India’s Wheels on Track

With globalization, a very tough competition is taking place between various countries of the world in industries, businesses and finance. Almost every country is trying to make best possible efforts in succeeding from others and carving out a niche for itself in a specific industry or sector.

Balancing Act

For India, the sunrise sector after Information Technology, IT Enabled Services, and BPO seems to be the automobile sector. Automotives is considered to be the core area of specialization in which India is topping the chart. Currently, almost everywhere there is a downward trend in automobile sector in the world, but it is countries like India and China that are progressing ahead with better management of the automobile sector.

So far, economic development in the world’s largest democracy has focused on services more than manufacturing. The country needs a balance and car makers provide an example worth following.

India’s manufacturing sector makes up only 16 per cent of its GDP. This needs to increase if the country is to find jobs for its huge population. Yet on the back of strong domestic demand, global car manufacturers have flocked to India and are helping to make the sector globally competitive – particularly in small cars. Capacity is expected to increase from 4.8 million units in 2010 to 12 million in 2018 according to Rothschild. India is set to become the third-largest auto maker in the world and could become a major exporter.

Good Gears

Since 1991, Indian government has introduced a series of steps for the liberalization in the automobile industry, including opening up for 100 per cent FDI through automatic route, and has consistently invited the global automobile players to work as participants and partners in India. There has been an increase of approximately 18 percent per annum in the industry over the past decade, which is likely to be continued in the years to come.

For the past 20 years, the country is influencing phenomenal growth in the auto industry. The credit for this can be given to number of positive factors that have converted this into reality. As per the sales arc, there has been a phenomenal increase from the period of 1990 to 2010.  It is the excessive domestic demand which has supported and encouraged the automobile industry to adopt a positive attitude in terms of capacity, research, and technological development.

With no caps on FDI, new entrants are spurring competition. And in contrast to recent policies on retail, state governments have been welcoming. Clusters are being created in the south and west of India where states such as Tamil Nadu and Gujarat offer cheap land to attract investment.

Proper emphasis has also been laid towards the setting up of distribution channels throughout the country and for developing export markets for manufacturing hubs based in India. The entire Indian automobile sector is manufacturing an average of 11 million vehicles and is exporting more than 1.5 million throughout the globe every year.

Government policies, substantial economic growth along with the rising purchasing ability of the people are some of the factors that have contributed to making the Indian automobile industry a success. Secondly, it is the gradual increase and improvement in the road infrastructure which has successively resulted in more and more demand for vehicles. The proper management of the infrastructure of roads has made the road transport a viable and a cost effective measure. The increase in per capita income has also made way for growing sales of two and four wheelers in India.

Road to Follow

Besides, a number of social factors, such as urbanization, are major causes for people getting influenced to buy personal automobiles. Similarly, rise in the income levels of working class of people, and enhancement of their social life has also contributed equally to this burgeoning sector’s success. There can be any number of reasons to be recounted for the fabulous growth of the automobile industry’s growth but it has certainly brought India on the world map of automobile manufacturing and usage.

Infrastructure bottlenecks, skills shortages and slow-moving bureaucracy pose big challenges to India’s manufacturing development. But as labor cost in China rise, India has an opportunity to win market share. In autos, it may have found a formula that can be replicated.

At present, India is the world's:

·         Largest tractor and three-wheel vehicle producer.

·         Second largest two-wheel vehicle producer.

·         Fourth largest commercial vehicle producer.

·         Eleventh largest passenger car producer.