Indian Automobile Industry_pest

Analysis of Macro-environmental factors for Automobile Industry

Automobile: An automobile or motor car is a wheeled motor vehicle for transporting passengers; which also carries its own engine or motor.

History: •Introduced to India in the late 1890’s and the manufacturing industry only took off after independence in 1947. •The protectionist economic policies of the government gave rise in the 1950's to the Hindustan Motors Ambassador. •Hindustan Motors and a few smaller manufacturers such as Premier Automobiles, Tata Motors, Bajaj Auto, Ashok and Standard Motors held an oligopoly until India's initial economic opening in the 1980's. •The maverick Indian politician Sanjay Gandhi championed the need for a "people's car"; the project was realized after his death with the launch of a state-owned firm Maruti Udyog which quickly gained over 50% market share. •Tata Motors exported buses and trucks to niche markets in the developing world.

AUTOMOBILE

2 WHEELER

3 WHEELER

L.C.V.

MOTORCYCLE

SCOOTERS

PASSENGER VEHICLE

COMMERCIAL VEHICLE

I.C.V.

H.C.V.

SCOOTERETTES

MOPEDS

Overview of Automobile Industry • The industry has grown at over CAGR of 14% p.a over the last 5 years. • In the year 2006-07, sales (domestic as well as exports) of the Indian automotive industry crossed the historic landmark of 10 million units.

• With the potential to emerge as one of the largest in the world. Presently, India is • 2nd largest two wheeler market in the world • 13th largest commercial vehicle market in the world • 11th largest passenger car market in the world and is expected to be the 7th largest market by 2016 .

• The industry has emerged as a key contributor to the Indian economy. • The Indian automotive industry is highly competitive with a number of global and Indian companies present in the market.

Automotive sales for 2002-07 Sales in units (2006-07)

Share in Total Sales

CAGR (200207)

Two Wheelers

8,476,686

76.2%

14.5%

Passenger Cars

1,578,176

14.2%

16.7%

Three-Wheelers

547,805

4.9%

20.5%

Commercial Vehicles

517,648

4.7%

26.7%

Sales(Million units) 2007

11.12

2006

9.71

2005

8.53

2004

7.29

2003

6.25

2002

5.41 0

5

10

15

Automotive clusters in India Major automotive clusters - Mumbai-PuneNasik-Aurangabad (West), Chennai Bangalore-Hosur (South) and Delhi-GurgaonFaridabad (North) Delhi-Gurgaon-NoidaGhaziabad Ludhiana

North / Central

Haridwar

Pitampur Jamshedpur Rajkot-Halol

Kolkata

Ashok Leyland Force Motors Hindustan Motors Honda SIEL Kinetic Majestic Piaggio Swaraj Mazda

Eicher Hero Honda Honda ICML LML Maruti Suzuki Yamaha Tata Motors

East Mumbai-Pune-Nasik Aurangabad

Hyderabad

Chennai Bangalore Hosur

Source: SIAM, IMaCS analysis

Hindustan Motors Tata Motors

South Ashok Leyland Enfield Ford Greaves Hindustan Motors Hyundai M&M Tata Toyota Kirloskar TVS Motors Volvo

West Ashok Leyland Bajaj Auto DaimlerChrysler FIAT Force Motors GM Greaves Kinetic M&M Premier Skoda Tata Motors

Overview of Passenger Vehicles Market •

Indian Passenger vehicle Industry has grown with CAGR of 15.5% from FY’2001-02 to FY’2006-07.

•

Significant increase in competition due to entry of global players.

•

Shrinking of mini car segment, and increasing share of compact cars in Indian market.

•

Impressive growth of executive segment(D), with CAGR of 112% from FY’ 2001-02 to FY’2006-07

•

Indian Passenger vehicle industry is undergoing significant market dispersion.

•

Emergence of India as Global manufacturing base for mini and compact cars.

•

Exports from passenger vehicle segment has grown significantly, with a CAGR of 30% from FY’2001-02 to FY’2006-07.

Domestic Passenger Vehicle Industry Sales

Break-up of the Industry by Segment for 2007

2007

1379.1

2006

Passenger Cars, 78%

1143.1

2005

22%

1061.3

SUVs/MUVs, 22%

000 units 2004

902.1

2003

78%

707.2

2002

675.1

0

500

1000

1500

Segment-wise Analysis of Passenger Vehicle Market Segment

Description

Share in 2001-02

Share in 2006-07

CAGR

A

Mini cars, up to 3400 mm length

28%

7%

-11%

B

Compact cars, between 3401-4000 mm length

54%

70%

22%

C

Mid size cars between 4001-4500 mm length

17%

18%

18.6%

D

Executive cars between 4501 - 4700 mm length

0.2%

3.8%

112%

E

Premium cars between 4701 - 5000 mm length

0.9%

1.18%

31.1%

F

Luxury cars - above 5001 mm length

0.0%

0.02%

NA

Segment

Key Brands and Companies to which they Belong

A

Maruti 800.

Market share of Key Players in 2006-07

B

Alto, Wagon-R, Swift (MSuzuki), Indica (Tata) Santro, Getz (Hyundai ), Palio (Fiat India)

Maruti Udyog Ltd.

46%

C

TATA Motors Ltd.

16%

Esteem, SX4 (MSuzuki) TATA Indigo, Verna, Elantra (Hyundai ), Honda City, Astra, Aveo, Optra (GM), Logan (M&M), Icon, Fiesta (Ford ), Cedia (HM), Petra (Fiat India)

D

Civic (Honda), Opel Vectra (GM), Contessa (HM), Skoda Octavia, Mercedes C-class (Daimler Chrysler India)

E

Sonata (Hyundai Motors),Honda Accord ,Corolla, Camry (Toyota Kirloskar), Mondeo, Superb (Skoda Auto), Mercedes E-class, 5 series (BMW India)

F

Mercedes S-class, Maybach (DaimlerChrysler), BMW 7 Series

SUV

Grand Vitara (MSuzuki),Safari (Tata), Tucsan (Hyundai Motors), CRV (Honda), Scorpio, C-fusion, Endeavour (Ford),

MUV

Omni, Versa (MSuzuki), Sumo, Indigo Marina (Tata), Innova,Tavera, Bolero (M&M)

Hyundai Motor India Ltd.

14%

Mahindra & Mahindra Ltd.

7%

Totyota

4%

Others

13%

Indian Passenger Vehicle Market – Competitive Scenario

Passenger Cars

46%

16%

14%

7%

4%

-

-

-

-

-

-

-

-

Utility Vehicles

2%

18%

1%

42%

21%

1%

10%

1%

<1%

-

4%

-

%

Multi Purpose Vehicles

40%

-

-

-

-

-

-

-

-

-

-

-

-

4th largest Passenger Vehicle Market in World

Overview of Two-wheeler and CVs Market •

The total sales of the Indian two wheeler industry has grown at a CAGR of 14.5 per cent between FY’2001-02 and FY’2006-07.

•

The motorcycles market had witnessed the fastest growth rate in the two wheeler segment, with a CAGR of 19.2%.

•

Indian Two-wheeler market is characterized with intense competition with around 10 major players.

•

Exports from two-wheeler industry has increased with a CAGR of 42.8%, from FY’200102 to FY’2006-07.

•

The total sales of the Indian Commercial vehicles industry has grown at a CAGR of 26.1% between FY’2001-02 and FY’2006-07.

•

With increased industrial production and investments in real estate CVs market has witnessed good growth.

•

CV exports has grown from 12000 units in FY’2001-02 to 50,000 units in FY’200607, showing a CAGR of 33.2%.

Segment-wise Analysis of Indian Two Wheeler Market Segment

Description

Share in 2001-02

Share in 2006-07

CAGR

A1

Scooter with engine capacity less than 75 cc

5%

0%

-33.9%

A2

Scooter with engine Capacity ,75-125 cc

5%

10%

32.9%

A3

Scooter with engine capacity between 125-250 cc

12%

1%

-27.7%

B2

Motorcycle with engine capacity between 75-125 cc

62%

66%

14.9%

B3

Motorcycle with engine capacity between 125-250 cc

5%

17%

44.8%

B4

Motorcycle with engine capacity above 250 cc

1%

1%

5.7%

C1

Mopeds

10%

5%

-2.7%

Segment-wise Analysis of Indian CVs Market Description (by Gross Vehicle Weight)

Share in 2001-02

Share in 2006-07

Up to 3.5 tonnes (Pickups)

15%

36%

51.9%

5 - 7.5 tonnes (LCV)

25%

9%

5.1%

7.5 – 12 tonnes (Intermediate CV)

7%

9%

33.4%

12 – 16 tonnes( 4X2 FF/SF)

29%

17%

14.6%

16 – 25 tonnes (Multi Axles)

8%

21%

55.9%

25 tonnes and above (Tractor Trailers)

8%

21%

9.7%

CAGR

Market share of key players in 2006-07 Market Share of key Players in Twowheeler Industry

Share of Key Players in CVs • Market Market Share of key Industry Players in Two-wheeler TATA Motors 64% Industry

Hero Honda

42%

Bajaj Motors

27%

Ashok Leyland

16%

TVS Motor co.

19%

M&M Ltd.

10%

HMSIL

9%

Eicher Motors Ltd.

6%

Others

3%

Others

4%

Indian 2-Wheeler Market Competitive Scenario

Motorcycle

42%

27%

19%

-

-

-

-

-

-

-

15%

28%

-

2%

46%

9% <1%

-

-

-

82%

-

-

-

8% 10%

-

India is now the second largest two-wheeler market in the world

Economic Environment • • • • • •

•

The Indian economy has grown at 8.5 per cent per annum. The manufacturing sector has grown at 8–10 per cent per annum in the last few years. More than 90 per cent of the CV purchase is on credit. Finance availability to CV buyers has grown in scope during the last few years. The increased enforcement of overloading restrictions has also contributed to an increase in the number of CVs plying on Indian roads. Several Indian firms have partnered with global players. While some have formed joint ventures with equity participation, others have entered into technology tie-ups. Establishment of India as a Manufacturing hub, for mini, compact cars, OEMs, and for auto components.

Key Market Drivers
Increasing disposable incomes

Key Trends
Market evolution from Mini cars


Rising aspirational levels

to Hatchbacks to Compact Sedans


Low interest rates. Wide variety and easy availability of Financing options.

now evident


Increasing customer emphasis on


High sensitivity to Fuel prices

aesthetics and comfort.


Lack of urban & rural public transportation infrastructure
Flourishing Service Sector


Shrinking product life-cycles

Indian Automotive Industry – Development and Growth Pre 1983

1983-1993

1993-2007

• Closed market • Growth of market limited by supply • Outdated models

• Suzuki, Japan and GOI joint venture to form Maruti Udyog • Joint ventures with companies in commercial vehicles and components

• Delicencing of the sector in 1993 • Global major OEMs start assembly in India (GM, Ford, Honda, Hyundai, etc.) • Imports allowed from April 2001; alignment of duty on components and parts to ASEAN levels. • Easy auto finances. • Implementation of VAT.

Players • Hindustan Motors • Premier • Telco • Ashok Leyland • Mahindra & Mahindra

Players • Maruti Udyog • Hindustan Motors • Premier • Telco • Ashok Leyland • Mahindra & Mahindra

Players • Entry of Global players

Current Political Environment • • • • • •

• •

Indian government auto policy aimed at promoting an integrated, phased and conducive growth of the Indian automotive industry. Allowing automatic approval for foreign equity investment up to 100 per cent, with no minimum investment criteria. Establish an international hub for manufacturing small, affordable passenger cars as well as tractors and two wheelers. Ensure a balanced transition to open trade at minimal risk to the Indian economy and local industry. Assist development of vehicles propelled by alternate energy sources. Laying emphasis on R&D activities carried out by companies in India by giving a weighted tax deduction of up to 150 per cent for in-house research and R&D activities. Plan to have a terminal life policy for CV along with incentives for replacement for such vehicles. Promoting multi-modal transportation and the implementation of mass rapid transport systems.

Social Environment • • • • • • • • •

Growth in urbanization, 4th largest economy by PPP index. Upward migration of household income levels. Increase in PPP , led to the increase in market share of compact cars. 85% of Cars are financed in India (15% in China). Cars priced below USD 12000 account for nearly 80% of the market. Vehicles priced between USD 7000 –12000 form the largest segment in the passenger car market. Indian customers are highly discerning, educated and well informed. They are price sensitive and put a lot of emphasis on value for money. Preference for small and compact cars. They are socially acceptable, even amongst the well-off. Preference for fuel efficient cars with low running costs. The Tata Indica has the lowest running cost at US 8.5 cents per mile.

Technological Environment •

With the entry of global companies into the indian market, advanced technologies ,both in product and production processes have developed.

•

With the development or evolution of alternate fuels, hybrid cars have made entry into the market.

•

Few global companies have setup their R&D centres in India.

•

Major global players like audi, BMW,Hyundai etc have setup their manufacturing units in India.

•

Government initiatives regarding tax rebates has led to global players setting up their R&D centres in India.

•

Govt. initiatives in establishing NATRIP network across the country will further lead to enhancing R&D and technological advancements.

NATRIP Network New testing center for tractors & off-road vehicles, accident data analysis and specialised driving training at RAE BAREILLY

New testing & homologation center at MANESAR

Hill Area driving training center and Regional In-Use vehicle management center at SILCHAR

Up-gradation of VRDE at AHMEDNAGAR

New complete proving ground at INDORE Up-gradation of ARAI at PUNE

New test & homologation center near CHENNAI

Environmental Scenario Automotive regulations in India

Status of Indian Regulation

Number of regulations

Fully / Partially aligned

43

In process of being aligned

32

Items / Regulations to be covered

39

Total

114

Emission Compliance Emission Standards Status Cars

Two Wheelers

C Vs

Bharat Stage II

Already introduced in Metros:MiniMetros, from Sept, 2003

From April 1, 2005 Entire Country

Already introduced in Metros, MiniMetros .

Bharat Stage III

From April 1, 2005

From April 1, 2008

From April 1, 2005

Bharat Stage IV

From April 1, 2010

From April1, 2008

From April 1, 2010

Growth Forecasts as per Automotive Mission Plan •

•

The size of the Indian automotive industry is expected to grow at a rate of 13% per annum over the next decade to reach around 31.96 Mn in 2016 from 11Mn in 2007. The total investments required to support the estimated growth are around US$ 120-159 billion by 2016. Vehicle Type

Number sold (in million units)

Two wheelers

27.80

Passenger vehicles

2.65

Three wheelers

0.87

CV

0.64

Total

31.96

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