A Time Capsule Of India’s Auto Industry Since Independence On August 15, 1947

Here’s how policies have changed from post-Independence to the modern era of electrification and global brands.

It’s 78 years since our Independence, and with each passing decade, our country’s auto industry has been leveling up. From a few cars on Indian roads in the early years to now bustling markets. But how has the automobile industry evolved over time? That's the question that sparked the curiosity within us. Hence we decided to take a closer look at it in our Independence Day special. Read more…..

Early Regulations and Market Formation (1947-1980)

1945-1970: The Initial Years

In the early years after Independence, the automobile industry experienced slow growth due to strict economic policies. Major auto players such as Hindustan Motors and Premier Automobiles were seen manufacturing only cars for the upper class. Due to the government’s restrictions, foreign automakers were discouraged from investing– this created a lack of competition, restricting innovation.

Did you know? 

• The Hindustan Ambassador was adapted from the British Morris Oxford.

• The Premier Padmini was a version of the Fiat 1100 that charmed Indian families.

In 1945, a significant collaboration also began to shape the industry's future for the Indian market. Mahindra & Mahindra (earlier known as Mahindra and Mohammad) was formed as a steel trading company. Later, they saw a business opportunity in manufacturing the MUVs (Multi Utility Vehicles) and started assembling under the license of Willys Jeeps in India. Soon after, the M&M was established as the SUV manufacturer.

Another strategic partnership was formed in 1954, when Tata Motors then known as TELCO (Tata Engineering And Locomotive Company), shook hands with Mercedes-Benz. This joint venture decided to manufacture medium commercial vehicles and they successfully rolled out their first vehicle after 6 months of the contract. However, this deal lasted for 15 years.

1981: A New Era Begins with Maruti Udyog

In February 1981, an Indian government company known as the Maruti Udyog Limited (MUL) collaborated with Suzuki Motor Corporation to manufacture cars for middle-income families. This venture was formed under the leadership of then Prime Minister Indira Gandhi’s son, Sanjay Gandhi. 

Did you know?

• Sanjay Gandhi was known for his passion for cars. Upon his return to India, he recognised the potential to manufacture ‘people’s car.’ In 1970, the government issued a letter of intent allowing Sanjay Gandhi to produce up to 50,000 cars, every year.

• The MUL created history by rolling out its first vehicle in 13 months - the Maruti 800, every 80’s kid’s favourite in 1984.

Liberalization and Its Impact (1980s-1990s)

Things got better in the 1980s when the economic reforms opened the doors to foreign investment and new technologies. The real turning point was the 1991 liberalization, which allowed international carmakers to enter the market. This policy brought in modern manufacturing technologies and boosted the competitive spirit that increased quality and production. 

1985: Broad-banding Policy

In 1985, the government introduced a ‘broad-branding’ policy that gave licenses to auto manufacturers to produce a diverse product range, from commercial vehicles to passenger cars.

1991: Economic Liberalization

The liberalization policy opened the gates for foreign manufacturers to invest in India, allowing Suzuki and Toyota of Japan, and Hyundai from South Korea to manufacture light vehicles here. 

In this period, a variety of options opened up for the Indian consumer, whereas there was only one option available in each price class before. 

Did you know?

In this period, Maruti became the market leader by manufacturing 12000 vehicles.

1993: Delicensing Policy

Following the liberalization policy in 1993, the government initiated a delicensing policy. The introduction of this policy ended the Licence Raj (a period characterised by excessive rules and licences), setting up an entry of multinational players. This encouraged existing firms to form joint ventures with foreign firms. The auto industry collected 5.48% of the total FDI (foreign direct investment) in a decade.

Tata and Mercedes Benz again signed a joint venture to manufacture passenger cars in India and Mercedes Benz E220 hit the roads in 1995. However, Tata Motors sold off its entire stake in Mercedes Benz by 2000-2001.

Did you know?

• In 1991, Tata launched the Sierra which was India’s first home-manufactured SUV (sports utility vehicle).

Advances in Infrastructure and Policy (2000s)

2001: Lifting of Import Restrictions

In 2001, the Government of India lifted the quantitative restrictions on the import of vehicles, allowing companies to import and sell foreign-made vehicles in India. However, for a year, companies had to meet the export obligations but these were removed in 2002, easing the movement globally. 

Additionally, this liberalization was in line with India’s commitment to the World Trade Organisation (WTO) which required a country to reduce trade barriers and promote an open market environment.

2002: Mumbai-Pune Expressway

The Mumbai-Pune Expressway was a breakthrough in infrastructural development in India. Our country has always lagged when it comes to highways, roads, or connectivity. This eight-lane highway changed it all in 2002. It was the first closed-access highway on which we could drive safely, knowing that there was no village around or no, median gaps (for the bikers to dart in). 

Changing Engine Preferences and Environmental Policies (1990s-2020s)

Late 1990s to Early 2000s: CNG popularity

CNG cars gained their popularity in the late 1990s with a significant push from the government. Delhi was among the first to adopt CNG for public transportation to control air pollution.

Also read: Evolution Of CNG Technology And Cars Over The Years

Did you know?

• As per the government data, there were over 4,500 CNG pumps already into existence in July 2022. The Petroleum and Natural Gas Ministry has already announced its plans to have more than 8,000 refuelling units by 2024 which should lead to an uptick in the sales of CNG cars.

1999: Supreme Court Intervenes for Cleaner Vehicles

The Supreme Court of India issued an order in 1999 mandating the upgrade of emission control systems. This intervention forced manufacturers to adopt cleaner, more efficient technologies, marking a major shift towards automotive practices. This push led to the widespread adoption of fuel injection systems over the older carburetor technologies.

Did you know?

• The first emission reduction norm came into force in 1991 for petrol vehicles and in 1992 for diesel ones.

2010 to 2019: Introduction of Hybrid technology and CNG cars

In this time frame, electric vehicles were introduced in foreign markets. However, Hybrid technology also started coming into the picture. At the same time, there was a decline in diesel vehicle sales (due to increased emission norms which resulted in the high upfront cost of producing a diesel engine) from about half of the market share. Around the same time, several manufacturers started offering CNG variants alongside petrol and diesel alternatives.

Did you know?

• Tata Nano was introduced in 2008 as the world’s most affordable car.

2017: Global Crash Standards -

India implemented global crash test standards with the help of NCAP in 2017. This was essential in enhancing the vehicle’s safety and aligning them with international safety standards. This rule encouraged the manufacturers to incorporate advanced safety technologies such as airbags, and anti-lock braking systems.

Did you know?

• Maruti Alto, Tata Nano, Hyundai i10, Ford Figo, and Volkswagen Polo were among the first cars to be crash tested and all cars scored a 0-star safety rating.

2017: Exit of General Motors From India

In May 2017, GM announced that they would stop selling cars in India and Chevrolet would eventually phased out, citing a decision to focus on key markets globally.

2020: Adoption of BS-VI Emission Standards

The Indian Government continued its commitment to environmental sustainability and adopted the Bharat Stage VI (BS-VI) emission standards in 2020. These standards are comparable to the Euro VI norms. The BS-VI has reduced the permissible emission limits for pollutants like nitrogen oxides, sulphur, and particulate matter. 

2021: Exit of Ford From India

The Ford automaker announced its decision to quit local manufacturing in India in 2021. According to industry experts, the reason for this exit was the lack of market understanding. 

Did you know?

The brand claimed to have incurred a loss of $2 billion over the last 10 years.

2022: Exit of Datsun Go From India

Nissan decided to shut down the production of the Datsun brand owing to low sales in India.

Did you know?

Datsun only sold 4,296 units in 2021, which was just 0.09% of the total market share.

Modern Trends and Future Directions (2020s-Present)

Electrification: The Green Revolution

The 2020s have been a turning point in the automobile industry. The phase I of the FAME India scheme in 2015, encouraged to uptake electric and hybrid vehicles in India. In the phase II, the government has extended the scheme for five years starting from 2019, allocating Rs 10,000 crore to support EV adoption. Additionally, with the boom in EV production, the government is all set to increase the number of charging stations. 

Did you know?

• Nitin Gadkari, the Minister for Road Transport & Highways declared that by 2030, about 18000 km of new highways will be paved.

• India experienced a substantial rise in EV sales in 2023, with the total volume reaching 1.62 million units, up from 1.09 million units in 2022.

• The domestic electric vehicles (EV) market is expected to grow at a compound annual growth rate (CAGR) of 49% between 2022 and 2030 and is expected to hit one crore units annual sales by 2030.

• The number of public charging stations for EVs has increased by almost  640.61% in 2 years.

Way Forward 

Tesla: Tesla planned to come to India by 2025 with its 2 models- Cybertruck and Model 2. But due to Tesla’s failure to deliver the car for 2 consecutive quarters, it seems that the carmaker doesn’t want to move into India. 

BYD: With already 3 models of BYD running in India- Seal, Atto 3, and E6, the carmaker plans to cover 90% of the EV market in India by the end of this year as it has made its position in EV priced above 30 lakhs.

Citroën: the automaker provides 3 models in India: the newly launched Basalt (Aug 9’24), C3, and C3 aircross. However, Citroen India targets selling 1 lakh units annually for the next five years. 

Conclusion 

The evolution of India’s automobile industry has been a fascinating journey: from a tightly regulated market to now one of the biggest automobile markets in the world. The contribution of the automobile industry to the National GDP has risen to about 7.1% in 2023 from 2.77% in 1992-93. Looking at the growing trajectory, we are confident that there’s much more to come. 

What do you think? Let us know in the comments below!