Shu Wei Wong works as a planner/strategist. She writes just about anything that interest her or writes on issues highly related to her field of work, especially on strategy and leadership. Find more of her thoughts at http://360strategyleadership.blogspot.com/
The automotive sector is one of India’s largest and fastest growing manufacturing sectors. With a turnover of US$13 B, the automobile sector employs about 0.45 million people directly and 10 million people indirectly, including after-sales and servicing networks. This ranked India as the 11th largest passenger car producer in the world. In the category of motorcycles and scooters, India is ranked 1st and 2nd respectively. With India increasingly liberalizing its market place, many new joint ventures evolved, resulting in close to 2 dozen global auto manufacturers setting up shop in India
The auto component segment is equally robust, supplying the entire range of parts required by the domestic automobile industry and currently employs about 250,000 people. Although small by global standards, this segment is growing rapidly as a result of its low costs and rising quality. Sales turnover of parts is estimated to have reached US$8.7 B in 2004/05, 29% higher than the previous year. Noticeably, auto component manufacturers supply to two kinds of buyers – original equipment manufacturers (OEM) and the replacement market. Over 300 small and medium companies directly service the OEMs assembling vehicles in India. Downstream, close to 5,000 other micro firms are working for these Tier 1 suppliers, as well as for the replacement market
The sector can be segmented into 2. One is the automobile segment. The other is the auto parts segment. The key manufacturing areas for these 2 segments are well spread across the country.
The growth of India’s automotive sector is driven by the key forces below:
Import
Automotive related imports are largely in auto parts, accounting for a lion’s share of 85%. These imports will feed the manufacturing plants, producing vehicles for domestic market as well as export market.
As the demand from the domestic market increases with rising affluence, production will increase in tandem, hence requiring more imports of parts, especially those of higher precision which still cannot be done in India. Global players in India still need to import fairly large amount of auto parts for their automobile assembly as quality and technological standards of auto parts sourced from within India may not meet their high standards. The expected Increase in exports of India-made vehicles will also contribute to import growth of auto parts.
Export
Automotive related exports expanded rapidly in recent years. Automobile exports grew at a compound annual growth rate of 46% between 2001 and 2006. Export share of production increased from 3% in 2001 to 8% in 2006. The growth is boosted by these several factors such as India’s cost competitiveness in terms of labor and raw material; established manufacturing base; economies of scale due to domestic market; potential to harness global brand image of the parent company, as well as the global hub policy for small cars like Hyundai, Suzuki, etc
Most automotive exports go to developing countries in Asia, where inexpensive cars can find a market. Egypt, Kenya and Nigeria are important destinations for India’s automotive exports. More recently, as the quality and technology of India-made automobiles have improved and met stringent requirement of the international market, some cars have found buyers even in Western Europe.
Similarly for auto parts, exports have been growing at a compound annual growth rate of 25% over 2000-2005. Share of exports in total production increased to 18% in 2005 from 10% in 1997. Foreign carmakers in rich countries are increasingly turning to India for parts, as low costs, relatively good technology base and access to cheap raw material make India highly competitive in its auto parts exports.
The main export markets are the USA, Germany, Japan, Sweden, the UK and Italy. Asia, Africa and the Middle East together take up 44% of India’s auto part exports.
Regulatory/Government efforts
Government efforts and regulatory frameworks are also key driving forces to the automotive industry in India. Currently, 100% foreign direct investment in the automotive industry, with no mandatory minimum level of investment is allowed. No local tie up is necessary since the sector has already been fully de-licensed and deregulated. This provides a strong impetus for global auto players to set up shop in India. Further, excise duty and custom taxes have also been kept competitive in order to make participation in the automotive industry conducive
On top of these, an Automotive Mission Plan 2006-2016 is also being drafted to develop the domestic sector, as well as the export market. It aims to develop India into a premier automotive hub. Moving forward, India targets to become one of the top 5 automotive economies by 2025
International Agreements
Trade/economic co-operation agreements between India and the region or other international markets will boost India’s exports of both automobile and parts to the region/international markets. Going forward, the potential agreements are: TVS Group’s plan to invest in Indonesia to manufacture 2-wheeler; FTA between India and ASEAN (negotiation in progress) would also offer opportunities for direct trade and investment between India and ASEAN countries; FTA with countries like China, Korea, Japan, Chile, etc
- Related Videos
- Related Articles
- Ask / Related Q&A
- Popularity of Indian Auto News
- Competition Landscape in India’s Automotive and Auto Parts Sector
- Why is Auto Industry So Important?
- Global Recession Hits Indian Auto Industry
- India Auto Loans: the Pros and Cons of Automobile Finance
- Auto Loans: Make Your Drive Affordable
- Used Car Finance India
- Auto insurance safeguards you while driving a car in India




Aggressive Cost Cuts Help Toyota to Profit - Dai-ichi Securities
By: Patrick Ferguson | 15/11/2009Dai-ichi Securities: - Japanese car giants finally see profit after intensive cuts backs and cost cutting schemes.
Carreg.co.uk are looking to but personalised number plates too
By: DALPR | 15/11/2009Carreg.co.uk are looking to purchase rare and cherished number plates
The Death of the SUV
By: Brenda Williams | 15/11/2009A few years ago, I purchased a sport utility vehicle. I wanted something that was going to elevate me off the ground. Besides this, I thought that the commercials were really catchy. I pictured myself driving over rugged terrain and along sandy beaches, spraying out a neat sheat of surf...
Driver Jean Behra
By: Brenda Williams | 15/11/2009Victory in motor sports is dependent on three factors: the skill and daring of the driver, the endurance of the vehicle and the patronage of Lady Luck. All three must work together to bring the driver from starter to champion finish. While any one factor may overwork to compensate for...
Race Car Driver Alberto Ascari
By: Brenda Williams | 15/11/2009Alberto Ascari was literally born into the Grand Prix. He entered this world on July 13, 1918 in Milan, Italy. His father was Antonio Ascari, the Italian racing star of the Grand Prix during the 1920's. Antonio also owned a Fiat dealership in Milan. As a child Alberto met the...
Eugenio Castellotti - Italian Ace
By: Brenda Williams | 15/11/2009Unlike many racecar drivers, Eugenio Castellotti was a member of a wealthy family. He was born on October 10, 1930 in Lodi, Italy. Although he was able to buy a Ferrari when he was just twenty, he didn't begin his racing career until two years later. Eugenio was a socialite...
Get the Most Stylish Tourmaster Jett 2 Jacket Silver
By: Jeammy Pickle | 15/11/2009Tourmaster Jett 2 Jacket: Drive in the Rain Apparel Rain washes away pain. Rain symbolizes the close of drought. Rain intends cleansing. Adults, similar children, passion to walk in the rain, to dance in the rain, and even drive motorcycles in the rain. Professional and amateur motorcyclists yearn for rain during...
Classic Cars and the Pleasure of Owning One
By: Norma Holt | 14/11/2009Until I started writing about them it was a subject that had never really crossed my mind. But what a wealth of pleasure they bring to those who are lucky enough to own and drive a classic car. They may be seen in rallies driving up the highway of any...
Eleven Places You Must See in Bali
By: Shu Wei Wong | 16/07/2008 | DestinationsA list of eleven places that one must see when in Bali. It includes short write up and interesting facts of those eleven places.
Characteristics of a Successful Leader
By: Shu Wei Wong | 16/10/2007 | LeadershipAs a successful leader, how would one answer the question from a follower - Why should I be lead by you? This articles suggest some key characteristics of a successful leader.
Who Gets Cellulite?
By: Shu Wei Wong | 12/10/2007 | WellnessThis article highlight who gets cellulite and why more woman gets cellulite than man.
Fixed Versus Floating Exchange Rate
By: Shu Wei Wong | 09/10/2007 | FinanceThe floating exchange rate is a market-driven price for currency, while the fixed exchange rate is fixed at a level where the government takes whatever measures that are necessary to maintain the rate and prevent it from fluctuating. What are the pros and cons of each of them?
Competition Landscape in India’s Automotive and Auto Parts Sector
By: Shu Wei Wong | 09/10/2007 | AutomotiveThe automotive sector is one of India’s largest and fastest growing manufacturing sectors. Competition in India’s automobile and parts sector had been heating up in the recent years.
Driving Forces of India's Automotive and Auto Parts Sector
By: Shu Wei Wong | 09/10/2007 | AutomotiveThe automotive and auto parts sector is one of India’s largest and fastest growing manufacturing sectors. This article highlights the key driving forces contributing to this sector
Australia - China Bilateral Trade Phenomenon
By: Shu Wei Wong | 08/10/2007 | BusinessOver the past five years, China has grown significantly in importance to Australia as a trading and investment partner. How is this phenomenon going to be like moving forward?