India’s Automobile Industry: A Story of Growth and Freedomw

By Emerald Tuladhar

From the trusty old Ambassador to the latest flashy sports cars, India’s automobile industry is an incredibly unique success story.

The modern Indian automobile industry is one of the fundamental pillars supporting the country’s overall macroeconomic growth and technological development. Standing as one the world’s largest industries, both in terms of manufacturing and vehicle usage, India’s automobile sector currently accounts for 6.4% of the country’s total GDP, creating over 32 million job opportunities in the process. With an impressive expected CAGR of 11.3% from 2020 to 2027, the Indian auto industry is only expected to continue its upward trajectory.

But how exactly did India’s automobile sector become this vibrant industry of progress and opportunities that we see today? For a country that didn’t produce its own car until 1957, India’s rise as one of the global automobile powerhouses has been nothing short of staggering. To truly understand this inspiring story, we have to look deeper into the decades before the overwhelming success, traversing the many tales of highs and lows that the industry has seen. Over the course of this article, we’ll be taking a closer look at a story of growth and freedom: the Indian automobile industry.

The Start of the Story

The start of India’s automotive journey is quite different to say the least. Even though the very first wheels to drive on Indian roads were all the way back in 1897, the car was actually imported by an Englishman. Whilst under British rule, cars were scarce in India with only a handful of them making appearances in cities like Bombay, Madras and Calcutta.

Even though a few cars could be seen driving the roads of these major cities, none of them were made locally. During most of the first half of the 20th century, the cars in India were all imported. A year after the first car entered India, Jamsetji Nusserwanji Tata became the first man of Indian origin to own a car in 1898.

The first years of the next century were dominated by inventions of steam-powered vehicles. The year 1903 saw Samuel John Green of Simpson & Co, Madras, build the first steam car of India. Driving down the roads of the city, this invention was met with huge praise and amazement. This steam-powered car served as a kick-starter for future innovations such as the first steam bus which became the earliest motor bus service in India.

It was only in 1928 that General Motors India Ltd started assembling trucks and cars in its Bombay factory, with December 4th of that year marking the date of the first car assembled in India rolling off the assembly line. Then in 1930, Ford Motor Co of India Ltd began the assembly of automobiles in Madras, followed by Bombay and Calcutta in the next year.

The First Movers After Independence

It was only during the 1940s, around the time of the country’s independence, that the major Indian automobile players started entering the scene. Between 1942 and 1948, major auto companies Hindustan Motors, Mahindra, Standard, Premier, and Tata Motors were established in India.

As India finally declared its independence from the British Empire on the 15th of August, 1947, the country prepared itself to usher in a new age of progress. In accordance with Mahatma Gandhi’s principles of self-reliance, the Government of India realized the dream of building an indigenous auto industry. This decision to build an internal ecosystem for automotive components and vehicles led to the creation of the Tariff Commission of 1952.

Hailed as the “License Raj”, the Tariff Commission of 1952 ushered in a period of severe restrictions and unfavorable policies in the Indian automobile industry. Initially set up with a goal of protecting India’s local industry from global competition, the commission ended up doing quite the opposite. By 1954, some of the largest automotive exporters to India like Ford, General Motors and Rootes promptly shut up shop, inadvertently alienating the Indian market from the rest of the world. And with local companies facing severe limitations on the models made, the number of cars produced and even the selling prices, the Indian auto sector was forced to a halt.

However, even amidst these challenges, there were bright sparks of innovation. In 1957, the first all-Indian car came into existence in the form of the iconic Hindustan Ambassador. Seven years after the launch of the Ambassador, Hindustan Motors’ biggest rivals, Premier, launched Padmini as a popular alternative to the larger Ambassador in 1964. These models reigned over the Indian automobile industry for much of the next decade.

Early Days of Development

The early days of development of the Indian automobile industry saw the formation of indigenous organizations that aimed to support the industry as a whole through sustainable progress and research. In 1960, the Society of Indian Automobile Manufacturers (SIAM) was established with a vision of creating an ecosystem of sustainable development for automobiles in India. During its inception, the yearly passenger vehicle sales were only a modest 24,207; humble beginnings in comparison to the 22,933,230 yearly sales the industry experiences today. Currently, in addition to collaborating closely with stakeholders in the development of economic and commercial laws, rules, and standards pertaining to vehicles, SIAM offers an open and transparent window into the Indian automotive industry.

Similarly, in 1966, the Automotive Research Association of India (ARAI) was established to promote the research and development of the country’s automobile sector. ARAI’s R&D program aimed to build local competencies, enhance manufacturing capacities, and develop Indian technologies. The organization also placed special emphasis on country-specific studies to promote sustainability, reliability, and safety.

The Winds of Change: Era of Liberalization

When we look over the history of India’s automobile industry in its entirety, it’s safe to say that the achievements of the 1980s laid the groundwork for the modern automobile industry as we know it today. Arguably the most significant decade for the auto sector, the 80s witnessed a series of liberal policy changes and progressive decisions that reshaped the industry completely.

In 1983, the Government of India formed a partnership that would define the direction of India’s auto segment and quite literally put the entire country on wheels. Maruti Udyog Ltd, known as Maruti Suzuki in the 21st century, was formed as a joint venture with Japan’s automotive powerhouse Suzuki which held 74% of the company’s stakes. This revolutionary decision to move away from old restrictive policies paved the way for modern technologies and advancements to enter the Indian automobile production ecosystem.

The growth from this newfound freedom was almost immediate. In 1980, there were just 46,633 vehicles sold in India. This number reached a monumental 100,000 units for the very first time in 1985 and then quickly doubled to 200,000 in 1989. The numbers painted a vivid picture; the Indian automobile industry was growing at an unprecedented rate!

The monumental rise of Bollywood in the 80s also contributed massively to the overall boom of cars. With car chase sequences becoming a staple of thrill and entertainment in Bollywood movies, and the protagonists frequently sporting the latest cars, the Indian masses' interest in owning a vehicle had peaked.

A New Age of Growth: Embracing Freedom

In terms of foreign influence and investment, the 1990s symbolized the era of a modernized global Indian auto market. 1993 in particular was a landmark year for the industry as the Government of India ended the “License Raj” and fully opened its doors to the outside world. As excise tax was reduced from 55% to 40%, import tax on CKD cut down to 50% and CBU to 110%, the Indian auto segment became greatly accessible. Realizing the infinite potential, foreign giants and investors rushed at the opportunity of investing in one of the world’s largest untapped auto markets. With investments pouring in, the car sales doubled between 1993 and 1996.

With the dawn of the new millennium, the Indian auto market found the prevalence of a new sector- luxury automobiles. Mercedes-Benz arrived in India in 2004 to make history as the country's first foreign luxury automaker. Prior to BMW's entry into the Indian market in 2006, Mercedes had a brief stranglehold over the country's premium automobile market. In 2007, Audi quickly adopted this strategy and created a three-way interchangeable share at the top of the Indian premium car market. Since then, these three enormous German companies have dominated the luxury car market in India.

Shifting Gears With Modern Innovations

As we enter our current day and age, we can see innovative technologies playing a pivotal role in shaping the modern auto industry. Like other major industries around the world, the auto sector has seen its fair share of technological marvels and innovative implementations. Let’s take a look at some of the prominent technologies and trends changing the Indian automobile landscape:

• Artificial Intelligence: With the adoption of AI into vehicles, the age of the smart car is truly upon us. Even in the Indian market, cars with AI capabilities have become prevalent due to massive foreign investments and lenient import laws. From the manufacturing process to the final product, AI now plays a pivotal role. AI-powered industrial robots are utilized during the construction of vehicles and autonomous cars can now traverse traffic with ease.
• Electric Mobility: The need for a sustainable future has led to the mass production and adoption of EV alternatives in the Indian auto industry. Industry leaders like Tata and Mahindra have been entering this market segment with the release of flagship products like the Tata Nexon EV and Mahindra E Verito. The 2020 move to BS6, jumping from BS4 and skipping BS5 entirely, has been a fundamental reason for the shift to EVs due to stricter emission standards across the industry.
• Autonomous Vehicles: With the rise of AI and IoT in the auto industry, self-driving vehicles now roam the streets of India. Combined with innovative technologies such as computer vision and pedestrian behavior-prediction, avoiding obstacles and accidents becomes a lot easier. Furthermore, by eliminating human negligence and driver fatigue, traveling is made vastly safer.
• Focus on Safety: Besides just modern technologies, the Indian automobile industry has also started embracing safety measures and procedures as an essential aspect of vehicles. It was finally in 2017 that India adopted notable crash test norms to match the standards of European manufacturers. Features such as Smart Braking Systems, Lane Departure Warning Systems, Collision Warning Systems and Fatigue Detection Systems have become increasingly prevalent in recent years.

Onwards and Upwards: The Future Is Now

The evolution of the Indian automobile industry has been an incredible journey spanning decades of challenges, turmoil, freedom, and growth. From the years under the British Empire where the number of vehicles were scarce and local manufacturing was virtually non-existent to the years of “License Raj” that saw severe restrictions plaguing the growth of the industry, the Indian auto sector has never been short of challenges. But despite these difficulties, India still managed to cement itself as one the world’s largest and most profitable auto segments within a comparatively short time period.

Seen most prominently during the roaring 1980s, our quest for progress led to the exponential boom of the local automobile sector. Now, as we enter the modern age, research from SIAM indicates that between April 2021 and March 2022, the Indian automobile industry produced a staggering total of 22,933,230 vehicles. These numbers currently make India the 4th largest automobile economy in the world. Judging from our history, filled with tales of growth and freedom, the Indian auto sector is only going to reach greater heights as we continue on the road to progress.