Auto Industry Analysis

AUTO INDUSTRY ANALYSIS

Automobile industry  Tenth largest in the world with an annual production of approximately 2 million units  Expected to become one of the major global automotive industries in the coming years

AUTOMOBILE

2 WHEELER

3 WHEELER

PASSENGER VEHICLE

COMMERCIAL VEHICLE

India is…. • Largest three wheeler market in the world • 2nd largest two wheeler market in the world • 4th largest passenger vehicle market in Asia • 4th largest tractor market in the world

Evolution of Early Automobile Industry to mid 90s

itial Years •Seller’s market and anufacturing was licensed long waiting periods High Customs duty on import teep excise duties & •Delicensing in 1993 ales tax Major players: •Removal of capacity emier Automobiles Ltd restrictions Hindustan Motors •Decrease in 980s customs & excise ntry of MUL, better product, th government support •Auto finance boommore players (foreign eller’s Market banks & non banking companies, better ong Waiting Periods schemes.

Mid 90s – Early 2000s •Buyers market •Increase in Indigenization •Easy Auto finance •Manufactures diversifying into related activities: finance lease, fleet management, insurance and used car market

Trends in Automobile sector

Continue…………. (Number of Vehicles)

Automobile Production Trends

Category

2002-03

2003-04

2004-05

2005-06

2006-07

2007-08

Passenger Vehicles

723,330

989,560

1,209,876

1,309,300

1,545,223

1,762,131

Commerci al Vehicles

203,697

275,040

353,703

391,083

519,982

545,176

Three Wheelers

276,719

356,223

374,445

434,423

556,126

500,592

Two Wheelers

5,076,221

5,622,741

6,529,829

7,608,697

8,466,666

8,026,049

Grand Total

6,279,967

7,243,564

8,467,853

9,743,503

11,087,997 10,833,948

Automobile Domestic Sales Trends

(Number of Vehicles)

Category

2002-03

2003-04

2004-05

2005-06

2006-07

2007-08

Passenger Vehicles

707,198

902,096

1,061,572

1,143,076

1,379,979

1,547,985

Commercia 190,682 l Vehicles

260,114

318,430

351,041

467,765

486,817

Three Wheelers

231,529

284,078

307,862

359,920

403,910

364,703

Two Wheelers

4,812,126

5,364,249

6,209,765

7,052,391

7,872,334

7,248,589

Grand Total

5,941,535

6,810,537

7,897,629

8,906,428

10,123,988

9,648,094

Automotive industry crisis • global financial crisis in the auto industry that began during the latter half of 2008 • weakened by the substantially more expensive automobile fuels linked to the 2003-2008 oil crisis • the global financial crisis and the related credit crunch placed pressure on the prices of raw materials • In 2009, the vehicle companies of the world are being hit hard by the economic slowdown across national

BUDGET 2008-09 • consumption-driven growth • policy on inclusive growth • attempt to address farmer's woes

Pre-budget Demands of the Automotive Industry • The adoption of a uniform excise structure of 16 percent across all passenger cars and utility vehicles • The reduction of excise duty on twowheelers and three-wheelers from 16 percent to 8 percent to offset declining sales • The provision of benefits for the development of hybrid technology • The offer of liberal credit to the agricultural sector to encourage the purchase of tractors

Budget Proposals Directly Impacting the Indian Automotive Industry

Analysis of current scenario  High interest rates, high domestic oil prices and inadequate vehicle financing have continued to affect the overall automobiles sector  The current slowdown in economic growth and automobiles industry has further deteriorated due to the global financial market crisis which has created volatility in stock markets and exchange rates and aggravated lack of liquidity

Continued…....  Automobile companies are reducing production by shutting plants for a few days to avoid inventory build-up and in anticipation of seeing further downside

Volume Growth of Automobile Sector in Print during 2008

Compared to 2007, Print advertising of Automobiles dropped by 13% during 2008..

Share of categories of Automobile sector in Print during 2008

 'Passenger Vehicles' were the front runners in Print advertising with 64% share followed by ‘Motorcycle’ and ‘Commercial Vehicles’ with 17% and 7% share respectively during 2008.

State-wise share of Automobile sector in Print during 2008

Tally of Automobile Advertisers in Print during 2008

• 4% rise in number of Automobile advertisers in Print during 2008 compared to 2007

Usage of Sales Promotions ad campaigns in the Automobile sector 

More than 55% of Automobile ads in Print were for Sales Promotion during 2008.

KEY ENABLERS

KEY CHALLENGES

• Favorable Demographics •Cost Pressure • Improving income curve •High Expectations • Reducing interest rates •Inadequate Infrastructure Developme Key Focus Areas • Product development( includes collaboration, new products developed) • Vendor base (quality of vendors, skill levels , size etc.) • Manufacturing capability( quality levels, productivity & skill levels, technology ) • Service levels • Supply chain • Labor law • Leverage IT Key Features of Future Auto Policy • Foreign Direct Investment • Import tariff • Incentives for Research and Development (R&D) • Environmental Aspects

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