Indian Automobile Sector (Oligopoly to monopolistic transformation)

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Indian Automobile Sector

Indian Automobile Sector

INTRODUCTIONThe Automotive Industry in India is one of the larger markets in the world and had previously been one of the fastest growing globally, but is now seeing flat growth rates.However production of passenger vehicles in India was recorded at 3.23 million in 2012-13 and is expected to grow at a compound annual growth rate (CAGR) of 13 per cent during 2012-2021AUTOMOBILE2 WHEELERS3 WHEELERSPASSENGER VEHICLESCOMMERCIAL VEHICLES2The growth journeyInitial Years Manufacturing was licensedHigh Customs duty on importSteep excise duties & sales tax2 Major players: Premier Automobiles Ltd. & Hindustan Motors

1980sEntry of Maruti Udyog Ltd.Better product, with government support.Sellers Market.Long Waiting Periods.Early to mid 90s

Sellers market and long waiting periods.

Delicensing in 1993.

Decrease in customs & excise duty.

Auto finance boom- more players (foreign banks & non banking companies, better schemes).

Mid 90s Early 2000s

Buyers market.

Easy Auto finance.

Manufactures diversifying into related activities: finance lease, insurance and used car market.

Automotive Companies in India

Major Multi-National CompaniesMajor Indian Companies

4Key Growth Drivers

These are the features.5Market shares

Passenger Vehicles Market Share

Commercial Vehicles Market ShareSources:For automobile sales and export data:Society of Indian Automobile Manufacturers(SIAM)For auto component revenue and export data:The Automotive Component Manufacturers Association of India (ACMA)6Sales

Sources:For automobile sales and export data:Society of Indian Automobile Manufacturers(SIAM)For auto component revenue and export data:The Automotive Component Manufacturers Association of India (ACMA)

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exportsSources:For automobile sales and export data:Society of Indian Automobile Manufacturers(SIAM)For auto component revenue and export data:The Automotive Component Manufacturers Association of India (ACMA)

Transformation from Oligopoly to Monopolistic Market

What is Oligopoly market?Market structure is featured by a few firms.Strategic Interaction - Reaction to competitors pricing and marketing strategies.Product can be homogenous or differentiated.Considerable barrier to entry for new firms.Possibility of Collusion, leading to illegal price setting.On the other hand, if no collusion, possibility of fierce competition among the few firms.

What is Monopolistic market?Market structure characterized by many firms.

Product differentiation allows a Range of prices.

Monopoly over a small range of price.

Barriers to entry and exit very minor.

Branding, advertising and personal selling to differentiate the product.

The Causes of Transformation The First Big StepSanjay Gandhi owned Maruti Technical Services Limited which was liquidated.

After his death, Indira Gandhi government collaborated with Suzuki Motors, a Japanese firm, for collaboration Formation of Maruti Udyog Limited and renamed later Maruti Suzuki in 2007.

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The Causes of TransformationPolicy changes introduced in 2 doses:Partial de-regulation in 1985 Eased licensing requirements, allowed selective capacity-expansion, partial relaxation of controls with regard to foreign collaboration, imports. However, trade and investment regulations continued, constraining growth of big business houses.2. 1991 policy changes Dispensed with bulk controls and regulationsPartial de-regulation allowed technology inflow into India.New Industrial Policy in July 1991 by Congress Government led by Mr. Narsimha Rao:It introduced Liberalization policies .April 1993 Government removed motor cars from list of industries reserved for compulsory licensing.

Effects of the TransformationNew firms, including foreign players, entered with modern engineering, efficient processes and modern shop-floor layouts.Indian automobile industry grew at 14.31% per annum in post-1991 era compared to 8.56% per annum during 1985-91.Delicencing of sector attracted many major Global OEMs (GM, Ford, Honda, Hyundai etc.) to start assembly in India.Demand for small and compact cars by highly educated, well-informed Indian customers.Easy Auto Finances attracted the buyers leading to sharp rise in the demand.

Indian Automobile Industry The Monopolistic Market

Current Trends in the Current Monopolistic Automobile MarketConsidering huge market potential, production of passenger cars is projected to grow at CAGR of 11% between 2010-11 and 2013-14.

Comparison:1982Number of manufacturers: 3Vehicle sales: 20000Number of models: 3

2011:Number of manufacturers: 20Vehicle sales: 23,80,000 approx.Number of models: 78KEY Competitors

Source: http://www.imaginmor.com/automobileindustryindia.html

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KEY Competitors ContdSource: http://www.imaginmor.com/automobileindustryindia.htmlKEY Competitors Contd

Source: http://www.imaginmor.com/automobileindustryindia.htmlKEY Competitors Contd

Source: http://www.imaginmor.com/automobileindustryindia.html

Sources of datawww.wikipedia.orgwww.automobileindia.comwww.investropedia.comFor automobile sales and export data:Society of Indian Automobile Manufacturers(SIAM) and for auto component revenue and export data:The Automotive Component Manufacturers Association of India (ACMA)Economic Timeshttp://www.imaginmor.com/automobileindustryindia.html

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