Indian automobile industry: An historical recap

Senthuran

July 2001

People say, “It’s a long history”.

The first motorcar was imported into India in the year 1898. It was only in the year 1928 that General Motors India Ltd., commenced assembling trucks and cars from components and parts imported from the USA in Completely Knocked Down (CKD) condition in their factory in Bombay (now Mumbai). Ford Motor Company of India Ltd., in 1930-31 commenced assembling of automobiles at Madras (now Chennai) and Culcutta (now Kolkata).

The development of this industry during the thirties and the forties was partial and limited and this is to be judged in terms of the country’s need and potentialities. The Second World War was a bad experience to the warring nations in Europe, America and Asia, but it was generally a good and memorable event to the automobile industry in India – for the war brought into prominence motor trucks and freight automobiles.

The National Planning Committee of 1948 appreciated the real long-range importance of this new means of transportation and its place in India’s planned economy. Automobile industry was called a key industry to the nations economic development, with the realisation of the need for developing an indigenous automobile industry, two pioneer concerns, the Hindustan Motors Ltd. and the Premier Automobile Ltd. were formed for the specific purpose of automobile manufacture.

These two firms together laid the foundation of the indigenous automobile in India, by taking up simultaneously assembling CKD motor vehicles and manufacture vital automobile components. The lead given by HM and PAL in the manufacture of motor vehicles as proposed to the early practices of assembling of motor vehicles from completely imported components was emulated by many other players, notably by Standard Motor Products of India Ltd., Automobile Products of India Ltd. and Ashok Leyland Ltd.

In March 1952, the Government of India asked the Tariff Commission to enquire into and recommend suitable measures for the development of the industry. The Commission in its report of 1953, recommended that only those firms, which had a manufacturing programme, should be allowed to operate and that more assemblers of imported CKD motor vehicles must be asked to terminate their activities within a period of three years.

Government accordingly reserved the limited market for automobile in the country, only for those unites that had a genuine facility for progressive manufacture of automobile. The number of makes and models selected for products was kept for low commensurate with the volume of demand. Thus, by the end of 1955, there was only three approved manufacturers of passenger cars in India, namely, HM, PAL and Standard Motors.

The automobile industry was established in the early 50s with the hope that it would develop into a full fledged industry if given the right protection. The term used at that time was Infant Industry: unfortunately while other automobile manufacturing nations rapidly expanded production and brought about radical changes in style, technology and design, our domestic Infant Industry stayed away from changes. For instance, in a matter of three decades from 1950 India’s share in global automotive output raised from 0.1 per cent to 0.4 per cent, while those of Brazil, Argentina and Yugoslavia, all developing countries contributed 2 per cent, 0.5 per cent and 0.8 per cent, respectively from a nil position in 1950.

No doubt the Indian market for cars and commercial vehicles was constrained due to lack of purchasing power, but there is no excuse for technological obsolescence, when within the country its scientist and engineers could develop technology to put up space satellites and supersonic aircrafts.

The need for change within industry was long overdue. In October 1980, the government made a statement promising to act as a catalyst in the modernization of the automobile industry in India. The goals were to bring about competitive condition within the industry by introducing a new generation of automobiles and to bring it within the reach of the common man. Thus, post 1980 India has seen a boom in automobile industry and some of the new manufacturers of passenger cars, mainly, Maruti Udyog Ltd., and the earlier players going in for innovation and technological advancement.

The opening up of the automobile industry in the liberalized industrial policy framework of the economy helped manufacturers to shift gears in terms of change their product mix and also allowed new global players to enter Indian market.

Today, a buyer of a vehicle is not restricted with choice. He can select almost all brands and models of the world in India. He too has technological choice such as auto-transmission vehicles, ABS braking, etc.

May be people who say, “It’s a long history” coin the phrase by the history of Indian automobile industry !