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Introduction Of Automobile Industry In India: Unleashing the Potential of India's Automobile Industry!

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The "automobile industry in India" plays a big role in the country's economy. It contributes greatly to India's manufacturing output, export earnings and employment numbers. Cars and motorcycles have also transformed how people live and work in India.

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Fig: Automobile Industry in India Map

The History of the Automobile Industry in India

The history of the "automobile industry in India" goes back more than 100 years. Automobile production began in India in the early 1900s, shortly after cars were invented. But the industry took off only from the 1990s with economic liberalization.

  • The first car to roll out of an Indian assembly plant was the 150-hp, 12-cylinder Fiat modelled car in 1897. It was assembled by The Lorraine Company in Gujarat. The company made a few more luxury cars for wealthy Indians over the next decades.
  • The first mass-production car made in India was the Standard sedan in 1948. Standard Motor Products of India produced it. The Hindustan 10, a license-built British car, was also produced around the same time. But volumes remained very small.
  • In 1954, Premier Automobiles launched the Fiat-based Premier Padmini, India's first truly Indian car. With an affordable price tag, it became popular among upper-middle-class families. The Ambassador car by Hindustan Motors followed in 1957.
  • During the license permit raj era till 1991, the "automobile industry in India" remained restricted. Import of vehicle components above a certain value was banned. Companies had to take government approvals for all major decisions.
  • This led to low productivity, limited competition and stagnation in the industry. Car sales in the 1980s averaged only 300,000 units annually. Only a few brands like Maruti, Telco (Tata) and Mahindra & Mahindra survived.
  • But economic liberalization in 1991 changed everything. The Indian government removed licensing for car production. It also lowered import duties to attract global manufacturers.
  • This gave a big push to the "automobile industry in India". Maruti Suzuki set up a joint venture with Suzuki marking Suzuki's entry into India. Hyundai, Toyota, Ford, Honda and others soon followed suit.
  • The entry of global majors boosted competition, technology transfer and economies of scale. Prices of cars fell sharply, making them more affordable. Demand started increasing rapidly in the 2000s.
  • The government's Automotive Mission Plan 2006-2016 aimed to make India a design and manufacturing hub. Policies promoted local sourcing and exports to capture a share of the rising global auto market.
  • Since then, the "automobile industry in India" has grown impressively. It now contributes significantly to the economy through employment, taxes, exports and technology adoption.
  • Evolving customer needs, a growing middle class, increasing urbanization and policy reforms continue to offer opportunities. But issues around high costs, infrastructure gaps, environmental pressures and technology upgradation persist.
  • The industry is now shifting focus to electric mobility, connectivity and shared transportation to stay relevant. If challenges are addressed and disruptions are managed well, the Indian automobile industry could emerge as a global manufacturing leader over the next decades. Its history so far shows the industry's resilience and ability to adapt over time - traits that will remain valuable for its future progress.

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Features of the Automobile Industry in India

The automobile industry in India is one of the largest industries in the country and is growing rapidly. The industry contributes a big percentage of India's GDP and exports. The industry starts from local car makers to big international brands.

  • The automobile industry in India has a long history starting with the formation of Hindustan Motors, which made the iconic Ambassador cars from 1956 to 2014. The industry mainly consisted of local car makers but started changing in the early 90s with the entry of global automobile giants like Suzuki, Hyundai and others.
  • Car brands like Maruti Suzuki now dominate almost 50% of the Indian market. Car sales have been increasing consistently in India over the last two decades. The Indian automobile industry produces two-wheelers, three-wheelers, passenger vehicles, commercial vehicles and other auto components.
  • The automobile industry in India also employs a lot of people directly and indirectly. The sector supports nearly 37 million jobs in India and contributes a lot to the economy. India has become a hotspot for new car companies due to its large market size and cheap labour.
  • The automobile industry in India has been going through rapid changes in the last two decades. This has resulted in the availability of the latest automobile technologies and a big choice of car options for customers. 

Major Developments

Some of the major developments seen in the Indian automobile sector are -

  • Safety: Car companies are focussing a lot on safety features nowadays. Many cars now come with airbags, ABS and many other safety features.
  • Electric vehicles: Due to concerns over pollution, electric vehicles are seeing a rise in popularity in India. Car companies like Tata and Mahindra have launched multiple EV options recently.
  • Technology: Cars now come with connectivity options, assistance systems and other advanced technologies that were not available earlier. Most cars also have touchscreen infotainment systems nowadays.
  • Design: Car designs have become more attractive and better aligned with global trends. Customers have a lot of options for features like alloy wheels, sunroofs and more.
  • Manufacturing: Car makers have improved local sourcing and reduced dependency on imports. Many Automobile companies now manufacture almost entire cars in India.
  • Affordability: Auto companies have worked on improving the affordability of cars by reducing prices. Most entry-level cars now cost less than 5 lakhs. This has resulted in higher sales.
  • The automobile industry in India faces multiple challenges, too, which it needs to overcome to grow further. 

In conclusion, the automobile industry in India has great potential for growth but also faces multiple challenges. The industry needs to focus on adapting to global trends, reducing costs, improving quality, increasing local sourcing and resolving issues like pollution to sustain growth. With the right policies and strategies, the sector can continue to contribute significantly to the Indian economy.

Challenges of the Automobile Industry in India

The automobile industry in India has seen tremendous growth over the last few decades. However, the industry is now facing several challenges which need to be addressed for it to sustain this growth in the future. Understanding these challenges is important so that suitable solutions can be found. Here are some of the major difficulties that the automobile industry in India is currently grappling with:

  • High taxes and duties: One of the biggest challenges for the automobile industry in India is the high taxes and duties it has to bear. Cars in India attract taxes as high as 100%, which makes them very costly for customers. Taxes like GST, excise duty and road tax are applied, which escalate the prices. This leads to lower sales volumes. The automobile industry in India has been demanding a reduction in taxes for years.
  • Rising input costs: The automobile industry in India depends upon the import of various raw materials and parts, as local manufacturing is still limited. The rising prices of steel, rubber, copper and other commodities have increased input costs for auto companies. With high taxation already affecting sales, rising costs create further pressures on the industry's margins and profits.
  • Infrastructure issues: Poor quality of roads, traffic congestion and lack of parking spaces in cities create troubles for the automobile industry in India. This leads to higher wear and tear of vehicles and lower customer satisfaction. Issues like a shortage of charging infrastructure hamper the growth of electric vehicles too. The industry needs support from the government to improve basic infrastructure.
  • Competition: The automobile industry in India has to deal with high competition from both local and global car makers. Almost every major automobile brand operates in India, which creates pricing pressures and makes it difficult for companies to grow quickly. The competition also forces firms to invest heavily in new products and technologies to attract customers.
  • Strict emission norms: The Indian government has been enforcing strict emission norms regularly to reduce vehicular pollution in the country. While necessary from an environmental perspective, complying with new emission standards requires huge investments by auto firms and increases costs. The tight timelines also become difficult to achieve sometimes. The industry needs more time from the government to adjust to new norms.
  • Technology disruptions: The automobile industry in India is witnessing multiple technology disruptions like electrification, autonomy, connectivity, ride-sharing and more. While new technologies offer opportunities, they also require heavy R&D investments. Many companies lack the resources required to adopt new technologies at a fast pace. The industry will need to adapt itself quickly to emerging trends for long-term survival.
  • Skilled manpower shortage: There is a shortage of skilled and technical manpower in critical domains like engineering, software and R&D in India. The automobile industry faces difficulties in recruiting suitable talent, which impacts innovation and growth. While the demand for talent is high, the availability of trained professionals is limited, which acts as a hindrance. The industry needs support from the education system to overcome this gap.
  • Declining rural demand: In the past, demand for cars from rural and semi-urban areas in India supported the growth of the automobile industry. However, demand from hinterlands has reduced in recent times due to issues like lower farm incomes, financing problems and rising costs. Since metros have saturated markets, the industry depends on reviving rural demand to achieve higher sales volumes.

Conclusion

The automobile industry in India faces a multitude of challenges at this point, which span areas like high taxation, rising costs, infrastructure troubles, technological disruptions, environmental regulations and more. There is an urgent need for collaborative efforts from the government and automobile companies to resolve issues like taxation, infrastructure development, skill development, rural financing and emission management. 

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Automobile Industry in India FAQs

The automobile industry in India is one of the largest in the world. It contributes more than 7% to India's GDP and around 49% to the manufacturing GDP. The industry produced over 29 million vehicles, including cars, commercial vehicles and two-wheelers, in 2019-20.

Maruti Suzuki, Hyundai, Tata Motors, Mahindra & Mahindra and Honda Cars India are the major players in the passenger vehicle segment. While Tata Motors, Ashok Leyland and VE Commercial Vehicles dominate the commercial vehicle segment. Hero MotoCorp and Honda Motorcycle & Scooter India are leaders in the two-wheeler segment.

The major challenges include high taxes and duties, rising input costs, infrastructure issues, stringent emission norms, technology disruptions, manpower shortage and declining rural demand.

Yes, the electric vehicle segment is growing rapidly in India. Due to increasing environmental concerns, rising fuel costs and government support, sales of electric vehicles like cars, scooters and rickshaws are increasing consistently. However, the base is still low currently.

The long-term outlook for the automobile industry in India is positive due to factors like rising incomes, increasing urbanization, growing middle class, lower vehicle penetration and government support. However, the industry needs to overcome challenges like high taxation, infrastructure issues and technology adaptation to realize its full potential.
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