An Analysis of the Relationship Between Production, Sales, and Export in the Indian Automobile Industry: Using Time Series

Abstract

This study examines how production, sales, and exports are related in the Indian auto industry using data from 1994 to 2023. The Augmented Dickey-Fuller (ADF) tests show that all the variables are not stationary at levels, but they do become stationary after the first difference. A Vector Auto Regression (VAR) model used to the differenced log-transformed data shows that variations in production considerably and positively affect exports at the 10% level, showing the importance of supply-side capacity in increasing international competitiveness. Sales, on the other hand, have no direct effect on exports, which highlights that domestic demand is not affected by external performance. These findings show that capacity of production, rather than sales expansion, is the primary factor influencing vehicle export trajectory of India, offering guidance for industry strategy and formulation of policy.