India

Indian Automotive Industry

On the canvas of the Indian Economy, Auto Industry occupies a prominent place. The Automobile industry encompasses commercial vehicles, multi-utility vehicles, passenger cars, two wheelers, three wheelers, tractors and auto components.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.. With an investment of Rs.50,000 crores, the turnover was Rs. 59,500 crores in Automotive Sector during 1999-2000. It employs 4,50,000 people directly and 100,00,000 people indirectly and is now inhabited by global majors in keen contention.

India manufactures about 38,00,000 2-wheelers, 5,70,000 passenger cars, 1,25,000 Multi Utility Vehicles, 1,70,000 Commercial Vehicles and 2,60,000 tractors annually. India ranks second in the production of two wheelers and fifth in commercial vehicles.

India’s automotive component industry manufactures the entire range of parts required by the domestic automobile industry and currently employs about 250,000 persons. Auto component manufacturers supply to two kinds of buyers – original equipment manufacturers (OEM) and the replacement market. The replacement market is characterised by the presence of several small-scale suppliers who score over the organised players in terms of excise duty exemptions and lower overheads. The demand from the OEM market, on the other hand, is dependent on the demand for new vehicles.

Indian Auto Industry in 2005

The Automobile Industry performance in the year 2004-05 showed encouraging results for all segments of the automobile industry. The industry registered a growth of around 16% in numbers over the year 2003-04.

Despite the speculations of slow growth from different quarters because of unprecedented rise in input prices, the passenger vehicles posted a growth of 18% in the year 2004-05 over the year 2003–04. SIAM had mentioned in the beginning of the year 2004-05 of a similar growth while announcing the performance figures for 2003-04. Within the passenger vehicle segment, passenger cars and utility vehicles have grown by 18% and 20% respectively while MPVs have grown at the rate of over 9%. The commercial vehicle segment clocked a growth rate of 22%. M&HCV segment has grown by 23% whereas LCVs grew by over 21%.

Two Wheeler segment as a whole during the year 2004-05 grew by over 15%. Backed by Government’s initiative on rural roads and better connectivity with major towns and cities, improved agricultural performance, upward trend of purchasing power in the hands of rural people, the two wheeler industry was able to achieve the record performance of crossing 6 million two wheelers with exact sales standing at 6,208,860 during the year 2004-05.

Market Share ( 2004-05)

Automobile Production Trends ( In Numbers)

Automobile Domestic Sales Trends

Exports

The performance of the automobile industry in exports is also encouraging.Commercial vehicle exports increased to an all time high of touching 30,000 growing at a rate of 72% Passenger vehicle exports grew by 29% to 166,413 units.The Two Wheelers also crossed three hundred thousand mark for the first time clocking around 366,724 numbers and recorded a growth rate of plus 38% over the last year

Incentive for Research and Development

The Government shall promote Research & Development in automotive industry by strengthening the efforts of industry in this direction by providing suitable fiscal and financial incentives.

The current policy allows Weighted Tax Deduction under I.T. Act, 1961 for sponsored research and in-house R&D expenditure. This will be improved further for research and development activities of vehicle and component manufacturers from the current level of 125%.

In addition, Vehicle manufacturers will also be considered for a rebate on the applicable excise duty for every 1% of the gross turnover of the company expended during the year on Research and Development carried either in-house under a distinct dedicated entity, faculty or division within the company assessed as competent and qualified for the purpose or in any other R&D institution in the country. This would include R & D leading to adoption of low emission technologies and energy saving devices.

Government will encourage setting up of independent auto design firms by providing them tax breaks, concessional duty on plant/equipment imports and granting automatic approval.

Allocations to automotive cess fund created for R&D of automotive industry shall be increased and the scope of activities covered under it enlarged.

Auto Policy of the Government of India

Vision

To establish a globally competitive automotive industry in india and to double its contribution to the economy by 2010.

Policy Objective

This policy aims to promote integrated, phased, enduring and self-sustained growth of the Indian automotive industry. The objectives are to:-

• Exalt the sector as a lever of industrial growth and employment and to achieve a high degree of value addition in the country;
• Promote a globally competitive automotive industry and emerge as a global source for auto components;
• Establish an international hub for manufacturing small, affordable passenger cars and a key center for manufacturing Tractors and Two-wheelers in the world;
• Ensure a balanced transition to open trade at a minimal risk to the Indian economy and local industry;
• Conduce incessant modernization of the industry and facilitate indigenous design, research and development;
• Steer India's software industry into automotive technology;
• Assist development of vehicles propelled by alternate energy sources;
• Development of domestic safety and environmental standards at par with international standards

SIAM welcomed the announcement of Auto Policy, and feels that the policy would serve as a reference document for all stake holders and other interested parties.

The Auto Policy has spelt out the direction of growth for the auto sector in India and addresses most concerns of the automobile sector, including-

• Promotion of R&D in the automotive sector to ensure continuous technology upgradation, building better designing capacities to remain competitive;
  impetus to Alternative Fuel Vehicles through appropriate long term fiscal structure to facilitate their acceptance;
• Emphasis on low emission fuel auto technologies and availability of appropriate auto fuels and
• Encouragement to construction of safer bus/truck bodies - subjecting unorganised sector also to 16% excise duty on body building activity as in case of OEMs.

The policy has rightly recognised the need for modernising the parc profile of vehicles to arrest degradation of air quality. The terminal life policy for commercial vehicles and move toward international taxing policies linked to age of vehicles, are steps in the right direction.

SIAM has always been advocating encouragement of value addition within the country against mere trading activity. However, this aspect has not been fully addressed. The Auto Policy allows automatic approval for foreign equity investment upto 100% in the automotive sector and does not lay down any minimum investment criteria.

The recommendation of promoting passenger cars of length upto 3.8 meters through excise benefits is not in line with the free market concept and may lead to market distortion.

However, with the Auto Policy in place, the automotive industry would get further fillip to become vibrant and globally competitive. The industry would get the required support from other Ministries and departments of Government of India in achieving the goals laid down in the auto policy.

For further details go to Department of Heavy Industry
Central Motor Vehicles rules

In India the Rules and Regulations related to driving licence, registration of motor vehicles control of traffic, construction & maintenance of motor vehicles etc are governed by the Motor Vehicles Act 1988 (MVA) and the Central Motor Vehicles rules 1989 (CMVR). The Ministry of Road Transport & Highways acts as a nodal agency for formulation and implementation of various provisions of the Motor Vehicle Act and CMVR.

The Ministry of Road Transport & Highways is advised by CMVR- Technical Standing Committee on various technical aspects related to CMVR. This Committee has representatives from various organisations namely; Ministry of Heavy Industries (MoHI), Ministry of Road Transport & Highways (MoRT&H), Bureau Indian Standards (BIS), Testing Agencies such as Automotive Research of India (ARAI), Vehicle Research Development & Establishment (VRDE), Central Institute of Road Transport (CIRT) and industry representatives from Society of Indian Automobile Manufacturers (SIAM) & Automotive Component Manufacturers Association (ACMA).

Major functions of the Committee are

• To provide technical clarification and interpretation of the Central Motor Vehicles Rules having technical bearing, to MoRT&H, as and when so desired.
  
• To recommend to the Government the International/ foreign standards which can be used in lieu of standard notified under the CMVR permit use of components/parts/ assemblies complying with such standards.
  
• To make recommendations on any other technical issues which have direct relevance in implementation of the Central Motor Vehicles Rules.
  
• To make recommendations on the new safety standards of various components for notification and implementation under Central Motor Vehicles Rules.
  
• To make recommendations on lead time for implementation of such safety standards.
  
• To recommend amendment of Central Motor Vehicles Rules having technical bearing keeping in view of Changes in automobile technologies.
  

Another Committee called the Automobile Industry Standards Committee (AISC) having members from MoHI, MoRT&H, BIS, ARAI, VRDE, CIRT, SIAM and ACMA, formulates safety standards related to Automobile Industry.

The major functions of the committee are as follows

• Preparation of new standards for automotive items related to safety.
  
• To review and recommend amendments to the existing standards.
  
• Recommend adoption of such standards to CMVR Technical Standing Committee.
  
• Recommend commissioning of testing facilities at appropriate stages.
  
• Recommend the necessary funding of such facilities to the CMVR Technical Standing Committee, and
  
• Advise CMVR Technical Standing Committee on any other issues referred to it.
  

This committee submits its recommendations to CMVR-Technical Standing Committee. The CMVR - Technical Standing Committee looks into the recommendations of AISC and submits its proposal with suggested the implementation dates to MoRT&H. MoRT&H then takes the final decision on incorporating the same in the CMVR/MVA.

The issues related to implementation of emission regulation are deliberated by a separate Committee namely Standing Committee on Implementation on Emission Legislation. MoRT&H to discuss the future emission norms, the related test procedures and the implementation strategy, in consultation with all stakeholders have formulated this committee.

Source : Society of Indian Automobile Manufacturers (SIAM)