In the last ten years, Indian auto ancillary industry witnessed significant growth with the entrance of global auto majors into an India market. Nevertheless, there are several key issues which needs to be addressed to make the industry more vibrant and thriving.

The automobile industry in India has seen a lot of competition over the last ten years, with the advent of economic liberalization. The potential for growth in the industry has been recognized by the leading players in the industry. some of the global majors like GM, Ford, Toyota etc. have set up manufacturing units in India. Total industry sales trends in India shown in Figure 1.

The growth in the auto industry has also had a positive impact on the auto ancillary industry. The growth in this segment of the industry in the last few years has been impressive both on the domestic and the export markets. The question is whether the ancillary industry can be a growth engine for the economy as a whole both in terms of the domestic as well as the export markets.

While the growth of the auto industry is impressive in the size of the market itself, it is small in comparison to those in the developed countries, little more than a percent of global auto sales. The total annual sales of the global top ten automobile companies for the period 2000-03 are shown in Figure 2. There is little doubt that product attributes like, performance, styling, appearance etc. do have a bearing on the demand for a particular model. however, a key success factor in this industry is the presence of a dealership network that is capable of providing after sales service. It is reported that Hyundai intends to make India the hub for the Santro model. Hyundai hopes to benefit from the lower production costs and thus attain a competitive edge in the small car market. However, Hyundai will be able to make use of its existing dealership network unlike other Indian companies who need to establish dealer networks.

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