Business Analysis of Auto Indusrty

8/3/2019 Business Analysis of Auto Indusrty

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Business Analysis of Automobile

Sector in India

By: Aditi Deodhar

Pranav ThawarePrutha Deshpande

Saurabh Ambaselkar


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AUTOMOBILE SECTOR

y The automotive sector is one of the key segments of the

economy having extensive forward and backward linkages

with other key segments of the economy.

y It contributes about 4 per cent in India's Gross Domestic

Product (GDP) and 5 per cent in India's industrial production.

y This sector has generated about 4.5 lakh of direct

employment and about one crore of indirect employment.


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y India holds huge potential in the automobile sector including the

automobile component sector owing to its technological, cost

and manpower advantage.

y India has a well developed, globally competitive Auto Ancillary

Industry and established automobile testing and R&D centers.

y India enjoys natural advantage and is among the lowest cost

producers of steel in the world.


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The automobile industry in India

y 9th largest automobile industry .

y 2nd largest two-wheeler market,

y 11th largest Passenger Cars producers.

y4

th

largest in Heavy Trucks.y 2nd largest tractor manufacturer.

y annual production of over 2.3 million units.

y The monthly sales of passenger cars in India exceed 100,000

units.


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Auto sector

y Despite economic slowdown that has affected the automobile

industry, production and exports of the sector went up last

fiscal, said the Economic Survey 2008-09, and underlined that

the industry employs over one crore people.

y While the overall automobile production went up by 3 per cent

to reach 1.11-crore, exports increased by over 23 per cent to

over 15-lakh. The domestic turnover of the sector stood at Rs.

2.19-lakh crore, while exports totalled at Rs. 31,782 crore,

taking the total size of the industry to Rs. 2.50-lakh crore

during 2008-09.


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AUTOMOBILE

2 WHEELER 3 WHEELERPASSENGER

VEHICLE

COMMERCIAL

VEHICLE

MOTORCYCLE SCOOTERS SCOOTERETTES MOPEDS

I.C.V. M.C.V. H.C.V.


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GROSS TUNROVER OF THE AUTOMOBILE INDUSTRY

IN INDIA

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

2004-052005-06

2006-072007-08

2008-09

(IN USD MILLION)

(IN USD MILLION)


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Automobile Production Trends

Category 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11

Passenger Vehicles 12,09,876 13,09,300 15,45,223 17,77,583 18,38,593 23,57,411 29,87,296

Commercial Vehicles 3,53,703 3,91,083 5,19,982 5,49,006 4,16,870 5,67,556 7,52,735

Three Wheelers 3,74,445 4,34,423 5,56,126 5,00,660 4,97,020 6,19,194 7,99,553

Two Wheelers 65,29,829 76,08,697 84,66,666 80,26,681 84,19,792 1,05,12,903 1,33,76,451

Grand Total 84,67,853 97,43,503 1,10,87,997 1,08,53,930 1,11,72,275 1,40,57,064 1,79,16,035


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16.25

4.36

3.39

76

Passenger Vehicles

Commercial Vehicles

Three Wheelers

Two Wheelers

Figures in %

Market Share


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Domestic sales

Category 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11


Commercial

Vehicles 3,18,430 3,51,041 4,67,765 4,90,494 3,84,194 5,32,721 6,76,408

Three Wheelers 3,07,862 3,59,920 4,03,910 3,64,781 3,49,727 4,40,392 5,26,022

Two Wheelers 62,09,765 70,52,391 78,72,334 72,49,278 74,37,619 93,70,951 1,17,90,305

Grand Total 78,97,629 89,06,428 1,01,23,988 96,54,435 97,24,243 1,22,95,397 1,55,13,156


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Export trend

Category 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11


Commercial

Vehicles 29,940 40,600 49,537 58,994 42,625 45,009 76,297

Three Wheelers 66,795 76,881 1,43,896 1,41,225 1,48,066 1,73,214 2,69,967

Two Wheelers 3,66,407 5,13,169 6,19,644 8,19,713 10,04,174 11,40,058 15,39,590

Grand Total 6,29,544 8,06,222 10,11,529 12,38,333 15,30,594 18,04,426 23,39,333


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Forcast 2011-12


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Market Share

Bajaj Auto,

24.4%

TVS Motors,

17.7%

Yamaha,

3.8%

Others, 5.8%

Honda

Motors, 8.5%

Hero Honda,

39.8%

Maruti, 50.37

Hyundai, 19.17

Tata Motors,

17.19

Honda, 5.33

Others, 5.73

2 wheelers market 4 wheelers market


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Indian Commercial Vehicle

MarketHM

Medium &

Heavy CV -

Trucks64% 24% - 8% - 3% -


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Indian 3-Wheeler Market

68% 24% 2% 1% 3% 3%

23% 40% 12% 13% 7% 6%

Sub SegmentsScooters

India

60%

40%


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SWOT Analysis

StrengthsAutomobile industry is an established and an evergreen industry.

India is the strongest player in the small car segment of the global

automobile market

Indian companies are the best cost innovators

Some of the greatest developments in the automotive supply chain

lie in the development of Just-In-Time (JIT) inventory methods.

Through the use of advanced technologies, assembly line

manufacturing, and JIT inventory management, the automotiveindustry has been able to achieve significant gains in productivity.


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Weakness

Indian is lacking in proper infrastructure.

This is slowing the pace of growth of auto industry

Companies are not improving after sale services


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Oppurtunityy The automotive ecosystem is in the midst of significant change, with

increasing challenges in consumer demands, technology development, and

globalization.

y While demand for incumbent technologies will remain strong, alternative

power trains could capture more than 20 percent of the global market by

2020, depending upon boundary conditions such as fuel taxation and

emissions regulation set by governments as well as oil price development.

y storage is in the heart of the next generation of efforts for fuel economy.

y More realistic scenario will emerge for technologies using Hydrogen as

automotive fuel.y Intelligent use of NCES (Non conventional energy sources) for powering

Public Transport.


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Threats

y Global Crisis

y Companies not focusing on R & D are under great risk

y High competition from foreign players

y

Lack of technology for Indian companies


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Demand Drivers

Inadequate public transportation system, especially in the semi-urban and

rural areas

Increased availability of cheap consumer financing in the past 3-4 years;

Increasing availability of fuel-efficient and low-maintenance models;

Increasing urbanization, which creates a need for personal transportation;

Changes in the demographic profile;

Difference between two-wheeler and passenger car prices, which makes

two-wheelers the entry level vehicle;

Steady increase in per capita income over the past five years; and

Increasing number of models with different features to satisfy diverse

consumer needs.


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Key Growth Drivers


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Key Market Drivers

Increasing disposable incomes

Low operating cost

Higher fuel efficiency of New-generation motorcycles

Greater reliability resulting in lowmaintenance cost

Low interest rates translating to lowfinancing and acquisition costshence greater affordability.

Inadequate urban & rural publictransportation infrastructure

Ease of use in congested citycentres

Key Trends

Eclipse of scooter segment

Emergence of new motorcycle sub-

segments

Economy

Executive

Performance

Shrinking product life-cycles


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Porters Model


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Threat ofNew Entrants; Unfavorable

Competitive Rivalry ; Unfavorable

Power ofBuyers; Favorable

Power of Suppliers;

Favorable

Threat of Substitute Products; Unfavorable


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Political - Legal Factors

Boosted Economic Growth

1 year

6% cut in CENVAT, abolition of surcharge onincome tax.

Abolition of FBT, Reduction of excise duty onbig cars.

Encourage Urban Fleet Modernization

1-5 Years

- Providing Special Auto-component Parks (SAP)

and Special Economic Zones (SEZ) as in IT .

Negative list of items and rules of origin in FTAs /

RTAs. (ASEAN Free Trade Agreement)

- SIAM recommended the government on extendingexcise and sales tax benefits to customers who opt for

scrappage of their old vehicles5-10 Years

Effective Implementation and Uniformenforcement of GST

Maintain a three tier tariff structure for rawmaterials, intermediate goods, finished goods.

Revamp WTO compatible export promotionalschemes like DEPB, EOU and EPCG schemes

AMPPlan 2006-16 set by govt

Stunted Economic Growth

1 year

Differential excise duty for small and big cars.

Customs duty for imported cars including hybridcars.

Excise duty cut only for petrol driven trucks

1-5 Years

Existing Complex labor laws( 45 Central acts and 16associated rules)

Not implementing country wide VAT

Ambiguous policy in land acquisition for green fieldprojects

.

5-10 YearsPoor execution of Infrastructure investments.(Construction of Highways of 16km per day againstthe target of 32 km per day)

Absence of National Auto fuel Policy (NAFP)


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Economic Factors

1 year

Increased access tocredit and lower interestloans

Investment inInfrastructure spendingcan boost thecommercial vehiclessegment.

Growing workingpopulation (441 millionpeople in 2015/16)

Upward migration of

household income levels(600 million people haveannual income of morethan $10,200)

Middle class expandingby 30 - 40 million everyyear

Can propel growth

1-5 year 5-10 years


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Technological FactorsFrugal Engineering is the way forward

Upgradeable green cars : Plug and play style engines to replace old ones: the Tata Nano

modelDownsize the cars without losing out on interior space. Lower cost, low fuel consumption , lessmaterial usage and less pollution

Grants and Incentives for R&D work

100% grant for fundamental research, 75% for pre-competitive technology, 50%for productdevelopment

Extension of 150% weighted deduction on R&D expenditure

DevelopingIndia as a Testing hub: National Automotive Testing and R&DInfrastructure Project

Investment of INR 17.18 Billion (about USD 380 million) in setting up, inter alia, independent automotive testingcenters 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


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THANK YOU

Documents

Business Analysis of Auto Indusrty