Wheels of progress

Print edition : October 07, 2011

The Mahindra Navistar plant at Chakan in Pune. - SHASHI ASHIWAL

Maharashtra has emerged as a front runner in automobile production for a number of reasons.

SHORTLY after the manufacture of the early modern automobile in the United States, cars arrived in India too. History says the first car made by Ford was driven in India in 1897. As the century turned, three cars were imported to Mumbai. Within the decade, there were 1,025 cars in the city.

Just before Independence, in 1945, Mahindra & Mahindra established a company that assembled jeeps and utility vehicles under licence from Willys, the American company best known for its jeep. It later became well known for manufacturing agricultural tractors and light commercial vehicles.

During the post-Independence period, the government tried to create an automotive components industry. However, the focus here was more on developing the manufacturing and engineering industry rather than making cars. This was when Hindustan Motors rolled out the Ambassador, which went on to acquire iconic status. This car ruled the Indian roads for 40 years until economic reforms made way for Japanese and European cars.

Nationalisation and the licence raj of the 1960s did not help either the automotive component or the vehicle industries. However, in the 1970s, the industry grew on the strength of the tractors, commercial vehicles and two-wheelers it manufactured.

In the 1990s, the industry grabbed the opportunity that economic reforms offered and rapidly took the sector to growth levels never seen before. By this time it was established that the automobile industry would play a crucial role in economic growth owing to its deep forward and backward linkages with almost every segment of the economy.

The 1980s saw Japanese manufacturers launch joint ventures to build motorcycles and light commercial vehicles. The Indian government chose Suzuki of Japan to partner with the government-owned Maruti Udyog to manufacture a small car. The car, the M800, captured the imagination of all Indians. In the 1990s, a number of Indian and international automobile companies launched operations in India. Since then, the sector, including the ancillary units, has seen accelerated growth.

Mumbai and the industry

Starting from the time when the first car ran on Mumbai's roads to the time when every automobile major set up office in the city, the financial capital and Maharashtra State have been very encouraging of the automobile industry.

Rakesh Shah, a car dealer, says that in recent times there has been a demand for luxury cars. In fact, he says, BMW, Rolls-Royce, Aston Martin, Porsche, Lamborghini, Maserati, Ferrari, Mercedes-Benz, Jaguar, and Maybach have already sold more cars in Mumbai than they expected to. Shah attributes this accent on style and luxury to the rise in incomes.

Maharashtra has emerged a front runner in automobile production for a number of reasons. As a State that has had friendly policies towards the manufacturing industry, it was an obvious choice for automobile makers. Some of the factors that favour Maharashtra are its strong human capital, access to ports, well-developed financial institutions, good demand for vehicles in the western region, and the presence of two of the oldest industrial houses (Tata and Bajaj).

THE LINEA GETS ready to be rolled out of Fiat's Ranjangaon plant near Pune.-SHASHI ASHIWAL

The Chakan corridor near Pune has become a vehicle production hub in Maharashtra. Companies such as General Motors, Volkswagen, Skoda, Mahindra & Mahindra, Tata Motors, Mercedes-Benz, Land Rover, Fiat and Force Motors have plants in this belt. Skoda also has a factory in Aurangabad.

According to the Maharashtra Industrial Development Corporation (MIDC), the government's industrial policy aims to develop Maharashtra as Asia's most competitive manufacturing hub. MIDC is responsible for establishing special economic zones (SEZs), which provide economic incentives (tax exemptions), power and water supply. There are 72 SEZs in Maharashtra, 80 per cent of which are located in the Golden Quadrilateral (Mumbai-Pune-Nasik-Aurangabad). They account for 80 per cent of Maharashtra's gross domestic product (GDP) and focus on manufacturing and services industries.

From 2003 to 2010, car sales in India have progressed at a compound annual growth rate (CAGR) of 13.7 per cent. With only 10 per cent of Indian households owning a car in 2009 (the corresponding figure is 80 per cent in Switzerland), this growth is unlikely to stop in the coming decade.

Congestion on Indian roads, more than market demand, will be the limiting factor, say most analysts. The need of the hour is better infrastructure. Automobile experts believe that while newer and more affordable cars are welcome, the country needs to address issues such as better roads, parking space and traffic discipline.

In the leadership race within the industry, Maruti is the largest player in the car segment, thanks to the fact that India is a compact car country. Hyundai and Tata Motors are the next in line though a host of challengers have emerged. The list includes Ford (Figo), Volkswagen (Polo), General Motors (Beat), Toyota (Etios Liva) and Honda (Jazz).

Companies such as Mahindra & Mahindra have focussed on their core business of sport utility vehicles (SUV). It sells nearly 10,000 units of the Bolero every month; the Scorpio and Xylo too are popular. The next offering from the company is a top-end SUV codenamed W201.

In two-wheelers, Hero Honda (now rechristened Hero MotoCorp) is the market leader, with monthly sales of 500,000 units. Bajaj comes next with average sales of 3.8 lakh motorcycles and three-wheelers. It exports a third of its output and plans to make its international business a key part of its growth.

TVS Motor and Honda Motorcycle & Scooter India are the other key players in the two-wheeler segment. The sales of two-wheelers are projected to grow at nearly 15 per cent, which means this fiscal will close at nearly 14 million motorcycles and scooters.

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