Automobile Scenario of India Essay

The Automotive industry in India is one of the largest in the world and one of the fastest growing globally. India manufactures over 17. 5 million vehicles (including 2 wheeled and 4 wheeled) and exports about 2. 33 million every year. It is the world’s second largest manufacturer of motorcycles, with annual sales exceeding 8. 5 million in 2009. India’s passenger car and commercial vehicle manufacturing industry is the seventh largest in the world, with an annual production of more than 3. 7 million units in 2010. According to recent reports, India is set to overtake Brazil to become the sixth largest passenger vehicle producer in the world, growing 16-18 per cent to sell around three million units in the course of 2011-12 In 2009, India emerged as Asia’s fourth largest exporter of passenger cars, behind Japan, South Korea, and Thailand. As of 2010, India is home to 40 million passenger vehicles and more than 3. 7 million automotive vehicles were produced in India in 2010 (an increase of 33. 9%), making the country the second fastest growing automobile market in the world. According to the Society of Indian Automobile Manufacturers, annual car sales are projected to increase up to 5 million vehicles by 2015 and more than 9 million by 2020. By 2050, the country is expected to top the world in car volumes with approximately 611 million vehicles on the nation’s roads. 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 go through the automakers and climbs up until the third tier suppliers. However the products, as channeled 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 in the sector is high and increasing, and its 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. 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, India’s 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 of 46%. [18] Hyundai Motor India and Mahindra and Mahindra are focusing expanding their footprint in the overseas market. Hero Honda Motors is occupying over 41% and sharing 26%[18] 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. History The first car ran on India’s roads in 1897. Until the 1930s, cars were imported directly, but in very small numbers. Embryonic automotive industry emerged in India in the 1940s. Mahindra & Mahindra was established by two brothers as a trading company in 1945, and began assembly of Jeep CJ-3A utility vehicles under license from Willys The Company soon branched out into the manufacture of light commercial vehicles (LCVs) and agricultural tractors. Following the independence, in 1947, the Government of India and the private sector launched efforts to create an automotive component manufacturing industry to supply to the automobile industry. However, the growth was relatively slow in the 1950s and 1960s due to nationalisation and the license raj which hampered the Indian private sector. After 1970, the automotive industry started to grow, but the growth was mainly driven by tractors, commercial vehicles and scooters. Cars were still a major luxury. Japanese manufacturers entered the Indian market ultimately leading to the establishment of Maruti Udyog. A number of foreign firms initiated joint ventures with Indian companies. In the 1980s, a number of Japanese manufacturers launched joint-ventures for building motorcycles and light commercial-vehicles. It was at this time that the Indian government chose Suzuki for its joint-venture to manufacture small cars. Following the economic liberalisation in 1991 and the gradual weakening of the license raj, a number of Indian and multi-national car companies launched operations. Since then, automotive component and automobile manufacturing growth has accelerated to meet domestic and export demands. [21] Following economic liberalization in India in 1991, the Indian automotive industry has demonstrated sustained growth as a result of increased competitiveness and relaxed restrictions. Several Indian automobile manufacturers such as Tata Motors, Maruti Suzuki and Mahindra and Mahindra, expanded their domestic and international operations. India’s robust economic growth led to the further expansion of its domestic automobile market which has attracted significant India-specific investment by multinational automobile manufacturers. [22] In February 2009, monthly sales of passenger cars in India exceeded 100,000 units[23] and has since grown rapidly to a record monthly high of 182,992 units in October 2009. [24] Objectives of study: Since the Auto Component industry is growing substantially, it is very important to know and identify how the industry is growing and creating its own place in the industrial sector helping the economy to grow. So the objectives of the study are: 1. To understand and analyse the current status of Indian Automobile Industry. 2. To Analyse the trends in the automobile industry in India. 3. To study the growth potential and challenges faced by automobile industry in India. Market and its Growth. The automotive industry of India is categorized into passenger cars, two wheelers, commercial vehicles and three wheelers, with two wheelers dominating the market. More than 75% of the vehicles sold are two wheelers. Nearly 59% of these two wheelers sold were motorcycles and about 12% were scooters. Mopeds occupy a small portion in the two wheeler market however; electric two wheelers are yet to penetrate. The passenger vehicles are further categorized into passenger cars, utility vehicles and multi-purpose vehicles. All sedan, hatchback, station wagon and sports cars fall under passenger cars. Tata Nano, is the world’s cheapest passenger car, manufactured by Tata Motors – a leading automaker of India. Multi-purpose vehicles or people-carriers are similar in shape to a van and are taller than a sedan, hatchback or a station wagon, and are designed for maximum interior room. Utility vehicles are designed for specific tasks. The passenger vehicles manufacturing account for about 15% of the market in India. Commercial vehicles are categorized into heavy, medium and light. They account for about 5% of the market. Three wheelers are categorized into passenger carriers and goods carriers. Three wheelers account for about 4% of the market in India. Domestic Market Share for 2010-11(%)| Passenger Vehicles| 16. 25| Commercial Vehicles| 4. 36| Three Wheelers| 3. 39| Two Wheelers| 76. 00| Source: Society of Indian Automotive Manufacturing (SIAM) GROSS TURNOVER OF THE AUTOMOBILEINDUSTRY IN INDIA| Year| (IN USD MILLION)| 2004-05| 20,896| 2005-06| 27,011| 2006-07| 34,285| 2007-08| 36,612| 2008-09| 38,238| The production of automobiles has greatly increased in the last decade. Automobile Production. Automobile Production Trends (Number of Vehicles)| Category| 2004-05| 2005-06| 2006-07| 2007-08| 2008-09| 2009-10| 2010-11| Passenger Vehicles| 1,209,876| 1,309,300| 1,545,223| 1,777,583| 1,838,593| 2,357,411 | 2,987,296 | Commercial Vehicles| 353,703| 391,083| 519,982| 549,006| 416,870| 567,556 | 752,735 | Three Wheelers| 374,445| 434,423| 556,126| 500,660| 497,020| 619,194 | 799,553 | Two Wheelers| 6,529,829| 7,608,697| 8,466,666| 8,026,681| 8,419,792| 10,512,903 | 13,376,451 | Grand Total| 8,467,853| 9,743,503| 11,087,997| 10,853,930| 11,172,275| 14,057,064 | 17,916,035 | Automobile Sales. Automobile Domestic Sales Trends(Number of Vehicles)| Category| 2004-05| 2005-06| 2006-07| 2007-08| 2008-09| 2009-10| 2010-11| Passenger Vehicles| 1,061,572| 1,143,076| 1,379,979| 1,549,882| 1,552,703| 1,951,333 | 2,520,421 | Commercial Vehicles| 318,430| 351,041| 467,765| 490,494| 384,194| 532,721 | 676,408 | Three Wheelers| 307,862| 359,920| 403,910| 364,781| 349,727| 440,392 | 526,022 | Two Wheelers| 6,209,765| 7,052,391| 7,872,334| 7,249,278| 7,437,619| 9,370,951 | 11,790,305 | Grand Total| 7,897,629| 8,906,428| 10,123,988| 9,654,435| 9,724,243| 12,295,397 | 15,513,156 |. Automobile Exports Automobile Exports Trends(Number of Vehicles)| Category| 2004-05| 2005-06| 2006-07| 2007-08| 2008-09| 2009-10| 2010-11| Passenger Vehicles| 166,402| 175,572| 198,452| 218,401| 335,729| 446,145 | 453,479 | Commercial Vehicles| 29,940| 40,600| 49,537| 58,994| 42,625| 45,009 | 76,297 | Three Wheelers| 66,795| 76,881| 143,896| 141,225| 148,066| 173,214 | 269,967 | Two Wheelers| 366,407| 513,169| 619,644| 819,713| 1,004,174| 1,140,058 | 1,539,590 | Grand Total| 629,544| 806,222| 1,011,529| 1,238,333| 1,530,594| 1,804,426 | 2,339,333 | Supply Chain of Automobile Industry. The supply chain of automotive industry in India is very similar to the supply chain of the automotive industry in Europe and America. The orders of the industry arise from the bottom of the supply chain i. e. , from the consumers and go 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. Automakers in India are the key to the supply chain and are responsible for the products and innovation in the industry. The description and the role of each of the contributors to the supply chain are discussed below. Third Tier Suppliers: These companies provide basic products like rubber, glass, steel, plastic and aluminium to the second tier suppliers. Second Tier Suppliers: These companies design vehicle systems or bodies for First Tier Suppliers and OEMs( Original Equipment Manufacturers). They work on designs provided by the first tier suppliers or OEMs. They also provide engineering resources for detailed designs. Some of their services may include welding, fabrication, shearing, bending etc. First Tier Suppliers: These companies provide major systems directly to assemblers. These companies have global coverage, in order to follow their customers to various locations around the world. They design and innovate in order to provide â€Å"black-box† solutions for the requirements of their customers. Black-box solutions are solutions created by suppliers using their own technology to meet the performance and interface requirements set by assemblers. First tier suppliers are responsible not only for the assembly of parts into complete units like dashboard, breaks-axel-suspension, seats, or cockpit but also for the management of second-tier suppliers. Automakers/Vehicle Manufacturers/Original Equipment Manufacturers (OEMs): After researching consumers’ wants and needs, automakers begin designing models which are tailored to consumers’ demands. The design process normally takes five years. These companies have manufacturing units where engines are manufactured and parts supplied by first tier suppliers and second tier suppliers are assembled. Automakers are the key to the supply chain of the automotive industry. Examples of these companies are Tata Motors, Maruti Suzuki, Toyota, and Honda. Innovation, design capability and branding are the main focus of these companies. Dealers: Once the vehicles are ready they are shipped to the regional branch and from there, to the authorised dealers of the companies. The dealers then sell the vehicles to the end customers. Parts and Accessory: These companies provide products like tires, windshields, and air bags etc. to automakers and dealers or directly to customers. Service Providers: Some of the services to the customers include servicing of vehicles, repairing parts, or financing of vehicles. Many dealers provide these services but, customers can also choose to go to independent service providers. Indian automotive companies †¢Chinkara Motors: Beachster, Hammer, Roadster 1. 8S, Rockster, Jeepster, Sailster †¢Hindustan Motors: Ambassador †¢ICML: Rhino Rx †¢Mahindra: Major, Xylo, Scorpio, Bolero, Thar, Verito, Genio †¢Premier Automobiles Limited: Sigma, RiO †¢San Motors: Storm Tata Motors: Nano, Indica, Indica Vista, Indigo, Indigo Manza, Indigo CS, Sumo, Venture, Safari, Xenon, Aria. Foreign automotive companies in India Vehicles manufactured or assembled in India †¢BMW India: 3 Series, 5 Series, X1. †¢Fiat India (in collaboration with Tata Motors): Grande Punto, Linea. †¢Ford India: Figo, Ikon, Fiesta, Endeavour. †¢General Motors India †¢Chevrolet: Spark, Beat, Aveo U-VA, Aveo, Optra, Cruze, Tavera. †¢Honda Siel: Jazz, City, Civic, Accord. †¢Hyundai Motor India:Santro, i10, i20, Accent, Verna Transform, Sonata Transform. †¢Land Rover:Freelander 2 †¢Maruti Suzuki: 800, Alto, WagonR, Estilo, A-star, Ritz, Swift, Swift DZire, SX4, Omni, Versa, Eeco, Gypsy. †¢Mercedes-Benz India: C-Class, E-Class. †¢Mitsubishi[80] (in collaboration with Hindustan Motors): Lancer, Lancer Cedia, Pajero †¢Nissan Motor India: Micra. †¢Renault India:Fluence †¢Toyota Kirloskar: Etios, Corolla, Innova. †¢Volkswagen Group Sales India: †¢Audi India: A4, A6, Q5. †¢Skoda Auto India: Fabia, Laura, Superb, Yeti. †¢Volkswagen India: Polo, Vento, Jetta, Passat. Opel was present in India until 2006. As of 2011, Opel only provides spare parts and vehicle servicing to existing Opel vehicle owners. Vehicles brought into India as CBUs †¢Aston Martin: Vantage, Rapide, Virage, DB9, DBS, One-77. †¢Audi: A7, A8, S4, S6, S8, Q7, TT, R8, RS5. †¢Bentley: Arnage, Azure, Brooklands, Continental GT, Continental Flying Spur, Mulsanne. †¢BMW: 5 Series GT, 6 Series, 7 Series, X3, X5, X6, X6 M, M3, M5, M6 and Z4. †¢Bugatti: Veyron. †¢Chevrolet: Captiva. †¢Ferrari: California, 458 Italia, 599 GTB Fiorano, FF. †¢Fiat: 500, Bravo. †¢General Motors: Hummer H2, Hummer H3. †¢Honda: Civic Hybrid, CR-V. †¢Hyundai: Santa Fe. †¢Jaguar: XF, XJ, XK. †¢Koenigsegg: CCX, CCXR, Agera. †¢Lamborghini: Gallardo, Murcielago. †¢Land Rover: Discovery 4, Range Rover, Range Rover Sport. †¢Maserat: Quattroporte, GranTurismo, GranCabrio. †¢Maybach: 57 and 62. †¢Mercedes-Benz: CL-Class, GL-Class, M-Class, R-Class, CLS-Class, S-Class, SL-Class, SLK-Class, Viano, G-Class, SLS. †¢Mitsubishi: Montero, Outlander, Evo X. †¢Nissan: Teana, X-Trail, 370Z, GT-R. †¢Porsche: 997, Boxster, Panamera, Cayman, Cayenne, Carrera GT. †¢Rolls Royce: Ghost, Phantom, Phantom Coupe, Phantom Drophead Coupe. †¢Skoda: Yeti, Superb. †¢Suzuki: Grand Vitara, Kizashi. †¢Toyota: Prius, Camry, Fortuner*, Land Cruiser, Land Cruiser Prado. †¢Volkswagen: Beetle, Tiguan, Touareg, Phaeton. †¢Volvo: S60, S80, XC60, XC90. *Toyota Fortuner is imported as a CKD kit from Toyota Motor Thailand Commercial vehicle manufacturers in India Indian brands †¢Force †¢Hindustan Motors †¢Premier †¢Tata †¢AMW †¢Eicher Motors Joint Venture Brands †¢VE Commercial Vehicles Limited – VE Commercial Vehicles limited – A JV between Volvo Groups & Eicher Motors Limited. †¢Ashok Leyland- originally a JV between Ashok Motors and Leyland Motors, now 51% owned by Hinduja Group †¢Mahindra Navistar – a 51:49 JV between Mahindra Group and Navistar International †¢Swaraj Mazda – originally a JV between Punjab Tractors and Mazda, now 53. 5% owned by Sumitomo Group †¢Kamaz Vectra – A JV between Russia’s KaMAZ and the Vectra Group Foreign brands †¢Volvo †¢Tatra. †¢MAN – as a JV with Force Motors, makes MAN Trucks in India †¢Mercedes-Benz sells luxury buses in India †¢Daimler AG – manufactures BharatBenz, a brand of trucks based on the Fuso and the Mercedes Benz truck platforms, which Daimler AG owns †¢Scania †¢Iveco †¢Hino †¢Isuzu †¢Piaggio †¢Caterpillar Inc. Electric car manufacturers in India †¢Ajanta Group †¢Mahindra †¢Hero Electric †¢REVA †¢Tara International †¢Tata Opel was present in India until 2006. As of 2011, Opel only provides spare parts and vehicle servicing to existing Opel vehicle owners.. *Toyota Fortuner is imported as a CKD kit from Toyota Motor Thailand. Market Characteristics Market Size The Indian Automotive Industry after de-licensing in July 1991 has grown at a spectacular rate on an average of 17% for last few years. The industry has attained a turnover of USD 35. 8 billion, (INR 165,000 crores) and an investment of USD 10. 9 billion. The industry has provided direct and indirect employment to 13. 1 million people. Automobile industry is currently contributing about 5% of the total GDP of India. India’s current GDP is about USD 650 billion and is expected to grow to USD 1,390 billion by 2016. The projected size in 2016 of the Indian automotive industry varies between USD 122 billion and UDS 159 billion including USD 35 billion in exports. This translates into a contribution of 10% to 11% towards India’s GDP by 2016, which is more than double the current contribution. Demand Determinants Determinants of demand for this industry include vehicle prices (which are determined largely by wage, material and equipment costs) and exchange rates, preferences, the running cost of a vehicle (mainly determined by the price of petrol), income, interest rates, scrapping rates, and product innovation. Exchange Rate: Movement in the value of Rupee determines the attractiveness of Indian products overseas and the price of import for domestic consumption. Affordability: Movement in income and interest rates determine the affordability of new motor vehicles. Allowing unrestricted Foreign Direct Investment (FDI) led to increase in competition in the domestic market hence, making better vehicles available at affordable prices. Product Innovation is an important determinant as it allows better models to be available each year and also encourages manufacturing of environmental friendly cars. Demographics: It is evident that high population of India has been one of the major reasons for large size of automobile industry in India. Factors that may be augment demand include rising population and an increasing proportion of young persons in the population that will be more inclined to use and replace cars. Also, increase in people with lesser dependency on traditional single family income structure is likely to add value to vehicle demand. Infrastructure: Longer-term determinants of demand include development in Indian’s infrastructure. India’s banking giant State Bank of India and Australia’s Macquarie Group has launched an infrastructure fund to rise up to USD 3 billion for infrastructure improvements. India needs about $500 billion to repair its infrastructure such as ports, roads, and power units. These investments are been made with an aim to generate long-term cash flow from automobile, power, and telecom industries. Price of Petrol: Movement in oil prices also have an impact on demand for large cars in India. During periods of high fuel cost as experienced in 2007 and first –half of 2008, demand for large cars declined in favour of smaller, more fuel efficient vehicles. The changing patterns in customer preferences for smaller more fuel efficient vehicles led to the launch of Tata Motor’s Nano – one of world’s smallest and cheapest cars. Key Competitors Tata Motors:Market Share: Commercial Vehicles 63. 94%, Passenger Vehicles 16. 45%. Tata Motors Limited is India’s largest automobile company, with consolidated revenues of USD 14 billion in 2008-09. It is the leader in commercial vehicles and among the top three in passenger vehicles. Tata Motors has winning products in the compact, midsize car and utility vehicle segments. The company is the world’s fourth largest truck manufacturer, and the world’s second largest bus manufacturer with over 24,000 employees. Since first rolled out in 1954, Tata Motors as has produced and sold over 4 million vehicles in India. Maruti Suzuki India: Market Share: Passenger Vehicles 46. 07% Maruti Suzuki India Limited, a subsidiary of Suzuki Motor Corporation of Japan, is India’s largest passenger car company, accounting for over 45% of the domestic car market. The company offers a complete range of cars from entry level Maruti-800 and Alto, to stylish hatchback Ritz, A star, Swift, Wagon-R, Estillo and sedans DZire, SX4 and Sports Utility vehicle Grand Vitara. Since inception in 1983, Maruti Suzuki India has produced and sold over 10 million vehicles in India and exported over 500,000 units to Europe and other countries. The company’s revenue for the fiscal 2010-2011 stood over Rs 375,224 million and Profits After Tax at over Rs. 22,886 million. Hyundai Motor India:Market Share: Passenger Vehicles 14. 15% Hyundai Motor India Limited is a wholly owned subsidiary of world’s fifth largest automobile company, Hyundai Motor Company, South Korea, and is the largest passenger car exporter. Hyundai Motor presently markets 49 variants of passenger cars across segments. These includes the Santro in the B segment, the i10, the premium hatchback i20 in the B+ segment, the Accent and the Verna in the C segment, the Sonata Transform in the E segment. Mahindra & Mahindra: Market Share: Commercial Vehicles 10. 01%, Passenger Vehicles 6. 50%, Three Wheelers 1. 31% Mahindra & Mahindra is mainly engaged in the Multi Utility Vehicle and Three Wheeler segments directly. The company competes in the Light Commercial Vehicle segment through its joint venture subsidiary Mahindra Navistar Automotives Limited and in the passenger car segment through another joint venture subsidiary Mahindra Renault. In the year 2009, on the domestic sales front, the Company along with its subsidiaries sold a total of 220,213 vehicles (including 44,533 three wheelers, 8,603 Light Commercial Vehicles through Mahindra Navistar Automotives and 13,423 cars through Mahindra Renault), recording a growth of 0. 6% over the previous year. Mahindra & Mahindra is expanding its footprint in the overseas market. In 2009 the Xylo was launched in South Africa. The company formed a new joint venture Mahindra Automotive Australia Pty. Limited, to focus on the Australian Market. Ashok Leyland: Market Share: Commercial Vehicles 16. 47% Against the backdrop of the sharp slump in demand for commercial vehicles, during 2008-09, Ashok Leyland registered sales of 47,118 medium and heavy commercial vehicles (M&HCV), 37. 5% less than in the previous year. This includes 16,049 M&HCV buses and 31,069 M&HCV trucks respectively, 8. 7% and 46. 3% less than in the previous year. Hero Honda Motors: Market Share: Two Wheelers 41. 35% Hero Honda has been the largest two wheeler company in the world for eight consecutive years. The company crossed the 15 million unit milestone over a 25 year span. Hero Honda sold more two wheelers than the second, third and fourth placed two-wheeler companies put together. Bajaj Auto: Market Share: Two Wheelers 26. 70%, Three Wheelers 58. 60% Bajaj Auto is ranked as the world’s fourth largest two and three wheeler manufacturer and the Bajaj brand is well-known across several countries in Latin America, Africa, Middle East, South and South East Asia. Despite falling demand in the motorcycle segment, the company has succeeded in maintaining an operating EBITDA (earnings before interest, taxes, depreciation and amortisation) margin of 13. 6% of net sales and other operating income. From 1. 66 million motorcycles in 2007-2008, the company’s domestic sales fell by 23% to 1. 28 million units in 2008-2009. Key Success Factors 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. Effective cost controls – Close relationship with supplies and goods distribution channels. Establishment of export markets – Growth of export markets Having an extensive distribution/collection network – Goods distribution channels Successful industrial relations policy – Ethical and tactical industrial relations 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. Growth Potential: 1. Increasing demand for vehicles: Increase of disposal income ,easily availability of finance,invreasing consumer awareness and close linkage with global automobile trends. 2. Stable economic policies adopted by successive Governments: The Government of India has continuously made several reforms for the groeth of automobile sector in India. It has lowered the excise duties and have relaxed many policies to boost the local demand . Implemeentation of VAThas helped India to position itself as one of the leading low cost manufacturing sources . 3. Availability of low cost skilled manpower: The cost of quality manpower in India is one of the lowest in the world . Each year the huge number of engineering graduates are produced who provide their skill at comprising salaries . 4. Quality standards: Manufactured in India or â€Å"Made in India† brand is rapidly getting associated with quality. The Indian manufacturer have focussed on quality and most of the leading automobile manufacturer are ISO certified Key Challenges Faced by Indian Automobile Industry Indian auto industry is one of the most promising and growing auto industries across the world. But at this juncture the Indian auto industry is facing various challenges catering to the growing domestic market. Recently, SIAM (Society of Indian Automobile Manufacturers) organized an Annual Convention in association with the Ministry of Heavy Industries and Public Enterprises to discuss the current scenario of the auto industry as well as to define the key challenges faced by the industry. The meeting focused to pave a way to transform challenges into business opportunities and boost the status of automotive industry in India. Some of the key challenges discussed faced by auto industry are fuel technology and nurturing talented manpower. These challenges are explained below in detail: Fuel Technology: Technology is significant and needed to ignite the growth of auto industry. Whether it’s a two-wheeler or a car, technology drives the growth. The challenge of alternative fuel technology ensures a brighter vision of the auto industry in the country. The increasing environmental pollution has become a concern for manufacturers and all associated with the industry. All of them are struggling hard to come up with a holistic and integrated approach to reduce carbon dioxide emission. Some of the initiatives to reduce the level of automotive emission include introduction of fuel-efficient cars, obligatory periodic maintenance, and inspection of automotives, designing automotives with recyclable materials, use of alternative fuels like CNG, LPG, biodiesel, and introduction of electric and hybrid cars. Car manufacturer like Maruti Suzuki has already introduced the new concept of using recyclable substance for car production in its dazzling car Maruti Suzuki A-Star. After the production of Maruti Suzuki A-Star, the company thrives to apply the same concept in all its future car models. In addition, it is believed that the Bharat IV Emission Norms are stringent and are to become mandatory in the next couple of years. The growing industry is hunting for more advanced ways and measures to meet the stringent norms. Some of the cars and other automotives may even be phased out during that period. Nurturing Talented Manpower: Manpower and human resources has always been a key growth driver in any industry including the automobile industry. Though India has a vast pool of talented and skilled professionals, the country needs initiatives and support to treasure these resources to excel in all arenas of the industries. Automobile industry is no exception and highly skilled manpower will further become the most reliable source of competitive advantage across the global as well as Indian automobile industry. More than even before creativity, innovative ideas, and expertise in different areas have become an asset these days. Talking about cars, car designers infuse their creativity in their designed car models and that’s something which attracts car customers Further to that, the industry has to foster the talent for servicing and maintenance as well.