Page 15 - Cost

performance and continued sustainability. India is the world's largest manufacturer
of two wheelers, ffh largest manufacturer
Michael Porter has said that wealth is actually of commercial vehicles as well as largest
created in the microeconomic level of the manufacturer of tractors. It is the fourth largest
economy, not by macroeconomic policies passenger car market in Asia as well as a home
– the latter only “aid” in wealth creation. to the largest motor cycle manufacturer. Te
Wealth therefore can only be created by frms. sector has shown great advances in terms of
Te capacity for wealth creation is rooted in development, spread, absorption of newer
the sophistication of the operating practices technologies and fexibility in the wake of
and strategies of companies. Attaining cost changing business scenario.
competitiveness as one of the strategies
increases the capacity to create wealth. Te Te Indian automotive industry has made
core idea is to induce cost competiveness rapid strides since de-licensing and opening up
as a strategy and not as a tactical plan. Tis of the sector in 1991. It has witnessed the entry
is especially true for companies that are in of several new manufacturers with the state-of-
cyclical businesses. Also economic meltdowns art technology, thus replacing the monopoly
are becoming harsher than ever. Sometimes of few manufacturers. At present, there are
surviving the downturn may be the most more than 16 manufacturers of passenger
important thing for a company to do. Cost cars and multi-utility vehicles and more than
competitiveness can go a long run in protecting 9 manufacturers of commercial vehicles. Te
the company’s future. More agile and nimble norms for foreign investment and import of
the company, more are the chances that it technology have also been liberalized over the
would take in the pain and be ready for the years for manufacture of vehicles. At present,
market to revive. 100% foreign direct investment (FDI) is
permissible under the automatic route in this
sector, including passenger car segment.
Q. Do you think that current strengths of
Indian Auto companies are sufcient to cope One signifcant conclusion that we can come
with the presence of global companies or need to is that global competition is here to stay.
a change? Terefore, all Indian auto companies need
to stay competitive to remain relevant in the
current times. Tey may not have access to
A.In the recent past, India has seen many higher technologies and intellectual properties
major auto players foraying in the domestic that their foreign peers may possess but they
market. would do well to keep utilizing their knowledge
India’s automotive industry is the key driver of the current market and their customers.
of our growing economy. It plays a pivotal role
in country's rapid economic and industrial In our opinion, current strengths of Indian
development. Te automotive industry Auto companies are sufcient to cope with
comprises of the automobile and the auto the presence of global companies. With the
component sectors. It includes passenger cars; granular knowledge of the Indian market, years
light, medium and heavy commercial vehicles; of presence and strong connect with the users,
multi-utility vehicles such as jeeps, scooters, Indian companies have built a relationship
motor-cycles, three wheelers, tractors, etc. with the consumers. But this should not
result in a lackadaisical approach towards
In India, automotive is one of the largest continuing to strive hard and innovate. Cost
industries showing impressive growth over competitiveness would remain at the heart of
the years and has been signifcantly making this. Understanding consumer and providing
increasing contribution to overall industrial not just good products but also great services
development in the country. Presently, along with it should ensure that the Indian

15 www.icmai.in The Institute of Cost Accountants of India