India Automobile Industry

Executive summary

India is a developing country with an emerging automobile sector that grew rapidly over the past few years. It has become Eleventh largest passenger car producer. India is the largest democracy in the world. Recently Indian Government also came up with their �Auto Policy’ and the vision of this policy is “To establish a globally competitive automotive industry in India and to double its contribution to the economy by 2010.” The Indian automotive industry has already attained a turnover of Rs.1, 65,000 crore ($34 billion USD). The contribution of the automotive industry to GDP has risen from 2.77% in 1992- 93 to 5% in 2005-06. The auto companies have a manufacturing capacity of over 95 vehicles per annum. Foreign investors have found this stable economy very favorable for their investments into the country. India’s GDP real growth rate is 9.2% (2006 EST.). The country's advantage in affordable and quality cars has let the economy to increase their international sales which stimulated the economy to boost up again in recent years. We analyze from the data that the FDI inflow is much higher in to India rather than the out flow. It is the 50th position in world competitiveness ranking. Its high level of well-educated workers, who constitute a formidable brain trust for future research and development, are its major asset. The raw materials and auto parts required by automobile production are widely available in India. The knowledge and information oriented automobile industries here are attracting foreign automobile investors as they are suitable for developing sophisticated activities. The rapid advancement in the automobile industry in developed countries has boosted up the demand for locally produced multipurpose cars and made the automobile industry of India to strongly focus on exterior design and frequent introduction of new models and on products with good quality and strong technology. One of the main reasons for India’s automobile industry to prosper is because of its steel industry such as Mittal Steel and Tata Steel. Indian manufacturing sector has been readjusting its structure from labor-intensive manufacturing to assembly-type production activities. Based on the analysis of the report, it can be concluded that joint venture and in some case, export can be two modes of entry. If they can get into a joint venture with a local car manufacturing company and share the setup costs and risks with them. Exporting helps a firm achieving experience curve and location economies and avoids often substantial cost of establishing manufacturing operations in the host country. The recommendations for India are to reduce tariff barrier from automobile sector and to have a diversified customer base, to implement advantageous alliances and partnerships, and to maintain a good balance between technology and cost efficiency. The PEST and the porter model highlighted that fact that India has proven itself as a leading automobile producer and maintained strong competitive advantage over its rivals in the past few years.

Table of Contents

Title Page

Acknowledgment 1

Letter of transmittal 2

Executive summary 3-4

Introduction 6

2. PEST Analysis

Political Analysis 7

System of Government 7

Government Policies 7-9

Political stability 9

Economic Analysis

Economic Indicator 10-11

Purchasing Parity 11

Human Development 11-12

Social/Cultural Analysis

Language 12

Religion 12

Education 12

Social Strata 12-13

Technological Analysis

Infrastructure 13

3. Analysis of national competitiveness using Porter’s model

Factor endowment 13-14

Demand condition 14-15

Related & supporting Industries 15

Firm strategy, structure & rivalry 16

4. SWOT ANALYSIS 16

Decision 17

Recommendation 17-18