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AUTOMOBILE INDUSTRY IN INDIA: New Production ParadigmPresented By:ShrutiRumaPrachiShivaniAkash

Introduction The automotive sector is one of the core industries of Indian Economy, whose prospect is reflective of the economic relience of the country.The industry currently accounts for nearly 4% of GNP and 17% of indirect tax revenue.The well developed Indian Automative Industry has a presence among all vechile segment and key components.According to Report of Society of Indian Automobile Manufacturers (SIAM), 2006 , Percent Share: Commercial vehicles 3.94 ,Passenger vehicles 12.83 ,Two Wheelers 79.19 ,Three Wheelers 4.04 . Although the automotive industry in India is nearly six decades old, until 1982, there were only three manufacturers M/s Hindustan Motors, M/s Premier Automobiles and M/s Standard Motors in the motorcar sector. In 1982, Maruti Udyog Ltd. (MUL) came up as a government initiative in collaboration with Suzuki of Japan to establish volume production of contemporary models. The Company Maruti Udyog Ltd. (MUL) has become Suzuki Motor Corporations R&D hub for Asia outside Japan. Maruti also set up a Centre for Excellence with a corpus or Rs. 100 million. This was done in collaboration with suppliers, who contributed an additional Rs. 50 million. Maruti has embarked upon this new project in collaboration with SMC for the manufacture of diesel engines, petrol engines and transmission assemblies for four wheeled vehicles. The project is being implemented in the existing Joint Venture Company viz. Suzuki Metal India Limited (renamed Suzuki Powertrain India Limited).

Q1 Identify the most important factors of production in case of automobile industry. Also attempt to explain the relative significance of each of these factorsAns:Labour: Workers employed directly in the car industry; engineers, designers, paint sprayers, testers, management staff, transport & distribution workers etc.Land: Natural resources used inmanufacturer, land forplant and equipment.Capital: Fixed capital: machinery, technology, buildings + Working capital: i.e. stocks of raw materials and components.Entrepreneurship(sometimes seen as aseparate factor): management, risk-takerQ2 What more information would you like to obtain in order to draw a production function for Maruti Udyog? Explain with logic.Ans:A production function defines the relationship between inputs and themaximum amount that can be produced within a given period of time with a given level of technology.Q=Q(L, N, K.................)

Production Function states that Q is the maximum amount of anoutput which the firm can produceif it combines the inputs (LandL, LaborN, and Capital K).

For purposes of analysis, the equation can be reduced to two inputs Xand Y. Restating,Q=f(X,Y) Where Q= Output,X= Labor, Y= Capital

Hence, In the case of Maruti Udyog,

Land: No details has been made available such as location, cost of land etcCapital: 100 million+ 50 million from suppliers = 150millionLabour: No information on Labourrequired is available.

Hence due to absence ofthese factors, production equationfor Maruti Udyog cannot bederived

Q3 Automobile industry is a good example of capital augmenting technical progress. Discuss.Ans:As per Davos Report 2006,1.India is largest three wheeler market in the world;2nd largest two wheeler market.4th largest tractor market.5th largest commercial vehicle market11th largest passenger car market in the worldexpected to be the seventh largest by2016.

India is among few countries that are showing a growth rate of 30 per cent in demand for passenger cars. The industry currently accounts for nearly 4% of the GNPand 17% of theindirect tax revenue.

As per another reportevery commercial vehicle manufactured, creates 13.31 jobsevery passenger car creates 5.31 jobsevery two-wheeler creates 0.49 jobs in thecountry.

This growth will primarily be fuelled by theincreasing number of vehicles on the road,as well as the aggressive expansion of independent and foreign players. While current margins for the industry remain attractive, players across the value chain may seemargins reducing to the lower levels observed in developed economies.

Therefore, to sustain profitability, players evaluate additional ways ofcapturing value, including expanding service networks, building scale.Revenue pools remain large across the value chain, henceif players are able topursue appropriate strategies, significant profits can be made in thissector.

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