Indian Automotive Industry on a High Growth Trajectory

.Today, this sector is one of the shining examples of what can be achieved in a relatively short span of time with the right kind of support of the Government, combined with the entrepreneurial skills and managerial talent that the Industry has to offer.Today India is the seventh largest vehicle manufacturer, second largest two wheeler manufacturer and the fifth largest commercial vehicle in the world.The past ten years have witnessed a six fold increase in the industry turnover and the automotive exports growing by almost twenty times.

The Government and the automotive industry had jointly set a road map, a vision, for the future of the Indian auto industry in the shape of the Automotive Mission Plan (AMP) 2006-16.During the period of downturn from 2007-09, there were many people who believed that it would be extremely difficult to meet the AMP targets.However, the spectacular rebound and growth witnessed by the industry during the last two – three years has belied these apprehensions.During 2010-11, the Indian automotive industry registered a total turnover of USD 73 billion, with exports worth USD 11 billion.Of this, the turnover by the auto component sector stood at USD 30 billion, with exports valued at USD 5 billion.The moderation of growth in the recent past is a transient phenomenon.The coming years shall continue to witness high levels of growth for the Indian automotive industry owing to the fact that most of the primary demand drivers like level of vehicle penetration, growth of the economy, the demographic profile of country, increasing wages and salaries coupled with the huge investments being made by the government in the infrastructure sector are all very favourable.It has been projected that the Indian auto industry has the potential reach a turnover level of USD 66.4 billion by 2016 and USD 113 billion by 2020.This translates to a fourfold increase over a period of ten years.

One area of concern is the ever increasing trade deficit in auto components. The import of auto components during 2010-11 was at USD 10 billion which meant that imported components constituted 1/3^rd of the total auto component turnover of the country.In 2010-11, India was a net importer of auto components worth USD 5 billion and this deficit has been on the increase since the past 4-5 years.Some of the reasons for the continued sharp increase in imports include capacity constraints of domestic manufacturers, price competitiveness of the imported products, lack of design capabilities with domestic industry etc.This is not a desirable situation as a significantly large portion of value addition and job creation is captured in auto component manufacturing.

Since the job creation potential from agriculture and services sectors can only go so far, the vast number of new jobs will need to come from the manufacturing sector.It is therefore not surprising that one of the focus areas for the government is to spur manufacturing in the country so that this sector can contribute at least 25% to the national GDP from the present level of 14%. For this to happen, the automotive industry which today contributes 22% of the manufacturing GDP, will need to play a major role.Therefore, one of the primary objectives for the government is to ensure that the huge future market potential that exists in this sector is met by the indigenous industry and not by way of imports.Clearly, this is an area where the government would like to work more closely with the industry to reverse the trend.

In order to realize the 2020 vision, the Indian auto component industry will need to build and optimize their capacities, focus on continuous improvement, absorb advance technologies, adopt latest manufacturing processes, build R&D competencies, inculcate and promote organization culture of innovation.In addition, it will need to continually strive to improve quality, cost and delivery standards to global benchmarks.Further, as the industry move towards an era of shortened product life cycles and faster roll out of newer models and variants, it will be imperative for the Indian auto component industry to graduate from the present “build to designâ€