Automobile Industry (pcd) - India

Indian Automotive Industry

The automotive sector, comprising of the automobile and auto component sub sectors, is one of the key segments of the economy having extensive forward and backward linkages with other key segments of the economy. It contributes about 4 per cent in India's Gross Domestic Product (GDP) and 5 per cent in India's industrial production. The well-developed Indian automotive industry ably fulfils this catalytic role by producing a wide variety of vehicles like passenger cars, light, medium and heavy commercial vehicles, multi-utility vehicles such as jeeps, scooters, motorcycles, mopeds, three wheelers, tractors etc. Since the first car rolled out on the streets of Mumbai (then Bombay) in 1898, the Automobile Industry of India has come a long way. During its early stages the auto industry was overlooked by the then Government and the policies were also not favorable. The liberalization policy and various tax reliefs by the Govt. of India in recent years have made remarkable impacts on Indian Automobile Industry. Indian auto industry, which is currently growing at the pace of around 18 % per annum, has become a hot destination for global auto players like Volvo, General Motors and Ford.

Investment Opportunities:

In India, lots of investment opportunities exist in the following areas:

• Establishing Research and Development Centres

• Establishing Engineering Centres

• Passenger Car Segment

A well developed transportation system plays a key role in the development of an economy, and India is no exception to it. With the growth of transportation system the Automotive Industry of India is also growing at rapid speed, occupying an important place on the 'canvas' of Indian economy. After liberalization of Indian Economy in general and automobile industry in particular, considerable number of Multinational Companies are operating in India either as wholly owned subsidiaries or in collaboration with their Indian partners. This automotive sector has taken benefit of liberalization of Indian economy to a large extent and made available various international brands in India for Indian consumers. Firms like Hyundai are supplying manufactures cars in the international market using its manufacturing facility in India in a big way. These firms are using locally available efficient and cost competitive huge pool of human resource in India. (Refer Excel Sheet for Automobile Export)

Future prospects:

Future prospect of Indian Automotive Sector is looking bright. A Customer Satisfaction Ranking done by TNS Automotive in April 2007 revealed that indigenous automobile companies are replacing foreign multinational companies in terms of consumer satisfaction. For the first time since 2002, the year on which TNS started this kind of survey; home grown companies displaced MNCs from the top. This trend shows that automotive sector has much to deliver in the years to come. 11th largest passenger car in the world and is expected to be the 7th largest market by 2016. (Refer Sales and Production Trends in Excel Sheet)

Employment generated:

This sector has generated about 4.5 lakh of direct employment and about one Crore of indirect employment. The auto component and ancillary industry has huge forward and backward linkages in terms of employment generated.

Government support:

• Current Industrial Policy: The New Industrial Policy of 1991 de-licensed the Automobile Industry in India, but passenger car was de-licensed in 1993. Now, no license is required for setting up of any unit for manufacture of Automobiles except in some special cases. Further, 100 per cent Foreign Direct Investment (FDI) is permissible under automatic route in this sector including passenger car segment. The import of technology or technological up gradation on the royalty payment of 5 per cent without any duration limit and lump sum payment of US $ 2 million is also allowed under automatics route in this sector. This liberalization has helped this sector to restructure itself, absorb newer technologies, and keep pace with the global developments realizing its full potential.

• Exim Policy: Removal of Quantitative Restrictions (QRs) from April 1, 2001 has allowed the import of vehicle, including passenger car segment freely subject to certain conditions notified by DGFT. To protect India from becoming a dumping ground for old and used vehicles produced abroad, the custom duty on the import of second hand vehicles including passenger cars has been raised to 105 per cent. The custom duty rate on new Completely