The Indian Automobile Industry is manufacturing over 11 million vehicles and exporting about 1.5 million every year.

[19] The dominant products of the industry are two wheelers with a market share of over 75% and passenger cars with a market share of about 16%.[19] Commercial vehicles and three wheelers share about 9% of the market between them. About 91% of the vehicles sold are used by households and only about 9% for commercial purposes.[19] The industry has attained a turnover of more than USD 35 billion and provides direct and indirect employment to over 13 million people.[19] The supply chain of this industry in India is very similar to the supply chain of the automotive industry in Europe and America. This may present its own set of opportunities and threats. The orders of the industry arise from the bottom of the supply chain i. e., from the consumers and goes through the automakers and climbs up until the third tier suppliers. However the products, as channelled in every traditional automotive industry, flow from the top of the supply chain to reach the consumers. Interestingly, the level of trade exports in this sector in India has been medium and imports have been low. However, this is rapidly changing and both exports and imports are increasing. The demand determinants of the industry are factors like affordability, product innovation, infrastructure and price of fuel. Also, the basis of competition in the sector is high and increasing, and its life cycle stage is growth. With a rapidly growing middle class, all the advantages of this sector in India are yet to be leveraged. Note that, with a high cost of developing production facilities, limited accessibility to new technology and soaring competition, the barriers to enter the Indian Automotive sector are high. On the other hand, India has a well-developed tax structure. The power to levy taxes and duties is distributed among the three tiers of Government. The cost structure of the industry is fairly traditional, but the profitability of motor vehicle manufacturers has been rising over the past five years. Major players, like Tata Motors and Maruti Suzuki have material cost of about 80% but are recording profits after tax of about 6% to 11%.[19] The level of technology change in the Motor vehicle Industry has been high but, the rate of change in technology has been medium. Investment in the

technology by the producers has been high. System-suppliers of integrated components and sub-systems have become the order of the day. However, further investment in new technologies will help the industry be more competitive. Over the past few years, the industry has been volatile. Currently, Indias increasing per capita disposable income which is expected to rise by 106% by 2015[19] and growth in exports is playing a major role in the rise and competitiveness of the industry. Tata Motors is leading the commercial vehicle segment with a market share of about 64%.[19] Maruti Suzuki is leading the passenger vehicle segment with a market share of 46%.[19]Hyundai Motor India and Mahindra and Mahindra are focusing expanding their footprint in the overseas market. Hero Honda Motors is occupying over 41% and sharing 26%[19] of the two wheeler market in India with Bajaj Auto. Bajaj Auto in itself is occupying about 58% of the three wheeler market. Consumers are very important of the survival of the Motor Vehicle manufacturing industry. In 2008-09, customer sentiment dropped, which burned on the augmentation in demand of cars. Steel is the major input used by manufacturers and the rise in price of steel is putting a cost pressure on manufacturers and cost is getting transferred to the end consumer. The price of oil and petrol affect the driving habits of consumers and the type of car they buy. The key to success in the industry is to improve labour productivity, labour flexibility, and capital efficiency. Having quality manpower, infrastructure improvements, and raw material availability also play a major role. Access to latest and most efficient technology and techniques will bring competitive advantage to the major players. Utilising manufacturing plants to optimum level and understanding implications from the government policies are the essentials in the Automotive Industry of India. Both, Industry and Indian Government are obligated to intervene the Indian Automotive industry. The Indian government should facilitate infrastructure creation, create favourable and predictable business environment, attract investment and promote research and development. The role of Industry will primarily be in designing and manufacturing products of world-class quality establishing cost competitiveness and improving productivity in

labour and in capital. With a combined effort, the Indian Automotive industry will emerge as the destination of choice in the world for design and manufacturing of automobiles. [edit]History The first car ran on India's roads in 1897. Until the 1930s, cars were imported directly, but in very small numbers. Embryonic automotive industry emerged in India in the 1940s. Mahindra & Mahindra was established by two brothers as a trading company in 1945, and began assembly of Jeep CJ-3A utility vehicles under license from Willys.[20] The company soon branched out into the manufacture of light commercial vehicles (LCVs) and agricultural tractors.[21] Following the independence, in 1947, the Government of India and the private sector launched efforts to create an automotive component manufacturing industry to supply to the automobile industry. However, the growth was relatively slow in the 1950s and 1960s due to nationalisation and the license raj which hampered the Indian private sector. After 1970, the automotive industry started to grow, but the growth was mainly driven by tractors, commercial vehicles and scooters. Cars were still a major luxury. Japanese manufacturers entered the Indian market ultimately leading to the establishment of Maruti Udyog. A number of foreign firms initiated joint ventures with Indian companies.[22] In the 1980s, a number of Japanese manufacturers launched joint-ventures for building motorcycles and light commercial-vehicles. It was at this time that the Indian government choseSuzuki for its joint-venture to manufacture small cars. Following the economic liberalisation in 1991 and the gradual weakening of the license raj, a number of Indian and multinational car companies launched operations. Since then, automotive component and automobile manufacturing growth has accelerated to meet domestic and export demands.[22] Following economic liberalization in India in 1991, the Indian automotive industry has demonstrated sustained growth as a result of increased competitiveness and relaxed restrictions. Several Indian automobile

manufacturers such as Tata Motors, Maruti Suzuki and Mahindra and Mahindra, expanded their domestic and international operations. India's robust economic growth led to the further expansion of its domestic automobile market which has attracted significant India-specific investment by multinational automobile manufacturers.[23] In February 2009, monthly sales of passenger cars in India exceeded 100,000 units[24] and has since grown rapidly to a record monthly high of 182,992 units in October 2009.[25] From 2003 to 2010, car sales in India have progressed at a CAGR of 13.7%, and with only 10% of Indian households owning a car in 2009 (whereas this figure reaches 80% in Switzerland for example [26]) this progression is unlikely to stop in the coming decade.[27] Congestion of Indian roads, more than market demand, will likely be the limiting factor.[28] SIAM is the apex industry body representing all the vehicle manufacturers, home-grown and international, in India.[29] [edit]Industry

Definition

This class consists of units mainly engaged in manufacturing motor vehicles or motor vehicle engines. Products and Services The primary activities of this industry are: Motor cars manufacturing Motor vehicle engine manufacturing The major products and services in this industry are: Passenger motor vehicle manufacturing segment (Passenger Cars, Utility Vehicles & Multi Purpose Vehicles) Commercial Vehicles (Medium & Heavy and Light Commercial Vehicles) Two Wheelers Three Wheelers [edit]Supply

Chain of Automobile Industry

The supply chain of automotive industry in India is very similar to the supply chain of the automotive industry in Europe and America. The orders of the industry arise from the bottom of the supply chain i. e., from the consumers and goes through the automakers and climbs up until the third tier suppliers. However the products, as channelled in every traditional automotive industry, flow from the top of the supply chain to reach the

consumers. Automakers in India are the key to the supply chain and are responsible for the products and innovation in the industry. The description and the role of each of the contributors to the supply chain are discussed below. Third Tier Suppliers: These companies provide basic products like rubber, glass, steel, plastic and aluminium to the second tier suppliers. Second Tier Suppliers: These companies design vehicle systems or bodies for First Tier Suppliers and OEMs. They work on designs provided by the first tier suppliers or OEMs. They also provide engineering resources for detailed designs. Some of their services may include welding, fabrication, shearing, bending etc. First Tier Suppliers: These companies provide major systems directly to assemblers. These companies have global coverage, in order to follow their customers to various locations around the world. They design and innovate in order to provide black-box solutions for the requirements of their customers. Black-box solutions are solutions created by suppliers using their own technology to meet the performance and interface requirements set by assemblers. First tier suppliers are responsible not only for the assembly of parts into complete units like dashboard, breaks-axel-suspension, seats, or cockpit but also for the management of second-tier suppliers. Automakers/Vehicle Manufacturers/Original Equipment Manufacturers (OEMs): After researching consumers wants and needs, automakers begin designing models which are tailored to consumers demands. The design process normally takes five years. These companies have manufacturing units where engines are manufactured and parts supplied by first tier suppliers and second tier suppliers are assembled. Automakers are the key to the supply chain of the automotive industry. Examples of these companies are Tata Motors, Maruti Suzuki, Toyota, and Honda. Innovation, design capability and branding are the main focus of these companies. Dealers: Once the vehicles are ready they are shipped to the regional branch and from there, to the authorised dealers of the companies. The dealers then sell the vehicles to the end customers.

Parts and Accessory: These companies provide products like tires, windshields, and air bags etc. to automakers and dealers or directly to customers. Service Providers: Some of the services to the customers include servicing of vehicles, repairing parts, or financing of vehicles. Many dealers provide these services but, customers can also choose to go to independent service providers. [edit]Key

statistics

The production of automobiles has greatly increased in the last decade. It passed the 1 million mark during 2003-2004 and has more than doubled since.[30] Year Car Production % % Commercial Change Change 29.39 17.83 7.74 16.33 16.53 7.27 29.78 28.98 7.55 26.37 -2.85 722,199 466,330 486,277 540,250 546,808 362, 755 332,803 253,555 190,848 160,054 283,403 285,044 54.86 -4.10 -9.99 -1.20 50.74 9.00 31.25 32.86 19.24 -43.52 -0.58 Total Vehicles Prodn. 3,536,783 2,641,550 2,332,328 2,253,999 2,019,808 1,628,755 1,511,157 1,161,523 894796 814611 801360 818193 % Change 33.89 13.25 3.35 10.39 19.36 7.22 23.13 22.96 8.96 1.62 -2.10

2010 2,814,584 2009 2,175,220 2008 1,846,051 2007 1,713,479 2006 1,473,000 2005 1,264,000 2004 1,178,354 2003 907,968 2002 703,948 2001 654,557 2000 517,957 1999 533,149 Year Motor Vehicle Production[19]

2004-2005 2005-2006 2006-2007 2007-2008 2008-2009 8,467,853 9,743,503 11,087,997 10,853,930 11,175,479 26,969 30,507 32,383 33,342*

Industry Revenue[19] 24,379

Exports (Units)[19] Exports (Revenue)[19]

629,544 1,915

806,222 2,231

1,011,529 2,552

1,238,333 3,008

1,530,660 3,718*

[edit]Automobile Type of Vehicle Passenger Vehicles [19] Commercial Vehicles [19] Two Wheelers [19] Total

Production

2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 1,209,876 1,309,300 1,545,223 353,703 391,083 434,423 519,982 556,126 1,777,583 549,006 500,660 8,026,681 1,838,697 417,126 501,030 8,418,626

Three Wheelers [19] 374,445

6,529,829 7,608,697 8,466,666

8,467,853 9,743,503 11,087,997 10,853,930 11,175,479

[edit]Automobile Type of Vehicle Passenger Vehicles [19] Commercial Vehicles [19] Two Wheelers Total
[19]

Sales

2004-2005 2005-2006 2006-2007 2007-2008 2008-2009 1,061,572 318,430 1,143,076 351,041 359,920 7,052,391 8,906,428 1,379,979 467,765 403,910 7,872,334 1,549,882 490,494 364,781 7,249,278 1,551,880 384,122 349,719 7,437,670 9,723,391

Three Wheelers [19] 307,862 6,209,765 7,897,629

10,123,988 9,654,435

[edit]Automobile Type of Vehicle Passenger Vehicles [19] Commercial Vehicles [19] Three Wheelers [19]

Exports

2004-2005 2005-2006 2006-2007 2007-2008 2008-2009 166,402 29,940 66,795 175,572 40,600 76,881 198,452 49,537 143,896 218,401 58,994 141,225 335,739 42,673 148,074

Two Wheelers [19] Total

366,407 629,544

513,169 806,222

619,644 1,011,529

819,713 1,238,333

1,004,174 1,530,660

Emission norms See also: Bharat Stage emission standards In tune with international standards to reduce vehicular pollution, the central government unveiled the standards titled 'India 2000' in 2000 with later upgraded guidelines as 'Bharat Stage'. These standards are quite similar to the more stringent European standards and have been traditionally implemented in a phased manner, with the latest upgrade getting implemented in 13 cities and later, in the rest of the nation. Delhi(NCR), Mumbai, Kolkata, Chennai, B engaluru, Hyderabad, Ahmedabad, Pune, Surat, Kanpur, Lucknow, Solapur, and Agra are the 13 cities where Bharat Stage IV has been imposed while the rest of the nation is still under Bharat Stage III.
[edit]

Exports

Mahindra Scorpio Jeep in service with the Italy's CNSAS.

India's automobile exports have grown consistently and reached $4.5 billion in 2009, with United Kingdom being India's largest export market followed by Italy, Germany, Netherlands and South Africa.[31] India's automobile exports are expected to cross $12 billion by 2014.[32] According to New York Times, India's strong engineering base and expertise in the manufacturing of low-cost, fuel-efficient cars has resulted in the expansion of manufacturing facilities of several automobile companies like Hyundai Motors, Nissan, Toyota, Volkswagen and Suzuki.[33] In 2008, Hyundai Motors alone exported 240,000 cars made in India. Nissan Motors plans to export 250,000 vehicles manufactured in its India plant by 2011.[34] Similarly, General Motors announced its plans to export about 50,000 cars manufactured in India by 2011.[35] In September 2009, Ford Motors announced its plans to setup a plant in India with an annual

capacity of 250,000 cars for US$500 million. The cars will be manufactured both for the Indian market and for export.[36] The company said that the plant was a part of its plan to make India the hub for its global production business.[37] Fiat Motors also announced that it would source more than US$1 billion worth auto components from India.[38] In July 2010, The Economic Times reported that PSA Peugeot Citron was planning to re-enter the Indian market and open a production plant in Andhra Pradesh with an annual capacity of 100,000 vehicles, investing EUR 700M in the operation.[39] PSA's intention to utilise this production facility for export purposes however remains unclear as of December 2010.

A Tata Safari on display in Poznan,Poland.

In 2009 India (0.23m) surpassed China (0.16m) as Asia's fourth largest exporter of cars after Japan (1.77m), Korea (1.12m) and Thailand (0.26m) by

allowing foreign carmakers 100% ownership of factories in India, which China does not allow.[5] In recent years, India has emerged as a leading center for the manufacture of small cars. Hyundai, the biggest exporter from the country, now ships more than 250,000 cars annually from India. Apart from shipments to its parent Suzuki, Maruti Suzuki also manufactures small cars forNissan, which sells them in Europe. Nissan will also export small cars from its new Indian assembly line. Tata Motors exports its passenger vehicles to Asian and African markets, and is in preparation to launch electric vehicles in Europe in 2010. The firm is also planning to launch an electric version of its low-cost car Nano in Europe and the U.S. Mahindra & Mahindra is preparing to introduce its pickup trucks and small SUVmodels in the U.S. market. Bajaj Auto is designing a low-cost car for the Renault Nissan Automotive India, which will market the product worldwide. Renault Nissan may also join domestic commercial vehicle manufacturer Ashok Leyland in another small car project.[40] While the possibilities are impressive, there are challenges that could thwart future growth of the Indian automobile industry. Since the demand for automobiles in recent years is directly linked to overall economic expansion and rising personal

incomes, industry growth will slow if the economy weakens.[40]

[edit]Top Rank 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19

20 Export destinations in 2007-2008 and growth from previous year

Country 2007-2008 (in USD Millions) 2008-2009 (in USD Millions) 525.24 359.68 216.11 188.57 246.32 192.74 265.63 164.86 143.54 409.63 120.71 98.13 94.10 73.82 56.96 134.21 148.74 127.63 163.66 38.30 Percentage Growth -11.52 8.22 -13.26 -15.79 48.77 17.21 80.28 20.11 5.99 206.8 1.54 -11.86 0.32 -11.63 -29.69 74.83 125.03 94.1 151.05 -36.07

United States of 593.64 America Italy Sri Lanka South Africa United Arab Emirates Algeria Bangladesh Egypt Germany Colombia Nepal Mexico Turkey Spain France Nigeria Greece Netherland 332.35 249.14 224.93

United Kingdom 165.57 164.44 147.34 137.26 134.43 133.52 118.88 111.33 93.80 83.53 81.01 76.77 66.01 65.75 65.19 59.91

20 Ghana [edit]

Commercial vehicle manufacturers in India

[edit]Indian

brands

Force[117] [118] Hindustan Motors [68] Premier [119] Tata [120] AMW [121] Eicher Motors [edit]Joint Venture Brands VE Commercial Vehicles Limited[122] - VE Commercial Vehicles limited - A JV between Volvo Groups & Eicher Motors Limited. [123] Ashok Leyland - originally a JV between Ashok Motors and Leyland Motors, now 51% owned by Hinduja Group [124] Mahindra Navistar - a 51:49 JV between Mahindra Group and Navistar International [125] Swaraj Mazda - originally a JV between Punjab Tractors and Mazda, now 53.5% owned by Sumitomo Group [126] Kamaz Vectra - A JV between Russia's KaMAZ and the Vectra Group [edit]Foreign brands

Volvo[127] Tatra[128] MAN[129] - as a JV with Force Motors, makes MAN Trucks in India Mercedes-Benz[130] Daimler AG[131] - manufactures BharatBenz, a brand of trucks based on the Fuso and the Mercedes Benz truck platforms, which Daimler AG owns Rosenbauer[132] Scania[133] Iveco[134] Hino[135]

Isuzu[136] Piaggio[137] Caterpillar Inc.[138

Taxation
India has a well developed tax structure. The power to levy taxes and duties is distributed among the three tiers of Government, in accordance with the provisions of the Indian Constitution. The main taxes/duties that the Union Government is empowered to levy are:- Income Tax (except tax on agricultural income, which the State Governments can levy), Customs duties, Central Excise and Sales Tax and Service Tax. The principal taxes levied by the State Governments are:- Sales Tax (tax on intra-State sale of goods), Stamp Duty (duty on transfer of property), State Excise (duty on manufacture of alcohol), Land Revenue (levy on land used for agricultural/non-agricultural purposes), Duty on Entertainment and Tax on Professions & Callings. The Local Bodies are empowered to levy tax on properties (buildings, etc.), Octroi (tax on entry of goods for use/consumption within areas of the Local Bodies), Tax on Markets and Tax/User Charges for utilities. Excise Duty Central Excise duty is an indirect tax levied on those automobiles which are manufactured in India and are meant for home consumption. The taxable event is 'manufacture' and the liability of central excise duty arises as soon as the automobiles are manufactured. It is a tax on manufacturing, which is paid by a manufacturer, who passes its incidence on to the customers. Types of Excise Duties Basic Excise Duty: This is the duty leviable under First Schedule to the Central Excise Tariff Act, 1985 at the rates mentioned in the said Schedule.

Special Excise Duty: This is the duty leviable under Second Schedule to the Central Excise Tariff Act, 1985 at the rates mentioned in the said Schedule. At present this is leviable on very few items. National Calamity Contingent Duty (NCCD): Normally known as NCCD. This duty is levied as per section 136 of the Finance Act, 2001, as a surcharge on specified goods. Excise Duties and Cesses Leviable under Miscellaneous Act:On certain specified goods, in addition to the aforesaid duties, prescribed rate of excise duty and cess is also leviable. Education Cesson excisable goods is levied in addition to any other duties of excise chargeable on such goods, under the Central Excise Act, 1944 or any other law for the time being in force. [edit]MODVAT

and CENVAT

Taxation of inputs, like raw materials, components and other intermediaries has a number of limitations. In production process, raw material passes through various processes stages till a final product emerges. Thus, output of the first manufacturer becomes input for second manufacturer and so on. When the inputs are used in the manufacture of product `A', the cost of the final product increases not only on account of the cost of the inputs, but also on account of the duty paid on such inputs. As the duty on the final product is on ad valorem basis and the final cost of product `A' includes the cost of inputs, inclusive of the duty paid, duty charged on product `A' meant doubly taxing raw materials. In other words, the tax burden goes on increasing as raw material and final product passes from one stage to other because, each subsequent purchaser has to pay tax again and again on the material which has already suffered tax. This is called cascading effect or double taxation. This very often distorted the production structure and did not allow the correct assessment of the tax incidence. Therefore, the Government tried to remove these defects of the Central Excise System by progressively relieving inputs from excise and countervailing duties. An ideal system to realize this objective would have been to adopt value

added taxation (VAT). However, on account of some practical difficulties it was not possible to fully adopt the value added taxation. Hence, Government evolved a new scheme, `MODVAT' (Modified Value Added Tax). MODVAT Scheme which essentially follows VAT Scheme of taxation. i.e. if a manufacturer A purchases certain components(raw materials) from another manufacturer B for use in its product. B would have paid excise duty on components manufactured by it and would have recovered that excise duty in its sales price from A. Now, A has to pay excise duty on product manufactured by it as well as bear the excise duty paid by the supplier of raw material B. Under the MODVAT scheme, an Original Equipment Manufacturer can take credit of excise duty paid by First Tier and Second Tier suppliers. It amounts to excise duty only on additions in value by each manufacturer at each stage. MODVAT Scheme ensures the revenue of the same order and at same time the price of the final product could be lower. Apart from reducing the costs through elimination of cascade effect, and bringing in greater rationalization in tax structure and also bringing in certainty in the amount of tax leviable on the final product, this scheme will help the consumer to understand precisely the impact of taxation on the cost of any product. Subsequently, MODVAT scheme was restructured into CENVAT (Central Value Added Tax) scheme. A new set of rules 57AA to 57AK , under The CENVAT Credit Rules, 2004, were framed and whatever restrictions were there in MODVAT Scheme were put to an end and comparatively, a free hand was given to the assesses. Under the CENVAT Scheme, a manufacturer of final product or provider of taxable service shall be allowed to take credit of duty of excise as well as of service tax paid on any input received in the factory or any input service received by manufacturer of final product. Inputs include goods used in the manufacture of capital goods which are further used in the factory of the manufacturer. [edit]Customs

Duty

Customs Duty (Import duty and Export tax) is a type of indirect tax levied on goods imported into India as well as on goods exported from India. Taxable event is import into or export from India. In India, the basic law for levy and collection of customs duty is Customs Act 1962. It provides for levy and collection of duty on imports and exports, import/export procedures, prohibitions on importation and exportation of goods, penalties, offences, etc. Export duties are levied occasionally to mop up excess profitability in international prices of goods in respect of which domestic prices may be low at the given time. But the sweep of import duties is quite wide. [edit]Service

Tax

Service tax is a tax levied on services rendered by a person and the responsibility of payment of the tax is cast on the service provider. It is an indirect tax as it can be recovered from the service receiver by the service provider in course of his business transactions. Service Tax was introduced in India in 1994 by Chapter V of the Finance Act, 1994. It was imposed on an initial set of three services in 1994 and the scope of the service tax has since been expanded continuously by subsequent Finance Acts. The Finance Act extends the levy of service tax to the whole of India, except the State of Jammu & Kashmir.[19] (Source: National Information Centre) Industry Assistance The automobile industry has a defined its target in the Automotive Mission Plan as To emerge as the destination of choice in the world for design and manufacture of automobiles with output reaching a level of USD 145 billion accounting more than 10% of GDP and providing additional employment to 25 million people by 2016.[19] In order to achieve this plan interventions are required from both Industry and Indian Government. The Indian Government would play a key enabling role in facilitating infrastructure creation, promote the countrys capabilities, create a favourable and predictable business environment, attract investment and promote research & development. The role of Industry will primarily be in designing and manufacturing products of

world-class quality standards, establishing cost competitiveness, improving productivity of both labour and capital, achieving scale and R&D enhancing capability and showcasing Indias products in potential markets. In order to achieve these goals the following key recommendations have been made in the Automotive Mission Plan to the Indian Government and Industry: Manufacturing and export of small cars, multi-utility vehicles, two and three wheelers, tractors, components to be promoted Care to be taken of negative like and rules of the country with current negotiation of Free Trade Agreement and Regional Trade agreement with countries like Thailand, Singapore, Malaysia, China, Korea, Egypt, Gulf etc. Attractive Tariff Policy which may follow attractive investment. Specific measures will be taken for expansion of domestic market. Incremental investment of USD 35 to 40 billion to Automotive Industry during the next 10 years. National Road Safety Board to act as the coordinating body for promoting safety. Inspection and Certification system to be strengthened by encouraging public-private partnership. National level Automotive Institute for training on automobile at International Training Institutes (ITIs) and Automotive Training Institute (ATIs) to be set up.
An Auto Design Centre to be established at National Institute of Design, Ahmadabad.

National Automotive Testing and R&D Implementation Project (NATRIP) to act as Centre of Excellence for Technical Design Data. Integration of Information Technology in manufacturing to be promoted. R&D for product, process and technology to be incentivised. Road Map for Auto Fuel Policy beyond 2010 would be drawn. The profitability of motor vehicle manufacturers has been rising over the past five years, mainly due to rising demand and growth of Indian middle class. Major players of the industry, like Maruti Suzuki India and Tata Motors have been recording profits of 6% to 11% from the past five years. Whereas, earlier profit margins in the industry were only 1.5% to 3%.

Cost of material has reduced from over 85% in the year 2001-2002 to under 80% in the year2008-2009.[19] Wages and salary as a percentage of revenue has been declining and with the increasing labour productivity this is expected to decline further in the coming years. [edit]Capital

and Labour Intensity

The level of Capital Intensity is high The level of Labour intensity in medium The motor vehicle manufacturing industry requires significant level of capital investment. Value is added through the automated manufacturing and assembly of costly components. Labour input is required in the manufacturing, assembly, and finishing processes. In order to achieve and retain competitiveness, vehicle manufacturing industry depends on its capacity and speed to innovate and upgrade. The most imperative indices for competitiveness in the industry are productivity in both labour and capital. Technology and Systems The level of technology change is high The rate of change in technology is medium Investment in technology by producers has been on the rise. The automobile industry in India has seen an enormous development in the engines which are being used. Carburettor engines have become obsolete and Multi Point Fuel Injection (MPFI) engines are the order of the days in patrol cars. The Diesel engines have also under gone a sea change from the time Rudolf Diesel invented it way back in the 1892. Today Common Rail Direct Injection (CRDI) is the order of the day. Multi Point Fuel injection (MPFI) The fuel injects were used to meet stricter emission norms as it keeps pollutants to bare minimum and drives the maximum performance out of a vehicle by squeezing out the maximum mileage even from the last drop of fuel that goes into the engine.

MPFI system injects fuel into individual cylinders after receiving command from the on board engine management system computer or Engine Control Unit (ECU). This technology results in superior fuel combustion, better fuel management, engine performance and reduced pollution. To get the maximum out from these types of engine one should use Premium petrol like XTRA Premium, Speed, and Power. Common Rail Direct Injection (CRDI) CRDI engine cars offer 25% more power than the normal direct injection engine with a superior pickup and torque, offering sometimes up to 70% more power than the conventional diesel engines. They are smooth, less strident, and immensely fuel efficient giving around 24 kilometres to a litre of Diesel. The fact that Diesel is cheaper than petrol in India further attributes greatness to the engine. In a CRDI engine, a tube or a common rail connects all the injectors and contains fuel at a constant pressure. The high pressure in the common rail ensures that when injected, the fuel breaks up into small particles and mixes evenly with the air, thereby leaving little un-burnt fuel thus reducing pollution. The common rail principle has been used to reduce the noise which used to be a downside with earlier Diesel engines; the technology has been pioneered by the Fiat group, only to be adopted by other automobile companies around the world. However, these engines are 25% more costly than the conventional engines. They also require higher degree of maintenance and spares are also expensive. The Indian automotive industry is in the mindset of a major structural transformation in todays globalised scenario. System Supplies of integrated components and sub-systems has become the order of the day, with individual small components being supplied to the system integrators instead of vehicle manufacturers. In this process most of the Small Scale Industrial units, manufacturing smaller individual components, have become tier 2 and tier 3 suppliers, while the large

companies including most Multi National Companies are being transformed into tier 1 companies who purchase from tier 2 and tier 3, and sell to the auto manufacturers. (Source: Department of Heavy Industry) Investment in new technology such as supply-chain management and collaborative forecasting (where members of the supply chain share forecasting data to reduce bottlenecks) will help make industry more competitive.