Automobile Sector in India

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Automobile Sector in India
Production
The cumulative production data for April-March 2012 shows production growth of 13.83 percent over same period last year. In March
2012 as compared to March 2011, production grew at a single digit rate of 6.83 percent. In 2011-12, the industry produced 20,366,432
vehicles of which share of two wheelers, passenger vehicles, three wheelers and commercial vehicles were 76 percent, 15 percent, 4
percent and 4 percent respectively.
Domestic Sales
The growth rate for overall domestic sales for 2011-12 was 12.24 percent amounting to 17,376,624 vehicles. In the month of only
March 2012, domestic sales grew at a rate of 10.11 percent as compared to March 2011.
Passenger Vehicles segment grew at 4.66 percent during April-March 2012 over same period last year. Passenger Cars grew by 2.19
percent, Utility Vehicles grew by 16.47 percent and Vans by 10.01 percent during this period. In March 2012, domestic sales of
Passenger Cars grew by 19.66 percent over the same month last year. Also, sales growth of total passenger vehicle in the month of
March 2012 was at 20.59 percent (as compared to March 2011). For the first time in history car sales crossed two million in a financial
year.
The overall Commercial Vehicles segment registered growth of 18.20 percent during April-March 2012 as compared to the same period
last year. While Medium & Heavy Commercial Vehicles (M&HCVs) registered a growth of 7.94 percent, Light Commercial Vehicles grew
at 27.36 percent. In only March 2012, commercial vehicle sales registered a growth of 14.82 percent over March 2011.
Three Wheelers sales recorded a decline of (-) 2.43 percent in April-March 2012 over same period last year. While Goods Carriers grew
by 6.31 percent during April-March 2012, Passenger Carriers registered decline by (-) 4.50 percent. In March 2012, total Three
Wheelers sales declined by (-) 9.11 percent over March 2011.
Total Two Wheelers sales registered a growth of 14.16 percent during April-March 2012. Mopeds, Motorcycles and Scooters grew by
11.39 percent, 12.01 percent and 24.55 percent respectively. If we compare sales figures of March 2012 to March 2011, the growth for
two wheelers was 8.27 percent.
Exports
During April-March 2012, the industry exported 2,910,055 automobiles registering a growth of 25.44 percent. Passenger Vehicles
registered growth at 14.18 percent in this period. Commercial Vehicles, Three Wheelers and Two Wheelers segments recorded growth
of 25.15 percent, 34.41 percent and 27.13 percent respectively during April-March 2012. For the first time in history car exports crossed
half a million in a financial year.
In March 2012 compared to March 2011, overall automobile exports registered a growth of 17.81 percent.
Domestic Market Share for 2011-12
Passenger Vehicles 15.07

Commercial Vehicles 4.66

Three Wheelers 2.95

Two Wheelers 77.32




Revised -F13 Forecast
Segment F13 Growth
(Oct 12 Est.)
Cars 1- 3%
UVs 50 – 52%
Vans 2 – 4%
PV Total 8 – 10%
LCV Goods 14 – 16%
MHCV Goods (11) – (13)%
Passenger Buses 5 – 7%
Total CV 3 – 5%
2W 5 – 7%
3W Goods (7) – (9)%
3W Passenger 1 – 3%
3W Total 0 – 2%
Auto Total 5 – 7%


Strengths


Automobile industry is an established and an evergreen industry.

India is the strongest player in the small car segment of the globalautomobile market

Indian companies are the best cost innovators

The automotive industry has long been known for its development andpromulgation of the
assembly-line
.



StrengthsStrengths
con..con..

Some of the greatest developments in the automotive supplychain lie in the development of Just-In-
Time (JIT) inventorymethods.

Through the use of advanced technologies, assembly linemanufacturing, and JIT inventory
management, the automotiveindustry has been able to achieve significant gains inproductivity.

WeaknessWeakness
Indian is lacking in properinfrastructure.
This is slowing the pace of growth of auto industry
Companies are not improvingafter sale services


OpportunitiesOpportunities

The automotive ecosystem is in the midst of significant change, withincreasing challenges in
consumer demands, technologydevelopment, and globalization.

While demand for incumbent technologies will remain strong,alternative power trains could capture
more than 20 percent of theglobal market by 2020, depending upon boundary conditions suchas
fuel taxation and emissions regulation set by governments as wellas oil price development.

storage is in the heart of the next generation of efforts for fueleconomy.

More realistic scenario will emerge for technologies using Hydrogenas automotive fuel.

Intelligent use of NCES (Non conventional energy sources) for powering Public Transport.


Threats Threats

Global Crisis

Companies not focusing on R &D are under great risk
High competition from foreignplayers
Lack of technology for Indiancompanies
Problems withAutomobileAutomobileSectorSector


Impact of Global Recession onImpact of Global Recession onIndian Car IndustryIndian Car Industry

India is one of the few countries where carsales have been increasing in the course of the worldwide
economic downturn.

Passenger car sales rose 31% to 115,067units in July from 87,901 units a year ago.

The effect of inflation has taken the rise inthe price rate of the cars by 3-4% which inturn suffices
the need to meet the rise inprice of the raw materials to build a car.

The effect of inflation has affected not onlythe production and sales of Indian cars butalso has
significantly affected the cardealer, officials and car financers. Researchand observations have led to
theconclusion that in the year 2008, the carmarket and the car industry is expected towitness 8-9%
fall


Some other Problems withSome other Problems with

AutomobileAutomobileSectorSector

Effect of Rising Fuel Prices on CarSales

The cars today are run on petrol,diesel and gas. The price hike of all the three has led to a
seriousproblem. The hike in petrol wentby 5% whereas the price of dieselwent up by 3%. The rise in
theprice of the fuel has depreciatedthe sales of cars by 8%.


Steps taken by governmentSteps taken by governmentto overcome recessionto overcome recession

Vehicle makers cut pricesfollowing a government reductionin value-added tax lastDecember, part of
a stimuluspackage to help the sector, andthe central bank has made aseries of rate cuts to spur
theeconomy.

Impact of Global Recession onIndian Car IndustryIndian Car Industry

India is one of the few countries where carsales have been increasing in the course of the worldwide
economic downturn.

Passenger car sales rose 31% to 115,067units in July from 87,901 units a year ago.

The effect of inflation has taken the rise inthe price rate of the cars by 3-4% which inturn suffices
the need to meet the rise inprice of the raw materials to build a car.

The effect of inflation has affected not onlythe production and sales of Indian cars butalso has
significantly affected the cardealer, officials and car financers. Researchand observations have led to
theconclusion that in the year 2008, the carmarket and the car industry is expected towitness 8-9%
fall
Some other Problems with AutomobileAutomobileSectorSector

Effect of Rising Fuel Prices on CarSales

The cars today are run on petrol,diesel and gas. The price hike of all the three has led to a
seriousproblem. The hike in petrol wentby 5% whereas the price of dieselwent up by 3%. The rise in
theprice of the fuel has depreciatedthe sales of cars by 8%.
Steps taken by governmentto overcome recessionto overcome recession

Vehicle makers cut pricesfollowing a government reductionin value-added tax lastDecember, part of
a stimuluspackage to help the sector, andthe central bank has made aseries of rate cuts to spur
theeconomy.


Industry An Overview


Indian Automobile Industry


 Largest three wheeler market in the world
 2nd largest two wheeler market in the world
 7th largest passenger car market in Asia & 10th Largest in the
world
 4th largest tractor market in the world
 5th largest commercial vehicle market in the world
 5th largest bus & truck market in the world


Please click on the image to enlarge
The Indian Automobile Industry embarked on a new journey since 1991 with delicensing of the sector and subsequent opening
up for 100 per cent FDI through automatic route. Almost all the global majors have set up their facilities in India taking the next
level of production of vehicles from 2 million in 1991 to 110+ million in 2011.
Top
The Automotive Aftermarket Business in India

The Indian automotive aftermarket is currently estimated at Rs 33,000 Crores, where the global market is at Rs 2,70,000
Crores. India has been one of the few markets globally to buck the recessionary trend and recorded a strong 25.6% volume
growth in FY 2010. The growth momentum continues to be non track with first 11 months of FY 2011, registering a growth of
29.8% over the corresponding period in the previous year.

The automotive aftermarket for parts in India is a large and growing market that spans manufacturers, distributors, retailers,
service providers and garages. Currently worth INR 19,000 crore to INK 24,000 crore, the market has been growing at 11 per
cent, and is estimated to reach INR 39,000 crore to INR 44,000 crore by 2015. This growth will primarily be fuelled by the
increasing number of vehicles on the road, as well as the aggressive expansion of independent and foreign players. While
current margins for the industry remain attractive, players across the value chain may see margins reducing to the lower levels
observed in developed economies. Therefore, to sustain profitability, it is imperative that players evaluate additional ways of
capturing value, including expanding service networks, developing branded generic parts, forward integrating and building
scale. Looking ahead, revenue pools remain large across the value chain; hence, if players are able to pursue appropriate
strategies, significant profits can be made in this sector.

The Indian market is valued at INR 19,000 crore to INR 24,000 crore, of which roughly 30 per cent comprises spurious parts.
CV, which include multi-axle vehicles, LCVs, buses and trailers account for roughly 22 per cent of this market (INR 4,500-5,500
crore), with Maharashtra, Tamil Nadu, Gujarat and Kerala accounting for over 40 per cent. The car market is estimated at INR
6,000-7,000 crore (34 per cent of the market) with Maharashtra, Andhra Pradesh, Delhi and Tamil Nadu cumulatively
accounting for about 40 per cent of the share (Exhibit 1).

The two - wheeler market is the largest at INR 10,000 crore to INR 11,000 crore, or 44 percent of the market, and Tamil Nadu,
Maharashtra, Gujarat and Uttar Pradesh constitute close to 45 per cent of the market. This market is also expected to grow the
fastest, given the strong growth in new sales (more than 15 per cent per year) and the large volume of two-wheelers entering
the vintage for aftermarket parts (2 to 12 years).

With the population of automobiles in India exceeding 110 million and growing at the rate of 12% p.a. the automotive
aftermarket business in India is poised for an immense growth. There are tremendous opportunities in Automotive Services,
Maintenance and Aftermarket Products. Some of the specific trends in the aftermarket business in India include:

Top
 Growth in Vehicle Sales, Vehicle Population, Replacement Parts and Aftermarket Products
 Huge Demand for Vehicle Servicing, Repairs and Maintenance
 Non Vehicle Manufacturers are getting into Automotive Service Business
 Branded service networks being set up both by vehicle manufacturers and other players
 Fuel Stations adding to the Servicing & Aftermarket Network
 Expansion of Service Networks by Vehicle Manufacturer
 Increased Customer Awareness on Vehicle Maintenance.
 Emergence of One-stop-shop for vehicle owners to meet their needs like servicing, spares, accessories, insurance,
warranty, etc, under one roof


Top

Please click on the image to enlarge Source : SIAM INDIA



http://www.ehow.com/facts_4897896_what-materials-used-car.html

The car industry uses a tremendous number of materials to build cars, including iron, aluminum, plastic
steel, glass, rubber, petroleum products, copper, steel and others. These parts are used to create
everything from those small things we don't think about, such as dashboard needles and wiring, to the
big stuff, such as the engine block or the transmission gears. Auto component industry supports
industries like automobiles, machine tools, steel, aluminum, rubber, plastics, electrical, electronics,
forgings and machining.
Factors that will drive growth in the sector
 Rising incomes among Indian population will lead to increased affordability, increasing domestic demand for vehicles,
especially in the small car segment.
 Fuel economy and demand for greater fuel efficiency is a major factor that affects consumer purchase decision that will bring
leading companies across two-wheeler and four-wheeler segment to focus on delivering performance-oriented products.
 Product innovation and market segmentation will channelize growth. Vehicles based on alternative fuels will be an area of
interest for both consumers and auto makers.
 Focus on establishing India as auto-manufacturing hub is reigning in policy support in form of Government’s technology
modernisation fund.
 Industry will seek to augment sales by tapping into rural markets, youth, women and luxury segments.

Upcoming trends
India is emerging as a strong automotive R&D hub with foreign players like Hyundai, Suzuki, General Motors setting up base in
India. This move is further enhanced by Government’s support towards setting up centres for development and innovation. Tata
Nano’s successful entry in the Indian market has steamed up the opportunities of growth available in alternative segments like
electric cars, vehicles run on natural gas, etc.

Job opportunities in automobile sector
According to the Confederation of Indian Industry, auto sector currently employs 787, 7702 people, 58 percent of who are in the
passenger car segment. However, there is an increasing demand for skilled professionals in the domain of effective service
delivery, spares management and support functions. ITIs and Polytechnics provide 530,000 graduates every year, but there is
an urgent need for updating courses to keep up with changing trends in technology, manufacturing, and processes.

Growth Drivers of Indian Automobile Market
 Rising industrial and agricultural output
 Rising per capita income
 Favourable demographic distribution with rising working population and middle class Urbanisation
 Increasing disposable incomes in rural agri-sector
 Availability of a variety of vehicle models meeting diverse needs and preferences
 Greater affordability of vehicles
 Easy finance schemes
 Favourable government policies
 Robust production
Key Statistics
The amount of cumulative foreign direct investment (FDI) inflow into the automobile industry during April 2000 to July 2012 was
worth US$ 6,992 million, amounting to 4 per cent of the total FDI inflows (in terms of US$), as per data provided by Department
of Industrial Policy and Promotion (DIPP), Ministry of Commerce.
The Indian small and light commercial vehicle segment is expected to grow at 18.5 per cent compound annual growth rate
(CAGR) for the next five years, according to a report titled 'Strategic Assesment of Small and Light Commercial Vehicles
Market in India' by Frost & Sullivan.
According to the recent data released by the Society of Indian Automobile Manufacturers (SIAM):
 The cumulative production for April-June 2012 registered a growth of 7.65 per cent over April-June 2011,
manufacturing 1,700,675 vehicles in June 2012
 Passenger vehicles segment grew at 9.71 per cent during April-June 2012, while overall commercial vehicle segment
registered an expansion of 6.06 per cent year-on-year (y-o-y)
 Two-wheelers sales registered a growth of 10.51 per cent during April-June 2012 wherein mopeds, motorcycles and
scooters grew by 6.60 per cent, 6.79 per cent and 29.14 per cent, respectively
Major Developments and Investments
 Mercedes-Benz India plans to increase its investment to Rs 850 crore (US$ 158.88 million) by 2014. The German car
maker through its dealer partners has already invested over Rs 480 crore (US$ 89.72 million) in India. The company
has also announced the starting of its new, start-of-the-art paint shop that is capable of water-based painting
 The Volkswagen Group aims to increase output by 10-15 per cent on a €100 million (US$ 126.35 million) investment
at its production facilities in Aurangabad and Chakan in Maharashtra
 Nissan plans to introduce ten new passenger vehicles by the end of March 2016. Nissan India aims to double its
vehicle sales in 2012-13 from 33,000 vehicles in 2011-12
 VE Commercial Vehicles (VECV), the joint venture (JV) between Volvo and Eicher, is readying a whole new range of
trucks with new platforms, engines and cabins. VECV has already invested Rs 700 crore (US$ 130.84 million) in the
business
 Toyota Kirloskar plans to increase capacity at its two plants in Bidadi, Karnataka, from 310,000 units to 400,000 units
a year. Capacity at the first plant would rise from 90,000 units to 100,000 units, at a cost of Rs 70 crore (US$ 13.08
million) and the second plant's capacity is being increased from 120,000 units to 210,000 units, with an investment of
Rs 830 crore (US$ 155.14 million)
 Blackstone Capital Partners (Singapore) has signed an agreement to acquire 12.5 per cent stake of International
Tractors Ltd (ITL) in a structured transaction worth US$ 100 million
 Mahindra Reva Electric Vehicles has inaugurated a new manufacturing facility in Bommasandra on the outskirts of
Bengaluru, Karnataka. The new manufacturing facility has an installed capacity to produce 30,000 vehicles annually
 Mahindra & Mahindra Ltd has started a technical centre in Troy, Michigan, to leverage on the design and consulting
service resources available in the region. The firm intends to use the centre to support company's automotive and
tractor engineering requirements in India
 DC Design's Avanti would be the first sports car to be designed and manufactured in India. The car's prototype has
been showcased at the 11th Auto Expo and has been priced at Rs 2.5 million (US$ 46,728)
 Yamaha Motor, Japan plans to use India as a key global hub for motorcycles and scooters. Yamaha will also use
India as one of its four regional procurement bases to source parts for its global two-wheeler operations. The
company also plans to expand its sales network across India in order to take its product closer to its customer base
particularly in the tier II and tier III cities
 Bajaj Auto Ltd has entered into an agreement with Kawasaki Heavy Industries, under which Bajaj motorcycles will be
assembled and sold in Indonesia through Kawasaki's distribution network as co-branded products
 Hero MotoCorp Ltd has invested US$ 20 million in the US-based Erik Buell Racing (EBR). The investment will help
EBR expand its Milwaukee production capacity and hire more people in its research and development (R&D) team
Government Initiatives
The Government of India plans to push the supply of vehicles powered by electricity over the next eight years. It is expected
that there will be a demand of 5-7 million electricity-operated vehicles by 2020. The Government of India allows 100 per cent
foreign direct investment (FDI) in the automotive industry through automatic route.
The Automotive Mission Plan (AMP) 2006-2016 aims at doubling the contribution of automotive sector in gross domestic
product (GDP) by taking the turnover to US$ 145 billion in 2016 with special emphasis on export of small cars, multi-utility
vehicles (MUVs), two & three wheelers and auto components.
Gujarat has been one of the most proactive states in terms of investor-friendly policies and environment. Maruti Suzuki India
Ltd (MSIL) has recently signed a state support agreement (SSA) with the state government for the purchase of land to set up its
third manufacturing facility. The company plans to infuse about Rs 4,000 crore (US$ 747.66 million) in the initial phase of the
project and equivalent amount would be invested by the company's ancillary suppliers to set up a vendor park near the facility.
The new unit is expected to commence operations by 2015-16.
Road Ahead
The rapid improvement in infrastructure, huge domestic market, increasing purchasing power, established financial market and
stable corporate governance framework have made the country a favourable destination for investment by global majors in the
auto industry, as per Automotive Mission Plan (AMP) (2006-16).
Additionally, the introduction of alternative fuels like hydrogen and bio fuels needs to be promoted to ensure sustainability of the
industry over the long term.
The vision of AMP 2006-2016 aims India "to emerge as the destination of choice in the world for design and manufacture of
automobiles and auto components with output reaching a level of US$ 145 billion accounting for more than 10 per cent of the
GDP and providing additional employment to 25 million people by 2016."

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