The Indian Automobile Industry: Overview

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MUL hoped this model would help the company shed its low-cost and simple look. The move expressed the company's intent to move up the value pyramid (by upgrading Alto-WagonR-Santro customers to the new model) while simultaneously increasing market penetration at the bottom of the value pyramid by making the M-800 more affordable. Indian Automobile IndustryThe Indian automobile industry has four major segments -- commercial vehicles (CVs), passenger vehicles, three wheelers, and two wheelers. The market share for each of these segments of the Indian automobile industry, for the year 2003-04, is shown in Figure I.

According to the Society of Indian Automobile Manufacturers (SIAM) , the Indian passenger vehicle market has three categories -- passenger cars, multi-purpose vehicles (MPVs), and utility vehicles (UVs).| | The passenger car market is further divided into various segments based on the length of the car (Refer to Exhibit II for a detailed description of the lengthwise classification of passenger cars. | The Indian automobile industry was a highly protected slow-growth industry with very few players till the opening up of the Indian economy in 1991. Low manufacturing costs, availability of skilled labor, an organized component industry, and the capability to supply in large volumes attracted global auto majors to set up their operations in India after the opening up of the sector.

For example, Fiat and DaimlerChrysler started outsourcing their component requirements to India. 100 percent Indian subsidiaries of global players, like Delphi Automotive Systems and Visteon , exported components to other parts of the world.| Macroeconomic factors like government regulations, low interest rates, and availability of retail finance played an important role in the rapid development of the automobile industry in India during the late nineties (Refer to Exhibit III for an understanding of the impact of the Union Budget on the Indian...
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