Indian Automotive Industry: Opportunities and Challenges Posed By Recent Developments

Abstract

The Indian automobile industry is currently experiencing an unprecedented boom in demand for all types of vehicles. This boom has been triggered primarily by two factors: (1) increase in disposable incomes and standards of living of middle class Indian families estimated to be as many as four million in number; and (2) the Indian government's liberalization measures such as relaxation of the foreign exchange and equity regulations, reduction of tariffs on imports, and banking liberalization that has fueled financing-driven purchases. Industry observers predict that passenger vehicle sales will triple in five years to about one million, and as the market grows and customer's purchasing abilities rise, there will be greater demand for higher-end models which currently constitute only a tiny fraction of the market. These trends have encouraged many multinational automakers from Japan, U. S. A., and Europe to enter the Indian market mainly through joint ventures with Indian firms. This paper presents an introduction to the key players in the Indian automotive industry, a summary of the recent developments, and an analysis of the opportunities and challenges facing the various players (Indian and multi-national assemblers and component makers) in the areas of product development, production, and distribution.