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| India Infoline Sector Reports | Thu, 11-Dec-2003 11:57:28 IST (GMT+5:30) | |
| Automobile - Cars | ||
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Historical Industry Development The first motor car on the streets of India was seen in 1898. Mumbai had its first taxicabs in the early 1900. Then for the next fifty years, cars were imported to satisfy domestic demand. Between 1910 and 20's the automobile industry made a humble beginning by setting up assembly plants in Mumbai, Calcutta and Chennai. The import/assembly of vehicles grew consistently after the 1920's, crossing the 30,000 mark in 1930. In 1946, Premier Automobile Ltd (PAL) earned the distinction of manufacturing the first car in the country by assembling 'Dodge DeSoto' and 'Plymouth' cars at its Kurla plant. Hindustan Motors (HM), which started as a manufacturer of auto components graduated to manufacture cars in 1949. In 1952, the GOI set up a tariff commission to devise regulations to develop an indigenous automobile industry in the country. After the commission submitted its recommendations, the GOI asked assembly plants, which did not have plans to set up manufacturing facilities, to shut operations. As a result General Motors, Ford and other assemblers closed operations in the country. The year was 1954 and this decision of the government marked a turning point in the history of the Indian car industry. The GOI also had a say in what type of vehicle each manufacturer should make. Therefore, each product was safely cocooned in its own segment with no fears of any impending competition. Also, no new entrant was allowed even though they had plans of a full-fledged manufacturing program. The restrictive set of policies was chiefly aimed at building an indigenous auto industry. However, the restrictions on foreign collaborations led to limitations on import of technology through technical agreements. The other control imposed on carmakers related to production capacity and distribution. The GOI control even extended to fixation of prices for cars and dealer commissions. This triggered the start of a protracted legal battle in 1969 between some carmakers and GOI. Simply put, the three decades following the establishment of the passenger car industry in India and leading upto the early 1980s, proved to be the 'dark ages' for the consumer, as his choice throughout this period was limited to two models viz Ambassador and Padmini. It was only in 1985, after the entry of Maruti Udyog, that the car makers were given a free hand to fix the prices of cars, thus, effectively abolishing all controls relating to the pricing of the end product. In the early 80's, a series of liberal policy changes were announced marking another turning point for the automobile industry. The GOI entered the car business, with a 74% stake in Maruti Udyog Ltd (MUL), the joint venture with Suzuki Motors Ltd of Japan. In 1985, the GOI announced its famous broadbanding policy which gave new licenses to broad groups of automotive products like two and four-wheeled vehicles. Though a liberal move, the licensing system was still very much intact. MUL introduced 'Maruti 800' in 1983 providing a complete facelift to the Indian car industry. The car was launched as a "peoples car" with a price tag of Rs40,000. This changed the industry's profile dramatically. Maruti 800 was well accepted by middle income families in the country and its sales increased from 1,200 units in FY84 to more than 200,000 units in FY99. However in FY2000, this figure came down to 189,184 units, due to rising competition from Hyundai's 'Santro', Telco's Indica and Daewoo's 'Matiz'. MUL extended its product range to include vans, multi-utility vehicles (MUVs) and mid-sized cars. The company has single handedly driven the sales of cars in the country from 45,000 in FY84 to 409,951 cars by FY2000, cornering around 79.6% market share.With increasing competition from new entrants, this market share has plummeted to almost 62% in FY2000. The de-licensing of auto industry in 1993 opened the gates to a virtual flood of international auto makers into the country with an idea to tap the large population base of 950mn people. Also the lifting of quantitative restrictions on imports by the recent policy is expected to add up to the flurry of foreign cars in to the country. Many companies have entered the car manufacturing sector, to tap the middle and premium end of car industry. The new entrants are Daewoo (Matiz), Telco (Indica) and Hyundai (Santro) in upper end of economy car market. GM, Ford, Peugeot, Mitsubishi, Honda and Fiat have entered the mid-sized car segment and Mercedes-Benz is in the premium end of market. Car manufacturers like Malyasia based Proton are also in line to hit the Indian ramp.
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