Technological Change in the Indian Passenger Car Industry

Energy Technology Innovation Policy Discussion Paper

Abstract

The last decade has seen a major transformation of the Indian car industry, from a protected business with only one world-class manufacturer to a landscape that includes most of the world’s major players as well as some emerging domestic firms vying for a significant piece of an expanding market.  In the process, the industry has also leaped forward technologically, driven by a confluence of factors such as intense competition, demanding consumer preferences, government policies (especially tightening emission standards), and the global strategies of the various players.  Now, cars manufactured in India are based on designs, and incorporate technologies, that are often comparable with those available globally; in fact, in some cases, the Indian launch of a vehicle (such as the Hyundai Santro Xing) has been its first launch worldwide.  At the same time, Indian car exports are also growing.  Interactions with automobile manufacturers also continue to fuel substantial changes within ancillary auto-component firms.  The substantial deepening of technological capabilities in the Indian automobile industry augurs well for the future.  Many of the players increasingly see India as their global manufacturing hub for small cars, and the government’s new Auto Policy intends to build on, and promote, such developments.  The government also anticipates undertaking policies that will reduce the environmental impact of automobiles, an issue that will be of escalating importance as the vehicle population in the cities and rest of the country continues to grow.  At the same time, the industry also will likely face new challenges as India further integrates with the global economy, and as other developing-country players such as China become more prominent in the global automotive landscape.  Meeting these goals, and navigating these challenges, will require a range of innovative public policies, including those that help further strengthen the technological capabilities of the sector.