Automobile industry has been the mother industry of many industries including Steel, Rubber, Plastic, Paint, Oil, Glass, Fabric, Electronics, Consumables, Equipments, Finance and Insurance. In short, automobile industry has the largest multiplier effect on other industries. When the car industry is on boom, it indicates the good prospects for the economy as well.
Today, India is the sixth largest car manufacturer in the world with a consistent double digit growth rate (second fastest growing market in world) and with over 33 million annual car production and is set to reach 5 million figure by 2015 and 9 million by 2020.
How car industry has been evolved and how it has come a long way from the nascent stage of 1970s to what we see the today’s rapid paced car industry would be quite interesting to see. Today, we see a much exciting, lively and rapidly changing automobile industry in India, which has rewritten marketing and strategic books for many car manufacturers and the market has attracted the foray of foreign players to en cash the goldmine of Indian consumers.
We can classify the development of the Indian car industry into 4 phases:
Phase 1-When cars are for a selected mass only (Till 1983)
This phase of Indian car industry lasted till early 80s, when cars used to be a status symbol and belonged to higher class (Top of the Pyramid). You must have heard of that old age royal Ambassador or Padmini or very few other imported cars that were seen on the roads specially meant for showing off the dominance in the society. Car used to be way ahead from the basic necessities unlike what we see today.
India was hardly literate during that period and there was a serious lack of industrialization and basic infrastructure. In short, there was a little or no urbanization. There was little awareness about the technology in the country and it was a costly affair right from purchasing the car to maintaining the car. Over and above cars used to be simple four wheeled vehicle for people who owned.
Phase 2-The advent of famous Maruti’s small car in India (Mid 1980s to Early 1990s)
Unlike the first phase of Indian car industry, second phase of development had been embarked with the glorious advent of Maruti’s famous small car brought in to India by Sanjay Gandhi from Japan’s Suzuki Motors.
Maruti Udyog Limited was established in 1981 by Government of India and Suzuki as a joint venture. Maruti 800’s production started in 1983 and this was the time when India whole heartedly welcomed its small car, which later lead to the series of evolution in Indian automobile industry and gifted us the today’s car industry.
Existing competition for Maruti, Ambassador and Padmini proved to be quite weak against Maruti and the advent of this small iconic car in India triggered the new concept of consumerism, which stated that, cars were no longer limited to rich class. Although, no major turnaround in technology had been seen during this phase too.
Phase 3-Real race begins with foreign players coming to India (Mid 1990s to Early 2000)
The next phase was reserved for the opening of the Indian market for the foreign players with liberalization policies formulated in India in 1991; it invited other foreign players in India who built the foundation of next stage of evolution, which stated the initial changes in technology, customer preferences and different classes of vehicle.
This was the phase when foreign giants like Honda, Hyundai, Toyota, GM, Ford including others eyed on potential of India market. TATA and Mahindra also begun its stint in India as Indian players in greater capacity during this period. There had been limited success to most of the foreign players during this period, but, a different era had started emerging in India with the actual race begun among these foreign players, who were all set to provide the new taste through advanced technology and variety in their offering.
This phase witnessed the launch of many game changers including Honda City,which has ruled the Indian market in premium mid size sedan segment for years. Honda embarked the era of global quality; on the other hand Toyota brought into its great reliability in form of vehicles like Qualis and Corolla.
Hyundai also started its entry in small car segment with its famous tall boy car, the sweet Santro, which later proved to be one of the most successful cars in India only behind few gigantic success of Maruti. Maruti Alto also made its entry into Indian market during this period, which later went on to become the largest selling model of India.
Name any foreign automobile giant and you would their entry in India during this period; even the luxury cars like BMW, Mercedes and Porsche made their way to Indian market. This post liberalization phase has seen diversity in product offering. Very little known to everyone is about the shut down of Daewoo, a potential player on Indian turf had witnessed the slowdown and later shut down story during this period.
Phase 4-Rise of Middle Class group, Rise of consumerism and Fast paced growth (Mid 2000 to Modern Automobile Industry)
This has been the phase when the car manufactures in India took the advantage of growing middle class power and changing pattern of consumerism in India. Indians have seen an upsurge in their income and spending.
Increasing urbanization and wallet power of youths have further fuelled the growth of car industry and provided the companies enough space to flourish. Indian car industry has been doubled in last 5 years
Key Highlights of Modern Car Industry In India
Booming Small Cars Segment
Compact segment has grown into leaps and bounds during last 6-8 years and has seen abundance in range of cars (cars like Alto, Swift, i10, Santro, Wagonr, Zen, Spark and Indica have made their places in customers' heart). Indian car industry is still dominated by small car segment with contribution of over 65% sales.
Now, small car segment is no longer confined to mere four wheeled vehicles, modern small cars are equipped with advanced technology and safety features. The segment has given birth to premium hatch back segment, which is dominated by i20, Swift, Fabia, Ritz and Figo to be precise. Some experiments went without great success like Getz due to wrong timing and Jazz due to poor pricing strategy. TATA's Indica has made its place firmly in taxi usage for last decade time. Other notable small cars who have made their entry are Micra and Polo.
The segment is still growing and will see dozens of new models very shortly. Toyota has already launched its Liva, Honda will make an entry to this segment with Brio and several others in pipeline.
New Development in Form of Mid Size Cars Segment
Mid size cars segment has also seen a flurry of new models in India that have successfully developed a new segment in India, which is consistently growing.
Honda City, Ford Ikon, Hyundai Accent and Maruti Esteem have been the front runners in this segment with a relatively lower sized but a very potential higher end luxurious sedan segment, which is primarily catered by Accord, Civic, Laura, Altis and Camry; it further gets advanced with Superb, BMWs and Mercs.
Growing Utility Vehicle Market
Scorpio, Bolero, Safari, Innova, Fortuner, Pazero, Endeavor, Land Rover and Outlander including others have made significant mark in MUV and SUV segment making it the fastest growing segment; however, this segment is still limited to around 5% of market in India.
Alternate Fuels, Hybrid Cars and Electric Cars
Thanks to skyrocketing fuel prices, global warming and changing technologies, that triggered the need of alternate fuels, hybrid cars and electric cars. Out of these three classes, use of alternate fuels (CNG and LPG) has taken a significant leap with number of models available with dual fuel options including Wagon R, Santro, i10, Accent and Beat.
Barring the unsuccessful stint by Honda Civic Hybrid, market has not seen any initiative for Hybrid technologies in India. Though, Toyota Hybrid option is available as an imported one, which proves to be quite costly due to government trade policies.
There is lot of scope in development of electric car segment in India, which is currently limited to Reva, the only electric vehicle available in India. Government needs to liberalize the norms to promote the usage of such vehicles seeing the concern of rising fuel prices. Chevrolet is planning to make an entry in Electric car segment with upcoming Electric Beat, which may change the market dynamics largely.
Increasing Demand For Diesel Cars
Gone are those days, when diesel cars used to be noisy, vibrating and a maintenance worry; technology has a come a long way in diesel vehicles to make them more refined and easy to maintain. Currently diesel cars contribute to 30% of total sales, which is expected to be around 45 to 50% in next decade time.
Today, we have Fiat multi-jet engine (1.3 Liter) powering Maruti, TATA and Fiat vehicles and several other CRD engines available in market. High demand of diesel cars have forced Honda to think about bringing diesel cars in India. Other successful stints have been from Ford Fiesta, Hyundai Verna, Maruti Swift Dezire, TATA Manja, etc.
Micro Cars
TATA has been the front runner in starting the era of micro cars with its much ambitious Nano, which came in Indian market in 2010 after many ups and downs in initial efforts of making the project successful. It added a new term in automobile dictionary, The Nanolution, a new segment altogether to introduce to the masses.
Several others are set to follow including Hyundai's mini car (to be launched in late 2011), Maruti's Servo and Bajaj's small car very shortly. The development of ultra small cars has hit the Bottom of Pyramid of the population and is all set to change the shape of automobile industry in India.
Changing Approach Towards Customer Service
Increasing number of cars in market has evolved the requirement of improved in customer service standards. Customers are becoming cautious about the total ownership cost (including maintenance, insurance, finance options, etc.) of the vehicle; now the car manufacturers are offering value added services, maintenance package, emergency assistance and extended warranties on the vehicle to lure the customers who want a hassle free ownership and good resale value of the car.
Now days, customers also look into the awards & recognition, customer satisfaction ranking (JD Power is leading customer satisfaction survey company in India) and feedback in various online sources before buying the car.
New Technologies
Today, car manufacturers offer complete range of advanced features in car and also offer automatic transmission option as high end option. Cruise control, air bags, anti-locked braking system (ABS), parking sensors, blue tooth connectivity, steering mounted controls, climate control, navigation system, etc. have become quite regular features now days leaving behind the era when the technology was confined to power steering and power windows.
Used Car Market
One of the major characteristic of the modern automobile industry in India is the evolution of used car market, which is all set to surpass the new car market in couple of years. Car companies have set up a separate division of used car sales to fulfill the used car demands, which also helps in assisting customer get good resale value of their cars. (Example-Maurti's True Value, Hyundai's Advantage, Mahindra's First Choice, TATA Motor's Assured, etc. )
We can see, how Indian car industry has come a long way from exploring the Top of the Pyramid to hitting the Bottom of the Pyramid. The outlook remains strong in next couple of decades seeing the low penetration of car (10 cars per 1000 people) and the way Indian economy is rising on global map. We can witness several changes along with the handling challenges of increasing lending rates, infrastructure limitations and rapidly swinging consumer behavior.
Let's hope for a speedy and adventurous ride for Indian Automobile Industry Ahead!
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