Macroeconomics Case Study

Indian Automobile Industry: Is it Going to be the ‘Global Small Car Hub’?

OR

Abstract:
In 1984, Government of India and Suzuki motors from Japan, formed a joint venture and launched Maruti 800 popularly known as ‘Peoples Car’, which went on to become one of the highest sold car, and created a new segment in the automobile market. Since 1998, the South Korean carmakers – Hyundai with its Santro line up and Daewoo with its Matiz – ushered in variety and vigour to the Indian small car market segment. However, year 2009 proved to be the year of small cars in India, for, apart from the historical launch of world’s cheapest car – Tata’s Nano – the year also saw the launch of 40 new models of small cars. The year 2009 also, as many industry pundits argue, has been a watershed year for global automobile industry forcing many changes and thrusting quite a few strategic redirections amongst many global auto majors the prime strategic reorientation; the focus being small cars. Added to that, almost all the companies stated the intent of making India as their production base for small cars. All these developments lead to an important question: Can India be the hub for small cars? This case study deals with the opportunities available to the Indian automobile industry and all the enabling factors available that could transform India into a global small car hub. The case analyses in depth why the small car segment is lucrative and also discusses the interest shown by all global automobile giants in investing in Indian car industry. The case also discusses the support provided by government agencies and the challenges which need to be addressed, quickly, if India has to become the global small car hub.

Pedagogical Objectives:

• To discuss and analyse Michael E. Porter’s Diamond model for competitive advantage of India in small car production
• To discuss the possible ripple effects created by ‘Tata Nano’ in pursuit of small and efficient (cost efficient with no-frills) car production
• Analysing the factors for shift in consumer preferences around the world from gas-guzzling automobiles to fuel-efficient small cars

Keywords : Indian Automobile Industry, Small Car Hub, Michael E Porter’s Diamond Model, National Competitiveness, Competitive Advantage, Cost Advantage, India’s Comparative Advantage, Tata Nano, Global Automobile Industry, Clusters, Fuel-Efficient, Automobiles, Auto