A SEMINAR REPORT ON

AUTOMOBILE SECTOR OF INDIA

Submitted in partial fulfillment for the Award of degree of

Master of Busines Administration

2011-2012
Submitted to:Ms. Swati Godha Mrs.Karishama Sharma Faculty, DMS PGC Submitted by:Mohammed Saleem MBA II Semester

Poornima School of Management ISI-2-6, Ricco industrial Area, Sitapura, Jiapur

PREFACE
A full time professional course like two year Management Program demand both conceptual and practical theory of knowledge.Hence there is a provision of project study work.

During this project the student learn through his/her own experience, real situation of corporate world, and its protocols and to put his/her theoretical knowledge in to practice.This experience is very valuable for the student and plays a leading as well as vital role in the professional life of management student.

Implementing and learning the concepts of Marketing in a work place provides an opportunity to learn practically.I got a chance to apply our theoretical knowledge.

Acknowledgement

I would like to express my gratitude to all those who gave me the possibility to complete this contemporary issue report. I want to thank the Department of Management Studies ( Poornima School of Management) for giving me permission to commence this report in the first instance, to do the necessary research work and to use Department data. I further thank Shri R.K.Agarwal, (Advisor, PGC) who gave and confirmed this permission and encouraged me to go ahead with my report. I am thankful to Mr. Shashikant Singhi (Director) for their stimulating support.

I want to thank them for all their help, interest and valuable hints. I special thanks to Ms. Swati Godha & Mrs. Karishma Sharma at the final version of report for English style and grammer, correcting both and offering suggestions for improvement, and for giving me chance to get such an experience.

MOHAMMED SALEEM

EXECUTIVE SUMMARY
The Indian Automobile Industry is manufacturing over 11 million vehicles and exporting about 1.5 million every year. The dominant products of the industry are two wheelers with a market share of over 75% and passenger cars with a market share of about 16%. Commercial vehicles and three wheelers share about 9% of the market between them. About 91% of the vehicles sold are used by households and only about 9% for commercial purposes. The industry has attained a turnover of more than USD 35 billion and provides direct and indirect employment to over 13 million people. The supply chain of this industry in India is very similar to the supply chain of the automotive industry in Europe and America. This may present its own set of opportunities and threats. The orders of the industry arise from the bottom of the supply chain i. e., from the consumers and goes through the automakers and climbs up until the third tier suppliers. However the products, as channelled in every traditional automotive industry, flow from the top of the supply chain to reach the consumers. Interestingly, the level of trade exports in this sector in India has been medium and imports have been low. However, this is rapidly changing and both exports and imports are increasing. The demand determinants of the industry are factors like affordability, product innovation, infrastructure and price of fuel. Also, the basis of competition is the sector is high and increasing and the life cycle stage is growth. With a rapidly growing middle class, all the advantages of this sector in India are yet to be leveraged. Note that, with a high cost of developing production facilities, limited accessibility to new technology and soaring competition, the barriers to enter the Indian Automotive sector are high and these barriers are study. On the other hand, India has a well-developed tax structure. The power to levy taxes and duties is distributed among the three tiers of Government. The cost structure of the industry is fairly traditional, but the profitability of motor vehicle manufacturers has been rising over the past five years. Major players, like Tata Motors and Maruti Suzuki have material cost of about 80% but are recording profits after tax of about 6% to 11%. The level of technology change in the Motor vehicle Industry has been high but, the rate of change in technology has been medium. Investment in the technology by the producers has been high. System-suppliers of integrated components and sub-systems have become the order of the day. However, further investment in new technologies will help the industry be more competitive. Over the past few years, the industry has been volatile. Currently, Indias increasing per capita disposable income which is expected to rise by 106% by 2015 and growth in exports is playing a major role in the rise and competitiveness of the industry.

Tata Motors is leading the commercial vehicle segment with a market share of about 64%. Maruti Suzuki is leading the passenger vehicle segment with a market share of46%. Hyundai Motor India and Mahindra and Mahindra are focusing expanding their footprint in the overseas market. Hero Honda Motors is occupying over 41% and sharing26% of the two wheeler market in India with Bajaj Auto. Bajaj Auto in itself is occupying about 58% of the three wheeler market. Consumers are very important of the survival of the Motor Vehicle manufacturing industry. In 2008-09, customer sentiment dropped, which burned on the augmentation in demand of cars. Steel is the major input used by manufacturers and the rise in price of steel is putting a cost pressure on manufacturers and cost is getting transferred to the end consumer. The price of oil and petrol affect the driving habits of consumers and the type of car they buy. The key to success in the industry is to improve labour productivity, labour flexibility, and capital efficiency. Having quality manpower, infrastructure improvements, and raw material availability also play a major role. Access to latest and most efficient technology and techniques will bring competitive advantage to the major players. Utilising manufacturing plants to optimum level and understanding implications from the government policies are the essentials in the Automotive Industry of India. Both, Industry and Indian Government are obligated to intervene the Indian Automotive industry. The Indian government should facilitate infrastructure creation, create favourable and predictable business environment, attract investment and promote research and development. The role of Industry will primarily be in designing and manufacturing products of world-class quality establishing cost competitiveness and improving productivity in labour and in capital. With a combined effort, the Indian Automotive industry will emerge as the destination of choice in the world for design and manufacturing of automobiles.

S.No.

Content

Pg.No.

1 2 3 4 5 6 7 8 9

Introduction Objective and scope Research methodology Hostory Findings,data & analysis Conclusion Recommendations Limitations Bibliography

1 3 7

13 15 16 21 24

INTRODUCTION TO AUTOMOBILE SECTOR

The Indian automobile market is gearing towards having international standards to meet the needs of the global automobile giants and become a global hub. Players are strategizing to consolidate their position and gradually increase market penetration with the launch of new models, targeting different segments. Since the sector is price driven, huge investment is envisaged to remain competitive through cost advantage, for which indigenization is highly important. The product becomes dearer if it is manufactured using imported parts. IT in the automobile sector plays a crucial role.. Some players are working towards development of efficient production systems that control the entire production process with high precision and accuracy. Such systems working The automobile industry, one of the core sectors, has undergone metamorphosis with the advent of new business and manufacturing practices in the light of liberalization and globalization. The sector seems to be optimistic of posting strong sales in the next couple of years in view of a reasonable surge in demand. on real time operating systems allow efficient control of different parts of manufacturing and production. It is essential to leverage skills of different engineering disciplines to build these kinds of integrated systems. Analysts foresee high scope in the electronics for auto sector and expect the retailing of such electronics products to contribute a major chunk of future revenues. The government is increasing the research and development (R&D) fund for the automobile industry over and above the Rs 1400 crores earmarked for eight years. All laboratories in the country researching on automobile technology, such as BHEL which is developing cell technology as alternative fuel, have also been brought together through the setting up of a national R & D working group. The group is working out a plan to link all major laboratories across the country to give a thrust to automotive research. Indian automobile sector being a driver of product and process technologies, and has become a excellent manufacturing base for global players, because of its high machine tool capabilities, extremely capable component industry, most of the raw material locally produced, low cost manufacturing base and highly skilled manpower Not only a large number of world manufacturers have set up production bases in India but also a large number of foreign companies are collaborating with the auto component suppliers and vendors. Indian Automobile Components Industry has been making rapid strides towards achievement of world-class Quality Systems by imbibing ISO 9000/QS 9000 Quality Systems whereby the Indian Automotive industry has become more competitive in the export market due to its technological and quality advances, so

much so that in quality conscious markets such as Europe and America, it is emerging as a major player, based on its performance. India today exports: Engine and engine parts, electrical parts, drive transmission & steering pats, suspension & braking parts among others. The sector is striding inroads into the rural middle class after its inroads into the urban markets and rural rich. It is trying to bring in varying products to suit requirements of different class segments of customers. States like Rajasthan, Uttar Pradesh, Maharashtra, Andhra Pradesh and West Bengal are vying to woo global players with proposals including heavy tax exemptions and to create a more investor friendly regime, each state is proposing to provide all regulatory clearances at express speed. The Government should promote Research & Development in automotive industry by strengthening the efforts of industry in this direction by providing suitable fiscal and financial incentives. The current policy allows Weighted Tax Deduction under I.T. Act, 1961 for sponsored research and in-house R&D expenditure. This will be improved further for research and development activities of vehicle and component manufacturers from the current level of 12.5%. In addition, Vehicle manufacturers will also be considered for a rebate on the applicable excise duty for every 1% of the gross turnover of the company expended during the year on Research and Development carried either in-house under a distinct dedicated entity, faculty or division within the company assessed as competent and qualified for the purpose or in any other R&D institution in the country. This would include R & D leading to adoption of low emission technologies and energy saving devices. Government will encourage setting up of independent auto design firms by providing them tax breaks, concessional duty on plant/equipment imports and granting automatic approval. Allocations to automotive fund created for R&D of automotive industry shall be increased and the scope of activities covered under it enlarged.

OBJECTIVE & SCOPE

VISION
To establish a globally competitive automotive industry in India and to double its contribution to the economy by 2010.

POLICY OBJECTIVE
This policy aims to promote integrated, phased, enduring and self-sustained growth of the Indian automotive industry. The objectives are to:

Exalt the sector as a lever of industrial growth and employment and to achieve a high degree of value addition in the country; Promote a globally competitive automotive industry and emerge as a global source for auto components; Establish an international hub for manufacturing small, affordable passenger cars and a key center for manufacturing Tractors and Twowheelers in the world; Ensure a balanced transition to open trade at a minimal risk to the Indian economy and local industry; Conduce incessant modernization of the industry and facilitate indigenous design, research and development; Steer India's software industry into automotive technology; Assist development of vehicles propelled by alternate energy sources; Development of domestic safety and environmental standards at par with international standards.

SIAM welcomed the announcement of Auto Policy, and feels that the policy would serve as a reference document for all stake holders and other interested parties. The Auto Policy has spelt out the direction of growth for the auto sector in India and addresses most concerns of the automobile sector, includingPromotion of R&D in the automotive sector to ensure continuous technology

up gradation, building better designing capacities to remain competitive; Impetus to Alternative Fuel Vehicles through appropriate long term fiscal structure to facilitate their acceptance; Emphasis on low emission fuel auto technologies and availability of appropriate auto fuels and encouragement to construction of safer bus/truck bodies - subjecting unorganized sector also to 16% excise duty on body building activity as in case of OEMs

The policy has rightly recognized the need for modernizing the parch profile of vehicles to arrest degradation of air quality. The terminal life policy for commercial vehicles and move toward international taxing policies linked to age of vehicles, are steps in the right direction. SIAM has always been advocating encouragement of value addition within the country against mere trading activity. However, this aspect has not been fully addressed. The Auto Policy allows automatic approval for foreign equity investment up to 100% in the automotive sector and does not lay down any minimum investment criteria. The recommendation of promoting passenger cars of length up to 3.8 meters through excise benefits is not in line with the free market concept and may lead to market distortion. However, with the Auto Policy in place, the automotive industry would get further fillip to become vibrant and globally competitive. The industry would get the required support from other Ministries and departments of Government of India in achieving the goals laid down in the auto policy

REASEARCH METHDOLOGY
De-licensing in 1991 has put the Indian automobile industry on a new growth track, attracting foreign auto giants to set up their production facilities in the country to take advantage of various benefits it offers. This took the Indian automobile production from 5.3 Million Units in 2001-02 to 10.8 Million Units in 2007-08. The other reasons attracting global auto manufacturers to India are the countrys large middle class population, growing earning power, strong technological capability and availability of trained manpower at competitive prices. These are the major findings of our new report, " Indian Automobile Sector - A Booming Market In 2006-07, the Indian automotive industry provided direct employment to more than 300,000 people, exported auto component worth around US$ 2.87 Billion, and contributed 5% to the GDP. Due to this large contribution of the industry in the national economy, the Indian government lifted the requirement of forging joint ventures for foreign companies, which attracted global to the Indian market to establish their plants, resulting in heightened automobile production. The Indian automobile market is currently dominated by two-wheeler segment but in future, the demand for passenger cars and commercial vehicles will increase with industrial development. Also, as India has low vehicle presence (with passenger car stock of only around 11 per 1,000 population in 2008), it possesses substantial potential for growth.

Key Research Highlights

- Passenger car production in India is projected to cross three million units in 2014-15. - Sales of passenger cars during 2008-09 to 2015-16 are expected to grow at a CAGR of around 10%. - Export of passenger cars is anticipated to rise more than the domestic sales during 2008-09 to 2015-16. - Motorcycle sales will perform positively in future, exceeding 10 Million units by 2012-13. - Value of auto component exports is likely to attain a double digit figure in 201213. - Turnover of the Indian auto component industry is forecasted to surpass US$ 50 Billion in 2014-15.

Key Issues & Facts Analyzed in the Report - Study of the Indian automobile industry structure. - Analysis of performance of industry sub-segments and their future outlook. - Understanding the Indian auto component market and its growth aspects. - Evaluation of factors fuelling growth in the Indian automobile market. - Discussion of the forces countering the market growth. - Identification of future prospects for the Indian automobile industry. Research Methodology Used in the Report Information Sources
The information has been sourced from various authentic and reliable sources like books, newspapers, trade journals and white papers, industry portals, government agencies, trade associations, monitoring industry news and developments, and through access to more than 3000 paid databases.

Analysis Method
RNCOS industry forecast and analysis is based on various macro- and microeconomic factors, sector and industry specific databases, and our in-house statistical and analytical model. This model takes into account the past and current trends in an economy, and more specifically in an industry, to bring out an objective market analysis. Our industry experts study the relationship between various industry and economic variables to ensure the required accuracy and desired check on the quality of data and information given in the report.

FINDINGS & DATA ANALYSIS

delivers information, analysis and data for the world's automotive industry, including detailed coverage and analysis of the industry's leading markets and companies. Our reports features current and forecast estimates on the size of the industry (sales, establishments, employment) for the largest world countries.

Automotive Market Reports provides business information to various sources, it caters to C-level, managers, executives, research specialist, etc. It covers on a comprehensive scale company profiles, demand forecast, review, and other related research reports confined to automotive sector.

Our exclusive network of industry specialists ensures an unrivalled resource to bring you the very best in Automotive industry whether it be via our highly respected off-the-shelf research reports or our cost-effective customized client research.

The automotive industry is becoming more and more competitive, characterised by increasing globalisation, industry consolidation, diminishing margins and excessive capacity. In such an environment, the need to make every investment decision a prudent one is paramount. Similarly there is a real need to fully understand every step of the value chain if the full benefit of investment is to be felt.

For instance let have a look at Indian Automobile Sales Trend -

History of Automobile Industry

The automobile as we know it was not invented in a single day by a single inventor. The history of the automobile reflects an evolution that took place worldwide. It is estimated that over 100,000 patents created the modern automobile. However, we can point to the many firsts that occurred along the way. Starting with the first theoretical plans for a motor vehicle that had been drawn up by both Leonardo Day Vinci and Isaac Newton. In 1769, the very first self-propelled road vehicle was a military tractor invented by French engineer and mechanic, Nicolas Joseph Cognate (1725 - 1804). Cognate used a steam engine to power his vehicle, built under his instructions at the Paris Arsenal by mechanic Brazen. It was used by the French Army to haul artillery at a whopping speed of 2 1/2 mph on only three wheels. The vehicle had to stop every ten to fifteen minutes to build up steam power. The steam engine and boiler were separate from the rest of the vehicle and placed in the front (see engraving above). The following year (1770), Cognate built a steam-powered tricycle that carried four passengers. In 1771, Cognates drove one of his road vehicles into a stone wall, making Cognate the first person to get into a motor vehicle accident. This was the beginning of bad luck for the inventor. After one of Cognates patrons died and the other was exiled, the money for Cognates road vehicle experiments ended. Steam engines powered cars by burning fuel that heated water in a boiler, creating steam that expanded and pushed pistons that turned the crankshaft, which then turned the wheels. During the early history of self-propelled vehicles both road and railroad vehicles were being developed with steam engines. (Cognate also designed two steam locomotives with engines that never worked well.) Steam engines added so much weight to a vehicle that they proved a poor design for road vehicles; however, steam engines were very successfully used in locomotives. Historians, who accept that early steam-powered road vehicles were automobiles, feel that Nicolas Cognate was the inventor of the first automobile. The automotive industry has certain trends it has to follow, just like fashion designers and musical composers. In times of recession and decreasing sales there is less room to take chances and manufacturers are prone to follow the common pattern as a safer bet rather than releasing a controversial product or idea that might or might not be successful. However throughout the automotive industry's history, great innovators have "boldly gone where no man has gone before" to set new trends which have dynamically altered the industry as a whole.

1880's & early 1900's

About hundred years ago -The first motor car was imported -Import duty on vehicles was introduced. -Indian Great Royal Road (Predecessor of the Grand Trunk Road) was conceived. First car brought in India by a princely ruler in 1898. Simpson & Co established in 1840. -They were the first to build a steam car and a steam bus, to attempt motor car manufacture, to build and operate petrol driven passenger service and to import American Chassis in India. Railways first came to India in 1850's In 1865 Col. Rooks Crompton introduced public transport wagons strapped to and pulled by imported steam road rollers called streamers. The maximum speed of these buses was 33 kms/hr. From 1888 Motors Spirit attracted a substantial import duty. In 1919 at the end of the war, a large number of military vehicles came on the roads. In 1928 assembly of CKD Trucks and Cars was started by the wholly owned Indian subsidiary of American General Motors in Bombay and in 1930-31 by Canadian Ford Motors in Madras, Bombay and Calcutta In 1935 the proposals of Sir M Vishvesvaraya to set up an Automobile Industry were disallowed. 1942 Hindustan Motors Ltd incorporated and their first vehicle was made in 1950. In 1944 Premier Automobiles Ltd incorporated and in 1947 their first vehicle was produced. In 1947 the Government of Bombay accepted a scheme of Bajaj Auto to replace the cycle rickshaw by the auto and assembly started in a couple of years under a license from Piaggio. Manufacturing Programme for the auto and scooter was submitted in 1953 to the Tariff Commission and approved by the Government in 1959.

In 1953 the Government decreed that only firms having a manufacturing programme should be allowed to operate and mere assemblers of imported CKD units be asked to terminate operations in three years. Only seven firms namely Hindustan Motors Limited, Automobile Products of India Limited, Ashok Leyland Limited, Standard Motors Products of India Limited., Premier Automobiles Limited, Mahindra & Mahindra and TELCO received approval. M&M was manufacturing jeeps. Few more companies came up later. Government continued with its protectionism policies towards the industry. In 1956, Bajaj Tempo Ltd entered the Indian market with a programme of manufacturing Commercial Vehicles, and Simpson for making engines.

1960's s

In sixties 2 and 3 Wheeler segment established a foothold in the industry. Escorts and Ideal Jawa entered the field in the beginning of sixties. Association of Indian Automobile Manufacturers formally established in 1960. Standard Motors Products of India Ltd. moved over to the manufacture of Light Commercial Vehicles in 1965.

1970's

Major factors affecting the industry's structure were the implementation of MRTP Act, FERA and Oil Shocks of 1973 and 1979. During this decade there was not much change in the four wheeler industry except the entry of Sipani Automobiles in the small car market. Oil Shock of 1973 quickened the process of dieselization of the Commercial Vehicle segment.

Three other companies, namely, Kirloskar Ghatge Patil Auto Ltd, Indian Automotive Ltd and Sen & Pandit Engg products Ltd entered the market during 1971-75. They ultimately withdrew in early eighties. During the seventies the economy was in bad shape. This and many specific problems affected the Automobile Industry adversely.

1980's - The period of liberalized policy and intense competition

First phase of liberalisation announced. Unfair practices of monopoly, oligopoly etc slowly disappeared. Liberalisation of the protectionism policies of the Government. Lots of new Foreign Collaborations came up in the eighties. Many companies went in for Japanese collaborations. Hindustan Motors Ltd. in collaboration with Isuzu of Japan introduced the Isuzu truck in early eighties. ALL entered into collaboration with Leyland Vehicles Ltd. s development of integral buses and with Hino Motors of Japan for the manufacture of W Series of Engines. TELCO after the expiry of its contract with Daimler Benz, indigenously improved the same Benz model and introduced it in the market. Government approved four new firms in the LCV market, namely, DCM, Eicher, Swaraj and Allwyn. They had collaborations with Japanese companies namely, Toyota, Mitsubishi, Mazda and Nissan respectively. In 1983 Maruti Udyog Ltd was started in collaboration with Suzuki, a Japanese firm. Other three Car manufacturers namely, Hindustan Motors Ltd., Premier Automobiles Ltd., Standard Motor Production of India Ltd. also introduced new models in the market. At the time there were five Passenger Car manufacturers in India Maruti Udyog Ltd., Hindustan Motors Ltd., Premier Automobiles Ltd., Standard Motor Production of India Ltd. and Sipani Automobiles. Ashok Leyland Ltd. and TELCO were strong players in the Commercial Vehicles sector.

In 1983-84 Bajaj Tempo Ltd. entered into a collaboration with DaimlerBenz of Germany for manufacture of LCVs. Important policy changes like relaxation in MRTP and FERA, delicensing of some ancillary products, broad banding of the products, modifications in licensing policy, concessions to private sector (both Indian and Foreign) and foreign collaboration policy etc. resulted in higher growth / better performance of the industry than in the earlier decades.

1990's

Mass Emission Norms were introduced for in 1991 for Petrol Vehicles and in 1992 for Diesel Vehicles. In 1991 new Industrial Policy was announced. It was the death of the License Raj and the Automobile Industry was allowed to expand. Further tightening of Emission norms was done in 1996. In 1997 National Highway Policy has been announced which will have a positive impact on the Automobile Industry. The Indian Automobile market in general and Passenger Cars in particular have witnessed liberalisation. Many multinationals like Daewoo, Peugeot, General Motors, Mercedes-Benz, Honda, Hyundai, Toyota, Volvo and Fiat entered the market. Various companies are coming up with state-of-art models of vehicles. TELCO has diversified in Passenger Car segment with Indica. Despite the adverse trend in the growth of the industry, it is resolutely trying to meet the challenges. Various issues of critical importance to the industry are being dealt with forcefully.

Role of Government in Automobile Industry

The government is making efforts to overcome the constraints at their research centers for automobile industry. India can also learn from countries like Japan that are already using these technologies for a wide number of applications. The Indian auto industry should launch programmes for market development and a wider acceptance of alternative energy-driven vehicles in India. It should also work in tandem with the government to make India a world leader in this area. Indian automobile industry is also consistently trying to meet the emerging challenges of environmental pollution and better safety standard. According to a study, automobile exhaust contributes more than 60% of the atmospheric pollution in metropolitan cities, with the growing number of vehicles, the pollution in the cities is continuously increasing. Government initiated controls by notifying emission standard from the year 1992 under which were furthers tightened in April 1996 under the Motor Vehicles Act. Euro-I emission norms have already been made applicable throughout the country and Indian is poised to induct Euro-II norms across the country by April 2005. Form that date 7 metropolitan cities are going to switch over to EuroIII norms. To meet this emerging challenges of newer emission norms Indian automobile industry has already braced itself up with new investment and fresh technological induction. With the growing number of vehicles, the pollution in the cities is ever increasing. Government initiated controls by notifying emission standards from the year 1992 which were further tightened under the Motor Vehicle Act. For meeting these norms, unleaded petrol was also introduced in metropolitan cities from 1995, which enabled fitments of catalytic convertors on new petrol driven vehicles. The norms are being further tightened from April,2000 when Indias stage one norm equivalent to Euro-I will become effective. For 2-wheelers, India has announced one of the tightest norms in the entire world. In the national capital territory region of Delhi, Indias stage 2 norms equivalent to Euro-II norms, will be effective from April, 2000, as per the order of Honble Supreme Court. This would apply to passenger cars. The government seems most keen to hand over a huge replacement market on a platter to the automobile industry without ensuring that manufacturers take responsibility of the emission performance of the vehicles they produce for its useful life. In fact the most important action point that was recorded after the ministerial

consultation was that manufacturers would have to give emissions warranty for two- wheelers from But ultimately, the government could not muster enough courage to push the mighty automobile industry and enforce it. Government will encourage and assist establishment of specialized training institutes for the automobile sector through the active association of interested automobile industries. These institutes will be set up in Bidadi Industrial area and Dharwad Growth center. The Institute will be managed by the participating automobile industries and will train skilled category of auto workers, in specified skill areas such as painting, welding, auto mechanical, etc. It also is making an effort abe to enlist the support of multilateral aid institutions to provide part of the funding for this project, which promises tremendous environment-improvement benefits for the vehicle, which create pollution. The policy of broadbanding capacities in the eighties led to increased utilization of capacity for four-wheelers in the industry. The liberal policy on foreign participation through technical and financial collaboration in early eighties led to substantial product upgradation and introduction of new models. But it was alleged that the policy was discriminatory in favor of MUL, while others like Telco, PAL, HM were denied permission to produce cars in collaboration with Japanese companies. The GOI controls the car sector by way of framing policies on depreciation norms, import duty on cars and parts used in it, petrol prices and import duty of steel. During the era of socialist inspired controls, the government protected the car industry from new entrants by making effective use of licenses. However, after liberalization and with the consequent opening up of the auto sector in 1992-93, the license raj ceased to exist . The perception of a car as a luxury good lead to heavy excise duty on cars. The excise duty doubled from 25% in FY87 to 55% in FY91. Till 1987, the GOI followed a discriminatory policy so as to charge lower duty on fuel efficient car with engine capacity of less than 1000cc. This helped MUL to price its car at a lower price in comparison to others. But with lobbying from PAL and HM government withdrew the provision in 1987. But with the onset of the liberalization process in the early nineties, the government has continually rationalized the excise duty

regime. Presently, there is a duty of 40% (16% + 24%) on motor vehicles, designed for transport of not more than six persons (excluding the driver). On vehicles designed for transport of more than six persons, but not more than 12 persons, the duty is 32% (16% + 16%). Over and above the excise duty, cess by the Central Government, states are now charging a uniform sales tax of 12%. This came in being after the 15th of May 2000. Earlier, states used to charge sales tax varying from 3 to 14%. But MUL vehicles receive favorable treatment in terms of sales tax as well. In line with its treatment for luxury items import duties for car have been maintained high. In the 80's, import duties varied between 150 to 200% based on the engine capacity of a car. The import duty on cars and components has come down in the last few years in line with general reduction in import tariffs. In the FY98 budget, the import duty on cars has also been further brought down from 50% to 40% ad valorem. Substantial reduction in import duty has been extended in the budget FY98 for import of certain items which would help the industry to reduce the emission level of vehicles. The import duty on catalytic converters and parts thereof has been reduced from 25% to 5%. The duty on CNG kits and parts thereof have been reduced from 10% to 5%.

LIMITATIONS

FDI up to 100 percent has been permitted under the automatic route to this sector, which has led to a turnover of US$12 billion in the Indian auto industry and US$3 billion in the auto parts industry The manufacturing of automobiles and automobile components is permitted with 100 percent FDI under the automatic route The automobile industry in India does not belong to the licensed agreement Imports of components are allowed without any restrictions and also encouraged Coal Unlike China, India has allowed FDI inflows in its coal industries. Following are some of the vital points for overseas investment in the coal sector. The captive coal mining unit allows private sector participation All the sales of coal mining are made through Coal India Ltd. FDI inflows are permitted in the coal production unit in India depending on outputs Foreign investors holding less than a 50 percent share in coal production units in India can invest in coal mining or other related activities, and this does not require approval from the Foreign Investment Promotion Board. This has been systematized by the Indian government in order to put certain restrictions on the power of the foreign investors while investing in the Indian market FDI of higher value are sometimes permitted in coal production depending on the end-product. If the output of coal production unit links to any significant sector or activities, then FDI of higher value is not permitted, which is just the opposite if the end-product is not so serious FDI inflows up to 100 percent are permitted in the coal and lignite mining for captive consumption in the power generation sector, and for captive consumption of the same in steel and cement sector, FDI is allowed up to 74 percent

FDI of up to 10 percent is allowed in the coal processing unit which includes coal washing and sizing

SEGMENTATION OF AUTOMOBILE INDUSTRY

2 WHEELER

PASSENGER VEHICLE

COMMERCIAL VEHICLE

IMPACT ON GDP

Directly and indirectly it employs more than 10 million people.

The market value of Automobile Industry is more than US$8 billion. and Contribution in Indian GDP is near about 4% and will be double by 2016.

The automobile industry in India grew at rate of 11.5 % over the past five years, but growth rate in last year 2008-09 was only 0.7%. FDI inflows in Automobile Industry 2008-09 was Rs.5,212 Cr an increase of 47.25% compare to 2007-08. In 2009, India emerged as Asia's fourth largest exporter of automobiles, behind Japan, South Korea and Thailand.

SWOT OF AUTOMOBILE INDUSTRY

STRENGTHS

Large domestic market Sustainable labor cost advantage Government incentives for manufacturing plants Strong engineering skills in design Able to achieve significant gains in productivity

WEAKNESSES

Low labor productivity High interest costs and high overheads Rising cost of production Low investment in Research and Development

OPPORTUNITIES

Commercial vehicles Heavy thrust on mining and construction activity Increase in the income level Cut in excise duties Rising rural demand

THREATS

Rising interest rates Cut throat competition Lack of technology for Indian Companies

FUTURE PROSPECT OF INDIAN AUTOMOBILE SECTOR

Automobile industry expert predicts that by 2050 every sixth car in the world will be for Indians. By 2010 India will take over Germany in sales volumes and Japan by 2012 The Indian automobile component industry is estimated to triple from USD 63 billion to USD 190 billion within a span of six years by 2012. Industry analysts predict this industry to touch USD 13000 million mark by 2010, a cumulative growth of 9.5% annually. It is said that for every Re 1 spent, the auto sector returns Rs. 2.24 to the Indian economy.

CONCLUSION
Industry across countries will have to meet challenges of newer technologies, alternative fuels and affordability of automobiles by people at large through constructive cooperation. The earlier we are able to achieve this the better it would be for the world performance.