New Adaptive Methodologies could revive the struggling Automotive Industry

"In 2009, after a meeting at BMW’s Munich Corporate office, as I reached the parking lot I found a flyer in Bayerisch German language. It was letter from BMW Union which says that BMW employees should drive BMW cars, as they are getting salary from BMW and in this difficult time you should sell off your non BMW brands and replace them with BMW. For this they have opened one small office for getting assistance. This was the time when German government started old scrap car scheme to increase sales."

The struggle in the automotive industry has been troubling OEs and suppliers and stake holders in India and abroad for some years now. Now as the Budget is approaching the industry is optimistic on a positive announcements. Certain sectors like CV, Tractors and Construction Equipment are highly dependent on market conditions. The automotive industry is affected by external market dynamics but as per the new study conducted by ACG this can controlled with greatest effect.

The study primarily focus on delivering how the automotive industry can come out of recession which will have a positive impact on many dependent industries. The secondary consideration is given on Safety aspects which will be become habit in India which will save lives on our roads.

An overview of the challenges for Passenger and Commercial vehicle Industry:

Indian Automotive Industry is showing de growth from last couple of years and seem to await tough times ahead.

Mainly there are two kind of challenges ahead for OE – Economy and Market Sentiments.

Some of the latest development happened which could give negative sentiments to market. Seasonal changes like Monsoon and external political scenarios like in Iraq and domestic Government policies have all had an effect.

Automotive Industry is already struggling on many fronts, on top of it market condition are not favorable to generate adequate sales. All stake holders including Central and State Gov. has to come forward and implement measures which will be profitable for all in long term.

There are three major ways to revive the Automotive Industry 

  1. Scrap of old vehicles as a part of combined effort by Government and OEs which promote to buy new vehicles. A similar approach was adopted by Germany during 2009-10. SIAM has also suggested same kind of scheme to Government of India.
  2. Tax Relief: in Excise duty and other one all stake Holder of Automotive Industry take initiative. All OEMs working on optimal solution but lot of challenges are there on Market and product issue.
  3. Create Demand: The downfall in sales is owe much to the weak market sentiments which we believe will carry on towards the next few quarters. As per ACG study, OEs must think of introducing new variants with advanced safety and comfort features implemented at minimum additional cost. This could thereby overcome the sentiments and create enough demands.

Purchase behavior – India

Price and after sales are two most important criteria in buying car in India. Meanwhile Safety and environmental friendliness are the least considered features according to Indian buyers. But the latter two are two indispensable part of road safety and the habit has to be induced into our buyers.

OEs should adopt steps to create awareness in users about the importance of safety features along with state/central governments devising steps for the same.

When Volvo car was launched with most equipped safety features in Sweden which had become premier choice for females mainly for those with children, however it was a bit too expensive.

If Stake Holders promote to buy vehicles with optimal safety features, it will beneficial to OEMs, Insurance Companies, Financiers and Suppliers. Also the impact on human lives will be massive.

Here are some of the safety features with their importance.

There are also interesting conclusions we had drawn that how few comfort features play important role in driving safety.

Implementation of advanced safety features will reduced considerable amount of road accidents

Commercial vehicle and Car constitutes major share of accidents in India which can be control through safety features.

If there safety features will be promoted by all stake holders then in this cycle all will be the beneficial in define time.

Automotive Industry Tax Structure:

Government could give some relief in its duty structure. For this category can be made for maximum benefits to industry.

As per ACG Revenue collection study 2012-13, it is shown that Tax revenue is almost increases every year. Now its Government turn to give some support to industry. As soon industry will revive, once again it is will give better return to Government.

Maximum tax collection of Central Government is Motor Vehicle taxes and fees and State Government is collecting maximum taxes from Motor Spirit.

Purchase Full report : How to revive Automotive Industry in India

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Autobei Consulting Group

‘Autobei Consulting Group (ACG) ’ is a management consulting group which has leveraged on its expertise and proprietary databases to provide "Customized Solutions" in areas such ‘Sales Analysis’, ‘Business Planning’, ‘Market assessment’ and ‘Project Feasibility’ on Global Automotive Industry. Autobei Consulting Group (ACG) make use of the expertise and vast experience to deliver Cutting Edge Research Solutions.


  1. Eventhough we do many statistics we can’t predict India Automotive market.
    It may bounce back and wash out all predictions. It happens in past.

    – To the extend we judge commercial Vehicle segment but for Passenger cars we cannot predict.

  2. Dear Narayanan,

    This article is not about Statistics or forecast. Arun is trying to say how to create demand in market and what Automotive Industry stake holder need do something by themselves. Always do not depend on Government.

    Mckinsey Services

  3. Due to tough competition in the automobile sector,the price, quality and after sales play a major role which flow along with brand,the customers incline to the brand and the product get transfer,hence,the OEMs and the associate dealerships must take measures to its survival and on other hand weak Govt. do not initiate the proper tax structure,however,present Govt.is strong enough to help the system,will definitely make some road map to ease the tension,however ,all necessary economical measures are need to be imposed to drive profit which is ultimate result

  4. Good comprehensive insight on current situation of Indian automobile industry.

    Neeraj Gupta
    Zonal Business Head-West Region
    Hover Automotive India

  5. Excellent analysis. Provides some perspective of the way ahead for Indian Auto Industry in creating demand. I like the approach of this article in bring into focus on how to create demand in the auto industry. Something i believe the Malaysian Auto Industry should analyse with and look from the perspective of demand and supply. Malaysia does have its own Auto industry which however sad to say is being dominated by foreign makes.

    I was wondering-if this article analysis should also consider discussing on how to introduce Electric Vehicles (EV) and fuel cell vehicle (FCV)- although I did note that the market is least concerned with environmental issues. Both EV and FCV actually goes beyond environmental concerns. It transverse on resolving issues on finite supply of expensive fossil fuels as well including safety. Something that perhaps the Indian Auto Market should consider looking into.

  6. Its high time that government seriously plough back money and relook at tax structure to make all the players stand up.
    CV is the most affected with freight rates not so high, increased diesel prices, transporters does not get enough returns and making it difficult for them to think of buying trucks or even replacing them.
    Though scraping of old vehicles, sounds to be logical but government should look from the long term perspective how they are going to make this industry grow with sustainable measures with regard to demand generation.

  7. Due to tough competition in the automobile sector, the product price, its quality & service plays a major part in creating brand perception that is responsible for customers going for (buying) the brand. So, the manufacturers and their dealers must take measures to make the brand strong. Govt. too needs to play its part to perfection creating a road map to ease the tension. Therefore,all necessary economical measures are needed to drive profit, that is the end result.

    Rohit Yadav
    NISSAN, Gurgaon

  8. Dear Arun,

    It’s good to note that, ACG has giving lot of inputs to improve Automobile Industry.

    Whether it’s Passenger car, Commercial vehicle or two wheeler, the following observations from the undersigned,

    1. Purchasing cost- Approximately 35% cost is consuming as a Tax
    2.Operating cost -Driver,Fuel, Insurance, Road tax& permit and Toll charges (major contribution like Service Tax)
    3.Maintenance cost – Parts(Excise&VAT) & Service Labour ( Service tax)

    If you look after the above, Government tax is playing a major role of increasing vehicle cost.


    Delay in new Projects and payments to contractors are postponing or with draw the purchasing idea from the customer mind.

    Diesel price is increasing on every month, why????????????????

    Why the Oil companies need marketing activities for promoting their brand??????????? (If there is any value addition, only overheads are increasing for them and the cost is adding on fuel price)

    Who are all following traffic rules in Indian roads?????????? which results increase in accidents

    If Central/State Government is not taking any corrective action immediately, difficult to save AUTOMOTIVE INDUSTRY.

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