CHAPTER6
SUGGESTIONS AND CONCLUSION
SUGGESTIONS
Indian AI, though, has shown an impressive growth in the post reform period, is facing
keen competition in the globalised business environment The forgoing analysis has
revealed the various problems (production, marketing, financial etc.) of the Indian AI.
Only market leaders of different segments of Indian AI like, Maruti, Hero Honda, Tata
Motors, Bajaj Auto, Mahindra, Ashok Leyland, TVS Motors, Hind Motors etc. use world
class technology, modem cost control techniques, auto financing schemes, modernization
plans, research and development projects etc. On the other hand small auto players, like,
Maharashtra Scooters, Scooter India, Majestic Auto, Kinetic Motors, LML, etc. are not
updated compared to market leaders. In general, following suggestions have been offered
for further and sustained development of the industry.
• The J.I.T. (Just-in-time) production system may be followed for production of
vehicles and its components, like Japanese companies. This would help reduce
cost through reduction of cycle time, decrease in inventory, etc. as well as
help achieving higher quality. Only leading auto firms, such as, Maruti, Tata
Motors, Hero Honda, Mahindra, Bajaj Auto, Hind Motor etc. follow the
technique, other companies in the Industry should also follow the same.
• To compete with the world famous players, updated foreign technical
collaboration is essential for new version/modified model of vehicles for
every segments of the AI, be it cars, motorcycles, tracks, buses, scooters etc.
Scooter India, Maharashtra Scooters, Majestic Auto etc. should also adopt
updated technologies par with the international ones.
• Auto manufacturers may initiate a comprehensive cost control programme
called Cell Cost Management (CCM). CCM helps the auto makers to identify
product-wise costs for developing product level profit planning.
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• The Indian AI highly needs replacement and modernization. Replacement and
modernization of existing plants are essential in AI for long-run commercial
race and keen competition with domestic and foreign auto companies in the
new millennium. Though some of the leading domestic auto firms, like, Tata
Motors, Maruti, Bajaj Auto, Mahindra, Hero Honda, Ashok Leyland etc. are
using the sophisticated machineries at present, other firms, like, Maharashtra
Scooters, Scooter India, Majestic Auto etc. should also follow the same for
overall development of Indian AI.
• Research and development project may be taken up seriously for technology
upgradation relating to engine efficiency, additional product features,
emission regulations etc.
• In 2006-07, two important initiatives have been taken by the Government of
India, namely, Automobile Mission Plan (AMP) and National Automotive
Testing and Research & Development Infrastructure Project (NATRIP). The
AMP (2006-2016) has to be properly implemented for making the country a
preferred destination for design and manufacture of automobile and its
components. On the other hand, under NATRIP, proposal for a 4,000 acre
testing track, an environmental lab, crash test lab and an electro-magnetic
compatibility lab have also to be properly implemented in the auto sector for
achieving international standards of vehicle safety, emission and performance
standards in the global competitive scenario.
• Global ambition is another suggestion for further development of the industry.
The Indian AI is undergoing a fundamental shift as few auto players are
setting out to unlock the benefits of wide scale of operations exhibited by the
increasing merger and acquisitions (M&A) deals with foreign auto giants,
like, General Motors, Renault, Suzuki, Honda etc. who are aggressively
drawing up plans to make India their export hub. The amount of foreign
exchange earned through these joint ventures will make important
contribution for economic development of the country. Like Tata Motors,
Mahindra, Maruti, other domestic auto players must pay their attention on
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global auto business. Though at present the global auto market is also hit by
the global financial meltdown, the situation is likely to be improved in near
future.
• In 2007, Toyota has emerged as the world’s biggest automaker. Such title has
snatched by Toyota from General Motors who was the masterpiece of
carmaker ending its seventy years of dominance in the globe. Now, Toyota
has emerged as the world leader by developing hybrid technology, global
brand image, cutting costs, producing eco-friendly and fuel efficient cars,
offering durable vehicles with moderate price, less trouble to buy, giving
utmost importance to customer-care and of course, involving managerial
innovation and creativity. Domestic auto players may adopt such principles
for success in the competitive environment
• The vehicle that may be operated using unconventional fuels, like, Ethanol,
LPG (liquefied petroleum gas), CNG (compressed natural gas), HV (hybrid
vehicles) is known as green vehicles. It is eco-friendly, with less emission of
green house gases (GHG) and better fuel efficient. And, of course, it reduces
oil dependency. Today, the world’s largest car producer Toyota Motor is the
first auto giant to take the green initiative. Domestic auto leaders should also
pay their attention to produce green vehicles in order to gain market share in
the US and European (most environmental cautious zone) auto markets.
• We know that India has the largest number of middle-class people in the globe
and the number of middle class has been growing significantly since opening
up of the country’s economy. There exists a vast potential market for high
quality low cost cars. Domestic auto companies should pay their attention to
such middle-class customer segment. Tata Motor has already introduced its
NANO model, the cheapest car in the world, in 2009.
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• Auto firms may pay their attention to produce capital goods, machinery parts,
tools, spare parts etc. instead of importing them at a high cost, in order to
reduce costs and become more competitive.
• A new concept ‘Automobile Metamarkef may be considered. Metamarket
refers to the cluster of complementary goods and services that are very closely
related but are spread across different industries. The automobile metamarket
consists of auto manufacturers, dealers (vehicle and spare parts), mechanics,
service centres, financial institutions, insurance companies, auto expo, auto
magazines, and auto sites on the internet, classified auto advertisement in the
daily newspapers, auto advertisement in TV etc. A customer is expected to be
highly interested in such automobile metamarket while planning to buy or
actually buying a vehicle.
• Customer relationship means planned and sustained efforts to establish and
develop mutual understanding between an organization and its customers.
Dealers act as liaison between customers and the manufacturing firm. Dealers
network may be developed keeping in mind their efficiency and
performances, and customer relationship may be improved by:
a) providing value-added services, such as, driving and training
programmes,
b) providing after-sales service facilities,
c) launching exchange schemes, and .
d) offering extended warranty periods, etc.
As mentioned earlier, market leaders have already taken the above factors into
their consideration. But other firms should also be careful enough to improve
these aspects.
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Domestic auto producers must try to explore the international markets in
different ways e.g. by setting up assembly lines in foreign countries,
establishing manufacturing plant in the countries outside India or exporting
vehicles directly at moderate prices. They should also pay their attention to
the rapidly developing economies as emerging markets. Emerging markets
refer to the nations that are restructuring their economies along market-
oriented routes and offer a wealth of opportunities in trade, foreign direct
investment, transfer of technolog}' etc. According to World Bank, Brazil,
Russia, India, China (BRIC), Indonesia, Mexico, South Africa, South Korea,
Poland etc. are considered as emerging markets. With high productivity, better
quality and low cost etc., the firms may enter into such markets.
Vehicle producers must be aware of the changes in customer preferences well
in advance in order to satisfy the customers. For instance, car producers may
now pay their attention to make small cars at a low cost because there is a
high demand for such vehicles. Tata Motors has already announced
introduction of its Rs.l lakh small car NANO, by 2009. Similarly, two
wheeler players should give much more attention to produce motorcycles with
high power four-stroke engine model, preferably at a lower cost. And,
manufacturers of commercial vehicle may pay their attention on light
commercial vehicle for transporting goods and people.
Extensive market research and customer feedback are essential before
launching a new vehicle. Advertising campaigns is highly essential for new
and specific vehicle in the present competitive market
Domestic auto-makers must focus on rural market because around 70% of
Indian people live in rural areas, and their earnings and standard of living have
increased due to sustained agricultural development over the years.
Auto companies may maintain a separate vehicle financing section for sales
improvement. Bajaj Auto, Mahindra, Hero Honda, Ashok Leyland, Tata
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Motors, Maruti, etc. have their own financing unit. If it is not possible for
others to introduce financing facilities from their own, they may arrange
financing with leading financial institutions, namely ICICI, SBI, AXIS Bank
etc. on easy terms and conditions.
• Manpower rationalization is another suggestion in this regard. Manufacturers
may reduce their inefficient employees in modem technological environment,
by offering appropriate voluntary retirement schemes (VRS) and inducting
fresh, innovative and efficient manpower in order to improve productivity and
quality, control costs and stay in competition.
• Auto makers may extend component business with main auto business to earn
extra revenue in the global competitive market
• In the present scenario, there is a great need to develop excellence in the
management and update the level of employee competencies.
CONCLUSION
Today, Indian AI is on the top gear. But up to 1980s, the Indian AI was not in a good
position due to the Government Policy of restricted licensing, high customs and excise
duties, and few foreign technical collaborations in the industry. There were quantitative
restrictions on imports of vehicles. Few models of different types of vehicles were in the
market The after-sales services were not a major thrust area for the auto players. As a
result the growth of the industry was almost in a stagnating condition. In 1983, Maruti
Udyog Limited was set up as a joint venture between the Government of India and
Suzuki Motor Corporation of Japan and commenced operations in car segment. In the
mid 1980s, some foreign companies (from Japan, USA, UK, Italy, and Germany)
established technical collaborations/tie-ups with domestic auto manufactures. Up to 1990,
productions and sales of vehicles increased, but no significant progress has been found.
Since reform measures have been taken in 1991, Indian Economy has been showing.the
positive sign of development as reflected in various macro-economic factors, such as, a
steady GDP growth rate, increase in per capita income, increase in foreign exchange
reserve, low inflation rate, booming stock market, growth in IT sector, increase in
purchasing power of consumer, etc. In this developing economic environment, Indian AI
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is also growing. Main factors, such as, high rate of growth in Indian Economy, healthy
automobile policy including excise duty rationalization, favourable auto financing
schemes, export potential of automobiles, creation of Special Economic Zone (SEZ),
National Automotive Testing and Research & Development Infrastructure Project
(NATRIP), invitation of multinational auto giants and Foreign Direct Investment (EDI) in
Indian territory have specially contributed towards impressive growth of Indian AI.
Moreover, increase in road length, increase in agricultural and industrial production
necessitating movement of goods, rapid growth in population, increase in standard of
living, increase in urbanization, high return from stock market etc. have also contributed
the rapid growth of the industry. Since mid 1990s all multinational auto giants have taken
their entry in Indian territory. Several joint ventures/tie-ups between domestic and global
auto firms have brought the industry in the frontline of the economy of the country.
Moreover, overseas acquisitions by domestic auto players, rapid technological
development, capability to manufacturing international standard of vehicles etc. have
made the industry globally competitive. Now, India ranks first, second, fourth and ninth
in production of 3W, 2W, CV and PC respectively. India is now 9th largest producer of
automobile in the globe. Today, domestic auto sector accounts for nearly 5.2% of GDP
and acts as a good foreign exchange earner, revenue earner, output multiplier and of
course, employment generator. Financial performance (viz. growth in productions and
sales, growth in sales and profit in real terms, as well as, at current prices, analysis of
profitability, liquidity and working capital) of all segments and selected auto companies
have shown unprecedented growth during 1991-92 to 2005-06 (except Hind. Motors) in
the present study period. In the present global competitive business environment, AI of
the country has been facing several problems, viz., financial, production and marketing
etc. Yet, the industry has achieved a remarkable growth since opening up the economy of
the country. Many firms belonging to the Indian AI has learnt the use of advanced
technology for manufacturing different vehicles. Domestic auto firms still dominate the
auto market in all segments of AI
Therefore, it may be concluded that the Indian AI has been growing tremendously in
the post-liberalised era. The demand for all types of vehicles has grown substantially and
the prospect of the Indian AI appears to be very bright.
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LIMITATIONS OF THE STUDY
Just like any other study of social science, the present study is also not free from some
limitations. Some of the principal limitations are mentioned below.
• The present study covers only a period of 15 years. Non-availability of
sufficient data for a larger number of years, particularly for the period prior to
1991-92, has been one of the major limitations. However, the objective of the
study being performance analysis in the post-liberalized era, the study is
expected to reveal the trend covering a period of 15 years.
• Growth of Indian AI has not been compared with that of the developed
countries, like, USA, Japan, Germany, Italy etc. due to non-availability of
required data.
• It has not been possible to collect the Annual Reports of the Indian Auto
companies for all the years of the study period. Therefore, financial data have
been collected from other secondary sources like, CIME, Statistical Abstract
India, National Stock Exchange Infobank, RBI, etc. having their own
limitations.
• Tractors and Auto Ancillaries that constitute a minor part of the Auto Industry
have been left out of the study.
SCOPE FOR FURTHER RESEARCH WORK
The present study primarily deals with the financial performance of Indian AI in the post-
liberalized era from 1991-92 to 2005-06 covering its most important segments viz., CV,
PC & MUV and 2W & 3W. In course of the study, it has been felt that some further
research works may be carried on in relation to the auto industry. A few such areas are
mentioned below:
• An analysis of financial performance of Indian AI since its inception
may be an important research area
• Future prospect of AI in India may be another important area for
research.
• A comparative study of Indian AI with one or more AI of developed or
developing country(s) may also be carried on.
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