Driving productivity: a comparison of the Indian automobile manufacturers and component suppliers

Abstract

ABSTRACT This study analyzes the factors influencing productivity within the Indian Automobile industry, specifically examining the component manufacturers and the original equipment manufacturers (OEMs). Utilising a dynamic panel data model, we assess the effects of lagged R&D stock, trade dynamics, and firm-specific factors on total factor productivity spanning the period 2000–2023. Our findings underscore the significant impact of a firm’s lagged R&D stock, lagged export intensity and the import of embodied and disembodied technology in the industry. While lagged export intensity plays a significant role in improving productivity, with a greater impact on the OEM segment, the influence of technology imports differs across both segments. Specifically, OEMs benefit more from the import of embodied technology or capital equipment, while the component segment from disembodied technology or royalty payments and licensing. We also find that electric vehicle penetration has a significant positive impact on the productivity of the OEM segment alone, indicating that the benefits of the new technology do not have a visible impact on the industry as a whole. These results highlight distinct patterns in technological learning between the two segments, unveiling structural variations within the industry.