How reforms altered the automobile landscape

This week marks 25 years of economic reforms in India which have played a big role in reshaping the automotive landscape.

Prior to this, there were just three big carmakers: Hindustan Motors (HM), Premier Auto (PAL) and the relatively new Maruti Udyog which was barely eight years old then. The gates were now going to be thrown open to multinationals which meant customers could access big global brands.

The earlier entrants were Peugeot, Daewoo and General Motors while Fiat decided to produce the Uno in a technical alliance with Premier. Peugeot also tied up with PAL to make its 309 at a facility near Mumbai. GM opted for HM as its ally to roll out the Opel Astra from Gujarat while Daewoo and DCM joined hands to make the Cielo.

These were exciting times and a host of Indian companies made known that they were as keen on participating in this great auto parade in joint ventures with MNCs. These also included two-wheeler companies like Bajaj Auto which were keen to spread their wings. Mahindra & Mahindra was tipped to bring in the Cherokee with Chrysler as ally but opted for Ford instead. HM, which already had GM as partner, now went one step further and teamed up with Mitsubishi too for a project near Chennai.

The list was growing by the day. After Daewoo, it was the turn of another Korean brand, Hyundai, which chose to set up a wholly-owned subsidiary and produce cars at a sprawling facility near Chennai. Tata Motors (known as Telco then) and Daimler got together while the Japanese duo of Toyota and Honda joined hands with the Kirloskars and Siddharth Shriram group respectively. In the midst of this MNC onslaught, Ratan Tata made known that his company was working on its own India-made car which would offer the optimal mix of space and comfort. It was a strong statement intended to prove that Tata Motors was now going beyond its traditional image of making trucks.

Less than perfect

Even as the automotive arena was gradually changing, not everything was hunky dory. Peugeot was up against a labour strife at its plant and also staring a shortage of completely knocked down kits to make its 309. In addition, there were problems with its Indian partner which finally ended up in a legal dispute.

In November 1997, came the news that Peugeot had decided to shut down its India operations just when it seemed that the worst was over. By this time, Fiat had changed its mind about putting up an all-new plant in Pune and bought out PAL’s auto operations in Mumbai. The idea was to ensure that the Uno, which had had a spectacular response in bookings, was given top priority.

It was also during this time that Maruti Udyog was in the midst of a tug-of-war involving its partners, Suzuki and the Government of India. After 15 years, this successful joint venture was threatening to fall apart.

The 1998 Auto Expo showed how the automotive landscape was changing. Hyundai had on display its Santro to take on Maruti’s monopoly in compact cars while Daewoo showcased its Matiz. The star of the show was, however, the Tata Indica which effectively proved that India was second to none in making cars.

While it may sound clichéd, the wheels have moved on since then. The Centre got out of Maruti and Suzuki took charge of the company which was firing on all cylinders again. The Santro hit the bull’s-eye and Hyundai grew over the years to emerge Maruti’s most serious rival.

Daewoo went the Peugeot way and closed its Surajpur operations thanks to its parent company’s financial woes back home in Korea. GM then acquired the company which became its growth engine for other markets. The American automaker is, however, still struggling in India despite its best efforts at revival which included a foray with SAIC Motor Corp of China.

Perhaps, the biggest disappointment was the Tata Indica which ended up doing well in the taxi segment. Ratan Tata got the attention of the world some years later with the Nano which again was the star of the 2008 Auto Expo but lost its way in the market.

Hindustan Motors decided to close down its Ambassador assembly line in West Bengal. It marked the end of an era for the iconic brand which just could not take on competitive pressure. Likewise, Premier exited the automobile space and the last few hundred Padmini taxis will soon make their way out of Mumbai.

While Tata was not too fortunate with the Indica and Nano, M&M got everything right with its Scorpio that debuted in 2001. The company decided that SUVs would be its core business once it exited the Ford alliance and has been doing well since then. M&M has also forayed into two-wheelers, trucks pickups and electric cars as part of its endeavour to offer a slew of mobility options. It also acquired SsangYong Motors of South Korea and attempted a comeback in cars with Renault which did not work out.

Over the last 25 years since reforms kicked off, compact cars still rule in India even while customers are willing to go the extra mile for features. Luxury options like Mercedes, Audi and BMW also have a growing list of buyers. Ford, Toyota, Honda and Volkswagen have not made it to the big league while Maruti and Hyundai are comfortably ahead. GM and Fiat are putting their houses in order while a slew of Chinese automakers are poised to enter the Indian market. The next five years promise to be as exciting and tumultuous.

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