Automobile is One of the Largest Industries in Global Market...Writtn

8/8/2019 Automobile is One of the Largest Industries in Global Market...Writtn

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Automobile is one of the largest industries in global market. Being the leader in

product and process technologies in the manufacturing sector, it has been

recognized as one of the drivers of economic growth. During the last decade, well

directed efforts have been made to provide a new look to the automobile policy forrealizing the sector's full potential for the economy. Aggressive marketing by the

auto finance companies have also played a significant role in boosting automobile

demand, especially from the population in the middle income group.

A Nations economy is well known from its transport system. For instant and rapid

growth in economy, a well-developed and well-networked transportation system is

essential. As India's transport network is developing at a fast pace, Indian

Automobile Industry is growing too. Also, the Automobile industry has strong

backward and forward linkages and hence provides employment to a large section

of the population. Thus the role of Automobile Industry is very essential in Indian

economy. Various types of vehicles are manufactured by the Automobile Industry.

Indian Automobile Industry includes the manufacturing of trucks, buses, passenger

cars, defence vehicles, two-wheelers.

The two-wheeler manufacturing is dominated by companies like TVS, HondaMotorcycle &

Scooter India (Pvt.) Ltd., Hero Honda, Yamaha, Bajaj, etc

Over view of two wheelers sector:

India two-wheeler contributes the largest volumes amongst all the segments in

automobile industry. This segment can be broadly categorized into 3 sub-segments

viz; scooters, motorcycles and mopeds. In the last four to five years, the two-

wheeler market has witnessed a marked shift towards motorcycles at the expenseof scooters. In the rural areas, consumers have come to prefer sturdier bikes to

withstand the bad road conditions. In the process the share of motorcycle segment

has grown from 48% to 58%, the share of scooters declined drastically from 33%

to 25%, while that of mopeds declined by 2% from 19% to 17% during the year

2008-09. The Euro emission norms effective from April 2000 led to the existing


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players in the two- stroke segment to install catalytic converters. All the new

models are now being replaced by 4-stroke motorcycles. Excise duty on

motorcycles has been reduced from 32% to 24%, resulting in price reduction,

which has aided in propelling the demand for motorcycles. Within the two-wheeler

industry, motorcycle segment grew at a phenomenally high rate of 35% as againsta deceleration of 3% for scooters and 27% for mopeds. In fact, motorcycle has

been taking away the share of scooters and mopeds in a 4.3 million two-wheeler

market and surging ahead with its market share of 68%. The increasing demand

from semi-urban and rural segments may have caused this positive shift towards

motorcycles. Also, easy credit coupled with low interest rate regime, constrained

personal transport, increasing income levels in middle class and higher aspirations

of young people all seem to be the factors responsible for such high growth in two-

wheelers. The growth in two-wheelers has been robust enough to counter theslowdown and other factors constraining the overall business activity in the

country. Also, rationalization of excise duty in the Union Budget 2002-03 had a

positive impact on the demand for motorcycles. We also expect the motorcycles to

continue to lead the two-wheeler segment like in all other Asian countries.

Available forecasts suggest that this trend would continue for another couple of

years and the industry would record nearly double-digit average annual growth up

to 2006.

During the year, there have been important developments in two-wheeler industry.

The competition has strengthened though there are hardly any new entrants into the

industry.There is an increasing emphasis on price and this has led to cost cutting

efforts all across the industry, thereby, making the customer an ultimate

beneficiary. The trend also saw introduction of new motorcycles with capacity

ranging from 100 to 180cc bikes. We anticipate that many more new models will

be launched during the year and provide customers plenty of choice at competitive

prices.


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Business cannot consistently grow at 25-30 percent.Each business has a tendency

to taper and plateau after attaining a particular size. An annual growth rate of 10-

12% over a period of time is extremely healthy.

The TCS study rankings are conducted at the motorcycle segment-level to providecomparisons among similar groups of motorcycles. Motorcycles ranking highest in

their respective segments for TCS are: Hero Honda CD100 SS (best standard

motorcycle segment); Hero Honda Splendor ( best executive motorcycle segment);

Bajaj pulsar (best premium motorcycle segment);and Royal Enfield Bullet Electra

( best cruiser motorcycle segment).

The feeling of freedom and being one with the nature comes from riding a two

wheeler. Indians prefer the two wheelers because of their small manageable size,

low maintenance, and pricing and easy loan repayments. Indians suggests the fullof people of all age groups riding a two wheeler. Motorized two wheeler are

symbol of status by the populace. Two wheelers in India are the second largest

producer and manufacturer of two-wheelers in the world.

The motorcycle segment was initially dominated by Enfield 350cc bikes and

Escorts 175cc bike. The two-wheeler market was opened to foreign competition in

the mid-80s. And the then market leaders- Escorts and Enfield- were caught

unaware by the onslaught of the 100cc bikes of the four Indo- Japenese joint

ventures. With the availability of fuel efficient low power bikes of the four Indo-

Japenese joint ventures. With the availability of fuel efficient low power bikes,

demand swelled, resulting in Hero Honda then the only producer of four stroke

bikes (100cc category), gaining a top slot.

The first Japanese motorcycles were introduced in the early eighties. TVS Suzuki

and Hero Honda brought in the first two-stroke and four-stroke engine motorcycles

respectively. These two players initially started with assembly of CKD kits, and

later on progressed to indigenous manufacturing. In the 90s the major growth for

motorcycle segment was brought in by Japanese motorcycles, which grew at a rate

of nearly 25% CAGR in the last five years.


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The industry had a smooth ride in the 50s, 60s and 70s when the Government

prohibited new entries and strictly controlled capacity expansion. The industry saw

a sudden growth in the 80s. The industry witnessed a steady growth of 14%

leading to a peak volume of 1.9mn vehicles in 1990.

In 1990, the entire automobile industry saw a drastic fall in demand. This resulted

in a decline of 15% in 1991 and 8% in 1992, resulting in a production loss of

0.4mn vehicles. Barring Hero Honda, all the major producers suffered from

recession in FY93 and FY94. Hero Honda showed a marginal decline in 1992.

The reasons for recession in the sector were the incessant rise in fuel prices, high

input costs and reduced purchasing power due to significant rise in general price

level and credit crunch in consumer financing. Factors like increased production in

1992, due to new entrants coupled with the recession in the industry resulted in

company either reporting losses or a fall in profits.

Two wheelers composition in India:

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Automobile is One of the Largest Industries in Global Market...Writtn