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Indian Automobiles History

The Indian Automobile History can be well explained in four phases:

I. 1898 to 1957

II. 1954 to 1985

III. 1985 to 1993

IV. 1991 till date

1898 to 1957

It is on record that the first motorcar on the streets of India was seen in 1898. Mumbai (earlierBombay) had its first taxicabs by the turn of the century and in 1903, an American company began tooperate a public taxi service with a fleet of 50 cars. For about 50 years after the first car arrived inIndia, cars were directly imported until foreign manufacturers began to realize the vast potential Indiahad with its vast distances and large population. Before world war-1, around 4,000 motor vehicles (carsand commercial vehicles put together) were imported. During the years between the wars a small startfor an automobile industry was made when assembly plants were established in Mumbai, Calcutta, andChennai (Earlier madras). The import / assembly of vehicles grew consistently after the 1920s, crossing30,000 units by 1930. It was towards the end of the war that the importance of establishing anindigenous automobile industry in India was realized when Premier Automobiles Ltd. (PAL) andHindustan Motors (HM) set up factories in the mid 40s for progressive manufacture rather thanassembly from imported components. HM was established in 1942 for the manufacture of certain autocomponents, but it was only in 1949 that the company actually began making cars. PAL was founded in1944 by Seth Walchand Hirachand, a visionary and industrialist of pre-independent India, and as earlyas 1946 assembly of the Dodge DeSoto and Plymouth cars at PAL's Kurla Plant commenced.

In the next five decades following independence, PAL and HM together symbolized India's car industry.The cars the offered (and still do) were products of a highly controlled economy and all that was wrongwith the licensing system.

While PAL and HM focused on passenger cars at the time of independence, the Mahindra brothers,Kailash Chandra and Jagdish Chandra founded Mahindra & Mahindra in 1945 with the objective ofmaking utility vehicles. With industrialization gaining priority and with it transportation, a vehicle thatcould diverse the vast and harsh Indian hinterland was the order of the day. Four wheel drive vehicleswere considered most suitable at the time for cross country as also for the army. Mahindra brothers

decided to manufacture the world's most popular four wheel drive vehicle then - the American Jeep.Initially no modifications what so ever were carried out on the vehicle, not even the switch from let to

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right hand drive.

Independent India classified automobiles as an industry of importance, which would be controlled andregulated by the government. For starters, the import of completely built-up units was severelyrestricted. If not completely banned. In 1952 the government appointed the first Tariff Commission tolook on the recommendations drawn by the Tariff commission, the government terminated theactivities of assemblers that did not have any manufacturing program. This was to restrict the thenlimited market only to those companies which had a genuine program for phased manufacture. At thesame time its was decided that the number of models selected for production would be kept to arealistic minimum so as to offer economies of scale for each type.

The Indian Rupee was not convertible on current account. In march 1954, most assemblers such asGeneral Motors and Ford decided to down shutters and leave India rather than to undertakemanufacture. Thus 1954 can be said to be the turning point of the Indian Auto-history. By 1956, theIndian auto industry was sealed off from new players in view of the very limited volumes available.And the government also had a say in what make and type of vehicle each manufacturer should market.Categories of vehicles were limited to three passenger cars, three medium trucks, one heavy truck.Each product existed within its own private segment and their was never any fear of competition. Nonew entrant was to be allowed in even if it did have a full fledged manufacturing program.

1957 policy THOU SHALL MAKE THE FOLLOWING:

CARS Utility VehiclesTRUCKS & BUSESLight (One ton)

TRUCKS & BUSESMedium (3-5 ton)

TRUCKS & BUSESHeavy (above 5 ton)

Fiat 1100 (PAL)Jeep (Mahindra

& Mahindra)Dodge and Fargo

(PAL)Bedford (HM)

Layland Comet, Tiger (Ashok layland)

Hindustan (HM) Tata Mercedes-Benz

(Telco)

Standard(StandardMotors)

1954-1985

In the decade that followed the establishment of the industry in 1954, local manufacturersconcentrated on import substitution and indigenization. Model changes were minimal. PAL switched toFIAT 1100 Delite which is the Padmini of today, although the car retains the same power-train andmechanical dating back to 1964. Until 1968, foreign collaborations with equity participation werepermitted.

Late 1960's was also the time in India when the Government for their requirement of Steel Plant wasunder heavy influence of the Russians. This was also the time when India was under strenuousrelationship with Pakistan and again Russian tie ups with India regarding Strategic Military aid influencedthe policy makers of Government of India.

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Growing criticism about the auto industry relying too heavily on foreign technology prompted theMudaliar committee to look into the whole issue of foreign collaborations. The stricter approach advisedby the committee thereafter discouraged the acquisition of technology through foreigninvestment of the western world.

This was a tough period for passenger car makers whose so called elitist products came under more andmore controls. A control on imports meant that manufacturers were forced to indigenize completely andquality, in particular, suffered. The failure rate of components climbed and quality sank to an all timelow. Breakdowns were regular and it was considered foolish to travel long distance without a bag full ofspares. Drivers of Ambassadors used to be known for even carrying a spare drive shaft.!!!

The other control imposed on carmakers was on capacity and distribution. Though capacity control iscited by manufacturers to be a barrier to growth, the fact is that licensed capacity was in excess ofinstalled capacity during this period. It was price controls that seriously affected carmakers, whereGovt. fixed the prices, even the dealer commission. With their bottom line at stake carmakers went toSupreme Court in 1969, resulting into Car Price Commission to work out a formula for incremental priceincreases - though it wan not until 1985 that Price control was completely abolished.

The three decades following the establishment of the passenger car industry leading up to the broadbanding period of the early 1980s were the dark ages for the consumer whose choice throughout thisperiod was limited essentially to two models the Ambassador and the Padmini. Car ownership was usuallya bitter experience thanks to the indifference of car companies and the shabby quality of their productsindeed, the cars being churned out of factories were so bad it took upto ten days to do the pre-deliveryinspection. Still if everything did work on the car on delivery you were one lucky owner.

1985 -1993

First winds of liberalization in the early 1980s a series of liberal policy changes were rapidly introducedmarking a crucial turning point for the automobile industry. This change of attitude on the part of thegovt. coincided with the sate taking a direct interest in the auto business, with 74% stake in MauriUdyog Ltd. (MUL) and the joint venture between SUZUKI of Japan and the Indian Government. This wasrevolutionary departure from the government restrictions, previous policies on the foreign equity andtechnology.

In 1985 Govt. of India announced its famous broad banding policy which gave new licenses to bradgroups of automotive products such as two and four wheeled vehicles.

Several new products were launched during this period. All three traditional car manufacturersadded a new model to their ranges. Standard Motors returned to the car business after a break of 10years when in 1985, it introduced the Standard 2000, a Rover SD1 body with the old two literVanguard engine and gearbox. HM brought in a 1972 Vauxhall Victor transplanted its aging Ambassadorengine into it and Contessa was born. Premier meanwhile brought in Fiat 124 (so called 118NE in India -due to 118 crores of revenue generation from bookings). This car had a Nissan A12 power-train.

The outdated hybrids brought in, were to a certain extent, due to the unwillingness of the governmentto allow freedom in model selection.

MUL magic:

Boasting a market share of nearly 70%, no manufacturer dominates the home market as the MUL does.The company is undoubtedly the biggest success story of the Indian automobile industry. When 800was launched back in 1983, it gave the car market a complete facelift. The traditional Padmini andAmbassador were swept aside in a wave of Maruti mania. Maruti 800 offered the suddenly emancipatedIndian motorist a cheaper, friendlier alternative. But through the 800 essentially the Suzuki Alto SS80,

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became the ideal car, this was more out of chance than plan. The key to Mauruti's success has been itsmanagement. MUL's first objective was to make sure the company got not only the product technologyfrom Suzuki but also imbibed the super-effective work culture of the Japanese.

1993 till date:

The de-licensing of the industry in 1993 opened the sluice gates a flood of international auto-makersthat rushed into what they saw as the last remaining untapped market - the largest democratic marketof the world. The next couple of years saw an unprecedented growth in the industry with assembly linesworking overtime to meet demand. Dazzled by the potential of India's 100 million odd people, carcompanies planned ambitious capacities. However, India was a much tougher markets than they hadimagined. They under estimated Maruti's strangle hold of the bottom end of the market and were unableto compete with it on price and sheer value for money.

This forced most of the new entrants into the premium end of the market the so called mid sized luxurysegment. With prices ranging from Rs. 500,000 to 800,000/- affordable by only a handful, there arepredictably few takers for these cars. Peugeot, Daewoo, Hyundai, Ford, GM Opel, Mitsubishi, Honda,Mercedes Benz are all saddled with excess capacities.

Manufacturers are rethinking their strategies and rationalizing capacities to cope with what is currentlyseen as a temporary hiccup. Many are still optimistic about mid - sized segment and expect it to havethe maximum growth potential. Daewoo, Hyundai and Telco have recently entered into the smallsegment cars but are finding a great deal difficult to enter the M800 market. Ford has launched its IKONsedan (a variant of the Ford Fiesta hatchback) with a capacity of 20,000 / annum.

Eventually the combination of a good value from the manufacturer will decide who will last in the shakeout that has already begun.