Automobile industry in India

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Motor Vehicle Production
1950-2013

India
World

Indian Auto Industry
Facts
• Second Largest two wheeler
manufacturer in the world
• Largest tractor and three
wheeler manufacturers in the
world
• Fourth largest Commercial
vehicle market in the world
• Eleventh largest passenger car
market in the world

Trends
• Growth of exports of 33.57 %
FY 2011-12.
• Output of commercial vehicles
has grown 2.8 times compared
to the 2.2 times increase in
passenger cars
• For every passenger car turned
out, there are almost 7 twowheelers produced

two wheeler market

9%
16%

car markwet

75%

other vehicles

Growth Potential
•Can become World’s third
largest automobile market in
2030.
•By 2016, Automotive sector can
DOUBLE its percentage
contribution to GDP from current
levels of 5% (US$50 billion) to
10% ($180 billion).

The Growth Journey
Pre 1983
Closed market
• Growth of market limited by
supply
• Outdated models
Players
• Hindustan Motors
• Premier
• Telco
• Ashok Leyland
• Mahindra & Mahindra

1983-1993

1993-2012

Japanisation - GOI- Suzuki joint
venture to form Maruti Udyog
• Joint ventures with companies in
commercial vehicles and
components
Players
• Maruti Udyog
• Hindustan Motors
• Premier
• Telco
• Ashok Leyland
• Mahindra & Mahindra

Delicensing of sector in 1993
• Global major OEMs start
assembly in India (Toyota, GM,
Ford, Honda, Hyundai)
• Imports allowed from April
2001; alignment of duty on
components and parts to ASEAN
levels
• Implementation of VAT

Era of globalization and
evolution of India as a
global
manufacturing hub

Automotive Companies in
India
Major Indian Companies
Major Multi-national companies

Booming Indian Economy

Key Growth Drivers

Auto Industry Numbers
Overall Market
• Over all Production increased to 14.82 million vehicles in 2010-11
from 11.17 million vehicles in 2009-10
• Passenger vehicles increased marginally from 1.95 million from
1.83 million
• Two-wheelers increased from 9.11 million to 9.51 million

• Domestic Market
•  Vehicles sold including PV,CV 2W and 3W in 2008-09 was 9.72
million as compared to 9.65 million in 2007-08.

• Exports
• Sales was 1.53 million units in 2008-09
• As per the Automotive Mission Plan (AMP) 2006-2016 total turnover
of the automotive industry in India would be in the order of US$
122 billion-159 billion in 2016

Category wise numbers
Dominated by Motorcycles 80% , Scooters 14% Mopeds 6%
Domestic - 7.25mn units . Hero mocorp.35% & Bajaj 32%

Two Wheeler

share

CAGR – 9.5%

Exports 819000 units (07-08) . Bajaj Auto 59% TVS 17%
share
CAGR – 41%
Dominated by Cars 78% , MUV/SUV 22%

Passenger Vehicles

Domestic – 1.5mn units Maruti-46% Tata-15%

Hyundai 14%

CAGR -14.8%
Exports - 217000 units (07-08) Maruti 66% Hyundai 24%
CAGR
– 26% – Goods 48% Passenger 38% , Rest by
Dominated
by M&HCV

Commercial Vehicles

LCV -14%
Domestic – 487 thousand units , Tata-62% Ashok Leyland -15%
CAGR- 22%
Exports – 59
units,
Tatawith
67%64%
Ashok
Leyland
12%
Dominated
bythousand
Passenger
Carriers
share
, Goods

Three Wheeler

CAGR -30.6%
Carrier -36%
Domestic – 365 thousand units , Bajaj -42% Piaggio-41%
CAGR- 10.5%
Export – 141 thousand units , Bajaj -97%

Production data

The Indian Auto Components Market
• Original Equipment Manufacturers (OEMs)
• Replacement Parts Production and Distribution : e.g. Air
filters, oil filers and replacement lights
• Rubber Fabrication : tyres, hoses, belts etc.
• Estimated component market size is US$ 8.7 bn
• The exports of auto components industry has grown at a rate
of nearly 30 per cent CAGR over the last four years.

Second Hand Automobile Market
• Used car market demand : 1.4 million cars annually
• Market Structure :
• Organized : 10%
• Unorganized : 90%
• Vendor Based – 30%
• Direct Dealings – 70%
• Certified used car dealers in India are – Maruti TrueValue, Honda Auto Terrace, Ford Assured, Toyota U
Trust, Hyundai Advantage, Mahindra and Mahindra’s First Choice, General Motors - Chevrolet-OK
• Unorganized market lacks services like -warranties, OEM equipments, insurance and taxes
• Second hand market expected to grow at 12-15 per cent in the next five years to touch a robust 2.5 million
units and a turnover of Rs 50 thousand crore
• Estimations are that 50 percent of the used cars sales will be brought under organized car market by 2013

Economic Factors
1
1 year
year
•Increased
access to credit
and
lower
interest loans

1-5 year

5-10 years

•Investment
in
Infrastructure
spending
can
boost
the
commercial
vehicles
segment.

•Growing
working
population (441
million people in
2015/16)
•Upward migration of
household income levels
(600 million people have
annual income of more
than $10,200)
•Middle class expanding
by 30 - 40 million every
year

Can propel growth

Economic Factors
11 year
year
•Impact of delayed
monsoon (85% of
normal, subsequent
impact
on
paddy
cultivation) on rural
demand.

1-5 year
•Non-availability
of
Key raw material
(like Steel) at cheap
price.
•Possible increase of
interest rates (by 22.5% BPLR) because
of
planned
government
borrowing.

5-10 years
•Non- availability of
supplier base with
demanded capability
(Quality
and
Quantity).
•Poor execution of
Infrastructure
investments.
(Construction
of
Highways of 16km
per day against the
target of 32 km per
day)
•Increase in crude oil
price($ 35/barrel to $
70/
barrel
in
14
months).

Can Stunt Growth

Social Factors
• Rapid Urbanization of semi urban regions
• Rising aspirational levels. Improvement in living
standards of middle class
• Increased spending on Fashion & lifestyle
comforts.
• Seeking “Value for money”- consumer behavior


Increasing customer emphasis on aesthetics and
comfort.

• A perfect marriage of rise in disposable
income and demographic dividend
(From US$ 556 per annum US$ 1150 by
2015)

Technological Factors
Frugal Engineering is the way forward
‘Upgradeable’ green cars : Plug and play style engines to replace old ones: the Tata
Nano model
Downsize the cars without losing out on interior space. Lower cost, low fuel
consumption , less material usage and less pollution

Grants and Incentives for R&D work
100% grant for fundamental research, 75% for pre-competitive technology, 50%for
product development
Extension of 150% weighted deduction on R&D expenditure

Developing India as a Testing hub: National Automotive Testing and R&D
Infrastructure Project
Investment of INR 17.18 Billion (about USD 380 million) in setting up, inter alia, independent
automotive testing centers within the three automotive hubs in the country
Setting up of comprehensive Testing and Validation facilities including Field Tracks for Agricultural
Tractors, Trailers, Construction Equipments and various other off-road vehicles at Rae Bareilly in
Northern India

Collaborations and Foreign Tie ups for research and technology transfer
Developing engines for bio-fuels, electric or hybrid vehicles

RATIO ANALYSIS

Net sales

Bajaj Auto

Key Financial Ratios of Bajaj Auto

Key Financial Ratios of
Tata Motors

FUTURE GROWTH
According to the Society of
Indian Automobile
Manufacturers,

•Annual vehicle sales are
projected to increase to 5
million by 2015
•more than 9 million by
2020.
•By 2050, India is
expected to top the world
in car volumes with
approximately 611 million

Break through future trends
•India will be a Automotive hub, led by small cars and auto component
domains
•Export of automotive components to ASEAN,BRIC,EU and USA for OEMs as
well as Aftermarket
•Booming Automobiles (Particularly cars) second sales and remodeling
•Increased deployment of IT-enabled Automobile support systems like
.GPS,ABS,ASR and Safety systems
•Quality Certification (Deming, Six Sigma,TQM,TS16949) amongst suppliers
have attained critical mass and the entire market will follow to get quality
certifications.
•Will be a hub for optimal cost, high quality vehicular testing and terrain
data acquisition services
•Alternate fuel (Bio fuel, electricity) and environment friendly green
engines (Bharat emission norms)

References
• www.acmainfo.com
• www.wikipedia.org
• www.siamindia.com
• www.ibef.org
• Ernst & Young Auto Track
• www.economywatch.com
• www.business-standard.com
• The Economic Times
• Hindu Business Line
• www.automobileindia.com
• automobiles.mapsofindia.com

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