Time to shift gears

The automotive industry has shown it is a key contributor to any country's economy, be it in terms of the nation's gross domestic product (GDP), creating employment, or raising standards of living.

For a country as large and diverse as India, affordable, accessible and sustainable mobility solutions for its people and goods are keys to its development. India is already the sixth largest automotive manufacturer in the world, with the industry contributing about six per cent to GDP, 22 per cent to manufacturing GDP, and generating direct employment for over a million people and indirect employment for 15 million.

The Indian auto industry has matured with time, from merely assembling vehicles to full range in-house design and development capabilities. State-of-the-art indigenous capabilities, frugal engineering processes and world-class technical prowess have showcased the Indian automotive industry's potential. In fact, many across the world have started to take notice of the Indian frugal engineering approach.

Beyond its GDP contribution and employment generation, the auto industry has great potential for strengthening the 'Made in India' brand globally. Noticeable strides have already been made through internationally acclaimed products such as the Tata Nano, the Mahindra XUV500 and the recently launched electric vehicle Mahindra e2o. In fact, the e2o is the first manifestation of the Mahindra Group's efforts at redefining sustainable urbanisation. Our businesses are focused on transforming lives in urban settings while also striving to improve agri-productivity and rural consumption to sustain a dynamic rural economy.

With many global original equipment manufacturers (OEMs) using India as a manufacturing base and having established development centres, brand India has grown stronger.

But today, we find the automotive industry in a near-crisis. In fact, in FY2013, seven out of 12 industry sub-segments shrank. Further, only 14 of the 32 auto OEMs (excluding two wheelers) in India posted volume growth in the same year. The outlook for FY2014 also does not look very positive.

If we analyse the root cause of what is ailing the industry, we find that demand for mobility solutions still exists and products satisfying varied customer segments are also available. The slowdown is partially due to the volatile economic environment, uncertainty over economic growth, high vehicle financing rates, high inflation leading to people making fewer discretionary expenses and rising fuel prices, as well as policy shocks such as the additional three per cent duty on SUVs.

Considering the enormous contribution and potential of this industry, its emergence from the slowdown needs to be high priority for the country at large and not just the auto industry.

The automotive industry needs both measures to boost the sector in the short term as well as long term policy interventions to sustain the growth momentum. Some examples are taxation policies, fleet modernisation programmes and a boost to infrastructure development.

I have confidence in the India growth story and the contribution the auto industry will make to the country's progress. With the right interventions at the appropriate time, this potential will definitely be realised.

The author is President - Automotive and Farm Equipment Sector of Mahindra and Mahindra Ltd.