Growth of Car Industry in India | Economics Project Topics

Published on Nov 30, 2023

Abstract

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.

Some of the early Automobile Companies in India are:
 Hindustan Motors
 Premier Automobiles
 Tata Motors
 Maruti Suzuki

Sanjay Gandhi was the first Indian politician who championed the need for a "people's car". Thus the state-owned firm, Maruti Udyog, was launched and gained over 50% market share. After the liberalization in 1991, India's Automobile Industry grew in leaps and bounds. With the growth in the Indian economy, big international car manufacturers like General Motors, Ford, Toyota, Honda, Hyundai, Rolls Royce, Bentley and Maybach entered the Indian market. Earlier in the 1920's Rolls Royce collections was the maharaja’s status symbol. With time the middle class also started possessing their own automobiles.

With the introduction of several automobiles in India, highways or expressways were constructed. The renowned international automakers like Ford, Suzuki, GM and Honda have their manufacturing bases in India. But, Automobile Industry in India is dominated by domestic companies like Maruti Suzuki, Tata Motors, Mahindra & Mahindra, Ashok Leyland and bajaj auto. Today Indian automotive industry is fully capable in producing various kinds of vehicles.

The milestones achieved by the Automobile Companies in India are:

• The first automobile in India rolled in 1897 in Mumbai.

• International players are adding to their investments in Indian auto industry.

• Cars dominate the Indian passenger vehicle market by 79%.

• India 's Automobile Industry is the largest three-wheeler market in the world.

• The Automobile Industry in India is the fifth largest commercial vehicle manufacturer in the world.

India is the fourth largest car market in Asia Elasticity

Price Elasticity:- In car industry of India price elasticity matters a lot as India is a mixed bag of consumers and buyers, every class of people exist in it. As the price of the car increases the demand for it also decreases, a car comes under a luxury good as its elasticity is greater than 1it is highly elastic. Therefore, the increasing trend of cars, price elasticity does not make a major impact on it.

Cross Elasticity:- In car industry of India , cross elasticity plays a major role in it, because in price elasticity price of good affects the demand of other related good. Therefore, as car is a major good and petrol is a related good both are directly related, increase in price of petrol will effect in decreasing demand of a car. Therefore, cross elasticity is a component of car industry.

Income Elasticity:- As car is a luxury good, so it is not necessary for everybody to bare the expense of car. Income elasticity is very important factor as the income is directly related to the demand of a good. When the income of the consumer increases the demand of car, also increases more and more consumers gets ready to pay the cost of car, but as the income decreases it simultaneously affect the demand of car. Therefore, income elasticity is another component of car industry of India .

Growth Factors

The Car industry in India has seen a tremendous growth and seems to be the fastest growing sector in the world. This sector has responded with an exponential progress in the number of new models launched in the last few months. The craze for cars amongst people is growing day-by-day. Hence, all the car manufacturers are giving tough competition to each other by opting innovative and unique ideas to capture the market.

India is presently ranked 17th amongst auto car manufacturing countries in the world. Keeping in pace with the ever growing demand for cars, the production of cars has also been high, off late; thanks to a huge export potential and favourable Government policy. Multinational companies have been eyeing at India to set up their manufacturing facilities. According to auto experts and analysts, India is poised to become third largest auto car manufacturing hub in the world by 2020.The major factors for growth of car industry in India is:-

• Launch of new technologies in the market such as CRDi, ABS,ESP,Ride control systems etc.

• Launch of new segments for all class of people.

• Introducing new concept cars with better enhancements.

• New price range's in every segments for different choices of the people.

• Different companies introduced in Indian markets, with different car types.