Indian Automotive Industry: Performance Analysis

By Kumar, Velu Suresh | Political Economy Journal of India, July-December 2012 | Go to article overview

Indian Automotive Industry: Performance Analysis


Kumar, Velu Suresh, Political Economy Journal of India


The automotive has become an important ingredient of nearly every aspect of economic and social life. Its impact on everyday life and human perception is so great that it has become something like a symbol of progress and development. Automotive industry is not only an issue of consumption, but also regarded as an industry that drives the entire economy.

Automotive industry's most obvious benefit is its input into the motor transport industry, viz., in ferrying goods and people from one place to another in a more flexible and very often more efficient manner than by other forms of transport. Road vehicles can penetrate into areas where other forms of transport cannot, thereby contribute towards the integration of backward areas into the national main stream. Due to its deep forward and backward linkages with several key segments of the economy, automotive industry has a strong multiplier effect and is capable of being the driver of economic growth. A sound transportation system plays a pivotal role in the country's rapid economic and industrial development. It is also important from a strategic viewpoint, as it strengthens national security.

Global automotive Industry

The global motor vehicle production has reached a peak at a total of 73.3 million units in 2007 (Table -1). There has been an addition of 14.9 million vehicle production since 2000. A bulk of this increase has come from Asia-Pacific region mainly China, India and Thailand. However in 2009, the production dropped by 13.5 percent to 61.71 million units. Production in US dropped by 34.3 percent to 5.7 million units and sales dropped by 21.2 percent to 10.4 million units in 2009. AS on November 2009, China is the world's larges motor vehicles market, both by sales and production. Production in China rose by 48.3 percent to 13.8 million units and sales rose by 45 percent to 13.7 million units in 2009.

Evolution of Indian Automotive Industry

The origin of the automotive industry in India commenced as early as 1942, when Hindustan Motors Limited was established at Baroda under the management of Birla Brothers and Premier Automobile Limited in 1944 under Aero-Auto at Bombay. But even before this, imported cars and trucks were available in the country. India had her first imported car in 1987. It was bought by a Calcutta gentleman. In 1903, Simpson and company (established in 1840) brought out the first steam car build in the company's workshop at Madras. By the end of 1903, Simpson began to import of cars, the first being a 10 hp Turner Miesse steam car. In 1905, Simpson built the first steam bus. The bus ran between Bezwada and Musulipatnam. This was possibly India's first bus service, though short-lived.

It was only after 1920 that local assembly of vehicles, from components and parts imported in completely knocked down (CKD) was started in a few units set up in Bombay, Madras and Calcutta. In 1928, General Motors India Ltd. Commenced assembling of trucks and cars in Bombay. It was followed by the Ford Motor Company of India in 1930 in Madras and in 1931 in Bombay and Calcutta. In 1936, Addison and Company Limited began with the assembly of cars and trucks at Madras. Assembly or import of vehicles increased substantially since the twenties and crossed 30000 units by 1930 (constituting about 17000 passenger cars and 15000 commercial vehicles).

In 1935, M. Visvesaraya's proposal to establish an automobile industry was rejected by the then Central Government. However, the National Planning Committee of 1938, set up by the Indian National Congress, appreciated the "real, long-range importance of this new means of transportation and its place in India's planned economy", and emphasized the importance of setting up an "organized automobile industry in the country". The Second World War needs also brought into bold relief the usefulness of having a domestic automobile industry. In line with this thinking, the government of India constituted a panel on automobiles and tractors in 1945, which submitted its report in 1947. …

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