Emerging challenges in the Indian automotive industry in the domain of supply chain management on account of shorter product life cycles leading to increasing product proliferation

Abstract

Ever since Henry Ford made his famous offer of “any color as long as it’s black,” type of product variety to offer the consumer has been a cornerstone of most automobile manufacturers’ strategies. The automobile industry has since incorporated product variety into Ford's mass-production approach. Today buyers of mainstream vehicles choose from a wide range of models, body styles, engines, colors, trims, and options. From a marketing perspective, firms offer product variety on the premise that the attributes of goods determine their value and that variety is a key driver of utility. The primary argument here being that there is a deterministic utility to the customer in being able to choose what attributes he/she wants. For forty years since India's independence from the British in 1947, the Indian car market was dominated by two localized versions of ancient European designs -- the Morris Oxford, known as the Ambassador, and a model of Fiat. This lack of product activity in the Indian market was mainly due to the Indian government's complex regulatory system that effectively banned foreign-owned operations. Within this system, any Indian firm that wanted to import technology or products needed a license/permit from the government. The difficulty of getting these licenses stifled automobile and component imports, creating a low volume high cost car industry that was inefficient, unprofitable, and technologically obsolete. The two dominant products Ambassador and Fiat, although customized to the poor road conditions in India, were based on a stale design concept, with outdated features, and were also fuel inefficient. In the early 1980's, the Indian government made limited attempts at reforming the automotive industry, and entered into a joint venture with Suzuki of Japan. The joint-venture, called Maruti Udyog Limited, launched a small but fuel efficient model, the "Maruti 100". The product became an instant hit. Despite being a late entrant, Maruti's vehicles are estimated to account for as much as 70 per cent of India's car population.