Evolution of Automobile Industry

Initial Years

 Manufacturing was licensed

 High Customs duty on import

 Steep excise duties & sales tax

 2 Major players: Premier Automobiles Ltd. &

Hindustan Motors

1980s

 Entry of MUL, better product, with government

support

 Seller’s Market, Long Waiting Periods

Early to mid 90s

 Delicensing in 1991

 Removal of capacity restrictions

 Decrease in customs & excise

 Auto finance boom- more players (foreign banks &

non banking companies, better 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
Industry Overview
• Car Industry is in growing phase. After delicensing in
1991 it has grown at a rate of 17% for last few years.
• Rs.1,65,000 crore turnover with investment of over
Rs.50,000 crore and some Rs.35,000 crores of
investment in pipeline.
• Providing direct and indirect employment to 1.31
crore people.
• Contributing 17% to indirect taxes.
• The exports in the automotive sector has grown on
an average CAGR of 30% per year for the last five
years reaching a turnover of 8 billion USD.
• Rural households possessing cars or jeeps has grown
four times between 1993-94 and 2007-08 while in
urban areas it has gone up from 1.2% to 4.6% in the
same time according to NSSO.
• Current growth rate is 12.7%.
The Key Players…
GDP
• Directly and indirectly it employs more than 10
million people.
• The market value of Automobile Industry is more than
US$8 billion. and Contribution in Indian GDP is near
about 4% and will be double by 2016.
• The automobile industry in India grew at rate of 11.5
% over the past five years, but growth rate in last year
2008-09 was only 0.7%.
• FDI inflows in Automobile Industry 2008-09 was
Rs.5,212 Cr an increase of 47.25% compare to 2007-08.
• In 2009, India emerged as Asia's fourth largest
exporter of automobiles, behind Japan, South Korea and
Thailand
Macroeconomic Policies Affecting the
Auto Industry
• Stable national economic performance.
• Consistent national economic and regulatory
policies.
• Transparent economic and regulatory policies.
• Commitment by the government to the auto sector.
• Monetary policies which promote low interest rates
(affordability)
• Stability in exchange rates.
• Improvement of automobile infrastructure (roads,
parking lots and complementary public
transportation).
• High inflation rate
• Open trade and investment environment to foster
economically rational decisions based on market
principles, rather than government policies.
• Consistency, transparency and non discrimination in
automotive policies.
• Harmonisation and Modernisation of Customs
Procedures.
• Harmonisation of automotive safety and emissions
standards and certification.
• Reducing distortion impact of duty and commodity
tax policies.
• Tax policies which encourage consumption, rather
than penalise purchase.
• Ease and availability of consumer and investment
financing.
India is expected to achieve mass
motorization status in 2014
Key Market Drivers
 Increasing disposable incomes

 Rising aspiration levels

 Wide variety and easy availability of Financing

options.

 High sensitivity to Fuel prices

 Lack of urban & rural public transportation

infrastructure

 Flourishing Service Sector

Key Trends
 Market evolution from Mini cars to Hatchbacks to
Compact Sedans now evident

 Increasing customer emphasis on aesthetics and

comfort.

 Shrinking product life-cycles

Automotive Sector in India is guided
by:
• SIAM - Society of Indian Automobile Manufacturers
• ACMA - Auto Components Manufacturers Association
• FADA - Federation of Automobile Dealers Association
• FISPDA- Federation of Indian Spare Parts Dealers
Association
• ARAI - Automobile Research Association of India.

FUTURE PROSPECT OF INDIAN

AUTOMOBILE SECTOR
• Automobile industry expert predicts that by 2050 every
sixth car in the world will be for Indians.
• By 2010 India will take over Germany in sales volumes
and Japan by 2012
• The Indian automobile component industry is estimated
to triple from USD 63 billion to USD 190 billion within a
span of six years by 2012.
• Industry analysts predict this industry to touch USD
13000 million mark by 2010, a cumulative growth of
9.5% annually.
• It is said that for every Re 1 spent, the auto sector
returns Rs. 2.24 to the Indian economy.
TATA MOTORS
• Tata Motors Limited is a multinational corporation
headquartered in Mumbai, India. Part of the Tata Group
• Established in 1945, when the company began
manufacturing locomotives, the company manufactured
its first commercial vehicle in 1954 in a collaboration with
Daimler-Benz AG, which ended in 1969.
• Tata Motors has a consolidated revenue of USD 16
billion after the acquisition of British automotive brands
Jaguar and Landrover in 2008.
• It is India's largest company in the automobile and
commercial vehicle sector.
• The company is the world’s fourth largest truck
manufacturer, and the world’s second largest bus
manufacturer. In India.
• Tata Motors is a dual-listed company traded on both the
Bombay Stock Exchange as well as on the New York
Stock Exchange.
• In 1998 it launched Tata Indica, India's first fully
indigenous passenger car.
• Tata ranks as the leader in every commercial vehicle
segment, and is in the top 3 makers of passenger cars.
Tata Motors is also the designer and manufacturer of the
iconic Tata Nano, which is the cheapest car in the world.
SWOT
STRENGTHS
• The internationalization strategy
• Expertise.
• Intensive management development.
• Successful alliance with Italian mass producer Fiat since
2006.
WEAKNESSES
• The company's passenger car products are based upon
3rd and
4th generation platforms.
• Tata has not got a foothold in the luxury car segment in
its
domestic, Indian market.

OPPORTUNITIES
• Purchased the Land Rover and Jaguar brands from Ford
Motors for UK £2.3 million in 2008.
• Tata Motors Limited acquired Daewoo Motor's
Commercial vehicle business in 2004 for around USD
$16 million.
• Nano is the cheapest car in the World introduced by
TATA.

THREATS
• Other competing car manufacturers have been in the
passenger car business for 40, 50 or more years.
• Sustainability and environmentalism could mean extra
costs
for this low-cost producer.
• Rising prices in the global economy could pose a threat
to
Tata Motors Limited on a couple of fronts.
• The price of steel and aluminium is increasing putting
pressure
on the costs of production.
• Many of Tata's products run on Diesel fuel which is
becoming
expensive globally and within its traditional home
market.

MARUTI UDYOG LIMITED

• Maruti Suzuki India Limited is a publicly listed
automaker in India.
• It was the first company in India to mass-produce and
sell more than a million cars.
• It is the market leader in India and on 17 September
2007, Maruti Udyog was renamed Maruti Suzuki India
Limited.
• The company headquarter is in Gurgaon,Haryana.s
• Established in December 1983, Maruti Suzuki India Ltd.
has ushered a revolution in the Indian car industry.
• This car is meant for an average Indian individual which
is affordable as well as has elegant appeal.
• Maruti Suzuki India Ltd. is the result of collaboration of
Maruti with Suzuki of Japan.
• The company has crossed the milestone of becoming
the first Indian company in March 1994, by
manufacturing in totality one million vehicles.
SWOT
STRENGTHS
• Established distribution and after-sales networks
• Understanding of the Indian market and ability to
liaison with the government
• Ability to design products with differentiating features
• Brand Image
• Experience and Know-how in technology
WEAKNESSES
• Lack of experience with the foreign market
• Inexperience with foreign workforce
• Heavy Import tariffs
OPPORTUNITY
• Increased purchasing power of Indian middleclass
category
• Govt. subsidies
• Tax benefits
• Foreign collaboration
THREATS
• Threats from Chinese manufacturers
• Indian as well as foreign competitors

Key Concerns
• Increasing cost of raw materials (Especially metals)
combined with high inflation rate is set to have
negative impact on industry.
• As the RBI has taken some liquidity tightening steps,
interest rates are set to increase in short term and it
can have dampening effect.
• Passenger vehicle market is fairly fragmented.
There are 14 players and more than 80 models in the
market. So, there exists high competition in the
segment resulting in fierce price competition which
in turn has resulted reduced margins for players.
• Now with increase in cost of inputs competition can
result in further reduction in profitability.
Capital Investment And FDI Inflow
• Honda to sell 150,000 cars by end 2010 after
investing $150-$200mn.
• Mahindra has already launched a no- frills Logan
sedan.
• Nissan has planned to construct a 200,000 unit a
year plant in Chennai, on a new compact car that will
roll out in 2009 entailing a huge investment of
$908m.
• About two-thirds of the planned investments in the
Indian passenger car industry i.e. about Rs.24,000
crore will come from Tata Motors, Maruti, Hyundai,
Honda Motors, General Motors and other companies.
Conclusion
• After de-licensing in July 1991, Auto industry has
grown at a spectacular rate
• The exports in the automotive sector has grown at a
spectacular rate for the last five years & future looks
bright.
• Over Rs. 35,000 crore of investment is in pipeline.
Lot of International players are coming with huge
investments in India.
• Government Policies are towards harnessing the
growth of Car Industry
REFERENCES
• [Link]
• [Link]
[Link]
• [Link]
• [Link]/
• DBS Cholamandalam Securities
ltd. report on Automobile Sector