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Bullock nation turns auto power

With car makers expanding capacities, India could end up producing 2 million cars by 2010, reports Deepak Joshi.
Hindustan Times | By Deepak Joshi
UPDATED ON MAR 17, 2008 11:18 PM IST

India may not have faced a million mutinies yet. But it has definitely emerged as a nation that manufactures 1 million cars annually for the past five years. You could call it a boom, or a mutiny on the roads, depending on which side of the traffic jam you are on.

Whatever the perspective, the fact is that India’s car industry as well as market has come of age. Pressures on the roads and talk of carbon emissions choking the air and causing global climate change may be the flip side of the story — but there is no denying the heady feeling of a nation which once was associated with bullock carts placing itself on the global automobile map, as it happened this year when Tata Motors unveiled its small car Nano.

Clearly, the growing car industry is not catering merely to domestic consumers. Indian cars are increasingly finding acceptance in the global marquee as well.

In 11 months of the current financial year (April 2007 to February 2008), 13,81,530 units were sold in the domestic market. Another 1,93,199 units found their way in overseas market. Despite a global slowdown, the Indian car market has grown by 14.45 per cent in 11 months.

With car manufacturers expanding capacities, India could end up producing 2 million cars by 2010. This is a remarkable achievement considering that only 25 years ago, India was manufacturing less than 50,000 units annually.

Reflecting the newly found importance of the Indian market, General Motors Asia Pacific head Nick Reilly held the company’s automotive strategy board meeting in Mumbai this year. He also visited GM plant in Talegaon, near Pune. The 1.4 lakh units-per-annum plant will commence production towards the end of the year, raising GM’s annual capacities in India to 2.25 lakh units per annum.

Honda Siel Cars India, which has long been a niche product player here, has expanded its capacity to one lakh units from 50,000 units. The company is also planning to enter the market with a compact car from its facilities in Rajasthan.

Apart from doubling the capacity, several advanced manufacturing techniques and robots have been used in the plant to enhance quality and precision of operations. The weld shop now has 27 robots and the new paint shop has 12 robots to apply the finishing topcoat to the vehicles. This automation will speed up the manufacturing process and also increase efficiency on the line.

The new, ergonomic layout of the assembly line and other work areas ensures a stress-free environment for associates.

Hyundai Motor India has also doubled its capacity to 6 lakh units per annum. A 3 lakh units per annum facility in the outskirts of Chennai became operational in February this year.

Germany’s Volkswagen also plans to make 1.4 lakh cars per annum in India from 2009 and its subsidiary Skoda has been operating for the past several years with premium products well received by the market.

Until the early 1980s, Indian car industry was quite small and did not grow in terms of production. In the mid-1960s average annual production was less than 34,000. There was some growth in the production during 1970-73, and it reached a peak level of 39,973. In 1974-80, there was a phase of recession and production declined from its peak level of 1973 to a rock bottom of 30,538 cars in 1980, thereby subjecting the industry to a long phase of severe capacity under utilisation and depression. In 1980-81, now defunct Premier Automobiles, for instance, could produce only 9,301 cars.

The breakthrough came in 1983-84 with the entry of Maruti Udyog Ltd., now re-christened Maruti Suzuki India Ltd. The objective of Maruti was to manufacture a low-cost family car. It wanted to create a new mass-market base for the middle class. Starting with a share of 1.80 per cent in 1983-84 in a market dominated by Hindustan Motors’ Ambassador, Maruti raised its share of production to 72 per cent in 1993-94. Tata Motors, which entered the car business after economic reforms started in 1991 with its Indica model, has underlined India’s engineering and design prowess by bringing an indigenous cars and is set to storm the market with its Rs 1 lakh car, Nano, by the end of the year.

Maruti’s strategy from the beginning was not only to go for large production, but diversify as well. Old guard Hindustan Motors and Premier Automobiles did not try to compete with Maruti in the same segment with their existing products because, given the high capital cost of their old production facilities, it was not possible.

The competition in industry still centres around Maruti. The company still has its unique competitive advantage in view of its economic though many of its plus points are under pressure. Maruti’s plan for modernisation and capacity expansion is significant decision to retain its pole position in the Indian market and tap the global opportunities as well.

Today, India’s roads see sedans and upscale variants including utility vehicles made by brands like Mitsubishi, Fiat, Hyundai, Ford and Toyota jostle with the Mahindra Renault, Tata Indigo and the Maruti SX4. Imported and locally assembled luxury cars by brands like BMW and Benz are also joining the crowd.

The recent cut in excise duty on cars in the budget for 2008/09 only signals that this is one industry that the government is willing to encourage to fuel growth. Growth, of course, brings other problems, related to environment and traffic. But then, as they say, that is another story.

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