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Submitted to:- Submitted by:- Dr. J.K.Sharma Alok Srivastava
Strategic Analysis of Indian Heavy Commercial Vehicles
Industry
Heavy Commercial vehicles industry in India has reflected a steady growth over the last decade by constantly trying to upgrade their technology and production process.
Heavy vehicles in India are mostly made by companies like Tata Motors and Ashok Leyland.
HCVs however form an indispensable part of Indian automobile industry.
Heavy Commercial vehicles Industry
The automobile industry is one of the largest in the world and one of the fastest growing globally.
India’s commercial vehicle manufacturing industry is the seventh largest in the world, with an annual production of more than 1.6 million units in 2011.
The contribution of automobile industry to GDP has risen from 2.77% in 1992-93 to 5% in 2010-11 and it will expect to be double by 2016.
Ranking of Indian Heavy Commercial Vehicles Industry is Third in World market.
Ranking of Indian Light Commercial Vehicles Industry is Fifth in World market.
Current Position of Indian Commercial Vehicles Industry
2006 2007 2008 2009 2010 20110
200
400
600
800
1000
1200
1400
374 431 445 526676 790
267273 225
202
318383
HCVLCV
Sales in Indian Commercial Vehicle market (2006-2011) (in thousands) (in units)
2006 2007 2008 2009 2010 20110
200
400
600
800
1000
1200
1400
416 491 467 538732 844
283295 247 203
341
419
HCVLCV
Production in Indian Commercial Vehicle market (2006-2011) (in thousands) (in units)
Tata MotorsAshok LeylandVolvo MotorsEicher MotorsSwaraj MazdaForce Motors
Key Players
Brand 2006 2007 2008 2009 2010Tata Motors 164873 165892 134158 128101 188660Ashok Leyland 72874 72924 61512 42529 79696Eicher Motors 18036 21870 16082 16903 28221Swaraj Mazda 10315 10951 8189 4954 7142Asia Motors Works - - 1959 3319 6074Force Motors - - - 4268 6021Volvo Trucks 858 1031 1270 1444 1663Mahindra & Mahindra
- - - - 247
Mercedes-Benz - - 205 230 165Scania (VW) - - 135 112 165
Heavy Commercial Vehicle sales in Units
52%
14%
22%
12%
Market Share
Tata Motors Ltd.Eicher MotorsAshok LeylandOthers
Market Share hold by Key Players
Barriers to entry into Heavy commercial vehicles Industry are relatively low and setting up operations is fairly easy.
100% FDI is allowedGovernment of India permits 200% weighted
deduction on in-house research expenditure and 175% on outsourced research & development expenses.
Regulatory Scenario
KEY FEATURES OF POLICY
Low entry barrierInvestment IncentiveConcern for Emissions Emphasis on R&D
Indian Auto Policy 2002
Value Chain Configuration
Key Success factors for HCVs Industry
SWOT Analysis
Large domestic market Sustainable labour cost advantage Competitive auto component Government incentive for manufacturing plants Strong engineering skills in design etc.
Strengths
Low labour Productivity High interest costs and high overheads
make the production uncompetitive Various forms of taxes push up the cost of production Low investment in Research and
Development Infrastructure bottleneck
Weaknesses
Supreme court ban on overloadingHeavy thrust on mining and construction
activityCut in excise dutyRising rural demandEstablishment of SEZ hub for HCVs.
Opportunities
Rising Inputs costRising interest ratesCut throat competition
Threats
PEST Analysis
Indian government automatic allowing approval for foreign equity investment up to 100%.
Establish an international hub for manufacturing Tractors.
Assist development of vehicles propelled by alternative energy source.
Laying emphasis on R&D activities carried out by companies in India by giving a weighted tax deduction for in-house research.
Plan to have a terminal plan policy for HCV along with incentives.
Political Environment
Indian economy has grown at 8.5% p.a.The manufacturing sector has grown at 8-
10% p.a. in the past few yearsFinancial availability to HCV buyers has
grown in scope during the last few yearsMore than 90% HCVs purchase is on credit.Several Indian companies have partnered
with global players.
Economic Environment
Growth in urbanization, 4th largest economy by PPP index.
The Automotive Research Association of India (ARAI) has been playing a crucial role in assuring safe, less polluting and more efficient vehicles.
Preference for fuel efficient HCVs with low running cost.
New measures are being taken to make the automobiles less polluting. This will help in reducing the exploitation.
Social 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 alternative fuels such as biodiesel and ethanol gasoline, hybrid heavy commercial vehicles have made entry into the market.
Fuel specifications of gasoline and diesel have been aligned with the corresponding fuel specifications for meeting the Euro II, Euro III and Euro IV emission norms.
Technological Environment
Rivalry among Competitors Rivalry in the Indian HCV Industry is intense
due to the foreign companies in the market. Product being matched in a few months by
the competitors.Bargaining Power of Buyers Buyers is having bargaining power due to low
switching costs associated with selecting from among competing brands.
Porter Five Forces Model
Bargaining Power of Suppliers
The industry is comprised of powerful buyers who are generally able to dictate their terms to the suppliers.
Barriers to Entry Introduction of Indian Auto Policy 2002 100% FDI is allowed
Continue……..
Threats of Substitutes The threats of substitutes to HCVs industry is
very less because only alternative is Indian railways .
Switching cost is also high in terms of time, convenience and utility.
Continue……..
Tata Motors has largest share in heavy commercial vehicles industry.
2nd largest heavy commercial vehicle market in the world.
Tata Motors, Ashok Leyland , Eicher Motors are the dominant player of the Indian HCVs Industry
Rise in interest rate adversely affect the demand of HCV because around 90% of vehicles purchased are financed.
Findings
Cost advantage is the strongest point for the Indian HCV Industry.
Indian Railways are the only competitor of Indian HCVs Industry.
Now a days Indian HCV Industry uses sales promotion tool such as electronic media advertisement.
Continue……..
THANKING YOU
http://www.investindia.gov.in http://pmindia.nic.in/Economic_Outlook_2010-11 www.icra.in www.automobileindia.com www.projectvendor.com www.tatamotors.com
IHS Automotive & KPMG International Report
BIBLIOGRAPHY