siam delhi 1st sept 04

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Automobile Industry : Advantage India

Indian automobile industry – An agenda for global leadership

Speech by

Mukesh D. Ambani

Chairman and Managing DirectorReliance Industries Limited

SIAM Society of Indian Automobile Manufacturers



Dr. Montek Singh Ahluwalia,

Shri Jagdish Khattar,

Shri Madhur Bajaj,

Ladies and Gentlemen,

It is indeed a pleasure and a privilege to be here this morning.

For me, this is a rare occasion.

Because I am in the midst of an august assembly of automobile industry

associates.

When Shri Jagdish Khattar so graciously invited me for this event, I

wondered: why me? A rank outside the automobile industry!

But, then I realised the significance of his gesture.

He wanted to convey the inter-connectivity of all segments of Indian

industry.

This growing linkage is central to the “Advantage India” vision.

And, the Automobile industry is its crucial component.

Thank you Shri Khattar for the opportunity and for the honour.

I propose to share with you my perspective on this linkage and its profound

importance for our country.

My perspective flows from a simple conviction.

That the future of Indian industry is intertwined with the future of the Indian

people.

And, I am not talking of a very distant future.

This is because we are in the midst of a revolution of rising expectations.

The state-controlled economy failed to meet the aspirations of our

people.

Therefore, they supported the shift to a market-driven economy.



Both in theory and practice, market-driven economies have led to greater

generation of wealth.

They also encourage greater competition, improvement in quality and more

consumer satisfaction.

However, on one crucial issue, market economy has yet to win people’s

confidence. This is the issue of equitable distribution of wealth.

Disparity in the midst of prosperity makes people angry and impatient.

They begin to express their concerns and doubts in various ways.

Including through the ballot box.

Industry and policy makers must take note of this.

They must convince the people that market does not ignore the issue of

equity.

Creation of wealth in free markets must lead to equitable growth and social

justice.

This is a huge challenge.

The man who has the responsibility to guide the nation’s development in

meeting this challenge is with us today.

I am really very pleased that Dr. Montek Singh Ahluwalia is the Chief Guest

for today’s function.

Sir, your contribution in transforming the economic landscape of India has

been remarkable.

You have been an ardent advocate of economic reforms.

India looks up to you to create a new trajectory for rapid growth and

equitable development.

Under your leadership, Indian planning process can create a new

developmental paradigm.

It can integrate our battle against poverty with rapid industrial and

technological development in a globalised world.



And this will pave the way for global leadership for India.


In its thirty-nine year history, the Society of Indian AutomobileManufacturers has had a galaxy of illustrious leaders.

Today it is fortunate to have Shri Khattar at the helm of affairs.

All of us in industry salute his achievements and contributions in

transforming Maruti.

Under his leadership, Maruti Udyog has become synonymous with India’s

global aspirations in automobiles.

SIAM is rightfully pursuing some very important issues, critical for the

future of Indian economy.

These issues provide a s t imulat ing backdrop to this Annual

Convention.

SIAM’s theme for this convention is quite appropriate: “Automobileindustry: Advantage India”.

This theme demands the most creative response from the industry.

Dear friends,

Fortunately, the automobile industry is a telling example of the dramatic

impact of economic reforms on our industrial scene.

During my youth, automobiles came largely in twos.

In scooters, you had a Lambretta or a Vespa.

In motorcycles, you had a Bullet or a Java.

In cars, you had to choose between an Ambassador and a Fiat.

In trucks, it was either an Ashok Leyland or a Tata.

In tractors, it was between a Swaraj and a Mahindra.

I was wondering, why?



It then dawned on me that those were the days of the slogan Hum Do,

Hamare Do.

Probably, the family planning slogan had infected the automobile industry

more than others.

However, on a serious note, this situation reflected the India of yester years.

Economic reforms and deregulation have transformed that scene.

Automobile industry has scripted a new inspirational story.

It is a story of exciting diversity, phenomenal growth and delightful

consumer experience – all within a few years.

India has already become one of the fastest growing automobile markets

in the world.

This is a tribute to leaders and managers in the industry and, equally to

policy planners.

The automobile industry has the opportunity to go beyond this impressiveachievement.

It is standing on the doorsteps of a quantum leap.

This will be triggered by the India advantage in the 21 st century.

The India Advantage

Friends,

India has put behind the era of missed opportunities that marked our

performance in the industrial age.

Economic reforms, initiated by Dr. Manmohan Singh, have changed India

in many ways.

By creating an environment of minimum regulations in several sectors,reforms have motivated the productive sector break new grounds.

It has empowered the consumer in a competitive domestic market.

Capital has now become more mobile and relatively less expensive.



Entrepreneurial opportunities now go beyond a privileged few.

Economic reforms have also created a vibrant services sector and higher

incomes for people employed in this sector.

The world has come to recognise India for its competitive advantages –

in people power, intellect and emerging technology prowess.

These developments are creating unprecedented opportunities for India in

the knowledge age.

We can leverage these advantages to create a new growth trajectory.

In the process, we can bring prosperity to over a billion people in India.

In fact, we can impact beyond our frontiers.

And when we do so, India will truly emerge a global power.


Let me place the “Advantage India” vision in a broader context.

The global economy is highly skewed.

Four billion people, for all practical processes, are beyond the call of the

development processes.

Global economic output is estimated to be over 30 trillion US dollars.

About 80-85% of it benefits only one billion people in the developed

world.

The balance five billion, including one billion in India, have to do with just

15-20%.

This inequality is at the root of several problems facing our world today.

There is no way that islands of prosperity can flourish in an ocean of

poverty.

To meet the challenge of spiraling aspirations, products and services must

be made available to all at competitive and affordable prices.

India can make a very significant contribution in this regard.



In the process, India can grow from a 500 billion US dollar economy to

a 2 trillion US dollar economy in ten years.

And the automobile industry can play a major role in this resurgence.

It can leverage the India advantage – in talent, market, services and higher

purchasing power.

The Automobile Opportunity


The automobile industry has an enormous opportunity for creating newwealth by delivering value to the world and by delivering value to the

domestic user.

The automobile industry also has the opportunity to contribute in equitable

distribution of the wealth so created.

This, the industry can do by developing a new paradigm in employment.

I emphasise this point because India cannot become a major economicpower unless it wins the employment challenge.

Today the Indian automobile industry employs half a million people in the

organised sector and about ten million people in the unorganised sector.

To my mind, the potential is several times this number.

To realise that potential, we have to seize the opportunities – both at home

and worldwide.

And these opportunities are looming large on the horizon.

Globalisation and the convergence of information and communications are

leading to unbundling of design, engineering, component manufacture and

assembly operations.

India can take advantage of this global unbundling trend.

The Indian automobile component industry is emerging as a world-class

outsourcing destination for global auto majors.

Outsourcing is now extending to demanding components like the gearbox.



India is also becoming a destination for automobile research and

development.

The Indian automobile industry is fully equipped to deliver compelling value

to the world in design, engineering and component manufacture.

The opportunity for India is to plug into all aspects of the global value

chain.

It has also the opportunity and the potential to dramatically increase its

share of global automobile market.

There are about 700 million vehicles on the road in the world.

It is estimated that this vehicle population would grow to about 1.3 billion

in the year 2030.

Most of this increase of 600 million will come from developing countries.

These markets will look for low-cost automobiles.

India has the opportunity to meet this need.

And, in the process create a huge export market.

Companies like Maruti Udyog and Mahindra and Mahindra have

demonstrated their ability to address this opportunity.

They have proven India’s enormous capabilities in this sector.

Maruti Udyog has revolutionalised the passenger car segment.

And Mahindra and Mahindra has transformed the rural vehicle segment.

It has also demonstrated that a world-class utility vehicle can be designed,

built and sold for just a few thousand dollars.

India can also bridge the growing global divide in personal transportation.

And, in this process, it would create the basis for a new wealth creation

opportunity.

India is among few countries that are showing a growth rate of 30% in

demand for passenger cars.



Rural markets are on the verge of opening up.

India’s private vehicle ownership is just 6 per 1000 as against 463 per 1000

in USA.

The home market for the automobile industry is also growing.

This will sustain India’s competitiveness in serving other developing

markets.

Growth in per capita will power the growth of motor vehicle sales.

So would the increasing level of urbanisation.

In the four metro cities, personalised vehicles already form nearly 83 per

cent of all vehicles on the roads.

By 2020 more than half of India’s population is expected to live in urban

areas.

All this will bring about a dramatic growth in demand.

Challenges


My father Shri Dhirubhai Ambani was obsessed with a dream:

That India should become one of the major economic powers in the world.

I believe we can translate this dream into reality within our lifetime.

The automobile industry can play a major role in enabling India to attain

global leadership.

It is the largest industry in the world with revenues of about 1.8 trillion

US dollars.

Some call it the ‘industry of industries’.

The industry is rightfully engaged in building new plants, increasing

production from existing plants, bringing out new models, exporting more

and captivating users in innovative ways.

To my mind, time has come that it embraces a larger perspective.



This is critical for global leadership.

Of course, there are several challenges in pursuit of this lofty goal.

These include: road infrastructure, transportation fuels, technologyinfrastructure and societal concerns.

Road Infrastructure

The road system in India is not conducive to the growth of the automobile

industry.

2.2 million kilometres of road network, the second largest in the world,

is undergoing rapid deterioration.

This state of disrepair must be a cause of despair.

Concerted efforts are required to address this situation.

In the United States, 85 percent of revenue earned by government on road

transportation is spent on road development.

While we have made a beginning in modernising our road system, we need

to determine to make our road system a national pride.

How do we bring a world-class road system in India? This is the first

challenge.

Transportation Fuels

Transportation fuels is the second challenge.

As automobile population grows, transformation in the transportation fuel

mix is inevitable.

At present, India is blessed with huge quantities of natural gas.

In the medium term, there will be a greater role for indigenous gas.

Already there are very strong arguments in favour of gas from an

environmental perspective.

However, over the long term, renewable automobile fuels will enter the

scene.



Over the very long term, a hydrogen based fuel infrastructure may

emerge.

These profound changes will have far reaching impact.

For the automobile industry, this means future proofing engine design and

vehicle performance.

For the transportation fuel industry, it means creating the right quality

product and the supply chain infrastructure.

Talking of fuels, there is a major issue that must concern the automobile

industry.

Is it fair to charge a 20 rupees per litre more for petrol as compared to

diesel, when in reality the prices must be more or less the same?

Is it not our duty to address the interest of consumers?

We need to discuss this issue seriously.

And find a solution in a spirit of partnership among government, automobile

industry and the transportation fuels industry for the benefit of ultimate

consumer.

Technology Infrastructure

Technology infrastructure is the third challenge.

Automobiles are going from analog to digital, from mechanical to electrical

and from isolated to connected.

The convergence of information technology and communications and the

emergence of micro-electro-mechanical systems are causing this

revolution.

The Indian automobile industry can harness India’s unprecedented strides

in information technology and communications.

These can be used to develop solutions for networked personal

transportation for the whole world.

Not many are aware that India today has an overarching Radio Frequency

(RF) and fibre infrastructure.



This has been caused by the next generation communications infrastructure

brought about by deregulation in the Telecom sector.

We at Reliance are also creating a massive nationwide petroleum-retailing

network. The automobile industry can leverage this RF and fibreinfrastructure to electronically recognise every vehicle that drives into an

outlet and deliver superior customer service.

This will necessitate a partnership with the automobile industry to create

RF enabled vehicles.

Re-engineering


The automobile industry has continuously innovated in the production

function to embrace automation, robotics and new management

techniques.

Today, the automobile industry is at the doorsteps of yet another phase

of re-engineering.

It can seamlessly integrate several small units in engineering, automotive

components and consumer electronics.

It can thus unbundle the production value chain and achieve higher

productivity.

And deliver greater value to consumers.

To my mind, India is ideally suited to make this happen with its numerous

small-scale units and a vibrant information technology industry.

Societal Partnerships

Societal partnerships is the fifth challenge.

As automobile population grows, common people become worried about

increasing road congestion, and rise in accidents.

Anxiety also grows about increased energy consumption. Over 45% of

total consumption of oil is currently accounted for by the transportation

segment.



There are concerns that greater use of automobiles will lead to higher levels

of pollution, congestion, noise and high costs of health care.

There are views that auto users are not paying the real cost of fuel that

includes costs of externalities.

There are others who opine that growth of the automobile industry would

destroy public transportation systems.

This, they argue, would affect poorer sections of the population who need

quality, high-speed, public transportation at affordable costs.

And finally, there are some who compare the automobile industry with the

tobacco industry and want warnings that say ‘driving kills’.

The automobile industry must factor these concerns and fashion a strategy

of comprehensive social partnership.

Instead of blaming one another, there is a need for partnership with

government, the transportation fuel industry, providers of other modes of

transportation, society leaders and environmentalists.

The automobile industry must position itself as an enhancer of economic

growth and development, and not merely an enabler of mobility.

Reliance Partnership


I will like to assure you that Reliance will be happy to be part of sucha partnership.

There are several opportunities for the automobile industry and Reliance

to work together to mutual benefit.

Convergence of information technology and communications is one

opportunity. This can be used to bringing solutions in networked mobility.

We can work together to utilise the RF infrastructure to develop and deliver

several value added services for the automobile user.

These would range from information services for those on the move to

intelligent driving systems.



This can be done in two to three years if we work in a coordinated way.

Building on this convergence platform, we can seek opportunities in the

external world.

We can also work together to bring about new and alternative transportation

fuels.

Together, we can create a basis for becoming a service leader in the world.

I am sure, over the coming years, these opportunities that look futuristic

today will become a reality.

Conclusion


Not long ago, for many people, automobiles were means to independence

and mobility.

Automobiles soon moved from means of mobility to objects of desire.

It then became statements of social status.

Today, automobiles are creating technology-led experiences.

But, for vast sections of the global population owning an automobile is

still a desire and a dream.

The Indian automobile industry has an opportunity to reach out to both

kinds of users.

India has the opportunity to develop and deliver solutions based on

integrating information, communication and interface technologies.

India also has the opportunity to make quality automobiles in an affordable

manner.

India has the opportunity to bridge the personal transportation dividebetween the rich and the poor nations.

Today India produces one out of 60 automobiles made in the world.

We must aim at producing one out of every ten automobiles made in the world.



I believe this is possible.

Friends,

My father gave to Reliance a secret formula to overcome all challengesand obstacles:

“Make sure that what is in the interest of India is in the interest of Reliance”,

he would say.

I believe that the automobile industry can show that India and Indian industry

can be in alignment.

That India’s concerns are its concerns.

That employment and environment are as important to it as exports and

markets.


Industrial age was the age of acquisition and exploitation.

Knowledge age is an era of sharing and caring.

It is an era of cooperative prosperity.

This is achievable by partnership and networking.

The Indian automobile industry has a historic opportunity to prove this

in practice.

And, thereby, win global leadership for itself and for India.

I am sure it will seize this opportunity with conviction and confidence.

I wish the Indian automobile industry a very successful future.

Thank you.



September 1, 2004 – New Delhi

Automobile Industry : Advantage India

Indian automobile industry – An agenda for global leadership

SIAM Society of Indian Automobile Manufacturers

siam delhi 1st sept 04

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