Government controlled every aspect of decision-making including capacity, product specs, royalty payments and prices in the early years. Quality suffered and consumers had little choice.
14 Aug 2022 | 11881 Views | By Brian de Souza
In the beginning was the Licence Raj. When independent India adopted the Soviet-inspired model of socialism, it placed its bets on planning to allocate resources such as scarce foreign exchange. The government did not believe in being dependent on the outside world, and import substitution was encouraged. Business would have ...
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In the beginning was the Licence Raj. When independent India adopted the Soviet-inspired model of socialism, it placed its bets on planning to allocate resources such as scarce foreign exchange. The government did not believe in being dependent on the outside world, and import substitution was encouraged. Business would have to make products with basically no reference point to global standards or developments.
The government of the day was convinced that through central planning and control of resources, it would be able to lift millions of Indians out of dire poverty. However, it needs to be said that India’s first PM, Pandit Jawaharlal Nehru clearly articulated the need for industry when he said that factories were the temples of modern India. The automotive sector, perhaps, was not on his mind.
One image of the self-reliance that dominated the early years was that of the Bhakra Nangal dam. Understandably so, as India was an agricultural economy with millions dependent on it for their livelihoods. With India’s decision to clamp down on imports in order to save foreign exchange, the foreign auto sector brands had little choice but to exit.
Among those who left were a clutch of companies that included names like Ford, Skoda, Studebaker and Buick, to mention a few. Some of these names are familiar to us today, but in the early years of independence, these companies brought their completely built up (CBU) cars into India via the import route, and came via a docks near you. They were not manufactured here, there was no supplier community, and to afford a car, one had to be really very wealthy to buy one and sadly the banks or financial lenders did not offer schemes as we see today. One only has to see a black and white picture of Bombay’s Marine drive in the 1950s and 1960s to see how sparse the country’s vehicle population was.
While Nehru appealed to Indian business men’s entrepreneurial instincts, some of those who took up the gauntlet were pioneers in the automotive sector. The Birlas forayed into car making, rolling out the first domestically made cars, the Morris Oxford-based Ambassador. The model was manufactured in Kolkata in 1948 through a technical collaboration with Morris Motors, UK.
Over time, the Ambassador would become synonymous with government officials, and Indian politicians even as it also established a reputation of sorts as a durable but spacious as a taxi and capable of surviving on all kinds of road conditions. India’s other automotive pioneers were Seth Walchand Hirachand, whose quest to make cars actually began eight years before Independence when he visited the US to talk about a potential collaboration with the US big 3 carmakers.
But he did not meet with success, and so Hirachand set up Premier Automobiles in 1944 and signed up with Fiat in 1951 to assemble the Fiat Millicento in India. That association would continue for many decades. Pioneers’ grit There were other pioneers too, and they included two brothers, Kailash Chandra and Jagdish Chandra Mahindra who had cushy government jobs but responding to Nehru’s call, decided to tie-up with Ghulam Mohammed to assemble the American Willys Jeep in India.
Looking back on those year, Keshub Mahindra, a descendent of those pioneers, a former chairman of the Mahindra Group would later recall that the government wanted India to have its own auto industry, but was clueless about how to go about it. Also, the government had a say in every aspect of the manufacturing, it even determined the make and type of each vehicle, and these included three passenger cars, three medium trucks, one heavy truck and Jeep and light truck.
That explains why these early pioneers had to make everything on their own. HM's build quality for Ambassadors was often questioned and reliability was one of its weak points. Apart from the manufacturing, there were also controls on capacity and distribution, but price control was the key issue. Actually, the government determined the price and even dealer commissions. Exasperated, these carmakers even approached the Supreme Court and Car Price Commission was set up to work out a price increase formula. One outcome was that carmakers had very little encouragement for investments in R&D.
A bitter experience
For the three subsequent decades, car ownership was a bitter experience. Even a simple pre-delivery inspection could take as much as 10 days! By 1956, the industry was pretty much sealed off from new players, and the world itself, as assemblers like GM and Ford had decided to leave the country rather than manufacture here. Looking back, it can be said that it was to their credit that none of these early pioneers gave up their automotive or entrepreneurial ambitions. Also, two were located in Bombay, and one was in Calcutta so these were in a sense, the early automotive hubs, and as recently as the 1980s, their imprint could be seen in the Premier taxis in what was then Bombay, the Willy’s Jeep, and in the never-say-die Amby that ruled Calcutta’s potholed streets. From a government standpoint, the car was seen as elitist, and that a poor country could not waste scarce resources on these cars. From a macro-perspective, the transport policy favoured public transport and the railways.
All that would change in the 1980s with PM Indira Gandhi's government taking a stake of 74 percent in Maruti Udyog. There was no looking back after that.
Southern pioneers
It must be mentioned that not all cars before Maruti came on the scene were made from Uttarpara or Kurla. UK’s Standard Company inked a deal with the Indian government to set up a car making unit in the south and Standard Motor Products of India or STAMPRO was born. Through the 1950s, it assembled a trio of models including the Standard Vanguard, Standard 8, Standard 10 and Pennant.
In 1961, it launched the Triumph with a 946-cc engine plonked under its hood and called in the Herald. Like its counterparts in Mumbai and Calcutta, STAMPRO also tried to localise parts, and designed and launched the Gazel, a first for an Indian carmaker. The Rover-based Standard 2000 that was launched in 1985 was a generation ahead of other cars. Another company that tried its hand at cars was Bangalore-based Sunrise Automotive which tied up with a UK company Robin, a three-wheeler, fibre-glass bodied Badal.
The company also launched the Dolphin, an Indian version of a UK car and the Sipani Montana, a hastily put together product to take over the Maruti 800. With the 800, India’s car sector was headed for sea change with all other players gradually falling by the wayside. The company with the support of the Indian government was soon to herald a new benchmark chapter in India’s automotive history. In the trucks and buses sector, it was the Tata Engineering and Locomotive Company or Telco that was a byword for trucks even as its southern counterpart, Ashok Leyland, forged a tie-up the British Leyland group that made trucks and buses.
As in the case of cars, the government regulated product specs including engines and the tyre sizes. Given the scarce foreign exchange, import substitution was the mantra. The government also determined technical fees and royalties that had to be paid. The UK partner managed product development and technology even as it complied with the phased process of manufacturing. A fact that may not be known to many was that TVS & Sons ran a rural transport service in Madurai. That was even earlier in 1912, and the company tried to run its services in time.
Over time, the company tried its hand at cars and even acquired a GM dealership, and to appeal to the wealthy to buy cars as against using horse-driven carriages, a Chevrolet car, complete with chauffeur, would be sent to a zamindar's house, with a request that he use the car for a week. Finally, the family, impressed by the car’s comfort and status that the car gave them, would buy one. Another automotive pioneer in the south was Ashok Leyland that began its innings around the time HM was taking its first steps into car making.
ALL as we know it today began as Ashok Motors and was founded by a Indian freedom fighter from Punjab, Raghunandan Saran who set up a CV plant and named it after his son, Ashok. He was apparently persuaded by Nehru to invest in a modern industrial venture and incorporated the company to assemble and sell the Austin brand of cars from England. Headquartered in Chennai, and with a manufacturing plant at Ennore, where proximity to the sea meant risks of erosion, the company dealt with Austin A40 passenger cars in India. Over time, and with engineering support from British Leyland, the company made buses like the Leyland Tiger and Leyland Titan.
Coming back to Telco, it was established in 1945 and its legacy kicked off with 443 indigenously developed commercial vehicles (CVs) in 1954. This plant was also where TELCO developed armoured vehicles, CVs, steam road rollers, excavators, forklifts, and diesel shunters - all vehicles that “played a vital part in building our nation”, as the company’s website describes it. The company played a major role and was actively involved in nation building since its inception in 1945. In a sense, it was a kind of 'atmanirbharta' of those days.
Telco’s leveraged Mercedes to roll out the TMB 312 from Jamshedpur in 1954. It was around this time that the government of a young India announced a new industrial policy under which a limited number of licenses in each industry to manufacturers who would produce their products in India and achieve 90 percent Indian content within five years. Daimler-Benz of Germany inked a 15-year technical collaboration agreement with Tata, after obtaining a license to manufacture medium and heavy trucks. The initials TMB stood for Tata Mercedes Benz.
The person in charge of the project with Daimler Benz was Tata’s MD Sumant Moolgaokar who was solely responsible for building up the company’s technical skills. To its credit, Telco never scrimped on making the investments that were required to develop internal talent and skills, a legacy of its top brass. The German partner, which is somewhat in contrast with the car making pioneers, also gave all its support to Telco never compromising on what it was keen to give its Indian partner. In fact, the TMB 312 took eight long years to localise but all along, the company upgraded the truck and made sure it was robust enough to tough operating conditions.
The technical collaboration ended in 1969, but Benz continues to hold a 12-per cent equity stake in the Tata company. With the alliance, Telco decided to go it alone, selling all the trucks that it made were sold under the Tata brand name. Then with labour being a problem, it set up a plant at Pune spread over 1010 acres and to this day dominates that part of a sprawling Pune city. The site of the new factory, as Arun Maira of Arthur D Little, a consultancy puts it was a sun-baked, rocky plateau. The first building that was constructed contained the training centre. This was in keeping with Moolgaokar’s maxim of “Train your workers before you build your machines”.
Looking ahead in other ways, he directed that two lakes be excavated and the soil used to plant over 100,000 trees which in many ways pre-figured the corporate social responsibility (CSR) and environmental initiatives that the company is well regarded for today. Telco used Daimler 's engineering and it was only much later that the company would foray into making LCVs with the 407, a product that the company pioneered from the drawing board upwards and a testament to its expertise was that it was able to take on DCM Toyota’s LCV, Dyna. In the LCV space, the company has gone it alone in the field while other manufacturers had gone in for collaboration with Japanese firms like Isuzu, Toyota, Mitsubishi, Nissan and Mazda to make LCVs. The spiralling yen has added to the load on Japan's Indian collaborators. Other players were the Firodia-owned Bajaj Tempo.
Winds of change
The first signs that change was in the air came in the government’s Industrial Policy Statement of July 1980, which was based as the Industrial Policy Resolution of 1956, and spelt out a new set of socio-economic objectives. These included, among others, optimum utilisation of installed capacity, maximum production and achieving higher productivity, higher job generation, correction of regional imbalances, the promotion of export-oriented industries and consumer protection against high prices and bad quality.
In a decade from that year, India would open up to the world. In his budget speech to parliament on July 24, 1991, the then finance minister, Manmohan Singh said, “I do not minimise the difficulties that lie ahead on the long and arduous journey on which we have embarked. But as Victor Hugo once said, “no power on earth can stop an idea whose time has come”. I suggest to this august House that the emergence of India as a major economic power in the world happens to be one such idea. Let the whole world hear it loud and clear. India is now wide awake. We shall prevail. We shall overcome."
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