47

History of

Automobile

Industry

Chapter: 2

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2.1: History of World Automobile Industry

According to www.en.wikipedia.org, after the steam engine was developed in the 17th

century, various attempts were made to apply this source of power to self-propelled

road vehicles. Early efforts were unsuccessful, except for those that produced

interesting toys such as the machine developed about 1680 by the English scientist Sir

Isaac Newton, which was propelled by the back pressure of a jet of steam directed to the

rear. The first successful self-propelled road vehicle was a steam automobile invented in

1770 by the French engineer Nicolas Joseph Cugnot (1725–1804). It was designed to

transport artillery, and it ran on three wheels. In Great Britain the inventors William

Murdock (1754–1839) and James Watt constructed another form of automobile in 1781,

and in 1784 they produced a model of a wagon that used the power of a high-pressure,

noncondensing steam engine. The British inventor William Symington (1763–1831) in

1786 built a working model of a so-called steam carriage.

2.2 The 19th Century

The first automobile to carry passengers was built in 1801 by the British inventor

Richard Trevithick. His initial success was based on the greater efficiency and smaller

size of his power unit, which was the first to have the piston moved by steam at high

pressure. Earlier power units had pistons that moved as a result of atmospheric pressure

against the vacuum produced by the condensation of steam. The quantity of water

required for this condensation necessarily precluded the use of these earlier engines for

vehicles. Their bulk and weight relative to the power developed, moreover, were such

that they could not have moved themselves if mounted on a vehicle. Later, Trevithick

successfully embodied his power plant in a locomotive for rails. He is considered the

founder of both road and rail automotive transportation.

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In the U.S., the inventor Oliver Evans (1755–1819) obtained the first patent on a steam

carriage in 1789. In 1803 he built a self-propelled steam dredge, which is regarded as

the first self-propelled vehicle to operate over American roads. Improvement in the

steam engine and in vehicles continued, especially in England, and by 1830 steam

coaches were in regular daily use to transport passengers over English roads. Starting in

1831, however, restrictive legislation in England forced the steam coaches off the roads,

and by 1860 development of self-propelled vehicles virtually ceased.

2.3 The Internal-Combustion Engine

The first internal-combustion engine was designed by the Dutch scientist Christiaan

Huygens in 1678; it was to have been fueled with gunpowder, but it was never built.

About 1860 a French inventor, Étienne Lenoir (1822–1900), built the first practical

internal-combustion engine; it burned illuminating gas. In 1866 two German engineers,

Eugen Langen (1833–95) and Nikolaus August Otto (1832–91), developed a more

efficient gas engine, and in 1876 Otto built a four-cycle engine, a prototype of the so-

called Otto-cycle engines used in most modern automobiles and airplanes.

The high-speed internal-combustion motor of the German engineer Gottlieb Daimler

revolutionized the automobile industry. His four-cycle, single-cylinder motor, patented

in 1887, achieved speeds many times those of any previous engine, thereby producing

many times the power for the same weight. In 1889 he developed a two-cylinder engine

that gave still greater power; the cylinders were in a V-type configuration. This engine

design was adopted by a French manufacturer, Emile Levassor (1844–97), who

launched experiments in 1891 that subsequently led his firm, Panhard et Levassor, into

automobile manufacture. Levassor’s first automobile, produced in 1894, not only

incorporated the Daimler engine but also was the first car in which the working parts

were arranged in the operational sequence still used in present-day models. That is, the

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engine was in front, followed by the clutch, gearbox, propeller shaft, and differential

and driving axle. The superiority of the high-speed Daimler engine over the then highly

developed steam engine was conclusively demonstrated at the famous Paris-Bordeaux

Race of 1895. The first car, propelled by a Daimler engine, came in six hours ahead of

the second car, and the next three cars to finish were all propelled by Daimler engines.

Another pioneer of the gasoline engine was the German engineer Karl Benz, who in

1885, working independently of Daimler, produced a mechanically propelled tricycle.

In the U.S., pioneer automobile manufacturers were very active in the 1890s. Charles

Edgar Duryea (1861–1938) and his brother Frank Duryea (1869–1967) brought out

their horseless carriage in 1892–93; the design of 1894 had two cylinders. Elwood

Haynes (1857–1925) constructed his automobile about the same time, and Alexander

Winton (1860–1932) produced his in 1896. Henry Ford produced his first experimental

car in 1893.

2.4 The Selden Patent

An important development in the commercial and industrial history of the motor vehicle

in the U.S. was the patent applied for in 1879 by George Baldwin Selden (1846–1922),

a lawyer in Rochester, N.Y. By legal technicalities, the actual issuing of this patent was

delayed until 1895, so that the original patent rights did not expire until 1912. This

patent covered the application of an internal-combustion engine to the propulsion of a

vehicle. It included the combination of such a motor with a clutch, or similar engaging

and disengaging device in the train of mechanism, by which the motor drove the

propelling wheels. It also covered the use of reducing gear, by which the propelling

wheels could be driven at speeds lower than that of the motor shaft. Several leading

companies took licenses under the patent, but others, led by Ford, refused to do so,

leading to litigation that continued from 1903 to 1911. This litigation terminated in the

decision that Selden’s patent was not infringed because it was valid only for an

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automobile driven by an engine of the specific type described in the patent, instead of

the four-cycle engine then in universal use.

By the time the Selden patent suit ended, 600,000 automobiles were being operated in

the U.S., some driven by steam, some by gasoline, and some by electricity. These cars

were almost all open models of the roadster and phaeton, or touring-car, type. Motoring

was increasingly being considered as a means of transportation rather than as a sport.

2.5 Rise of US Automobile Manufacturing

To meet the growing demand for automobiles of all types, Ford greatly speeded up

production by introducing, in 1913, the conveyor belt to carry automobile parts on

assembly lines. Another important influence in the subsequent growth of the automobile

industry was the formation at this time of the organization then known as the

Automobile Board of Trade and since 1993 named the American Automobile

Manufacturers Association. Members of the organization, which today embraces all

U.S.-based automobile manufacturers, made a cross-licensing agreement whereby any

member company might use the patents controlled by any other member without

payment of royalties. The agreement established a custom of “patents for use” instead

of for monopoly; patent rights were shared so that the industry as a whole could

manufacture better cars.

Influenced by access to ample water and iron-ore resources and to a concentration of

mechanical tinkerers such as Henry Ford, who launched Ford Motor Co. in 1903, many

early U.S. manufacturers located their plants in or near Detroit or elsewhere in

Michigan. Although automakers flourished throughout the Midwest during the

industry’s early decades, by the early 1990s the three surviving corporations were

headquartered in the Detroit area. The “Big Three” are Ford Motor Corp., General

Motors Corp., and Chrysler Corp.

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While Ford was perfecting his Model T, the General Motors Corp. (GM) was

established in 1908 by William C. Durant (1861–1947), who combined the Buick,

Oldsmobile, and Oakland companies and, later, Cadillac, to form GM. The firm started

by Louis Chevrolet (1879–1941) was added in 1918. GM weathered numerous financial

crises in its early years, finally gaining stability when the du Pont family bought much

GM stock (since divested) in 1920. The invention by Charles F. Kettering (1876–1958)

of the electric self-starter in 1912 was a benchmark in U.S. automotive development,

but others quickly followed, including balloon tires in 1921. Among other U.S.

automotive pioneers were the brothers John Dodge (1864–1920) and Horace Dodge

(1868–1920), machinists and bicycle builders; Walter P. Chrysler; and John N. Willys

(1873–1935), whose company won fame during World War II as a manufacturer of

jeeps for the military.

2.6 The Modern Auto Industry

From its inception until 1978, the U.S. automotive industry showed a steady expansion,

with the exception of the years during World War II when its plants were converted to

the production of war materials. In 1978, motor vehicle production reached an all-time

high of 12.9 million units, including about 9.2 million cars; since then production has

fluctuated. In the early 1980s the industry was in a recession, producing fewer cars in

1982 than in any year since 1958. From 1990 to 1992 the industry experienced another

recession. In 1996, U.S. motor vehicle production totaled 11.8 million, including 6.1

million cars and 5.7 million trucks; North American motor vehicle production,

including all vehicles made by domestic and foreign companies in the U.S., Canada,

and Mexico, reached more than 15.4 million—8.2 million cars and 7.3 million trucks. In

the mid-1990s, the U.S. auto industry showed signs of recovery.

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2.7 Foreign Automakers in US

By 1991, 143 million cars and 45.4 million trucks and buses were in operation in the

U.S., and more than 456 million cars and 139 million trucks and buses were operating

worldwide, forming an indispensable transportation network. While the USA initially

dominated the world auto market, many foreign automakers have become successful,

some within the USA itself.

Germany’s Volkswagen was the first foreign automaker to become a force in the USA.

It sent its first shipments of autos, popularly known as Beetles, to the U.S. in the early

1950s. British and French automakers also enjoyed growth in exports to the U.S. during

the 1950s. In 1978 Volkswagen opened an assembly operation in Pennsylvania, but

after slumping sales in the 1980s it moved production to Mexico.

While most European automakers have faltered, Japan has become the leading importer

of automobiles to the USA. The first Japanese imports to the U.S.—16 compact

pickups—arrived in 1956. Ten years later Japanese vehicle imports reached 65,000

units. By 1992 the Japanese claimed 2.9 million annual car and truck sales in the U.S.

Starting in 1982 with Honda Motor Co. Ltd.’s new assembly plant near Columbus,

Ohio, Japanese automakers began building assembly plants and engine-manufacturing

facilities in North America. By 1993 foreign-based “transplants,” mostly Japanese, were

building 2.7 million passenger cars and light trucks in the U.S. and Canada annually.

Some of these plants were operated jointly with U.S.-based automakers. South Korea’s

Hyundai also had opened an assembly plant in Québec; in the mid-1990s, Germany’s

BMW and Daimler-Benz both opened new state-of-the-art production facilities in South

Carolina and Alabama, respectively.

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2.8 Pollution-Control Technologies

In 1966 legislation was enacted requiring exhaust-emission control devices on all cars

built in the U.S. after Jan. 1, 1968. The federal exhaust-emission control law followed

the enactment of similar standards in California, where unburned hydrocarbons had

polluted the atmosphere over Los Angeles for many years. The automotive industry

introduced two exhaust-emission control systems for internal-combustion engines. One

involves injecting air into the exhaust gas as it flows from the cylinder to the exhaust

manifold, allowing more hydrocarbons and carbon monoxide to be burned before being

emitted into the atmosphere. The other involves engine modifications to improve

carburetion, distributor calibration, and combustion. The 1970 Clean Air Act required

U.S. automobile manufacturers to design more efficient, “clean” engines in order to

reduce harmful emissions by 90 percent before 1976 (postponed to 1980). The

government also stipulated that the average mileage for all cars be 11.7 km/liter (27.5

mi/gal) by 1985. After 1975, nearly all new cars produced in the U.S. were equipped

with an exhaust-emission device called a CATALYTIC CONVERTER, because the

device will only function with lead-free fuel, its introduction caused a dramatic decline

in the use of leaded gasoline.

The Clean Air Act of 1990 tightened federal exhaust emission standards for both

automobiles and heavy-duty trucks. Replacement of gasoline with clean alternative

fuels, such as methanol, or natural gas was strongly encouraged. The state of California,

meanwhile, mandated that by 1998 two percent of all cars sold in that state produce zero

emissions, with the percentage rising in subsequent years; it moderated its stance in

1995 to ten percent by 2003.

Spurred by these mandates, research on alternative engine technologies concentrated on

electrical vehicles, run by either fuel cells or batteries. By 1997 automakers had

introduced several electrical models: GM’s EV1 in December 1996 was the first

modern electric vehicle to be mass-produced in the U.S. Honda’s EV Plus followed in

May 1997 and Toyota’s RAV4-EV in November that same year. Other major world

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automakers, including Peugeot (France) and Fiat (Italy), have introduced electric cars in

Europe to be used as city vehicles. Because of the range limitations and high cost of

battery-powered vehicles, other technologies were also introduced. The German

automaker Daimler-Benz produced a fuel-cell-powered van in 1995; an alternative to

massive batteries, fuel cells combine oxygen from air with hydrogen from oil or natural

gas to make electricity, water vapor being a nonpolluting by-product.

In late 1997 Toyota marketed in Japan the first mass-produced hybrid vehicle. A hybrid

vehicle, as the name indicates, combines a gasoline engine with an electric motor.

Unlike battery-powered cars, which need their batteries recharged after about 160 km

(100 mi), a hybrid’s battery is recharged by the gasoline engine as the car is driven.

Fuel-cell and hybrid vehicles are also being developed by American automakers.

2.9 Fuel Crisis

The fuel crisis of the mid-1970s was also an impetus to clean-air technologies and

helped initiate long-lasting changes in the auto industry. Rising gasoline prices led to an

increased demand for small cars, and U.S. manufacturers turned out their own models to

compete with foreign ones. The future lay in “downsizing” even standard models to

reduce weight and increase economy. High-strength plastics and aluminum replaced

steel in many components, and smaller, more efficient engines were designed. Chief

among these were dual displacement engines, stratified charge engines, and engines

whose power is boosted by four valves per cylinder or by turbochargers and

superchargers.

By the early 1990s nearly all engines boasted electronic controls, such as fuel-injection

systems, to manage all vital functions and to provide the most efficient fuel economy

and emission control.

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As the crisis abated, a national speed limit, set at 55 mph in 1974 in an attempt to

conserve fuel, was raised to 65 mph on rural interstate highways in 1987 and entirely

repealed in 1995, returning to the states the power to set their own speed limits.

2.10 Automobile Safety

In 1965 Ralph Nader, an American lawyer and consumer-protection advocate,

published the book Unsafe at Any Speed, in which he argued that poor automobile

design was a major contributor to 50,000 highway deaths annually in the U.S. Congress

responded in 1966 with legislation regulating automobile design for the first time and

established the National Safety Bureau, later renamed the National Highway Traffic

Safety Administration (NHTSA), which was empowered to set standards for cars and

trucks manufactured after Jan. 15, 1968. Among early standards were those requiring

collapsible steering columns; padded instrument panels; seat belts for all passengers;

recessed or breakaway switches and handles; door sidebeam reinforcement bars to

absorb impacts from the side; front and rear bumpers designed to absorb 8-km/hr (5-

mph) impacts without damage; side-mounted reflectors or lights enabling drivers to see

other cars better at night; dual brake cylinders; and improved fuel tanks to reduce

leakage in accidents.

In the 1970s the NHTSA required that cars be constructed so that passengers could

survive 48-km/hr (30-mph) impacts against immovable barriers. A “passive restraint”

standard was proposed that would require manufacturers to devise automatic passenger

restraint systems. Air bags that, upon impact, automatically inflate in a fraction of a

second were developed as one solution. A second was “passive” seat belts that do not

require passengers to fasten the belts themselves. In 1984, after years of debate over

regulatory proposals, the Department of Transportation mandated the phasing in of

automatic crash protection for American-built cars to begin in 1986. By 1989 most new

U.S. cars had passive restraints, chiefly motorized seat belts. By 1992 nearly 51 percent

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of all cars sold in the U.S. had a driver-side air bag and many were equipped with a

passenger-side air bag. In the 1990s automakers began switching to puncture-resistant

plastic fuel tanks, long popular in race cars. Steel side-door beams to protect against

side impacts also were installed on many cars and trucks to meet a 1994 federal

mandate.

Electronically controlled antilock braking systems (ABS), introduced in the 1980s, were

installed on 32.2 percent of all cars sold in the U.S. during 1992. By automatically

pumping the brakes, the ABS allows a driver to retain control in panic stops on slippery

surfaces. Improved safety features and highways helped reduce the nation’s highway

fatalities from 53,172 in 1980 to 40,300 in 1992; a crackdown on drunk drivers that

grew stronger in the early 1990s also played a key role.

2.11 Automotive Trends

Following the 1973 Arab oil embargo, fuel scarcities and price increases prompted

automobile designers to scale down the largest models and to develop new lines of

small cars and trucks. In the late 1980s and early ‘90s, however, Americans increasingly

returned to larger cars with larger engines, since fuel prices had stabilized at around $1

to $1.25 per gallon and automakers had more than doubled the fuel economy of larger

engines. An additional 4.3-cents-per-gallon U.S. fuel tax enacted in 1993 was not seen

as having a serious impact on the trend to larger cars. In 1992 surging sales of light

trucks, including minivans first introduced in the mid-1980s and increasingly popular

sport/utility vehicles such as Jeeps, pushed the truck share to a record 39 percent of total

U.S. motor vehicle sales.

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2.12 Planning the New Model

The development of a new car or truck model typically is initiated three to five years

before production is to begin. Product planners establish basic design goals such as size,

weight, and potential market. Early in this process, the engine and transmission are

selected, and the exterior and interior dimensions defined. Stylists then design the

exterior shape and interior configuration. Often numerous renderings are prepared

before a final decision is made to hand build a small number of clay models of the

proposed cars. Since the 1970s this process has been speeded through computer-aided

design (COMPUTER-AIDED DESIGN/COMPUTER-AIDED MANUFACTURE),

incorporating video display terminals on which detailed engineering plans can be drawn

and manipulated, thereby permitting engineers and stylists to produce a large number of

variations in design before selecting a final configuration to model in clay. These clay

models, many of which may be constructed, sometimes are photographed and used by

marketing departments to test the reactions of selected groups to the designs. After a

design is “locked in,” actual operable prototypes—each of which may cost $500,000—

are constructed for further testing.

In the early 1990s, U.S. automakers adopted the team approach to developing new

models, bringing together experts from engineering, design, manufacturing, product

planning, marketing, and other departments with suppliers of components and systems.

The main objectives were to reduce the time between concept and new-model

introduction and to eliminate problems during the cycle, thereby improving quality and

customer satisfaction. Many suppliers were awarded long-term contracts based on

quality and productivity. Although U.S. vehicles generally were considered inferior to

Japanese models in the 1970s and ‘80s, by the 1990s their ratings had risen to virtual

parity.

At the same time automakers worldwide were rapidly adapting their plants to computer-

aided manufacture (CAM), in particular installing mechanical robots to weld and paint,

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in an effort to increase productivity. Other new technologies, such as laser-welding and

machine-vision systems for preciseness, were being employed.

2.13 Labor Relations

Worker involvement in the full process began in the 1980s. Worker “circles,” as

developed by the Japanese, gained adherents in the U.S. auto industry as a means of

taking some of the drudgery from repetitive, assembly-line tasks and simultaneously

giving workers a larger interest in decision making. Profit sharing among auto workers

began at the American Motors Corp. in the early 1960s. Chrysler Corp. approved the

concept in bargaining with the United Auto Workers (UAW) union in 1981, as did Ford

in 1982. By the mid-1980s profit sharing had become standard in the industry.

In 1990 the U.S. auto industry and related industries employed about one of every 13

workers in the nation. It is the largest single consumer of steel, plastics, glass, and

rubber, to name four key supporting industries. The auto companies could not exist

without outside suppliers, who typically supply 30 to 70 percent of the industry’s

requirements.

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2.14 Foreign Competition

As the 1990s began, U.S. automakers faced intense competition, primarily from the

Japanese, who each year since 1980 had produced more cars and trucks than any other

single nation in the world. Japanese automakers first grabbed a large share of the world

market in the 1970s by producing affordable, high-quality, fuel-efficient compact cars

at a time of great demand when U.S. automakers were top-heavy with large cars.

Japan produced 12.5 million cars and trucks in 1992 compared with 9.7 million by the

U.S.; however, adding Canadian production by U.S.-based automakers pushed the total

to 11.7 million. By 1993 a major recession in their home market forced Japanese

automakers to raise prices dramatically in world markets because of the yen’s growing

strength against other currencies. While the Japanese in the 1970s and ‘80s enjoyed a

$2000 to $3000 cost/price advantage over U.S. automakers, by 1993 the opposite was

true.

2.15 Government Involvement

To provide U.S. automakers time to catch up with the Japanese, during the 1980s the

U.S. government pressed Japan to restrain motor vehicle exports to the U.S. to 2.1

million per year. This quota was lowered to 1.6 million as the Japanese began producing

large volumes of vehicles in American plants.

Under the National Competitiveness Act of 1984, the three U.S.-based automakers

began forming consortia in 1989 under which they share in research and development to

reduce costs and speed new technology. By 1993, a dozen consortia had been formed,

some involving government agencies and universities, to work on EVs, batteries, paints,

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exhaust emissions, environmental research, composites, lightweight materials, and

supercomputers.

After taking office in 1993, President Bill Clinton established a positive relationship

with U.S. automakers. By 1994 the administration had secured an agreement with Japan

to reduce that nation’s trade surplus with the U.S., and had made available advanced

aerospace technology to help automakers develop alternative engines and cars.

2.16 Sourcing

To protect its members’ jobs, the UAW continued in the 1990s to lobby for a so-called

content law that would require U.S. automakers to use a certain percentage of

domestically manufactured components—for example, 75 percent of the dollar value of

the vehicle—in production. Most countries already had such legislation to protect their

local industries. The union’s campaign was a reaction to the increasing trend to

“sourcing,” or manufacturing major components in several countries, importing them,

and assembling the vehicle in “home” nations. Thus, a GM car may have, for example,

an engine produced in Mexico, electronics made in Singapore, and a transmission made

in Canada.

Indeed, beginning in the 1980s, Ford and GM developed “world” cars of basically the

same design but produced in several countries from parts and components made

elsewhere in so-called modular plants. By the 1990s, Ford had a $6-billion global car

program that included a new line of compact-size cars for Europe and North America

using basically common components with distinctive exterior styling. GM shared major

components among its many car lines produced around the world, but had not attempted

a full-scale global car program. U.S. automakers adapted their North American-built

cars and trucks to world markets, including development of right-hand-drive models for

markets such as Japan, Great Britain, and Australia.

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2.17 Internationalization

Worldwide sourcing was part of an important trend that was accelerating in the 1990s:

the full internationalization of the world automotive industry in advance of what most

industry analysts predicted would be a major shakeout (a series of bankruptcies of

weaker firms or mergers of weaker with stronger firms) caused by competitive

pressures. Already a victim of this trend, American Motors Corp. came under control of

France’s Renault in the 1980s and then was acquired in 1987 by Chrysler. Other

combinations include Ford’s 25 percent ownership of Mazda and buyout of Great

Britain’s Jaguar; GM’s 35 percent ownership of Isuzu; Chrysler’s close alliance with

Mitsubishi; BMW’s 1994 acquisition of Great Britain’s Rover Group; Volkswagen’s

purchase of Britain’s Rolls-Royce in 1998 and, the same year, the largest merger in

industrial history—the formation of DaimlerChrysler from Daimler-Benz and the U.S.

automaker. Nearly every major automaker has equity in, or a technical, production, or

marketing arrangement with, at least one other automaker.

In this industrial and capital realignment, the U.S. government in the early 1990s

supported a strong domestic automotive industry despite the conflicting demands to

clean up the environment and to stretch fuel economy of motor vehicles. As the industry

began to recover from a 3-year recession in 1993, U.S.-based corporations had

recaptured market share from the Japanese and had taken steps to improve quality and

productivity.

According to www.economywatch.com, Automobile Industry History In the year 1769,

a French engineer by the name of Nicolas J. Cugnot invented the first automobile to run

on roads. This automobile, in fact, was a self-powered, three-wheeled, military tractor

that made the use of a steam engine. The range of the automobile, however, was very

brief and at the most, it could only run at a stretch for fifteen minutes. In addition, these

automobiles were not fit for the roads as the steam engines made them very heavy and

large, and required ample starting time. Oliver Evans was the first to design a steam

engine driven automobile in the USA.

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A Scotsman, Robert Anderson, was the first to invent an electric carriage between 1832

and 1839. However, Thomas Davenport of the U.S.A. and Scotsman Robert Davidson

were amongst the first to invent more applicable automobiles, making use of non-

rechargeable electric batteries in 1842. Development of roads made travelling

comfortable and as a result, the short ranged, electric battery driven automobiles were

no more the best option for travelling over longer distances.

The Automobile Industry finally came of age with Henry Ford in 1914 for the bulk

production of cars. This led to the development of the industry and it first begun in the

assembly lines of his car factory. The several methods adopted by Ford, made the new

invention (that is, the car) popular amongst the rich as well as the masses.

According the History of Automobile Industry USA, dominated the automobile

markets around the globe with no notable competitors. However, after the end of the

Second World War in 1945, the Automobile Industry of other technologically advanced

nations such as Japan and certain European nations gained momentum and within a

very short period, beginning in the early 1980s, the U.S Automobile Industry was

flooded with foreign automobile companies, especially those of Japan and Germany.

The current trends of the Global Automobile Industry reveal that in the developed

countries the Automobile Industries are stagnating as a result of the drooping car

markets, whereas the Automobile Industry in the developing nations, such as, India and

Brazil, have been consistently registering higher growth rates every passing year for

their flourishing domestic automobile markets.

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2.18 The Automotive Industry after 1945 - Europe after World War II

According to www.britannica.com, In Europe motor vehicles were recognized as an

export item that could help restore war-shattered economies. Britain, for example,

earmarked more than half of its automotive output for export and restricted domestic

purchases for several years after the war. In addition, the horsepower tax was

abandoned to enable British manufacturers to build profitably for the world market. The

most popular British designs (excluding specialized luxury vehicles such as the Rolls-

Royce) continued to be lightweight cars, including several models with an ingenious

front-wheel drive. The trend to consolidation led in 1952 to the merger of Morris and

Austin to form the British Motor Corporation, Ltd., a combine that accounted for about

two-fifths of Britain’s motor vehicle production. Another British combine was formed

around Leyland Motors, which had grown into the country’s largest manufacturer of

commercial vehicles and became a power in the passenger-car field by acquiring

Standard-Triumph and Sunbeam in the 1950s. Leyland and the British Motor

Corporation united in 1968 as the British Leyland Motor Corporation (later British

Leyland Ltd. and, after 1978, BL Ltd.); this move, sanctioned by the government, was

intended to forestall possible American domination of the British automobile industry.

Except for Rolls-Royce, whose automobile production was only a very small part of the

company’s business, British automobile output was then largely controlled by four

firms: British Leyland, Ford, Vauxhall, and Rootes, which came under Chrysler control

in 1967 but was sold off to France’s Peugeot-Citroën in 1978. When British Leyland

had financial difficulties in the early 1970s, it was taken over by the government.

In the 1980s the remaining parts of BL, which by then was focused on building Jaguar,

Mini, and Rover cars and Land Rover sport utility vehicles and commercial trucks,

became the Rover Group. Eventually Jaguar regained profitability, and the British

government sold off the company through a public stock offering. The remaining

Rover/Mini operations were acquired by British Aerospace Corporation. Rover then

entered into a cooperative venture with Japan’s Honda in which cars of Honda design

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were built at Rover plants for sale in Britain and other European countries under the

Rover and Honda brands.

A small number also were exported to the United States under the Sterling name.

Eventually Honda became dissatisfied with the venture, and British Aerospace sold the

Rover/Mini operations to BMW of Germany in 1994. In 2000 BMW sold the Land

Rover segment to Ford, which had acquired the stock of Jaguar in 1989, while its Rover

cars segment was spun off to a British consortium and became MG Rover Group Ltd.

BMW retained the profitable Mini operations. In the late 1990s Britain’s Rolls-Royce

Motor Cars, then owned by Vickers PLC, became the subject of a bidding war in which

Germany’s Volkswagen emerged as the owner of the company’s Bentley brand and all

of its manufacturing facilities; BMW emerged as the owner of the Rolls-Royce brand

with respect to cars, effective at the end of 2002.

The post-World War II revival of the German automobile industry from almost total

destruction was a spectacular feat, with most emphasis centring on the Volkswagen. At

the end of the war the Volkswagen factory and the city of Wolfsburg were in ruins.

Restored to production, in a little more than a decade the plant was producing one-half

of West Germany’s motor vehicles and had established a strong position in the world

market.

Breaking away from what had become standard design, the Volkswagen used a four-

cylinder air-cooled engine at the rear of the car.

It also dispensed with the annual model change that had become customary with other

automobile manufacturers. Although the company had been founded by the German

government, in the 1960s the government divested itself of 60 percent of its interest by

selling stock to the public, an unusual case of denationalization in an era when

nationalization of industry was far more common. In the same decade, Volkswagen

acquired Auto Union, which evolved into its Audi luxury car segment.

In the late 1960s BMW rose from a builder of small, oddly styled Isetta cars and

motorcycles into one noted for high-priced passenger vehicles and premium

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motorcycles. Opel became the base for the European operations of General Motors, and

by the 1990s it supplied much of the small-car engineering expertise for GM operations

around the world. Prior to its merger with Chrysler Corporation in 1998, Daimler-Benz

had developed diversified interests ranging from trains to aerospace products. Fiat

(Fabbrica Italiana Automobili Torino), a firm founded in 1899 but without a mass

market until the 1950s, dominated Italian automotive production. The French industry

was centred on Renault, Peugeot, Citroën, and Simca. Renault was nationalized at the

end of World War II, and it became a public corporation in the 1990s. Citroën was

acquired in 1976 by independently owned Peugeot to form PSA Peugeot-Citroën. Simca

became a Chrysler property in 1958 but was sold to Peugeot in the late 1970s. Although

Sweden was a relatively small producer, Swedish builders Saab and Volvo became

important factors in the world market during the 1960s and ’70s. Their car operations

were acquired in the 1980s and ’90s by General Motors and Ford, respectively.

2.19 History of Automobile Industry in Iran

According to www.iranyellowpages.net, the first car imported into Iran was a Ford

that Mozaffaredin Shah, the king of Qajar, had purchased it from Belgium. This car

which puffed much smoke was renowned as "smoky chariot". Following urbanization

process since 1920, the importing trend of cars increased. Most automobiles of that

time were brought from the USA and England. The first car manufactured in Iran was

called "Paykan". It as produced in "Iran National Industrial Corporation" licensed by

British Talbot Company and offered to market in 1967. Later on, Iran National

Company, on a gradual basis, assumed the manufacture of other vehicles like pick up,

minibus and passenger bus. In the same year, two models of American "Rambler" cars

locally called "Aria" and "Shahin" were produced by Pars Khodro, however,

one year later, in1968, a model of French Citroen named "Dyane" was

offered by SAIPA company to the national market.

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In 1972, Pars Khodro transformed into "Iran General Motors" and started

manufacturing two models of Chevrolet (Opel) 2500 cc and 2800 cc as well as three

other cars licensed by American General Motors, namely; "Buick", "Cadillac" and

"Chevrolet Nova". The production of these cars continued until 1981. In SAIPA

Company the production of "Citroen Dyane" stopped in 1980, however, the

manufacture of "Renault 5" that had already been launched in 1975 went ahead. In

recent years, the production of innovative cars such as "Pride", "Peugeot 405 and 206",

"Nissan Patrol" and "Mazda 323" could be mentioned.

2.20 Auto Manufacturing Companies

Automobile manufacturing companies in Iran are as follows: Iran Khodro, SAIPA, Pars

Khodro, Shahab Khodro, Iran Khodro Diesel, SAIPA Diesel, Morattab, Kerman

Khodro, Raniaran and Zamyad.

2.20.1 Iran Khodro Company (Ex-Iran National)

Iran National Industrial Corporation (Iran Khodro) which is the biggest automobile

manufacturing plant in Iran was established on 19 March 1962 and one year later, on 19

March 1963 came into operation. The company started operating of "Paykan" assembly

line then followed by the production of "Mercedes Benz Bus 302" and "Minibus 309"

as well as "Paykan Pick up". After Islamic Revolution, the title of Iran National

changed into Iran Khodro.

Afterwards, following the closure of British Talbot Company, Iran Khodro purchased

related production line machinery and launched it in Iran. At the same time, this

company concluded an agreement with French "Peugeot" to target the production of

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"Peugeot 405". Furthermore, Iran Khodro initiated the production of nationally

optimized model of "Peugeot RD" and "Hyundai" minibus in 1997 which followed by

the manufacture of "Peugeot Pars" (Persia) and "Peugeot Station". In this context, this

company is expected to begin the production of "Peugeot 206" and "X7" or "National

automobile" as of June 2001.

2.20.2 Morattab Industrial Company LTD

Morattab Industrial Company was established in September 1957 to serve as dealer and

local agent of different types of cars. However, since 1970 its general regulations

witnessed some changes and the company began to assemble different types of "Land

Rover" four wheel drive cars including pick up, ambulance and station wagon. It also

engaged in production of different accessories. In recent years, this company further to

the manufacture of a model of 4WD car "Pazhan" (Land Rover) is committed to

produce some accessories such as propeller shaft, clutch, etc.

2.20.3 SAIPA, Iranian Automotive Company

SAIPA company was established in 1966 and started to manufacture a model of Citroen

"Dyane", "pick up" and "Ahu", however, later on, since 1974 the plant began to

assemble "Renault 5" in two different models of 2 & 4 door. Afterwards, since 1982,

this company started producing "Nissan Junior", a model of pick up car, powered by

2400 cc engine. Later on, SAIPA initiated assembly of "Renault 21" since 1992 until

1996. Nevertheless, in later developments the company concluded another agreement

with Kia Motors Company from South Korea to manufacture "Pride" cars in two

hatchback and saloon models. In its future programs, SAIPA is making final

arrangements to produce "Citroen Xantia".

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2.20.4 Zamyad Company

Zamyad was set up in 1963 to import and assemble truck, pick up and other types of

vehicles. In 1972, the company started manufacturing of "Volvo" truck and rear drive

"Nissan Junior" pick up, powered by 2000 cc engine. Some years ago, Zamyad

managed to obtain the license for manufacture of Italian "IVICO" minibus, however,

since 1991 it is engaged in importing CKD parts to assemble "IVICO" trucks.

2.20.5 Iran Kaveh Company

Iran Kaveh Industrial Company was established in 1964 to assemble American "Mack"

trucks. The company started assembling operations since 1968, however, after Islamic

Revolution interrupted relations with the USA caused sharp decrease in production so

that the manufacture of "Mack" finally ceased in 1983. Then, this company engaged

merely in producing different types of trailers, and dump trucks, but in 1988 it

established new set of cooperation with Swedish "Volvo" company to manufacture

"Volvo F12" trucks. In 1999, Iran Kaveh merged with SAIPA and formed SAIPA

Diesel Manufacturing Group.

2.20.6 Iran Pars Khodro Company

This company which formerly entitled "Jeep" was established in 1967 and used to

manufacture American Rambler lacally called "Aria" and "Shahin" saloon cars,

convertible "Jeep", pick up, station wagon and ambulance. In 1973, after concluding an

agreement with "American General Motors" it was called "Iran General Motors" and

initiated manufacture of big saloon cars such as "Chevrolet", "Buick" and "Cadillac", as

well as "Chevrolet pick up" and "Jeep". After the Islamic Revolution and interruption in

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production of the above-mentioned cars in Iran, the assembly line of "Nissan Patrol" for

sports utility van and pick up models powered by 4 and 6 cylinder engines substituted

for older cars. In the meantime, since 1997, further to the production of these models,

Pars Khodro purchased another assembly line from SAIPA to produce "Renault 5" as a

new brand called "Sepand I & II).

2.20.7 Shahab Khodro Company (Ex-Iran Leyland Motors)

This company was set up in 1964 to manufacture various types of heavy and light

trucks as well as buses. After Islamic Revolution, the company purchased bus chassis

from Iran Khodro and equipped them with "Mercedes Benz" diesel engines offered by

Tabriz "IDEM" company to build "Mercedes Benz 302" buses. In recent years, Shahab

Khodro has started producing bus chassis and also reached agreement with "Renault" to

furnish its buses with the French company diesel engines. 2-8 Khavar Industrial Group

In 1959 Khavar Benz Company was established to manufacture "Mercedes Benz"

trucks under license of German "Daimler Benz". This Company merged with Iran

Khodro in 1999 and formed Iran Khodro Diesel.

2.20.8 Khavar Industrial Group

In 1959 Khavar Benz Company was established to manufacture "Mercedes Benz"

trucks under license of German "Daimler Benz". This Company merged with Iran

Khodro in 1999 and formed Iran Khodro Diesel.

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2.20.9 Mazda Auto Manufacturing Company (Bahman Auto Manufacturing

Group)

In 1952 this company was preliminary registered "Cuban Gulf Corporation" to be

involved in shipping services. Based on permission issued by Ministry of Industry, the

company was agreed to manufacture Italian "Vespa" motorcycles. In 1970, this factory

initiated the production of Japanese "Mazda" pick up and was changed into "Mazda

Auto Manufacturing Company". Currently, further to the production of Mazda pick up,

the company assembles "Mazda 323" saloon cars, as well.

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2.21 History of India’s Automobile Industry

According to www.auto.indiamart.com, it was in 1898 that the first motorcar rode down

India’s roads.

Before Independence

Before independence India was seen as a market for imported vehicles. The assembling

of cars manufactured by General Motors and other leading brands was the order of the

day. Indian auto industry focused on servicing, dealership, financing and maintenance

of vehicles. Manufacturing started only after a decade from independence.

After Independence

Till the 1950s the Indian Railways played a pivotal role in meeting India's

transportation needs. The earlier automobiles were a domestic version of prominent

International Brands. The Morris Oxford popular in the 1950s, became the Ambassador,

the Fiat 1100 became the Premier Padmini. By 1960s nearly 98% of the product was

developed indigenously. By the end of 1970s, significant changes in the automobile

industry were witnessed. Initiatives like joint ventures for light commercial vehicles did

not succeed. New models like Contessa, the Rover and the Premier 118NE, hit the

market.

The Pioneering Achievements

Mr. J.R.D Tata's role in the development of the Indian automobile industry has to be

mentioned. The Tata group set up a high standard Engineering Research Centre (ERC)

in 1965 to facilitate technological advancement. Mr. Tata pioneered the indigenization

of scientific knowledge for trucks in collaboration with Mercedes Benz.

The launch of Maruti 800 in 1983 changed the dynamics of the passenger car sector in

India. It was also known as the people’s car.

Ashok Leyland (is a commercial vehicle manufacturing company based in Chennai,

India. Founded in 1948, the company is one of India's leading manufacturers of

commercial vehicles, such as trucks and buses, as well as emergency and military

vehicles.

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2.22 History of World Trucks Industry

According to, www.carhacker.blogspot.com, the oldest truck was built by Mercedes

Benz on 1st October 1896. It had four HP two-cylinder engines, weight of the complete

vehicle: 1,200 kilograms for carrying a load of 1,500 kilograms, invoiced to British

Motor Syndicate Ltd. London. Ten years after the invention of the first car, Gottlieb

Daimler had built the world’s first truck.

The world’s first truck looked like a horse-drawn cart without a drawbar. The driver

was seated on the coach-box ahead of the front axle, out in the open air. Hence the truck

was a cab-over-engine unit. The engine was installed in the rear – a Daimler "Phoenix"

two-cylinder engine which developed 4 hp from a displacement of 1.1 liters. Engine

power was transmitted to the rear axle by a belt system, a design resembling that of the

planetary hub reduction axles introduced decades later.

2.23 History of Iran Trucks Industry

Iran Khodoro Diesel Company

Saipa Diesel Company

2.23.1 History of Iran Khodro Diesel Company

According to Iran Khodro website, Iran Khodro Diesel Company was established

initially under the name of Khawar Industrial Group in early 1966. The company started

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its production by assembling one truck a day but after a short period due to the increase

demand for commercial vehicles developed production and assembling lines.

In 1999 Iran Khodro Company merged its bus and midi-bus production lines with

Khawar Industrial Group truck production lines together and the new company Iran

Khodro Diesel, public joint stock was born to manufacture different types of

commercial vehicles for domestic and overseas markets.

Today, Iran Khodro Diesel has a wide production site of 600,000 square metres

(6,500,000 sq ft).

2.23.2 Affiliated Companies

Iran Khodro Diesel Company is holding by itself several affiliated companies

manufacturing required components and parts for production namely as IDEM (Diesel

& CNG Engine Manufacturer under license of Daimler Benz Germany),

CHARKHESHGAR (Gearbox Manufacturer) under the license of ZF Germany),

VAMCO Services & Spare parts Procurement Company), EPCO (Procurement

Company) and TKC (Center of Research and Development and innovation).

2.23.3 History of Saipa Diesel Company

According to Saipa Diesel Company website, Saipa Diesel Company, originally

branded Iran Kaveh, commenced its operations in 1963 through an exclusive agreement

with Mack Trucks assembling Mack Trucks and various types of trailers. During the

period of cooperation with Mack Trucks, which came to an end in 1978, Saipa Diesel

succeeded to produce 7500 units of Mack Trucks.

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Following the stoppage of Mack Trucks production, the company managed to assemble

alternative vehicles in cargo and passenger transportation section in order to utilize the

current capacities, and contribute to employment.

In 1984 and following the studies for establishment of a new truck production line, an

agreement was concluded with Volvo Trucks for the production of Volvo F12 trucks.

Concluding an agreement with Yugoslavian company of Goscha for the production of

platform trailers was another significant measure resulted in a high Diesel in the same

year. These measures resulted in a high volume of sales in domestic market as well as

the introduction of the products, received warmly, in foreign markets, so that the

Economy & Commerce Director of the former Ministry of Industries granted Saipa

Diesel a Letter of Appreciation in 1992.

Parallel with the establishment and development of cooperation with one of the most

renowned companies active in the field of commercial vehicles, namely Volvo Trucks,

the knowledge and capabilities of the company’s staff developed too, so that the

designing of Budsun light trucks, aiming at diversification of the range of products as

well as meeting the market demand in this section, was achieved by the company’s

experts and through cooperation with Renault Trucks since 1995, and, consequently, the

certificate of R&D was granted to the company by Ministry of Industries in the

following year.

Also, in 1997, Kaveh Khodro Saipa was established with the goal of designing,

supplying and manufacturing the required parts and assemblies for supporting the

production lines of Saipa Diesel. Simultaneously, the organization’s management

processes were planned based on the requirements of quality control standards (ISO

9002: 1994) and accordingly Saipa Diesel was recognized as the first company ever to

attain the afore-mentioned certificate, with the scope of manufacture and assembly of

F12 trucks, as well as a Letter of Appreciation by Safety & Health Protection

Committee of Central Bureau of Labor & Social Affaris.

In 1998 Saipa Diesel founded Iran Kaveh Saipa in order to develop and centralize its

trailers and truck bodies operations.

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The processes of design, manufacture and assembly of tarpaulin and platform trailers

were added to the scope of the previous certificate, and, as a result, ISO 9001:1994

certificate was procured, through systematization of these operations, and

management’s commitment with regard to continual maintaining and improvement of

the implemented quality control system.

In the period between 1984 to 2001 there were produced, regularly, more than 10,000

units of Volvo F12 & NL12 trucks, achieving 52% of self-sufficiency, and in 1999 the

company won the Exemplary Exporting Company Prize, for the second time, granted by

the President of the country. Taking into consideration the need to acquire Rena

Technical Services Company, trailing behind the experience of importing and repairing

of heavy trucks and agricultural machinery since 1957. Accordingly, in 2000, Saipa

Diesel acquired the whole shares of Rena Company, aiming at offering after-sales

services to its customers. It was only in the following year that while attaining a Letter

of Appreciation as the exemplary industrial company, Saipa Diesel was simultaneously

ranked the first in the field of after-sales services, and was granted a Letter of

Appreciation by Iran Quality Inspection & Standard Institute.

The new legislation on vehicle emissions made it obligatory for the trucks running on

European countries to be equipped with engines in conformity with Euro standards. As

a result, the Iran’s international transportation companies, failing to conform with Euro

Standards, faced a serious crisis. It was then that Saipa Diesel, trailing behind of a

century of experience, as a major player in the field of commercial vehicles felt it

incumbent upon itself to grapple with the problem the Iran’s international transportation

fleet was facing. It had to be precise and prompt.

As a consequence, following the preliminary talks with Volvo Trucks, an agreement

was concluded with the Swedish company for the introduction of the state-of-the-art

and products to domestic market. It didn’t last long before Saipa Diesel managed to

equip the truck fleet of domestic international transportation companies with the new

generation of Volvo trucks, namely Volvo FH12 & NH12 heavy trucks, thus

overcoming the crisis. Parallel with his the company implemented the strategy of

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developing management systems and excellence road for internalization of total quality

management (TQM) within the framework of the first version of it’s strategy in 2001.

In the following year the company succeeds to attain the Letter of Appreciation, and

was ranked the first in the field of after-sales services, through Quality Inspection and

Standard Institute for second time. Simultaneous road and its strategies, the

organization’s processes were re-engineered.

In 2003, the following measures were taken by the company: process interaction map in

the company’s management systems manual were illustrated, a wide range of activities

took place for provision of the necessary infrastructure and implementation o the

required integrated applicable systems within a developed Iranian ERP, Electronic

communication process, being effective in marketing, advertisement, and culture

promotion developed through hardware facilities and communication network, and

ultimately management systems were followed up, so that the company succeeded to

attain ISO 14001, ISO 9001 : 2000, for the scope of manufacture and assembly of FH12

trucks, and also managed to attain the Letter of Appreciation for green economy

through Industry & Mine House. Also, the Quality Inspection & Standard Institute

granted Saipa Diesel a Letter of Appreciation for after-sales services, and ranked the

company the first in this field.

The country’s economic development during 2002 and 2003, and predictions

concerning increasing commercial vehicles market demand spurred the strategic

committee to adopt developing strategies, and expanding the range of products to 14

types; it created the required infrastructure for the realization of a production capacity

of 25,000 units annually.

Accordingly, concluding an agreement with Renault Trucks for the production of

various applications of Midlum trucks, and producing up-to-date FM Volvo trucks,

Saipa Diesel equipped its production workshops with the latest technology for the

production of state-of-the-art European products.

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Also, designing flexible production lines, the company managed to materialize

allocation of production share for each and every product, taking into the account the

market demand. To materialize this purpose, the company acquired a part of Melli Shoe

Plant in order to centralize sales operations and processes.

Since 2004, Saipa Diesel increased the production capacity of commercial vehicles up

to 20,000 units annually in a various range (6-200 tons) in cargo section, and that of

commercial passenger section to 5000 units annually (17-25 seater minibuses & 29-33

seater midibuses).

Parallel to above-mentioned changes and in line with planned excellence road, the

organization’s processes were revised, taking into account the requirements of job

safety and health management. And, the regular utilization of assessing models of

Nissan Plant Management System & excellence model of EFQM were placed in the

company’s agenda for identification of strong points and improvable fields of the

organization, aiming at ensuring the success of the company for the realization of total

quality management concepts.

The totality of these attempts resulted in attaining OHSAS 18001 as well as Integrated

Management System (IMS) certificate through integration of implemented systems.

Saipa Diesel being the first company ever to achieve it in the domestic automotive

attaining Committed to Excellence certificate from National Productivity & Excellence

Award, receiving the Letter of Appreciation, and ranking the first for after-sale-services

through Quality Inspection & Standard Institute, was all among the company’s

achievements in 2004.

In 2005, in line with materialization of the company’s vision based on gaining the

maximum domestic market share of cargo commercial vehicle section, and to meet the

demand of a part of the market for relatively cheaper vehicles, the company adopted the

strategy of commercial cooperation with Chinese companies.

As a result, following intensive studies on core capabilities of potential Chinese

partners, two Chinese companies of Foton (for the light range) and Dong Feng (for the

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heavy range) were accordingly selected as Saipa Diesel’s new partners. Simultaneously,

the company’s commercial cooperation with its pain partner, namely Volvo Trucks,

developed, which resulted in the introduction of the new generation products of Volvo

FM12 & FH16, thus promoting the diversification of Saipa Diesel’s products to 21

types with various applications.

At the same time, the management’s support for the executing improvement plans

resulting from self-assessments, and the efforts of all the staff for strengthening the

company’s capabilities, and accordingly the growth trends in all fields contributed to

the promotion of Saipa Diesel’s Excellence level and attainment of Recognized for

Excellence certificate from National Productivity & Excellence Award. Winning Saipa

Group’s Excellence Prize, Procurement of National production Seminar Prize through

House of Industry & Mine, ranking the first and receiving a Letter of Appreciation for

after-sale-services through Quality Inspection & Standard Institute for the fifth

consecutive year were all among the company’s achievements in 2005.

Continuous participation in foreign markets, and paying due attention to offering after-

sales services in 2006 contributed to the recognition of the company as exemplary

exporting company for the third time and attaining a special Letter of Appreciation for

this achievement through Iran’s Development and Renovation Organization (IDRO).

Also, the company once more ranked the first and won a Letter of Appreciation for

after-sales services through Quality Inspection & Standard Institute.

In 2007, promotion of old Volvo products as well as replacement of old Dong Feng

trucks by the new generation products, namely T375 model accounted for the

diversification of Saipa Diesel’s products to reach to 29 types. Also, the company

managed to renew its management systems certificates (ISO 9001, ISO 14001, and

OHSAS 18001), and simultaneously expand their scope to production and assembly of

Volvo and Renault trucks through taking necessary measures for maintaining

implemented management systems including executing systematic self-assessment,

internal audits, regular monitoring of criteria, and continual improvement of processes.

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Today, enjoying a wide range of products in light, medium and heavy section with 35

models, Saipa Diesel is honored to be capable of meeting the customers’ demand and

satisfaction. Recognition of the company as ranking the first in the field of after-sales

services by Quality Inspection & Standard Institute for 7 consecutive years, ranking the

second among the companies affiliated to Iran’s Development & Renovation

Organization (IDRO), and attaining 80% of whole export volume of Saipa Group of

companies in 2008 have all contributed to a promising future for Saipa Diesel in

domestic and international markets.

Today, the company also has taken firm step for the renovation of passenger

transportation fleet through the production of state-of-the-art minibuses and midibuses.

2.24 History of India Trucks Industry

According to, www.automobiles.mapsofindia.com, as per the history of Automobile

Companies in India, in the late 1890's Tata Motors launched its first truck in India. It

was done in collaboration with Mercedes-Benz.

Though automobiles were introduced to India in the late 19th century, it was only after

the Indian independence in 1947 that India started manufacturing automobiles.

2.24.1 History of Ashok Leyland Company

The origin of Ashok Leyland can be traced to the urge for self-reliance, felt by

independent India. Pandit Jawaharlal Nehru, India’s first Prime Minister, persuaded Mr

Raghunandan Saran, an industrialist, to enter automotive manufacture.

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The company was established in 1948 as Ashok Motors, to assemble Austin cars. The

company’s destiny and name changed soon with equity participation by British Leyland

and Ashok Leyland commenced manufacture of commercial vehicles in 1955. Today

the company is the flagship of the Hinduja Group, a British-based and Indian originated

transnational conglomerate.

Early products included the Leyland Comet bus chassis, which sold in large numbers to

many operators, including Hyderabad Road Transport, Ahmedabad Municipality,

Travancore State Transport, Bombay State Transport and Delhi Road Transport

Authority. By 1963, the Comet was operated by every State Transport Undertaking in

India, and over 8,000 were in service. The Comet was soon joined in production by a

version of the Leyland Tiger.

In 1968, production of the Leyland Titan ceased in Britain, but was restarted by Ashok

Leyland in India. The Titan PD3 chassis was modified, and a five speed heavy duty

constant-mesh gearbox utilized, together with the Ashok Leyland version of the O.680

engine. The Ashok Leyland Titan was very successful, and continued in production for

many years.

Over the years, Ashok Leyland vehicles have built a reputation for reliability and

ruggedness. This was mainly due to the product design legacy carried over from British

Leyland.

Through tie-ups with global technology leaders, supplemented by in-house R&D

infrastructure and capabilities, Ashok Leyland has maintained its technological

leadership even as it offers the most comprehensive range of model configurations in its

class.

Ashok Leyland had collaboration with Hino Motors, Japan from whom the technology

for the H-series engines was bought. Many indigenous versions of H-series engine were

developed with 4 and 6 cylinder and also conforming to BS2 and BS3 emission norms

in India. These engines proved to be extremely popular with the customers primarily for

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their excellent fuel efficiency. Most current models of Ashok Leyland come with H-

series engines.

In 1987, the overseas holding by Land Rover Leyland International Holdings Limited

(LRLIH) was taken over by a joint venture between the Hinduja Group, the Non-

Resident Indian transnational group and IVECO Fiat SpA, part of the Fiat Group and

Europe's leading truck manufacturer. Ashok Leyland’s long-term plan to become a

global player by benchmarking global standards of technology and quality was soon

firmed up. Access to international technology and a USD 200 million investment

programme created a state-of-the-art manufacturing base to roll out international class

products. This resulted in Ashok Leyland launching the 'Cargo' range of trucks. These

vehicles used Iveco engines and for the first time had factory-fitted cabs. Though the

Cargo trucks are no longer in production, the cab continues to be used on the 'ecomet'

range of trucks.

In the journey towards global standards of quality, Ashok Leyland reached a major

milestone in 1993 when it became the first in India's automobile history to win the ISO

9002 certification. The more comprehensive ISO 9001 certification came in 1994, QS

9000 in 1998 and ISO 14001 certification for all vehicle manufacturing units in 2002. In

2006, Ashok Leyland became the first automobile company in India to receive the

TS16949 Corporate Certification.

2.24.2 Current Status

Ashok Leyland is a technology leader in the commercial vehicles sector of India. The

history of the company has been punctuated by a number of technological innovations,

which have since become industry norms. It was the first to introduce multi-axled

trucks, full air brakes and a host of innovations like the rear engine and articulated buses

in India. In 1997, the company launched the country’s first CNG bus and in 2002,

developed the first Hybrid Electric Vehicle.

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The company has also maintained its profitable track record for 60 years. The annual

turnover of the company was USD 1.4 billion in 2008-09. Selling 54,431 medium and

heavy vehicles in 2008-09, Ashok Leyland is India's largest exporter of medium and

heavy duty trucks out of India. It is also one of the largest private sector employers in

India - with about 12,000 employees working in 6 factories and offices spread over the

length and breadth of India.

The company has increased its rated capacity to 105,000 vehicles per annum. Also

further investment plans including putting up two new plants - one in Uttarakhand in

North India and a bus body building unit in middle-east Asia are fast afoot. It already

has a sizable presence in African Countries like Nigeria, Ghana, Egypt and South

Africa.

Ashok Leyland has also entered into some significant partnerships, seizing growth

opportunities offered by diversification and globalization – with Continental

Corporation for automotive infotronics; with Alteams in Finland for high pressure die

casting and recently, with John Deere for construction equipment.

The company acquired Czech Republic-based Avia's truck business. The newly

acquired company has been named Avia Ashok Leyland Motors s.r.o. This gives Ashok

Leyland a foothold in the highly competitive European truck market.

The Hinduja Group also bought out IVECO's indirect stake in Ashok Leyland in 2007.

The promoter shareholding now stands at 51%.

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2.24.3 Nissan Ashok Leyland

In 2007, the company announced a joint venture with Japanese auto giant Nissan

(Renault Nissan Group) which will share a common manufacturing facility in Chennai,

India. The shareholding structures of the three joint venture companies are as under:

• Ashok Leyland Nissan Vehicles Pvt. Ltd., the vehicle manufacturing company

will be owned 51% by Ashok Leyland and 49% by Nissan

• Nissan Ashok Leyland Powertrain Pvt. Ltd., the powertrain manufacturing

company will be owned 51% by Nissan and 49% by Ashok Leyland

• Nissan Ashok Leyland Technologies Pvt. Ltd., the technology development

company will be owned 50:50 by the two partners.

2.24.4 Facilities

• The company has six manufacturing locations in India.

o Ennore and Hosur, Tamilnadu

o Alwar, Rajasthan

o Bhandara, Maharastra

• Ashok Leyland's Technical Centre, at Vellivoyalchavadi in the outskirts of

Chennai, is a state-of-the-art product development facility, that apart from

modern test tracks and component test labs, also houses India's one and only Six

Poster testing equipment.

• The company has an Engine Research and Development facility in Hosur.

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• The company is setting up a new Plant in the North Indian state of Uttarakhand

at Pant Nagar at an investment outlay of Rs. 1200 crores. This plant is expected

to go on stream in the year 2010. The Plant will have a capacity to produce

around 40,000 commercial vehicles and is expected to cater mainly to the North

Indian market taking advantage of the excise duty and other tax concessions.

• The company has signed an agreement with Ras Al Khaimah Investment

Authority (RAKIA) in UAE for setting up a bus body building unit in the

Middle East.

2.24.5 Achievements

• At 60 million passengers a day, Ashok Leyland buses carry more people than

the entire Indian rail network.

• Ashok Leyland has a near 85% market share in the Marine Diesel engines

markets in India.

• In 2002, all the vehicle-manufacturing units of Ashok Leyland were ISO 14001

certified for their Environmental Management System. First time in Indian

commercial vehicle industry

• In 2005, received the world-renowned BS7799 Certification for its Information

Security Management System (ISMS) - first time for an auto manufacturer in

India.

• In 2006, received the coveted ISO/TS 16949 Corporate Certification – first in

Indian auto industry

• It is one of the leading suppliers of defense vehicles in the world and also the

leading supplier of logistics vehicles to the Indian Army.

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2.24.6 Timeline of Indian Automobile Industry

• 1897 First Person to own a car in India - Mr Foster of M/s Crompton Greaves

Company, Mumbai

• 1901 First Indian to own a car in India - JamshedJi Tata

• 1905 First Woman to drive a car in India - Mrs. Suzanne RD Tata

• 1905 Fiat Motors stepped in India

• 1911 First Taxi in India

• 1924 Formation of traffic police

• 1928 Chevrolet Motors came to India

• 1942 Hindustan Motors was established

• 1944 Premier Automobiles Limited started making automobiles

• 1945 Tata Motors (Tata Engineering and Locomotive Company) was

established

• 1947 Mahindra & Mahindra Limited started its operations

• 1948 Ashok Motors was established

• 1948 Standard Motors came to India

• 1974 Sipani Motors was set up in India

• 1981 Maruti Suzuki was established in India

• 1994 Rover Company came to India

• 1994 Mercedes-Benz came to India

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• 1994 General Motors India - Opel brand launched

• 1995 Ford Motor Company came to India

• 1995 Honda Siel Cars India came to India

• 1995 REVA Electric Car Company came to India

• 1995 Daewoo Motors came to India

• 1996 Hyundai Motor Company stepped in India

• 1997 Toyota Kirloskar Motors came to India

• 1997 Fiat Motors (Re-Entry) stepped in India

• 1998 San Motors came to India

• 1998 Mitsubishi Motors came to India

• 2001 Škoda Auto stepped in India

• 2003 General Motors India - Chevrolet brand launched

• 2005 BMW came to India

• 2007 Audi stepped in India

• 2009 Land Rover and Jaguar came to India

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2.25 Iran’s Automobile Industry

According to www.iran-daily.com, Automobile industry is one of the unpredictable

industries in Iran. Since it is politicized, its strategies change with the change in

government.

Iran’s automobile industry is the second most active industry of the country, after its oil

and gas industry. There are 13 public and privately owned automakers in Iran, of which

two - Iran Khodro and Saipa - accounted for 94% of the total domestic production. Iran

Khodro, which produced the most prevalent car brand in the country - the Paykan,

which has been replaced in 2005 by the Samand.

The Iranian manufacturers currently produce six different types of vehicle, including

passenger cars, 4WD, trucks, buses, minibuses, and pickup trucks. The sector directly

employs about 500,000 people (roughly 2.3% of the workforce).

The industry will soon be doomed to failure unless the private sector is encouraged to

become involved in it. The present situation is that the two major factories have the

monopoly and benefit from direct or indirect state support while the private sector does

not receive the same treatment.

Government support for the two major car producers, Iran-Khodro and Saipa, has made

it difficult for private sector to exert an essential role in the industry unless they

establish ties with the two leading manufacturers.

The high 90-percent tariff on car import and lack of key private companies have made it

possible for some auto manufacturers to take advantage of the situation by marketing

low-quality cars.

But why does the private sector not dare to assume a key role in car production in Iran?

This is a question that some of the lawmakers and senior economical experts have

responded to.

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Many experts believe that the monopoly of major car producers has effectively curbed

private sector involvement. They believe that the present condition of Iran’s car

industry has also weakened the private sector. Others view the lack of funds as the main

obstacle. Meanwhile the low number of cars produced is one of the reasons for private

sector failure.

Monopoly of two major companies as the other reason for the private sector’s. Iran’s

car industry is monopolized by two major companies which have government support.

This influences the policies of the car industry and limits the benefits and interests of

the private sector. Based on this, the private sector will fail to play a major role.

The private sector role in car production can make the atmosphere competitive and this

is both to the advantage of Iran’s industry and economy.

Since the scope for investment in this industry is lacking, private companies try to

import cars instead of producing it. Therefore as long as monopoly exists we should not

expect the private sector to play a significant role in Iran’s automobile industry.

Private companies try to produce automobile parts in the hope that it will help them

produce cars in future. But the low number of cars produced and lack of competitive

atmosphere discourage them and they prefer to import parts and assemble them.

2.25.1 Automobile Manufacturing in Iran

According to Ministry of Industries and Mining of Iran, Iran's automobile production

crossed the 1 million mark in 2005. Iran Khodro is the largest car manufacturer in the

Middle-East. It has established joint-ventures with foreign partners on 4 continents.

The other car manufacturers, such as the Bahman Group, Kerman Motors, Kish Khodro,

Raniran, Traktorsazi, Shahab Khodro, and others together produced only 6%. These

automakers produce a wide range of automobiles including motorbikes, passenger cars,

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vans, mini trucks, medium sized trucks, heavy duty trucks, minibuses, large size buses

and other heavy automobiles used in commercial and private activities in the country.

Iran ranked the world's 16th biggest automaker in 2006 and has a fleet of 7 million cars,

which translates to almost one car per ten persons in the country (including trucks and

buses).

2.25.2 Market and Domestic Production

In 2008, Industrial Development and Renovation Organization of Iran (IDRO) reported

that SAIPA accounts for 54 percent and Iran Khodro for 46 percent of the output.

Although carmakers are listed on the stock exchange, the government still owns about

40 percent of both companies.

The other car manufacturers, such as the Bahman Group, Kerman Motors, Kish Khodro,

Raniran, Traktorsazi, Shahab Khodro, and others together produced only 6%. These

automakers produce a wide range of automobiles including motorbikes, passenger cars,

vans, mini trucks, medium sized trucks, heavy duty trucks, minibuses, large size buses

and other heavy automobiles used in commercial and private activities in the country.

Iran with having a fleet of 7 million cars, buses and trucks ranked the world’s 16th

biggest automaker (largest in the Middle East) with production above 1 million units in

2006 (1.5 million in 2009), resulting in almost 1.5 percent of total world production of

vehicles. Sixty percent of passenger cars produced in 2008 will use natural gas as fuel

or will be dual-fuel, and the remaining 40 percent will run on regular gasoline (2008).

Some problems faced by the industry are slow deliveries of cars, lack of after sales

services and low quality in the production of some cars.

More than half of the vehicles in Iran are over 25 years old (2007). The government has

sought to upgrade the local fleet and the authorities aim to pull some 200,000 outmoded

vehicles off the road each year, underpinning demand. Auto manufacturing industry's

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share in gross national product is two percent and Iran's auto production rate in the

global markets is 1.7 percent (2008).

Car imports have risen, from $184 million in 2002 to $1.5 billion in 2007. This is while

the country’s car exports stand at around $500 million. Iran car exports are projected to

reach $1 billion by March 2009.

2.25.3 Auto Parts

Sazegostar and Sapco, are the respective purchasing arms of Iran Khodro and Saipa (the

two largest Iranian auto manufacturers). The Iranian automotive parts industry consists

of approximately 1200 companies (15,000 factories), which include those affiliated to

vehicle manufacturers as well as independent firms. The industry consists of two

primary sectors: Original Equipment Manufacturing (OEM) suppliers, which produce

parts for auto makers, and After-Market Parts Manufacturers (AMPM), which produce

replacement parts for vehicles.

Iran annually needs some 4,000 buses for its domestic transportation. Since the 1970s,

Iran has been producing a number of different buses, such as German Mercedes and

Mann as well as Swedish Scania and Volvo that it has exported throughout the Middle

East. Daewoo Bus Corp. and an Iranian automaker Ardebil Sabalan Khodrow-Maywan

have teamed up to build buses in Iran. The plant, which is slated to be completed by

March 2010, will have a production capacity of 2,000 buses per year and would produce

some 800 city and intercity buses in the 18 months after its inauguration. Based on the

agreement, the engines and gearboxes would be manufactured in South Korea. But

production would increasingly shift to Iran, where about 60 percent of the parts would

be made.

In 2006, the government lowered the automotive import tariff levels to 90 percent for

light weight vehicles and since then a huge influx of imported vehicles has been

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witnessed in the country. The tariff level for import of heavy vehicles is even lower at

20 percent, due to low levels of local production and high demand. As a result, a variety

of automotive brands are being presently imported into Iran including Toyota, BMW,

Mercedes Benz (these three being the expensive and/or luxury brands), Rover,

Ssangyong, Audi, Subaru, Volkswagen, Renault Leon, Altea variety of heavy vehicles,

construction and mining equipment from leading manufacturers such as Mercedes

Benz, Renault, Iveco, Mann, Kamaz, Caterpillar.

2.25.4 Perspective

Like other sectors, the automotive industry is suffering from a lack of foreign direct

investment (FDI) and capital imports. The privatization process is moving extremely

slowly, while Iran looks set to face a summer of power shortages, a result of a lack of

diversity in power-generation (2008). International sanctions, high inflation,

exacerbated by fuel price hikes, and dampened consumer demand have depressed

growth in the passenger car segment, but industrial growth coupled with infrastructural

development is spurring demand in the commercial vehicles segment. Iranian

automotive market will contract in the 2008/09 Iranian year (running from 20 March)

and that annual domestic sales are unlikely to exceed 1mn units over the next five years.

2.25.5 Environmental Standards

Beginning in 2000, Iranian truck fleets running on international roads were being

stopped at European frontiers due to their non-conformity to European environmental

standards. Saipa Diesel committed itself to helping international transportation

companies out of their plight by introducing Volvo FH12 and NH12 trucks. Since 2001,

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they have been equipped with Euro II & III engines, meeting the European

requirements, and Saipa has captured 90% of the local market share.

2.25.6 Updating Technology

Saipa Diesel has also taken on the responsibility of updating the Iranian truck fleets.

Besides the production of heavy trucks, there was a need to fill the gap in light and

medium trucks, which were mostly out-dated models. Volvo FM & Renault Midlum

trucks were added to the range of the company's products.

2.25.7 Present & Future

At present, Saipa Diesel's annual production capacity is 20,000 units of different types

of trucks and 6,000 units of various types of trailers and truck bodies. Several actions

have contributed to the company's current position as domestic market leader.

• Investment and development of production and technology sections.

• Expanding subsidiary companies.

• Renovation of the domestic transportation fleets.

• Up-dating products to conform to standards worldwide.

• Establishment of an Integrated Workplace Management System.

• Gaining certificates in accordance with ISO 9001, ISO 14001 and OHSAS

18001.

• Introducing state-of-the-art midibuses and minibuses.

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2.25.8 Smaller Makers

There are a number of small volume makers in Iran, some of which are privately, or

majority privately owned. Pars Khodro was established in 1957 and is owned by IDRO.

It produces old design Nissan Patrol models and the Nissan Maxima as well as a version

of the Renault 5 known as the Sepand (95% local content is claimed). The licensing

deal with Nissan for the Maxima was signed in 2000 (with approximately 15% local

content) and the intended annual production run is 2,000 units. Like Iran Khodro and

SAIPA, Pars Khodro also has its own parts supplier, a company called Desco.

Bahman Group is a privately owned groups that manufacturers single and double-cab

versions of an old Mazda 1600 pick-up. The company also assembles from CKD kits

the Mazda 323 passenger car.

Kerman Khodro was established in 1995 as a joint venture between the Iranian private

sector and Daewoo of Korea. The company makes the Cielo and Matiz models and is

51% owned by Iranian interests and 49% by Daewoo. It has not been able to introduce a

replacement for the aged Cielo model due to political problems involving the US

ownership of Daewoo Motor.

2.25.9 Natural Gas

Large gas reserves and problems of acute pollution are encouraging the development of

CNG for automotive applications and the automotive industry is moving ahead with

plans to manufacture models with engines equipped for dual gasoline-CNG use. Iran

Khodro and Saipa are both working fast to increase the proportion of their cars that are

capable of dual fuel use.

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The Supreme Economic Council, headed by the President, has also approved a plan

aimed at installing special kits on some 550,000 existing cars to enable them to use

CNG.

2.25.10 Some Demand-Side Considerations

Wealth indicators, demographics (60% of the population is under 26 years of age) and

pent-up replacement demand are among the factors suggesting very strong growth

potential for Iran's car market. The estimated four million vehicles on the road have an

average age of fifteen years and less than 30% of Iran's three million private cars are

under ten years old.

But there are constraints. One is the tax inclusive price of vehicles. Even a basic Paykan

costs the equivalent of $10,000. A more modern car? Try $30,000 after the local maker

has been stung on imported parts and tariffs.

Also, finance purchase does not exist in the Islamic Republic - cash only. Half down

now, half on delivery - which even for a Paykan may be a year away, such is the

demand for cars in Iran. Unsurprisingly, many cars in use in Iran are used as

workhorses, earning their keep as the ubiquitous unofficial Paykan shared taxis.

The realisation of pent-up replacement demand requires Iran's car industry to develop in

a way that creates low-price models. If a way can be found to overcome the

affordability and financing problems, Iran's car market could grow rapidly towards one

million units a year - given the country's indigenous wealth and sizeable population.

In terms of export demand, Iran is already shipping significant numbers of vehicles to

CIS republics in Central Asia as well as to countries in the Middle East and North

Africa. The government sees the development of further export business as a way to

consolidate Iran as the leading regional industrial player (to some degree, Iran already

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finds itself in competition with Turkey throughout the region Middle East and Central

Asian regions).

2.25.11 Growth Potential

According to French automaker Peugeot, Iran has one car for every 21 inhabitants.

Turkey has one for every 12. Western European countries and Japan have nearly one

car for every two people. That indicates tremendous market growth potential, and in

part explains substantial foreign car manufacturer interest in the Iranian market.

2.25.12 Automotive Industry and Market of Iran 2007

According to www.researchandmarkets.com, Iran ranked as the 16th biggest automaker

of the world in the year 2006. It is the number one automaker of the Middle East and

one of the leading frontrunners in the Asian continent. Over one million and eighty four

thousand automotives were produced in the year 2006-2007 which constituted 1.43% of

the total automotives produced in the world. Automotive production in Iran between

March 2006 and March 2007 rose to 127 units per 1000 persons in the country.

There are over 25 automakers in Iran, actively producing both light and heavy vehicles.

These automakers are in joint venture with several popular international automakers

such as Peugeot (France), Citroen (France), Volkswagen (Germany), Nissan (Japan),

Toyota (Japan), Kia Motors (South Korea), Proton (Malaysia), Chery (China) and many

other established producers of light and heavy vehicles. These automakers produce a

wide range of automotives including motorbikes, passenger cars, vans, mini trucks,

medium sized trucks, heavy duty trucks, minibuses, large size buses and other heavy

automotives used in commercial and private activities in the country.

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However, despite high production levels, it is unanimously believed by experts that the

demand for automotives far outstrips the supply. According to estimates the current

demand stands at 1.5 million vehicles, which currently cannot be met by the local

producers. More than half of the vehicles in Iran are over 25 years old and vehicle

density is relatively low at 55 cars per 1000 people.

In 2006, the government lowered the automotive import tariff levels to 90% (further

drop is expected in March 2008) for light weight vehicles and since then a huge influx

of imported vehicles has been witnessed in the country. The tariff level for import of

heavy vehicles is even lower at 20%, due to low levels of local production and high

demand.

As a result, a variety of automotive brands are being presently imported into Iran

including Toyota, BMW, Mercedes Benz (these three being the expensive and/or luxury

brands), Rover, Ssangyong, Audi, Subaru, Rio LS, Hyundai (Sonata and Azar1),

Citroen, Daimler-Chrysler, Proton, Countach, Volkswagen, Renault Leon, Altea variety

of heavy vehicles, construction and mining equipment from leading manufacturers such

as Mercedes Benz, Renault, Iveco, Mann, Kamaz, Caterpillar.

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2.26 India’s Automobile Industry

2.26.1 Evolution of the Indian Automobile Industry

According to MVIRDC World Trade Centre in Mumbai (Export Potential for Auto and

Auto Components, 2005):

Phase I: (1960-1980)

• Constrained growth/ lower technological advancement

• Growth of the domestic homegrown majors

Phase II: (1980-1991)

• The period entrenched Maruti Udyog Limited as trendsetter

• Significant growth in export segment/ growing emphasis on quality, leanness

and overall efficiency as prime competitive advantages.

Phase III: (post 1991)

• Marked by huge capacity expansions and structural re-shaping, transformation

and co-operative innovation

• The liberalization policy opens up the industry to global competition

• Increasing emphasis on Supply Chain Management (SCM) rationalization,

flexibility and agility

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According to Ministry of Heavy Industries and Public Enterprises, India, On the canvas

of the Indian economy, auto industry occupies a prominent place. 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.

In India, as in many other countries, the auto industry is one of the largest industries. It

is one of the key sectors of the economy. The industry comprises of automobile and the

auto component sectors and encompasses commercial vehicles, multi utility vehicles,

passenger cars, two-wheelers, three-wheelers, tractors and related auto components. The

industry has shown great advances since delicensing and opening up of the sector to

foreign direct investment (FDI) in 1993.

It has deep forward and backward linkages with the rest of the economy, and hence, has

a strong multiplier effect. This results in the auto industry being the driver of economic

growth and India is keen to use it as a lever of accelerated growth in the country.

According to (The Financial Express, 06.02.2007), there is a popular adage in the stock

market circles that the economy of the country (India) can be gauged by the growth in

car sales. The auto sector boom always envisages the growth of infrastructure, logistics,

supply chain management, rising salaries amongst middle-class, equally robust financial

sector, et al.

The best part is that auto loans by banks have been a win-win situation for all the parties

involved the customer, the banks as well as the automobile manufacturers.

According to Ministry of Heavy Industries and Public Enterprises, India, In India, since

the early 1940s when the auto industry rolled out first passenger car, its significance in

the economy has progressively increased. However, from its early days until the mid-

1980s for two-wheelers and LCVs, and until the early 1990s for passenger cars, the

focus of development of the automotive industry has been on import substitution.

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The current low penetration levels in India in all three segments of the industry, namely

commercial vehicles, passenger cars and two wheelers and under-exploitation of the

potential of this industry to foster the growth of the economy have resulted in the auto

industry contributing a relatively low (nearly 5 per cent) share of industrial output in

India compared to the 8-10 per cent range in other developing countries such as Mexico

and Brazil and much higher (15-17 per cent range) in developed countries such as the

United States and Germany. Even the share of employment is low at 2.5 per cent for the

auto industry in India compared to 3-7 per cent in developing countries and around 15

per cent in mature economies.

During last decade, conscious efforts have been made to fine-tune state policy

perspective in a manner that this industry realises its full potential in the economy.

With this, the industry has shown great advances since abolition of licensing in 1991

and automatic approval permitted up to 51 per cent foreign investment in priority

sectors that included the automotive industry, except passenger car manufacture.

Motorcar manufacture was freed from licensing in April 1993.

Public policy dispensation requiring new joint venture car manufacturers to commit

certain levels of phased indigenisation, minimum investments in manufacturing

facilities, neutralization of foreign exchange on imports with the exports of cars and

components, etc., was withdrawn in September 2001 as a major initiative to bring

policy framework in step with WTO requirements.

The quantitative restrictions on imports were removed with effect from 1st April 2001.

Thus, industrial licensing and foreign investment regime in the country has been

progressively liberalized. The freeing of the industry from restrictive environment has

on the one hand helped it to restructure, absorb newer technologies, align itself to the

global developments and realize its potential; on the other hand, this has significantly

increased industry’s contribution to overall industrial growth in the country.

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According to Ministry of Heavy Industries and Public Enterprises, India, there are at

present 13 manufacturers of passenger cars and multi utility vehicles, 7 manufacturers

of commercial vehicles, 11 of 2- or 3-wheelers and 10 of tractors besides 4

manufacturers of engines. The industry has an investment of a sum exceeding US$ 10

billion. During 1999-2000 the turnover of the automotive industry as a whole was US$

12.5 billion approximately. The industry employs 500,000 people directly and more

than 10 million people indirectly and is now inhabited by global majors in keen

competition.

The arrival of most international automotive giants in India has set the stage for an

exponential growth in the component industry’s levels of technology, quality and

competitiveness.

2.26.2 Advantage India

• India holds huge potential in the automobile sector including the automobile

component sector owing to its technological, cost and manpower advantage.

• India has a well-developed, globally competitive Auto Ancillary Industry and

established automobile testing and R&D centers.

• The country enjoys natural advantage and is among the lowest cost producers of

steel in the world.

• India is the world’s second largest manufacturer of two wheelers.

• India is fifth largest manufacturer of commercial vehicles.

• The country manufactures largest number of tractors in the world.

• India is fourth largest passenger car market in Asia.

• World’s largest manufacturer of two wheelers is located in India.

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2.26.3 Investment Opportunities

• Establishing Research and Development Centers

• Establishing Engineering Centers

• Passenger Car Segment

• Two Wheeler Segment

• Heavy truck Segment

2.26.4 Automobile Production Trends of India:

2.26.5 Production

According to Ministry of Heavy Industries and Public Enterprises of India, overall

production in February 2009 grew by 6.10 percent over the same month last year. The

cumulative production data for April 2008 – February 2009 shows a growth of 2.65

percent over April 2007 – February 2008.

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2.26.6 Domestic Sales

Passenger Vehicles segment registered growth with 0.28 percent growth during April –

February 2009 over April – February 2008. Passenger Cars and Multi Purpose Vehicles

grew by 1.35 percent and 7.01 percent respectively during this period. However, sales

of Utility Vehicles fell by 7.90 percent. The sales in February 2009 for passenger

vehicles grew at 15.02 percent over February 2008 - with all segments except Utility

Vehicles registering positive growth.

In February 2009, three wheelers sales grew by 5.06 percent over same month last year.

Two Wheelers registered marginal growth of 2.50 percent during April 2008 – February

2009. Mopeds and Scooters grew by 3.86 percent and 9.51 percent. Motorcycles also

grew marginally at 0.98 percent. Electric two wheelers segment grew by 45.24 percent.

Two Wheelers sales grew at a growth rate of 16.23 percent in February 2009 over same

month last year.

2.26.7 Exports

The period from April 2008 – February 2009 saw automobile exports registering a

growth of 26.51 percent with all segments except Commercial Vehicles, registering

positive growth.

Passenger Vehicles and Two Wheelers segment grew by 56.30 and 25.55 percent

respectively. Three Wheelers exports grew by 7.43 percent.

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2.26.8 Auto Components Industry

Surge in automobile industry since the nineties has led to robust growth of the auto

component sector in the country. In tandem with the industry trends, the Indian

component sector has shown great advances in recent years in terms of growth, spread,

absorption of new technologies and flexibility.

Indian auto component industry has seen major growth with the arrival of world vehicle

manufacturers from Japan, Korea, US and Europe. Today, India is emerging as one of

the key auto components center in Asia and is expected to play a significant role in the

global automotive supply chain in the near future.

The Auto Component industry is today considered as the sunrise industry with huge

growth prospects. This industry is also expected to drive the growth of the engineering

sector in view of its strong downstream and upstream linkages with many other

segments of the engineering sector like raw materials, capital goods, intermediate

products etc.

2.26.9 Policy Initiatives (Auto Policy)

According to Ministry of Heavy Industries and Public Enterprises, India:

a) Vision

To establish a globally competitive Automotive Industry in India and to double its

contribution to the economy by 2010.

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b) Objectives

This policy aims to promote integrated, phased, enduring and self-sustained growth of

the Indian automotive industry.

The objectives are to:-

(i) Exalt the sector as a lever of industrial growth and employment and to achieve a high

degree of value addition in the country.

(ii) Promote a globally competitive automotive industry and emerge as a global source

for auto components.

(iii) Establish an international hub for manufacturing small, affordable passenger cars

and a key center for manufacturing Tractors and Two-wheelers in the world.

(iv) Ensure a balanced transition to open trade at a minimal risk to the Indian economy

and local industry.

(v) Conduce incessant modernization of the industry and facilitate indigenous design,

research and development.

(vi) Steer India's software industry into automotive technology.

(vii) Assist development of vehicles propelled by alternate energy sources.

(viii) Development of domestic safety and environmental standards at par with

international standards.

To emerge as the destination of choice in the world for design and manufacture of

automobiles and auto components with output reaching a level of US$ 145 billion

accounting for more than 10% of the GDP and providing additional employment to 25

million people by 2016.

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According to Ministry of Heavy Industries and Public Enterprises of India, Automotive

Mission Plan 2016:

2.26.10 Foreign Direct Investment

• Automatic approval for foreign equity investment upto 100 per cent of

manufacture of automobiles and component is permitted.

• The automobile industry is delicensed.

• Import of components is freely allowed.

2.26.11 Major Players in the Automobile Sector

• Tata Motors Ltd.

• Mahindra & Mahindra Ltd.

• Ashok Leyland

• Bajaj Auto Ltd.

• Hero Honda Motors Ltd.

• Daimler Chrysler India Private Ltd.

• Maruti Suzuki Ltd.

• Ford India Private Ltd.

• Fiat India Automobiles Ltd.

• Hyundai Motor India Ltd.

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• General Motors India Private Ltd.

• Volvo Auto India Private Ltd.

• Yamaha Motor India Ltd.

According to www.iloveindia.com, Automobile Industry in India has witnessed a

tremendous growth in recent years and is all set to carry on the momentum in the

foreseeable future.

Indian automobile industry has come a long way since the first car ran on the streets of

Bombay in 1898. Today, automobile sector in India is one of the key sectors of the

economy in terms of the employment.

Directly and indirectly it employs more than 10 million people and if we add the

number of people employed in the auto-component and auto ancillary industry then the

number goes even higher.

The Indian automobile industry has made a rapid progress in the recent years. Thanks to

the government's liberalization polices, easy finances, price discounts, tax relief, the

Indian automobile industry is thriving at a fast pace.

The automobile industry comprises of heavy vehicles (trucks, buses, light commercial

vehicles, tractors); passenger cars; and two-wheelers. Heavy vehicles section is

dominated by Tata Motors, Ashok Leyland, Eicher Motors, Mahindra and Mahindra,

and Bajaj. The major car manufacturers in India are Hindustan Motors, Maruti Udyog,

Fiat India Private Ltd., Ford India Ltd., General Motors India Pvt. Ltd., Honda Siel Cars

India Ltd., Hyundai Motors India Ltd., and Skoda India Private Ltd., Toyota Motors,

Tata Motors etc. The dominant players in the two-wheeler sector are Hero Honda,

Bajaj, TVS, Honda Motorcycle & Scooter India (Pvt.) Ltd., and Yamaha, etc.

In the initial years after independence Indian automobile industry was plagued by

unfavourable government policies. All it had to offer in the passenger car segment was

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a 1940s Morris model called the Ambassador and a 1960s Suzuki-derived model called

the Maruti 800. The automobile sector in India underwent a metamorphosis as a result

of the liberalization policies initiated in the 1991.

Measures such as relaxation of the foreign exchange and equity regulations, reduction

of tariffs on imports, and refining the banking policies played a vital role in turning

around the Indian automobile industry. Until the mid 1990s, the Indian auto sector

consisted of just a handful of local companies.

However, after the sector opened to foreign direct investment in 1996, global majors

moved in. Automobile industry in India also received an unintended boost from

stringent government auto emission regulations over the past few years. This ensured

that vehicles produced in India conformed to the standards of the developed world.

Indian automobile industry has matured in last few years and offers differentiated

products for different segments of the society. It is currently making inroads into the

rural middle class market after its inroads into the urban markets and rural rich.

In the recent years Indian automobile sector has witnessed a slew of investments. India

is on every major global automobile player's radar. Indian automobile industry is also

fast becoming an outsourcing hub for automobile companies worldwide, as indicated by

the zooming automobile exports from the country. Today, Hyundai, Honda, Toyota,

General Motors, Ford and Mitsubishi have set up their manufacturing bases in India.

Due to rapid economic growth and higher disposable income it is believed that the

success story of the Indian automobile industry is going to continue.

Some of the major characteristics of Indian automobile sector are:

• Second largest two-wheeler market in the world.

• Fourth largest commercial vehicle market in the world.

• 11th largest passenger car market in the world

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• Expected to become the world's third largest automobile market by 2030, behind

only China and the US.

2.26.12 Highlights of Indian Automobile Industries

According to Ministry of Heavy Industries and Public Enterprises of India, It is a well

known fact that for the economy to develop it is very important to have good

transportation system and keeping these things in mind the automobile industry is

growing rapidly. The annual growth rate is between16% to18%. Today India can

produce every kind of automobiles right from cars and two wheelers to heavy vehicles.

And not only Indians but foreigners too are investing their money in the Indian

Automobile industries. The growth of auto industries can be understood from the

following facts:

• India is the world's second largest two wheeler manufacturer.

• India is the world's second largest tractor manufacturer.

• India has the fourth largest car market in Asia.

• India has the world's largest three wheeler market.

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2.26.13 Leading Automobile Dealers in India

Some of the large two wheeler manufacturing companies in India are Hero Honda,

TVS, Bajaj, Mahindra, Tata Motors etc. The leading car manufacturing company of

India is Maruti Udyog. Other such companies are Mahindra, Tata Motors etc. Recently

Ratan Tata, Chairman (Tata Motors) created history by launching the world's cheapest

car NANO. The price is just one lakh rupees. The manufacturers of heavy vehicles are

Ashok Leyland, Tata Motors etc.

2.26.14 Emerging Trends in Indian Automobile Sector

According to Ministry of Heavy Industries and Public Enterprises of India:

Globalization is pushing auto majors to consolidate, to upgrade technology, enlarge

product range, access new markets and cut costs. They have resorted to common

platforms, modular assemblies and systems integration of component suppliers and e-

commerce.

The component industry is undergoing vertical integration resulting into emergence of

‘systems and assembly suppliers’ rather than individual component suppliers. Thus,

while most component suppliers are integrating into tier 2 and tier 3 suppliers, larger

manufacturers and multinational corporations (MNCs) are being transformed into tier 1

companies.

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2.26.15 Foreign Companies in the Indian Auto-Sector

According to Ministry of Heavy Industries and Public Enterprises, India:

Until the mid-1990s, automobile industry in India consisted of just a handful of local

companies with small capacities and obsolete technologies. Nevertheless, after the

sector was thrown open to foreign direct investment in 1996, some of the global majors

moved in and, by 2002, Hyundai, Honda, Toyota, General Motors, Ford and Mitsubishi

set up their manufacturing bases.

Over the past four to five years, the country has seen the launch of several domestic and

foreign models of passenger cars, multi-utility vehicles (MUVs), commercial vehicles

and two-wheelers and a robust growth in the production of all kinds of vehicles.

Moreover, owing to its low-cost, high-quality manufacturing, India has also emerged as

a significant outsourcing hub for auto components and auto engineering design, rivaling

Thailand. German auto-maker Volkswagen AG, too, is looking to enter India.

India is expected to be the small car hub for Japanese major Toyota. The car, a hot

hatch like the Swift or Getz is likely to be exported to markets like Brazil and other

Asian countries. This global car is crucial for Toyota, which is looking to improve its

sales in the BRIC (Brazil, Russia, India, and China) markets.

Two multi-national car majors — Suzuki Motor Corporation of Japan and Hyundai

Motor Company of Korea — have indicated that their manufacturing facilities will be

used as a global source for small cars. The spurt in in-house product development skills

and the uniquely high concentration of small cars will influence the country's ability to

become a sourcing hub for sub-compact cars.

A heartening feature of the changing automobile scene in India over the past five years

is the newfound success and confidence of domestic manufacturers. They are no longer

afraid of competition from the international auto majors.

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2.26.16 Future of the India’s Automobile Industry

According to Ministry of Heavy Industries and Public Enterprises of India, It is also

estimated that in the coming years this industry is going to develop further and India is

going to be a source base for global auto manufacturers. The global giants of

automobile industries, such as Honda, Suzuki, and Hyundai have already launched their

SUV's and recently Tata Motors have owned Ford's British brands Land Rover and

Jaguar. In the coming times it is beyond a shadow of a doubt that India will reign

supreme in auto industries and every commuter will either have a car, bike or scooter at

his disposal.

Automotive industry is the key driver of any growing economy. It plays a pivotal role in

country's rapid economic and industrial development. It caters to the requirement of

equipment for basic industries like steel, non-ferrous metals, fertilisers, refineries,

petrochemicals, shipping, textiles, plastics, glass, rubber, capital equipments, logistics,

paper, cement, sugar, etc. It facilitates the improvement in various infrastructure

facilities like power, rail and road transport. Due to its deep forward and backward

linkages with almost every segment of the economy, the industry has a strong and

positive multiplier effect and thus propels progress of a nation.

The automotive industry comprises of the automobile and the auto component sectors.

It includes passenger cars; light, medium and heavy commercial vehicles; multi-utility

vehicles such as jeeps, scooters, motor-cycles, three wheelers, tractors, etc; and auto

components like engine parts, drive and transmission parts, suspension and braking

parts , electricals, body and chassis parts; etc.

In India, automotive is one of the largest industries showing impressive growth over the

years and has been significantly making increasing contribution to overall industrial

development in the country.

Presently, India is the world's second largest manufacturer of two wheelers, fifth largest

manufacturer of commercial vehicles as well as largest manufacturer of tractors. It is the

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fourth largest passenger car market in Asia as well as a home to the largest motor cycle

manufacturer. The installed capacity of the automobile sector has been 9,540,000

vehicles, comprising 1,590,000 four wheelers (including passenger cars) and 7,950,000

two and three wheelers. The sector has shown great advances in terms of development,

spread, absorption of newer technologies and flexibility in the wake of changing

business scenario.

According to www.ibef.org, the growth of the Indian middle class along with the

growth of the economy over the past few years has attracted global auto majors to the

Indian market. Moreover, India provides trained manpower at competitive costs making

India a favoured global manufacturing hub. The attractiveness of the Indian markets on

one hand and the stagnation of the auto sector in markets such as Europe, US and Japan

on the other have resulted in shifting of new capacities and flow of capital to the Indian

automobile industry.

The Indian auto industry has been growing at the rate of 15-27 per cent over the past

five years.

According to the International Yearbook of Industrial Statistics 2008 released by United

Nations Industrial Development Organisation (UNIDO), India ranks 12th in the list of

the world's top 15 automakers.

Moreover, Indian car makers are earning acclaim worldwide. The home-grown

automaker, Maruti Suzuki India Ltd (MSIL) has emerged as the fourth most reputed

auto company in the world, even ahead of its parent Suzuki Motor Co of Japan,

according to the Global 200: The World's Best Corporate Reputations list, compiled by

US-based Reputation Institute.

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2.26.17 Industry Today, India

According to Ministry of Heavy Industries and Public Enterprises of India, Following

India's economic liberalization in 1991, the automobile industry was opened for 100

percent foreign direct investment. A surge in the country's economic growth rate and

purchasing power has fueled a 17% annual growth rate in the Indian automobile

industry since 1991. The automotive industry generates direct and indirect employment

to about 13.1 million people as of 2006-07.

The automotive parts and cars exports have grown at an annual rate of 30% per year in

the 21st century. However, the India's share of the overall global automotive industry

remains low as of 2007. Increased competitin amongst automobile manufacturers

provides for a variety of competitive options for the consumer.

India was one of the largest manufacturers of tractors in the world in 2005-06, when it

produced 293,000 units. India produced 65 Million tyres during FY 2005-06. India's

tyre productions meet domestic demand, as well as are exported to over 60 countries.

2.26.18 Outlook

India’s car market has emerged as one of the fastest growing in the world. The number

of cars sold domestically is projected to double by 2010, and domestic production is

skyrocketing as foreign car makers are setting up their own production plants in India.

The government’s 10-year plan aims to create a $145 billion auto industry by 2016.

Most of India's current automobile production meets domestic demand. Forecasts

predict sales of 4.2 Million four-wheel automobiles in India by 2015. But, several

manufacturers are now focusing on exports, and a diverse range of automotive

components are now built and exported from India. India's passenger vehicle exports

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are forecast to rise from 170,000 in 2006 to 500,000 in 2010, (Ministry of Heavy

Industries and Public Enterprises, India).

The Department of Heavy Industry, under the Ministry of Heavy Industries and

Public Enterprises, is the main agency in India for promoting the growth and

development of the automotive industry. The department assists the industry in

achievement of its expansion plans through policy initiatives, suitable interventions for

restructuring of tariffs and trade, promotion of technological collaboration and up-

gradation as well as research and development. The department is also concerned with

the development of the heavy engineering industry, machine tools industry, heavy

electrical industry, industrial machinery, etc.