MIT International Journal of Mechanical Engineering, Vol ... · PDF fileMahindra & Mahindra Maruti SUZUKI San Motors Skoda Tata Motors Yamaha Motor below. Fig. 4: Percentage Market

MIT International Journal of Mechanical Engineering, Vol. 5, No. 1, January 2015, pp. 30-36 30ISSN 2230-7680 © MIT Publications

A Review: Present Indian Automobile Industry

Pankaj GuptaDepartment of Mechanical

Engineering, Faculty of Engineering & Technology (R.B.S.E.T.C. Agra)

U.P., India

Rajdeep GuptaKrishna Institute of

Engineering and TechnologyModinagar, U.P., India

Pulkit MaheshwariKrishna Institute of

Engineering and TechnologyModinagar, U.P., India

INTRODUCTION Universally, the automotive industry has been accepted as a major driver of growth of a nation’s economy and is a significant contributor to the global economy. The automobile has been described as ‘both a form and function’ based product involving high level of engineering as well as being positioned as a fashion product [1]. The industry has rightly been called as “the industry of industries”, since it uses outputs of nearly all manufacturing industries [2] and supports upstream (mining, steel etc.) and downstream industries (finance, insurance, after – market etc.)[3].The Indian automobile sector is one of its most vibrant industries. The industry accounts for 22 per cent of the country’s manufacturing gross domestic product (GDP). It comprises passenger cars, two-wheelers, threewheelers and commercial vehicles. India is currently the seventh-largest in the world with an average annual production of 17.5 million vehicles, of which 2.3 million are exported. According to the Society for Indian Automobile Manufacturers (SIAM), the automobile industry has already invested Rs. 70,000 crores in the past four years in building new factories, adding fresh capacity and bringing out new products. The auto components industry too is gearing up to compliment the vehicle industry’s growth. About $6 billion has been invested in the past 4 years according to Automotive Component Manufacturers Association of India (ACMA)[4]. It

is driven by a sustained increase in vehicle population and an increasing preference towards higher-end vehicles with rising consumer aspirations (Volvo registered 155% increased growth of its luxury segment in 2013). The Indian auto market has the potential to dominate the global auto industry, provided a conducive environment is created for potential innovators to come up with new pilot projects. The evolution of the automotive component industry predictably followed the evolution of the auto industry itself. With the start-up of local production of cars, trucks, and two-wheelers in the 1950s, many of the associated component manufacturers (mainly from Europe) started operations in India. Over a period of time, many of the major manufacturers had established plants for manufacture or assembly of parts. These included companies like Bosch (fuel injection systems and spark plugs) and Mahle (pistons) from Germany; Lucas (auto electricals), Girling (brakes), and Lockheed (clutches) from the United Kingdom; and Champion (spark plugs), Armstrong (shock absorbers), and Union Carbide-Exide (batteries) from the United States. From the Indian perspective, these units were primarily intended to aid import substitution. In the process, there was gradual transfer of technology from the parent company[6]. The motorcycle segment continues to dominate the market. Entry-level bikes (engine power below 125cc and price in the range of US$ 850–1,000)

As India’s economy continues to grow at a rapid pace, the automobile industry will be a key beneficiary. This is widely true across automotive markets—from those serving customers with two-wheelers and four-wheelers to those offering commercial vehicles. The main factors behind such growth are the increasing affluence of the average consumer, overall GDP growth, the arrival of ultra-low-cost cars, and the increasing maturity of Indian original equipment manufacturers (OEMs).The automotive Industry in India is now working in terms of the dynamics of an open market. In India, automobile sector is one of the largest growing industries. Many joint ventures have been set up in India with foreign collaboration. India also has one of the fastest growing economies, and many U.S. companies view India as a potentially lucrative market. It is expected that the automotive industry will play an important role in helping the economy to continue this growth. This paper gives an overview of Indian Automobile Industry.

ABSTRACT


account for around 80 per cent of sales. The cost of ownership and economics of operations are key purchase criteria. The premium-bike segment (engine power above 150cc and price in the range of US$ 1,200–2,000) is growing at a faster pace than entry-level vehicles; this is an indication of the increasing affluence of customers. Recent trends indicate that 100cc bikes are being preferred over 125cc bikes by the market [7]. Fig. 1 shows the Segment wise Market Share.

Fig. 1: Segment-wise market share[8]

Fig. 2: Rising GDP Per Capita (US $)[9]

LITERATURE REVIEW Every major shift in policies made by the Indian government, the automotive industry has come out stronger and better. While the shift in policies seems to have mostly been brought by chance events, the Indian government has at least to be credited for making the right decisions and implementing them correctly. It is paradoxical that the Indian middle class, the most attractive feature for foreign investment in the liberalization phase, was

an outcome of the statist ideologies in the regulatory phase. The product innovations of domestic firms like Tata Motors and Bajaj Auto today are the fruits of indigenization and protection policies of the regulatory phases[10]. Buyer decision processes are the decision-making processes undertaken by consumers in regard to a potential market transaction before, during, and after the purchase of a product or service. Consumers have to make different kinds of decisions everyday according to their different needs. Some of the decisions are playing critical roles in consumers’ daily life, for example, purchasing a new home or purchasing a car, whereas sometimes the decisions are made on a virtually automatic basis[11].

PRESENT SCENARIO INDIAN AUTO INDUSTRY Although the Indian automotive industry has its genesis in the 40’s, it has seen considerable growth in the last two decades mainly due to economic liberalization including 100% FDI in the sector[12]. Global auto and component manufacturing companies are motivated to establish manufacturing and R&D facilities in the country due to availability of large pool of skilled workers, low production costs, faster design and development process and emerging market status[13]. Presently, there are more than 30 OEMs offering more than 75 options in all categories of vehicles. India’s automotive industry is the world’s sixth largest producer of automobiles in terms of volume and value and has grown 14.4% in the last decade. The industry contributes 7% to India’s GDP, 7-8% of the total employed population (about 13 million people), 4% of exports [13] [14], 39% of FDI inflows (USD 5.5 billion between (2010-14) and contributes 17% to total indirect taxes collected. Overall domestic sales are led by two wheelers, (77.4% of total sales in 2012-13) followed by passenger vehicles (15.1%) and commercial vehicles (4.45%)[14].In the last five years there has been an overall growth in automobile production (from 10.85 million vehicles in 2007-8 to 20.63 million vehicles in 2012-13). Although 2012-13 has seen almost stagnant sales, exports have increased by 10% in the same period. However, in global terms, even with export earnings of 4 billion USD (including 1.8 billion USD as exports of auto component sector), the automotive sector contributes only 2.37% of world production and is ranked a low 26th in rank in the world auto export market with a share of 0.53%. The quest of Indian automotive industry in striving for global competitiveness is evident from the fact that major automotive manufacturers are the second-largest number of recipients (after Japan) of the Deming award for quality.[15] Significantly, India has the best-in-class fuel economy rates as well as affordable total cost of ownership .[16] The above scenario indicates that the Indian automotive industry has potential for substantial growth.

India is a global hub of automobile industry having: 15 Manufacturers of passenger cars and multi-utility vehicles. 9 Manufacturers of commercial vehicles. 16 Manufacturers of 2/3 wheelers.


14 Manufacturers tractors. 5 Manufacturers of engine.[17] At present, India is the: • Second largest two-wheeler market in the world. • Fourth largest commercial vehicle market in the world. • 11th largest passenger car market in the world.[18]

The main automobile focuses in India are based at Chennai, Gurgaon, Manesar, Pune, Ahmedabad, Halol, Aurangabad, Kolkata, Noida and Bangalore. Chennai is the biggest centre accounting for 60% of Indian auto exports. The auto components industry, although largely concentrated near automobile hubs, is fairly widespread in other parts of the country too.[18]

Automobile Domestic Sales Trends [19]

Category Number of Vehicles

Year 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13

Passenger Vehicles 1,549,882 1,552,703 1,951,333 2,501,542 2,618,072 2,686,429

Commercial

Vehicles 490,494 384,194 532,721 684,905 809,532 793,150

Three Wheeler 364,781 349,727 440,392 526,024 513,251 538,291

Four Wheeler 7,249,278 7,437,619 9,370,951 11,768,910 13,435,769 13,797,748

Grand Total 9,654,435 9,724,243 12,295,397 15,481,381 17,376,624 17,815,618

Fig. 3: Automobile current trends and performance in domestic market[20]

AUTOMOBILE COMPANIES IN INDIA Hero Honda: Largest two-wheeler manufacturer in the world. Bajaj Auto: Second-largest two-wheeler manufacturer and largest three-wheeler manufacturer in India. TVS Motor Co. Third-largest two-wheeler manufacturer in India; has established a manufacturing facility in Indonesia. Honda Motorcycle & Scooter India (Pvt.) Ltd. (HMSIL): Has recently entered the Indian market through its own subsidiary (in addition to its joint venture Hero Honda). Suzuki Motorcycle India Pvt. Ltd.[21]. The

Company started its India operations in February 2006 through this fully-owned subsidiary.

Following are the Top Automobile Companies in India:

Audi

Bajaj Auto

BMW Chevrolet


DaimlerChrysler (Mercedes) Fiat Ford General Motors Hindustan Motors Hero Honda Motors Hyundai Motors Mahindra & Mahindra Maruti SUZUKI San Motors Skoda Tata Motors Yamaha Motor

Fig. 4: Percentage Market Share of Two Wheelers in 2013[11]

Fig. 5: Percentage Market Share of Commercial Vehicles in 2013[11]

FORECAST OF INDIAN AUTO INDUSTRY According to reports from IHS Automotive, sales of cars and light CVs are believed to reach 6-7 million by 2020, up from a predicted 3.7 million this year. Based on these numbers, it can be predicted that by 2016, India is most likely overtake Germany, Japan and Brazil to become the world’s 3rd largest automotive market. India is expected to become the world’s third largest automobile market by 2030 behind only China and the US. India will be part of global automotive triumvirate – the global BIG

3. The global automotive game will be pretty much decided by twin forces for China and India.[17]

Fig. 6: Percentage Market Share of Passenger Vehicles in 2013[11]

Passenger vehicle market of India will even cross Japan by selling about 5 million vehicles by 2017-18. India’s passenger vehicle production projections: In 2010: 2.6 Million Vehicles By 2015: 5.1 Million Vehicles By 2020: 9.7 Million Vehicles There are top 12 countries which are the sales destination. Top 12 Car sales Destinations at present till 2014 are given in table below.

Sr. No. Country Sales in 2013(10^7)

1 China 2.2

2 U.S.A. 1.1

3 Japan 0.9

4 Germany 0.57

5 South Korea 0.45

6 India 0.39

7 Brazil 0.37

8 Mexico 0.305

9 Thailand 0.25

10 Canada 0.23

11 Russia 0.22

12 Spain 0.21

ROLE OF FDI The automobile sector in the Indian industry is one of the high performing sectors of the Indian economy. This has added largely in creating India an important intention for many international players in the automobile industry who desire to deposit up their businesses in India. The automobile industry in India is increasing by 18 percent per year. The automobile sector in India was opened up to foreign investments in the year 1991. 100% Foreign Direct Investment (FDI) is allowed in the automobile


industry in India. According to the Department of Industrial Policy and Promotion (DIPP), the auto sector accounts for 4% of total foreign direct investment (FDI) inflow into India. As per the DIPP’s FDI figures for May 2012, FDI inflow into the auto sector for the period April 2011 to March 2012 totalled US$ 923 million; cumulative FDI into the sector for the period April 2000 to May 2012 stood at US$ 6,853 million. [18]

Fig. 7: Much earlier than 2020, India will exceed the major EU

market (West Europe and India in (2015)[22]

The Indian government promotes foreign investment through: 1. The automobile sector and allows 100% FDI under the

automatic route. 2. It is a fully de-licensed industry. 3. Free imports of automotive components are allowed. 4. The government has not laid down any minimum

investment criteria for the automobile industry.[18] Foreign Direct Investment (FDI) in India is upward. FDI is extremely favourable for a country like India. The major obstacles to investment in this sector are inadequate infrastructure and a lack of governance and transparency.

OPPORTUNITIES IN THE INDIAN MARKET A growth spurt in any industry presents an opportunity to shape a market for long-term prosperity. Motorbikes, the prime driver of two-wheeler growth, carry fairly high margins in a rapidly growing market. High-value sports and luxury motorbikes boast fat margins, too, yet global market leaders such as Harley- Davidson, BMW, and Ducati are not aggressively investing in the Indian market, which leaves an opening for domestic manufacturers. Sales of lower-margin scooters have increased somewhat, whereas sales of mopeds, with the thinnest margins, have declined. Mainstream consumers use two- wheelers for personal or family transport. New engine technologies that increase horsepower while maintaining the high fuel efficiency of the four-stroke engine have strong potential to further boost sales. To sustain sales growth, manufacturers, dealers, and consumer finance groups must work together to build innovative financing options for consumers. The four-wheel passenger vehicle market has grown impressively at the hands of the new middle class, although market penetration

remains low. Four-wheel automobiles are still too expensive for the vast majority of Indian motor vehicle buyers, although the Tata Nano and other Sub-A segment automobiles will bridge a significant gap in the automotive ladder. While the small-car market continues to develop, local players like Tata and Maruti are also aggressively pushing into the compact and entry midsize segments. The entry midsize market represents particularly fertile ground, expected to grow 27 percent over the next five years. At present, the Honda City, Hyundai Accent, and Maruti Esteem are the leading models in this segment.[22] To become a global player in small cars for both domestic and export markets, Indian manufacturers will need new innovations in power-train and manufacturing technologies to drive down costs and compete with two-wheelers. There are opportunities on the cost side of the entry midsize segments as well, as automakers utilize India’s worldclass engineering and low-cost manufacturing labour. Global OEMs now have an opportunity to develop cars in India and even manufacture them for export to the Western markets. Even in a moderate economic scenario, we expect the four-wheel passenger market to reach at least 2.5 million units by 2015. [22] India’s commercial vehicle industry, although one of the largest in the world, is nascent by Western standards. Only 20 percent of the nation’s commercial vehicles are in fleet ownership, compared with about 70 percent in the Western markets. An increase in fleet ownership will make the market more regulated, more consolidated, less price sensitive, and more apt to be driven by economics than by emotion.

CURRENT TRENDS IN INDIAN AUTOMOBILE INDUSTRY Indian automotive market is full of tremendous opportunities and is capable of scaling to greater heights.[19] Some of the technology drivers for car sales in the year 2014-15 would be: 1. Connected Cars: Connected cars and infotainment are the

future. Auto manufacturers are increasingly focusing (and should continue to focus) on connected cars to significantly advance the driving experience of drivers. A connected vehicle could also have Predictive Diagnostic Tools to check vehicle’s health and accordingly warn the driver in case there are any issues with the vehicle, eliminating any unexpected breakdowns. With additional features like parking assistance, driver warning systems, weather and traffic reports, and music streaming, connected cars promise to make driving more safe, convenient and enjoyable.

However, this trend is not restricted to passenger vehicles alone and is applicable to public transportation as well.

2. Intelligent Public Transportation: State transport buses funded under the Indian government’s JnNURM II (Jawaharlal Nehru National Urban Renewal Mission)


program are required to have On-Bus Intelligent Transport Systems. The first ARAI approved (ITS), which is compliant to JNNURM II standards has been recently developed and launched by KPIT. The On-Bus (ITS) comes with features like automatic vehicle location, vehicle health monitoring and diagnostics along with back-end support from KPIT via cloud and remote diagnostics. The console displays information about the passengers, routes and vehicle health, ensuring the safety and security of both the bus driver and passengers.

3. Green Cars: Indian Government is on a serious mission to go green. Rising fuels costs and pollution levels are some of the reasons for this endeavour. In fact, the India National Electric Mobility Mission Plan 2020 envisages that by 2020, there will be 5-7 million electric vehicles (EVs) on the roads. There has also been a conscious shift by auto manufacturers to move towards energy efficient vehicles and hybrid/ electric vehicles.

4. Cloud and Big Data: Indian auto industry has usually carried out processes for marketing and sales manually. Cloud and big data has the potential to not just bring in operational efficiency in the automotive functions but also drive down IT applications and infrastructure costs. Adopting cloud-based solutions will enable Indian auto manufacturers to standardize processes and automate data-heavy transactions that come in the form of invoices, purchase orders and shipping notices, and so on, thereby eliminating delays and human errors.

CHALLENGES : INDIAN AUTOMOBILE INDUSTRY As we move into millennium, Indian Automobile Industry faces more tremendous opportunities and also great challenges. These challenges should be overcome and the challenges are listed below: • Low R&D: In India Research and Development program

is in automotive sector is very low compared to other countries.

• Fuel price volatility: It is one of the major factor. As price of fuel increases, rate of vehicle purchasing decreases.

• Slowdown in demand: There is slowdown in demand of vehicles India due to high price of vehicles.

• Skilled manpower: Auto industry, like many other industries is facing severe shortage of skilled technical as well as managerial manpower. This challenge becomes all the more daunting because of lack of adequate training infrastructure. There is also an urgent need to improve the quality of skilled and semiskilled manpower working in the auto industry.

• Growing competition: There is fierce competition among the automobile players in India. Everyone wants to have a share in the domestic market. Manufacturers’ margins have been squeezed severely and they are all under pressure to cut costs to be profitable and competitive.

• Taxation Complexity: Tax laws in India are believed to be one of the most complex laws across the globe. The complexity is due to a plethora of associated processes.

• The inadequacy of road infrastructure in India is a big bottleneck in the Indian automotive sector. This is compounded by the fact that traffic management is very poor non-existent. Also, port capacity is not adequate to ship exports from India. in a number of locations.

• Infrastructural constraint Land acquisition norms, processes, and timelines: Due to lack of proper implementation of standardized processes relating to land acquisition as well as difficulty in approaching the concerned department/ministry/organisation or at the right time, it becomes difficult to acquire required land and

• Other challenges includes Environmental issue, changing customer preferences, growth in input cost,

CONCLUSION The automotive industry is at the core of India’s manufacturing economy. India is positioned to become one of the world’s most attractive automotive markets for both manufacturers and consumers. The resulting benefits to society—in economic growth, increased jobs, and stability for families employed by the automotive industry—are considerable. All in all, India is set to become one of the biggest automobile industry in coming time.

REFERENCES

1. Thomas, K. (2013),“The Automotive Supply Chain in the New Normal: Analysis of the Industry Opportunities”, Available: www.scmresources.ca/documents/. [Dec. 23, 2013].

2. Drucker, P, (1946), The Concept of the Corporation, John Day, New York.

3. A.T. Kearney (2013), “The Contribution of the Automobile Industry to Technology and Value Creation”, Available : www.atkearney.com .[Dec. 23, 2013]

4. Automotive Component Manufacturers Association of India (ACMA).

5. Top Automobile Companies in India, http://business.mapsofindia.com/automobile/top- automobilecompanies.html

6. V. Sumantran, K. Ramchand, David J. Andrea, “The Indian Automobile Industry: A Primer Describing its Evolution and Current State”, [Online] Available: http://deepblue.lib.umich. edu/bitstream/2027.42/1025/2/84827.0001.001.pdf

6. IBEF, Automotive Industry, September 2009, [Online] Available: http://www.sgcci.in/downloads/ Automotive_171109.pdf

8. ACMA, Indian Auto Component Industry: An Overview, [Online] Available: http://acmainfo.com/docmgr/status_of_ auto_industry/status_indian_auto_industry.pdf

9. Sunil Kakkar,“Indian Auto Industry, the way forward”, Maruti Suzuki India Ltd.

10. Ranawat and Tiwari (2009), Influence of Govt. Policies on India’s Automotive Industry, March 2009, Working Paper No. 57, Hamburg University of Technology.


11. Dr.Govind P. Shind, ‘Automobile Industry and Performance of Key Players’ in Asian Journal of Technology & Management Research, Vol. 01 – Issue: 02 (Jul. - Dec 2011).

12. [9]Automotive (2006), “Automotive Mission Plan 2006-2016 – A Mission for Development of Indian Automotive Industry”, Ministry of Heavy Industries & Public Enterprises, Government of India. http://dhi.nic.in.

13. Auto SCM India 2006, Chennai, “Background note on Supply Chain Management in Automotive Industry”.

14. A.T. Kearney (2013), “Building World Class Supply Chain in India”, Conference on Auto Supply Chain Management, 2013, Available: www.atkearney.com. [Dec. 23, 2013].

15. Souresh Bhattacharya, ‘Supply Chain Management in Indian Automotive Industry : Complexities, Challenges and Way Ahead in ‘International Journal of Managing Value and Supply Chains (IJMVSC) Vol. 5, No. 2, June 2014.

16. KPMG (2006), “Indian Automotive Supply Chain– A Discussion paper” Available: www.in.kpmg.com.[Sep. 6, 2013].

17. Amarjit Singh, Indian Automobile Industry: A Review in IJRMET Vol. 2, Issue 2, May - Oct. 2012.

18. Dr. S. Saravanan, review paper on ‘Process, Progress and Performance of FDI in Automobile Industry in India’ published in International Journal of Applied Research and Studies (iJARS) 2013.

19. Society of Indian Automotive manufacturers(SIAM) analysis. 20. RBSA Advisors, ‘Synopsis of India’s Automobile Sector’ –FY

[2012 -13]. 21. Maps of India,“Effects of Globalization on Indian Industry”,

[Online] Available: http://business.mapsofindia.com/ globalization/india-industry/

22. Booz & Co’ India Automotive Market, 2020’ in Delhi 2011.

23. KPMG, ‘Auto Industry: India in the Changing World Order (2012)’.

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MIT International Journal of Mechanical Engineering, Vol ... · PDF fileMahindra & Mahindra Maruti SUZUKI San Motors Skoda Tata Motors Yamaha Motor below. Fig. 4: Percentage Market