabrication, shearing,
• First Tier Suppliers: These companies provide major systems directly to
assemblers. These companies have global coverage to follow their customers
to various locations around the world. They design and innovate to provide
"black-box" solutions for the requirements of their customers. Black-box
solutions are solutions created by suppliers using their own technology to meet
the performance and interface requirements set by assemblers.
11. • First tier suppliers are responsible not only for the assembly of parts
into complete units like dashboard, brakes-axle-suspension, seats, or
cockpit but also for the management of second-tier suppliers.
• Automakers/Vehicle Manufacturers/Original Equipment Manufacturers
(OEMs): After researching consumers' wants and needs, automakers
begin designing models which are tailored to consumers' demands.
The design process normally takes five years. These companies have
manufacturing units where engines are manufactured and parts
supplied by first tier suppliers and second tier suppliers are assembled.
Automakers are the key to the supply chain of the automotive industry.
Examples of these companies are Tata Motors, Maruti Suzuki, Toyota,
and Honda. Innovation, design capability and branding are the main
focus of these companies.
12. • Dealers: Once the vehicles are ready they are shipped to the regional
branch and from there, to the authorised dealers of the companies.
The dealers then sell the vehicles to the end customers.
• Parts and Accessory: These companies provide products like tires,
windshields, and air bags etc. to automakers and dealers or directly to
• Service Providers: Some of the services to the customers include
servicing of vehicles, repairing parts, or financing of vehicles. Many
dealers provide these services but, customers can also choose to go to
independent service providers.
14. ROBUST GROWTH IN REVENUES
• The gross turnover of
automobile manufacturers in
India expanded at a CAGR of
11.72 per cent over FY07-15
• The domestic 2 wheelers
segment accounted for 80.4
per cent of the total domestic
market share1 for the year
15. TOTAL PRODUCTION OF AUTOMOBILES IN
INDIA (MILLION UNITS)
• Production of automobiles increased at a CAGR of 9.4 per cent
• During FY06-16, passenger vehicle segment witnessed the
fastest growth, at a CAGR of 10.09 per cent, followed by 2
wheeler segment, which grew at a CAGR of 9.48 per cent
during the same time period.
• During fiscal year 2016-17, passenger vehicle market in India is
likely to cross the 3 million units milestone.
• By February 2017, Suzuki Motors plans to commence
production at its Gujarat plant
17. MARKET BREAK-UP BY PRODUCTION
• 2-wheelers dominate production volumes; in FY16, the segment
accounted for about 78.6 per cent of the total 3.90%
automotive production in the country.
• India is world’s 6th largest vehicles manufacturer globally.
Further, India is the Asia’s 2nd largest 2-wheeler manufacturer &
5th largest producer of commercial vehicles, 4th largest
manufacturer of passenger car & the largest manufacturer of
• The 2-wheeler industry recorded sales of 1.42 million units
(including exports) during the month of October 2016.
19. STRONG GROWTH IN EXPORTS
• During FY06-16, automobile exports from the country increased at a
CAGR of 16.23 per cent.
• Further, during FY06-16, 2-wheeler segment reported fastest growth of
around 17.5 per cent, followed by 3-wheelers , which grew at a rate of
14.8 per cent during the same period.
• The country's largest carmaker Maruti Suzuki India recorded
cumulative exports of 1500 thousand vehicles in September, 2016.
• In January 2017, Suzuki India announced that it will begin exporting its
Indian made motorcycle - Gixxer to Japan.
• India is expected to become the 3rd largest car market across the
world by 2020.
21. PRESENCE OF A CLEAR LEADER IN EACH
• The automotive industry is majorly commanded by domestic
players, with an immense market share in the country during
22. • The automotive industry is majorly commanded by the
dominance of domestic players, with an immense market share
in the country during FY161
23. GOVERNMENT INITIATIVES
• The Government of India encourages foreign investment in the
automobile sector and allows 100 per cent FDI under the automatic
• The Government of India plans to introduce a new Green Urban
Transport Scheme with a central assistance of about Rs 25,000 crore
(US$ 3.75 billion), aimed at boosting the growth of urban transport
along low carbon path for substantial reduction in pollution, and
providing a framework for funding urban mobility projects at National,
State and City level with minimum recourse to budgetary support by
encouraging innovative financing of projects.
• Government of India aims to make automobiles manufacturing the
main driver of ‘Make in India’ initiative, as it expects passenger
vehicles market to triple to 9.4 million units by 2026, as highlighted in
the Auto Mission Plan (AMP) 2016-26.
24. • The Government plans to promote eco-friendly cars in the country i.e.
CNG based vehicle, hybrid vehicle, and electric vehicle and also made
mandatory of 5 per cent ethanol blending in petrol.
• The government has formulated a Scheme for Faster Adoption and
Manufacturing of Electric and Hybrid Vehicles in India, under the
National Electric Mobility Mission 2020 to encourage the progressive
induction of reliable, affordable and efficient electric and hybrid
vehicles in the country.
26. ROAD AHEAD
• India’s automotive industry is one of the most competitive in the world. It
does not cover 100 per cent of technology or components required to make
a car but it is giving a good 97 per cent, as highlighted by Mr Vicent Cobee,
Corporate Vice-President, Nissan Motor’s Datsun.
• Leading auto maker Maruti Suzuki expects Indian passenger car market to
reach four million units by 2020, up from 1.97 million units in 2014-15.
• Mr Young Key Koo, Managing Director, Hyundai Motor India Ltd, has stated
that India is a key market for the company, not only in terms of volumes but
also as a hub of small products for exports to 92 countries.
• Mr Joachim Drees, Global CEO, MAN Trucks & Bus AG, has stated that India
has the potential to be among the top five markets, outside of Europe, by
2020 for the company, which is reflected in the appointment of its most
experienced managers to India for increasing volumes and exports out of
27. • The Indian automotive aftermarket is estimated to grow at around 10-
15 per cent to reach US$ 16.5 billion by 2021 from around US$ 7
billion in 2016. It has the potential to generate up to US$ 300 billion in
annual revenue by 2026, create 65 million additional jobs and
contribute over 12 per cent to India’s Gross Domestic Product.
• According to Mr Guillaume Sicard, president, Nissan India Operations,
the income tax rate cut from 10 per cent to 5 per cent for individual tax
payers earning under Rs 5 lakh (US$ 7,472) per annum will create a
positive sentiment among likely first time buyers for entry level and
• Society of Indian automobile Manufacturers.
• India Brand Equity Foundation.