The Indian Auto Industry – path to success of Volkswagen

Abstract

From 1970 to 1984, cars were considered a luxury commodity in India that fewer segments of the society could afford. Passenger car purchasing and even vehicle production process had its limitations. The manufacturing of vehicles was licensed with quantitative restrictions on imports and even a tariff structure was designed to restrict the market. Back then, the Indian automotive market was swamped with products from Tata, Ashok Leyland, Mahindra & Mahindra, Hindustan Motors, Premier Automobiles and Bajaj Auto. Between 1985 to 1995, some Indian companies collaborated with Japanese manufacturers to enter the four and two wheeler segments respectively e.g. Maruti Udyog and Hero Honda. While quantitative restriction continued post the economic liberalization in 1991, the Indian auto industry witnessed the de-licensing of its passenger car segment. Several international automobile companies entered the passenger car market from 1995 to 2000 and began investing in the service network to support maintenance of road vehicles. In the year 2000, the Indian government made several changes to the landmark policy, signaling the end of the quantitative restrictions with the implementation of 100 % Foreign Direct Investments (FDI) through automatic route. Vehicles were manufactured in the domestic market and exports received a boost.