Indias automobile sector consists of the passenger cars and utility vehicles, commercial vehicle, two wheelers and tractors segment. The total market size of the auto sector in India is approximately Rs 540 billion and has been growing at around 8 percent per annum for the last few years. Since the last four to five years, the two wheelers segment has driven the overall volume growth on account of the spurt in the sales of motorcycles. However, lately the passenger cars and commercial vehicles segment has also seen a good growth due to high discounts, lower financing rates and a pickup in industrial activity respectively.
The automobile industry is fairly concentrated, as in most of the segments two to three players have cornered a major chunk of the total sales. For instance, in passenger cars segment, MUL, Tata Motors and Hyundai Motors control around 85 percent of the total annual sales. Similarly, in the two wheelers segment, the sales volumes of Hero Honda, Bajaj Auto and TVS Motors constitute around 80 percent of the total sales and in the commercial vehicles segment, the market leader Telco controls around 56 percent of the total annual sales. The autocomponents industry on the other hand is highly fragmented, though there are dominant players in some of the critical segments.
Given the high growth expectations and a liberal government policy, the investment potential in the India auto sector is huge. CRIS INFAC is forecasting a 12-15% annual growth in the passenger car sales, 6-8% in commercial vehicles and around 10% in two wheelers. Several passenger car makers have already achieved near full capacity utilisation and are expanding. Almost all the major automobile manufacturers such as GM, Ford, DaimlerChrysler, Honda, Toyota, Hyundai, and Fiat (with the exception of Volkswagen, which is planning to set up manufacturing shortly) already have made significant investments in India. In the next 2-3 years, the passenger vehicle industry is expected to see investments of more than Rs 30 billion. Similarly, two wheeler industry is expected to attract investment amounting to Rs 10 billion.
There has also been a surge in exports of cars, utility vehicles and two wheelers. The expected growth in domestic sales and exports of vehicles also offers significant opportunity for investors to invest in the auto ancillary industry. Already several international suppliers such as Delphi, Visteon, TRW, Johnson Controls, Denso and Dana, have set up manufacturing facilities and are expanding rapidly to serve not only the domestic market but also to supply to their global customers. Another attractive area of investment for vehicle and parts makers is research and design, to take advantage of Indias low cost advantage.
However, investment in commercial vehicle manufacturing looks relatively unattractive, given the current size and structure of the Indian market.
Recently, government has liberalised the investment norms for the auto sector. Local content requirements and export obligations have been scrapped, and minimum investment requirements also have been diluted. Import duties on vehicles and parts have been gradually coming down and are expected to decline further in the next two years. Several state governments also offer attractive incentives, such as sales tax relaxations and concessional land, to potential investors. However, manufacture of certain components continues to be reserved for the small-scale sector. This reservation is also expected to lifted gradually over the medium term.
The expected rise in income levels, wide choice of models and easy availability of finance at low interest rates will drive growth in passenger cars segment, which is likely to be over 12 percent per annum for the next four to five years. Two wheelers growth is likely to marginally slow down, but still grow at an average annual growth rate of around 10 percent.
The commercial vehicles segment is likely to grow at a trend rate of 6-8 percent driven mainly by the increase in industrial and economic activity on account of the expected growth in the economy, though annual growth rates may fluctuate widely with the cyclical ups and downs of the economy. Tractor industry growth is likely to turnaround and post a growth in volumes in 2004-05. However, it will post a moderate growth of around 4-5 percent annual growth rate over the medium term.
Indian Automotive Industry: Opportunities and Challenges Posed By Recent Developments
Executive Summary: 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.
1.1 Introduction to The Indian Automotive Industry
For forty years since India's independence from the British in 1947, the Indian car market was
dominated by two localized versions of ancient European designs -- the Morris Oxford, known as
the Ambassador, and a old Fiat. This lack of product activity in the Indian market was mainly due
to the Indian government's complex regulatory system that effectively banned foreign-owned
operations. Within this system (referred to informally as the "license raj"), any Indian firm that
wanted to import technology or products needed a license/permit from the government. The
difficulty of getting these licenses stifled automobile and component imports, creating a low
volume high cost car industry that was inefficient, unprofitable, and technologically obsolete. The
two dominant products Ambassador and Fiat, although customized to the poor road conditions in
India, were based on a stale design concept (with outdated features), and were also fuel inefficient.
In the early 1980's, the Indian government made limited attempts at reforming the automotive
industry, and entered into a joint venture with Suzuki of Japan. The joint-venture, called Maruti
Udyog Limited, launched a small but fuel efficient model (called "Maruti 100"). Priced at about
$5,500, the product became an instant hit. The joint venture now produces three small-car models,
a van, and a utility vehicle at a rate of more than 250,000 a year. Despite being a late entrant,
Maruti's vehicles are estimated to account for as much as 70 per cent of India's car population.
In 1991, a newly elected Indian government took over and faced with a balance-of-payments crisis
initiated a series of economic liberalization measures designed to open the Indian economy to
foreign investment and trade. These new measures effectively dismantled the license raj which had
made it difficult for Indian firms to import machinery and know-how, and had disallowed equity
ownerships by foreign firms. In 1993, the government followed up its liberalization measures with
significant reductions in the import duty on automobile components. These measures have spurred
the growth of the Indian economy in general, and the automotive industry in particular. Since
1993, the automotive industry has been experiencing growth rates of above 25%. Data for the
1995-96 financial year is yet to be released by all the firms, but estimates indicate that passenger
vehicle sales may reach or exceed 350,000 for the first time. (Passenger vehicles include cars and
vans but not jeeps.) Table 1 presents the production data of passenger vehicles for the top four
Indian assemblers. Foreign vehicle sales have been insignificant until the 1994-95 years.
Company Main Products 1992/93
Maruti Udyog Limited
Maruti 100, Esteem,
NE118 (Higher end)
Hindustan Motors (HM) Ambassador
Contessa (Higher end)
Tata Engg. & Locomotive
Company Ltd. (TELCO)
Total Passenger Vehicles 163,300 280,000 (est.)
Table 1: Estimated Production of Passenger Vehicles By the Top Firms in the Indian
Automotive Industry; Source: Association of Indian Automobile Manufacturers (AIAM),
Automotive Components Manufacturers Association of India (ACMA) and other press reports1.
1.2 A Brief Introduction to the Top Four Indian Automotive Assemblers
As seen in Table 1, Maruti Udyog Limited (MUL) is the number one Indian automotive assembler
commanding more than a 70% share of the Indian passenger vehicle market. (It also sells a few
thousand jeeps, called Gypsy, which are not included in the passenger vehicle data of Table 1.)
Most recent data released by MUL show that it produced a total of 277,000 vehicles in 1995/96
resulting in a turnover of approximately $2 billion (Rs. 6673 crore, Source: Financial Express,
March 30, 1996). It is also a reasonably profitable venture with after tax profits of about $122
million (a 65 % increase over the previous year). MUL's relatively large production volumes offer
scale economies in production and distribution, that pose formidable barriers to entry. It has also
established a solid supplier-base located around India (most of its assembly is concentrated in
Northern India near New Delhi). Its products enjoy good reputation in fact, Indian automotive
industry observers credit Maruti for the rapid improvement in quality and supplier capability in
this industry. (Until last year, new Maruti's have to be booked several months in advance!) MUL's
product line is concentrated in the economy car segment, although it has been moving up recently
to cater to the premium market segments by introducing the higher-end Esteem.
1Much of the data presented in this paper has been extracted from the annual reports published by ACMA,
and from articles in the business press and trade journals.
Occupying the second position in 1994/95 is Bombay-based Premier Automobiles Ltd. (PAL),
which edged out Calcutta-based Hindustan Motors Ltd. (HM) from the second place. In fact, PAL
produced the Fiat, and HM produces the Ambassador both products that dominated the Indian
automotive industry for decades. The advent of Maruti has resulted in the decline of both these
firms. PAL's main products are the Premier Padmini (in the compact car segment) and the NE118
(in the mid-size car segment). Recently, PAL has rejuvenated itself by entering into joint ventures
with Peugeot (for the Peugeot 309), and with Fiat (for the Fiat Uno). Its close competitor HM
continues to produce Ambassadors in small volumes targeted at the economy/compact car segment.
HM also offers a higher end product called Contessa Classic, and has entered into joint venture
agreements with General Motors (GM) to produce the Opel Astra, and with Mitsubishi to make
the Lancer targeted at the higher-end market.
Despite occupying the fourth position and producing passenger vehicles only in small volumes,
Tata Engg. & Locomotive Company Ltd. (TELCO) is noteworthy, not only because it is a part of
the powerful Tata industrial family, but also because it is one of the few firms with indigenous
product development capabilities, and has been a dominant player in the commercial vehicles
segment. (The author, in fact, worked with TELCO for a brief period in the late 80's in their light
commercial vehicles product development group.) TELCO holds about 70% of the heavy
commercial vehicles market, and (after entering the market late) has also managed to fend off
Japanese competition by gaining about 50% of the light commercial vehicles segment with its inhouse
product development. It entered the passenger vehicles market only in 1991-92, and has
quickly established itself in the higher end of this segment with its Estate and Sierra models. The
firm has entered into a joint venture with Mercedes Benz to assemble the E220's, and is also said to
be planning an entry into the small/economy car segment challenging Maruti's stronghold.
1.3 A Brief Introduction to the Indian Component Suppliers
Component suppliers are the backbone of an emerging automotive industry. By all accounts, the
Indian component industry, based mostly in the southern city of Madras, is tiny. The auto
component manufacturers association of India (ACMA) estimates that $2.1 billion worth of car
parts were produced in the financial year 1995, out of which exports amounted to $228 million. To
put this in perspective, the entire Indian industry's revenue is roughly one-tenth that of GM's
component unit, Delphi automotive systems2. But, the component market has been growing
rapidly at about 25% a year, and is expected to quadruple in size by the year 2000. This growth
has not only been due to the growing demand for passenger vehicles, but also due to the increasing
trend by multi-national OEM's to resort to global sourcing to improve competitiveness.
Leading automotive assemblers and component makers are increasingly turning to India for
components. One of the now widely-cited examples of this trend is the Indian component firm,
Sundaram Fasteners Limited (SFL), which the author has been studying for the last year. SFL
became GM's largest supplier of radiator caps, and exports about 300,000 caps from its factories in
Madras to GM plants around the world. In 1992, when GM was planning to close one of its
plants in UK., SFL took advantage of the liberalized economic environment in India, bought the
machinery from GM, and relocated them to its plant in Madras. The company has continued to
2It is also noteworthy that Delphi is in the process of setting up its own units in India to make steering systems,
chassis, and electrical systems recognizing the needs of the fast-expanding Indian automobile market.
invest heavily in quality and productivity improvements, and a tour around SFL's suburban
Madras Factory shows a world-class plant with minimal inventory and rework. The company's
workers, trained in statistical tools and control charts, keep processes under statistical control due
to which radiator cap rejection rate is less than 1% of annual production. The company also has a
very skilled managerial and engineering workforce, which has helped it develop in-house product
development capabilities. Using these resources and skills, the firm is now seeking to expand its
supply to other manufacturers in Europe, US, and Asia, and also diversify into other components.
SFL exemplifies the Indian auto components industry, which although small and fragmented has
the competitive advantages of a skilled workforce and low labor costs. It is estimated that
components can be produced about 30% cheaper in India than in the west. (The top Indian
assembler, Maruti, is able to price its cars at about $5,500 because it sources 90% of its
components from Indian suppliers.) Rapid growth and tie-ups with foreign firms will help Indian
auto components suppliers further invest in capacity and automation and acquisition of the latest
know-how, thereby closing the productivity gap with other world-class component makers.
Exhibit 1 shows a few other notable Indian component suppliers and their exports to OEM's.
2. Recent Developments and Issues Facing the Indian Automotive Industry
In the past two years, more than a dozen multi-national firms have announced plans to enter the
Indian market. Most of them have formed joint ventures with Indian firms, while there are
exceptions such as Hyundai which plan to form fully-owned units. Exhibit 2 displays most of
these firms and their products planned for the Indian market3. Despite the large growth potential
of the Indian market (analysts expect the growth to triple in the next five years), no one expects the
industry to sustain the fragmentation caused by more than a dozen suppliers. Many of these new
firms will not enjoy the scale economies and relationships with suppliers that Maruti does, so they
have decided not to challenge Maruti at its price of $5,500 in the smaller car segment. Most are
planning to produce between 20,000 and 50,000 higher-end vehicles. The stiffest competition is
building up in the mid-sized car range (1,300 cc and above), where several of these multi-national
and Indian companies are planning to go head-to-head. Although these newly announced vehicles
at $12,000 or above remain expensive by Indian standards and planned capacity exceeds projected
demand, new entrants are betting on the rising incomes of middle-class families. Notably,
Daewoo's new product Cielo, priced at about $15,000 in a joint venture with the Indian firm DCM,
drew 76,000 advance bookings last year reflecting the pent-up demand in the market.
Amongst the many issues facing the Indian automotive industry, the biggest by far is the poor road
infrastructure. India's road network, comprising of a modest national highway system (that is only
2% or less of the total roadway length) is woefully inadequate and dilapidated, and can barely keep
pace with the auto industry's rapid growth. Most roads are single-lane roads built in the 1950's
and 60's, and are crowded with two-wheelers, bullock carts, and even pedestrian humans and cows.
Traffic laws are not well enforced leading to one of the highest per-capita accident rates in the
world. It is to be expected that the introduction of bigger and more powerful vehicles will only
worsen the situation. Upgrading the existing highway system is itself expected to cost $30 billion
or more, and resource and land constraints prevent the building of new highways. The Indian
3Conspicuous by its absence from this list of new entrants is Toyota, which initially had an arrangement with the
Hinduja group that was called off in March, 1996. Toyota is said to be adopting a wait-and-see attitude.
government's approach to solving this problem is to privatize the road infrastructure, by having
private firms build and operate tollways. However, it is unclear if this alone will be able to solve
this infrastructure problem of enormous proportions, which can severely bottleneck future growth.
The significant (about 50%) tariffs imposed on import products and components combined with
the vagaries of currency exchange rates make localization an important imperative for foreign
companies entering the Indian market. Firms are already making a major effort to localize rapidly;
The Daewoo-DCM venture is expected to raise its local content to 90% by the decade's end.
GM's Astra will start with 40% labor content, and go up to 75% within three years. One challenge
to localization is a shortage of component suppliers with size and sophistication.
Another major uncertainty facing the Indian market is the government's policies toward foreign
investments and joint ventures. As Amsden and Kang  note4, governments play a key role in
shaping the growth of the auto industry in emerging economies (as compared with developed
countries). Although many observers say the economic reforms initiated by the ruling Congress
party are not reversible, the difficulties experienced by Enron Corp. in its investments in the
power sector under the hands of the opposition Bharatiya Janata Party (BJP) do not bode well for
other foreign investors. With elections in mid-1996 expected to return a coalition group to power,
it will be hard for the new government to push the reform measures with the same vigor and pace
as the previous government did. It is even unclear if the group in power will be so positively
inclined to foreign investments and trade as the current government.
3. Discussion of the Strengths and Weaknesses of the Various Players
To analyze the strengths and weaknesses of the various players in the Indian automotive industry,
it is useful to classify them into the following four categories: (1) Indian Assemblers, (2) Multinational
Assemblers (3) Indian Component Makers, and (4) Multi-national Component Makers.
Table 2 presents the strengths and weaknesses of each of these groups.
The Indian assemblers, typified by Maruti, have built a formidable distribution and after-sales
network. They also have an established supplier base, which gives them cost and delivery time
advantages, especially in light of import tariffs and currency exchange rate fluctuations/
devaluations. Their biggest weakness, with the exception of TELCO, is the lack of product design
capability. In the coming years, they should focus on acquiring product design and lean production
know-how (as the Korean firms did in the eighties and early nineties [Amsden and Kang 95]).
They could acquire know-how with help from their joint-venture partners, and also with
investments in research and development which at present are at extremely low levels.
Multi-national assemblers could really benefit from their lean production capabilities in India,
where production runs are expected to be small due to the large number of players entering the
Indian market. They could also set themselves apart by incorporating safety and comfort features
not currently included in Indian-assembled products. These include seat restraints, airbags, and
anti-lock brakes, and comfort features such as power windows, and central locks. U. S. assemblers
have a reputation of safety, which they could leverage to their advantage. Close cooperation with
4Amsden, A. H., and J. Kang, "Learning to Be Lean in An Emerging Economy: The Case of South Korea", IMVP
Sponsors Meeting, Toronto, 1995.
the joint-venture partners can overcome the lack of experience with the Indian market, but the small
size of the component supplier base will pose a challenge to their need to localize rapidly.
Group Strengths Weaknesses
Indian Assemblers Established distribution and
after-sales networks, and
Understanding of the Indian
market and ability to liaison
with the government
Lack of product development
capabilities (except TELCO)
Brand image (especially HM
Multi-national Assemblers Lean production capability
Ability to design products
with differentiating features
Deep pockets, brand image.
Lack of experience with the
Indian market, industry, and
Small component supplier
base and high import tariffs.
Indian Component Suppliers Low cost, skilled workforce
Learning From exports
Small Size, Fragmentation
Lack of know-how in certain
Size, Deep pockets
Experience and Know-how in
Import tariffs, currency
exchange rate fluctuations.
Inexperience with Indian
Table 2 Strengths and Weaknesses of the Different Groups in the Indian Auto Industry
As mentioned earlier, the Indian component industry is small and fragmented, but is growing and
learning fast due to exports. It is also estimated to hold a 20-40% cost advantage over multinational
component suppliers who are much larger and are themselves opening up units in India to
take advantage of the lower-cost, skilled workforce. The Indian component industry needs to
invest in capacity and research and development to stay abreast of competition, when the wage gap
closes over time. It is likely that some of the multi-national assemblers or component makers might
buy some of the small but niche component makers with a reputation for quality.
The Indian automotive industry, although growing rapidly, is in a state of flux. The production
capacities planned by the new joint ventures currently exceed most projections, and unless import
tariffs come down quickly and the economy grows remarkably, a shake-out may be expected from
the current 20 firms to about half a dozen major firms turning out finished products by the end of
the decade. However, if multi-national firms decide to use India as a production base from which
vehicles are exported to the rest of the world, more than half a dozen firms may be able to remain
profitable in India. Suzuki has already begun to use its Maruti joint-venture production to export a
few thousand cars to the Middle East and Europe. However, the production capacities of other
emerging economies such as Korea and China are also predicted to grow significantly in the coming
years, so exports may also face a highly competitive market situation.
In this paper, we have presented a brief introduction to the Indian assemblers and component
suppliers. We noted that Indian assemblers have a tight hold over the small-car market due to their
low cost supplier base and the tariffs levied on import components. Maruti with its production
volumes of over 250,000 enjoys scale economies in production, distribution, and service that are
hard to challenge. As Amsden and Kang  (cited before) and Womack et al.5 note, production
volumes do confer several advantages to a firm. However, new entrants can set themselves apart
by offering new safety and comfort features that are not currently offered in the Indian market.
They can also leverage their low production run (lean) capabilities to stay profitable despite the
low production volumes. Further, they can combine their reputation with the Indian industry's
lower production costs to produce cars and export them to the global markets. Many multinationals
are already said to be planning such an approach.
For Indian component makers and assemblers, product development capability is key, in order to
rejuvenate their product lines, enhance their reputation, and export their products to the markets in
developed countries. The author is currently pursuing a study of product development and
production systems in the Indian component industry. Since the plants located in India are very
far from the developed markets of the USA, Europe, and Japan, component suppliers incur
significant transportation and inventory carrying costs in exporting products to global markets.
Their situation is worsened by the poor Indian infrastructure, which leads to frequent power
interruptions and long delays in supply. These companies are adopting innovative techniques to
cope with these uncertainties, which will be a topic of another paper.
The Indian automotive industry, as a whole, is also severely bottlenecked by the woefully
inadequate road infrastructure. Privatization of the road infrastructure, even if started immediately,
can take years to solve this problem. India also experiences an extraordinarily high number of
traffic fatalities, and faces severe pollution problems. As of April 1, 1996, the ministry of surface
transport has set emission norms (that are modest by international standards), which local
automakers say are hard to meet. Multi-national firms can bring their experience and know-how to
bear in these areas, and enhance their reputation as well as attract customers who are safetyconscious
and environmentally aware. This will also result in the gradual reduction of the autorelated
facilities and pollution (due to the diffusion of these practices), thereby contributing to the
further growth of the Indian automotive industry.
5Womack J. P., D. T. Jones, and D. Roos, "The Machine That Changed The World: The Story of Lean
Production", Harper Publishers, 1990.
Exhibit 1: Notable Indian Component Suppliers and Their Exports To OEM's
Sundaram Fasteners: Supplies radiator caps to GM, Caterpillar, and others.
Wheels India: Supplies wheels to heavy vehicle and automotive manufacturers in Europe.
Eicher Goodearth: Supplies machined castings to Mitsubishi and other major automotive firms.
Sona Steering: Supplies steering systems to Japanese component makers.
Brakes India: Castings and rubber components to Lucas Industries, Germany.
Source: ACMA Annual report and India Today (March 93)
Exhibit 2: New Entrants To The Indian Automotive Industry as of March 1996
Company Joint Venture Partner Planned Products (Ave. Price)
Audi (Volkswagen) Franchise (Imported car) Audi-A4 ($85,000)
Daewoo (Korea) DCM Cielo ($15K)
Fiat Premier Automobiles (PAL) Fiat Uno 1000 cc ($10,000)
Ford Motor Company Mahindra & Mahindra Ford Escort, Festiva ($12K)
General Motors Corp. (GM) Hindustan Motors (HM) Opel Astra ($22K average)
Honda Shriram Industries Civic ($18K)
Hyundai (Korea) Wholly-owned subsidiary Accent
Mercedes-Benz TELCO Mercedes E220 ($70K)
Mitsubishi Hindustan Motors (HM) Lancer ($15K)
Peugeot Premier Automobiles (PAL) Peugeot 309 ($15K)
Volkswagen Eicher Ltd. Golf ($20K)
Source: Press Reports From India
India's auto industry comes of age
Not long ago, India's auto industry was a laughing stock. Its two best-known cars were a 1940s Morris model called the Ambassador and a 1960s Suzuki-derived model called the Maruti 800. But that was then. Today, for instance, the Mumbai-based Dilip Chhabria Design Pvt Ltd (DC Design) is seeking to take on Pininfarina and Bertone, the Italian standard in international car design, by designing and building concept cars, prototypes and limited-production runs. Nor is DC Design alone.
"There can be few more improbable automotive stories than the yarn about the Indian designers creating bespoke concept and prototype cars," said the United Kingdom's auto magazine Autocar in a recent issue. "Yet the hottest ideas in car design are happening right now in the back streets of Mumbai." India is now the ninth country in the world to design a vehicle on its own.
In fact, the Indian auto industry is fast becoming an outsourcing hub for automobile companies worldwide, as zooming automobile exports from the country indicate. Surinder Kapur, the chairman of Sona Koyo Steering, which exports car steering assemblies, says, "Car makers over the world have realized that India can design a car on its own and make it globally acceptable."
Passenger car exports have nearly trebled in four years, from 28,122 units in 1998-99 to 71,653 vehicles in 2002-3. The industry expects this to gather steam further ahead because car exports in the first quarter of 2003-4 leapt by 87 percent over the same period in 2002-3. The two-wheeler segment is booming, too, with exports zooming from 100,004 units last year to 179,000 units in 2002-3. By 2005, the industry expects 400,000 two-wheelers on foreign shores.
The Indian-made sports utility vehicle Scorpio received a singular response in Detroit early this year, not just for its design but also because of its cheaper price tag. Tata Motors, the country's second-largest car maker's small Indica convinced MG Rover of the UK to sell it to the UK market as the City Rover. Others like Ford's mid-sized car model Ikon, Maruti's Altos and Toyota's Indian-made multi-utility vehicle have found ready buyers in a number of American, European and neighboring countries.
And when cars and two wheeler exports are on a roll, can automobile components be far behind? Pushed to export last year following a two-year domestic slowdown, the auto component exported $850 million worth of the nuts and bolts that go into making an automobile by March 2003, up from $578 million in March 2002. "Indian auto component makers now supply to virtually the best and the biggest in the world," says Suresh Krishna of Sundaram Fasteners, a leading auto component exporter, adding that he expects the country to export a targeted $2 billion by 2006.
"Indeed, India is well on its way to become an outsourcing hub for global auto manufacturers and the country stands a good chance against China," says Sundaram Mutual Fund managing director T P Raman, although Joginder Singh, vice president of finance for Ford Motor Company of Canada, thinks that global auto majors can't ignore either China or India.
Already, 15 global car makers - including GM, Ford, DaimlerChrysler, Mercedes-Benz, Audi, Isuzu and Nissan have set up outsourcing offices in the country, with a combined budget of approximately $1.5 billion, industry sources say. Leading component makers like Delphi, Visteon and Caterpillar, too, have found India their best bet. While according to industry estimates the cost of automotive design in Europe ranges as high as $800 per hour, and even higher in the US, costs are as low as $60 per hour in India for equivalent quality.
Whether the next outsourcing wave or simply smart marketing by a local industry, global auto makers are increasingly turning to India for sourcing a wide range of needs that even include designing models meant only for global markets. "To begin with," says Deep Kapuria, of Automobile Components Manufacturers Association of India, "it's triggered by the overall economic slowdown and large-scale bankruptcies in the global auto sector. And as global giants continue losing money, cost pressures are forcing them to opt for sourcing bases in developing countries."
But more importantly, according to industry analysts, the Indian auto industry has finally come of age, having upgraded itself in the past few years to meet global standards. Dilip Chhabria, the head of DC Designs, makes no bones about taking on the world's best. Earlier this year, the Aston Martin AMV8 Vantage starred at the Detroit Auto Show. Chhabria developed the prototype as part of a Ford contract.
Until the mid 1990s, the Indian auto sector consisted of just a handful of local companies. However, after the sector opened to foreign direct investment in 1996, global majors moved in. By 2002, Hyundai, Honda, Toyota, GM, Ford and Mitsubishi had set up their manufacturing bases here.
"These companies first had to focus on issues like quality, vendors and marketing before they could think big," says Arindam Bhattacharya, vice-president, Boston Consulting Group. Thus, in the past four to five years, these companies have not only fine-tuned their operations but forced transformation on the rest of the industry as well.
"Consequently," Bhattacharya adds, "India has not only emerged as a low-cost base but also a source for producing quality products."
The sector also received an unintended boost from stringent government auto emission regulations over the past few years. This ensured that vehicles produced in India conformed to the standards of the developed world. It also drew technology infusion and investment. "Not surprising then that India is also set to become a preferred research and development [R&D] center," says Ravi Khanna, president and managing director, Delphi India, adding that its Indian facilities are "an integral part of its worldwide engineering and technical footprint".
Nevertheless, according to managing director Jagdish Khattar of Maruti Udyog Ltd. India's largest car maker and a Suzuki joint venture, India still has a long way to go to become a global force. "Indian companies need to first grow the Indian market to acquire economies of scale," he says. China, for instance, consumes four times India's 700,000 annual car sales. Moreover, if Indian companies hope to corner a big chunk of the global market they need to ramp up global presence considerably, say others.
Still, Joginder Singh of Ford feels that India's auto industry will continue to make its presence felt, primarily because it is one of the few countries the global auto industry cannot ignore. "Two-thirds of a car is built from suppliers. That's a big cost item and companies can cut costs to a large extent in places like India and China," he says. "We can't ignore either China or India, which are projected to be so huge that it would be dangerous to look only at one of them. They are showing the highest growth rate of any market in the world. Any auto maker would be on a fool's errand if it ignores any of them."
Small wonder then that Ravi Khanna of Delphi India is "convinced that with the increasing emphasis on quality, India is fast moving towards becoming a sourcing hub for global automobile makers".
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GREEN RATING FOR AUTOMOBILE SECTOR
Is the Indian automobile sector as environmentally conscious as best in the world?
NO! Automobile sector has fared badly. Under the project rating scale we were to award five leaves award to the best company. But sadly no auto company deserved this honour. The best company gets less than 45 per cent marks getting a mere three leaves award. But the sector as a whole gets even lesser, scoring 31.4 per cent, deserving only two leaves award.
The passenger car segment leads the way among the entire automobile segment and is the only segment which gets three leaves. Mass transport vehicle segment comes second. The two and three wheeler segment, with two leaves, lags behind even the mass transport vehicles, which has performed better due to introduction of CNG fuelled vehicles.
THE GOOD, THE BAD, THE UGLY
In terms of overall performance, the three companies, which top the environmental rating, are Daewoo Motor India Ltd., Hyundai Motors India Ltd. and General Motors India. All these three companies have performed well in product usage phase.
The companies, which are at the bottom of the pile, are the three non-participating companies, Bajaj Tempo Ltd., Yamaha Motor Escort Ltd. and Swaraj Mazda Ltd.
Maximum of the companies in top ten are passenger car manufacturers while most of the two and three wheeler manufacturers have shown a poor performance trailing behind in the ratings. However, there is an exception, Hero Honda Motors, which has not only achieved three leaves rating but also ranks fifth in overall rating.
The other two and three wheeler companies lag very far behind. Though Bajaj Auto Ltd. and TVS Suzuki follow Hero Honda Motors as the 2nd and 3rd in the segment but in the overall rating they fare poorly.
WINNERS AND LOSERS
As far as individual products are concerned, Daewoo's small car Matiz, has been judged as the most environment friendly vehicle overall, scoring high in terms of vehicle and engine design, and also performing well in other aspects such as pollution control equipment installed and emissions.
Maruti's most popular vehicle in the country Maruti-800 (Euro II model) is the second most eco-friendly vehicle. It scores less than Matiz in terms of design but scores more in the emissions. The third most eco-friendly vehicle is Hyundai's Santro, which also has the highest fuel efficiency.
Small is beautiful--All the top three eco-friendly vehicles are small cars and have inherent advantages over the larger ones in the sense that they emit less pollution and consume less fuel compared to larger vehicles. They also use lesser material during manufacturing stages.
Honda City 1.5V-tech gets the recognition of being the most technologically advanced and least polluting vehicle in India with emission as low as 85 per cent lower than the Euro II norms.
The vehicle with the worst performance environmentally is Mahindra & Mahindra's Armada, which comes last in the passenger car segment. It has scored very low in all criteria.
Among the two and three wheelers, both selected models of Hero Honda (Splendor and CD 100) are the most eco friendly two wheelers. They have scored above average in vehicle and engine design and are one of the very few four-stroke two wheeler fitted with any kind of pollution control equipment.
Bajaj boxer, the latest model of Bajaj Auto that ranks third, has scored well in vehicle and engine design but lacks in emission control equipment and comparatively poorer emission.
The best performing two-stroke model ranks fourth amongst the two wheelers. The lowest score has been obtained by Kinetic Safari moped, which obtained average scores in design and emissions and very poor scores in pollution control equipment and emissions.
Among the mass transport vehicles Ashok-Leyland's Viking compressed natural gas (CNG) bus scored above average in design and very high in emissions due to inherent advantages of CNG vehicle making it the best performer in this section. The second position is also taken by another CNG fuelled vehicle, that is, Telco LPO CGS bus. Interestingly, the worst performers in this segment are Ashok Leyland's diesel fuelled Comet 1611 and Tusker Turbo tractor.
A total number of 29 automobile manufacturers were selected for the project of which 26 companies participated voluntarily (90 per cent participation). The three companies which refused to participate and chose to continue being non-transparent are Bajaj Tempo Ltd., Yamaha Escorts Motor Ltd. and Swaraj Mazda Ltd.
The Green Rating of Indian Industry project was started by the Centre for Science and Environment (CSE) in 1996 to address an array of environmental issues facing all segments of Indian industries. The project is supported by the United Nations Development Programme (UNDP) and the Ministry of Environment and Forest (MoEF). The first sectoral rating undertaken under the pilot phase of the project was pulp and paper sectoral rating, which was a highly successful exercise and was rated as the best environmental audit project in last 25 years in Asia by 'Asia Week'.
Spanning over a period of two years, Green Rating of automobile sector was a great challenge owing to diversity between companies in their production processes as well as the products manufactured. Participation of all the major automobile companies in the exercise makes it a unique effort to assess the environmental health of the sector. The project has covered 35 production facilities spread in nine states and almost 80 per cent of the products currently running on Indian roads.
The rating methodology for automobile sector has been developed keeping in mind the life cycle impact of the automobile industry. Thus, the weightages were allotted accordingly with 80 per cent of the score devoted to life cycle analysis (LCA) and remaining 20 per cent for corporate governance.
The life cycle assessment included determining the environmental impacts at various steps of the production process right from sourcing of raw materials, to the manufacturing and assembly process, to the pollution caused by use of the vehicle, and finally the impact caused by its disposal.
Of the 80 per cent on the life cycle assessment, the highest weightage (56 per cent) was allotted to the product use phase based on the conclusion arrived at by the project that maximum pollution occurs during use phase. "Vehicle are the core of the automobile industry since they alone generate about 80 per cent of the total life cycle pollution," says Chandra Bhushan, Coordinator, Green Rating Project, CSE. "In order to assess the environmental performance of the product, a combination of engine design, pollution control equipment fitted and the emission test data supplied by the test agencies were considered, making this exercise the most comprehensive ever taken anywhere in the world. Even the green automobile ratings done in the US and in Europe only consider emissions and fuel consumption data to rank the vehicles. Green rating project has taken a quantum leap over the existing automobile rating methodology" he adds.
Robustness of the Rating methodology
'Engine design analysis should represent the emissions from the vehicles,' was the main focus for arriving at the robustness of the product rating criteria, developed by GRP, since the engine and vehicle rating was given by the project and the emissions rating was given on the basis of the test data of certified test agencies. Therefore, the litmus test for GRP was to correlate the ratings given by two separate institutions with no interaction between them. This was very well reflected in high coefficient of correlation found between the scores obtained in engine design and pollution control equipment, and the score obtained in emission. For example, in petrol passenger cars in 78 per cent cases the engine design did represent the emission characteristics of the vehicles.
Testing the effectiveness of the rating methodology in replicating the life cycle analysis, the test undertaken by the project was to correlate the overall rating with the vehicle's rating. Since, as per life cycle analysis, a company with poor product should get poor results, however good it may be on other aspects. This too was very well established in the rating with product rating having a very high correlation (97 per cent) with the overall rating. However, the analysis brought out the fact that the other criteria were as important and were seen to have high degree of correlation with the overall ratings.
Green rating project findings draw its process on the principle that root of the cure of any disease lies in the proper diagnosis rather than just medication!!!
More miles per litre
A fuel-efficient car would be the cheapest vehicle in the long run and an important consideration for the customer as well. The Hyundai Santro was judged the most fuel-efficient petrol passenger vehicle followed by Fiat Uno and Maruti-800 Euro-II model. In case of diesel passenger car, Mitsubishi Lancer was judged the most fuel-efficient and Toyota Qualis Euro-I model was most fuel-efficient multi-utility vehicle.
Clean fuel, clean vehicle
We did a comparative analysis of impact of fuels on emissions.
Study based on analysis of three diesel-fuelled mass transport vehicles and two CNG fuelled mass transport vehicles clearly showed that CNG fuelled vehicles are far better in terms of tail pipe emissions than the diesel fuelled mass transport vehicles. CNG-fuelled vehicles have as much as five times lower particulates and overall 73 per cent lower emissions than their diesel counterparts.
Overall petrol vehicles show an inherent advantage over the diesel-fuelled vehicles with all the top 14 cars being petrol ones. The best diesel car, which is Mercedes E 220, ranks as low as 15. While the best multi-utility vehicle, Toyota Qualis Euro II model ranks a dismal 20th among all the 31 models.
Are MNCs better than Indian Companies?
Green rating project reveals that contrary to the prevalent belief there is hardly any difference in the overall performance of Indian companies and MNCs. Both of them meet the same environmental standards in each and every aspect. A double standard was perceptible in the business pattern of MNCs as they were following a practice of dumping obsolete products on the pretext of poor fuel and existing regulatory norm in the Indian market. Other than corporate environmental governance and pro-active initiatives, Indian companies are at par with the MNCs.
Does cleanliness make business sense?
Yes it does. A fairly tangible correlation was observed between the environmental performance and economic performance of companies in the automobile sector. On an average, in total automobile segments it was found that about 67 per cent of time there was direct relation between the environmental rating and profit of company. That is, if a company is good on the environment front, it is also sound in its balance sheet. In specific vehicle segment, this correlation was very high, as high as 81 per cent in two and three wheeler companies.
Although, insufficiently informed consumers contribute to 80 per cent of the pollution generated by automobile companies on road. Yet the sector in itself or through its dealers has not taken any proactive effort to educate these consumers. Two and three wheeler companies are the worst in consumer awareness raising initiatives. Except for giving free servicing not much has been done to educate people.
Maintenance of the vehicles
The project found that though the maintenance of the vehicle plays a major role in the overall environmental performance during the vehicle use, the strategy adopted by the automobile companies do not provide enough incentive to the consumers to go to the authorised service stations/ workshops. The cost of maintenance at authorised service stations were found to be as high as 50 to 100 per cent than the unauthorised stations, and this was the main reason why consumers avoided going to the authorised stations once their vehicle became a bit old. Automobile companies need to work on economy of scale and provide enough incentive to the consumer to use authorised service stations. This will not only reduce the pollution load but will also improve company's bottom line. Companies need to think in terms of annual maintenance contract to facilitate this recommends green rating project.
Impact of fuel quality
GRP analysis on Indian automobile segment clearly shows that the companies are holding fuel quality responsible for pollution. Whereas, the truth is that current engine design in India is at least a decade old compared to similar type of vehicles manufactured in western countries. Basic initiative towards improving the engine design is lacking. Use of alternative fuels over conventional fuels is yet to take its start in major way and their needs to be a big boost in the development of this concept in India.
The automobile sector in general has not taken much effort to establish the impact of fuel quality on emissions. Some studies undertaken by companies have shown that there is hardly any consistent trend to show that the fuels are mainly responsible for the poor emission quality. Role of age factor on the effectiveness of catalytic converters too needs a comprehensive study to establish a relation as it plays a great role in determining the pollution scenario on roads.
Impact of various parameters on fuel efficiency
Impact of various design parameters of vehicles on the tail pipe emission and fuel efficiency was carried out by the project. Weight of the vehicle and its engine size was found to have inverse relationship with fuel efficiency, though compression ratio had a direct relationship.
The project also found that a Indian passenger car switching over to multi point fuel injection system from the carburettor system can expect a reduction in the tail pipe emission in the range of 25 per cent to 40 per cent.
Another interesting finding was that majority of the petrol passenger cars running on the Indian roads are using catalytic converters which does not suit their engine design.
Which is better? Two stroke or Four Stroke.
On the comparative performance undertaken for two-stroke and four-stroke two wheelers, the outcome clearly established that four stroke two-wheelers are better that two stroke two-wheelers with respect to both emission and fuel efficiency.The carbon monoxide (CO) and hydrocarbons and nitrogen oxides (HC+NOx) emitted by two-stroke two-wheelers (with catalytic converter) are 23 per cent and 38 per cent, respectively higher than their equivalent four-stroke two-wheelers without catalytic converter.
Meeting of regulations
While some Indian vehicles are meeting Euro II equivalent norms in the national capital region of Delhi and Euro I equivalent norms in the rest of the country, it was found that overall, automobiles in all the segments are meeting the regulatory norms well. However, GRP found that this is not enough as there are companies that can go much beyond the minimum regulatory requirement but absence of incentives from government discourages them. Government should come out with some incentive mechanism to differentiate between just a good performer and excellent performers.
Supply Chain Management
Green rating project closely scrutinised the practice of outsourcing by Indian automobile companies and found that majority of pollution during automobile production takes place at the supplier and vendor's site, most of them being small and medium scale companies. Overall automobile companies had a very poor performance on this aspect. The project found a clear trend of transferring of pollution by automobile companies to its supply chain. Companies urgently need to adopt a green procurement policy and green up their supply chain.
Importance of ISO 14001
Almost half of the automobile sector has adopted environment management systems (EMS) standards. However ISO 14001 adopted by automobile companies is not the actual reflection of their environment management as these companies are just assembly plants. Most of their processes are outsourced and the major pollution happens at vendor's site and during product use and disposal. Thus, ISO 14001 only takes care of very small percent of pollution generated by the companies. The project has recommended automobile sector to adopt an environment management system, which reflects the environmental aspects of automobile business and not to use the existing system, which is production centric.
Some other findings related to production process:
1) The entire sector uses paints that contain heavy metals and are based on solvents. No company uses water based paints
2) The regulatory standards for wastewater characteristic applicable to the automobile sector are lax as well as irrational
THE WAY AHEAD
"Business Planning but with the ingredients of Social, Environmental and above all Ethical consideration imbibed in it will define the future of Indian Automobile Sector", says Sunita Narian, Director, CSE. "We recommend a coherent approach to be adopted by automobile industry, government and consumers. Once the consumer starts including environment in their buying decisions, which they should because environment in automobile actually means economy and savings, companies will be pushed to improve," adds Chandra Bhushan, coordinator of Green Rating Project.
Companies cannot afford to loose their market given the kind of cutthroat competition existing in India today. Consumers need to build on the research outcome of green rating project, and ask for emission and fuel efficiency performance of automobiles as their buying criterion along with price.
Government on its part should come out with economic instruments as its major tool to regulate automobile companies. Pollution control body too needs a complete rethinking of its regulatory approach to this sector. Wastewater characteristics, solid/hazardous waste management, paint sludge incineration, dioxin and furans are some major aspects of automobile pollution during manufacturing process-regulations for which are either weak or non-existent. Downstream pollution checks and supply chain management are also some issues where regulatory bodies will have to do some soul searching.
Automobile companies need to do a lot of rethinking. Extensive research and development, option of alternate fuels, clean technologies and quality control to oversee adherence to product conformance will shape the future of automobile sector in India.
Companies must come forward and be more active in shouldering their responsibilities in educating consumers regarding good and bad features of vehicles.
Proactive dialogue between this sector and society in general could pave the way for long-term solution to the various pollutions caused by the automobile sector. All stakeholders need to come together to improve the environmental performance of this sector. We have just made a start, a lot more needs to be done.
Current status of Indian Automotive Industry
On the canvas of the Indian Economy, Auto Industry occupies a prominent place. Due to its deep forward and backward linkages with several key segments of the economy, automotive industry has a strong multiplier effect and is capable of being the driver of economic growth. A sound transportation system plays a pivotal role in the country's rapid economic and industrial development. The well-developed Indian automotive industry ably fulfils this catalytic role by producing a wide variety of vehicles: passenger cars, light, medium and heavy commercial vehicles, multi-utility vehicles such as jeeps, scooters, motorcycles, mopeds, three wheelers, tractors etc.
Although the automotive industry in India is nearly six decades old, until 1982, only three manufacturers - M/s. Hindustan Motors, M/s. Premier Automobiles & M/s. Standard Motors tenanted the motorcar sector. Owing to low volumes, it perpetuated obsolete technologies and was out of sync with the world industry. In 1982, Maruti Udyog Limited (MUL) came up as a Government initiative in collaboration with Suzuki of Japan to establish volume production of contemporary models. After the lifting of licensing in 1993, 17 new ventures have come up, of which 16 are for manufacture of cars. There are at present 12 manufacturer of passenger cars, 5 manufacturers of MUVs, 9 manufacturers of Commercial Vehicles, 12 of two wheelers, 4 of three wheelers and 14 of tractors besides 5 manufacturers of engine.
The industry comprising of the automobile and the auto component sectors has shown great advances since delicensing and opening up of the sector to FDI in 1993. The industry has an investment of a sum exceeding Rs. 50,000 crore. During the year 2003-04 the turnover of the automotive sector was around Rs. 1,00,000 crore. The industry provides direct employment to 4.5 lakhs and generates indirect employment of 1 crore. The contribution of the automotive industry to GDP has risen from 2.77% in 1992-93 to 4% in 2003-04.
The Automobile Manufacturers have put up a robust manufacturing capacity of 95 lakh plus vehicles per annum since 1993. Today India is the world's second largest manufacturer of two wheelers, fifth largest manufacturer of commercial vehicles and manufactures largest number of tractors in the world. The country offers fourth largest passenger car market in Asia today. A supplier driven market, having no more than a handful of vehicular models two decades ago, now offers more than 150 models and variants by way of customer options. The installed capacity of the automobile sector during the year 2003-04 was as under:
One of the largest industries in India, automotive industry has been witnessing impressive growth during the last two decades. Abolition of licensing in 1991, permitting automatic approval and successive liberalisation of the sector over the years have led to all round development of this industry. The freeing of the industry from restrictive environment has, on the one hand, helped it to restructure, absorb newer technologies, align itself to the global developments and realise its potential and on the other hand, this has significantly increased industry's contribution to overall industrial growth in the country. Overall automobile sector bagged a growth of 15.12% in 2003-04. During the year 2004- 05 (upto April-Sept. 2004) the Industry has registered a growth rate of 15.06%. The details of actual production during 2003- 04 and 2004-05 (upto April-Sept.2004) are given below:
S. No. Name of the Sector No. of units Production
1. Commercial Vehicles 9 275224 156815
2. Cars 12 842437 465983
3. Multi-Utility Vehicles 5 146103 114739
4. 2-wheelers 12 5624950 3023805
5. 3-wheelers 4 340729 177554
Total 42 7229443 3938896
Automotive industry of India is now finding increasing recognition worldwide and a beginning has been made in exports of vehicles as well as components. The automobile industry along with the component industry is also contributing to the export effort of the country. During the year 2002-03 the export of automobile industry had registered a growth rate of 65.35% while it was 55.98% during the year 2003-04. The details of exports during 2003-04 and 2004-05 (upto April-Sept. 2004) are given below:-
S. No EXPORT 2003-04 2004-05(April-Sept. 04)
1. Commercial vehicles 17227 12575
2. Passenger cars 126249 76076
3. Multi- Utility Vehicles 3067 2164
4. 2-wheelers 264669 170978
5. 3-wheelers 68138 37901
TOTAL 479350 299704
Auto Components Industry
Surge in automobile industry since the nineties has led to robust growth of the auto component sector in the country. Responding to emerging scenario, Indian auto component sector has shown great advances in recent years in terms of growth, spread, absorption of newer technologies and flexibility, despite multiplicity of technology platforms and low volumes. India's reasonably priced skilled workforce, large population of technology workers coupled with strengths gained by the country in IT and electronics all build up an environment for significant leap in component industry.
The Indian auto component sector is being written up as the next industry, after software, that has the potential of becoming globally competitive. Indian Auto Component Industry, with a turn over of an approx Rs. 36,300 crore (2004-05,prov.) and manufacturing all the key components required for vehicle manufacturing, is an important sector of the Automotive industry. The phased Manufacturing Policy (PMP) followed in the 1980s enabled the component industry to induct new technologies, new products and a much higher level of quality in their operations that enabled quick and effective localization of the component base. The Indian auto component industry over the years has played a key role in the growth and development of the country's automotive industry. The Indian auto component sector today has 420 key players who contribute more than 85% of the output of this sector. The vital statistics of the auto component sector during 2002-03 and 2003-04 are as under:
Indicators 2002-03 2003-04
Rs. 12,500 crore Rs. 13,400 crore
Output Rs. 24,500 crore
Rs. 30,640 crore
Rs. 3,800 crore Rs. 4,550 crore
Employment 5,00,000 persons
Indian auto component industry has seen major growth with the arrival of world vehicle manufacturers from Japan, Korea, US & Europe. Due to diversities in the technological profiles of these OEMs, the sector today produces large variety of components. Today, India is emerging as one of the key auto components center in Asia and expected to play a significant role in the global automotive supply chain in the near future.
Indian auto component industry is wide (over 420 firms in the organized sector producing practically all components and more than 10,000 firms in small unorganized sector, in tierized format) and has been one of the fastest growing segments of automotive industry, growing by over 28%, in nominal terms, between 1995-98. During the year 2003-04, the sector has recorded a growth of 25.06% by recording a production of the order of Rs. 30,640 crore. During the year 2004-05, the output of the Auto Component Industry is expected to be around Rs. 36,300 crore.
Component exports in the year 2003-04 have already crossed US $ 1 billion. This,
however, represents only about 0.8% of global component trade currently estimated
at around US $1.2 trillion. This is reflective of significant opportunities that lie ahead.
Several export units have reached rejection rate below 5 parts per million (PPM) with many of them touching a zero PPM. On export front, auto component industry has registered a growth of 29% in the year 2003-04 which is expected to be around 30% in the year 2004-05. During the year 2003-04, total export was of the order of Rs. 4550 crore as compared to Rs. 3497 crore during the year 2002-03. up in the current year with the reduction in the excise duty and improvement in the credit delivery system for the sector.