India - A Global Manufacturing HUB

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Case Details:

Case Code : BREP010
Case Length : 14 Pages
Period : 1995-2004
Pub Date : 2004
Teaching Note :Not Available
Organization : -
Industry : Manufacturing
Countries : India

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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It is expected that in 2004, the figure will reach 36 mn. With vast untapped potential, the Indian market offers a huge market for global manufacturers such as Nokia, Samsung (mobile phones); and HCL Infosystems, LG, and IBM (PCs).

Major global companies have established manufacturing facilities in India in order to reduce their manufacturing costs and cater to the expanding Indian market. Expressing his optimism over the market potential in India, Gopal Srinivasan, CEO, TVS Electronics said, "It isn't a question of opportunity here. It is a question of being able to execute; companies in this space should grow at least two to three times."4

The Automotive Industry

According to the 2002-03 Economic Survey published by the Ministry of Finance,5 India is well on its way to being one of the world's major automobile manufacturing hubs. Over the past decade, since the automotive industry was deregulated and opened to private participation in 1995, the industry has witnessed tremendous changes, especially in the cars segment, with several global players such as Hyundai, GM, Ford, Peugot, Mitsubishi, Honda and Fiat entering the market.

From 1990 to 2000, the sale of passenger cars rose from 50,000 to 5,00,000 units. However, in this period, most of the automakers had been catering to local demand and had not exported their vehicles from India.

This trend has changed since 2000, with several leading automakers like Tata Motors and Hyundai exporting vehicles from India. Since 2000, the government has permitted 100% FDI in the automotive industry in all segments including cars.

With the increasing spending power, there is a steady rise in the sales of automobiles in the country (Refer Exhibit I).

In December 2002, UK-based automaker MG Rover Group6 signed an agreement with Tata Motors to sell Tata's highly successful Indica model, with some modifications in the design and engine, in the UK and in Europe. Indica was sold under the City Rover brand name by MG Rover. This was the first time that an Indian car was being sourced by a global automaker...


4] Vidya Viswanathan, "Hardware's Rs 75,000 crore Opportunity," Business Today, February 29, 2004.

5] The Economic Survey is an annual pre-budget commentary on the state of the economy drawn up by the Union finance ministry. It is presented in Parliament and covers (each year, the survey is the finance ministry's version of the economic developments in the country in the course of the just-completed financial year.

6] The MG Rover Group is owned by Phoenix Venture Holdings Limited, a British-owned company. The company was formed following the purchase of the Rover Group from BMW in May 2000. The total group's annual sales volume was in excess of 150,000 units in 2002.


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