Industry Analysis.pptx

7/29/2019 Industry Analysis.pptx

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The first car ran on India's roads in 1897. Until the 1930s, cars were importeddirectly, but in very small numbers.

Following the independence in 1947, the Government of India and the private

sector launched efforts to create an automotive component manufacturing industryto supply to the automobile industry.

Total restrictions for import of vehicles was set and after 1970 the automotiveindustry started to grow, but the growth was mainly driven by tractors, commercial

vehicles and scooters.

Since the de-licensing of the sector in 1991 and the subsequent opening up of 100percent FDI through automatic route, Indian automobile sector has come a longway.


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The automobile industry in the country is one of the key sectors ofeconomy in terms of employment opportunities.

It directly and indirectly employees around 10million people.

The market value of automobile industry is more than US $8billion and

contribution in Indian GDP is near about 5% and it will be doubled by

2016. The world standings for the Indian automobile sector, as per the

Confederation of Indian Industry, are as follows:

Largest three-wheeler market

Second largest two-wheeler market

Tenth largest passenger car market

Fourth largest tractor market

Fifth largest commercial vehicle market

Fifth largest bus and truck segment


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Global automobile industry is growing at therate of 2% per annum.

But in recent year growth is dropped due toincrease in saturation in the larger car marketof the world.

Mostly all players in car market areredesignining there pricing strategies.

Mergers will help to achieve operationalefficiencies.


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There was rapid growth in automobile

industry till 2010.

23.75% decline in sales from 2010 to2011.

Increase in demand of diesel cars.

Companys focused on cost effectivestrategy to increase the sales.


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In order to examine the level of concentration of sales in Indian auto

industry, the Herschman-Herfindahls Index (HHI) was used.

The figure shows that market concentration has been lower in the

two/three-wheelers sector than in the other automobile sectors.

While it has declined in the mid-1990s in the latter, it clearly emerges from

this figure that there is an increasing trend of market concentration from

2000-01 in Indian automobile sector. Even in Indian auto-component

sector, market concentration has been rising since 2003-04, has nowattained the high levels of 1990-91, showing that some companies are

scaling up


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In 2002, the Indian government formulated an auto policy that aimed at

promoting integrated, phased, enduring and self-sustained growth of the

Indian automotive industry

Allows automatic approval for foreign equity investment up to 100% in the

automotive sector and does not lay down any minimum investmentcriteria.

Formulation of an appropriate auto fuel policy to ensure availability of

adequate amount of appropriate fuel to meet emission norms

Establish an international hub for manufacturing small, affordable

passenger cars as well as tractor and two wheelers. Lying emphasis on R&D activities carried out by companies in India by

giving a weighted tax deduction of up to 150% for in house research and

R&D activities.


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Govt. has granted concessions, such as reduced interest rates for export

financing.

The Indian economy has grown at 8.5% per annum.

The manufacturing sector has grown at 8-10 % per annum in the last few

years. Several Indian firms have partnered with global players. While some have

formed joint ventures with equity participation, other also has entered into

technology tie-ups.

Establishment of India as a manufacturing hub, for mini, compact cars,

OEMs and for auto components


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Since changed lifestyle of people, leads to increased purchase of

automobiles, so automobile sector have a large customer base to serve.

The average family size is 4, which makes it favorable to buy a four

wheeler.

85% of cars are financed in India. Car priced below USD 12000 accounts for nearly 80% of the 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 fuel efficient cars with low running costs.


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More and more emphasis is being laid on R & D activities carried out by

companies in India

Customized solutions (designer cars, etc) can be provided with the

proliferation of technology

Internet makes it easy to collect and analyse customer feedback With the entry of global companies into the Indian market, advanced

technologies, both in product and production process have developed.

With the development or evolution of alternate fuels, hybrid cars have

made entry into the market.


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Legal provision relating to environmental population by automobiles.

Legal provisions relating to safety measures.

Confirms the governments intention on harmonizing the regulatory

standards with the rest of the world

Indian government auto policy aimed at promoting an integrated, phasedand conductive growth of the Indian automobile industry.

Establish an international hub for manufacturing small, affordable

passenger cars as well as tractor and two wheelers.

Ensure a balanced transition to open trade at minimal risk to the Indian

economy and local industry.


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Physicalinfrastructure such as roads and bridges affect the use ofautomobiles. If there is good availability of roads or the roads are smooth

then it will affect the use of automobiles.

Physical conditions like environmental situation affect the use of

automobiles. If the environment is pleasant then it will lead to more use ofvehicles.


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RivalryAmong Firms

Threat ofNew Entrants

BargainingPower ofSuppliers

Threat ofSubstituteProducts

BargainingPower ofCustomers


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High In most markets, the capital and expertise needed to setup an auto or parts

manufacturing facility, would be a great enough barrier to entry to preventmany new entrants from setting up.

However, given India's incredible growth forecasts, infrastructure progress(especially new and better roads), and ever-expanding financing options torural residents, the market is attractive. As such, we expect the threat ofnew entrants to be high.

Although the barriers to new companies are substantial, establishingcompanies are entering the new markets through strategic partnerships orthrough buying out or merging with other companies. However, a domesticcompany, with local knowledge and expertise, has the potential to competeits home market against the global firms who are not well establishedthere.


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High

Buyers in India have a wide variety of choice. There are more than 20

foreign manufacturers selling in India (including ultra high-end such as

Rolls-Royce and Lamborghini). Of course there are also a plethora ofincredibly cheap choices, like the famous Tata Nano.

In the relationship between the industry and its ultimate consumers, the

power axis is tipped in the consumers favor. This is due to the fairly

standardized nature and the low switching costs associated with selectingfrom among competing brands.


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Moderate

India is famous for its two-wheelers (bikes and mopeds) and three-

wheelers. These are very real and obvious threats to auto manufacturers.

The threat of substitutes to the automotive industry is fairly mild.

Numerous other forms of transportation are available, but none offer the

utility, convenience, independence and value offered by automobiles. The

switching cost associated with using a different mode of

transportation, may be high in terms of personal time, convenience andutility.


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Moderate

India is famous for its two-wheelers (bikes and mopeds) and three-

wheelers. These are very real and obvious threats to auto manufacturers.

The threat of substitutes to the automotive industry is fairly mild.

Numerous other forms of transportation are available, but none offer the

utility, convenience, independence and value offered by automobiles. The

switching cost associated with using a different mode of

transportation, may be high in terms of personal time, convenience andutility.


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High

The industry is not yet in its shake-out phase and is still struggling to find

the up-and-coming stars and possibly topple the leaders.

Despite the high concentration ratio seen in the automotive sector, rivalry

in the Indian auto sector is intense due to the entry of foreign companies in

the market. The industry rivalry is extremely high with any being product

being matched in a few months by the competitors. This instinct of the

industry is primarily driven by technical capabilities acquired over years ofgestation under the technical collaboration with international players.


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The research and development (R&D) teamof Fiat India will assist Chrysler to design and

develop the smallest Jeep, to be launchedglobally by mid-2014. The Italian companyhas also commissioned an R&D set-up,Chrysler India Automotive Pvt Ltd, in Chennai


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Volvo Group plans to invest Rs 3,800 crore (US$ 710.28million) in India over the next few years.

Honda Car India plans to set up a greenfield diesel enginefactory at its second industrial location in Rajasthan.

Tata Motors has started assembling the Jaguar XF at its newfacility in Chakan near Pune, Maharashtra.

Hero MotoCorp has started construction of its fourthmanufacturing plant and a new Global Parts Centre (GPC) at

Neemrana, Rajasthan. Luxury carmakers like BMW, Audi are planning more 'Made

in India' products to increase the number of offerings in thesub Rs 2.5 million (US$ 46,729) category to expand market.

The Automotive Mission Plan (AMP) 2006-2016 .


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76%

15%4%

4%

Production

Two Wheelers

Passenger Vehicles

Three Wheelers

Commercial Vehicles

Total Production: 20,366,432

A t bil P d ti T d


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0

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,00014,000,000

16,000,000

18,000,000

Automobile Production Trends

Passenger Vehicles Commercial Vehicles

Three Wheelers Two Wheelers

A t bil D ti S l T d


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0

2,000,000

4,000,0006,000,000

8,000,000

10,000,000

12,000,000

14,000,000

16,000,000

Automobile Domestic Sales Trends




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14.15%

25.15%

34.40%

27.20%Passenger

Vehicles

Commercial

Vehicles

Three Wheelers

Two Wheelers

Total Exports :2,910,055

A t bil E t T d


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0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

Automobile Exports Trends




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Environment Safety- Idle Emission Norms -1984- Mass Emission norms in 1991 and 1992.

- Current Standards Employment Generated- The auto industry currently employs more than12.5 million people both directly and indirectlyand generates employment of 13 persons foreach truck, 6 persons for each car and fourpersons for each three wheeler and one personfor two-wheelers.


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China is the largest motor vehicle producing country . Produced 18,418,876vehicles in 2011 as compared to Indias 3,936,448 and the United States8,398,654.

Growth in production :

- China +0.8%-USA +11.5%-India +10.4.%

33% of the world demand in the automobile industry will be from the BRICmarket.

China will remain by far the largest of the four auto markets, expanding its share

of total BRIC sales from 53 percent in 2008 to 61 percent in 2014. Brazil is themost mature and stable of the BRIC markets and is likely to remain the second-largest of the four through 2014. India will grow rapidly and remain the third-largest BRIC market through 2013. In 2014, the Russian markets strong post crisisrecovery is likely to propel it into third place, nudging India down to fourth place.


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10-11% yoy volume growth likely in CV in 2013driven by the sales of LCV .

Segment volume growth in 2013 lower than 2012.

16% revenue growth this year. In domesticmarket. As the major autoOEMs have low financial

leverage, their credit profiles are unlikely to be

considerably impacted from a further slightweakening in credit metrics in the year. 14.7% of growth is expected to come from India

and 8.3% from China by the end of2013.


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ticleshow/17939058.cmshttp://timesofindia.indiatimes.com/business/india-business/Outlook-for-auto-industry-stable-in-2013-Fitch-group/articleshow/17939058.cmshttp://timesofindia.indiatimes.com/business/india-business/Outlook-for-auto-industry-stable-in-2013-Fitch-group/articleshow/17939058.cmshttp://timesofindia.indiatimes.com/business/india-business/Outlook-for-auto-industry-stable-in-2013-Fitch-group/articleshow/17939058.cmshttp://timesofindia.indiatimes.com/business/india-business/Outlook-for-auto-industry-stable-in-2013-Fitch-group/articleshow/17939058.cmshttp://timesofindia.indiatimes.com/business/india-business/Outlook-for-auto-industry-stable-in-2013-Fitch-group/articleshow/17939058.cmshttp://timesofindia.indiatimes.com/business/india-business/Outlook-for-auto-industry-stable-in-2013-Fitch-group/articleshow/17939058.cmshttp://timesofindia.indiatimes.com/business/india-business/Outlook-for-auto-industry-stable-in-2013-Fitch-group/articleshow/17939058.cmshttp://timesofindia.indiatimes.com/business/india-business/Outlook-for-auto-industry-stable-in-2013-Fitch-group/articleshow/17939058.cmshttp://timesofindia.indiatimes.com/business/india-business/Outlook-for-auto-industry-stable-in-2013-Fitch-group/articleshow/17939058.cmshttp://timesofindia.indiatimes.com/business/india-business/Outlook-for-auto-industry-stable-in-2013-Fitch-group/articleshow/17939058.cmshttp://timesofindia.indiatimes.com/business/india-business/Outlook-for-auto-industry-stable-in-2013-Fitch-group/articleshow/17939058.cmshttp://oica.net/wp-content/uploads/lcv-2011-november-2012.pdfhttp://oica.net/wp-content/uploads/lcv-2011-november-2012.pdfhttp://oica.net/wp-content/uploads/lcv-2011-november-2012.pdfhttp://oica.net/wp-content/uploads/lcv-2011-november-2012.pdfhttp://oica.net/wp-content/uploads/lcv-2011-november-2012.pdfhttp://oica.net/wp-content/uploads/lcv-2011-november-2012.pdfhttp://oica.net/wp-content/uploads/lcv-2011-november-2012.pdfhttp://oica.net/wp-content/uploads/lcv-2011-november-2012.pdfhttp://oica.net/wp-content/uploads/lcv-2011-november-2012.pdfhttp://oica.net/wp-content/uploads/lcv-2011-november-2012.pdfhttp://www.ibef.org/industry/india-automobiles.aspxhttp://www.ibef.org/industry/india-automobiles.aspxhttp://www.ibef.org/industry/india-automobiles.aspxhttp://www.siamindia.com/scripts/IndustryStatistics.aspxhttp://www.siamindia.com/scripts/IndustryStatistics.aspxhttp://www.siamindia.com/scripts/IndustryStatistics.aspx


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Industry Analysis.pptx