Strengths of the Automobile Industry
Low labor cost:
India enjoys a comparative cost advantage in labour as compared
to western countries.
Skilled Manpower:
India has vast pool of skilled manpower and qualified
engineers among the largest in the world.
On a scale of 1-10, 1 = low, 10 = high.
Availability of Skilled labour.
Sr No Country Points.
1 India 8.5
2 Brazil 7.5
3 US 7.4
4 Germany 6.6
5 Mexico 6.6
Availability of Qualified Engineers.
Sr No Country Points.
1 Germany 7.5
2 India 7.4
3 US 7.2
4 Brazil 6.4
5 Mexico 6.3
Reference: Competitiveness of Indian automotive industry Feb 2004.
Weaknesses of the Automobile Industry
Low labor productivity:
Cost advantage in labor wages is nullified by the fact that we have lower labor productivity.
Defect rates high:
We have a higher defect rate about 10 times the world average.
Low Investment in R & D:
The Industry has a very low investment in R & D as compared to their foreign counterparts which will their sustainability in the future.
Not reached critical mass:
Indian companies are in nascent stage and hence not able to cater to the requirements of OEM’s. Our auto- ancillary industry is of 2.4 bn $ while Ford’s outsourcing budget is 86 bn $.
Poor infrastructure :
Poor infrastructure like roads, ports, railways which lead to
higher logistics cost and lower reliability.
Opportunities for the Automobile Industry
Global automobile companies are setting up manufacturing facilities in India. Also, many Indian automobile manufacturers have announced their plans to increase the export of vehicles from India. The year 2002-03 has already seen a significant 65% increase in export volumes during the period April to March. This trend is expected to continue with more global OEMs sourcing vehicles from their Indian plants.
Additionally, the introduction of newer technologies such as Electronic Diesel Control Systems to reduce emission levels, safety devices such as Air Bags, Anti-lock Braking Systems, etc. augur well for the Company and the automotive sector as a whole. These technologies not only offer increased safety for drivers and passengers, but also result in greater comfort and better drivability.
While there exist many opportunities for growth in business, there are also quite a few factors, which act as an impediment.
In my last year’s speech I mentioned about the need for a well thought out and clearly defined policy on emission norms. It is now fairly certain that Bharat Stage II norms (equivalent of Euro II norms) will be implemented countrywide starting 2005. It is important that this plan is implemented in time in the interest of a cleaner environment.
Technology is available to meet the advanced emission norms using gasoline and diesel fuel; Bosch and many other companies have proved this worldwide. There is no need for the authorities to specify the type of technical solution required for this purpose as long as the end objectives are met.
The spurious and reconditioned goods market, which I also dealt with in detail in my speech last year, continues to be a worrying factor as it directly affects our market share. The Company on its part has intensified the anti-spurious operations by conducting several raids across the country with the help of local regulatory authorities. Large quantities of spurious and fake products have been seized and legal action has been taken against those indulging in such activities.
The Company believes that continued focus and concerted action against spurious activities would improve safety and fuel efficiency of the vehicles and at the same time help in expanding our market share in the Aftermarket. The Company is also continuously educating the users about the benefits of using genuine spares in place of spurious and reconditioned spares.
The lack of any significant change in the labor law reforms also continues to be a matter of concern. It is essential that legal reforms be put in place at the earliest to provide more flexibility in manufacturing operations and enable the industry to quickly adjust the work force in line with fluctuating market conditions.
Low labor cost:
India enjoys a comparative cost advantage in labour as compared
to western countries.
Skilled Manpower:
India has vast pool of skilled manpower and qualified
engineers among the largest in the world.
On a scale of 1-10, 1 = low, 10 = high.
Availability of Skilled labour.
Sr No Country Points.
1 India 8.5
2 Brazil 7.5
3 US 7.4
4 Germany 6.6
5 Mexico 6.6
Availability of Qualified Engineers.
Sr No Country Points.
1 Germany 7.5
2 India 7.4
3 US 7.2
4 Brazil 6.4
5 Mexico 6.3
Reference: Competitiveness of Indian automotive industry Feb 2004.
Weaknesses of the Automobile Industry
Low labor productivity:
Cost advantage in labor wages is nullified by the fact that we have lower labor productivity.
Defect rates high:
We have a higher defect rate about 10 times the world average.
Low Investment in R & D:
The Industry has a very low investment in R & D as compared to their foreign counterparts which will their sustainability in the future.
Not reached critical mass:
Indian companies are in nascent stage and hence not able to cater to the requirements of OEM’s. Our auto- ancillary industry is of 2.4 bn $ while Ford’s outsourcing budget is 86 bn $.
Poor infrastructure :
Poor infrastructure like roads, ports, railways which lead to
higher logistics cost and lower reliability.
Opportunities for the Automobile Industry
Global automobile companies are setting up manufacturing facilities in India. Also, many Indian automobile manufacturers have announced their plans to increase the export of vehicles from India. The year 2002-03 has already seen a significant 65% increase in export volumes during the period April to March. This trend is expected to continue with more global OEMs sourcing vehicles from their Indian plants.
Additionally, the introduction of newer technologies such as Electronic Diesel Control Systems to reduce emission levels, safety devices such as Air Bags, Anti-lock Braking Systems, etc. augur well for the Company and the automotive sector as a whole. These technologies not only offer increased safety for drivers and passengers, but also result in greater comfort and better drivability.
While there exist many opportunities for growth in business, there are also quite a few factors, which act as an impediment.
In my last year’s speech I mentioned about the need for a well thought out and clearly defined policy on emission norms. It is now fairly certain that Bharat Stage II norms (equivalent of Euro II norms) will be implemented countrywide starting 2005. It is important that this plan is implemented in time in the interest of a cleaner environment.
Technology is available to meet the advanced emission norms using gasoline and diesel fuel; Bosch and many other companies have proved this worldwide. There is no need for the authorities to specify the type of technical solution required for this purpose as long as the end objectives are met.
The spurious and reconditioned goods market, which I also dealt with in detail in my speech last year, continues to be a worrying factor as it directly affects our market share. The Company on its part has intensified the anti-spurious operations by conducting several raids across the country with the help of local regulatory authorities. Large quantities of spurious and fake products have been seized and legal action has been taken against those indulging in such activities.
The Company believes that continued focus and concerted action against spurious activities would improve safety and fuel efficiency of the vehicles and at the same time help in expanding our market share in the Aftermarket. The Company is also continuously educating the users about the benefits of using genuine spares in place of spurious and reconditioned spares.
The lack of any significant change in the labor law reforms also continues to be a matter of concern. It is essential that legal reforms be put in place at the earliest to provide more flexibility in manufacturing operations and enable the industry to quickly adjust the work force in line with fluctuating market conditions.