Thursday, October 10, 2019
Indian Automobile Industry Essay
A. Introduction The Automotive Industry in India is one of the larger markets in the world and had previously been one of the fastest growing globally, but is now seeing flat or negative growth rates. IndiaÃ¢â¬â¢s passenger car and commercial vehicle manufacturing industry is the sixth largest in the world, with an annual production of more than 3.9 million units in 2011. According to recent reports, India overtook Brazil and became the sixth largest passenger vehicle producer in the world, grew 16 to 18 per cent to sell around three million units in the course of 2011-12. In 2009, India emerged as AsiaÃ¢â¬â¢s fourth largest exporter of passenger cars, behind Japan, South Korea, and Thailand.In 2010, India beat Thailand to become AsiaÃ¢â¬â¢s third largest exporter of passenger cars. As of 2010, India is home to 40 million passenger vehicles. More than 3.7 million automotive vehicles were produced in India in 2010 (an increase of 33.9%), making the country the second (after China) fastest growi ng automobile market in the world in that year. According to the Society of Indian Automobile Manufacturers, annual vehicle sales are projected to increase to 4 million by 2015, no longer 5 million as previously projected. The majority of IndiaÃ¢â¬â¢s car manufacturing industry is based around three clusters in the south, west and north. The southern cluster consisting of Chennai is the biggest with 35% of the revenue share. Chennai, with the India operations of Ford, Hyundai, Renault, Mitsubishi, Nissan, BMW, Hindustan Motors, Daimler, Caparo and PSA Peugeot CitroÃ «n is about to begin their operations by 2014. Chennai accounts for 60% of the countryÃ¢â¬â¢s automotive exports. The western hub near Mumbai and Pune contributes to 33% of the market. The Chakan corridor near Pune, Maharashtra is the western cluster with companies like General Motors, Volkswagen, Skoda, Mahindra and Mahindra, Tata Motors, Mercedes Benz, Land Rover, Jaguar Cars, Fiat and Force Motors having assembly plants in the area. Nashik has a major base of Mahindra & Mahindra with a SUV assembly unit and an Engine assembly unit. Aurangabad with Audi, Skoda and Volkswagen also forms part of the western cluster. The northern cluster around the National Capital Region contributes 32% of the Indian market. Gurgaon and Manesar in Haryana form the northern cluster where the countryÃ¢â¬â¢s largest car manufacturer, Maruti Suzuki is based. Another emerging cluster is in the state of Gujarat with manufacturing facility of General Motors in Halol and further planned for Tata Nano at their plant in Sanand. Ford, Maruti Suzuki and Peugeot-Citroen plants are also set to come up in Gujarat. Kolkata with Hindustan Motors, Noida with Honda and Bangalore with Toyota are some of the other automotive manufacturing regions around the country. B. Major Players The Major Market Players C. Product Segmentation While there are multiple ways of segmenting this industry like based on price and engine size but the most prevalent and the official method is based on dimension. i.e. the length of the vehicle under consideration. A1 Segment Ã¢â¬â Mini Ã¢â¬â Up to 3400mm (M800, Nano) A2 Segment Ã¢â¬â Compact Ã¢â¬â 3401 to 4000mm (Alto, wagon r, Zen,i10,A-star,Swift,i20,palio,indica etc) A3 Segment Ã¢â¬â Midsize Ã¢â¬â 4001 to 4500mm (Manza, City, Sx4, Dzire, Logan, Accent, Fiesta, Verna etc) A4 Segment Ã¢â¬â Executive Ã¢â¬â 4501 to 4700mm (Corolla, civic, C class, Cruze, Optra, Octavia etc) A5 Segment Ã¢â¬â Premium Ã¢â¬â 4701 to 5000mm (Camry, E class, Accord, Sonata, Laura, Superb etc) A6 Segment Ã¢â¬â Luxury Ã¢â¬â Above 5000mm (Mercedes S class, 5 series etc) B1 Segment Ã¢â¬â Van Ã¢â¬â Omni, Versa, Magic etc B2 Segment Ã¢â¬â MUV/MPV Ã¢â¬â Innova, Tavera, Sumo etc SUV Segment Ã¢â¬â CRV, Vitaraetc While it is easy for SIAM to segment the vehicles as per dimensions but for consumers, it becomes a tad difficult. This is primarily because of the widely varying / spread out prices of the vehicles. A 2 segment, as per the above criterion, will range between 3 lakhs to 7 lakhs. And A 3 will be between 4.5 to 9 lakhs. Such wide variation in prices has distorted the image of segments in the minds of consumers. Hence, for simplicity purposes, a different segmentation has cropped up. The details are as follows:- A Segment Ã¢â¬â Approximately below 3.5 lakhs Ã¢â¬â Alto, Eon, Nano, Spark, 800 B 1 Segment Ã¢â¬â Hatchback largely below 6 lakhs Ã¢â¬â Wagon R, Indica, Beat, Santro, A Star, Micra, Estilo B 2 Segment Ã¢â¬â Hatchback majorly below 7.5 lakhs Ã¢â¬â Swift, I 10, I 20, Ritz, Figo, Polo, Liva, Vista, Jazz, Punto, Brio, Fabia, Pulse, Aveo UVA C 1 Segment Ã¢â¬â Sedan below 8 lakhs Ã¢â¬â Dzire, Indigo, Etios, Sunny, Fiesta Classic, Verito, Accent, Ambassador, Aveo C 2 Segment Ã¢â¬â Sedan below 9.5 lakhs Ã¢â¬â Linea, Manza, Verna, Rapid, Vento, City, SX 4, Verna New, Optra D 1 Segment Ã¢â¬â Premium Sedan below 15 lakhs Ã¢â¬â Corolla, Civic, Cruze, Laura, Jetta, Fluence D 2 Segment Ã¢â¬â Luxury Sedan below 25 lakhsÃ¢â¬â Superb, Passat, Accord, Camry, Sonata, Teana, Kizashi B1 Segment Ã¢â¬â Van Ã¢â¬â Omni, Versa, Magic etc B2 Segment Ã¢â¬â MUV/MPV Ã¢â¬â Innova, Tavera, Sumo etc SUV Segment Ã¢â¬â CRV, Vitaraetc If we analyze the 1st Quarter of 2012-13, then total vehicle sales has been around 6.32 lakh units. The hatchback segments has totaled to 56% of the entire passenger car sales in India. This comes to 355857 units. This clearly shows the popularity of smaller cars in the Indian market. Alto continues to be the top selling brand with 17422 in July. It is followed by Swift (11421) and Wagon R (9582) Ã¢â¬â all Maruti brands. This is an indication of how well the Maruti team has understood the Indian market. i 10, I 20, Nano, Beat, Figo, Santro& Polo are some of the high selling models in these segments and these models continue to clock more than 3000 units monthly. Nano has been a disappointment so far with huge expectations but it is showing some kind of resilience off late. As a segment, the Utility segment is showing the maximum growth. In fact, this segment has outclassed the other popular segments of A, B 1 & B 2. With 128110 units under its hood in the 1st quarter, the segment is definitely making some good progress. MarutiÃ¢â¬â¢sErtiga, MahindraÃ¢â¬â¢s XUV 500 & Bolero has been instrumental in pushing the volumes of this segment. Innova and Omni too are raking in good numbers. What has been disappointing is the performance from the Tata Motors stable Venture, Safari and Sumo have been showing steady decline in the numbers per se but definitely possess huge potential to challenge the other models. Among the sedans, Maruti Dzire continues to lead the pack. With 11413 numbers in July, it is way ahead of its next model Verna (5300). The iconic models of City, Linea, SX4 have been showing consistent under growth and seriously calls for some introspection by their respective manufacturers. Vento & Rapid also showed some slack but given the aggression of VW and Nissan, it wont be long before they start to pull in good numbers. TataÃ¢â¬â¢s Indigo and Manza were on a slightly negative terrain all these months but somehow the trend has been reversed in July. 6816 for these 2 models augurs well for the company. D. Indian Automobile Industry : Barriers to Entry (and Exit) Barriers to entry (or, BTE) are anything that hinders the movement of firms into an industry. That is, BTE reduce or eliminate the entry of new businesses into an industry. Sometimes BTE can be almost insurmountable: no new firms can enter an industry. Other times BTE can slow down the entry of new firms: new firms appear but only slow. Very low BTE, however, means that new firms can enter the industry relatively rapidly. What can act as a BTE ? 1. Amount of capital The amount of capital required to enter the auto industry is in billions of dollars. So, very few outsiders can ever hope to enter the industry. This major financial requirement services as a significant barrier to entry for many industries. The auto manufacturing industry is considered to be highly capital and labor intensive. The major costs for producing and selling automobiles include: * Labor While machines and robots are playing a greater role in manufacturing vehicles, there are still substantial labor costs in designing and engineering automobiles * Advertising Each year automakers spend billions on print and broadcast advertising, furthermore, they spent large amounts of money on market research to anticipate consumer trends and preferences 2. Limited capacity of parts suppliers Existing parts suppliers have downsized their operations to the point that they do not have excess capacity. 3. Competition There are already significant numbers of well established competitors. 4.Government regulations The stringent regulations regarding safety, design, emission standards and fuel efficiency may sometimes act as a deterrent. 5. Patent protection laws This may prevent the use of certain innovations at low cost. 6. Marketing Marketing a new brand can be difficult and very expensive. 7. Economies of scale Economies of scale give large producers a significant cost advantage over small rivals. Where a firm has grown very large and significant economies of scale exist, they can have cost competitiveness. New entrants generally start small and therefore, have much higher unit production costs than the giant firms. These new, small entrants find it nearly impossible to survive against the large rival because they just canÃ¢â¬â¢t be price competitive given their much larger unit production costs. 8. Entry-deterring behavior A firm can protect itself from competition by deliberately acting in a way that convinces potential competitors not to enter the industry. Some firms spend huge amounts of money on advertising to keep new rivals from starting up business. Or, firms can act exceedingly aggressive if faced with new competition by perhaps starting a major price war every time a new competitor enters their market. Lawsuits against new rivals have been used to drive them out of business or to, at the very least, raise the cost of entering the business to very high levels. 9. Knowledge and Technology Ideas and Knowledge that provides competitive advantage over others when patented prevent others from using it and thus creates barrier to entry. For eg. TATA motors have great knowledge/ experience in the automobile industry and have renowned technological advantage because of the recent acquisition and mergers. 10. Product Differentiation and Cost Advantage The new product has to be different and attractive to be accepted by the customers. Attractiveness can be measured in the terms of the features, price etc. For an entrant to attain this, it requires lot of effort as compared to an established player. TATA Nano is an example where till now, no new entrant has entered as a competitor. Barriers to Exit: Obstacles or impediments that prevent a company from exiting a market. A company may decide to exit a market because it is unable to capture market share or turn a profit or for some other reason altogether. High barriers to exit might force it to continue competing in the market. The factors that may form a barrier to exit include: 1. High investment in non-transferable fixed assetsThis is particularly common for manufacturing companies that invest heavily in capital equipment which is specific to one task. 2. High redundancy costsIf a company has a large number of employees, employees with high salaries, or contracts with employees which stipulate high redundancy payments (layoff costs), then the firm may face significant cost if it wishes to leave the market. 3. Other closure costs. Contract contingencies with suppliers or buyers and any penalty costs incurred from cutting short tenancy agreements. 4. Potential upturn Firms may be influenced by the potential of an upturn in their market that may reverse their current financial situation. 5. Government policies In India, the Industrial Disputes Act, 1947 puts restrictions on employers in the matter of reducing excess staff by retrenchment, by closure of establishments and the retrenchment process involved lot of legalities and complex procedures. Also, any plans of retrenchment and reduction of staff and workforce are subjected to strong opposition by trade unions. E. Role of Non-Pricing Competition Non-price competition refers to firms competing with one another not in terms of reducing the price to attract consumers instead, in form of brand name, advertising, packaging, free home- delivery, free service, sponsorship deals and so on. These are the different forms of non-price competition. The main aim of non-price competition is product development. As products are differentiated in monopolistic competition, to prove and show how ones product is superior than others- colour, appearance, packaging, skill level etc. It is been done to create an inelastic demand for the product. Following parameters can be used for competition instead of reducing cost: Quality: If consumers must choose between two products of the same price but they can see that one is of a higher quality, they generally pick the product of higher quality. In this way, if a firm can figure out how to produce an item at a cost comparable to what its competitor charges but make it of higher quality, that firm may be able to steal the market from its competitor. Now in case of automobiles, within a given price range people generally donÃ¢â¬â¢t comprise with the quality aesthetics. For example : Recalls of vehicles sold. Recently, Honda Cars India Ltd recalled 42,672 units of second generation Honda City cars manufactured in 2007 and 2008 to replace their power window switch. HCIL carried out preventive part replacement of power window switch. The company is proactively replacing Power Window Switch which may malfunction in case water or any other liquid enters the driver side window. Honda Cars India is carrying out the part replacement as part of a global exercise by Honda Motor Company to ensure stringent quality standards for its products. However, a problem with this approach is that it may take some time for consumers to realize any difference in quality. Perception and Branding: In some cases, little possibility of quality differentiation exists between two products. However, the long-term sustainability of such an approach may be difficult because, as such brand advantages arise through consumer trends, consumer trends may also lead to their demise. We can take example of HyundaiÃ¢â¬â¢s Eon and MarutiÃ¢â¬â¢s Alto 800. Maruti being a well-known brand it was difficult for Hyundai Eon to compete with it. Hyundai India offers its Eon fleet within a price bracket of Rs. 2.8 to Rs. 3.8 lakhs in the country. Maruti Suzuki has pitched its Alto 800 models with a slightly humble pricing falling in the range starting from Rs. 2.4 lakhs that goes on till Rs. 3.6 lakhs in the Indian auto market. Sales Comparision between Maruti Suzuki Alto 800 and Hyundai Eon Source: http://blogs.hindustantimes.com/car-nama/2012/07/13/alto-vs-eon-eight-months-on/ Product Design: In some cases, firms may compete by changing the design of their products to make them more appealing without significantly changing production costs or quality levels. Such a strategy can prove effective at stealing business from competitors, but it can also backfire, because it can cause the company to alienate its existing consumers, who may be knowingly choosing the existing design over other products with different designs specifically because it appeals to their tastes. Product Differentiation: Not all consumers are the same. By offering a range of similar products geared toward different market sectors, firms can expand their market base. However, such product differentiation can result in significantly higher overhead costs for production. For example every model has variants in following aspects: Fuel used (petrol, diesel, LPG, CNG) Cost varients (low end to high end with addition of features like sunroof, airbags etc.) Model| Price (INR)| Mileage| Volkswagon Vento PetorlTrendline| 7,29,000| 15.04| Volkswagon Vento Petrol Comfortline| 7,75,805| 15.04| Volkswagon Vento Petrol Style Limited Edition| 8,10,805| 15.04| Volkswagon Vento Diesel Trendline| 8,44,000| 20.54| Volkswagon Vento Petrol Highline| 8,74,805| 15.04| Volkswagon Vento Diesel Comfortline| 8,90,805| 20.54| Volkswagon Vento Diesel Style Limited Edition| 9,25,805| 20.54| Volkswagon Vento Petrol Highline AT| 9,74,805| 14.4| Volkswagon Vento Diesel Highline| 9,89,805| 20.54| Sales Structure: When two firms are competing with similar products, one may be able to enjoy more market share and a deeper level of penetration due to a more effective and aggressive sales structure. By engaging in direct sales, firms can appeal to prospective buyers who otherwise would not feel compelled to buy due to advertising or other kinds of marketing. Multilevel marketing is one way in which firms rapidly build their consumer base. However, by turning buyers into sellers as well, such schemes may require significantly higher prices. A typical supply chain in Indian Automobile Industry Source: ImaginMor, Inderscience Enterprises Ltd and United Nations Industrial Development Organisation The description and the role of each of the contributors to the supply chain are discussed below. Third Tier Suppliers: These companies provide basic products like rubber, glass, steel, plastic and aluminium to the second tier suppliers. Second Tier Suppliers: These companies design vehicle systems or bodies for First Tier Suppliers and OEMs. They work on designs provided by the first tier suppliers or OEMs. They also provide engineering resources for detailed designs. Some of their services may include welding, fabrication, shearing, bending etc. First Tier Suppliers: These companies provide major systems directly to assemblers. These companies have global coverage, in order to follow their customers to various locations around the world. They design and innovate in order to provide Ã¢â¬Å"black-boxÃ¢â¬ solutions for the requirements of their customers. Black-box solutions are solutions created by suppliers using their own technology to meet the performance and interface requirements set by assemblers. First tier suppliers are responsible not only for the assembly of parts into complete units like dashboard, breaks-axel-suspension, seats, or cockpit but also for the management of second-tier suppliers. Automakers/Vehicle Manufacturers/Original Equipment Manufacturers (OEMs): After researching consumersÃ¢â¬â¢ wants and needs, automakers begin designing models which are tailored to consumersÃ¢â¬â¢ demands. The design process normally takes five years. These companies have manufacturing units where engines are manufactured and parts supplied by first tier suppliers and second tier suppliers are assembled. Automakers are the key to the supply chain of the automotive industry. Examples of these companies are Tata Motors, Maruti Suzuki, Toyota, and Honda. Innovation, design capability and branding are the main focus of these companies. Dealers: Once the vehicles are ready they are shipped to the regional branch and from there, to the authorised dealers of the companies. The dealers then sell the vehicles to the end customers. Parts and Accessory: These companies provide products like tires, windshields, and air bags etc. to automakers and dealers or directly to customers. Service Providers: Some of the services to the customers include servicing of vehicles, repairing parts, or financing of vehicles. Many dealers provide these services but, customers can also choose to go to independent service providers. The increased usage of IT at different tiers of the supply chain is on the increase in all the companies in India. An important finding that emerged from the findings was that the integration of supply chain is being done at all the cities in the country i rrespective of the market share. F. Key Developments in Indian Auto Sector Major Developments & Investments * Nissan Motor India Pvt Ltd is expecting to sell over 60 per cent more units this year on the back of the launch of its upgraded small car Ã¢â¬â Nissan Micra * Daimler India Commercial Vehicles (DICV) exported its first lot of 64 Fuso trucks manufactured at its Oragadam plant in Chennai. * Mahindra USA, a subsidiary of Mahindra and Mahindra (M&M), will set up an assembly and distribution centre, expanding one of the four tractor facilities in North America, by January 2014 * The Japan-based automobile manufacturer Isuzu MotorsÃ¢â¬â¢ local subsidiary Isuzu Motors India has entered into an agreement with Hindustan Motors (HM) for contract manufacturing of Isuzu SUVs and pickup trucks * A year after introducing the popular Ã¢â¬ËMINIÃ¢â¬â¢ range of cars in India, luxury car maker BMW has started local production of Ã¢â¬ËMINI CountrymanÃ¢â¬â¢ at its facility in Chennai * New Holland Fiat India plans to invest Rs 1,100 crore (US$ 184.56 million) to set up a new green-field pl ant in Maharashtra and also to increase its tractor manufacturing capacity by 50 per cent in the next three years * Hero MotoCorp has bought a 49.2 per cent stake in its US-based technology partner Erik Buell Racing (EBR) for US$ 25 million. This is Hero MotoCorpÃ¢â¬â¢s first-ever equity purchase in an overseas company. Also, Hero MotoCorp has entered into the African continent with launch of its brand and products in Kenya, where it has also set up an assembly unit. The company has also partnered with Ryce East Africa to sell its two-wheelers in the country * Daimler is developing its Indian commercial vehicle operations as an export hub. Daimler India Commercial Vehicles (DICV) will export locally assembled trucks from the conglomerateÃ¢â¬â¢s Mitsubishi Fuso range in 15 markets in Asia and Africa. Government Initiatives The Government of India plans to introduce fuel-efficiency ratings for automobiles to encourage sale of cars that consume less petrol or diesel, as per Mr. Veerappa Moily, Union Minister for Petroleum and Natural Gas, Government of India. The Union Budget 2013-14 announced by Mr. P Chidambaram, the Union Finance Minister, Government of India, in the Parliament on February 28, 2013, had a few add-ons for the industry. The analysis by Deloitte on the Union Budget highlighted the following: * The period of concession available for specified part of electric and hybrid vehicles till April 2013 has been extended upto March 31, 2015 * The basic customs duty (BCD) on imported luxury goods such as high-end motor vehicles, motor cycles, yachts and similar vessels was increased. The duty was raised from 75 percent to 100 percent on Cars / motor vehicles (irrespective of engine capacity) with CIF value more than US$ 40,000; from 60 percent to 75 percent on motorcycles with engine capacity of 800cc or more and on yachts and similar vessels from 10 percent to 25 percent * In addition, an increase in excise duty from 27 to 30 per cent has been allowed for SUVs with engine capacity exceeding 1,500 cc, while excise duty was decreased from 80 to 72 per cent, in case of SUVs registered solely for taxi purposes * An exemption from BCD on lithium ion automotive battery for manufacture of lithium ion battery packs for supply to manufacturers of hybrid and electric vehicles * The excise duty on chassis of diesel motor vehicles for transport of goods reduced from 14 per cent to 13 per cent Moreover, the Government of India allows 100 per cent foreign direct investment (FDI) in the automotive industry through automatic route. The Government also plans to accelerate the supply of electric vehicles over the next eight years. It is expected that there will be a demand for 5-7 million electricity-operated vehicles by 2020. The contribution of automotive sector in the gross domestic product (GDP) is expected to double, reaching a turnover worth US$ 145 billion in 2016, with special focus on export of small cars, MUVs, two & three wheelers and auto components, as per the Automotive Mission Plan (AMP) 2006-2016. Road Ahead Global and Indian manufacturers are focusing their efforts to develop innovative products, technologies and supply chains in the industry. Car makers are launching a slew of car models, mostly compact SUVs, in the coming months. The automobile body SIAM expects the launches to be able to brighten the market. Lastly, the vision of AMP 2006-2016 sees India, Ã¢â¬Å"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 per cent of the GDP and providing additional employment to 25 million people by 2016.Ã¢â¬ G. Major Challenges and Suggested Measures Challenges: 1. Strong decline in economic growth- * It affects the consumer buying behavior- Buyers driven by fear of job loss, moved aggressively to increase their rate of saving. At the same time, high cost and growing longevity of motor vehicles prompted buyers to postpone purchases that they might have otherwise made. * Freezing of credit markets meant cancelledorders, unpaid supplier invoices, and Ã¢â¬ËtemporarilyÃ¢â¬â¢ shuttered plants. * High excise duty- 12 % for sub 4 meters cars and 24 % for over 4 meters cars. * High interest rates as well as difficulty to obtain loans for purchase. 2. Duplicate spare parts- Indian market has always suffered from duplicate products and cheap counterfeits. This puts pressure on OEMs to reduce the prices and compete with these cheaper counterfeits. According to the study conducted by market research agency nielson co with acma, 41 % of total spare parts belong to OEMs and OESes, 23 % belong to imported segment and 36 % are duplicate. 3. Lack of infrastructure- Lack of proper road infrastructure, resulting into heavy Traffic has become major concern in most of the cities in India. Parking problem, parking cost adds to it. Bad roads, Bad drivers on road further add to the problem. 4. Availability of skilled man-power- As per data published by NSDC(National Skill Development Corporation), automobile sector in India is going to face a shortfall of 35 million skilled manpower by 2022. Limited availability of skilled manpower is bound to pose a great challenge to the positive growth of the Indian automotive manufacturing industry. 5. High Ownership cost- Small car sales are likely to fall by a couple of percentage points in 2013-14 due to continued uncertainty over income growth, high fuel costs arising from a deprecating rupee and still relatively high inflation.Diesel cars will lose their sheen, particularly in the small car segment, due to the gradual deregulation of diesel prices and the expected fall in petrol prices. 6. IR related issues- The $73 billion automobile sector has witnessed abhorrent industrial unrest in the recent 5 years with disputes in Maruti Suzuki, Hero Honda, Honda Motorcycles and Scooters India, Rico,Hyundai, Ashok Leyland, MRF, Apollo Tyres, Sona Koyo and Toyota Kirloskar Motors Ltd. Thissector, to generate double revenue needs a flexible workforce of 25 million with an amicableatmosphere to hire and fire workers to cope with the cyclical swings in demand for cars, trucksand bikes but the archaic labour laws governing employment of contract labour has fan thesetensions. This speculates the lack of efficient implementation machinery. Industrial unrestsaccompanying murders of the executives have also been committed in 2-3 instances recently,demonstrating the urging to address the issue by the social partners. 7. Global competitionÃ¢â¬â Competition will only increase in the years to come, as more international players enter India and the pace of innovation accelerates. This would elevate both R&D and selling and distribution costs, thereby impacting margins. Despite these headwinds, India would continue to remain an attractive market, as volumes across segments are projected to grow at a five-year compounded annual growth rate (CAGR) of over 10 per cent. Suggested Measures India has a very low car penetration about 10 per 1000. This number is expected to become 382 by 2025, this means that there is plenty of room to each automobile giant to grow in Indian market without affecting the volume of other competitors. Few of the following suggested measures may have a bounce back effect on the Indian Automobile Industry; 1. Friendly government policies: Tax benefits for R&D development and Skill related investments, subsidies for hybrid vehicles are the measures if taken can boost the Indian automobile sector. Similarly extension of 200 % weighted deduction of R & D expense under income tax law andweighted deduction of 150 % for expenditure in skill development by industries seem to be positive steps towards the cause. 2. Healthy Industrial Relations through better contract worker policies: As in most of the developed countries thecontract workers are covered under the social security provisions and are paid at par with the permanent workers. Such transparent policies may definitely promote positive industrial relations and foster industrial growth. 3. Technology up gradation measures-Automobile industry is slowing down, but at the same time we are seeing long waiting periods for new launches, which means people are no longer going for same old trusty brands and models and want more value for their money. Which gives me hopes that if Auto makers focus on launching more new models and more global launches they will surely find customers. 4. Promoting Hybrid vehicles or better fuel efficiencyÃ¢â¬âTo counter the problems of high fuel prices, itÃ¢â¬â¢s the need of the hour to develop higher fuel efficient products and also the products running on alternative fuel to decrease the ownership cost. For this concession on import duty on specified parts of hybrid vehicles are necessary. Stringent laws and strict exercise to eliminate spurious auto-spare part business. 5. Ensuring easy loan availabilityÃ¢â¬âThe industry should also approach the banks and NBFCs for better and easier loan availability to the car buyers. 100% finance and lower EMI with longer loan tenure will definitely help.