 The Indian automobiles industry, which registered impressive and continuous growth since 2000 in almost all segments, had to shift to a lower gear through 2007-08. According to the figures released by the Society of Indian Automobile Manufacturers (SIAM) on the performance through 2007-08, domestic sales of passenger cars at 1,547,985 vehicles showed a growth of 12.17 per cent; sales of commercial vehicles (CV) at 486,817 increased by 4.07 per cent; three wheelers (364,703) registered a negative growth (near 10 per cent) and that of two wheelers declined by 7.92 per cent, to 7,248,589.
R. Seshasayee, MD, Ashok Leyland pointed to the cyclical nature of the industry and expressed hope on an early return to the growth path. There are several factors that favour the CV segment to bounce back: the huge focus on infrastructure development particularly highways, the big step up in investment on projects, record agriculture production estimated at around 227 million tonnes for the current year and the economy continuing to grow at over eight per cent. But high finance costs and the liquidity crunch witnessed from time to time put the brakes on strident growth.
Dilip Chinoy, Director General, SIAM pointed to efforts made by the industry to step up R&D that would attempt to tackle the issue of fuel efficiency as also to contain costs.
IE presents an analysis on the auto sector on the performance in the last couple of years and the vast interest generated among global manufacturers to set up production facilities in India.
 Cars continue to cruise on the overdrive
Through 2007-08 total production of passenger vehicles increased from 1.55 million to 1.76 million; total domestic sales from 1.38 million to 1.55 million and exports from 198,452 to 218,418 vehicles.
Maruti Suzuki continued to be the leader accounting for the production of 660,138 passenger cars, 3004 utility vehicles and 93,952 multi purpose vehicles, vans, etc. This was followed by Hyundai Motor and Tata Motors.
The Korean manufacturer, Hyundai Motor, has been effectively making use of the cost advantage of producing small cars in India. The company exported 144,439 cars; Maruti Suzuki exported 53,033 followed by Tata Motors 14,810. The cumulative export of passenger vehicles through the year was at 218,418 (198,452), roughly around 12 per cent of the total production. What a big jump! A decade ago there were hardly any exports; and the export realisation through 2007-08 should have exceeded Rs.6500 crore!
Handsome investments have been made by Maruti, Hyundai Motor and Tata Motors for sizeable step up in their production capabilities. Maruti has two plants at Gurgaon and Manesar and has capacity for around a million vehicles. Hyundai is expanding capacity to 600,000, Tata Motors, busy with its low priced Nano car, has excellent production facilities at its existing plants at Pune and at the new ones coming at Singur and Uttarkhand that would enable it to raise capacity to a million cars in quick time.
General Motors, Ford, Fiat, Mahindra-Renault, Hyundai, Toyota and Skoda also have impressive plans of expansion. There are new entrants for volume production by other renowned global manufacturers like Volkswagen, Renault-Nissan and Bajaj-Renault-Nissan. If all these plans go well and the demand for passenger cars continued to grow in double digits, capacity created over the next five years can rise to a level of five million. This capacity will be dominated by the entry level small cars in the price range of Rs.100,000 to Rs. 150,000.
With the easy financing facilities developed by vehicle manufacturers in close cooperation with financial institutions, funding the purchases may not be a problem; but plying the vehicles will be.
The existing road infrastructure in the cities is already cracking under the strain of increasing number of vehicles with no corresponding improvement in the road network. Whether it is Delhi or Chennai, Hyderabad or Bengaluru, the road system is not able to cope with the huge increase in the number of vehicles.
IE has been suggesting that traffic engineering and planning is too serious, an issue to be left to the hands of the bureaucrats and politicians. Companies like BMW have rich experience and expertise in this area. SIAM should persuade its large member companies to involve closely with the strategic engineering and planning of specific cities nearer their manufacturing centres. Maruti, for instance, can take this responsibility for the national capital region as also select large cities in Punjab, Haryana and UP. Tata Motors can do this for Kolkata and few other major cities in the eastern region. Hyundai for Chennai and Ashok Leyland for Bengaluru… The companies can provide for these under their CSR initiatives.
 Commercial vehicles - demand flat
During 2007-08 production of passenger carriers in the medium and heavy CV segment increased by around 42 per cent from 32,820 to 46,542. However, medium and heavy goods carriers registered a decline in production from 261,438 in 2006-07 to 244,572 in 2007-08, while LCVs recorded an increase from 225,724 to 254,062; in this passenger carriers accounted for 33,894 (29,443).
More players have been active in the three wheeler segment which recorded a decline in production through the year from 556,126 to 500,592 vehicles. Bajaj Auto, the leader in the passenger segment, was followed by Piaggio. In the goods carriers segment, Piaggio was the leader. TVS Motors has plans to enter this segment.
 Two wheeler production registered a decline
Total production of two wheelers of all categories - scooters, scooterettes, motor cycles and mopeds recorded a decline from 11.09 million vehicles produced in 2006-07 to 10.83 million in the subsequent year. Hero Honda Motors maintained its lead with the total production of 3.33 million vehicles followed by Bajaj Auto (2.18 million) and TVS with the production of over a million vehicles. The rapid increase in the production of the Japanese Honda Motor Cycles and Scooters India Private Ltd, should be a matter of concern to Munjals of Hero Honda.
More interesting things seem to be in store for the auto sector. Though the two wheeler and passenger cars segments had already attracted global players, the CV segment has not experienced such interest on the part of established global manufactures. That is until recently. The sector has been dominated by Tata Motors and Ashok Leyland; both the companies have been building up strong capabilities in research, engineering and development. They also have a vast network of dealers and service stations and have perfected excellent financing arrangements during the last five decades and more of operations.
 Spate of new manufacturers of CVs
However, this area is witnessing entry of number of international players with deep pockets and established reputation. M&M will produce medium and heavy vehicles in collaboration with International Truck Engine Corporation, USA. Force Motors will introduce such vehicles in collaboration with MAN of Germany. Daimler Benz has announced plans to produce heavy vehicles near Chennai in collaboration with the Hero group. Volvo Eicher will be another major venture; through the last decade the Swedish giant Volvo has earned a reputation for its high quality heavy duty vehicles. The Japanese Nissan has signed an agreement with Ashok Leyland for the production of LCVs. Besides there are also other small companies that plan to set up facilities for assembly of vehicles from parts procured from various manufacturers of engines, axles...
Anticipating such heavy competition, both Tata Motors and Ashok Leyland have been stepping up investments in engineering, research and development facilities. One is bound to witness more sophisticated, fully built passenger and goods vehicles.
IE would like to suggest that the vehicle manufacturers to set up at least one driving school in each district in a collaborative effort. We witness humongous loss of lives in road accidents quite unrelated to the vehicle population. A major contributor to this is the motor vehicle. Ashok Leyland and Maruti have set up a few of driving schools but these are few and far between. As part of their CSR initiative, the prosperous auto sector would do well to set up such training centres all over the country. Simultaneously they should also lobby for a minimum educational qualification for one to qualify as a vehicle driver. With widespread corruption, a mechanic assisting a driver graduates rapidly into the position of a driver and utilises the pervasive corruption to get a driving licence with ease. With the present stress on skills development, auto industry should collectively work together to improve the skills of driving as a top priority.
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