Automobiles

Last Updated: October 2011 Indian Automobile Industry: Brief Introduction India, the world's second-fastest growing auto market, is in top-gear growth. The country is a hot destination for automobile manufacturers due to its robust economic growth, favourable demographics, higher disposable income, changing lifestyle and positive industrial ecosystem. India is expected to become the third biggest automaker in the world within next decade, according to Diane H Gulyas, President, DuPont Performance Polymers. Owing to its vertical and horizontal integration with other key segments of the economy, the industry is said to be a major growth driver. Market Dynamics For FY 2011, Maruti Suzuki held a reasonable market share of 48.74 per cent while that of Hyundai was around 18.10 per cent. Tata Motors' market share stood at 12.92 per cent for the period. General Motors India (GMI) and Honda Siel cars India (HSCI) had a market share of 4.40 per cent and 2.97 per cent respectively during FY2011. According to the data released by the Society of Indian Automobile Manufacturers (SIAM), Maruti held 43 per cent of the total Indian passenger-car market in the six months ended September 2011 as against Hyundai's 20 per cent pie. Key Statistics

SIAM expects India's car sales to grow 2-4 per cent in the fiscal year ending March 2012 while a growth of 13-15 per cent is projected in commercial vehicles' sales segment. Car sales in September 2011 stood at 165,925 cars. Sales of commercial vehicles (a key indicator of the country's economic activity), increased by 18.05 percent to 70,634, while motorcycle sales rose 19.93 percent to 933,465 of them in September. Total sales of vehicles across categories witnessed a growth of 19.39 per cent to 1571,342 units in September 2011 from 1316,118 units in the corresponding period last year. The sales of scooters increased by 50.74 per cent to 231,710 units (from 153,716 units in September 2010) while that of threewheelers stood at 49,255 units (from 48,814 units in September 2010) in September 2011. Overall automobile exports registered a growth rate of 32.31 per cent during April-December 2011. Passenger Vehicles registered growth at 21.01 percent in this period while two-wheelers, commercial vehicles and three wheelers segments recorded growth of 32.34 per cent, 35.91 per cent and 49.55 per cent respectively.

Indian Automobile Industry: Major Developments & Investments Seoul-based Hyundai Motor Company has launched its cheapest car model 'Eon' in Indian markets to give in a face-off to Maruti Suzuki India Ltd and the company expects to sell 140,000-150,000 Eon cars a year. With a view to add a model that could vie for international markets, India's largest utility vehicle maker Mahindra and Mahindra Ltd (M&M) has introduced a new sport utility vehicle (SUV) XUV500; nine years after the launch of Scorpio. Marking its first motor export from India, Toyota Kirloskar Motor Pvt Ltd (TKM) would commence export of the 'Etios' series sedan and hatchback to South Africa in March 2012. The company is targeting emerging economies to increase its sales. Swedish company Volvo's Indian bus-making unit has unveiled its plan to invest around Rs 4 billion (US$ 80 million) over 2011-15 to increase its annual output to 5000 buses and revenue to Rs 490 billion (US$ 1 billion) by 2015 to cater to the burgeoning Indian market. German luxury car makers are on their toes to achieve top slot in the Indian markets and they would enhance their sales network by 2012 to a great extent to accomplish the same. While Mercedes Benz will add 8 dealerships in 2012, Audi plans to increase the number of sales outlets from 13 to 25 in 2012. Also, BMW is working on a project to triple its dealerships by 2015. The company plans to add 18 of them by October 2012 to take the total number to 40.

Formula One (F1) on the track Taking a huge step in motor sports segment, India is conducting Grand Prix F1 race at the end of October 2011 in Greater Noida where 12 international teams (all based out of Europe) would participate. The 5.14 km track was designed by the German track designer Hermann Tilke and built by the Noida-based construction company Jaypee Group. The Jaypee Group, which acquired the rights for the race in India, employed over 6,000 workers and 300 engineers to build the track

and arena, which is spread over 850 acres, and will accommodate around 120,000 viewers. Jaypee Sports International Ltd (JPSI) has spent around Rs. 1,800 crore (US$ 365 million) on the project, which includes paying licensing fees to Fdration Internationale de l'Automobile (FIA), the sport's governing body. Government Initiatives The Indian government is in the process of forming a National Automotive Board (NAB) which would become a formal set-up to look into the issue of recall of vehicles and hence improve manufacturing standards. The prospective body, to oversee technical and safety aspects of vehicles, will have representatives from all the nodal ministries and automotive bodies such as the Automotive Research Association of India (ARAI). In a first-of-its-kind public-private partnership, automotive components manufacturer Tata AutoComp Systems Ltd has signed a memorandum of understanding (MoU) with the government of Gujarat for imparting vocational training to rural youth to widen employment opportunities for them. The agreement, focussed to fill-in the skilled manpower shortage faced by the auto industry, would facilitate revamp of the State's Industrial Training Institutes (ITIs), launch of skill development programmes and introduction of modular employable skills (MES) courses. Tata AutoComp will train nearly 1,500 youth in Gujarat annually through this MoU. Also, the government of Gujarat has provided 600 acre plot in Sanand to the European car-maker PSA Peugeot Citroen to set up its manufacturing facility. In order to bring-in new and efficient vehicles on the Indian roads, SIAM has endorsed a regular, concrete scrappage policy to the government which says that all vehicles (cars, commercial vehicles and two-wheelers) made before 1996 should be scrapped. According to SIAM, such a policy would also help control pollution and harmful emissions. Meanwhile, following the discussions between the visiting Myanmar Minister of Industry Soe Thein and Mr Praful Patel, Minister of Heavy Industries and Public Enterprises Tata Motors has proposed to set-up a bus-assembly facility in the neighbouring country along with supply of passenger vehicles to them. The discussions entailed mutual industrial collaboration between the two nations. Road Ahead Luxury car makers are keen on Indian markets as the sales for the same are expected to touch 150,000 units by 2020. Indian luxury car market is growing at an annual rate of 70 per cent and is expected to cross 20,000 units by the end of 2011 in terms of sales. Hence, the concerned majors are looking at Tier-II cities for new dealerships along with opening second or third outlet in top 10 metros. According to industry experts, India is poised to become the third largest car market by 2020 after the US and China. [Exchange Rate as on October 18, 2011: INR1 = US$0.0203] References: Society of Indian Automobile Manufacturers (SIAM), Press Releases, Media Reports

Global Meltdown and its Impact on the Indian Economy

With the collapse of Lehman Brothers and other Wall Street icons, there was growing recession which affected the US, the European Union (EU) and Japan. This was the result of large scale defaults in the US housing market as the banks went on providing risky loans without adequate security and the repaying capacity of the borrower. The principal source of transmission of the crisis has been the real sector, generally referred to as the Main Street. This crisis engulfed the United States in the form of creeping recession and this worsened the situation. As a consequence, US demand for imports from other countries indicated a decline. The basic cause of the crisis was largely an unregulated environment, mortgage lending to subprime borrowers. Since the borrowers did not have adequate repaying capacity and also because subprime borrowing had to pay two-to-three percentage points higher rate of interest and they have a history of default, the situation became worse. But once the housing market collapsed, the lender institutions saw their balance-sheets go into red. Although at one time it was thought that this crisis would not affect the Indian economy, later it was found that the Foreign Direct Investment (FDI) started drying up and this affected investment in the Indian economy. It was, therefore, felt that the Indian economy will grow at about seven per cent in 2008-09 and at six per cent in 2009-10. The lesson of this experience is that India must exercise caution while liberalising its financial sector. A redeeming feature of the current crisis is that its magnitude is much lesser than that of the Great Depression of the 1930s when unemploy-ment rate in the United States exceeded 25 per cent. Currently, it stands at 6.5 per cent and is predicted to remain around eight per cent in 2009. Impact on Indian Economy The industries most affected by weakening demand were airlines, hotels, real estate. Besides this, Indian exports suffered a setback and there was a setback in the production of export-oriented sectors. The government advised the sectors of weakening demand to reduce prices. It provided some relief by cutting down excise duties, but such simplistic solutions were doomed to failure. Weakening demand led to producers cutting production. To reduce the impact of the crisis, firms reduced their workforce, to reduce costs. This led to increase in unemployment but the total impact on the economy was not very large. Industrial production and manufacturing output declined to five per cent in the last quarter of 2008-09. Consequently, a vicious cycle of weak demand and falling output developed in the Indian economy. A weakening of demand in the US affected our IT and Business Process Outsourcing (BPO) sector and the loss of opportunities for young persons seeking employment at lucrative salaries abroad. Indias famous IT sector, which earned about $ 50 billion as annual revenue, is expected to fall by 50 per cent of its total revenues. This would reduce the cushion to set off the deficit in balance of trade and thus enlarge our balance of payments deficit. It has now been estimated that sluggish demand for exports would result in a loss of 10 million jobs in the export sector alone. To lift the economy out of the recession the Government announced a package of Rs 35,000 crores in the first instance on December 7, 2008. The main areas to benefit were the following: (a) HousingA refinance facility of Rs 4000 crores was provided to the National Housing Bank. Following this, public sector banks announced to provide small home loans seekers loans at reduced rates to step up demand in retail housing sector. (i) Loans up to Rs 5 lakhs: Maximum interest rate fixed at 8.5 per cent. (ii) Loans from Rs 5-20 lakhs: Maximum interest rate at 9.25 per cent.

(iii) No processing charges to be levied on borrowers. (iv) No penalty to be charged in case of pre-payment. (v) Free life insurance cover for the entire outstanding amount. This means a borrower can get a loan up to 90 per cent of the value of the house. The government hopes to disburse Rs 15,000 to 20,000 crores under the new package. The housing package is the core of the governments new fiscal policy. It will give a fillip to other sectors such as steel, cement, brick kilns etc. Besides, the small and medium industries (SMEs) too get a boost by manufacturing all kinds of fittings and furnishings. The success of the housing package will, however, depend on the State governments efforts to free up surplus land so that land prices come down and the cost of housing becomes reasonable. (b) TextilesDue to declining orders from the worlds largest market the United States, the textile sector has been seriously affected. An allocation of Rs 1400 crores has been made to clear the entire backlog in the Technology Upgradation Fund (TUF) scheme. The Apparel Export Promotion Council (AEPC) Chairman, however, said: It is a disappointing package. The allocation of Rs. 1,400 crores has been pending for many years and thus, it is the payment of arrears only. There is nothing new in it. It would have been much better if more concrete measures have been taken to reverse the downturn in the exports of readymade garments and avoid further job losses in the textile sector. InfrastructureThe government has been proclaiming that infrastructure is the engine of growth. To boost the infrastructure, the India Infrastructure Finance Company Ltd. (IIFCL) has been authorised to raise Rs 14,000 crores through tax-free bonds. These funds will be used to finance infrastructure, more especially highways and ports. It may be mentioned that refinance refers to the replacement of an existing debt obligation with a debt obligation bearing better terms, meaning thereby at lower rates or a changed repayment schedule. The IIFCL will be permitted to raise further resources by the issue of such bonds so that a public-private partnership (PPP) programme of Rs 1,00,000 crores in the highway sector is promoted. (d) ExportsExports which accounted for 22 per cent of the GDP are expected to fall by 12 per cent. The governments fiscal package provides an interest rate subsidy of two per cent on exports for the labourintensive sectors such as textiles, handicrafts, leather, gems and jewellery, but the Federation of Indian Export Organization (FIEO) felt the measures are not enough as they will not make the exports price-competitive and, therefore, will not boost exports. G.K. Pillai, the Commerce Secretary, has estimated a loss of 1.5 million jobs in the export sector alone during 2008-09 on account of the $15 billion decline in the expected exports. (e) Small and Medium Enterprises (SMEs)The government has announced a guarantee cover of 50 per cent for loans between Rs 50 lakhs to Rs 1 crore for SMEs. The lockin period for loans covered under the existing schemes will be reduced from 24 months to 18 months to encourage banks to cover more loans under the scheme. Besides, the government will instruct state-owned companies to ensure prompt payment of bills of SMEs so that they do not suffer on account of delay in the payment of their bills. In short, the fiscal package is aimed at boosting growth in exports, real estate, auto, textiles and small and medium enterprises. The aim is to encourage growth and boost employment which have been threatened by the recession in the world economy, more especially in the United States.

Just within a month, the government announced another package to bail out the Indian economy. Dr Montek Singh Ahluwalia said: We should expect, from allglobal projections that the next year (2009) is going to be a very difficult year for the global economy. The purpose of the new package announced on January 1, 2009 was to minimise the pain. With this end in view, the new package included the following measures:1. To boost investment and spending to revive growth, the RBI cut the repo rate, which it charges on short-term loans to banks from 6.5 per cent to 5.5 per cent and also reduced the Cash Reserve Ratio (CRR)the share of deposits which has to be kept with the RBI from 5.5 per cent to five per cent. 2. To revive exports which has resulted in a contraction of industrial output, drawback benefits have been enhanced for some exporters. Export-Import Bank also gets Rs. 5000 crores as credit from the RBI. 3. To help the realty sector, realty companies have been allowed to borrow from overseas to develop integrated townships. 4. To boost infrastructure, the India Infrastructure Finance Company Ltd. (IIFCL) has been allowed to raise Rs 30,000 crores from tax-free bonds. Besides, Non-Banking Finance Companies (NBFCs) need no government approval to borrow from overseas for infrastructure projects. This will sustain the growth momentum on infrastructure. 5. To make more funds available, ceiling on foreign institutional investments (FIIs) in corporate bonds has been increased to $ 15 billion from $ 6 billion. The purpose is to seek much bigger FII investment. 6. To stimulate the Commercial Vehicles (CVs) sector, depreciation benefit on commercial vehicles has been increased form 15 per cent to 50 per cent on purchases. Besides, the States will get one-time funding from the Centre to buy buses for urban transport. In addition, public sector banks would provide finance firms funds for commercial vehicles. It is hoped that Tata Motors and Ashok Leylands sales would revive. On February 24, 2009, the government announced a slashing down of excise duty from 10 per cent to eight per centa reduction by two per cent. Since 90 per cent of the manufactured goods attract 10 per cent excise duty, this measure is designed to reduce the prices of colour TV sets, washing machines, refrigerators, soap, detergents, colas, cars and commercial vehicles. Cement prices are likely to drop Rs 4-5 per bag of 50 kg while steel prices may cost Rs 500-600 per tonne less. In addition to this, the government decided to cut service tax form 12 per cent to 10 per centa reduction by two per cent. As a consequence, phone bills, airline tickets, credit card charges, tour packages etc. would cost less. A two per cent reduction in service tax will directly touch the lives of over 500 million persons by reducing monthly expenses. The entire stimulus package of Rs 30,000 crores to boost demand in the economy and thus reduce the impact of recession. Commerce and Industry Minister Kamal Nath announced a small relief package of Rs 325 crores for leather, textiles, gems and jewellery on February 26, 2009. Assessment of the Impact of the Fiscal Package There is no doubt that the government is motivated with good intentions and is thus aiming to spend a huge amount of Rs 1,00,000 crores for developing infrastructure in roads, ports etc. which pose a serious handicap to growth. Besides, the aim of other measures is to boost exports and help sectors like textiles and small and medium industries which are labour-intensive and generate more employment.

But the success of the fiscal package will depend on the quality and speed of implementation so that delays in implementation may not aggravate the economic recession to move into the dangerous zone of depression. One of the major stumbling blocks which may neutralise the positive effects of large expenditure on infrastructure is corruption. In case corruption is not simultaneously curbed to reasonably low levels, it may delay and reduce the muchdesired effect in enlarging infrastructure. It may result in the Indian infrastructure network being geared into a temporary employment generation programme with much smaller impact on the economy as against the intended objectives. For reducing corruption, two things need to be ensuredtransparency and avoidance of arbitrariness. By cutting arbitrariness in decision-making, corruption can be curbed to a great extent. Transparency instills confidence in the government. Secondly, there is a need to orient the fiscal package towards inclusive growth so that the weaker sections benefit. This would require special emphasis, for instance, on rural infrastructurerural roads and housing, instead of only highways and urban housing. Similarly, a much larger expenditure on primary and secondary education, health and sanitation can also result in a more inclusive growth process. Thirdly, the chances of our exports increasing are very limited unless the G-3 economies, namely, the US, EU and Japan, are able to bring about a positive shift in their growth in the near future for which the predictions at present are not very optimistic. The World Bank has projected the world output to grow at 0.9 per cent in 2009 as against 2.5 per cent in 2008. If these predictions come out to be true, there is a fear of the recession in 2008 turning into a depression in 2009. But the Indian economy is predicted to grow at about seven per cent in2008 and about six per cent in 2009. Since the G-3 economies of the US, EU and Japan are affected seriously by the present recession, the chances of Indian exports increasing in these countries appear to be very dim. The natural conclusion is that the Indian economy should concentrate on developing the domestic market. Thus, inward looking policies should be preferred as against the outward looking approach of integrating the Indian economy to the world economy is followed during the last decade. It is heartening that the Prime Minister intends to insulate the Indian economy from the world economy. Fourthly, although there is a demand for a much larger Fiscal Package to bail out the Indian economy, there are serious limitations faced by the government because it has to fight terrorism on the one hand and financial meltdown on the other. The government has to undertake a huge expenditure at the Central as well as State levels to enhance security. It is difficult to precisely estimate this expenditure at this stage since it entails larger recruitment of police and paramilitary forces along with equipping them with the most uptodate weapons. But there is a massive increase in expenditure to combat terrorism, along with a fiscal package to boost the Indian economy; there is also likely to be shortfall in tax revenues. Consequently, the Budget deficit is bound to increase. The government will not be able to reduce the fiscal deficit to 2.5 per cent of GDP, it may increase to three to 3.5 per cent during 2008-09. But this is inevitable and the target of reducing it according to the schedule prescribed by the Fiscal Responsibility and Budget Management Act, has to be postponed. But the Finance Minister has not agreed to the abolition of the FRBM Act since it would be imprudent to relax or abrogate the FRBM. To quote Dr Ishar Ahluwalia: The FRBM is like a chastity belt, but dont loosen it without a better alternative. It may, however, be mentioned that the quasi fiscal deficit (the deficit left out of the Budget) is presently estimated as six per cent of the GDP. A compre-hensive view of the fiscal deficit (as shown in the Budget and kept outside the Budget) would be in the range of nine to 9.5 per cent of the GDP, though it may now be lower due to a very sharp decline in international crude oil prices from $140 per barrel to about $ 40 per barrel at present. This is a welcome relief. If the government is also able to push the fertiliser prices to lower levels which is possible in the changed circumstances, eventually the total fiscal deficit (shown as well as kept outside the Budget) may come down to 6.5 to seven per cent of the GDP. This is quite large but it is inevitable in the present situation.

To conclude: As against the US package of $ 800 billion to bail out the US economy and the Chinese package to $ 580 billion to salvage its economy, the Indian fiscal package of Rs 35,000 crores ($ 7.3 billion approximately) is a small measure to boost the Indian economy. It is due to this reason that the chieftains of industry want a much bigger package to bail out the Indian economy, as against the minuscule announced by the government. But the plan to spend more on housing is commendable if it can be implemented in a short time and an effective manner. The government should have transparency and avoid arbitrariness in the implementation so that corruption can be kept within reasonable limits. The government has been provided relief with the sharp fall in the international price of crude oil and this should be taken advantage of in reducing expenditure to subsidise oil imports. Additional employment generation by helping SMEs will be a step towards inclusive growth since they are labour intensive. The intention to create infrastructure by expanding highways and ports and to spend Rs 1,00,000 crores through the IIFCL is commendable. However, it may be more prudent to expand rural roads and rural housing so as to promote more inclusive growth. This would require proper planning which may take more time and does not provide immediate benefit. It may not be possible to reduce the fiscal deficit during 2008-09 since much larger expenditures are needed to combat terrorism and as there is recession in the Indian economy, but international factors will influence the process. As the G3 economies of the US, EU and Japan pick up, the Indian economy will also benefit from their reversal of recessionary trends. In this situation, the expectation of seven per cent growth of the GDP in 2008-09 and six per cent in 2009-10 reflects a fairly good performance of the Indian economy. Now that the three packages have been announced, it is high time that the policy-makers in the Ministry of Finance, Commerce, Industry and Rural Development should get together to ensure that the planned expenditurebudgeted and provided in the two stimulus packagesis quickly translated into productive capacities so as to create the muchneeded multiplier effect on private investment. It is easier to provide funds, but it is more difficult to ensure their speedy and proper utilisation. In infrastructure, we suffer from inordinate delays and this results in cost overruns which the nation has to bear. The huge amount of funds placed with the India Infrastructure Finance Company Ltd (IIFCL) would require identification of new projects or expansion of the existing projects. This is not an easy task because the IIFCL is only a funding agency and implementation has to be carried out by other entities, may be the State governments, public sector undertakings or private sector corporations. To upgrade the level of infrastructure spending by a factor of two requires gigantic efforts of co-ordination between different agencies for speedy implementation. The government should, therefore, concentrate its efforts to remove hurdles in the path of implementation. The package has also provided finances to the non-banking finance companies (NBFCs), but there is serious lack of skill with the NBFCs on project appraisals and to ascertain the credit-worthiness of the borrowers and the accompanying project risks. There has to a national campaign for training the NBFCs in project appraisals. Similarly, the State governments must improve the share of their implementation and co-operate with the Central Government to improve various infrastructure projects in their domain or in collaboration with the Centre. It needs to be emphasised that implementation holds the key to bail out the Indian economy from the economic crisis. Pranab Mukherjee has suggested that to reduce the pain of recession, employers should cut wages all along the line to reduce costs, rather than retrenching workers and thus add to job losses. To quote: Jobs must be protected even if it

means some reduction in compensation at various levels. This is a useful tool to fight recession and it has also been tried in several countries. This suggestion should be implemented until such time that the economy gets revived. The author, a well-known economist, is a Visiting Professor, Institute of Human Development, New Delhi.

Overview
The Indian Automobile Industry manufactures over 11 million vehicles and exports about 1.5 million each year. [18] 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%.[18] 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. [18] The industry has a turnover of more than USD $35 billion and provides direct and indirect employment to over 13 million people.[18]??? The supply chain is similar to the supply chain of the automotive industry in Europe and America. 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. With a high cost of developing production facilities, limited accessibility to new technology, and increasing 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%.[18] 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, India's increasing per capita disposable income which is expected to rise by 106% by 2015[18] 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%.[18] Maruti Suzuki is leading the passenger vehicle segment with a market share of 46%.[18] 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% [18] 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.[19] The company soon branched out into the manufacture of light commercial vehicles (LCVs) and agricultural tractors.[20] 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.[21] 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 chose Suzuki 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 multi-national car companies launched operations. Since then, automotive component and automobile manufacturing growth has accelerated to meet domestic and export demands.[21] 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.[22] In February 2009, monthly sales of passenger cars in India exceeded 100,000 units[23] and has since grown rapidly to a record monthly high of 182,992 units in October 2009. [24] 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)[25] this progression is unlikely to stop in the coming decade.[26]Congestion of Indian roads, more than market demand, will likely be the limiting factor.[27] SIAM is the apex industry body representing all the vehicle manufacturers, home-grown and international, in India.[28] [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 to follow their customers to various locations around the world. They design and innovate 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-axle-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.[29]

Year

Car Production

% Change

Commercial

% Change

Total Vehicles Prodn.

% Change

2010

2,814,584

29.39

722,199

54.86

3,536,783

33.89

2009

2,175,220

17.83

466,330

-4.10

2,641,550

13.25

2008

1,846,051

7.74

486,277

-9.99

2,332,328

3.35

Year

Car Production

% Change

Commercial

% Change

Total Vehicles Prodn.

% Change

2007

1,713,479

16.33

540,250

-1.20

2,253,999

10.39

2006

1,473,000

16.53

546,808

50.74

2,019,808

19.36

2005

1,264,000

7.27

362,755

9.00

1,628,755

7.22

2004

1,178,354

29.78

332,803

31.25

1,511,157

23.13

2003

907,968

28.98

253,555

32.86

1,161,523

22.96

2002

703,948

7.55

190,848

19.24

894796

8.96

2001

654,557

26.37

160,054

-43.52

814611

1.62

2000

517,957

-2.85

283,403

-0.58

801360

-2.10

1999

533,149

285,044

818193

Year

2004-2005

2005-2006

2006-2007

2007-2008

2008-2009

Motor Vehicle Production[18]

8,467,853

9,743,503

11,087,997

10,853,930

11,175,479

Industry Revenue USD Million [18] 24,379

26,969

30,507

32,383

33,342*

Exports (Units)[18]

629,544

806,222

1,011,529

1,238,333

1,530,660

Exports (Revenue)[18] [edit]Automobile

1,915

2,231

2,552

3,008

3,718*

Production

Type of Vehicle

2005-2006

2006-2007

2007-2008

2008-2009

2009-2010

Passenger Vehicles [18]

1,209,876

1,309,300

1,545,223

1,777,583

1,838,697

Commercial Vehicles [18] 353,703

391,083

519,982

549,006

417,126

Three Wheelers [18]

374,445

434,423

556,126

500,660

501,030

Two Wheelers [18]

6,529,829

7,608,697

8,466,666

8,026,681

8,418,626

Total [edit]Automobile

8,467,853

9,743,503

11,087,997

10,853,930

11,175,479

Sales
2004-2005 2005-2006 2006-2007 2007-2008 2008-2009

Type of Vehicle

Passenger Vehicles [18]

1,061,572

1,143,076

1,379,979

1,549,882

1,551,880

Commercial Vehicles [18] 318,430

351,041

467,765

490,494

384,122

Three Wheelers [18]

307,862

359,920

403,910

364,781

349,719

Two Wheelers [18]

6,209,765

7,052,391

7,872,334

7,249,278

7,437,670

Total [edit]Automobile

7,897,629

8,906,428

10,123,988

9,654,435

9,723,391

Exports
2004-2005 2005-2006 2006-2007 2007-2008 2008-2009

Type of Vehicle

Passenger Vehicles [18]

166,402

175,572

198,452

218,401

335,739

Type of Vehicle

2004-2005

2005-2006

2006-2007

2007-2008

2008-2009

Commercial Vehicles [18] 29,940

40,600

49,537

58,994

42,673

Three Wheelers [18]

66,795

76,881

143,896

141,225

148,074

Two Wheelers [18]

366,407

513,169

619,644

819,713

1,004,174

Total [edit]Product

629,544

806,222

1,011,529

1,238,333

1,530,660

and service segmentation

The automotive industry of India is categorised into passenger cars, two wheelers, commercial vehicles and three wheelers, with two wheelers dominating the market. More than 75% of the vehicles sold are two wheelers. Nearly 59% of these two wheelers sold were motorcycles and about 12% were scooters. Mopeds occupy a small portion in the two wheeler market however; electric two wheelers are yet to penetrate. The passenger vehicles are further categorised into passenger cars, utility vehicles and multi-purpose vehicles. All sedan, hatchback, station wagon and sports cars fall under passenger cars. Tata Nano, is the world's cheapest passenger car, manufactured by Tata Motors - a leading automaker of India. Multi-purpose vehicles or people-carriers are similar in shape to a van and are taller than a sedan, hatchback or a station wagon, and are designed for maximum interior room. Utility vehicles are designed for specific tasks. The passenger vehicles manufacturing account for about 15% of the market in India. Commercial vehicles are categorised into heavy, medium and light. They account for about 5% of the market. Three wheelers are categorised into passenger carriers and goods carriers. Three wheelers account for about 4% of the market in India.

Segment[18]

2003-04

2004-05

2005-06

2006-07

2007-08

Passenger Car[18] (%)

10.22

10.39

9.91

10.65

12.42

Utility Vehicles (UVs) (%)

2.15

2.23

2.18

2.18

2.39

Multi Purpose Vehicles (MPVs) (%)

0.87

0.82

0.75

0.82

0.98

Total Passenger Vehicles[18] (%)

13.25

13.44

12.83

13.65

15.79

Passenger Carriers (%)

0.36

0.32

0.32

0.28

0.43

Segment[18]

2003-04

2004-05

2005-06

2006-07

2007-08

Goods Carriers (%)

2.01

2.19

2.01

2.44

2.10

Total Medium & Heavy Commercial Vehicles[18] (%) 2.37

2.51

2.33

2.73

2.53

Passenger Carriers (%)

0.28

0.25

0.25

0.24

0.32

Goods Carriers (%)

1.17

1.27

1.36

1.67

1.77

Total Light Commercial Vehicles (%)

1.45

1.52

1.61

1.90

2.10

Total Commercial Vehicles[18] (%)

3.82

4.03

3.94

4.63

4.63

Passenger Carriers (%)

2.56

2.17

2.39

2.34

2.51

Goods Carriers (%)

1.61

1.73

1.65

1.65

1.51

Total Three Wheelers[18] (%)

4.17

3.90

4.04

4.00

4.01

Scoters/Scooterettee (%)

13.01

11.68

10.21

9.31

11.57

Motorcycles/Step-Throughs (%)

61.24

62.86

65.24

64.83

59.35

Mopeds (%)

4.52

4.08

3.74

3.52

4.47

Electric Two Wheelers (%)

0.07

0.19

Total Two Wheelers[18] (%)

78.76

78.63

79.18

77.73

75.57

Segment[18]

2003-04

2004-05

2005-06

2006-07

2007-08

Grand Total[18] (%) [edit]Vehicle

100.00

100.00

100.00

100.00

100.00

Registration

India had over 100 million vehicles registered on its roads in the year 2008. [18] This is a growth of about 100% in the past 9 years. Over 77% and about 77 million of these vehicles are two wheelers, about 14% and over 14 million are cars, jeeps and taxis. Over 5 million and over 1 million vehicles registered are goods vehicles and buses respectively. [18] Two wheelers account a significant market share. Tata Motors with the launch of Tata Nano is trying to attract some of these two wheeler buyers to buy a small, cheap and affordable passenger car. [edit]Total

Number of Vehicle Registrations in India from 2001 to 2008

Two Wheelers (in '000) Cars, Jeeps and Taxis (in '000) Buses (in '000) Goods Vehicles (in '000) Other Vehicles (in '000)

Year

All Vehicles (in '000)

2001

54,991

38,556

7,058

634

2,948

5,795

2002

58,924

41,581

7,613

635

2,974

6,121

2003

67,007

47,519

8,599

721

3,492

6,676

2004

72,718

51,922

9,451

768

3,749

6,828

2005

80,045

57,417

10,460

822

4,053

7,337

2006

88,068

63,487

11,571

879

4,345

7,891

2007

96,808

70,141

12,810

936

4,652

8,464

2008

106,591

77,588

14,222

1,003

5,018

9,065

[edit]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, Bengaluru, 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]Geographic

Segmentation

The total number of new vehicles registered in the 28 states and 7 union territories of India in the year 2008 were about 106,591. The diagram above displays the registration of new vehicles in various states and union territories. About 16 states and 1 union territory had over a million new vehicles registered. Tamil Nadu had about 16 million new vehicles registered, Maharashtra had over 13 million, and Gujarat had over 10 million. About 91% of these vehicles are non-commercial vehicles purchased by households looking for a two wheeler, or a car. Only about 9% of new vehicles registered are used for commercial purposes. Details of category wise new vehicle registrations in the various states and union territories are displayed. The number of new vehicles registrations has grown by about 66% in the past five years. [edit]Geographical

Segmentation:State-wise motor vehicles registration in India from 2001 -

2008
2001 (in '000) 2002 (in '000) 2003 (in '000) 2004 (in '000) 2005 (in '000) 2006 (in '000) 2007 (in '000) 2008 (in '000)

States\Year

Andhra Pradesh

1111

4,389

5,002

5,720

6,446

7,232

8,042

8,989

Arunachal Pradesh

21

21

21

21

21

21

21

21

Assam

542

596

657

727

798

883

973

1,086

Bihar

949

1,024

1,121

751

726

694

647

593

Chhattisgarh

857

948

1,076

1,216

1,367

1,536

1,726

1,939

Goa

341

366

397

436

483

537

585

638

Gujarat

5,576

6,008

6,508

7,087

7,892

8,785

9,633

10,543

Haryana

1,949

2,122

2,279

2,548

2,883

3,267

3,689

4,164

Himachal Pradesh

217

244

269

289

329

375

421

480

Jammu & Kashmir

330

364

399

439

493

556

628

719

States\Year

2001 (in '000)

2002 (in '000)

2003 (in '000)

2004 (in '000)

2005 (in '000)

2006 (in '000)

2007 (in '000)

2008 (in '000)

Jharkhand

909

984

1,101

1,217

1,341

1,479

1,630

1,796

Karnataka

3,537

3,636

3,738

3,977

4,338

4,717

5,036

5,360

Kerala

2,112

2,315

2,552

2,792

3,180

3,612

4,034

4,564

Madhya Pradesh

3,095

3,173

3,459

3,804

4,119

4,442

4,710

4,968

Maharashtra

6,760

7,414

8,134

8,969

10,055

11,281

12,477

13,817

Manipur

77

90

97

106

114

123

134

145

Meghalaya

62

67

73

73

78

84

89

95

Mizoram

31

34

37

42

48

54

61

70

Nagaland

160

177

162

172

186

201

215

230

Orissa

1,096

1,215

1,359

1,525

1,717

1,936

2,159

2,417

Punjab

2,910

3,103

3,308

3,529

3,859

4,225

4,571

4,992

Rajasthan

2,943

3,197

3,487

3,834

4,285

4,791

5,281

5,815

Sikkim

12

13

15

17

19

21

23

25

Tamil Nadu

5,162

5,658

8,005

8,575

10,085

11,901

13,860

16,207

States\Year

2001 (in '000)

2002 (in '000)

2003 (in '000)

2004 (in '000)

2005 (in '000)

2006 (in '000)

2007 (in '000)

2008 (in '000)

Tripura

50

57

66

76

85

95

105

117

Uttarakhand

364

406

457

516

580

651

732

822

Uttar Pradesh

4,921

5,171

5,928

6,460

7,271

8,144

8,970

9,919

West Bengal

1,690

1,690

2,366

2,548

2,816

3,138

3,464

3,833

Andaman & Nicobar Islands

25

28

28

28

31

34

38

42

Chandigarh

386

386

562

586

629

677

732

799

Dadra & Nagar Haveli

13

13

31

35

43

54

67

86

Daman & Diu

37

41

44

48

55

63

71

79

Delhi

3,635

3,699

3,971

4,237

4,544

4,868

5,166

5,469

Lakshadweep

Pondicherry

252

270

293

313

359

418

495

552

[edit]Geographical

Segmentation: Category-wise number of registrations in States of India

T y p e o f V e h i c l e
[ 1 8 ]

A n d h r a P r a d e s h

A r u n a c h a l P r a d e s h

A s s a m

B i h a r

C h h a t t i s g a r h

G o a

G u j a r a t

H a r y a n a

H i m a c h a l P r a d e s h

J a m m u & K a s h m i r

J h a r k h a n d

K a r n a t a k a

K e r a l a

M a d h y a P r a d e s h

M a h a r a s h t r a

M a n i p u r

M e g h a l a y a

M i z o r a m

N a g a l a n d

O r i s s a

P u n j a b

R a j a s t h a n

S i k k i m

T a m i l N a d u

T r i p u r a

U t t a r a k h a n d

U t t a r P r a d e s h

W e s t B e n g a l

Mu ltia xle d/A rtic ula ted 27 14 83, 30, 40, 28, 18 14 41, 29, 62, 10 73, 77, 24 14, 41, 50, 75, 17 94, 24 Ve 2,3 5,9 3,2 1,6 6,3 9,7 6,2 3,1 18 51 41 32 2,3 7,6 64 95 56 0,5 31 17 3,1 02 01 49 92 3,5 48 1,0 hicl 23 63 15 19 21 99 35 47 9 6 3 6 04 67 4 8 6 96 5 8 13 8 9 6 1 52 2 35 es/ Tru cks & Lor rie s

Lig ht Mo tor 66, 14, 32, 16, Ve 55 89 31 29 68 hicl 5 1 7 6 6 es (go od s)

20 58, 12, 2,3 4,3 32 27 40 36 5 2

91, 13 30, 25 1,2 75 6,1 03 6,0 06 5 81 0 82

35, 34, 13, 20 57, 1,2 9,2 35 59 5,6 54 64 60 4,3 68 55 43 3 5 62 3 5 1 14 1

T y p e o f V e h i c l e
[ 1 8 ]

A n d h r a P r a d e s h

A r u n a c h a l P r a d e s h

A s s a m

B i h a r

C h h a t t i s g a r h

G o a

G u j a r a t

H a r y a n a

H i m a c h a l P r a d e s h

J a m m u & K a s h m i r

J h a r k h a n d

K a r n a t a k a

K e r a l a

M a d h y a P r a d e s h

M a h a r a s h t r a

M a n i p u r

M e g h a l a y a

M i z o r a m

N a g a l a n d

O r i s s a

P u n j a b

R a j a s t h a n

S i k k i m

T a m i l N a d u

T r i p u r a

U t t a r a k h a n d

U t t a r P r a d e s h

W e s t B e n g a l

76, 15, 10, 10, 45, 20, 29, 67, 24, 49, 13, 18, 55, 26, 41, Bu 66 2,0 4,8 9,3 4,8 9,5 2,4 2,8 84 3,5 40 1,5 4,6 90 49 28 96 66 13 71 20 62 09 96 57 93 43 38 ses 5 43 68 69 72 39 03 27 0 05 6 96 26 7 8 6 1 9 9 0 6 6 2 6 9 6 7 5

11 81, 10, 14, 22, 40, 14, 14, 10, 21, 40, 11 61, 10 24, 11, 32, 13, 30, 67, Ta 29 8,2 36 5,0 3,8 4,4 4,9 25 6,3 62 36 00 00 10 99 97 32 81 83 4,2 42 2,4 61 98 86 38 19 91 xis 9 73 3 30 64 48 47 7 73 7 8 0 5 0 0 0 5 4 9 45 4 75 4 2 8 5 3 8

Lig ht Mo tor Ve 26 29, 27 37, 14, 36, 19 29 45, 49 21, 36, 64, 1,4 9,5 7,4 9,3 2,7 2,5 2,9 1,1 8,2 hicl 3,3 80 6,9 84 25 25 0,3 4,2 14 3,1 89 83 58 30 07 74 75 83 21 34 45 91 es 25 6 08 1 5 7 62 44 6 42 3 8 0 (pa sse ng er)

15 12, 78, 38, 6,7 4,1 16 06 28 99 92 2 7 9

Tot 1,1 al 57 14 97, 88, 50, 74 26 66, 86, 13 45 68 23 12, 24, 10, 66, 14 17 34 82 20, 40, 28 38 43, 5,2 7,3 Co 0,4 7,9 28 62 84 9,3 8,1 60 94 0,1 3,2 5,1 8,4 45 81 31 50 6,5 7,9 0,5 8,0 93 27 6,8 8,6 90 72 25 m 88 66 0 1 2 17 92 9 9 76 62 91 04 6 9 9 6 12 65 37 21 1 1 60 27 4 me rci

T y p e o f V e h i c l e
[ 1 8 ]

A n d h r a P r a d e s h

A r u n a c h a l P r a d e s h

A s s a m

B i h a r

C h h a t t i s g a r h

G o a

G u j a r a t

H a r y a n a

H i m a c h a l P r a d e s h

J a m m u & K a s h m i r

J h a r k h a n d

K a r n a t a k a

K e r a l a

M a d h y a P r a d e s h

M a h a r a s h t r a

M a n i p u r

M e g h a l a y a

M i z o r a m

N a g a l a n d

O r i s s a

P u n j a b

R a j a s t h a n

S i k k i m

T a m i l N a d u

T r i p u r a

U t t a r a k h a n d

U t t a r P r a d e s h

W e s t B e n g a l

al

Tw o Wh eel ers

4,5 5,1 1,5 2,7 10, 41 46 99 30 15 25 93 43, 62, 26, 32, 60 8,7 9,7 1,0 9,4 2,2 3,6 7,7 28 16 40 67 5 80 51 22 88 86 11 45 3 7 4 4

1,5 95, 80 8

2,8 76, 19 1

6,7 6,2 1,2 2,5 2,6 4,9 1,5 75, 21, 19, 36, 44, 39 16, 23, 87, 92, 4,6 34, 22, 81, 33 05 50 74 24 1,2 79 57 18 17 82 20 04 32 3 0 1 1 1 51 5 4 3 1 5 7 6

39 10 27, 43, 71, 57 27 51, 74, 92, 41 37 14 92 14, 33, 62, 26 20 73 42, 39 49 Ca 2,3 8,0 4,8 1,8 8,6 7,7 6,0 50 57 51 2,4 2,8 91 18 17 8,1 8,9 8,0 4,0 59 27 55 7,3 3,9 1,3 22 1,4 4,5 rs 40 30 50 70 72 38 63 8 2 6 14 95 8 7 1 81 12 30 06 5 3 3 79 91 80 0 43 05

Je ep s

58, 14, 21, 2,2 7,3 11 26 72 60 02 4 6 6

11 87, 12, 10, 23, 41, 71, 36, 26 21, 26, 32, 12 53, 7,8 9,4 6,7 2,8 0,9 20 33 69 41 02 65 28 2,7 64 52 79 8,0 98 72 01 65 63 43 3 1 3 9 4 6 2 41 9 7 7 56 7

97, 6,4 82 52 1

O mn 36, 54 i Bu 9 ses

3,2 59

1,3 2,7 44 45 65

36, 30, 51 48 3 8

12, 57 60 0 9

20 2,2 7 38

19, 48 95 7 7

14, 78 73 7 6

33 47 3,8 9,0 1,2 44 20 1,8 Tra 62, 10, 77, 44, 27 37 10, 15, 11 32 20 30, 45 40 9 3 0 98 04 63 1 9 27 cto 36 28 84 32 5,5 3,3 96 13 9,3 8,3 1,9 59 9,0 7,5

14 90, 31, 71 48, 7 88 98 8,0 34

T y p e o f V e h i c l e
[ 1 8 ]

A n d h r a P r a d e s h

A r u n a c h a l P r a d e s h

A s s a m

B i h a r

C h h a t t i s g a r h

G o a

G u j a r a t

H a r y a n a

H i m a c h a l P r a d e s h

J a m m u & K a s h m i r

J h a r k h a n d

K a r n a t a k a

K e r a l a

M a d h y a P r a d e s h

M a h a r a s h t r a

M a n i p u r

M e g h a l a y a

M i z o r a m

N a g a l a n d

O r i s s a

P u n j a b

R a j a s t h a n

S i k k i m

T a m i l N a d u

T r i p u r a

U t t a r a k h a n d

U t t a r P r a d e s h

W e s t B e n g a l

rs

43 73

40

80 40

14 23

82 1

Tra 46, 50, 38, 19 15 8,7 iler 88 40 80 9,6 5 40 03 s 5 3 4

62

12, 12 16 19 24, 57, 56 1,9 58 2,3 25 69 41 51 0,1 4,9 0,6 18 01 1 13 0 04 4 6 0 2 85 33 28 1 3

39, 10, 1,0 89 91 02 15 8 0 1

Ot 20, 16, 17, 55, 19, 11, 16, 11, 4,5 17 2,9 2,1 3,8 1,6 1,6 5,7 22 77 24 8,8 4,3 4,5 her 72 15 07 40 10 30 11 01 00 9 28 03 04 65 26 99 1 2 7 06 54 11 s 4 8 8 5 2 8 1 8

76, 19, 35, 54 2,1 89 18 16 1 22 5 8 4

Tot al no nco m me rci al

5,1 1,1 6,3 2,2 1,0 3,5 2,1 15, 57 65 38 22 35 49, 27, 38, 79, 86, 23, 06, 87 8,8 3,4 5,2 2,2 1,6 43 12 17 71 78 32 88 2 53 23 78 04 47 2 4 3 8 2 2 3

3,5 65, 12 4

7,8 1,3 3,3 3,4 7,7 6,1 2,1 93, 48, 31, 10 54, 47 24, 78, 51, 93, 9,9 47, 73, 59, 86 56 82 5,4 61 5,7 82 47 13 26 11 22 33 33 9 3 6 11 6 11 9 0 5 9 0 8 6

[edit]Geographical

Segmentation: Category-wise registration in Union Territories of India

Andaman & Nicobar Islands Dadra & Daman & Delhi Nagar Haveli Diu

Type of Vehicle

Chandigarh

Lakshadweep Pondicherry

Type of Vehicle

Andaman & Nicobar Islands

Chandigarh

Dadra & Daman & Delhi Nagar Haveli Diu

Lakshadweep Pondicherry

Multiaxled/Articulated Vehicles/Trucks & Lorries

1,519

1,671

5,487

1,896

75,601

6,588

Light Motor Vehicles (goods)

7,459

1,190

1,829

75,947

270

2,923

Buses

459

1,239

154

361

36,059

1,831

Taxis

436

1,173

108

43

24,712

1,421

Light Motor Vehicles (passenger) 784

500

890

20,893

408

4,283

Total Commercial

3,198

11,542

7,439

5,019

233,212

678

17,046

Two Wheelers

21,743

416,917

17,881

30,351

2,665,750 3,978

235,438

Cars

1,693

157,612

9,270

12,278

1,192,389 78

47,642

Jeeps

1,033

429

295

122,283

85

3,838

Omni Buses

38

8,386

2,545

Tractors

261

36

44

165

4,851

44

318

Trailers

67

46

124

99

1,582

Others

461

30

9,705

503

4,541

Total non-commercial

25,258

574,565

27,000

43,281

4,003,463 4,693

295,904

[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 byItaly, Germany, Netherlands and South Africa.[30] India's automobile exports are expected to cross $12 billion by 2014.[31] 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.[32] 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.[33] Similarly, General Motors announced its plans to export about 50,000 cars manufactured in India by 2011.[34] In September 2009, Ford Motors announced its plans to set up 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. [35] The company said that the plant was a part of its plan to make India the hub for its global production business.[36] Fiat Motors also announced that it would source more than US$1 billion worth auto components from India.[37] 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.[38] 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. [3]

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 for Nissan, 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 Europeand the U.S. Mahindra & Mahindra is preparing to introduce its pickup trucks and small SUV models 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.[39] 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. [39]

Automotive industry crisis of 20082010

From Wikipedia, the free encyclopedia
Part of a series on:

Late-2000s financial crisis

Major dimensions[show]

Countries[show]

Summits[show]

Legislation[show]

Company bailouts[show]

Company failures[show]

Causes[show]

Solutions[show]

The automotive industry crisis of 20082010 was a part of a global financial downturn. The crisis affected European and Asian automobile manufacturers, but it was primarily felt in the American automobile manufacturing industry. The downturn also affected Canada by virtue of the Automotive Products Trade Agreement.[1] The automotive industry was weakened by a substantial increase in the prices of automotive fuels[2] linked to the 2003-2008 energy crisis which discouraged purchases of sport utility vehicles (SUVs) and pickup trucks which have low fuel economy.[3] The popularity and relatively high profit margins of these vehicles had encouraged the American "Big Three" automakers, General Motors, Ford, and Chrysler to make them their primary focus. With fewer fuel-efficient models to offer to consumers, sales began to slide. By 2008, the situation had turned critical as the credit crunch [4] placed pressure on the prices of raw materials. Car companies from Asia, Europe, North America, and elsewhere have implemented creative marketing strategies to entice reluctant consumers as most experienced double-digit percentage declines in sales. Major manufacturers, including the Big Three and Toyota offered substantial discounts across their lineups. The Big Three faced criticism for their lineups, which were seen to be irresponsible in light of rising fuel prices. North American consumers turned to smaller, cheaper, more fuel-efficient imports from Japan and Europe. However, many of the vehicles perceived to be foreign were actually "transplants," foreign cars manufactured or assembled in the United States, at lower cost than true imports.[5]
Contents
[hide]

1 Asia

o o o o

1.1 China 1.2 India 1.3 Japan 1.4 South Korea

2 Europe

o o o o o o

2.1 France 2.2 France/Germany 2.3 Italy 2.4 Russia 2.5 Spain 2.6 Sweden

2.7 United Kingdom

3 North America

o o

3.1 Canada 3.2 United States

4 See also 5 References 6 External links

3.2.1 Effects of environmental expectations and changing product demand 3.2.2 Effect of 2008 oil price shock and economic crisis

[edit]Asia
[edit]China
In 2008 the Chinese government reduced automotive taxes in order to spur flagging sales. In January 2009, Chinese auto-manufacturer Chery reported unprecedented monthly sales.[6] (See alsoAutomobile industry in China)

[edit]India
Citing falling production numbers, the State Bank of India reduced interest rates on automotive loans in February 2009.[7] For the first few months of 2009, Tata Motors conducted a widespread marketing campaign heralding the debut of the Tata Nano. Billed as "the people's car," the manufacturer hopes the low cost will encourage customers to purchase the vehicle despite the ongoing credit crisis.[8]

[edit]Japan

The Toyota Prius is one of Toyota's Hybrid Fuel efficient vehicles which have moved in and out of short supply

With high gas prices and a weak US economy in the summer of 2008, Toyota reported a double-digit decline in sales for the month of June, similar to figures reported by the Detroit Big Three. For Toyota, these were attributed mainly to slow sales of its Tundra pickup, as well as shortages of its fuel-efficient vehicles such as the Prius, Corolla and Yaris. In response, the company has announced plans to idle its truck plants, while shifting production at other facilities to manufacture in-demand vehicles.[9][10][11][12] On December 22, 2008, Toyota declared that it expected the first time loss in 70 years in its core vehicle-making business. Loss of $1.7 billion, in its group operating revenue, would be its first operating loss since 1938 (Company was founded in 1937). Toyota saw its sales drop 33.9 percent and Honda Motor by 31.6 percent.[13] On 5 December 2008 Honda Motor Company announced that it would be exiting Formula One race with immediate effect due to the 2008 economic crisis and are looking to sell the team. [14] Honda has predicted that there may be reductions among part-time and contract staff. Upper management bonuses would also be reassessed and directors in the company will take a 10 percent pay cut effective January 2009.[15] Nissan, another leading Japanese car manufacturer, announced that it also would be slashing production and will reduce its output by 80,000 vehicles in the first few months of 2009.[16] In December 2008, Suzuki, Japan's fourth biggest car manufacturer, announced that it will cut production in Japan by about 30,000 units due to falling demand. The company is expected to face its first profit drop in eight years for financial year ending in March 2009.[17] On 16 December 2008, Fuji Heavy Industries, Japan's largest transport equipment manufacturer and the maker of Subaru brand cars, announced that it would exiting World Rally Championship at the end of the 2008 championship, "this sudden decision was in response to the widespread economic downturn that is affecting the entire automotive industry", and came one day after competitor Suzukiexited the sport.[18][19] Reported in Bloomberg on Dec 23, 2008, that Mitsubishi Motors is to widen production cuts on falling demand. The Japanese maker of Outlander sport-utility vehicles, will scrap the night shifts at two domestic factories as the deepening global recession saps auto demand. The carmaker will halt the night shift at its Mizushima plant, excluding the minicar line. Nighttime work at the Okazaki factory will stop from Feb. 2. The cuts are part of Mitsubishi's move to reduce planned output by 110,000 vehicles in the year ending March because of tumbling sales in Japan, the U.S. and Europe. Japan's vehicle sales may fall to the lowest in 31 years in 2009, according to the country's automobile manufacturers association. Mitsubishi will also halt production of passenger cars on every Friday next month at the Mizushima factory in western Japan. The Okazaki plant in central Japan will close every Saturday in January and for another five days. Toyota on Dec 22, 2008 slashed profit forecasts amid a sales slump. The Japanese automaker, often held up with Honda as a success story for the rest of the auto industry to follow, said it expected a slim profit margin of US$555 million for the year ending in March 2009. Toyota had originally been projecting a massive profit of $13.9 billion for that period. Their sales in the United States were down 34 per cent and were down 34 per cent

in Europe as well. They expected a loss which would be the equivalent of about $2 billion (CDN)." Toyota President Katsuaki Watanabe said the impact on the company from the struggling global economy has been "faster, wider and deeper than expected." "The change that has hit the world economy is of a critical scale that comes once in a hundred years," Watanabe said, speaking in Nagoya.[20] Facing its first loss in nearly sixty years, Toyota sought loans from the Japanese government.[21] On November 4, 2009, Toyota announced its immediate withdrawal from Formula One, ending the team's involvement in the sport after eight seasons. See also 20092010 Toyota vehicle recalls.

[edit]South Korea

The Hyundai Genesis named the 2009North American Car of the Year.

South Korean automakers have been generally much more profitable than their US and Japanese counterparts, recording strong growth even in depressed markets such as the United States. [22] Despite a global economic slowdown, Hyundai-Kia successfully managed to overtake Honda Motor in 2008 as the world's 5th largest automaker, climbing eight rankings in less than a decade.[23] Hyundai-Kia continued its rapid success in 2009, when only a year after overtaking Honda, it surpassed Ford Motor as the world's 4th largest automaker.[24] Hyundai-Kia's continued success was unusual at a time when most automakers saw their sales falling sharply, with leading automaker GM even filing for bankruptcy. Hyundai-Kia took significant advantage of the prolonged automotive crisis by producing affordable yet high quality and well designed vehicles.[citation needed] Rapid globalization has seen state of the art factories being built in several countries including Slovakia, the United States and China. The manufacturing facilities have been geared-up to build products that are designed and engineered for local markets. The Kia cee'd is a leading example, being designed, developed and engineered in Germany and built in Slovakia.[25] Unlike others, this crisis turned into an opportunity for many South Korean automakers. Korean automaker Hyundai offered customers who have lost their jobs to return a new-car purchase for a refund.[26] The continued growth and success is attributable to the country's fuel-efficient and well-equipped, yet

affordable cars with generous warranties, such as the Kia Picanto, Kia cee'd and Hyundai i30, which attracted global consumers at a time of severe economic recession, rapidly rising oil prices and increasing environmental concerns. South Korean automakers therefore had a competitive advantage against expensive luxury vehicles and SUVs from US, Japanese and German automakers. During the fourth quarter of 2008 to the first quarter of 2009, which was the height of this automotive crisis, the extremely weak South Korean won, especially against the US dollar and Japanese yen, significantly boosted the price competitiveness of South Korean exports in key markets. Another factor that helped maintain this momentum was an increasingly improving brand awareness, attributable to the introduction of the country's own luxury vehicles such as the Hyundai Genesis and Hyundai Genesis Coupe, which received highly positive awards in the press and reviews. Hyundai's brand grew by 9% in 2008, surpassing Porsche and Ferrari, while it used the Super Bowl football broadcast, the world's most expensive commercial air time, to promote the Hyundai brand in the United States.[27] Nonetheless, South Korean automakers were not completely immune to this automotive crisis and in December 2008 Hyundai Motor Company had begun reducing production at plants in the U.S., China, Slovakia, India and Turkey because of sluggish demand. The company missed an earlier projection of 4.8 million units for 2008 and announced a freeze of wages for administrative workers and shortened factory operations as demand weakens amid a global financial crisis.[28] South Korea's fourth largest automaker, SsangYong Motor, owned by the Chinese automobile manufacturer SAIC (Shanghai Automotive Industry Corporation), is the worst affected company in this crisis as it manufactures mainly heavy petroleum consuming SUVs. The carmaker recorded its fourth straight quarterly losses by the end of 2008 with red ink of $20.8 million in the third quarter. Also during the July to September period, sales dropped 63 percent to 3,835 vehicles. Its production lines have been idle since Dec. 17 as part of efforts to reduce its inventory. The automaker has halted production twice previously this year. In December 2008, SAIC gave an ultimatum to the SsangYong union to accept its restructuring plan or face the parent company's withdrawal, which, if implemented, would mean certain bankruptcy.[29] However, the South Korean Ministry of Knowledge Economy said that there will be no liquidity provision at the government level for five automakers - Hyundai, Kia, GM Daewoo, Samsung Renault and Ssangyong."We have no plans to inject liquidity into the carmakers," a ministry official said. "It has been repeatedly made clear."[29]

[edit]Europe
In Europe where car sales had also drastically decreased, consideration was being given to financial support for the automotive industry, particularly in France, Germany and Italy. German Foreign Minister Frank-Walter Steinmeier and Jean-Claude Juncker, Luxembourg's Prime Minister and head of the Eurogroup of single

currency nations, discussed the possibility of a common rescue package to be agreed by all the EU member states.[30]

[edit]France
On November 20, 2008, French automobile manufacturer PSA Peugeot Citroen predicted sales volumes would fall by at least 10% in 2009, following a 17% drop in the current quarter. As a result, it planned to cut 2,700 jobs.[31] On the 11 February 2009, PSA announced it would cut 11,000 jobs world wide, however none of these are expected to be in France.[32] Renault announced a net profit for 2008 of 599 million euros for the 2008 financial year. This was a 78% drop in profits from the 2007 financial year. European sales fell 4% and world wide sales 7%, forcing Renault to abandon their 2009 growth targets.[33] This however made Renault one of the few car makers to return a profit. Renault consistently struggled to return profits in the 1990s.

[edit]France/Germany
On November 24, 2008, French President Nicolas Sarkozy and German Chancellor Angela Merkel agreed to support the crisis-stricken automobile industry in France and Germany.[34] Detailed plans would be announced shortly.[35]

[edit]Italy

Fiat and Chrysler hope smaller models like the Fiat Grande Punto could be successful in the U.S. market

On December 16, 2008 Fiat in Italy announced that it will extend its temporary plant closures in Italy by a month; the Pomigliano d'Arco, the main plant for its Alfa Romeo cars will be shut for four weeks.[36] However, on February 20, 2009, reacting to actions by the Italian government to stimulate the automotive sector, Fiat said its plant closures would be curtailed.[37] The company also forecast that sales in Europe will drop by 14 percent in 2009.[36] On January 20, 2009 the company announced that it had entered into an agreement, subject to regulatory approvals, to acquire 35% of Chrysler. Fiat's 35% stake in Chrysler would not involve a conventional sale of shares, but would be achieved in return for allowing Chrysler to utilise some of Fiat's fuel efficient technologies

(Chrysler's February submission to the U.S. government included a commitment to produce nine Fiat-derived vehicles over a four-year period starting in 2010, including four hybrid-electric and battery-electric models).[38] Chrysler would be accorded access to Fiat's sales outlets in Europe, while in reciprocation Fiat will also gain access to Chrysler's dealership network in the U.S., where it is predicted smaller models such as the Fiat Grande Puntomay be successful.[39] In the past, Fiat has had trouble gaining a foothold in the American markets, whilst Chrysler has never held a strong market share in Europe since it sold its UK based Rootes Group and France based Simca to PSA Peugeot Citroen in the 1980s. On January 22, 2009, Fiat announced a 19% drop in revenues in the last three months of 2008. Italian Prime Minister Silvio Berlusconi said the government would meet to discuss the issue.[40]

[edit]Russia
Main article: Automotive industry in Russia Russia's automotive industry was hit hard by the late 2000s recession, which started from United States. Production of passenger cars dropped from 1,470,000 units in 2008 to just 597,000 units in 2009. Lorry production fell from 256,000 to 91,000 in the same period.[41] In late 2008, the Russian government introduced protectionistic measures, worth $5 billion, to improve the situation in the industry. This included $2 billion's worth of bailouts for troubled companies and $3 billion credits to buyers of Russian cars.[42] Prime minister Vladimir Putin described the move as vital in order to save jobs.[43] The tariffs for imported foreign cars and trucks were increased to a minimum 50% and 100%, respectively. The tariffs are linked to engine size of the vehicle. The increased duties led to protests in Russian cities, most notably in Vladivostok, as the import of Japanese cars is an important sector of the city's economy.[44] The most efficient anti-crisis measure executed by the Russian government was the introduction of a car scrappage scheme in March 2010. Under the scheme, buyers of new cars can receive a subsidy which is 600,000 rubles ($20,000) at maximum.[45] Sales of Russia's largest carmaker Avtovaz sales doubled in the second quarter of 2010 as a result, and the company returned to profit.[46][47]

[edit]Spain
Spanish automobile manufacturer SEAT (a subsidiary of the Volkswagen Group) cut production at its Martorell plant by 5% on the 7 October 2008, due to a fall in general sales. This affected 750 employees and continued until July 2009.[48] SEAT is still continuing to install solar panels in its Martorell plant near Barcelona.[49]

[edit]Sweden

On December 11, 2008, the Swedish government provided its troubled auto makers, Volvo and Saab, with support amounting to SEK 28 billion (3.5 billion USD). The two companies had requested assistance, faced with the financial difficulties of their U.S. owners Ford and General Motors. The plan consists of a maximum of SEK 20 billion in credit guarantees, and up to SEK 5 billion in rescue loans.[50] On the 18 February 2009 General Motors warned Saab may fail within ten days, should the Swedish government not intervene.[51] On 20 February, an administrator was appointed to restructure Saab and assist in it becoming independent of its troubled parent General Motors. General Motors have confirmed their intention to sell their Swedish subsidiary, Saab.[52] Of Sweden's 9 million population, 140,000 work in the car industry and they account for 15% of exports.[51]

[edit]United Kingdom
In the United Kingdom, Jaguar Land Rover, now owned by Tata Motors, was seeking a $1.5 billion loan from the government to cope with the credit crisis.[53] On 22 December 2008, Tata declared that it would inject "tens of millions" of pounds into the company it had acquired from Ford Motor Corporation in early 2008. British Prime Minister Gordon Brownalso stated the intention to help out car industry in U.K.[54] On the 8 January 2009, Nissan UK announced it was to shed 1200 jobs from its Washington, Tyne and Wear factory in North East England due to the automotive industry crisis of 2008.[55] This announcement was made, despite the plant recently being hailed as the most efficient in Europe.[56][57] General Motors UK subsidiary Vauxhall Motors, whose brand is the second most popular in the UK[citation
needed]

has two bases in the UK, a factory in Ellesmere Port, Cheshire and their headquarters and design and

development centre in Luton, Bedfordshire. It is as yet unknown whether these plants will be affected by the GM cutbacks. The group along with their sister subsidiary,Opel of Germany was supposed to be sold in their majority to Magna International, an Austro-Canadian company who supply many parts to large car companies, but General Motors cancelled the transaction. UK bus manufacturer Optare received an order from Arriva in November 2008 for the manufacture of 53 buses in a contract worth over 6million, securing 500 jobs at the company's Assembly factory inCross Gates, Leeds, West Yorkshire and the parts centre in Cumbernauld, North Lanarkshire.[58] UK Van and commercial vehicle manufacturer LDV Group asked the UK government for a 30 million bridging loan to facilitate a management buyout of the group. On the same day this was refused.[59] LDV has since said it has a viable future and intends to become the first volume producer of electric vans should the management buyout take place. Production at LDV's factory inBirmingham, West Midlands (where it employed 850 staff) has been suspended since December 2008 due to falling demand.[60] Eventually, no buyout materialised and LDV was declared defunct on 15 October 2009

[edit]North America
[edit]Canada
Main article: Effects of the 20082010 automotive industry crisis on Canada The Canadian auto industry is closely linked to the U.S., due to the Automotive Products Trade Agreement and later the North American Free Trade Agreement (NAFTA), and is in similar trouble.

[edit]United States
Main article: Effects of the 20082010 automotive industry crisis on the United States The crisis in the United States is mainly defined by the government bailouts of both General Motors and Chrysler, while Ford secured a line of credit in case they require a bridging loan in the near future. Car sales declined in the United States, affecting both US based and foreign car manufacturers. The bridging loans lead to greater scrutiny of the U.S. automotive industry in addition to criticism of their product range, product quality, high labour wages, job bank programs, and healthcare and retirement benefits. While the "Big Three" U.S. market share declined from 70% in 1998 to 53% in 2008, global volume increased particularly in Asia and Europe.[61] The U.S. auto industry was profitable in every year since 1955, except those years following U.S. recessions and involvement in wars. U.S. auto industry profits suffered from 1971-73 during the Vietnam War, during the recession in the late 1970s which impacted auto industry profits from 1981 83, during and after the Gulf War when industry profits declined from 199193, and during the Iraq War from 200103 and 2006-09. During these periods the companies incurred much legacy debt.[62] Facing financial losses, the Big Three have idled many factories and drastically reduced employment levels. GM spun off many of its employees in certain divisions into independent companies, including American Axle in 1994 and Delphi in 1999. Ford spun off Visteon in 2000. The spin-offs and other parts makers have shared Detroit's downturns, as have the U.S.-owned plants in Canada. Altogether the parts makers employ 416,000 people in the U.S. and Canada. General Motors alone is estimated to have lost $51 billion in the three years before the 2008 financial crisis began. GM is set to reacquire factories from its Delphi subsidiary during its Chapter 11 restructing.[63] The 2005 Harbour Report estimated that Toyota's lead in benefits cost advantage amounted to $350 US to $500 US per vehicle over North American manufacturers. The United Auto Workers agreed to a two-tier wage in recent 2007 negotiations, something which the Canadian Auto Workers has so far refused.[64] Jared Bernstein, the chief economist of Vice President Joe Biden, noted in an interview with WWJ-AM in Detroit that most of the 2007 contract concessions apply only to new hires, while older workers "still benefit from contracts that were signed a long time ago."[65] However, only 30% of parts used by the Big Three employ union labor, with 70% sourced from non-union labor.

Delphi, which was spun off from GM in 1999, filed for Chapter 11 bankruptcy after the UAW refused to cut their wages and GM is expected to be liable for a $7 billion shortfall.[66][67][68] In order to improve profits, the Detroit automakers made agreements with unions to reduce wages while making pension and health care commitments. GM, for instance, at one time picked up the entire cost of funding health insurance premiums of its employees, their survivors and GM retirees, as the U.S. did not have a universal health care system.[69] With most of these plans chronically underfunded in the late 1990s, the companies have tried to provide retirement packages to older workers, and made agreements with the UAW to transfer pension obligations to an independent trust.[70] Nonetheless, non-unionized Japanese automakers, with their younger American workforces (and far fewer American retirees) will continue to enjoy a cost advantage.[71][72][73]

A Chevrolet TrailBlazer, one of General Motors SUVs

Despite the history of their marques, many long running cars have been discontinued or relegated to fleet sales,[74][75][76] as GM, Ford and DaimlerChryslershifted away resources from midsize and compact cars to lead the "SUV Craze". Since the late 1990s, over half of their profits have come from light trucks and SUVs, while they often could not break even on compact cars unless the buyer chose options.[77] Ron Harbour, in releasing the Oliver Wymans 2008 Harbour Report, stated that many small econoboxes of the past acted as loss leaders, but were designed to bring customers to the brand in the hopes they would stay loyal and move up to more profitable models. The report estimated that an automaker needed to sell ten small cars to make the same profit as one big vehicle, and that they had to produce small and mid-size cars profitably to succeed, something that the Detroit three have not yet done.[78] SUV sales peaked in 1999 but have not returned to that level ever since, due to higher gas prices. In the case of Chrysler Corporation, compact and mid-sized vehicles such as the Dodge Neon, Dodge Stratus and Chrysler Cirrus were produced profitably during the 1990s concurrently with more profitable larger vehicles. However, following the DaimlerChrysler merger in 1998, there was a major cost-cutting operation at the company. The result was the lowering of benchmarked standards for Chrysler to aim at. This directly led to

the following in Chrysler's case. There was realignment of the Chrysler Group model range with those of GM and Ford (i.e. a skew towards larger vehicles). The Detroit Big Three had been slower to bring new vehicles to the market compared with foreign competitors. The Big Three have battled initial quality perceptions in spite of reports showing improvements. [79] Falling sales resulted in the Big Three's plants operating below capacity. GM's plants were operating at 85% in November 2005, well below the plants of its Asian competitors, and was only maintained by relying on cash incentives and subsidized leases.[80] Rebates, employee pricing, and 0% financing boosted sales but drained the automaker's cash reserves. The subprime mortgage crisis and high oil prices of 2008 caused the popularity of once best-selling trucks and SUVs to plummet. Automakers were forced to continue offering heavy incentives to help clear excess inventory.[81] Due to the declining residual value of their vehicles, Chrysler and GM stopped offering leases on a most of their vehicles in 2008.[82] In September, 2008 the Big Three asked for $50 billion to pay for health care expenses and avoid bankruptcy and ensuing layoffs, and Congress worked out a 25$ billion loan.[83] By December, President Bush had agreed to an emergency bailout of $17.4 billion to be distributed by the next administration in January and February.[84] In early 2009, the prospect of avoiding bankruptcy by General Motors and Chrysler continued to wane as new financial information about the scale of the 2008 losses came in. Ultimately, poor management and business practices forced Chrysler and General Motors into bankruptcy. Chrysler filed for chapter 11 bankruptcy protection on May 1, 2009 [85] followed by General Motors a month later.[86] On June 2, GM Motors announced the sale of the Hummer brand of off-road vehicles to Sichuan Tengzhong Heavy Industrial Machinery Company Ltd., a machinery company in western China, a deal which later fell through.[87][88][89]

[edit]Effects of environmental expectations and changing product demand

Environmental politics and related concerns regarding carbon emissions have heightened sensitivity to gas mileage standards and environmental protection worldwide. In a 2007 edition of his book An Inconvenient Truth, Al Gore criticized the Big Three. "They keep trying to sell large, inefficient gas-guzzlers even though fewer and fewer people are buying them." For example, Japan requires autos to achieve 45 miles per US gallon (5.2 L/100 km; 54 mpg-imp) of gasoline and China requires 35 mpg-US (6.7 L/100 km; 42 mpg-imp). The European Union requires 47 mpg-US (5.0 L/100 km; 56 mpg-imp) by 2012. By comparison, U.S. autos are required to achieve only 25 mpg-US (9.4 L/100 km; 30 mpg-imp) presently. Other nations have adopted standards that are increasing mpg requirements in the future. When California raised its own standards, the auto companies sued.[90][91] The Big Three received funding for a $25 billion government loan during October 2008 to help them re-tool their factories to meet new fuel-efficiency standards of at least 35 mpg-US (6.7 L/100 km; 42 mpg-imp) by 2020. The

$25 billion in loans from the Department of Energy to the auto manufacturers were actually authorized by Congress early this year but not funded. Automakers could use these loans to "equip or establish facilities to produce advanced technology vehicles that would meet certain emissions and fuel economy standards; component suppliers could borrow funds to retool or build facilities to produce parts for such vehicles." [92]

[edit]Effect of 2008 oil price shock and economic crisis

Medium term crude oil prices 1987-2011

In 2008, a series of damaging blows drove the Big Three to the verge of bankruptcy. Part of the cause was very high labor costs (much higher than the foreign plants in the U.S.)[citation needed]. The Big Three had in recent years manufactured SUVs and large pickups, which were much more profitable than smaller, fuel-efficient cars. Manufacturers made 15% to 20% profit margin on an SUV, compared to 3% or less on a car.[93] When gasoline prices rose above $4 per gallon in 2008, Americans stopped buying the big vehicles and Big Three sales and profitability plummeted. Robert Samuelson has advocated a more consistent energy policy, arguing "wild swings between low and high fuel prices have crippled the U.S. industry by erratically shifting buyer preferences -- to and from SUVs."[94] The financial crisis played a role, as GM was unable to obtain credit to buy Chrysler.[citation needed] Sales fell further as consumer credit tightened and it became much harder for people with average or poor credit to obtain a bank loan to buy a car. During 2007, nearly 2 million new U.S. cars were purchased with funds from home equity loans. Such funding was considerably less available in 2008.[95] In addition, stock prices fell as shareholders worried about bankruptcy; GM's shares fell below 1946 levels. Furthermore, the instability of the job market and individual consumers' finances discourages consumers who already have a working vehicle from taking on a new loan and payments, which affected almost all major manufacturers. The annual capacity of the industry is 17 million cars; sales in 2008 dropped to an annual rate of only 10 million vehicles made in the U.S. and Canada. All the automakers and their vast supplier network account for 2.3% of the U.S. economic output, down from 3.1% in 2006 and as much as 5% in the 1990s. Some 20% of the entire national manufacturing sector is still tied to the automobile industry. The transplants can make a profit when sales are at least 12 million; the Big Three when sales are at least 15 million.[96] The crisis has affected auto companies around the world, with large sales decreases experienced by all.

As of December 19, 2008, oil prices had fallen to $33.87 per barrel, but the automobile crisis continues. [97]