Report on Auto Industry

8/7/2019 Report on Auto Industry

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Report on

AutoIndustry

A Holistic Overview

PGDM (IB) 2009-11


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Report on Auto Industry

BIMTECH - Strategic Management

2Contributors

The following are the Members who contributed in this report

S.No. Name of the Member Course Roll No.

1 Deepkiran Matta PGDM (IB) 2142 Gautam Gulati PGDM (IB) 2193 Keyoor Prashant Diwaker PGDM (IB) 2244 Monica Virbhan PGDM (IB) 2295 Nikhil PGDM (IB) 2316 Nikita Aggarwal PGDM (IB) 2327 Pallavi Chhabra PGDM (IB) 2368 Pragya Agarwal PGDM (IB) 2389 Upasana Singh PGDM (IB) 26510 Urooj Ansari PGDM (IB) 26611 Ankit Khandelwal PGDM (IB) 26812 Mohit Motwani PGDM (IB) 27013 Shivansh Sharma PGDM (IB) 275


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3ACKNOWLEDGEMENT

First and Foremost, we would like to thank our faculty,

Professor R.J.Masilamani, (Strategic Management

Course) at BIMTECH, Gr. Noida for the valuable

guidance and advice. His foresight for creating an in-

house industry report repository has motivated us to

produce this report.

Besides, we would also like to thank the authority ofcollege for providing us with a good learning environment

and facilities to complete this project.

This report has helped us in getting an overall overview

about the Automobile Sector in Global Market along with

India. W are sure that this report will find useful for

many who would be seeking a collective information

about the industry prior to their Final Placement

Process.


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4TABLE OF CONTENT

S.No. Topic Page No.

1 History of Automobile 52 Growth of Automobile Industry across the globe 73 Technological shift in Automobile Industry 214 Indian Automobile Sector - History 325 Indian Automobile Sector Growth 366 Indian Automobile Sector - Case Study 377 Indian Automobile Sector - Financial Growth 418 Indian Automobile Sector - Recent Development 489 Indian Automobile Sector Innovations 5210 Indian Automobile Sector Opportunity 57


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5History of Automobile

In the year 1769, a French engineer by the name of Nicolas J. Cugnot invented the

first automobile to run on roads. This automobile, in fact, was a self-powered, three-

wheeled, military tractor that made the use of a steam engine. The range of the

automobile, however, was very brief and at the most, it could only run at a stretch for

fifteen minutes. In addition, these automobiles were not fit for the roads as the steam

engines made them very heavy and large, and required ample starting time. Oliver

Evans was the first to design a steam engine driven automobile in the U.S.

A Scotsman, Robert Anderson, was the first to invent an electric carriage between

1832 and 1839. However, Thomas Davenport of the U.S.A. and Scotsman Robert

Davidson were amongst the first to invent more applicable automobiles, making use

of non-rechargeable electric batteries in 1842. Development of roads made travelling

comfortable and as a result, the short ranged, electric battery driven automobiles

were no more the best option for travelling over longer distances.

Charles Kettering's invention of the electric starter in 1912, turned the process of

starting automobiles more faster and easier at the same time, doing away with the

hand tools. Crude oil being discovered in Texas, the automobiles driven by engines

that ran on gasoline became even more affordable, as the prices of gasoline

reduced. The prices of electric automobiles were going through a constant rise, in

spite of the fact that these were less efficient than the gasoline automobiles.

Jean Joseph tienne Lenoir was the first to invent an

internal combustion engine that ran on petroleum and attached it to a three-wheeled

carriage, and successfully traversed a distance of fifty miles in 1863.

Karl Benz manufactured the first automobile ( a three-wheeled car) that was

affordable and compatible for travelling over long distances for its internal

combustion engine that ran on gas, in 1886.Later in 1887, Gottlieb Daimler was the

first to invent the predecessor of the modern automobile with an engine that had a
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6vertical cylinder in addition to a gasoline driven carburetor. First building a two-

wheeled automobile (Reitwagen) , Daimler was again the first to build a four-

wheeled automobile in 1886. The engines manufactured by Daimler were improved

upon and these portable and fast engines made automobiles the way we see them

today.

The advanced engines turned the slow, expensive automobiles of the yesteryears, a

thing of the past, and cars became more affordable as both the prices of gasoline

and petroleum as well as the manufacturing costs reduced through their mass

manufacture at the assembly lines of factories. Penhard and Levassor in 1889, and

Peugeot in 1991 became the earliest mass manufacturers of the modern

automobiles.

The Automobile Industry finally came of age with Henry Ford in 1914 for the bulk

production of cars. This lead to the development of the industry and

assembly lines ofcar factory came into existence. The several methods adopted by

Ford, made the new invention (that is, the car) popular amongst the rich as well as

the masses.

According the History of Automobile Industry US, dominated

the automobile markets around the globe with no notable competitors. However,

after the end of the Second World War in 1945, the Automobile Industry of other

technologically advanced nations such as Japan and certain European nations

gained momentum and within a very short period, beginning in the early 1980s, the

U.S Automobile Industry was flooded with foreign automobile companies, especially

those of Japan and Germany.

The current trends of the Global Automobile Industry reveal that in the developed

countries the Automobile Industries are stagnating as a result of the drooping car

markets, whereas the Automobile Industry in the developing nations, such as, India

and Brazil, have been consistently registering higher growth rates every passing

year for their flourishing domestic automobile markets.
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7Global Growth of Automobile Industry

Europe Auto Industry

Europe relies on a strong automotive sector. Further financial and economicpressure on the sector will affect the European economy as a whole; 2.2 millionpeople are employed directly in automotiveManufacturing; an additional 9.8 million rely on it for their jobs in closely relatedsectors. The real multiplier, in terms of employment in the wider economy, is stillhigher. ACEA members generate a turnover of 551 billion, and total industryexports are worth 77 billion. Around 378 billion in taxes come from vehicles,

reinforcing the sectors reputation as the engine room of Europe.Vehicle Production

In 2008, 18.4 million vehicles were made in Europe, 7% fewer than the 19.7 millionproduced in 2007. Of the five major vehicle producing countries, Italy reported theworst decline (-20.3%), followed by France (-14.9%), Spain (-12%), the UK (-5.8%)and Germany (-2.8%). Car production fell 7%, from 17.1 to 15.9 million units. Outputin Austria fell most dramatically (-37.3%), followed by Italy (-27.6%) and Finland (-25%). New member states, which account for 18% of EU production fared better;Poland and Hungary, reported output increases of 20.9% and 18.9% respectively.

Van and truck production reflected a dramatic decline in the economy in the finalquarter. From January to June 2008, light commercial vehicle production had risen6.5%; by quarter four, it crashed 7% or138,481units. Heavy truck production also rose in quarter two by 15%, only to fall20% from September to December. Bus and coach production reported growth inoutput last year, rising 7%, however markets showed signs of faltering by December.


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8

In 2009, New passenger car production in the EU recorded a rebound of 34% threemonths into the year, compared to the first quarter of 2009. However, production wasstill 13% down when compared to the first quarter of 2008. The same pictureemerged in the segment of vans. Despite a 51% increase three months into the year2010, production of vans remained 35% below the pre-crisis level of2008. Truck production decreased by 5% until April this year, and by 63% comparedto the first quarter of 2008. The segment of buses declined by 22% three months intothe year compared to the same period in 2009.

In units produced, Germany remained the largest auto manufacturing country in theEU (1.4 million units, +33%), while the UK saw its car production pick up most(+72.7%) compared to the first quarter of the previous year. Except for Finland (-59.5%), Belgium (-10.5%), the Netherlands (-7.5%) and Italy (-0.1%), all countriesposted growth.


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9

Market Demand

In Western Europe, only five countries posted new car growth, Finland (+11.2%),Portugal (+5.7%), Belgium (+2.1%), Luxembourg (+2.0%) and Switzerland (+1.0%).Among the five major markets, Spain reported the steepest fall in demand in itshistory (-28.1%), while Italy (-13.4%) and the UK (-11.3%) fell by more than 10%.Across Europe, new car demand fell 7.8% to 14.7 million units. In the final quarter itcrashed 19.3%. Consumer choices reflected concerns about the economy. Marketpenetration of small cars was the highest ever at 38.8%; SUVs penetration whichhad peaked in 2007 at 9.9.% fell back to 9%, with the most dramatic fall in Francefrom 7.2 to 4.6%. Average engine size fell to 1706cc, from 1740cc a year earlier,while average power output, which had risen steadily since 1990, fell to 86 from 87KW. More than half of all new cars sold were diesel models (52.7%).


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10Commercial vehicle registrations were down 9% across Europe, the sharpestdownturn since 1993. Truck registrations, down 4% overall, suffered most in newmember states (-21.1%). Light commercial vehicle demand (LCVs), up 5.1% in newmember states, was dragged down by performance in Western Europe (-12%) toend 10.4% down overall. Bus and coach registrations rose 12.1% over the year, but

in December they fell 7.5%. By March 2009, government fleet renewal schemes hadbeen introduced in 11 countries to boost flagging markets and help sustain thetransition to greener cars. In Germany, new car sales rose by an encouraging21.5% in February. Effects were also notable in other markets, such as France, Italyand Slovakia.

In 2010, demand for new passenger cars in the EU continued to grow until a 7.4%decline was noted in April. In May, new registrations further decreased by 9.3%. Therecent drops reflect both the end to government support schemes as well as thecontinuing challenging economic situation in the EU.

From January to May, small cars* (segments A and B) accounted for 44.6% of thetotal market for new cars compared to 45.3% in the same period of 2009. Half of allnew cars registered had a diesel engine, compared to 46.3% over January Maylast year.

Demand for commercial vehicles cautiously points towards recovery, although thesegment of vans was the only one to record positive figures since February.


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11

* based on AAA data for the EU15 + EFTA

Vehicles in Use

There are more than 250 million vehicles on the European roads About 6% of them are new vehicles The average age of the European car fleet is about 8 years*.


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12 About 34% of the cars on EU roads are older than 10 years

The average annual distance travelled by a car in the EU is about 22 000 km/year*. Car density per 1000 inhabitants in Western Europe in 2007 was 458.

The European vehicle fleet reached over 256 million units in 2008, an increase of1.2% compared to the previous year. With 224 million vehicles, passenger carsaccounted for the highest share of the vehicle fleet (87%). he European car fleet ismainly concentrated in Western Europe, with over 7 out of 10 cars registered inGermany, Italy, France, the UK and Spain. The number of diesel cars on the roadsincreased by 7%* in 2008, compared to 2007.


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13

US Auto Industry

The decline in production and sales of motor vehicles accelerated in the winter andspring of 2009. This section analyzes the factors behind the nosedive in U.S. autosales and production during the past year and near-term projections for a possiblerevival of auto sales and production. It also discusses the fallout of the recession inthe auto industry on auto suppliers and the unions that represent Detroit 3 autoworkers, primarily the United Auto Workers (UAW).

Vehicle production

In 2009, U.S. motor vehicle production declined dramatically, as shown in Table 1,

with overall U.S. output of cars and light trucks dropping by 34% from the previousyear. Chrysler and GM sales dropped by 57% and 48%, respectively. Toyota, BMW,and Honda each fell by over 25%. Fords performance, with sales dropping by only13% year over year, was better than other automakers.

In January 2009, U.S. automobile production bottomed out. In that month, U.S.production at a seasonally adjusted annual rate (SAAR)10 fell to only 3.7 millionvehicles (cars and light trucks), compared to a SAAR of 10.7 million units in January2008. Production in the first two quarters of 2009 fell by more than 50%, comparedto 2008 levels.11 The U.S. cash for clunkers program, which began on July 24,2009, increased the production of vehicles in July and August to 6.2 and 5.9 millionSAAR, respectively. After the clunkers program ended, many automakers faceddepleted inventories. Increased production in the fall resulted in a 1.2% increase inproduction during the fourth quarter of 2009 over the same quarter in 2008. For all of2009, 5.8 million vehicles were produced.12 According to IHS Global Insight, U.S.

production performance in 2009 was the lowest in nearly 50 years, with the previous


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14production low having been recorded in 1961, when 5.5 million light vehicles weremanufactured (in a United States with a population of 179 million).

U.S. production is forecast to rise by nearly 23% to 6.9 million in 2010, to reach 8.1million in 2011, and climb thereafter to reach more than 10 million light vehicles in

2014, for the first time in nearly a decade.14 In the near term, production will remainbelow pre-recession levels. As automakers have moved to rebuild depletedinventory, new production plans have emerged. GM, Ford, and others raised theirproduction levels during the fourth quarter of 2009. For the Detroit 3, SUVs andpickup trucks remain a staple of their business plans. In 2009, 82% of Fords U.S.production and 83% of Chryslers was light trucks (i.e., pickup trucks and SUVs). Bycontrast, 44% of Hondas and 37% of Toyotas 2009 production in the United Stateswas light trucks.15 While neither Honda nor Toyota are generally perceived to bedependent on SUV and light truck sales, these vehicles are rapidly becoming a largepart of their businesses, demonstrating how potent the market for these products canbe.

Vehicle Sales

In addition to the slide in production, the first months of 2009 were the low point inmotor vehicle sales: the seasonally adjusted annual rate (SAAR) of car salesbottomed out in February 2009, at 9.11 million units. But the cash for clunkersprogram in summer 2009 and strong sales in December 2009 helped cushion resultsfor the year, with greater than expected sales of 10.4 million vehicles in 2009. Still,for 2009, GMs U.S. sales fell by 30%, Chryslers by 36%, and Toyotas and Hondasby 20% each. (see Table 2.) Toyota posted its first annual net loss since 1950.

Table 2 shows the change in auto sales by manufacturer in terms of year-over-yearsales for 2008 to 2009 and for 2007 to 2009 (2007 was the last full year of salesbefore the recession hit the industry in 2008), and the shift in market share from2008 to 2009. GMs share fell from 22.2% to 19.8%, while Fords share rose to15.5% and Hyundai/Kias to more than 7%. The turmoil and bankruptcies of GM andChrysler have likely been a boon to Ford. Federal ownership of GM and Chryslerbecame a distinguishing factor that apparently led to a preference for Ford amongmany buyers. Fords top marketing executive said, Ironically, the debate around theindustry was the best thing that happened to Ford. Were finally relevant in NorthAmerica.16 The attention on the Detroit 3 during 2009 also allowed Ford tointroduce consumers to its new lines of trucks and automobiles and its new, more

fuel-efficient engines. A national survey of online auto shoppers conducted duringthe summer of 2009 showed that 22% were actively looking at Ford vehicles, equalto the number looking for Toyotas.17 During the fourth quarter of 2009, Ford closedthe gap with Toyota and during January and February 2010, sold 55,301 morevehicles than Toyota. February also marked the first time that Ford outsold GM since1998.

Hyundais increase in market share demonstrates that a once little -known Asianautomaker whose early vehicles, introduced in the U.S. market 20 years ago,rated poorly in terms of qualitycan transform itself. For years, Hyundai enjoyed aprotected home market in Korea. This ensured its prosperity there, but the lack ofcompetition meant the company didnt develop the product quality or consistency tocompete effectively in international markets. The result: Hyundais initial U.S.


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15success in 1986 was undercut quickly by quality problems.19 More recently,Hyundai opened a U.S. plant in Alabama and a nearby Kia plant in Georgia. It hasalso improved its product quality and offers one of the longest warranties in thebusiness, which is luring new customers away from both U.S. and Japanesemanufacturers.

The three automakers with the largest U.S. market shares in 2009 were GM, Toyota,and Ford. During 2009, Honda surpassed Chrysler to become the fourth-largestseller of vehicles in the United States. Hyundais surge to a 7% market share placedit within striking range of Chryslers diminished 8.9% share.
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16


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17Japan Auto Industry

Automobiles are the focus of an extremely wide range of industrial and relatedactivity, from materials supply and vehicle production and distribution to sales,

servicing and other auto-centered operations. Auto-related employment in Japan atpresent totals 5.15 million people.

Vehicle Production

In 2009, motor vehicle production in Japan decreased for the second consecutiveyear, totalling 7.93 million units, down 31.5% from the previous year. Passenger carproduction fell 30.9% to 6.86 million units. Within that category, standard carproduction declined 40.2% to a total of 3.46 million units, small car productiondropped 21.0% to 2.15 million units, and mini car production decreased 11.9% to1.26 million units. Truck and bus production also showed a decline from 2008,

plunging 34.7% and 37.3%, to 985,000 and 87,000 units respectively.


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18Vehicle Sales

Passenger car and commercial vehicle demand in Japan in 2009 totalled 4.61 millionunits, a decline of 9.3% from the previous year. Total passenger car sales dropped7.2% to 3.92 million units, with the standard car segment decreasing 7.3% to 1.16

million units, small cars falling 4.5% to 1.48 million units, and mini cars sliding 10.1%to 1.28 million units. Sales of trucks and buses declined 19.8% and 18.0% from2008, to 673,000 and 13,000 units respectively.

International Comparison


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19


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20


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21Global Technological Shift in

Automobiles Industry

The automobile is a technology that has changed society dramatically over the last

century. But not only society changed, the technology of the motorcar itself has

changed significantly: an automobile of the 1900's has almost only the concept of

four wheels and an engine in common with today's modern cars. The academic

world has given little attention to the history of the car, but the last couple of decades

the body of literature is growing. Still there is little attention to the technical history of

the motorcar itself.

Theory of technical change in automotive history

Technological change has been the field of study for more than seventy years now.

Technology has been studied from several different directions, but mainly from an

economical perspective because technology is seen as the driving factor behind

economic growth. In the 1970's however technology as a theme of study has also

come under the attention of sociologists, philosophers and historians.

One of the main questions in this emerging field of Science and Technology Studies

is how technological change occurs. Overtime two different main directions of

explanations for technological change have emerged.

First is Technological Determinism, best expressed by the work of Lewis Mumford.1

The premium assumption of Technological Determinism is that technology has its

own intrinsic power that steers the direction of future developments. Opposite to this

view the SCOT (Social Construction of Technology) approach emerged in the late

1970's and beginning of the 1980's.2 SCOT emphasizes the role society, existing out

of different groups with different powers, plays in the development of technology.

The opposition between Technological Determinism and SCOT has many forms and

gradations. The polarized difference between the intrinsic powers of technology


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22versus the external or contextual powers are expressed differently in different fields

of technology and therefore have a broader scope than simply the Science and

Technology field. In studying history of technology it makes sense to at least beware

of this ongoing discussion to analyze technical developments. This research will

continue from the basic viewpoint that technology has a dual nature: it contains an

intrinsic power to shape the future path of development, but also is submitted to

external forces that create or limit new opportunities. Furthermore the two

discussions in the field of history of technology will serve as a theoretical

background. Technological determinism versus Social Construction of Technology

and Narrative history versus Theoretical history are interesting oppositions for further

research. The hypothesis is that both are extreme oppositions and the best view lays

somewhere in the middle. But this is of course oversimplified. The main purpose is to

understand more about technical change on the artefact level and the discussion will

be kept in mind in looking into the technical specifications of the artefacts.

All three layers (artefacts, human activities and knowledge) of technology as

introduced by Bijker (1995) will be studied. The artefacts will be the automobiles and

there technological components. For studying the artefacts a structural model as

developed by Gijs Mom will serve as a tool to analyze technological change on

different levels (see figure 2.1). The second layer (human activities) is the broadest

and will involve the engineers and users of the technology. In the case of the car, the

users are of course the drivers and passengers, but also people who are affected by

cars. Although it is not the idea to explain how automobiles have changed the lives

of people in general (I would suggest to read Flink or Sachs), it is important to look at

users and non-users to investigate motives for technological changes. The

knowledge about automobiles, in a large variety of forms (books, papers, tacit,manuals) is also shared by users and non-users. In this case users are not merely

car users, but more car engineers; people who are involved in technological

developments of cars.

The three levels of technology corresponded partly with three other levels of

analysis: artefact, system and society. Here the main focus is upon the artefacts, but

this study also tries to make a link with the car as a system and the role ofautomobiles in society. An automobile is a complex structure of components varying


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23in complexity and dependency. Studying technical change in automotive technology

requires a hierarchical structural model that makes it possible to analyze changes on

different levels. The model used here is developed by Gijs Mom and it consists of a

hierarchical division on the level of artefact, subsystems, main functional groups,

auxiliary functional groups, component assemblies and basic components.

The artefact here is a passenger car that has a propulsion system (subsystem) that

consists of a number of parts. For instance the engine and gearbox (main functional

group) with a gear system (auxiliary functional group)

The artefact here is a passenger car that has a propulsion system (subsystem) that

consists of a number of parts. For instance the engine and gearbox (main functional

group) with a gear system (auxiliary functional group) and synchromesh (component

assembly) and finally a number of nuts and bolts (basic component). The argument

is that changes can occur on different levels of the structural model and these

changes differ in impact they have on other components, the artefact as a whole and

on society. Using this particular model will give insight in the nature of technological

change by showing not only the important revolutionary changes, but also the small

evolutionary developments.


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24In fact the assumption here is that most revolutionary changes start as a small

change on a lower level and thus could be called an evolutionary development. The

level of analysis in this part of the research is the automobile as an artefact. In his

book The productivity Dilemma Abernathy puts the theme of innovation in

automobile technology in the perspective of production factors.

Basically he argues that the automotive industry has grown to such a proportion

major innovations do not take place anymore since the Second World War, as these

innovations would be far too costly to implement in the whole production process.

His focus is mainly on the American automotive industry where indeed the

production process causes inflexibility in design options. However, in Europe and

especially in Japan other production methods have led to different design processes,

allowing more innovation.

Artefacts consist of a nested hierarchy of subsystems, although there has not been

sufficient attention to this in empirical research on dominant design, some however

do. Henderson and Clark distinguish between incremental, modular, architectural

and radical innovations the hierarchical structure has an important implication: a

modular change at one level in the hierarchical system can be an architectural or

radical change at a lower level in the hierarchy.


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25

The concepts used by Henderson and Clark prove to be useful in analyzing

automotive technology. The concepts can be coupled to specific levels in the

automobile as an artefact (described in figure 2.1), where the architecture could be achange in vehicle platform (the basis of a motorcar, consisting of its underbody

construction), the modular level can be compared with e.g. a engine or gearbox and

incremental level can be any small change. What an radical innovation would be

remains the question, because on this level the step from the horse drawn chariot to

the automobile would be the last radical change that occurred.

Peter Hugill goes into the architectural innovation of the automobile in his analysis ofdrive systems.5 Hugill defines the placement of the engine, transmission, driveshaft

and final drive as the main characteristic of an automobile (See Appendix A). By

using these limited amounts of components he is able to track the major innovations

in 100 years of automobile technology as they are simply coupled to the variations of

placing the core components.


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26Problem however is that all incremental changes are overlooked and thus this

analysis has rather limited explanation power. For instance the Issigonis/Christie

system would not have been a technical possibility without developments that

allowed engineers to limit the size of the engine and gearbox. This system was used

in the famous Mini of the British Motor Corporation (BMC) from 1960-2000.6 For a

further explanation on technical change we need to look beyond these general

architectural concepts and look at incremental changes as well. Before doing that I

will discuss some problems that one runs into while researching automobiles in

history.

Engine size and horsepower 1950-1980

The main analysis in this paper consists of data for cars on the European Market in

the period 1950-1980. The data used is derived from catalogues and automotive

journals, which are also used as qualitative sources for consumer behavior. Finally

engineering journals and conference proceedings are used to research producer

behavior. The importance of the specific period 1950-1980 is shown in figure 4.1:


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27It is clear to see the rapid growth of density of cars per inhabitant in The Netherlands

in both large and small municipalities for this period (the graph is based on a study of

diffusion of the motorcar in The Netherlands). Such a rapid growth could well imply

some major changes in the technology, as a great number of new users start to

adopt the automobile. The following data on engine capacity was taken from

yearbooks for each second year (1960, 1962, 1964 and so on) that contains prices

and technical data of all the vehicles available on the Dutch market.8 For each

specific model an average type was chosen, as some car models are available in

different configurations. For instance a Golf Mark I was available as a 1100, 1300,

1500, GTI and 1600 Diesel version, with L, S or LS specifications. In this case all the

different engine variants are included, but leaving the trim level (L, S or LS) out of

consideration.9

The graph shows some distinctive developments. The average engine size of cars

on the market in The Netherlands is floating between 2 litres and 3.7 litres, which is

quite large. This is caused by the relatively high number of American automobiles

that were sold in The Netherlands, a long-standing tradition dating back before the


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28Second World War. The rapid growth of the maximum engine size in the late fifties

can also be explained by the growth of American cars in both vehicle size and

engine size. The period from halfway through the fifties until the beginning of the

sixties which show a drop of the minimum engine size can be explained by the

numbers of small engine vehicles from Eastern Europe.

One of the biggest problems in making an analysis is the lack of concurrent sales

data that specifies the make and model for each year. Only from the seventies

onwards these figures were documented in The Netherlands. Figure 4.3 shows the

minimum, maximum and average horsepower of the 20 best selling cars in The

Netherlands. From 1970 onwards these are based on actual sales numbers, but

earlier figures are derived from journal articles and loose information in yearbooks.

It is clear that the maximum, minimum and average power of the 20 best selling

vehicles in The Netherlands went up during the period 1950-205, although we can

see some variance in the figures. The drop after halfway through the seventies in

maximum engine power could easily be coupled to the oil crises in that period, but

this drop has no significant meaning for the average power of the best selling

vehicles. The maximum and minimum are however slowly closing up to each other

when one looks at the trend lines.


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29The two graphs are not fully comparable, but they do however raise a number of

questions. We can assume from both graphs that engineers were able the retrieve

slightly more horsepower from the same engine size. The engine size tells a lot

about the characteristics of an automobile. Coupled to the horsepower it could be

used as an efficiency measurement of developments of in engine technology. So the

engines became more efficient, but we need to look deeper into the technology to

see why this could happen. New technologies like turbo chargers, superchargers

and improvements in fuel quality may well have contributed to this development. So

we need to analyse the work of the engineers some further and with different, more

qualitative, tools.

Conclusion

A car is an artefact that consists of a complex hierarchy of different components and

that is used in a specific context. Some components change over time, the

hierarchical value changes, and the context changes, while other components

remain the same or are rediscovered after a few years time. Analyzing this world of

changes is difficult but with the help of the structural model and concepts of change

like radical and incremental change, it should be possible to investigate the nature of

technical change in automotive history and technological change in general.For explaining technical change in general, without only putting up narratives on

engineering or artefact histories, the challenge is to work systematically to cover as

much ground as possible. For this a model or scheme can be useful to keep track of

all the developments and relations that surround the technical artefact. In figure 5.1

such a framework is shown.


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30

This framework allows us to study both the production side of the artefact and theuse side. As one of the assumptions is that users have a lot of influence on the

design of an artefact, either directly or trough mediating agencies. The application

(the use) and the expectation (the pictured use) are both strong driving forces for

engineers to work on new technologies, which they express in the properties of the

artefact. They do this through routinized processes, or by breaking through these

processes, which we can call practices. The same goes for users. In the simplified

scheme (figure 5.2), the importance of practices is more put forward.


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The next step is to try to put this schemes to work in a number of case studies partly

derived from analysis of the technical shown in part 4 (the European car, shockabsorbers) and partly taken from some general developments in the automotive

culture (the safety debate and the car as consumer good/symbol).

Advantage of understanding change in automotive technology

First of all, a gap in the existing knowledge and literature will be filled. Second, a

general knowledge of the past can help to understand more about current and futuredevelopments. It is possible to prevent mistakes in development processes by

comparing and understanding at similar processes in the past and projecting them to

the future. The possible adoption of hydrogen cars is an interesting case in that

respect, as it shares some similarities with the steam cars and gasoline cars

competition. Third point is more general as this research tries to contribute to the

history of technology as an academic field by jointly studying society and technology

thoroughly and try to link the two of them on different levels. So this research aims

further than merely show developments in automotive technology, it also tries to

explain historical developments in society and show patterns of technological

development in general.


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32Indian Automobile Sector - History

1950

Premier Automobileswas established in 1944 as a result of successful negotiations

with Chrysler Corporation in 1939, resulting in licenses to build a Plymouth car and

a Dodge truck, sold under the Dodge, Plymouth, DeSoto, and Fargo names starting

around 1949. In the early years, quality was considered good by both Chrysler and

the Indian Department of Defense. In 1949, parts were being made in India, starting

with simpler components and gradually building up to more complex pieces. Two

companies made parts: Premier and Hindustan Motors of Calcutta. The early years

of Premier and Hindustan were marked by very low sales, due to the size of the

market; only about 20,000 vehicles per year were made in India, in 65 different

models. To prevent foreign companies from dominating by mass-producing parts to

be assembled into cars in India, the government set up steep import duties on

imported parts in 1954, allowing Indian parts-makers to survive.

1954

Tata Motors: Collaboration with Daimler Benz AG, West Germany, for manufactureof medium commercial vehicles. The first vehicle rolled out within 6 months of the

contract which ended in 1969.

1958

The Hindustan Ambassador is a car manufactured by Hindustan Motors of India. It

has been in production since 1958 with few modifications or changes and is based

on the Morris Oxford III model first made by the Morris Motor Company at Cowley,Oxford in the United Kingdom from 1956 to 1959.

Despite its British origins, the Ambassador is considered as a definitive Indian car

and is fondly called "The king of Indian roads". The automobile is manufactured by

Hindustan Motors at its Uttarpara plant near Kolkata, West Bengal. It was the most

popular car in India and is perceived to be best suited to the harsh Indian terrain due

to its very good suspension.
http://en.wikipedia.org/wiki/Uttarparahttp://en.wikipedia.org/wiki/Factoryhttp://en.wikipedia.org/wiki/Factoryhttp://en.wikipedia.org/wiki/Factoryhttp://en.wikipedia.org/wiki/Uttarpara


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1960

Government of India decided to set up an expert committee to consider the feasibility

of manufacturing a low-cost car in the range of Rs 6500

1961

Bharat Forge Ltd is one of the most innovative and exciting companies to emerge in

the history of the forging industry .The Indian Automotive Industry in the 50s was

more like the story of imported kits. Ancillaries were nominal and infrastructure was

scarce and inadequate. It was then, that Bharat Forge came into existence in 1961to meet the forging needs of the Indian Automotive Industry.

1962

Fiat 1100 launched. In 1962, the third generation Fiat 1100 was introduced. Changes

and redesigns continued until 1969, when the Fiat 1100 was finally replaced by the

new middle-class Fiat 128.

1977

Tata motors R&D center was started at Pune in 1966 to support automobile

research which produced the first commercial vehicle in 1977. Tata Motors began

the production and sale of heavy commercial vehicles by 1983

1980

1. Maruti Udyog launch set up by Sanjay Gandhi revived through a Joint Venture

with Suzuki Motor Corporation.

2. From this point the decline of Hindustan Motors and Premier Automobiles

began.

3. Major trend could be seen when the Japanese automakers started teaming up

with Indian motorcycle and car and commercial vehicle factories. 1982

License and Joint Venture Agreement(JVA) signed between Maruti Udyog

Ltd. and SMC of Japan


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4. The collaborative phase with the foreign players started in early 1980s

through a joint venture between Maruti (a government of India Undertaking)

and Suzuki Motor Corporation, a Japanese corporation to manufacture four

wheelers. But, during that period even the industry was subject to control and

excess of regulations.

5. Component manufacturer by Bharat Forge started expanding overseas by

forming Joint Venture with European and US firms.

1983

1. Maruti 800 was launched

2. DCM- Joint ventured with Toyota motors to manufacture and assemble

commercial vehicles.

1990

1. Liberalization policy allows passenger car to be produced without license.

2. Maruti Udyog became the leading manufacturer in the automobile industry.

3. Foreign car manufacturers entered India.

4. Advanced technology was also introduced.

5. Stringent environment and safety guidelines came into enforcement.

6. Auto financing came up.

7. Technology upgraded. Maruti launched 3 box car with 1000 cc engine.

1994

Tata launched Sumo and entered Joint Venture with Mercedes Benz for cars in

India.

1995

South Koreas Hyundai Motor Company entered India and established wholly owned

subsidiary. They launched their first car Santro.


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351998

Technology up gradation Tata launched the first indigenously designed car- Safari

and Indica.

2001

The first electric car REVA was launched.

2005

Tata launched Indias first mini truck the ace and rolled out 500,000 passenger cars

from its factory in Pune. The company also acquired 21% in Spanish bus maker

Hispano Carrocerra and launched the Novus range of medium- duty trucks in India.

2008

Tata signed a bond with the Gujarat government for setting up Nano manufacturing

plant.

Tata acquired Jaguar Land Rover from Ford motors. It was the first Indian company

to acquire foreign brand.

2009

Nano the cheapest car was launched by Tata motors.


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36Indian Automobile Sector Growth

India is the second fastest growing automobile market in the world afterChina.

Over 2 million passenger vehicles were produced from April 2009 to Feb2010, representing growth of nearly 25%.

India is emerging as a major production base for small cars, with outputexpected to reach 3 million units by 2016. The country is building a reputationin designing and manufacturing low cost cars.

Production of trucks and buses increased more than 35% between April

2009 and Feb 2010. An expanding highway network and overall economicgrowth is pushing up demand.

India is the second largest market for motorcycles worldwide. Output ofnearly 10 million units was registered during April 2009 Feb 2010, markinggrowth of nearly 25%.

The auto parts industry is also scaling up, as global car manufacturers areincreasing their component sourcing from India, due to cost andengineering competencies.

Competition is set to intensify as more global firms enter the market.


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37Indian Automobile Sector - Case Study

MAHINDRA & MAHINDRA AND RENAULT JOINT VENTURE

In February 2005, Mahindra & Mahindra and Renault decided to join forces to

produce and commercialize the Logan in India. The joint venture was a 51:49

partnership between Mahindra & Mahindra and Renault. The state-of-the-art Logan

facility in Nasik offered a body shop, stamping shop, a paint shop with a top quality

pre-treatment and an assembly line specific for the Logan.

Logan was launched in India in 2007 with the concept to challenge the price Value

equation existing in the midsize car category. Soon it became one of the most

successful car in the midsize category and now is synonymous to comfort and

performance. The Logan drives in loads of refinement in comfort, style and

technology. Built around the Renaults famous Space Optimization Design, it

redefines space and luxury. With the widest backseat, maximum legroom and 3

separate headrests, it makes sure even the third passenger enjoys the drive asmuch. Logan is one of the safest drives on the road. Its geared to protect you with a

honeycomb dashboard and the front unit thats designed to resist even a head-on

impact.

Logan failed to attract consumers due to its length of fractionally more than 4

meters that required a factory gate duty of 22% compared to 10% for the less-

than-4 meter cars. The sedans sales plummeted to 5,332 units in the last fiscal year

ended March 31, 2009. Consequently, the JV lost about INR5 billion ($110 million)

during the fiscal year.

In an interview Anand Mahindra said He will 'never again' go for a JV 'where we

don't control changes in the product Mahindra wanted engineering changes made to

the under-performing Logan, but these were refused by Renault.


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38DAEWOO BANKRUPTCY STORY

Daewoo or the Daewoo Group was a major South Korean chaebol (conglomerate). It

was founded on 22 March 1967 as Daewoo Industrial and was dismantled by the

Korean government in 1999. Prior to the Asian financial crisis of 1998, Daewoo was

the second largest conglomerate in Korea after Hyundai Group, followed by LG

Group and Samsung Group. There were about 20 divisions under the Daewoo

Group, some of which survive today as independent companies.

CRISIS AND COLLAPS

Daewoo Group ran into deep financial trouble in 1998 due to the Asian financialcrisis, increasingly thin relationships with the Korean government under

President Kim Dae Jung, and its own poor financial management. With the Korean

government in deficit, traditional reliance on access to cheap and nearly unlimited

credit was severely restricted.

In 1998, when the economic crisis forced most of the chaebol to cut back, Daewoo

brazenly added 14 new firms to its existing 275 subsidiaries, in a year where the

group lost a total of 550 billion won ($458 million) on sales of 62 trillion won ($51

billion). At the end of 1997, South Koreas four biggest chaebol had a debt of nearly

five times their equity. While LG and Samsung cut back in the midst of the economic

crisis, Daewoo took on 40% more debt."

By 1999, Daewoo, the second largest conglomerate in South Korea with interests in

about 100 countries, went bankrupt, with debts of about 80 billion won ($84.3

million).

Factors that affected Daewoo's performance

Government intervention: Government policy served as a double edged sword: it

protected the chaebol, providing them with massive subsidies, unlimited cheap

credit, and protection against foreign competition. However, the price for these

services was total loyalty to the government. Chaebol were forced to take over

industries against their will. The government was constantly involved in their

businesses and stifled their creativity.


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39

Labor market: The traditional work ethic that helped Korea reach economicprosperity has been threatened as workers have begun increasingly violent

protests against years of long hours and low pay. Daewoo shipbuilding suffered

heavy losses due to workers' demands for pay raises.

Operating in a global economy: International demand for free trade is forcing the

Korean government to open its market. The chaebol will lose its protectionist

import controls. Most recently, the North American Free Trade Agreement and

the European Economic Community imposed trade limitations. Product quality from Korea: Korean products were considered to be of low

quality.

By the 1990s, Daewoo Group was heavily leveraged, major markets were

stagnant, expenditures on R&D were increasing, labor unrest was continuing,

and government policy was turning against the company.

Kim was most recently charged with allegedly paying campaign contributions to

former president Roh Tae Woo in exchange for a large government contract tobuild a submarine base.
http://en.wikipedia.org/wiki/European_Economic_Communityhttp://en.wikipedia.org/wiki/Roh_Tae_Woohttp://en.wikipedia.org/wiki/Roh_Tae_Woohttp://en.wikipedia.org/wiki/European_Economic_Community


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40

SINGUR CONTROVERSY

The delay in the launch of Tata Nano was caused largely due to the Singur

controversy. Singur is present in the state of West Bengal and about 997 acres had

been allotted to Tata Motors for building the Nano. The construction for this factory

on which the Nano was supposed to be coming up started in the month of July 2007

but soon faced opposition from a political party. The Trinamool congress led by

Mamata Banerjee protested against the manufacture of the car and the plant saying

that the land was to be used for agrarian purposes and was wrongfully allotted toTata Motors for making the Nano. There were protests all over the state and even in

the capital city of New Delhi. Activists of the Trinamool congress stood outside the

main gate of the plant and protested against any work in the plant.

On 2nd October 2008, Tata Sons Chairman Ratan Tata officially announced that Tata

Motors would be pulling out of Singur for the security of their officers was of

paramount importance to them and the states of Karnataka, Maharashtra as well as

Gujarat were being looked at as viable options for the setting up of the Tata motors

factory. Finally Gujarat was taken up as the apt place for building a new factory


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41

Indian Automobile Sector - Financial

GrowthEye-Catching FDI Destination - INDIA

India is on the peak of the Foreign Direct Investment wave. FDI flows into Indiatrebled from $6 billion in 2004-05 to $19 billion in 2006-07 and are expected toquadruple to $25 billion in 2007-08. By AT Kearney's FDI Confidence Index 2006,India is the second most attractive FDI destination after China, pushing the US to thethird position. It is commonly believed that soon India will catch up with China. Thismay also happen as China attempts to cool the economy and its protectionism

measures that are eclipsing the Middle Kingdom's attractiveness. With rising wagesand high land prices in the eastern regions, China may be losing its edge as a low-cost manufacturing hub. India seems to be the natural choice.

India is up-and-coming a significant manufacturer, especially of electrical andelectronic equipment, automobiles and auto-parts. During 2000-2005 of the total FDIinflow, electrical and electronic (including computer software) and automobileaccounted for 13.7 per cent and 8.4 per cent respectively.

In services sectors, the lead players are the US, Singapore and the UK. During2000-2005, the total investment from these three countries accounted for about 40

per cent of the FDI in the services sector. In automobiles, the key player is Japan.During 2000-2005, Japan accounted for about 41 per cent of the total FDI inautomobile, surpassing all its competitors by a big margin.

India's vast domestic market and the large pool of technically skilled manpower werethe magnetism for the foreign investors. Hitherto, known for knowledge-basedindustries, India is emerging a powerhouse of conventional manufacturing too. Themanufacturing sector in the Index for Industrial Production has grown at an annualrate of over 9 per cent over the last three years.

Korean auto-makers think India is a better destination than China. Though Chinaprovides a bigger market for automobiles, India offers a potential for higher growth.Clearly, manufacturing and service-led growth and the increasing consumerisationmake India one of the most important destinations for FDI.


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42Automotive Mission Plan 2016

The bumper-to-bumper traffic of global automobile biggies on the passage to Indiahas finally made government sit up and take notice. In a bid to drive greaterinvestments into the sector, ministry of heavy industries has decided to put together

a 10-year mission plan to make India a global hub for automotive industry.

"The ten year mission plan will also set the roadmap for budgetary fiscal incentives"The Government of India is drawing up an Automotive Mission Plan 2016 that aimsto make India a global automotive hub. The idea is to draw an innovative plan ofaction with full participation of the stakeholders and to implement it in mission modeto meet the challenges coming in the way of growth of industry. Through thisAutomotive Mission Plan, Government also wants to provide a level playing field tothe players in the sector and to lay a predictable future direction of growth to enablethe manufacturers in making a more informed investment decision.

Major players in the automobile sector are:

o Tatao Mahindrao Ashok Leylando Bajajo Hero Hondao Daimler Chryslero Suzukio Fordo Fiato Hyundaio General Motorso Volvoo Yamahao Mazda

Foreign Companies in the Indian auto-sector

Until the mid-1990s, automobile industry in India consisted of just a handful of localcompanies with small capacities and obsolete technologies. Nevertheless, after the

sector was thrown open to foreign direct investment in 1996, some of the globalmajors moved in and, by 2002, Hyundai, Honda, Toyota, General Motors, Ford andMitsubishi set up their manufacturing bases.

Over the past four to five years, the country has seen the launch of several domesticand foreign models of passenger cars, multi-utility vehicles (MUVs), commercialvehicles and two-wheelers and a robust growth in the production of all kinds ofvehicles. Moreover, owing to its low-cost, high-quality manufacturing, India has alsoemerged as a significant outsourcing hub for auto components and auto engineeringdesign, rivaling Thailand. German auto-maker Volkswagen AG, too, is looking toenter India.


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43India is expected to be the small car hub for Japanese major Toyota. The car, a hothatch like the Swift or Getz is likely to be exported to markets like Brazil and otherAsian countries. This global car is crucial for Toyota, which is looking to improve itssales in the BRIC (Brazil, Russia, India and China) markets.

Two multi-national car majors -- Suzuki Motor Corporation of Japan and HyundaiMotor Company of Korea -- have indicated that their manufacturing facilities will beused as a global source for small cars. The spurt in in-house product developmentskills and the uniquely high concentration of small cars will influence the country'sability to become a sourcing hub for sub-compact cars.

A heartening feature of the changing automobile scene in India over the past fiveyears is the newfound success and confidence of domestic manufacturers. They areno longer afraid of competition from the international auto majors.

For instance, today, Tata Motor's Indigo leads the popular customer category, while

its Indica is neck-to-neck with Hyundai's Santro in the race for the top-slot in the Bcategory. Meanwhile M&M's Scorpio has beaten back the challenge from Toyota'sQualis to lead the SUV segment.

Similarly, a few Indian winners have emerged in the motorbike market -- the 150 and180 cc Pulsar from Bajaj and 110 cc Victor from the TVS stable. The 93 cc Bike fromBajaj and 110 cc Freedom bike from LML have also emerged as winners.

Evidently, Indian players have learnt from past mistakes and developed the skills tobuild cheaper automobiles using `appropriate' technologies. TVS, for instance, paidan overseas source $100,000 to fine-tune home-grown engines rather than $1.5million to import the entire engine. Similarly, M&M adapted available systems andoff-the-shelf components from global suppliers to keep costs down and go foraggressive pricing. True, Indian players are still lacking in scale of operation. Whileeconomies of scale no doubt play an important role in the auto sector, a few Indianmanufacturers relied on innovation rather than scale of operation for competitiveadvantage. For instance, Sundram Fasteners was able to achieve the feat of directlysupplying radiator caps to General Motors purely on the strength of innovation inproduct quality. The domestic tooling industry bagged the order for the ToyotaKirloskar transmission plant in the face of stiff competition from multinationalcorporations. The cost of the entire job turned out to be only a fraction of the original

estimate.As the automobile industry has matured over the past decade, the auto componentsindustry has also grown at a rapid pace and is fast achieving global competitivenessboth in terms of cost and quality.

In fact, industry observers believe that while the automobile market will grow at ameasured pace, the components industry is poised for a take-off. For it is among thehandful of industries where India has a distinct competitive advantage. Internationalautomobile majors, such as Hyundai, Ford, Toyota and GM, which set up their basesin India in the 1990s, persuaded some of their overseas component suppliers to set

up manufacturing facilities in India.


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44Consequently, the value of cumulative output of the auto components industry roserapidly to Rs 30,640 crore at end-2003-04 from just Rs 11,475 crore in 1996-97.Foreign companies such as Delphi, which followed General Motors in 1995, andVisteon, that followed Ford Motors in 1998, soon realised the substantial costadvantage of manufacturing components in India.

Finding the cost lower by about 30 per cent, they began exploring the possibility ofexporting back these low-cost, high-quality components to their global factories and,thus, reducing their overall costs. Not surprisingly, the industry's exports registered amore than four-fold jump to Rs 4,800 crore in 2003-04 from just Rs 1,033 crore in1996-97.

Automobile majors such as Maruti Udyog, Toyota, Hyundai have now finalised theirplans to invest in some of the critical auto components. According to the AutomotiveComponent Manufacturers Association of India (ACMA) officials, auto componentmanufacturers are expected to invest about Rs 10,000 crore over the next five years

at the rate of Rs 2,000 crore per annum.

According to analysts, the auto component industry could emerge as the nextsuccess story after software, pharmaceuticals, BPO and textiles. The size of theglobal auto component industry is estimated at $1 trillion and is set to grow further.Against this backdrop, McKinsey's latest report has estimated that the sector has thepotential of increasing its exports to $25 billion by 2015 from $1.1 billion in 2004.


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45Threat to the Dream

India's expedition to become a global auto manufacturing hub could be seriouslychallenged by its inability to uphold its low-cost production base. A survey conductedby the research, KMPMG firm reveals that the Indian auto component manufacturers

are increasingly becoming skeptical about sustaining the low-cost base asoverheads including labour costs and complex tax regime are constantly rising.

The survey said many executives believe that India's cost advantage is grindingdown fast as labour costs are constantly increasing and retaining employees isbecoming more and more difficult. Increased presence of global automotivecompanies in the country was cited as one of the reasons for the high erosion rate.

Indian auto businesses will only flourish if they boost investments in automation. Inthe longer term, cost advantage will only be retained if Indian capital can be used todevelop low-cost automation in manufacturing. This is the way to preserve our low

cost.

Global auto majors are also cynical about India's low cost manufacturing base. Indiataxation remains a big disadvantage. This is not about tax rates it is just aboutunnecessary complexity. But some companies also believe there is scope forreducing the cost of doing business.

In spite of this there are opportunities to exploit lower costs right across the board.It's true that labour costs are definitely increasing but they are still five per cent of thetotal operational costs. The labour costs can be further reduced if companies aresuccessful in bringing down other costs like reducing power costs. Low-cost basecan never last long. The company said Indian industry has till now relied on verylabour intensive model but it would have to switch to a more capital intensive modelnow.


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46

Factors contributing to the increased demand of automotives and the growth of

Indian Auto sector

The convergence of government policies, economys growth, peoples purchasing power

have all contributed to the phenomenal growth of Indian Auto industry. Some of theimportant growth drivers are explained below.

Rise in the industrial and agricultural output indirectly helps Indian Auto industry

Industrial and agricultural output increase has reflected in higher GDP and overall growthof the economy which is about 9% in the last three years. Higher GDP means morepurchasing power. Sales of vehicles for domestic and commercial consumption have seenhigh growth in these three years too.

Growth in the road infrastructure increases demand for vehicles

Indian highways and roads have improved a lot in quality and connectivity in the last 20years. Projects like the Golden Quadrilateral aim to make even remote areas accessible byroad. Some of the National Highways are of international standards. This has made roadtransport a viable, cost effective and speedy option both for goods and passenger traffic.

Rise in the Per capita income increases two/four wheeler sales

Industrial growth in the 70s, IT boom in the 1980s and BPO boom in the 1990s havetransformed the Indian middle class. The present generation is able to earn the samelevels of salary that their parents were earning after years of work. This has pushed up thedemand for two and four wheelers. A rise in per capita income is also indirectly responsiblefor the retail boom and industrial boom for consumer durables. This has pushed up thedemand for commercial vehicles to enable efficient distribution.

Urbanization changes the face of Indian auto industry

Joint families in towns and villages have given away to migration of the younger generationto cities in search of better opportunities. The new-age educated migrants and nuclearfamilies (many with double income couples) have a higher purchasing power. Presently,the rate of spread of urbanization is 30% which is likely to increase by 40% in 2030 (UN).Urbanization has promoted infrastructural development and it is estimated to spread at arate of $500 billion in the next 5-6 years


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Rising working class and middle class contribute to increased demand of

automotives

Post 1980s, a surging economy has created millions of new jobs in the private sector. Thishas lead to a lot of prosperity in the working class and the middle income households.They are able to provide for food, clothing and education and also are able to think ofowning luxuries like vehicles. According to the Planning Commission report, between theyear 2003 and 2009, 130 million people would have been added to the working population.According to a finding from McKinsey, the middle income group will grow from 50 million to550 million by 2025.

Exhaustive range of options in price and models of automotives

Indian consumer in 70s and 80s had to choose between and Premier Padmini or anAmbassador. Now there are at least 123 different models of cars from 30 oddmanufacturers available. The prices of the compact cars like Tatas Nano has made theworld sit up and take note of the truly unbeatable price points.

Attractive Finance Schemes for purchase of automotives

Most nationalized and foreign banks have very tempting finance options and low interestrates for purchase of cars and two wheelers. There are specialized companies that finance

the commercial vehicles. All this has made the dream of owning a vehicle an easy reality


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48Indian Automobile Sector - Recent

Development

VW Polos long waiting period affecting sales

The average monthly demand for the Volkswagen Polo stands at approximately2,500 units something that the German company did not anticipate when itlaunched the car in February 2010. Also, the company had not foreseen therelatively higher demand for the cars top-end variant. VWs inability to meet the highdemand for the Polo has now stretched the cars waiting period to 4 months, forcing

potential customers to settle for alternative options like the Ford Figo and theHyundai i10, thus affecting the Polos sales.

Fifty-five percent of the Polos components are sourced locally, and, with thecompany looking to ramp up production, vendors are under pressure to increasesupply. This has also led to some quality concerns, especially regarding componentsthat are manufactured in India, such as tyres.

In spite of production constraints, VW has decided to launch a new 1.6-litre petrolvariant of the small car. It is also getting ready to launch the Vento which is asedan built on the Polos platform. The Vento will be available in both petrol and

diesel versions.

Maruti, Volkswagen discuss synergies in manufacturing, product design

Officials from auto companies Maruti Suzuki and Volkswagen India met recently toexplore the possibility of a tie-up in production and vehicle design. German carmaker Volkswagen had bought a 20 percent stake in Japans Suzuki Motor in 2009.

Industry analysts say that VW may now employ Marutis low-cost manufacturing

expertise in its own projects, and also work with it in areas such as product designand testing. The two companies, however, will not share distribution networks, andwill continue to compete with each other in the retail market.

Media reports say that Maruti Suzukis top officials were present at the meeting, aswere senior officials from VW headed by VW India President Joerg Mueller. TheGerman carmaker can gain a lot from a tie-up with Maruti in India. While the formeris yet to make its mark in the country, the latter leads the auto industry with a 50percent-plus market share even at a time when the country if flooded with global carcompanies. A Maruti Suzuki India (MSI) spokesperson told reporters that the issue

was being handled by its parent company, Suzuki Motor, and that MSI could notcomment on it.


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49Bajaj-Renault to launch ultra low cost car in 2012

Carlos Ghosn, chief executive of French car maker Renault and Japan's Nissan

Motor Co. said on Tuesday an agreement had been signed with India's Bajaj Auto fora low-cost car which would come to India in 2012. Nissan Renault CEO CarlosGhosn met Bajaj Auto MD Rajiv Bajaj Monday evening to settle issues relating tobranding and the basic concept of the car that were delaying the project.

The design, manufacturing and sourcing for the car would be done by Bajaj, andRenault-Nissan will look after marketing in India and overseas, Ghosn told reportersat a media conference in New Delhi.

Bajaj and Renault-Nissan had announced the formation of a joint venture in May

2008, to develop, produce and market a car code-named ULC. The project ran intohiccups over branding, product detail and concept issues. This summer Rajiv Bajajwent on record to say he had asked for all the work done on the project to bescrapped. He wanted major modifications on design, positioning and other details.The new concept that the team came up with has now met with Mr Ghosns approval

as well.

Nissan has a joint venture with Ashok Leyland for light trucks and Renault withMahindra & Mahindra for the Logan sedan. Both these joint ventures are facingproblems and Mr Ghosn had last month said it was possible that his group wouldend up with only one partner in India.

Mr Ghosns India strategy has come under pressure lately because of the poor

performance of the Logan sedan which Renault makes and markets in India inpartnership with Mahindra & Mahindra.

Relations between Renault and M&M became strained with the Indian partnerunhappy over its lack of control on product design. His other JV between Nissan andAshok Leyland will also see a significant reduction in investment from the earlierannounced $500 million.

At the ongoing World Economic Forum summit, Mr Ghosn admitted that there wereproblems with his partnerships in India but added that he was gung ho about the$2500 car which will compete with the Rs 1 lakh Tata Nano when it rolls out in 2011.He told ET Now on Sunday that Renault, which had earlier frozen overseasinvestments during the financial crisis, will now resume its investments in Indiaincluding its share of the $1 billion new factory in Chennai which it will share withNissan.

"We had suspended the second phase of Chennai investment until we could see

where the global car market would end up," Mr Ghosn had said. "Now that theestimate is that the year will end with around 60 million units, up from around 55


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50million last year, we seem to have hit a plateau. So all plans of expansion can beresumed with a more solid understanding of the future. The Chennai plant will beinaugurated early 2010 and I will be there for it."

Toyota's small car to be 10% more fuel efficient than Maruti, Hyundai

The world's biggest carmaker by sales, Toyota Motor Corp, is developing a 10 percent more fuel-efficient small car for launch in India by early 2011 to beat marketleaders Maruti Suzuki and Hyundai.

"For our upcoming small car we have set the benchmark with Maruti's Swift andHyundai's i20. We are targeting to develop the car with 10 per cent more fuelefficiency than the Swift and i20," Toyota Motor Corporation Chief Engineer (Product

Planning for Passenger Vehicle) Yoshinori Noritake told a group of visiting Indianjournalists here.

The company would introduce the car with a four-cylinder engine that will be BharatStage IV emission norm compliant. Asked about engine specifications, Noritake said:"Though we have not decided, we are finalising the engine capacity to make itsuitable for enjoying the excise duty benefits for the small car."

Currently, small cars -- 1.2 litre for petrol and 1.5 litre for diesel engine -- are chargedonly 8 per cent excise duty compared with 20 per cent for bigger cars in the Indian

market. He said besides fuel efficiency, pricing is a big challenge that Toyota is tryingto overcome to be successful in the price-sensitive Indian market.

"Pricing is very important. Toyota is looking very positively with this small car to marka strong presence in the country," Noritake said. In order to reduce cost ofproduction, he said the company is looking at sharing components from othermodels with the proposed compact car.

"It is very important to reduce the cost. Commonalisation of components of variousmodels is helpful and now we are assessing this aspect," he said, adding a majorportion of the components will be sourced locally. "But we are also considering tosupply parts from the ASEAN countries such as Thailand and Indonesia to bringdown the cost of the car," he said.

The company is planning to launch both the hatchback and sedan versions of thecar. The base model of the car will also have options to select various high-endsafety features like ABS (anti braking system).


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51

First Tata Nano to roll out of Sanand on June 2nd

Tata Nano's production plant at Sanand, Gujarat would roll out its first product onJune 2nd. The plant at Sanand is Tata Motor's unbroached project in Gujarat afterfacing severe land disputes in West-Bengal. There have been speculations going onin the automobile industry from quite some time now regarding the inauguration ofthis plant, which finally would be concluded on June 2nd 2010. The inaugurationceremony would take place in the esteem presence of Gujarat's chief ministerNarendra Modi and Tata group's chairman Mr. Ratan Tata, the soul behind Nano.

Immediately after the plant is inaugurated the delivery of cars that have already been

booked would commence, company sources informed. Tata Nano has receivedunprecedented response since the launch its launch was announced. Thecommercial production had already started at the plant and the inauguration wouldtake the plunge to the next level that is car delivery.

The plant at Sanand has a production capacity of 250,000 units annually, and can beexpanded to approximately five lakh units per annum, a company statement said.The investment drawn by this plant is close to Rs 2,000 cr.

The company had announced in 2009 that the first 100,000 deliveries of Nano would

be achieved by December 2010 and with this news hovering around, theannouncement seems close to completion.


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52Indian Automobile Sector Innovations

Going Green Ideas

The rising number of automobiles has one negative fallout: air pollution, however ona positive note one must add that the emission in motor vehicles has seen a steadydecrease over the years. According to SIAM (Society of automobile Manufacturers inIndia) the country has seen an 86% reduction in pollution levels over the last decadeor so. It has to be noted that India has some of the stringent standards for two-wheeler prevalent anywhere in the world. With the introduction of Euro III (Bharat IIIin the Indian context) in select cities and the rest of the country moving to Euro IIstandards, Indians could breathe easy and breathe cleaner air. All car manufacturershave already started phasing out Euro I cars because they won't be allowed to besold in the country because of these new emission norms.

The emission norms in India came into force from 1991 for Petrol vehicles and in thefollowing year it was extended to Diesel vehicles that were playing in the country.From the year 1995 it was made mandatory for all petrol vehicles in the four metrosto use catalytic converters. Unleaded petrol was also made available to these fourcities then, which was later extended to other parts of the country by the year 2000.

The Central Pollution Control Board (CPCB) has taken some steps to reduce airpollution in the country

Establishment of Ambient air quality monitoring throughout the country. Notification of Ambient air quality standards under the Environment Protection

Act. Notification of Air pollution norms Improving the fuel quality Introduction of cars that run on alternative fuel like CNG/LPG etc. Improvement of public transport system Phasing out old and polluting commercial vehicles Creating awareness and public campaigns

In the wake of making the country pollution free various car companies have takensteps to improve the situation. Maruti Suzuki which is one of the oldest carmanufacturers in the country organizes free pollution check camps and is alsopushing aggressively for CNG kits for its cars. Recently it has launched a Wagon Rwhich comes fitted with LPG kit; it also has a LPG version of its popular car OMNI inits kitty.

Hyundai Motor Company globally has been in the forefront of innovatingenvironmental friendly vehicles like Hybrid Electric Vehicle and Fuel Cell ElectricVehicles.

Companies like Tata Motors and Mahindra and Mahindra are also working hard to

meet the stringent Bharat III or the Euro III standards in their diesel engines. It hasbeen able to meet the standard with a conventional diesel engine; however it is also


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53working on a CRDI engine to stay in the competition. Mahindra on the other handhas straightway introduced a CRDI version of its flagship vehicle Scorpio.

Not to be left behind the two-wheeler manufacturers have already taking steps tomeet the strict emission standards that are prevalent in the country. Hero Hondawhich is one of the largest two wheeler manufacturer in the country has a philosophyof continuously innovating new products to improve environmental compatibility.Similarly automobile users have a key role to play to keep the environment pollutionfree, they should maintain their vehicles and drive responsibly to make the country abetter place to drive about.

It is just unimaginable how things have changed around us in a matter of a decadeor less. Lets speak here on the advent of the Electric vehicles in the Indian context.The concept for Electric Vehicles was impossible about a couple of years ago. Thescene in India changed after Maini Reva, the first Indian electric car maker put up abold face and entered the Indian market. Yes, the going was certainly tough for Revainitially, thanks to the overly priced car which was limited only to the city use. It

seemed highly impractical when the car was first launched in India.

But those were the days and now these are the days. Times do change. Reva surelyset up as a pioneer in safeguarding the environment with its non-polluter electriccars. Picking up the cues, even bigger and environment-conscious car makers alsojoined the fray in a big way after the great recession of 08-09. This was a decisivemoment as the mindset of billions of people suddenly started changing in the wakeof Copenhagen summit.

India almost suddenly became a hot spot for the car manufactures to try out theirnew electric wares and cars that spat less smoke. This years Auto Expo certainlywill be serving as a launch pad for more and more electric vehicles to hit India. Thiscould prove a hit provided the practicality issues are sorted out soon.

At the Auto Expo, almost all the car manufactures are showcasing their electric carportfolio. Staring from General Motorss EVs, Electric vehicles like that ofHonda EV-N, Renault Twizy ZE andToyotas Prius Hybridwill be showcased. Toyota has beenmaking this hybrid since 1997 but India will see the third generation version of Priuson the roads pretty soon which will have a 1.5 litre petrol engine mated with anelectric motor and will give around 20 kilometers a litre.

GM will have the concept Chevy Volt and the Chevy Spark Electric prototype at theshow. The Chevy Spark Electric will have the same look at the petrol version but theengine will be replaced by an electric motor. The electric power train will be sourcedfrom REVA. It must be recalled that GM and Reva Electric had signed an agreementrecently to develop electric cars for the Indian market. The car is expected to debutcommercially this year. The Chevrolet Volt is an electric vehicle with extended-rangecapability. It is said to be designed to drive up to 40 miles on electricity without usinggasoline or producing tail-pipe emissions.

Tata Motors in the meanwhile is not lagging behind and we are anticipating that Tatashowcases an electric/hybrid version of its Nano and also an electric version of its

Indica, which has been in development in Norway. Tata had bought Norway-basedelectric vehicle maker Miljo Grenland/Innovasjon in 2008.
http://blog.carazoo.com/2009/10/honda-ev-n-electric-car-to-be-showcased.htmlhttp://blog.carazoo.com/2009/10/honda-ev-n-electric-car-to-be-showcased.htmlhttp://blog.carazoo.com/2009/10/prius-to-tread-in-india.htmlhttp://blog.carazoo.com/2009/10/prius-to-tread-in-india.htmlhttp://blog.carazoo.com/2009/10/prius-to-tread-in-india.htmlhttp://blog.carazoo.com/2009/10/prius-to-tread-in-india.htmlhttp://blog.carazoo.com/2009/10/honda-ev-n-electric-car-to-be-showcased.htmlhttp://blog.carazoo.com/2009/10/honda-ev-n-electric-car-to-be-showcased.html


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54The Norwegian firm will manufacture super polymer lithium ion batteries and electricvehicles based on Tata Motors range of products as well as conduct research anddevelopment in allied technologies. Tata Motors will soon roll out its Rs 160 croreelectric car project in Norway and later scale it up for other Scandinavian markets.

The Indica Vista EV has been designed and developed by Tata Motors' UKsubsidiary, Tata Motors European Technical Centre.

Indias largest car maker Maruti Suzuki is displaying its hybrid sedan amongst otherconcept cars at the Auto Expo 2010. The company is working on clean fueltechnologies as part of a public-private partnership ahead of the CommonwealthGames, 2010.

Reva, which is Indias first electric car, showed off its NXR and NXG range of smallEVs at the Frankfurt Auto Show last year. Though these cars will not be showcasedat the Auto Expo, the India launch is expected soon.

Hyundai too has joined the EV bandwagon and will be showcasing an i10 EV at theAuto Expo. The launch though will be at a later date.

Mahindra is not falling behind of the schedule and has a couple of EVs which is allset to be unveiled at the show.


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55Bharat Forge India unveil retrofit REVOLO hybrid kits; on sale in India in six

months

In what seems to be one of the best inventions of recent times, Bharat Forge andKPIT Cummins (a new JV has been

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