Asian Journal of Research in Business Economics and Management
  • Year: 2018
  • Volume: 8
  • Issue: 2

Total Factor Productivity in Passenger Vehicles in Automobile Sector: A Malmquist Index & Data Envelopment Analysis (DEA) Approach

1Associate Professor & Head, Department of Management Technology, RCOEM, Nagpur, India

2Assistant Professor, Department of Management Technology, RCOEM, Nagpur, India

Online published on 27 February, 2018.

Abstract

This study attempts to measure productivity change of passenger vehicles in the automobile sector for the period of five years. In this study the nature of efficiency and productivity change is probed through the Malmquist Productivity Index (MPI). The Malmquist productivity index has the constituents which are used in performance measurement; viz. change in scale efficiency, changes in technical efficiency, change in pure technical efficiency, change in technological change and total factor productivity.

The total factor productivity in the automobile sector depends on the improvement of technological change more than any other factor and this change in passenger vehicles can reach a high performance level and achieve competitive ability. All the automobile companies have recorded an improvement in technical efficiency affecting the total factor productivity. However Fiat India Automobiles Ltd recorded highest improvement in technical efficiency as well as total factor productivity improvement of 71% percent.

All the other companies have also shown improvement in the technical efficiency change as compared to the other factors of Malmquist Index. This indicates that during the period of study most companies managed to push their frontier possibility outwards by investing in the improvement of the technical efficiency and experience total productivity gain. The total factor productivity has recorded a 100% improvement in the wheeler automobile sector for the period from 2012–2016. The result implies that the companies have invested in technological innovation, so as to reduce their related costs of production.

Keywords

Passenger vehicles, Malmquist Index, Efficiency Change (EFFCH), Technical Efficiency Change (TECHCH), Scale Efficiency Change (SECH) Pure Technical Efficiency Change (PECH), and Total Factor Productivity Change (TFPCH)