PREFACE

Indian automobile industry has grown leaps and bounds since 1898, a time when a car had touched the Indian streets for the first time. At present it holds a promising tenth position in the entire world with being # 1 in Two Wheelers and # 4 in commercial vehicles. Withstanding a growth rate of 18% per annum and an annual production of more than 2 million units, it may not be an exaggeration to say that this industry in the coming years will soon touch a figure of 10 million units per year. The automobile industry in India the ninth largest in the world with an annual production of over 2.3 million units in 2011 is expected to become one of the major global automotive industries in the coming years. In this project we have undergone a detailed analysis of India automobile industry by using Fundamental and Technical tools. In order to better understand the threat and growth opportunities of Indian automobile industry with foreign automobile industry we have made comparative analysis of automobile industry of India with China. In this report we have studied the market and discussed some cases that shows threat to Indian automobile Industry.

TABLE OF CONTENTS
CHAPTER TITLE PAGE NO

EXCUTIVE SUMMARY

INTRODUCTION
I 1.1 Objective of the study 1.2 Importance of the study

6 7 7

LITERATURE REVIEW
2.1 Industry Overview 2.2 Industry Definition & Supply chain II 2.3 Passenger vehicle in India 2.4 Key Statistics of small car industry 2.4.1Product 2.4.2 Sales 2.4.3 Exports III 9 9 18 19 21 36

RESEARCH METHODOLOGY
3.1 Research Methodology Used 44

ANALYSIS AND INTERPRETATION

4.1 Market Analysis 4.1.1 Market Characteristics IV 4.1.2 International Market 46 46 48 57 4.2 Fundamental Analysis 4.2.1 Economy 4.2.2 GDP and Small car Industry 65 65 65

FINDINGS OF THE STUDY

5.1 Assessment of Threats & opportunities
2

5.1.1Five Forces Model 5.1.2PEST Analysis 5.1.3BCG Matrix 5.1.4Industrial Life Cycle 5.1.5 SWOT Analysis 5.2 5.3

70 71 71 73 74 75

90

Comparative study of Some Major Players

6.1 Introduction-TATA Motors 6.1.1 Analysis of TATA Motors VI 6.1.2 Porters Five forces Analysis 6.1.3 SWOT Analysis 6.1.4 BCG Matrix 6.2 Introduction-General Motors 6.2.1 Analysis of General Motors 6.2.2 Porters Five Forces Analysis VII
92 92 92

RECOMMENDATION CONCLUSION BIBLIOGRAPHY

95

VIII IX

97 100

EXECUTIVE SUMMARY
The automobile industry today is the most lucrative industry. Due to the increase in disposable income in both rural and urban sector and easy finance being provided by all the financial institutes, the passenger car sales have increased at the rate of 38% per annum in June 2010-11 over the corresponding period in the previous year. Further competition is heating up in the sector with a host of new players coming in and other like Porsche, Bentley, Audi, and BMW all set to venture in the Indian markets. The automobile industry, one of the core sectors, has undergone metamorphosis with the advent of new business and manufacturing practices in the light of liberalization and globalization. The sector seems to be optimistic of posting strong sales in the couple of years in the view of a reasonable surge in demand. The Indian automobile market is gearing towards international standards to meet the needs of the global automobile giants and become a global hub. A detailed analysis of Small car industry has been covered in respect of past growth and performance. Under this project to better understand the Industry we have used Fundamental and Technical tools to make it more authentic and meaningful. An approach has been followed under Fundamental Analysis which covered effect of Recession, the impact of inflation, FDIs, Export, GDP etc. on Small car Industry. The Industry Analysis has been done with the help of five forces model, BCG Matrix, SWOT analysis, industry life cycle. For assessment of threats and growth opportunities of Indian Small car industry with reference to foreign small car industry we have discussed some cases that shows the threat & oppurtunities to Indian Market. At the end conclusion have been specified so as to make the research work more meaningful and purposeful.

CHAPTER I INTRODUCTION

INTRODUCTION
The car industry was born in Germany more than 100 years ago. Early development of the industry began in France in the 1900s. It was in America that the industry came of age thanks to Henry Ford, who introduced the assembly line production system. The car industry pioneered many innovative business practices. For example, the industry introduced the concept of "planned obsolescence," i.e. frequent changes in design to induce customers to switch to a new model every other year. At the same time, by virtue of its sheer size and ubiquity, the industry attracted wide public attention. In the 1960s, consumer activist Ralph Nader attacked the safety record of the 'Big Three' Detroit manufacturers, General Motor, Ford and Chrysler. In the 1970s, as oil prices quadrupled, the industry found itself under attack from environmentalists. The industry also attracted government scrutiny on account of safety concerns, antitrust worries (in the days when General Motors had 60% share of the US market) and pollution. But in view of its size and the number of jobs it created, the industry continued to receive strong government support. When small, fuel efficient and reliable Japanese cars started to eat into the market share of the Big Three, the American government resorted to protectionism. Indias automobile sector consists of the passenger cars and utility vehicles, commercial vehicle, two wheelers and tractors segment. The total market size of the auto sector in India is approximately Rs 540 billion and has been growing at around 8 percent per annum for the last few years. Since the last four to five years, the two wheelers segment has driven the overall volume growth on account of the spurt in the sales of motorcycles. India is the second largest manufacturer of two-wheelers in the world. It stands next only to Japan and China in terms of the number of two-wheelers produced and sold respectively. India is one of the very few countries manufacturing three wheelers in the world. It is the world's largest manufacturer and seller of three-wheelers. Following India's growing openness, the arrival of new and existing models, easy availability of finance at relatively low rate of interest and price discounts offered by the dealers and manufacturers all have stirred the demand for vehicles and a strong growth of the Indian automobile industry The automobile industry in India is the ninth largest in the world with an annual production of over 2.3 million units in 2011. In 2011, India emerged as Asia's fourth largest exporter of automobiles, behind Japan, South Korea and Thailand. Following economic liberalization in India in 1991, the Indian automotive industry has demonstrated sustained growth as a result
6

of increased competitiveness and relaxed restrictions. Several Indian automobile manufacturers such as Tata Motors, Maruti Suzuki and Mahindra and Mahindra, expanded their domestic and international operations. India's robust economic growth led to the further expansion of its domestic automobile market which attracted significant India-specific investment by multinational automobile manufacturers. In February 2011, monthly sales of passenger cars in India exceeded 100,000 units.

1.1

Objective of the study

The objective of this project is to deeply analyze our Indian Small car Industry, which may be beneficial for many purposes like for investment purpose, for knowing the growth trend for better growth as well as the study of opportunities and threats from foreign industries. Secondary data from the internet has been used for effective analysis. The main objectives of the Project study are: Detailed analysis of Small carindustry which is gearing towards international standards Analyze the impact of qualitative factors on industrys and companys prospects Comparative analysis of Some major players of small car Industry.

1.2

Importance of Study

The importance of this study is to practically understand the relevance of the concepts about the industry or to do well in the business organisations and here in the realm of the automobile industry. The present market scenario was analyzed and future demands forecasted using research techniques. Also, a comprehensive study of the major factors involved in this market was conducted so as to see how different and similar a market structure is from the theories.

CHAPTER II LITERATURE REVIEW

Literature Review
2.1 Industry overview
The first car ran on India's roads in 1897. Until the 1930s, cars were imported directly, but in very small numbers. Embryonic automotive industry emerged in India in the 1940s. Mahindra & Mahindra was established by two brothers as a trading company in 1945, and began assembly of Jeep CJ-3A utility vehicles under license from Willys.[19] The company soon branched out into the manufacture of light commercial vehicles (LCVs) and agricultural tractors.[20] Following the independence, in 1947, the Government of India and the private sector launched efforts to create an automotive component manufacturing industry to supply to the automobile industry. However, the growth was relatively slow in the 1950s and 1960s due to nationalisation and the license raj which hampered the Indian private sector. After 1970, the automotive industry started to grow, but the growth was mainly driven by tractors, commercial vehicles and scooters. Cars were still a major luxury. Japanese manufacturers entered the Indian market ultimately leading to the establishment of Maruti Udyog. A number of foreign firms initiated joint ventures with Indian companies.[21] In the 1980s, a number of Japanese manufacturers launched joint-ventures for building motorcycles and light commercialvehicles. It was at this time that the Indian government chose Suzuki for its joint-venture to manufacture small cars. Following the economic liberalisation in 1991 and the gradual weakening of the license raj, a number of Indian and multi-national car companies launched operations. Since then, automotive component and automobile manufacturing growth has accelerated to meet domestic and export demands.[21] Following economic liberalization in India in 1991, the Indian automotive industry has demonstrated sustained growth as a result of increased competitiveness and relaxed restrictions. Several Indian automobile manufacturers such as Tata Motors, Maruti Suzuki and Mahindra and Mahindra, expanded their domestic and international operations. India's robust economic growth led to the further expansion of its domestic automobile market which has attracted significant Indiaspecific investment by multinational automobile manufacturers.[22] In February 2009, monthly sales of passenger cars in India exceeded 100,000 units[23] and has since grown rapidly to a record monthly high of 182,992 units in October 2009. [24] From 2003 to 2010, car sales in India have progressed at a CAGR of 13.7%, and with only 10% of Indian households owning a car in 2009 (whereas this figure reaches 80% in Switzerland for example)[25] this progression is unlikely to stop in the coming decade.[26]Congestion of Indian roads, more than market demand, will likely be the limiting factor.[27] SIAM is the apex industry body representing all the vehicle manufacturers, home-grown and international, in India.[28]

During early 60s & 70s, automobiles came largely in twos. In scooters, you had a Lambretta or a Vespa.In motorcycles, you had a Bullet or a Java.In cars, you had to choose between an Ambassador and a Fiat. In trucks, it was either an Ashok Leyland or a Tata. In tractors, it was between a Swaraj and a Mahindra. This situation reflected the India of yester years. Economic reforms and deregulation have transformed that scene. Automobile industry has written a new inspirational tale. It is a tale of exciting multiplicity, unparalleled growth and amusing consumer experience - all within a few years. India has already become one of the fastest growing automobile markets in the world. This is a tribute to leaders and managers in the industry and, equally to policy planners. The automobile industry has the opportunity to go beyond this remarkable achievement. It is standing on the doorsteps of a quantum leap. The Indian automobile industry is going through a technological change where each firm is engaged in changing its processes and technologies to maintain the competitive advantage and provide customers with the optimized products and services. Starting from the two wheelers, trucks, and tractors to the multi utility vehicles, commercial vehicles and the luxury
10

vehicles, the Indian automobile industry has achieved splendid achievement in the recent years. "The opportunity is staring in your face. It comes only once. If you miss it, you will not get it again" On the canvas of the Indian economy, auto industry maintains a high-flying place. Due to its deep frontward and rearward linkages with several key segments of the economy, automobile industry has a strong multiplier effect and is capable of being the driver of economic growth. A sound transportation system plays an essential role in the country's rapid economic and industrial development. The well-developed Indian automotive industry skillfully fulfils this catalytic role by producing a wide variety of vehicles: passenger cars, light, medium and heavy commercial vehicles, multi-utility vehicles such as jeeps, scooters, motorcycles, mopeds, three wheelers, tractors etc. The automotive sector is one of the core industries of the Indian economy, whose prospect is reflective of the economic resilience of the country. Continuous economic liberalization over the years by the government of India has resulted in making India as one of the prime business destination for many global automotive players. The automotive sector in India is growing at around 18 per cent per annum. "The auto industry is just a multiplier, a driver for employment, for investment, for technology" The Indian automotive industry started its new journey from 1991 with delicensing of the sector and subsequent opening up for 100 per cent FDI through automatic route. The automobile sector has been contributing its share to the shining economic performance of India in the recent years. With the Indian middle class earning higher per capita income, more people are ready to own private vehicles including cars and two-wheelers. Product movements and manned services have boosted in the sales of medium and sized commercial vehicles for passenger and goods transport. Side by side with fresh vehicle sales growth, the automotive components sector has witnessed big growth. The domestic auto components consumption has crossed rupees 9000 crore and an export of one half size of this figure.

Eye-Catching FDI Destination - INDIA!

India is on the peak of the Foreign Direct Investment wave. FDI flows into India trebled from $6 billion in 2007-08 to $19 billion in 2009-10 and are expected to quadruple to $25 billion in 2010-11. By AT Kearney's FDI Confidence Index 2006, India is the second most attractive FDI destination after China, pushing the US to the third position. It is commonly believed that soon India will catch up with China. This may also happen as China attempts to cool the
11

economy and its protectionism measures that are eclipsing the Middle Kingdom's attractiveness. With rising wages and high land prices in the eastern regions, China may be losing its edge as a low-cost manufacturing hub. India seems to be the natural choice. India is up-and-coming a significant manufacturer, especially of electrical and electronic equipment, automobiles and auto-parts. During 2005-2010 of the total FDI inflow, electrical and electronic (including computer software) and automobile accounted for 13.7 per cent and 8.4 per cent respectively. In services sectors, the lead players are the US, Singapore and the UK. The total investment from these three countries accounted for about 40 per cent of the FDI in the services sector. In automobiles, the key player is Japan. Japan accounted for about 41 per cent of the total FDI in automobile, surpassing all its competitors by a big margin. India's vast domestic market and the large pool of technically skilled manpower were the magnetism for the foreign investors. Hitherto, known for knowledge-based industries, India is emerging a powerhouse of conventional manufacturing too. The manufacturing sector in the Index for Industrial Production has grown at an annual rate of over 9 per cent over the last three years. Korean auto-makers think India is a better destination than China. Though China provides a bigger market for automobiles, India offers a potential for higher growth. Clearly, manufacturing and service-led growth and the increasing consumerisation makes India one of the most important destinations for FDI.

Automotive Mission Plan 2016

The bumper-to-bumper traffic of global automobile biggies on the passage to India has finally made government sit up and take notice. In a bid to drive greater investments into the sector, ministry of heavy industries has decided to put together a 10-year mission plan to make India a global hub for automotive industry."The ten year mission plan will also set the roadmap for budgetary fiscal incentives" The Government of India is drawing up an Automotive Mission Plan 2016 that aims to make India a global automotive hub. The idea is to draw an innovative plan of action with full participation of the stakeholders and to implement it in mission mode to meet the challenges coming in the way of growth of industry. Through this Automotive Mission Plan,Government also wants to provide a level playing field to the players in the sector and to lay a predictable future direction of growth to enable the manufacturers in making a more informed investment decision.

Major players in the automobile sector are:

Tata
12

Mahindra Ashok Leyland Bajaj Hero Honda Daimler Chrysler Suzuki Ford Fiat Hyundai General Motors Volvo Yamaha Mazda

Foreign Companies in the Indian auto-sector

Until the mid-1990s, automobile industry in India consisted of just a handful of local companies with small capacities and obsolete technologies. Nevertheless, after the sector was thrown open to foreign direct investment in 1996, some of the global majors moved in and Hyundai, Honda, Toyota, General Motors, Ford and Mitsubishi set up their manufacturing bases. Over the past four to five years, the country has seen the launch of several domestic and foreign models of passenger cars, multi-utility vehicles (MUVs), commercial vehicles and two-wheelers and a robust growth in the production of all kinds of vehicles. Moreover, owing to its low-cost, high-quality manufacturing, India has also emerged as a significant outsourcing hub for auto components and auto engineering design, rivaling Thailand. German auto-maker Volkswagen AG, too, is looking to enter India. India is expected to be the small car hub for Japanese major Toyota. The car, a hot hatch like the Swift or Getz is likely to be exported to markets like Brazil and other Asian countries. This global car is crucial for Toyota, which is looking to improve its sales in the BRIC (Brazil, Russia, India, China) markets. Two multi-national car majors -- Suzuki Motor Corporation of Japan and Hyundai Motor Company of Korea -- have indicated that their manufacturing facilities will be used as a global source for small cars. The spurt in in-house product development skills and the
13

uniquely high concentration of small cars will influence the country's ability to become a sourcing hub for sub-compact cars. A heartening feature of the changing automobile scene in India over the past five years is the newfound success and confidence of domestic manufacturers. They are no longer afraid of competition from the international auto majors. For instance, today, Tata Motor's Indigo leads the popular customer category, while its Indica is neck-to-neck with Hyundai's Santro in the race for the top-slot in the B category. Meanwhile M&M's Scorpio has beaten back the challenge from Toyota's Qualis to lead the SUV segment. Similarly, a few Indian winners have emerged in the motorbike market -- the 150 and 180 cc Pulsar from Bajaj and 110 cc Victor from the TVS stable. The 93 cc Bike from Bajaj and 110 cc Freedom bike from LML have also emerged as winners. Evidently, Indian players have learnt from past mistakes and developed the skills to build cheaper automobiles using `appropriate' technologies. TVS, for instance, paid an overseas source $100,000 to fine-tune home-grown engines rather than $1.5 million to import the entire engine. Similarly, M&M adapted available systems and off-the-shelf components from global suppliers to keep costs down and go for aggressive pricing. True, Indian players are still lacking in scale of operation. While economies of scale no doubt play an important role in the auto sector, a few Indian manufacturers relied on innovation rather than scale of operation for competitive advantage. For instance, Sundram Fasteners was able to achieve the feat of directly supplying radiator caps to General Motors purely on the strength of innovation in product quality. The domestic tooling industry bagged the order for the Toyota Kirloskar transmission plant in the face of stiff competition from multinational corporations. The cost of the entire job turned out to be only a fraction of the original estimate. As the automobile industry has matured over the past decade, the auto components industry has also grown at a rapid pace and is fast achieving global competitiveness both in terms of cost and quality. In fact, industry observers believe that while the automobile market will grow at a measured pace, the components industry is poised for a take-off. For it is among the handful of industries where India has a distinct competitive advantage. International automobile majors, such as Hyundai, Ford, Toyota and GM, which set up their bases in India in the 1990s, persuaded some of their overseas component suppliers to set up manufacturing facilities in India.

14

Consequently, the value of cumulative output of the auto components industry rose rapidly to Rs 30,640 crore at end-2003-04 from just Rs 11,475 crore in 1996-97. Foreign companies such as Delphi, which followed General Motors in 1995, and Visteon, that followed Ford Motors in 1998, soon realised the substantial cost advantage of manufacturing components in India. Finding the cost lower by about 30 per cent, they began exploring the possibility of exporting back these low-cost, high-quality components to their global factories and, thus, reducing their overall costs. Not surprisingly, the industry's exports registered a more than four-fold jump to Rs 4,800 crore in 2003-04 from just Rs 1,033 crore in 1996-97. Automobile majors such as Maruti Udyog, Toyota, Hyundai have now finalised their plans to invest in some of the critical auto components. According to the Automotive Component Manufacturers Association of India (ACMA) officials, auto component manufacturers are expected to invest about Rs 10,000 crore over the next five years at the rate of Rs 2,000 crore per annum. According to analysts, the auto component industry could emerge as the next success story after software, pharmaceuticals, BPO and textiles. The size of the global auto component industry is estimated at $1 trillion and is set to grow further. Against this backdrop, McKinsey's latest report has estimated that the sector has the potential of increasing its exports to $25 billion by 2015 from $1.1 billion in 2004.

Threat to the Dream!

India's expedition to become a global auto manufacturing hub could be seriously challenged by its inability to uphold its low-cost production base. A survey conducted by the research, KMPMG firm reveals that the Indian auto component manufacturers are increasingly becoming skeptical about sustaining the low-cost base as overheads including labour costs and complex tax regime are constantly rising. The survey said many executives believe that India's cost advantage is grinding down fast as labour costs are constantly increasing and retaining employees is becoming more and more difficult. Increased presence of global automotive companies in the country was cited as one of the reasons for the high erosion rate. Indian auto businesses will only flourish if they boost investments in automation. In the longer term, cost advantage will only be retained if Indian capital can be used to develop lowcost automation in manufacturing. This is the way to preserve our low cost.

15

Global auto majors are also cynical about India's low cost manufacturing base. India taxation remains a big disadvantage. This is not about tax rates it is just about unnecessary complexity. But some companies also believe there is scope for reducing the cost of doing business. In spite of this there are opportunities to exploit lower costs right across the board. It's true that labour costs are definitely increasing but they are still five per cent of the total operational costs. The labour costs can be further reduced if companies are successful in bringing down other costs like reducing power costs. Low-cost base can never last long. The company said Indian industry has till now relied on very labour intensive model but it would have to switch to a more capital intensive model now. The Indian Automobile Industry manufactures over 11 million vehicles and exports about 1.5 million each year. The dominant products of the industry are two-wheelers with a market share of over 75% and passenger cars with a market share of about 16%. Commercial vehicles and three-wheelers share about 9% of the market between them. About 91% of the vehicles sold are used by households and only about 9% for commercial purposes. The industry has a turnover of more than USD $35 billion and provides direct and indirect employment to over 13 million people.???The supply chain is similar to the supply chain of the automotive industry in Europe and America.Interestingly, the level of trade exports in this sector in India has been medium and imports have been low. However, this is rapidly changing and both exports and imports are increasing. The demand determinants of the industry are factors like affordability, product innovation, infrastructure and price of fuel. Also, the basis of competition in the sector is high and increasing, and its life cycle stage is growth. With a rapidly growing middle class, all the advantages of this sector in India are yet to be leveraged. With a high cost of developing production facilities, limited accessibility to new technology, and increasing competition, the barriers to enter the Indian Automotive sector are high. On the other hand, India has a well-developed tax structure. The power to levy taxes and duties is distributed among the three tiers of Government. The cost structure of the industry is fairly traditional, but the profitability of motor vehicle manufacturers has been rising over the past five years. Major players, like Tata Motors and Maruti Suzuki have material cost of about 80% but are recording profits after tax of about 6% to 11%. The level of technology change in the Motor vehicle Industry has been high but, the rate of change in technology has been medium. Investment in the technology by the producers has

16

been high. System-suppliers of integrated components and sub-systems have become the order of the day. However, further investment in new technologies will help the industry be more competitive. Over the past few years, the industry has been volatile. Currently, India's increasing per capita disposable income which is expected to rise by 106% by 2015 and growth in exports is playing a major role in the rise and competitiveness of the industry.Tata Motors is leading the commercial vehicle segment with a market share of about 64%. Maruti Suzuki is leading the passenger vehicle segment with a market share of 46%.Hyundai Motor India and Mahindra and Mahindra are focusing expanding their footprint in the overseas market. Hero MotoCorp is occupying over 41% and sharing 26% of the two-wheeler market in India with Bajaj Auto. Bajaj Auto in itself is occupying about 58% of the three-wheeler market.Consumers are very important of the survival of the Motor Vehicle manufacturing industry. In 2008-09, customer sentiment dropped, which burned on the augmentation in demand of cars. Steel is the major input used by manufacturers and the rise in price of steel is putting a cost pressure on manufacturers and cost is getting transferred to the end consumer. The price of oil and petrol affect the driving habits of consumers and the type of car they buy. The key to success in the industry is to improve labour productivity, labour flexibility, and capital efficiency. Having quality manpower, infrastructure improvements, and raw material availability also play a major role. Access to latest and most efficient technology and techniques will bring competitive advantage to the major players. Utilising manufacturing plants to optimum level and understanding implications from the government policies are the essentials in the Automotive Industry of India. Both, Industry and Indian Government are obligated to intervene the Indian Automobile industry. The Indian government should facilitate infrastructure creation, create favourable and predictable business environment, attract investment and promote research and development. The role of Industry will primarily be in designing and manufacturing products of world-class quality establishing cost competitiveness and improving productivity in labour and in capital. With a combined effort, the Indian Automotive industry will emerge as the destination of choice in the world for design and manufacturing of automobiles. The first car ran on India's roads in 1897. Until the 1930s, cars were imported directly, but in very small numbers. Embryonic automotive industry emerged in India in the 1940s. Mahindra & Mahindra was established by two brothers as a trading company in 1945, and began assembly of Jeep CJ-3A

17

utility vehicles under license from Willys. The company soon branched out into the manufacture of light commercial vehicles (LCVs) and agricultural tractors. Following the independence, in 1947, the Government of India and the private

sector launched efforts to create an automotive component manufacturing industry to supply to the automobile industry. However, the growth was relatively slow in the 1950s and 1960s due to nationalisation and the license raj which hampered the Indian private sector. After 1970, the automotive industry started to grow, but the growth was mainly driven by tractors, commercial vehicles and scooters. Cars were still a major luxury. Japanese manufacturers entered the Indian market ultimately leading to the establishment of Maruti Udyog. A number of foreign firms initiated joint ventures with Indian companies. In the 1980s, a number of Japanese manufacturers launched joint-ventures for building motorcycles and light commercial-vehicles. It was at this time that the Indian government chose Suzuki for its joint-venture to manufacture small cars. Following the economic liberalisation in 1991 and the gradual weakening of the license raj, a number of Indian and multi-national car companies launched operations. Since then, automotive component and automobile manufacturing growth has accelerated to meet domestic and export demands. Following economic liberalization in India in 1991, the Indian automotive industry has demonstrated sustained growth as a result of increased competitiveness and relaxed restrictions. Several Indian automobile manufacturers such as Tata Motors, Maruti Suzuki and Mahindra and Mahindra, expanded their domestic and international operations. India's robust economic growth led to the further expansion of its domestic automobile market which has attracted significant India-specific investment by multinational automobile manufacturers. In February 2009, monthly sales of passenger cars in India exceeded 100,000 units and has since grown rapidly to a record monthly high of 182,992 units in October 2009.[24] From 2003 to 2010, car sales in India have progressed at a CAGR of 13.7%, and with only 10% of Indian households owning a car in 2009 (whereas this figure reaches 80% in Switzerland for example) this progression is unlikely to stop in the coming decade. Congestion of Indian roads, more than market demand, will likely be the limiting factor. SIAM is the apex industry body representing all the vehicle manufacturers, home-grown and international, in India.

18

2.2

Industry Definition

This class consists of units mainly engaged in manufacturing motor vehicles or motor vehicle engines,Products and Services The primary activities of this industry are: Motor cars manufacturing Motor vehicle engine manufacturing The major products and services in this industry are: Passenger motor vehicle manufacturing segment (Passenger Cars, Utility Vehicles & Multi Purpose Vehicles) Commercial Vehicles (Medium & Heavy and Light Commercial Vehicles) Two Wheelers Three Wheelers.

19

2.3

The supply chain of automobile industry

The supply chain of automobile industry in India is very similar to the supply chain of the automotive industry in Europe and America. The orders of the industry arise from the bottom of the supply chain i. e., from the consumers and go through the automakers and climbs up until the third tier suppliers. However the products, as channeled in every traditional automotive industry, flow from the top of the supply chain to reach the consumers. Automakers in India are the key to the supply chain and are responsible for the products and innovation in the industry. The description and the role of each of the contributors to the supply chain are discussed below. Third Tier Suppliers: These companies provide basic products like rubber, glass, steel, plastic and aluminum to the second tier suppliers. Second Tier Suppliers: These companies design vehicle systems or bodies for First Tier Suppliers and OEMs. They work on designs provided by the first tier suppliers or OEMs. They also provide engineering resources for detailed designs. Some of their services may include welding, fabrication, shearing, bending etc.
20

First Tier Suppliers: These companies provide major systems directly to assemblers. These companies have global coverage to follow their customers to various locations around the world. They design and innovate to provide "black-box" solutions for the requirements of their customers. Black-box solutions are solutions created by suppliers using their own technology to meet the performance and interface requirements set by assemblers. First tier suppliers are responsible not only for the assembly of parts into complete units like dashboard, breaks-axle-suspension, seats, or cockpit but also for the management of second-tier suppliers. Automakers/Vehicle Manufacturers/Original Equipment Manufacturers (OEMs): After researching consumers' wants and needs, automakers begin designing models which are tailored to consumers' demands. The design process normally takes five years. These companies have manufacturing units where engines are manufactured and parts supplied by first tier suppliers and second tier suppliers are assembled. Automakers are the key to the supply chain of the automotive industry. Examples of these companies are Tata Motors, Maruti Suzuki, Toyota, and Honda. Innovation, design capability and branding are the main focus of these companies. Dealers: Once the vehicles are ready they are shipped to the regional branch and from there, to the authorised dealers of the companies. The dealers then sell the vehicles to the end customers. Parts and Accessory: These companies provide products like tires, windshields, and air bags etc. to automakers and dealers or directly to customers. Service Providers: Some of the services to the customers include servicing of vehicles, repairing parts, or financing of vehicles. Many dealers provide these services but, customers can also choose to go to independent service providers.

21

2.4

Key statistics

The production of automobiles has greatly increased in the last decade.

Year

Car Production

% Change

Commercial

% Change

Total Vehicles Prodn.

% Change

2010

2,814,584

29.39

722,199

54.86

3,536,783

33.89

2009

2,175,220

17.83

466,330

-4.10

2,641,550

13.25

2008

1,846,051

7.74

486,277

-9.99

2,332,328

3.35

2007

1,713,479

16.33

540,250

-1.20

2,253,999

10.39

22

Year

Car Production

% Change

Commercial

% Change

Total Vehicles Prodn.

% Change

2006

1,473,000

16.53

546,808

50.74

2,019,808

19.36

2010

1,264,000

7.27

362,755

9.00

1,628,755

7.22

2009

1,178,354

29.78

332,803

31.25

1,511,157

23.13

2008

907,968

28.98

253,555

32.86

1,161,523

22.96

2007

703,948

7.55

190,848

19.24

894796

8.96

2006

654,557

26.37

160,054

-43.52

814611

1.62

2005

517,957

-2.85

283,403

-0.58

801360

-2.10

2004

533,149

285,044

818193

Year

20062007

20072008

20082009

20092010

20102011

Motor Vehicle Production

8,467,853

9,743,503

11,087,997 10,853,930 11,175,479

Industry Million

Revenue

USD

24,379

26,969

30,507

32,383

33,342*

23

Year

20062007

20072008

20082009

20092010

20102011

Exports (Units)

629,544

806,222

1,011,529

1,238,333

1,530,660

Exports (Revenue)

1,915

2,231

2,552

3,008

3,718*

Automobile Production
Type of Vehicle 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011

Passenger Vehicles

1,209,876

1,309,300

1,545,223

1,777,583

1,838,697

Commercial Vehicles 353,703

391,083

519,982

549,006

417,126

Three Wheelers

374,445

434,423

556,126

500,660

501,030

Two Wheelers

6,529,829

7,608,697

8,466,666

8,026,681

8,418,626

Total.

8,467,853

9,743,503

11,087,997

10,853,930

11,175,479

Automobile Sales
Type of Vehicle 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011

Passenger Vehicles

1,061,572

1,143,076

1,379,979

1,549,882

1,551,880

24

Type of Vehicle

2006-2007

2007-2008

2008-2009

2009-2010

2010-2011

Commercial Vehicles 318,430

351,041

467,765

490,494

384,122

Three Wheelers

307,862

359,920

403,910

364,781

349,719

Two Wheelers

6,209,765

7,052,391

7,872,334

7,249,278

7,437,670

Total

7,897,629

8,906,428

10,123,988

9,654,435

9,723,391

Automobile Exports
Type of Vehicle 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011

Passenger Vehicles

166,402

175,572

198,452

218,401

335,739

Commercial Vehicles 29,940

40,600

49,537

58,994

42,673

Three Wheelers

66,795

76,881

143,896

141,225

148,074

Two Wheelers

366,407

513,169

619,644

819,713

1,004,174

Total

629,544

806,222

1,011,529

1,238,333

1,530,660

Product and service segmentation

The automotive industry of India is categorised into passenger cars, two-wheelers, commercial vehicles and three-wheelers, with two-wheelers dominating the market. More
25

than 75% of the vehicles sold are two-wheelers. Nearly 59% of these two-wheelers sold were motorcycles and about 12% were scooters. Mopeds occupy a small portion in the twowheeler market however; electric two-wheelers are yet to penetrate. The passenger vehicles are further categorised into passenger cars, utility vehicles and multipurpose vehicles. All sedan, hatchback, station wagon and sports cars fall under passenger cars. Tata Nano, is the world's cheapest passenger car, manufactured by Tata Motors - a leading automaker of India. Multi-purpose vehicles or people-carriers are similar in shape to a van and are taller than a sedan, hatchback or a station wagon, and are designed for maximum interior room. Utility vehicles are designed for specific tasks. The passenger vehicles manufacturing account for about 15% of the market in India. Commercial vehicles are categorised into heavy, medium and light. They account for about 5% of the market. Three-wheelers are categorised into passenger carriers and goods carriers. Three-wheelers account for about 4% of the market in India.

Segment

200607

200708

200809

200910

201011

Passenger Car (%)

10.22

10.39

9.91

10.65

12.42

Utility Vehicles (UVs) (%)

2.15

2.23

2.18

2.18

2.39

Multi Purpose Vehicles (MPVs) (%)

0.87

0.82

0.75

0.82

0.98

Total Passenger Vehicles (%)

13.25

13.44

12.83

13.65

15.79

Passenger Carriers (%)

0.36

0.32

0.32

0.28

0.43

Goods Carriers (%)

2.01

2.19

2.01

2.44

2.10

26

Segment

200607

200708

200809

200910

201011

Total Medium & Heavy Commercial Vehicles[18] (%)

2.37

2.51

2.33

2.73

2.53

Passenger Carriers (%)

0.28

0.25

0.25

0.24

0.32

Goods Carriers (%)

1.17

1.27

1.36

1.67

1.77

Total Light Commercial Vehicles (%)

1.45

1.52

1.61

1.90

2.10

Total Commercial Vehicles[18] (%)

3.82

4.03

3.94

4.63

4.63

Passenger Carriers (%)

2.56

2.17

2.39

2.34

2.51

Goods Carriers (%)

1.61

1.73

1.65

1.65

1.51

Total Three Wheelers[18] (%)

4.17

3.90

4.04

4.00

4.01

Scoters/Scooterettee (%)

13.01

11.68

10.21

9.31

11.57

Motorcycles/Step-Throughs (%)

61.24

62.86

65.24

64.83

59.35

Mopeds (%)

4.52

4.08

3.74

3.52

4.47

Electric Two Wheelers (%)

0.07

0.19

27

Segment

200607

200708

200809

200910

201011

Total Two Wheelers (%)

78.76

78.63

79.18

77.73

75.57

Grand Total (%)

100.00

100.00

100.00

100.00

100.00

Vehicle Registration
India had over 100 million vehicles registered on its roads in the year 2008. This is a growth of about 100% in the past 9 years. Over 77% and about 77 million of these vehicles are twowheelers, about 14% and over 14 million are cars, jeeps and taxis. Over 5 million and over 1 million vehicles registered are goods vehicles and buses respectively. Two-wheelers account a significant market share. Tata Motors with the launch of Tata Nano is trying to attract some of these two-wheeler buyers to buy a small, cheap and affordable passenger car.

Total Number of Vehicle Registrations in India from 2004 to 2011

Cars, Jeeps and Taxis '000) (in

All Year Vehicles (in '000)

Two Wheelers (in '000)

Buses (in '000)

Goods Vehicles (in '000)

Other Vehicles (in '000)

2004

54,991

38,556

7,058

634

2,948

5,795

2005

58,924

41,581

7,613

635

2,974

6,121

2006

67,007

47,519

8,599

721

3,492

6,676

28

All Year Vehicles (in '000)

Two Wheelers (in '000)

Cars, Jeeps and Taxis '000) (in

Buses (in '000)

Goods Vehicles (in '000)

Other Vehicles (in '000)

2007

72,718

51,922

9,451

768

3,749

6,828

2008

80,045

57,417

10,460

822

4,053

7,337

2009

88,068

63,487

11,571

879

4,345

7,891

2010

96,808

70,141

12,810

936

4,652

8,464

2011

106,591

77,588

14,222

1,003

5,018

9,065

Emission norms
In tune with international standards to reduce vehicular pollution, the central government unveiled the standards titled 'India 2000' in 2000 with later upgraded guidelines as 'Bharat Stage'. These standards are quite similar to the more stringent European standards and have been traditionally implemented in a phased manner, with the latest upgrade getting implemented in 13 cities and later, in the rest of the

nation. Delhi(NCR), Mumbai, Kolkata, Chennai, Bangalore, Hyderabad, Ahmedabad, Pune, Surat, Kanpur, Lucknow, Solapur, and Agra are the 13 cities where Bharat Stage IV has been imposed while the rest of the nation is still under Bharat Stage III.

Geographic Segmentation

29

The total number of new vehicles registered in the 28 states and 7 union territories of India in the year 2008 were about 106,591. The diagram above displays the registration of new vehicles in various states and union territories. About 16 states and 1 union territory had over a million new vehicles registered. Tamil Nadu had about 16 million new vehicles registered, Maharashtra had over 13 million, and Gujarat had over 10 million. About 91% of these vehicles are non-commercial vehicles purchased by households looking for a twowheeler, or a car. Only about 9% of new vehicles registered are used for commercial purposes. Details of category wise new vehicle registrations in the various states and union territories are displayed. The number of new vehicles registrations has grown by about 66% in the past five years.

Geographical Segmentation: State-wise motor vehicles registration in India from 2004 2011.
2004 States\Year (in '000) 2006 (in '000) 2008 (in '000) 2010 (in '000) 2011 (in '000)

2005(in '000)

2007(in '000)

2009(in '000)

Andhra Pradesh

1111

4,389

5,002

5,720

6,446

7,232

8,042

8,989

Arunachal Pradesh

21

21

21

21

21

21

21

21

Assam

542

596

657

727

798

883

973

1,086

Bihar

949

1,024

1,121

751

726

694

647

593

Chhattisgarh

857

948

1,076

1,216

1,367

1,536

1,726

1,939

30

2004 States\Year (in '000)

2005(in '000)

2006 (in '000)

2007(in '000)

2008 (in '000)

2009(in '000)

2010 (in '000)

2011 (in '000)

Goa

341

366

397

436

483

537

585

638

Gujarat

5,576

6,008

6,508

7,087

7,892

8,785

9,633

10,543

Haryana

1,949

2,122

2,279

2,548

2,883

3,267

3,689

4,164

Himachal Pradesh

217

244

269

289

329

375

421

480

Jammu Kashmir

&

330

364

399

439

493

556

628

719

Jharkhand

909

984

1,101

1,217

1,341

1,479

1,630

1,796

Karnataka

3,537

3,636

3,738

3,977

4,338

4,717

5,036

5,360

Kerala

2,112

2,315

2,552

2,792

3,180

3,612

4,034

4,564

Madhya Pradesh

3,095

3,173

3,459

3,804

4,119

4,442

4,710

4,968

Maharashtra

6,760

7,414

8,134

8,969

10,055 11,281

12,477 13,817

31

2004 States\Year (in '000)

2005(in '000)

2006 (in '000)

2007(in '000)

2008 (in '000)

2009(in '000)

2010 (in '000)

2011 (in '000)

Manipur

77

90

97

106

114

123

134

145

Meghalaya

62

67

73

73

78

84

89

95

Mizoram

31

34

37

42

48

54

61

70

Nagaland

160

177

162

172

186

201

215

230

Orissa

1,096

1,215

1,359

1,525

1,717

1,936

2,159

2,417

Punjab

2,910

3,103

3,308

3,529

3,859

4,225

4,571

4,992

Rajasthan

2,943

3,197

3,487

3,834

4,285

4,791

5,281

5,815

Sikkim

12

13

15

17

19

21

23

25

Tamil Nadu

5,162

5,658

8,005

8,575

10,085 11,901

13,860 16,207

Tripura

50

57

66

76

85

95

105

117

Uttarakhand

364

406

457

516

580

651

732

822

Uttar Pradesh

4,921

5,171

5,928

6,460

7,271

8,144

8,970

9,919

32

2004 States\Year (in '000)

2005(in '000)

2006 (in '000)

2007(in '000)

2008 (in '000)

2009(in '000)

2010 (in '000)

2011 (in '000)

West Bengal

1,690

1,690

2,366

2,548

2,816

3,138

3,464

3,833

Andaman Nicobar Islands

& 25 28 28 28 31 34 38 42

Chandigarh

386

386

562

586

629

677

732

799

Dadra & Nagar Haveli

13

13

31

35

43

54

67

86

Daman & Diu

37

41

44

48

55

63

71

79

Delhi

3,635

3,699

3,971

4,237

4,544

4,868

5,166

5,469

Lakshadweep

Pondicherry

252

270

293

313

359

418

495

552

33

Geographical

Segmentation:

Category-wise

registration

in

Union

Territories of India
Andaman Type of Vehicle & Nicobar Chandigarh Islands Dadra & Nagar Haveli

Daman & Diu

Delhi Lakshadweep Pondicherry

Multiaxled/Artic ulated Vehicles/Trucks & Lorries 1,519 1,671 5,487 1,896 75,601 6,588

Light

Motor

Vehicles (goods)

7,459

1,190

1,829

75,947 270

2,923

Buses

459

1,239

154

361

36,059 -

1,831

Taxis

436

1,173

108

43

24,712 -

1,421

Light Vehicles

Motor 784 500 890 20,893 408 4,283

(passenger)

Total Commercial

3,198

11,542

7,439

5,019

233,21 2

678

17,046

Two Wheelers

21,74

416,917

17,881

30,351

2,665, 750

3,978

235,438

34

Andaman Type of Vehicle & Nicobar Chandigarh Islands

Dadra & Nagar Haveli

Daman & Diu

Delhi Lakshadweep Pondicherry

Cars

1,693

157,612

9,270

12,278

1,192, 389

78

47,642

Jeeps

1,033

429

295

122,28 3

85

3,838

Omni Buses

38

8,386

2,545

Tractors

261

36

44

165

4,851

44

318

Trailers

67

46

124

99

1,582

Others

461

30

9,705

503

4,541

Total commercial

non-

25,258

574,565

27,000

43,281

4,003, 463

4,693

295,904

35

Exports

Mahindra Scorpio Jeep in service with the Italy's CNSAS. India's automobile exports have grown consistently and reached $4.5 billion in 2009, with United Kingdom being India's largest export market followed

byItaly, Germany, Netherlands and South Africa. India's automobile exports are expected to cross $12 billion by 2014. According to New York Times, India's strong engineering base and expertise in the manufacturing of low-cost, fuel-efficient cars has resulted in the expansion of manufacturing facilities of several automobile companies like Nissan, Toyota, Volkswagen and Suzuki. In 2008, Hyundai Motors alone exported 240,000 cars made in India. Nissan Motors plans to export 250,000 vehicles manufactured in its India plant by 2011. Similarly, General Motors announced its plans to export about 50,000 cars manufactured in India by 2011. In September 2009, Ford Motors announced its plans to set up a plant in India with an annual capacity of 250,000 cars for US$500 million. The cars will be manufactured both for the Indian market and for export. The company said that the plant was a part of its plan to make India the hub for its global production business. Fiat Motors also announced that it would source more than US$1 billion worth auto components from India. In July 2010, The Economic Times reported that PSA Peugeot Citron was planning to reenter the Indian market and open a production plant in Andhra Pradesh with an annual capacity of 100,000 vehicles, investing EUR 700M in the operation. PSA's intention to utilise this production facility for export purposes however remains unclear as of December 2010.

36

A Tata Safari on display in Poznan,Poland. In 2009 India (0.23m) surpassed China (0.16m) as Asia's fourth largest exporter of cars after Japan (1.77m), Korea (1.12m) and Thailand (0.26m) by allowing foreign carmakers 100% ownership of factories in India, which China does not allow. In recent years, India has emerged as a leading center for the manufacture of small cars. Hyundai, the biggest exporter from the country, now ships more than 250,000 cars annually from India. Apart from shipments to its parent Suzuki, Maruti Suzuki also manufactures small cars for Nissan, which sells them in Europe. Nissan will also export small cars from its new Indian assembly line. Tata Motors exports its passenger vehicles to Asian and African markets, and is in preparation to launch electric vehicles in Europe in 2010. The firm is also planning to launch an electric version of its low-cost car Nano in Europeand the U.S. Mahindra & Mahindra is preparing to introduce its pickup trucks and small SUV models in the U.S. market. Bajaj Auto is designing a low-cost car for the Renault Nissan Automotive India, which will market the product worldwide. Renault Nissan may also join domestic commercial vehicle manufacturer Ashok Leyland in another small car project. While the possibilities are impressive, there are challenges that could thwart future growth of the Indian automobile industry. Since the demand for automobiles in recent years is directly linked to overall economic expansion and rising personal incomes, industry growth will slow if the economy weakens.

Top 20 Export destinations in 2010-2011 and growth from previous year

2009-2010 (in USD Millions) 2010-2011 (in USD Millions) Percentage Growth

Rank

Country

37

Rank

Country

2009-2010 (in USD Millions)

2010-2011 (in USD Millions)

Percentage Growth

United States of America

593.64

525.24

-11.52

Italy

332.35

359.68

8.22

Sri Lanka

249.14

216.11

-13.26

South Africa

224.93

188.57

-15.79

United Kingdom

165.57

246.32

48.77

United Emirates

Arab

164.44

192.74

17.21

Algeria

147.34

265.63

80.28

Bangladesh

137.26

164.86

20.11

Egypt

134.43

143.54

5.99

10

Germany

133.52

409.63

206.8

11

Colombia

118.88

120.71

1.54

38

Rank

Country

2009-2010 (in USD Millions)

2010-2011 (in USD Millions)

Percentage Growth

12

Nepal

111.33

98.13

-11.86

13

Mexico

93.80

94.10

0.32

14

Turkey

83.53

73.82

-11.63

15

Spain

81.01

56.96

-29.69

16

France

76.77

134.21

74.83

17

Nigeria

66.01

148.74

125.03

18

Greece

65.75

127.63

94.1

19

Netherland

65.19

163.66

151.05

20

Ghana

59.91

38.30

-36.07

39

2.5

Passenger vehicles in India

This list is of cars that are officially available and serviced in India. While other cars can be imported to the country at a steep 105% import duty, car-makers such as Alfa Romeo, McLaren,Pagani, Cadillac, Chrysler, SSC, Zenvo,SEAT Smart, Daihatsu, Lexus, Infi niti,Acura, Saab, Spyker, Lotus, Ariel,Caterham, Peugeot,Citron,Mazda, Jeep, SsangYong, Kia, GAZ and Proton are in varying stages of official introduction to the Indian automobile market.

Indian automotive companies

Chinkara Motors: Beachster, Hammer, Roadster 1.8S, Rockster, Jeepster, Sailster Hindustan Motors: Ambassador ICML: Rhino Rx Mahindra: Major, Xylo, Scorpio, Bolero, Thar, Verito, Genio, XUV500. Premier Automobiles Limited: Sigma, RiO San Motors: Storm TataMotors:Nano, Indica, Vista, Indigo, Manza, Indigo CS, Sumo, Grande, Venture, Safari, Xenon, Aria

Foreign automotive companies in India Vehicles manufactured or assembled in India

Manufactured only in Chennai, India, thei10 is one of Hyundai's best selling globally exported cars.

40

Maruti Swift. Maruti Suzuki, a subsidiary of Japan's Suzuki Motor, is the largest automobile manufacturer in India. BMW India: 3 Series, 5 Series, X1, X3. Fiat India (in collaboration with Tata Motors): Grande Punto, Linea. Ford India: Figo, Fiesta Classic, Fiesta, Endeavour. General Motors India Chevrolet: Spark, Beat, Aveo U-VA, Aveo, Optra, Cruze, Tavera. Honda Siel: Brio, Jazz, City, Civic, Accord. Hyundai Motor India: Eon, Santro, i10, i20, Accent, Verna, Sonata. Land Rover: Freelander 2 Maruti Suzuki: 800, Alto, WagonR, Estilo, A-star, Ritz, Swift, Swift

DZire, SX4, Omni, Eeco, Gypsy. Mercedes-Benz India: C-Class, E-Class, M-Class, S-Class. Mitsubishi Cedia, Pajero. Nissan Motor India: Micra, Sunny, Evalia. Renault India: Pulse, Duster, Fluence, Koleos. Toyota Kirloskar: Etios Liva, Etios, Corolla Altis, Innova, Fortuner. Volkswagen Group Sales India: Audi India: A4, A6, Q5. koda Auto India: Fabia, Rapid, Laura. Volkswagen India: Polo, Vento, Jetta, Passat. (in collaboration with Hindustan Motors):[85] Lancer, Lancer

Opel was present in India until 2006. As of 2011, Opel only provides spare parts and vehicle servicing to existing Opel vehicle owners.

41

Vehicles brought into India as CBUs

Aston Martin: Vantage, Rapide, Virage, DB9, DBS, One-77. Audi: A7, A8, S4, S6, S8, Q7, TT, R8, RS5. Bentley: Arnage, Azure, Brooklands, Continental Flying Spur, Mulsanne. BMW: 5 Series GT, 6 Series, 7 Series, X5, X6, X6 GT, Continental

M, M3, M5, M6 and Z4. Bugatti: Veyron. Chevrolet: Captiva. Ferrari: California, 458 Italia, 599 GTB Fiorano, FF. Fiat: 500, Bravo. General Motors: Hummer H2, Hummer H3. Gumpert: Apollo. Honda: Civic Hybrid, CR-V. Hyundai: Santa Fe. Jaguar: XF, XJ, XK. Koenigsegg: CCX, CCXR, Agera. Lamborghini: Gallardo, Aventador. Land Rover: Discovery 4, Range Rover Evoque, Range Rover Sport, Range Rover. Maserati: Quattroporte, GranTurismo, GranCabrio. Maybach: 57 and 62. Mercedes-Benz: CL-Class, GL-Class, R-Class, CLS-Class, SLClass, SLK-Class, Viano, G-Class, SLS. MINI: Cooper, Cooper S, Convertible, Countryman. Mitsubishi: Montero, Outlander, Evo X. Nissan: Teana, X-Trail, 370Z, GT-R. Porsche: 997, Boxster, Panamera, Cayman, Cayenne, Carrera GT. Rolls Royce: Ghost, Phantom, Phantom Coup, Phantom Drophead Coup. koda: Yeti, Superb. Suzuki: Grand Vitara, Kizashi.
42

Toyota: Prius, Camry, Land Cruiser, Land Cruiser Prado. Volkswagen: Beetle, Tiguan, Touareg, Phaeton. Volvo: S60, S80, XC60, XC90.

Commercial vehicles manufacturer in India

Indian brands Joint Venture Brands VE Commercial Vehicles Limited - VE Commercial Vehicles limited - A JV between Volvo Groups & Eicher Motors Limited. Ashok Leyland - originally a JV between Ashok Motors and Leyland Motors, now 51% owned by Hinduja Group Mahindra Navistar a 51:49 JV between Mahindra Force Hindustan Motors Premier Tata AMW Eicher Motors

Group and Navistar International Swaraj Mazda originally a JV between Punjab

Tractors and Mazda, now 53.5% owned by Sumitomo Group Kamaz Vectra - A JV between Russia's KaMAZ and the Vectra Group Foreign brands Volvo Tatra MAN Mercedes-Benz - manufactures luxury coaches in India. Daimler AG - manufactures BharatBenz, a brand of trucks based on the Fuso and the Mercedes Benz truck platforms, which Daimler AG owns. Rosenbauer
43

Scania Iveco Hino DAF Isuzu Piaggio Caterpillar Inc.

Electric car manufacturers in India Ajanta Group Mahindra Hero Electric REVA Tara International Tata

Electric vehicle and Hybrid Vehicle

During April 2012 Indian Government has planned to unveil the roadmap for the development of the domestic electric and hybrid vehicles (xEV) in the country. A discussion between the various stakeholders including Government, industry and the academia is expected to take place during February 23-24]. The final contours of the policy will be formed after this set of discussions. Ministries such as Petroleum, Finance, Road Transport and Power are involved in developing a broad framework for the sector. Along with these ministries big auto industry names such as Mr Anand Mahindra ( Vice Chairman and Managing Director, Mahindra & Mahindra) and Mr Vikram Kirloskar (Vice-Chairman, Toyota Kirloskar) are also involved in this task. Government has also proposed to set up a Rs 740 crore R&D fund for the sector in the 12th five year plan during 2012-17. The idea is to reduce the high cost of key imported components such as the battery and electric motor and develop such capabilities locally

44

CHAPTER III RESEARCH METHODOLOGY

45

RESEARCH METHODOLOGY
Research Methodology is a way of systematically solves the research problem. It may be understood as a science of studying how research is done. We can say that research methodology has many dimensions to constitute a part of research methodology. The study of research methodology gives necessary training to the students in gathering information and necessary material related to their project and understanding the importance of the field work when necessary and training techniques for the collection of the appropriate to particular problem, in the use of statistics questionnaire and controlled experimentation and in recording evidences sorting it out and interrupting it knowledge of research methodology plays a key role in project work. It consists of series of action or necessary step to effectively carry out research and desired sequence of the step. There are many definitions of research design, but no single definition imparts full range of important aspects.

3.1

RESEARCH METHODOLOGY USED:-

Types of Data Collected:There are two types of data collected. They are Primary Data, Secondary Data . Primary Data: - Primary Data or sources are original works of research or raw data which interpretation or pronouncements that represent an official opinion or position. Primary sources are always the most authoritative because information has not been filtered or interpreted by a second party.Not Much Primary data is given in this report, apart from some guidance and overview about the industry from my friends and faculty. Secondary Data: - Secondary Data are interpretation of primary data. Nearly all the reference material fall into this category. This includes Encyclopedias, textbooks, handbooks, magazine, news paper and articles and most news casts are considered secondary information sources. . We have used the trend projection and exponential forecasting technique to predict the sales.Secondary data used in the project generally consist of internet, encyclopedia and Car magazines and Internet.

46

CHAPTER IV MARKET ANALYSIS

47

MARKET ANALYSIS
4.1 Market analysis of Industry

4.1.1 Market characteristics Market size The Indian Automotive Industry after de-licensing in July 1991 has grown at a spectacular rate on an average of 17% for last few years. The industry has attained a turnover of USD $35.8 billion, (INR 165,000 crores) and an investment of USD 10.9 billion. The industry has provided direct and indirect employment to 13.1 million people. Automobile industry is currently contributing about 5% of the total GDP of India. India's current GDP is about $1.4 trillion and is expected to grow to $3.75 trillion by 2020. The projected size in 2016 of the Indian automotive industry varies between $122 billion and $159 billion including USD 35 billion in exports. This translates into a contribution of 10% to 11% towards India's GDP by 2016, which is more than double the current contribution. Demand determinants Determinants of demand for this industry include vehicle prices (which are determined largely by wage, material and equipment costs) and exchange rates, preferences, the running cost of a vehicle (mainly determined by the price of petrol), income, interest rates, scrapping rates, and product innovation. Exchange Rate: Movement in the value of Rupee determines the attractiveness of Indian products overseas and the price of import for domestic consumption. Affordability: Movement in income determine the affordability of new motor vehicles. Allowing unrestricted Foreign Direct Investment (FDI) led to increase in competition in the domestic market hence, making better vehicles available at affordable prices. Product Innovation is an important determinant as it allows better models to be available each year and also encourages manufacturing of environmental friendly cars. Demographics: It is evident that high population of India has been one of the major reasons for large size of automobile industry in India. Factors that may be augment demand include rising population and an increasing proportion of young persons in the population that will be more inclined to use and replace cars. Also, increase in people with lesser dependency on traditional single family income structure is likely to add value to vehicle demand.
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Infrastructure: Longer-term determinants of demand include development in Indian's infrastructure. India's banking giant State Bank of India and Australia's Macquarie Group has launched an infrastructure fund to rise up to USD 3 billion for infrastructure improvements. India needs about $500 billion to repair its infrastructure such as ports, roads, and power units. These investments have been made with an aim to generate long-term cash flow from automobile, power, and telecom industries. (Source: Silicon India) Price of Petrol: Movement in oil prices also have an impact on demand for large cars in India. During periods of high fuel cost as experienced in 2007 and the first half of 2008, demand for large cars declined in favour of smaller, more fuel-efficient vehicles. The changing patterns in customer preferences for smaller, more fuel-efficient vehicles led to the launch of Tata Motor's Nano one of the world's smallest and cheapest cars. Surprisingly, when overall passenger car sales have run into problems, the sales of luxury cars and SUVs, which are significantly more expensive in India than abroad due to high import taxes, have experienced encouraging growth. The Indian unit of BMW had to raise capacity at its factory four times during 2011, while sales of the high-end Jaguar Land Rover model owned by Tata Motors rose impr essively during a period when more affordable passenger car sales were experiencing a downturn.

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4.1.2

International Markets

International Markets Exports The level of trade export is medium The level of trade export is increasing International Markets Imports The level of trade import is low The level of trade import is increasing

International Markets Analysis

The Indian automotive industry embarked a new journey in 1991 with de-licensing of the sector and subsequent opening up for 100% foreign direct investment (FDI). Since then almost all global majors have set up their facilities in Indian taking the level of production from 2 million in 1991 to over 10 million in recent years. The exports in automotive sector have grown on an average compound annual growth rate of 30% per year for the last seven years. The export earnings from this sector are over USD 6 billion. Even with this rapid growth, the Indian automotive industry's contribution in global terms is very low. This is evident from the fact that even thought passenger and commercial vehicles have crossed the production figures of 2.3 million in the year 2008, yet India's share is about 3.28% of world production of 70.53 million passenger and commercial vehicles. India's automotive exports constitute only about 0.3% of global automotive trade.

Basis of Competition
Competition in this industry is high. Competition in this industry is increasing. Automotive industry is a volume-driven industry, and certain critical mass is a pre-requisite for attracting the much-needed investment in research and development and new product design and development. Research and development investment is needed for innovations which is the lifeline for achieving and retaining competitiveness in the industry. This competitiveness in turn depends on the capacity and the speed of the industry to innovate and upgrade. The most important indices of competitiveness are productivity of both labour and capital. The concept of attaining competitiveness on the basis of low cost and abundant labour, favourable exchange rates, low interest rates and concessional duty structure is becoming
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inadequate and therefore, not sustainable. A greater emphasis is required on the development of the factors like innovation which can ensure competitiveness on a long-term basis. India, with a rapidly growing middle class , market oriented stable economy, availability of trained manpower at competitive cost, fairly well developed credit and financing facilities and local availability of almost all the raw materials at a competitive cost, has emerged as one of the favourite investment destinations for the automotive manufacturers. These advantages need to be leveraged in a manner to attain the twin objective of ensuring availability of best quality product at lower cost to the consumers on the one hand and developing and assimilating the latest technology in the industry on the other hand. As per Automotive Mission Plan 20062016 (2008), the Indian Government recognises its role as a catalyst and facilitator to encourage the companies to move to higher level of competitive performance. The Indian Government wants to create a policy environment to help companies gain competitive advantage. The government aims that with its policies its encourage growth, promote domestic competition and stimulate innovation.

Life Cycle
The life cycle stage is growth Life Cycle Reasons The market for manufacturing motor vehicles is consistently increasing. The products manufactured by this industry are profitable. Companies have been consistently opening new plats and employing over the past five years. Japanese and European manufacturers of motor vehicles have entered the market. Industry value added has been rising, along with the rise in GDP. Life Cycle Analysis General improvement in availability of trained manpower and good infrastructure is required for sustainable growth of the industry. Keeping this in view, the Indian Government has launched a unique initiative of National Automotive Testing and R&D Infrastructure Project (NATRIP) to provide specialised facilities for Testing, Certification and Homologation to the industry. A similar initiative is required for creating specialised institutions in automotive sector for education, training and development. The auto industry has grown in the clusters of interconnected companies which are linked by commonalities and complementarities. The major clusters are in and around Manesar in North, Pune in West, Chennai in South, Jamshedpur-Kolkata in East and Indore in Central India. The Government is planning to create a National Level Specialises Education and Training Institute for Automotive Sector and to enhance the transportation, communication and export infrastructure facilities.
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The contribution of automotive sector in the GDP of India is expected to double by 2016. through major spotlight on export of small cars, Multi-Utility Vehicles, Two- and Three-wheelers.

Industry Conditions
The automobile manufacturing sector is characterised by a high cyclical growth patterns, high fixed cost and break-even point levels, and an excessive number of participants. Barriers to entry into automobile manufacturing activity are formidable. Some of the barriers that need to be overcome by a new entrant include: the cost of developing high volume production facilities to benefit from economies of scale; and the ability to gain access to technology of major operators, as the present incumbents include some of the largest multinationals, that have considerable claims to new technology. The relative large size of domestic market, together with high competition, has already seen significant rationalisation of this industry.

Key Competitors
Tata Motors Market Share: Commercial Vehicles 63.94%, Passenger Vehicles 16.45% Tata Motors Limited is India's largest automobile company, with consolidated revenues of USD 14 billion in 2008-09. It is the leader in commercial vehicles and among the top three in passenger vehicles. Tata Motors has winning products in the compact, midsize car and utility vehicle segments. The company is the world's fourth largest truck manufacturer, and the world's second largest bus manufacturer with over 24,000 employees. Since first rolled out in 1954, Tata Motors as has produced and sold over 4 million vehicles in India. Tata Motors is the first company from India's engineering sector to be listed in the New York Stock Exchange (September 2004), has also emerged as an international automobile company. Through subsidiaries and associate companies, Tata Motors has operations in the United Kingdom, South Korea, Thailand and Spain. Among them is Jaguar Land Rover, a business comprising the two British brands which was acquired in 2008. In 2004, it acquired the Daewoo Commercial Vehicles Company, South Korea's second largest truck maker. The rechristened Tata Daewoo Commercial Vehicles Company has launched several new products in the Korean market, while also exporting these products to several international markets. Today two-thirds of heavy commercial vehicle exports out of South Korea are from Tata Daewoo. In 2005, Tata Motors acquired a 21% stake in Hispano Carrocera, a reputed
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Spanish bus and coach manufacturer, and subsequently the remaining stake in 2009. Hispano's presence is being expanded in other markets. In 2006, Tata Motors formed a joint venture with the Brazil-based Marcopolo, a global leader in bodybuilding for buses and coaches to manufacture fully built buses and coaches for India and select international markets. In 2006, Tata Motors entered into joint venture with Thonburi Automotive Assembly Plant Company of Thailand to manufacture and market the company's pickup vehicles in Thailand. The new plant of Tata Motors (Thailand) has begun production of the Xenon pickup truck, with the Xenon having been launched in Thailand in 2008. Tata Motors is also expanding its international footprint by franchises and joint ventures assembly operations in Kenya, Bangladesh, Ukraine, Russia, Senegal and South Africa. With over 3,000 engineers and scientists, the company's Engineering Research Centre, established in 1966, has enabled pioneering technologies and products. The company today has R&D centres in Pune, Jamshedpur, Lucknow, Dharwad in India, and in South Korea, Spain, and the UK. It was Tata Motors, which developed the first indigenously developed Light Commercial Vehicle, India's first Sports Utility Vehicle and, in 1998, the Tata Indica, India's first fully indigenous passenger car. Within two years of launch, Tata Indica became India's largest selling car in its segment. In 2005, Tata Motors created a new segment by launching the Tata Ace, India's first indigenously developed mini-truck. In January 2008, Tata Motors unveiled its People's Car, the Tata Nano, a development which signifies a first for the global automobile industry. Nano brings the comfort and safety of a car within the reach of thousands of families. The standard version has been priced at USD 2,200 or Rs.100,000 (excluding VAT and transportation cost). Maruti Suzuki India Market Share: Passenger Vehicles 46.07% Maruti Suzuki India Limited, a subsidiary of Suzuki Motor Corporation of Japan, is India's largest passenger car company, accounting for over 45% of the domestic car market. The company offers a complete range of cars from entry level Maruti-800 and Alto, to stylish hatchback Ritz, A star, Swift, Wagon-R, Estillo and sedans DZire, SX4 and Sports Utility vehicle Grand Vitara. Since inception in 1983, Maruti Suzuki India has produced and sold over 10 million vehicles in India and exported over 500,000 units to Europe and other countries. The company's
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revenue for the fiscal 2010-2011 stood over Rs 375,224 million and Profits After Tax at over Rs. 22,886 million. Hyundai Motor India Market Share: Passenger Vehicles 14.15% Hyundai Motor India Limited is a wholly owned subsidiary of world's fifth largest automobile company, Hyundai Motor Company, South Korea, and is the largest passenger car exporter. Hyundai Motor presently markets 49 variants of passenger cars across segments. These includes the Santro in the B segment, the i10, the premium hatchback i20 in the B+ segment, the Accent and the Verna in the C segment, the Sonata Transform in the E segment. Hyundai Motor, continuing its tradition of being the fastest growing passenger car manufacturer, registered total sales of 559,880 vehicles in the year 2009, an increase of 14.4% over 2008. In the domestic market it clocked a growth of 18.1% as compared to 2008 with 289,863 units, while overseas sales grew by 10.7%, with export of 270,017 units. Hyundai Motor currently exports cars to more than 110 countries across European Union, Africa, Middle East, Latin America and Asia. It has been the number one exporter of passenger car of the country for the sixth year in a row. In a little over a decade since Hyundai has been present in India, it has become the leading exporter of passenger cars with a market share of 66% of the total exports of passenger cars from India, making it a significant contributor to the Indian automobile industry. In 2010, in spite of a global slowdown, Hyundai Motor India's exports grew by 10.7%. In 2011 Hyundai plans to add 10 new markets with Australia being the latest entrant to the list. The first shipment to Australia is of 500 units of the i20 and the total i20 exports to Australia are expected to be in the region of 15,000 per annum. Mahindra & Mahindra Market Share: Commercial Vehicles 10.01%, Passenger Vehicles 6.50%, Three Wheelers 1.31% Mahindra & Mahindra is mainly engaged in the Multi Utility Vehicle and Three Wheeler segments directly. The company competes in the Light Commercial Vehicle segment through its joint venture subsidiary Mahindra Navistar Automotives Limited and in the passenger car segment through another joint venture subsidiary Mahindra Renault. In the year 2009, on the domestic sales front, the Company along with its subsidiaries sold a total of 220,213 vehicles
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(including 44,533 three-wheelers, 8,603 Light Commercial Vehicles through Mahindra Navistar Automotives and 13,423 cars through Mahindra Renault), recording a growth of 0.6% over the previous year. The company's domestic Multi Utility Vehicle sales volumes increased by 3.3%, as against a decline of 7.4% for industry Multi Utility Vehicle sales. A record number of 153,653 Multi Utility Vehicles were sold in the domestic market in 2011 compared to 148,761 MUVs in the previous year. Hence, Mahindra & Mahindra further strengthened its domination of the domestic Multi Utility Vehicle sub-segment during the year, increasing its market share to 57.2% over the previous year's market share of 51.3%. Mahindra & Mahindra is expanding its footprint in the overseas market. The Xylo was launched in South Africa. The company formed a new joint venture Mahindra Automotive Australia Pty. Limited, to focus on the Australian Market. Ashok Leyland Market Share: Commercial Vehicles 22% Against the backdrop of the sharp slump in demand for commercial vehicles, during 2010-11, Ashok Leyland registered sales of 47,118 medium and heavy commercial vehicles (M&HCV), 37.5% less than in the previous year. This includes 16,049 M&HCV buses and 31,069 M&HCV trucks respectively, 8.7% and 46.3% less than in the previous year. The company lost 1.8% market share in the Indian medium and heavy commercial vehicle market during the financial year 2010-11, mainly due to loss of sales in the truck segment. This was because the Eastern Region, where the Company's presence had been historically weak, was relatively stable, whilst the market declined sharply in other regions. While total industry volume of the medium and heavy duty buses declined by about 8.7%, the Company's market share grew marginally and Ashok Leyland retained its number one position in this segment. The Company sold 6,812 vehicles in the overseas markets during 2010-11. This represents a decrease of approximately 6.5% over the previous year. Total industry volume related to overseas markets to which the Company exports (such as Sri Lanka, the Middle East) witnessed a reduction of about 25% over the previous year. To combat the impact of decline in CV sales, the Company focused on non-cyclical businesses in the portfolio.
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The Company produced in all 54,049 vehicles during the year. To contain costs and conserve cash, the Company worked only about 50% of the working days in all its manufacturing units during the second half of the year. More significantly, Maruti Suzuki introduced more efficient manufacturing practices and developed a number of local component suppliers. This industrial eco-system with vastly improved capabilities eased the entry of several foreign car manufacturers, after industrial licensing was abandoned in the 1990s. The growth of component suppliers also enabled select domestic automobile firms, with no prior experience in car manufacturing, to add passenger vehicles to their product range. Though several foreign manufacturers have struggled to expand their foothold, the growing purchasing power of the middle class continues to attract new entrants to the Indian passenger car market.

This story essentially repeated itself in other segments of the Indian automobile market, including commercial vehicles and motorcycles. These segments too have evolved from duopolistic inertia to vigorous competition. In place of outdated products, buyers now have a surfeit of vehicle models to choose from. The trigger for change has typically been the introduction of foreign technology and competition. However, instead of being overwhelmed, the domestic manufacturers have emerged as market leaders, adapting well through alliances with foreign firms for technology.

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Yet, withdrawing restrictive industrial licensing and allowing the entry of foreign firms would not have ensured sustained growth for the Indian automobile industry. For demand growth to endure, the government would also have to enable the development of the countrys road network and reduce traffic congestion in its cities. Considering the poor state of Indian roads even in the 1990s, this was an arduous task that required large capital investments.

The National Highway Development Program launched in 2000 is similar in concept, though smaller in scale, to the National Highway System in the U.S. The first leg of the project linked the four big Indian cities of Delhi, Kolkata, Chennai, and Mumbai with a four-lane highway, dubbed the Golden Quadrilateral. The subsequent phases of the program developed the North-South and East-West highway corridors and access roads to major seaports. Since its launch, more than 20,000 miles of highways have been upgraded or are currently being developed under the program. Over the next decade, the government is planning to upgrade another 20,000 miles of highways apart from building more than 10,000 miles of expressways. Most of these projects are being implemented through private sector participation, with the government absorbing part of the costs for segments where toll collections are unlikely to make the project commercially viable.

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Most Indian cities have grown without even basic planning of the road network and other infrastructure. As the number of car owners started rising, roads in most cities became clogged and pollution levels increased. Widening of inner-city roads and construction of elevated roads over busy intersections and level crossings have helped the cities to absorb the significant increase in vehicle population over the last decade. The federal government provides a large part of the financing for such projects, under programs like the National Urban Renewal Mission.

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4.1.3 Market Segments

Passenger Vehicles: Middleclass dreams fuel sales growth Like most other markets, much of the excitement in India is in the passenger vehicle segment. Robust growth in middle class income levels and easier credit availability have sustained demand growth for passenger cars. Most major global manufacturers are already present in the country, while some of the domestic manufacturers are entering overseas markets. Despite increased competition, Maruti Suzuki, which is now majority owned by Suzuki Motor Corp, remains the market leader in India with a share of over 45%. Its strength lies in its wide range of small car models, which form the bulk of the Indian car market. Maruti Suzuki also has the largest dealer network and its annual manufacturing capacity is now over 1 million vehicles. Korean firm Hyundai and domestic major Tata Motors have been in a tight race for the second and third places for a while now. Hyundai is now marginally ahead with a market share of 14% as compared to over 12% for Tata Motors. Small hatchbacks dominate Hyundais model lineup and the firm has built up a strong brand reputation over the last several years. Tata Motors has a wider product range, from SUVs to the worlds cheapest car, the Nano. Tata products are positioned as value-for-money and run predominantly on diesel, which is nearly a third less expensive than gasoline in India because of government subsidies. The firm also jointly owns an assembly line with European carmaker Fiat and markets Fiat cars in India.

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Mahindra & Mahindra, another large local manufacturer, derives the bulk of its sales from the SUV segment where it is the market leader. The firm recently bought out European manufacturer Renault in a passenger car joint venture, which has not performed well. Several global manufacturers have struggled in India, though they have been present in the market for more than a decade. General Motors has seen a revival over the last year, after the firm launched low-priced hatchbacks under the Chevrolet brand. GM also sells small sedans and SUVs, but volumes remain very low. The firm sold half of its Indian operations to Chinese automaker SAIC Group last year, and the joint venture is planning to introduce utility vehicles, besides passenger cars. Ford has been more successful in the small sedan segment in India. The company has gained make share recently after the launch of a competitively priced small hatchback from its assembly line and engine plant near Chennai, in south India. Though their product offerings in the Indian market are limited, Japanese manufacturers Toyota and Honda enjoy leadership in their segments. Honda is a clear leader in the midsized sedan category, while Toyota sells the most minivans. In a bid to expand their market share, both firms are expected to launch small hatchbacks and sedans shortly.

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Leading Indian Automobile Firms

Market Firm Products Foreign Partner Value (in $ Stock Listing Billions) Tata Motors Passenger and Fiat Renault-Nissan for small car Suzuki Motor and Navistar Commercial Vehicles Honda Motor 7.9 Mumbai for 8.7 Mumbai, London 8.8 planned 9.2 11.6 Mumbai, New York Mumbai, London Firm) Mumbai (Holding

Commercial Vehicles Two and Three -

Bajaj Auto

Wheelers

Maruti Suzuki Passenger Vehicles Passenger Mahindra Mahindra

& Commercial Vehicles, Farm Equipment,

Two-wheelers Hero Honda Two - Wheelers

Market value data based on full capitalization as on September 20, 2010

Among European manufacturers, Skoda Auto, the Czech subsidiary of Volkswagen, has built a relatively good position in the mid-sized sedan market. Volkswagen itself has been a recent entrant in the Indian market and has expanded its product range by launching a small hatchback and a mid-sized sedan. Fiats record in India has been patchy and it now relies on the Tata Motors dealer network to sell its products. While its venture with Mahindra has not been successful, French automaker Renault has opened a large assembly line, jointly owned by its Japanese associate Nissan. The Renault-Nissan alliance is expected to launch several models in the near future, with Nissan focusing more on the small car segment. Luxury passenger cars have seen excellent demand growth, especially in recent years. However, the luxury segment now accounts for only about a percent of the total passenger vehicle market. Mercedes Benz and BMW have almost identical market shares while Audi has made rapid gains over the last year. All three manufacturers assemble cars in India from

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imported kits, which attract high import taxes, and hence product prices are higher than other markets. Jaguar and Land Rover, now owned by Tata Motors, are gradually expanding their dealerships in the country.

Commercial Vehicles: Rapid economic growth boosts demand

The volume of goods to be moved across the country and the demand for commercial vehicles to transport the goods are directly related to the pace of overall economic growth. When the country has a high population density and personal car ownership is low, demand for passenger transport will also rise faster when the economic growth accelerates. In recent years, as the country emerged as the second fastest growing economy in the world, India has seen a substantial increase in demand for trucks, buses, and other commercial vehicles. Though India has one of the most extensive railway networks in the world, the bulk of the commercial goods movement is by road. The rebuilding of the countrys main highways under the National Highway Development Program has made road transport easier and more efficient. Unlike in the past when only single axle trucks were suitable for narrow Indian roads, the new highways can easily accommodate large multi-axle tractor-trailers. Another factor that pushed up demand for trucks is the substantial increase in construction of buildings and infrastructure. To ease traffic congestion in cities, the bus transit systems have been improved and upgraded across the country. The federal government continues to finance the introduction of modern buses, comfortable enough to encourage commuters to switch from personal vehicles in cities. Increased migration of workers to the cities and industrial zones has also pushed up demand for long distance bus services. As the smaller towns and villages get connected to the highway system and more migrants move out of the villages, demand for commercial transport services will only increase in the future.

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For decades, Tata Motors has dominated the commercial vehicles segment and currently controls two-thirds of the market. The firm has the broadest dealer network and the widest product range of all manufacturers, from small goods carriers to large tractor-trailers. Tata Motors has also expanded its overseas presence over the last decade, mostly through acquisitions and joint ventures. The firm currently has a truck manufacturing facility in South Korea and owns a major portion of a bus and coach manufacturer in Spain. Tata Motors is the majority partner in a venture with Brazilian firm Marcopolo to build buses in India. In Thailand, the firm has joined hands with a local company to assemble and market pickup trucks.Ashok Leyland is a distant second in the segment with a nearly 13% market share of all commercial vehicle sales, including small goods carriers. The firms large trucks and buses are popular, but it has had limited success in smaller capacity truck models. Ashok Leyland is a market leader in buses and a leading vehicle supplier to the Indian armed forces. The company has recently tied up with Nissan for manufacturing light commercial vehicles and engines In the 1990s, several Japanese manufacturers entered the Indian market with light commercial vehicles but had limited success. Among more recent entrants, Volvo has gained market share in the large truck and bus segment and acquired half of a domestic manufacturer of small trucks. German manufacturer MAN owns half of a joint venture with local firm Force Motors, which manufactures a range of commercial vehicles. American manufacturer Navistar has a joint venture with Mahindra & Mahindra and has recently launched large trucks in India.

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Two-wheelers: Rural markets offer further growth opportunity

Like most developing markets, two-wheelers, such as motorcycles and motor scooters, are the most popular mode of personal transport in India. Two-wheelers are more affordable than low cost cars and even used cars. They are also cheaper to run and easier than cars to maneuver and park on narrow roads. Since the average road speeds in India are low, the lower passenger safety of two-wheelers when compared to cars does not inhibit buyers. These factors have made India the second largest two-wheeler market in the world with annual sales of over 10 million units. The increasing income levels in semi-urban and rural areas of the country offers further growth potential for two-wheeler manufacturers. Hero Honda is the undisputed market leader in the Indian two-wheeler market, with a market share of more than 40%. The firm is particularly strong in the entry-level motorcycle category and its products are positioned as the most fuel-efficient. Honda Motor of Japan holds a 26% stake in the firm and provides product technology. Bajaj Auto is the second largest Indian two-wheeler manufacturer, with a dominant position in higher priced motorcycles. The firm once had a near monopolistic control of the motor scooter market, but gradually withdrew from the segment as consumers switched to motorcycles. Bajaj Auto is also the market leader in three-wheelers, which are popular as taxis in India. TVS Motor is the third major player in the two-wheeler market. Honda Motor also has a wholly owned subsidiary in India, for manufacturing motorcycles and motor scooters. It is the market leader in motor scooters and the fourth largest in motorcycles. Honda is followed by fellow Japanese manufacturers Suzuki and Yamaha in the motorcycle segment. Harley Davidson is a recent entrant in the premium motorcycle market where volumes are very low.

Automobile Components: Attractive source for global auto firms

The Indian automobile component industry and allied businesses are among the select success stories in the countrys manufacturing sector, but their achievements are not yet widely acknowledged. The leading Indian component manufacturers have gradually built their design, engineering, and manufacturing competencies over the last couple of decades. The impressive growth of the domestic automobile market has allowed them to scale up their operations. Several of them now export to major global car manufacturers and the leading firms are establishing manufacturing operations in overseas mark

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Though major carmakers bring along their key suppliers when they enter new markets, local component manufacturers are enlisted as suppliers of smaller parts. As the carmakers become more confident in the capabilities of the local parts suppliers, they begin sourcing components from local suppliers even for their global operations. Several global automobile makers have been present in India for several years now and they have been sourcing parts from the network of local suppliers for other markets. Leading global manufacturers including Volkswagen and Fiat have announced their plans to increase component sourcing from India.

Outlook: Export potential adds to domestic demand flourish

Even after the spectacular growth in recent years, the Indian automobile market still has considerable room to grow. Passenger car ownership in India is still very low even when compared to other emerging markets. Despite domestic sales of over 10 million units annually, even two-wheeler ownership is below 100 per 1,000 of the population. It is likely that the continued rise in average income levels will sustain demand for personal vehicles while overall economic growth will support the demand for commercial vehicles. Besides the domestic prospects, India also has the opportunity to emerge as a global manufacturing base for select product segments. The big domestic market potential will allow carmakers to build large assembly lines, with sufficient economies of scale. Design, development, and production costs in India are lower than the developed markets. The country is also building a reputation in frugal engineering, or building low-cost products under tight budgets. Together with the growing maturity of domestic auto component suppliers, these factors are making an attractive automobile manufacturing location for the global markets. In recent years, India has emerged as a leading center for the manufacture of small cars. Hyundai, the biggest exporter from the country, now ships more than 250,000 cars annually from India. Apart from shipments to its parent Suzuki, Maruti Suzuki also manufactures small cars for Nissan, which sells them in Europe. Nissan will also export small cars from its new Indian assembly line. Tata Motors exports its passenger vehicles to Asian and African markets, and is planning to launch electric vehicles in Europe this year. The firm is also planning to launch an electric version of its low-cost car Nano in Europe and the U.S. Mahindra & Mahindra is preparing to introduce its pickup trucks and small SUV models in the U.S. market. Bajaj Auto is designing a low-cost car for the Nissan-Renault alliance,
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which will market the product globally. Nissan-Renault may also join domestic commercial vehicle manufacturer Ashok Leyland in another small car project.

While the potential is impressive, there are challenges that could pull down future growth of the Indian automobile industry. Since the demand surge for automobiles in recent years is directly linked to overall economic growth and rising personal incomes, industry growth will slow if the economy weakens. Also, any delay in the further development of the highway network could slow down domestic demand growth. It is possible that the government will favor mass transport systems for the large cities, which may restrict the demand for personal vehicles. Most Indian cities will have a combination of metro rail networks and dedicated road corridors for buses and it is possible that a good number of commuters will opt for public transport. It is also likely that intense competition will erode the profitability of manufacturers, especially in the passenger vehicles segment. Despite these challenges, the long-term outlook for the automobile industry in India remains bright. In most countries, the automobile industry historically has been one of the sectors leading the economic growth and development. Available indicators suggest that it will be no different in India, which is likely to remain one of the fastest growing economies in the world.

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4.2

FUNDAMENTAL ANALYSIS

4.2.1 ECONOMY
Economic analysis is the analysis of forces operating the overall economy a country. Economic analysis is a process whereby strengths and weaknesses of an economy are analyzed. Economic analysis is important in order to understand exact condition of an economy.

4.2.2 GDP and Automobile Industry

In absolute terms, India is 16th in the world in termsof nominal factory output. The service sector isgrowing rapidly in the past few years. This is the pie- chartshowing contributions of different sectors in Indian economy.The per capita Income is near about Rs38,000 reflecting improvement in the living standards of an average Indian.Today, automobile sector in India is one of the key sectors of the economy in terms of the employment. Directly and indirectly it employs more than 10 million people and if we add the number of people employed in the auto-component and auto ancillary industry then the number goes even higher. As the world economy slips into recession hitting the demand hard and the banking sector takes conservative approach towards lending to corporate sector, the GDP growth has downgraded it to 7.1 percent for 2009-10 and predicted it to be 6.5 per cent for FY 2010-11 Mr. Montek Singh (PlanningCommission of India). Following is the graph showing a trend of Indian GDP trend in past 3 years.

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The market value of Automobile Industry is more than US$8 bl. and Contribution in Indian GDP is near about 5% and will be double by 2016. The automotive industry in India grew at a computed annual growth rate (CAGR) of 11.5 percent over the past five years, but growth rate in last FY2008-09 was only0.7% with passenger car sales shows 1.31% growth while Commercial Vehicles segment slumped 21.7%.

Recession
All the major auto companies enjoyed the high growth ride till the mid 2008. But at the end of the year industry had to face the hard truth and witnessed the fall in sales compared to last year. In December 2011, overall production fell by 22 % over the same month last year. Global recession has hit the Indian auto industry, India is strong and growing industry but the impact of recession is evident now on industry as sales & growth of automobile companies have declined. Passenger Vehicles segment registered negative growth. One of its supporting facts is that the sales in December 2011 for passenger vehicles fell by 13.86% over December 2010 Two Wheelers registered minor growth of 1.85 % during April December 2011. However, Two Wheelers sales recorded 15.43 percent fall in December 2011 over the same month last year. Although the sector was hit by economic slowdown, overall production (passenger vehicles, commercial vehicles, two wheelers and three wheelers) increased from 10.85 million vehicles in 2009-10 to 11.17 million vehicles in 2010-11. Passenger vehicles increased marginally from 1.77 million to 1.83 million while two-wheelers increased from 8.02 million to 8.41 million. Total number of vehicles sold including passenger vehicles, commercial vehicles, two-wheelers and three-wheelers in 2010-11 was 9.72 million as compared to 9.65 million in 2009-10.

Inflation
Despite of negative inflation these days (-.21% on 22-Aug-11) we saw an increasing trend of sales in auto sector. A moderate amount of inflation is important for the proper growth of an economy like India because it attracts more private investment. The fall in wholesale prices from a year earlier is mainly due to a statistical base effect and doesnt suggest contraction in demand, the Reserve Bank of India said few week back, while revising its inflation forecast for the FY through March to around 5% from 4%. In last FY despite of skyrocketing oil prices (crude oil price has already up to $130 compared to $20 per barrel five years back), Indian automobile Industry was not as much affected and experts think that Indian automobile industry will continue to grow this year despite all obstacles- oil price hike, higher interest rates. However, the effect of inflation has affected
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every sector which is related to car manufacturing and production. The increase in the price of fuel and the steel due to inflation has led to a slower growth rate of the car industry in India. The effect of inflation has taken the rise in the price rate of the cars by 3-4% which in turn suffices the need to meet the rise in price of the raw materials to build a car. The car market and the car industry witnessed a fall of 8-9%.

FDIs
In India FDI up to 100 percent, has been permitted under automatic route to this sector, which has led to a turnover of USD 12 billion in the Indian auto industry and USD 3 billion in the auto parts industry. India enjoys a cost advantage with respect to casting and forging as manufacturing costs in India are 25 to 30 per cent lower than their western counterparts the Investment Commission has set a target of attracting foreign investment worth US$ 5 billion for the next seven years to increase India's share in the global auto components market from the existing 0.9 per cent to 2.5 per cent by 2015. FDI inflows in Automobile Industry 20082009- was Rs.5,212 Cr an increase of 47.25% compare to 2009-10, while in April-May 2011 it was around Rs.497 Cr.

Foreign Exchange
India holds the third largest stock of reserves among the emerging market economies after China and Russia. The overall approach to the management of India's foreign exchange reserves in recent years reflects the changing composition of the balance of payments and the 'liquidity risks' associated with different types of flows and other requirements. Taking these factors into account, India's foreign exchange reserves continued to be at a comfortable level and consistent with the rate of growth, the share of external sector in the economy and the size of risk-adjusted capital flows. Following is the table shows the trend of foreign reserves held by central bank in last FY. Reserves came down cause of recession all over the world however India still able to maintain its reserves hence a minor fall was seen compare to all other country which shows great strength in long-term for Indian Economy.

Current Scenario of Automobile Industry in Economy

With the latest available data Indian Automobile Industry is expected to grow at 9%-10% in near future, Two wheeler segment sales grew up by 12.8% with the modest 2.6% growth rate, under this segment the market leader Hero Honda registered growth of 12% in its domestic sales where as Bajaj Auto disappointed as sales plunging by 23%, on the other hand car sales has been grew up by a healthy 22.7% in last February and Commercial Vehicles reported

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slower sales. It is assumed that in coming festive season to meet demand, carmakers going to produce 70000units/month more over the average 1.3lac/month with help of 5000 new hands. manufacturer in the world. . . Indian Automobile Industry at Global level. India ranks 1st in the global two-wheeler market. .

Volkswagen, Toyota, Nissan & Ford plan new cars to cash in on fastest-growing compact car section of car market in India. Source: Economic Times Sales of different Auto Companies speed up even before festive season Maruti by 29%, TATA by 11%,Skoda Auto 33%, Hero Honda 33%, Mahindra 42%, Yamaha 63% etc. It is expected that the Automobile Industry in India would be the 7th largest automobile market within the year 2016. Projected Growth rate in Automobile Industry units. To emerge as the destination of choice in the world for design and manufacture of automobiles and auto components with output reaching a level of US$ 145 billion accounting for more than 10% of the GDP and providing additional employment to 25 million people by 2016. vehicle sales in the country will grow at a CAGR of 12 per cent to touch 3.75 million units by 2014. -wheeler sales will grow at a CAGR of 8.8% by 2014 at 11.3 million

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CHAPTER V ASSESMENT OF THREATS AN GROWTH OPPURTUNITIES OF INDIAN AUTOMOBILE INDUSTRY

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ASSESMENT OF THREATS AN GROWTH OPPURTUNITIES OF INDIAN AUTOMOBILE INDUSTRY

Assessment of the industry can be done based on the following headings: 1. Five Forces Model 2. BCG Matrix 3. Industrial Life Cycle 4. SWOT Analysis 5. Industry Specific Index

5.1.1 Five Forces Model

Michael Porter identifies five forces that influence an industry. These forces are

Degree of Rivalry 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 of gestation under the technical collaboration with international players.

Threat of Substitutes 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 and utility.

Barriers to entry The barriers to enter automotive industry are substantial. For a new company, the startup capital required to establish manufacturing capacity to achieve minimum efficient scale is prohibitive.

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Although the barriers to new companies are substantial, establishing companies are entering the new markets through strategic partnerships or through buying out or merging with other companies. However, a domestic company, with local knowledge and expertise, has the potential to compete its home market against the global firms who are not well established there. Suppliers power In the relationship between the industry and its suppliers, the power axis is tipped in industrys favor. The industry is comprised of powerful buyers who are generally able to dictate their terms to the suppliers. Buyers Power In the relationship between the automotive 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 selecting from among competing brands.

5.1.2 BCG Matrix

In an economy, different industries are present and different industries have different growth rate as compared to the growth of the economy. In an economy, there are a number of major industries and they all occupy different positions in the BCG matrix according to their growth and contribution towards the economy. In the Indian economy, some of the major sectors are FMCG, automobiles, banking and insurance, steel, telecom, software, pharmacology and retail sectors and these can be placed in the different positions in the matrix.

5.1.3 Industrial Life Cycle

The industrial life cycle is a term used for classifying industry vitality over time. Industry life cycle classification generally groups industries into one of four stages: pioneer, growth, maturity and decline. In the pioneer phase, the product has not been widely accepted or adopted. Business strategies are developing, and there is high risk of failure. However, successful companies can grow at extraordinary rates. The Indian automobile sector has passed this stage quite successfully. In the growth phase, the product market has been established and there is at least some historical guide to ground demand estimates. The

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industry is growing rapidly, often at an accelerating rate of sales and earnings growth. Indian Automotive Industry is booming with a growth rate of around 15 % annually. The cumulative growth of the Passenger Vehicles segment during April 2010 March 2011 was 12.17 percent. Passenger Cars grew by 11.79 percent, Utility Vehicles by 10.57 percent and Multi Purpose Vehicles by 21.39 percent in this period. The Commercial Vehicles segment grew marginally at 4.07 percent. While Medium & Heavy Commercial Vehicles declined by 1.66 percent, Light Commercial Vehicles recorded a growth of 12.29 percent. Three Wheelers sales fell by 9.71 percent with sales of Goods Carriers declining drastically by 20.49 percent and Passenger Carriers declined by 2.13 percent during April- March 2008 compared to the last year. Two Wheelers registered a negative growth rate of 7.92 % during this period, with motorcycles and electric two wheelers segments declining by 11.90 percent and 44.93% respect. However, Scooters and Mopeds segment grew by 11.64% and 16.63% respect. The growth rate of the automobile industry in India is greater than the GDP growth rate of the economy, so the automobile sector can be very well be said to be in the growth phase. As the product matures, growth slows as penetration reaches practical limits. Companies began to focus on market share rather than growth. Industry demand tends to follow the overall economy, but the scope of growth of the automobile sector is very much possible in India due to the increasing income of the middle class and their income as well as standard of living.

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5.1.4 SWOT Analysis

A scan of the internal and external environment is an important part of the strategic planning process. Environmental factors internal to the firm usually can be classified as strengths (S) or weaknesses (W), and those external to the firm can be classified as opportunities (O) or threats (T). Such an analysis of the strategic environment is referred to as a SWOT analysis. SWOT analysis of the Indian automobile sector gives the following points: Strengths Large domestic market Sustainable labor cost advantage Competitive auto component vendor base Government incentives for manufacturing plants Strong engineering skills in design etc

Weaknesses Low labor 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

Opportunities Commercial vehicles: SC ban on overloading Heavy thrust on mining and construction activity Increase in the income level Cut in excise duties Rising rural demand

Threats Rising input costs Rising interest rates Cut throat competition

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5.1.5 Industry Specific Index

Industry specific index also called as sectoral index are those indices, which represent a specific industry sector. All stocks in a sectoral index belong to that sector only. Hence an index like the BSE auto index is made of auto stocks. Sectoral Indices are very useful in tracking the movement and performance of particular sector. Above is the Indian Auto Industry Index(BSE) shows the ups and downs over the period of 5 years. Intially in 2003 when major giants got listed on stock exchange TATA Motors, Maruti Suzuki, etc. Indian auto industry start picking up growth slowly in the first end of 1st quarter index reaches to its highest in his history. Than we saw a steady fall in the index and in the mid 2006 reaches to years lowest point it again start booming and than year on year we saw a up and down movement in the index as lots of new players came in Indian market with foreign colaboration but when 2008 came with global slowdown it brings the demand of automobile so low that index reaches to its lowest in past 5year . Most of the company even shut down their manufacturing units for more than a week, production came down because of less demand in the economy. Also no further launches were made in mid or late 2009 and postponed to next year. We have also saw a fall in FDIs in automobile Industry. But in the beginning of 2010 right from 1st quarter auto industry again start regaining and we saw a tremondous growth in auto industry which never seen before not in india but all over the world. The demand of 2 and 4 Wheelers start increasing rapidly which also force auto industry to employ more workers to meet demand and with in the 2nd quarter of FY2010-11 Auto index reaches to its highest ever crossed mark of 6000. And this growth of industry will be carry further as festive season still to come, so there is a lot of scope to growth in this industry.

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5.2

THREATS TO INDIAN AUTOMOBILE INDUSTRY FROM

FOREIGN AUTMOBILE INDUSTRY The big threat to Indian autos

Can an improved Indica be sold for less than the Maruti 800? Can Bajaj create a service network that's miles ahead of the competition? Should TVS and Bajaj be developing nextgeneration two-wheeler engines together? If Indian-owned automobile companies are not asking themselves these kinds of questions today they will be marginalised tomorrow. True, the Indian auto sector is growing like gangbusters. But apparent success should not cloud our vision on long-term trends. Consider: Indian companies have already ceded market dominance in both mobikes and scooters. The Tatas are No 1 in the C segment, but their current dominance may be transient. The Mahindras never will be No 1 anywhere, unless we are talking tractors. The Firodias and the LMLs do not have it in them to make it to world class. What Indian entrepreneurs have not displayed so far is sharp, strategic thinking. They cannot expect to hold their own against global competition by simply following the strategies of the past. First and foremost, they must learn to identify the main enemy and dissect his long-term game plan before working out a counter-offensive. Though no one can rule the US and European carmakers out, the real long-term threat to Indian autos comes from the Japanese. Honda defeated Bajaj in two-wheelers with just one basic fuel-efficient bike. It is close to doing the same in scooters. By launching a pincer attack with a 100 per cent subsidiary, it is now in a position to completely dominate the all-important segments in two-wheelers. Dumping or sidelining the Hero group is only a matter of time. Yamaha and Suzuki decided to go it alone when they realised that their Indian partners (the Nandas and TVS) would be a drag on their ambitions. In four-wheelers, Suzuki wants only a minimal presence for Maruti in its new diesel and car plants. If Japan Inc is the real enemy of Indian-owned auto companies, their strategies are worth studying. Three in particular are of relevance to the Indian context. One is that they compete relentlessly on cost and quality. The Japanese grind their competitors into the dust using TPM, TQM and lean manufacturing techniques.

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Toyota is already No 2 worldwide and it has achieved this by cutting costs (and/or improving quality) at a rate that is faster than its competitors. If Toyota cuts costs annually by 57 per cent, this means it can sell the Corolla at the price of an Indigo in real terms) 10 years from now. If Tata Motors wants to stay in the competitive game, it will have to cut costs and improve quality at a faster rate than Toyota, Suzuki, and Honda -- not to speak of Hyundai And cost cutting has to spread across the supply chain -- and not just in the Tata or Bajaj factories. The first key to global success is superior supply chain competitiveness. The second way the Japanese compete is by targeting their rivals' profitable honey pots. Why did Honda get into scooters when everyone was saying the market was not growing as fast as mobikes? Answer: that's where Bajaj's margins were fattest. To win the war, you have to destroy your rivals' profit centres so that their ability to compete is steadily reduced. This also explains why the next target for Honda is the Pulsar -- Bajaj's best-selling bike. Once the profitability of Bajaj is down to sub-normal levels, defeating Bajaj will be easy for the Japanese. It also explains why Suzuki wants a diesel engine plant: it has to neutralise Tata Motors' advantage. The third Japanese war technique is the feint -- a mock attack that sends the opponent looking in the wrong direction for a counter-attack. Consider Toyota's first offering -- the Qualis Everyone knows that Toyota is world champ in cars but it chose to enter the MUV segment first. It did this to make its competitors invest more in this segment, forcing resources to be shifted there. But as the Mahindras celebrate the short-term success of the Scorpio or the Sumo, the real attack will come shortly in low and middle end cars. And when that comes, the Tatas will face the battle of their lives. So what should Indian auto-entrepreneurs do? One thing is to realise that they cannot take on their Japanese rivals in all segments. They have to work out strategic alliances in such a way that they can concentrate their resources in areas where they want to be No 1 and help their partners in the other ways. In two-wheelers, for example, this could mean players like TVS and Bajaj working out an alliance in supply chain improvements, customer servicing, engine development, and various other areas. The Tatas and Mahindras could carve out segments of dominance in MUVs so that they can specialise and improve quality and reduce costs faster. Without such strategic thinking, 10 years from now India's hitherto successful auto players will find that they are losing the war.
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Here we are discussing some case that shows that Indian market is really overshadowed from foreign market:

Hyundai Eon launched, treads on Alto territory:Hyundai has launched its new car directly pitted against Maruti Suzuki's global top seller Alto, firing a warning shot across the bow of its bleeding arch rival which has been wounded by a strike at one of its plants. Eon, Hyundai's first car developed from scratch for India and is aimed at the bulging middle of the country's car market, has a starting price of Rs 2.7 lakh, making it the first serious threat to the Alto's seven-year-old dominance of the country's car market. The Alto, with 3.47 lakh cars sold last fiscal year, accounted for around 16% of all cars sold in India and is the top selling car model on the planet, having edged Volkswagen's Gol & Golf and Fiat's Punto. Hyundai aims to sell 1.5 lakh units of the Eon in a year, an ambitious target in a tepid car market and also given that the Alto took almost four years after launch to reach this level of unit sales. "We are looking at the sub-compact segment, which is a fourth of the total Indian market and ushers in the greatest potential for growth in the world's second fastest market," said Arvind Saxena, Hyundai's director for sales. Hyundai's most ambitious launch to date comes at a time Maruti has temporarily stopped Alto's production because of a longstanding labour issues, now running into its third month, and which has left the country's biggest carmaker dependent on a slender inventory to drive sales during the bumper festive period. Hyundai, meanwhile, has already filled its dealers with stocks of the new Eon, hoping to capitalise on the vacuum in the segment. Although it launched the new car only on Thursday, it had started producing the cars from mid-September to develop a buffer to meet high festive demand. Although past challengers have barely managed to make a dent on Alto's sales, industry experts say this time could be different and are expecting a high-pitch battle in the small car segment completely dominated by Maruti.

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"Eon, with its fluidic styling and contemporary engineering, will directly hit the dated Alto and affect Maruti's fortunes," said Deepesh Rathore, managing director of IHS Automotive India. Added one Delhi-based CEO of an automotive company: "It's an ideal buy for first time car buyers who account for 25% of the 2-million new cars sold in India," But Maruti Suzuki, which generates a quarter of its India sales from the Alto, was unfazed by the prospect of a new challenger on its turf. "The new Eon does bring in new competition in small car segment, but Maruti is the brand to reckon with in compact cars. All our cars have low cost of ownership and higher resale value that defines the segment norms across brands," said Maruti's marketing boss Shashank Srivastava. The company is working on an answer to Eon and will unveil a all new small car with a new-age 800cc engine, company sources said. The Alto, launched in September 2000, has sold some 16.7 lakh units till date. Sales of the model, available in two engine configurations of 800cc and 998cc, grew 46% in last fiscal year to 3.47 lakh units. Maruti sells 32,000 units of the Alto every month on average. In contrast, Hyundai managed to sell 34,286 units of its smallest car Santro in the first five months of this year. But Hyundai executives hoping that the Eon, which sports a 814 cc engine and has a fuel efficiency of 21.1 kilometres per litre of petrol compared with Alto's 19.73, will give them a winner in India's price-sensitive small car market, which accounts for three out of four sold in the country. "Eon will set a new benchmark in India with best styling, performance, safety and convenience in its segment," said Hyundai Motor India president and CEO H W Park.

Volkswagen, Toyota, Ford, Renault, Nissan challenging Maruti, Hyundai, Tata Motors:
"The growth story is intact. This (drop in July) is just a temporary blip. All car manufacturers need to expand operations," says Sandeep Singh, deputy managing director, Toyota Kirloskar Motor, the joint venture in which the Japanese giant holds 89%. "If inflation is tamed, interest rates will come down. There is a huge opportunity and we have to move fast with our expansion plans," he adds. The world's largest carmaker by sales, Toyota, intends to boost its share of emerging markets from 40% in 2010 to 50% in two to three years on the back of growing sales of fuel-efficient small vehicles. That in a line sums up the name of the game for the auto majors: ramp up capacities at the entry levels with affordable and snazzier models. "The Indian market is much bigger for us now than in the past," says Hiroshi
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Nakagawa, managing director of Toyota Kirloskar Motor. The renewed focus on the mass market, more than half of the cars sold in India are compacts and hatchbacks, promises to change the name of the game. VW, one of the newer entrants into India, it began operations in 2007, has achieved what many of its global counterparts could not do in more than a decade: a market share of 3% in four years. It has done so by launching competitively-priced models -the Vento that was priced lower than the hitherto bestselling Honda City in the midsize segment; and the Polo premium hatchback is VW's cheapest car in India. Emboldened, VW is now thinking big, very big. Says John Chacko, Volkswagen Group's chief representative and president and MD, Volkswagen India: "We want to be amongst the top three in India by 2018. Globally we rank third with a market share of 11%. I am sure with a market share of 11% in India we can be amongst the top three." Chacko acknowledges that it's going to be a "long journey," and that he needs to get "a whole range of products, the right products and achieve high localisation levels" if he has to get into the top three. If VW does climb five places, it will also mean that one of the leaders, if not all three, will have to face up to a significant erosion in share. For, it's not only VW that can be spotted in their rear view mirrors. Detroit giants GM and Ford are also threatening to get their act together. What's more, Nissan (ranked No 6 in the world) and Renault have joined the race. The likes of Peugeot-Citroen, Kia, Chrysler and Proton are all itching to get foot to pedal, and finalising their India blueprints. There is demand but we are all constrained by capacity," says Michael Boneham, managing director, Ford India. Perhaps no longer. A week ago the US auto giant announced that it would invest close to $1 billion in a second factory in Sanand in Gujarat to assemble vehicles and make engines. If Ford has decided to bite the bullet after 13 years in the country, it may have something to do with some new-found success. Struggling with just a 1.5% market share till a year ago, Ford bounced back smartly to more than double its share to 3.54%. The success ingredient: The small car Figo, which accounts for three fourths of all cars Ford sold in July. More variants of the Figo are in the works even as the Detroit major recently launched the premium sedan Fiesta. But Ford is clear that that compacts is where the action is, it will launch eight new such products in 12-18 months.

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ROOM FOR ALL "Maruti has the scale, new products and is currently the most efficient manufacturer in India," says Hormazd Sorabjee, editor of Autocar India. "At least for the next 8-10 years, Maruti will continue to be the dominant player as India is a lead market for Suzuki, much more important than Japan," he adds. Indeed, Suzuki's ability to transfer R&D quickly will go a long way in helping Maruti stay on top. "Our ability to put models in the market that reflect customer needs in shorter periods at a low cost of ownership will make the difference," says RC Bhargava, chairman, Maruti Suzuki. "We may lose market share over a 10-year period but our volumes will grow," he adds. Over the past decade, Maruti's share has slipped by 14 percentage points from 55% in 2000. Another masterstroke from Maruti could well prove to be a plan to re-introduce its one-time breadand-butter entry-level brand, the Maruti 800. Analysts point out that the new-look 800 will comply with the new emission norms, and will be priced lower than the Alto, taking it closer into the territory of the world's cheapest car, the Tata Nano. Hyundai too is planning to launch a car below its current base model, the Santro. Tata Motors may well be the most vulnerable of the top three, what with the Nano not yet delivering huge volumes. Sales in July fell to 3,250 from a peak of 10,000 a few months ago. Overall, Tata's share in passenger cars has dropped from 18% in fiscal 2007 to 12.66% in the April-June 2011 quarter. "Of the top three, Tata Motors seems to be on the weakest wicket. The Nano has not given them the required market share," says Maruti's Bhargava. "The passenger vehicle segment of Tata Motors is under pressure as the lead time for product development is too long," adds Autocar's Sorabjee. Tata Motors officials were unavailable for comment. The biggest beneficiaries are the new kids on the block. In the first six months of 2011, points out VW's Garg, the top three have grown volumes by 14%, 21% and 9% respectively, but their market shares have dropped cumulatively by 3.8%. In the same period Toyota, VW and Ford have collectively gained 4.4%, adds Garg. "This has to happen in any emerging market where a market leader starts losing share as the number of players increase," he explains. VW for its part has more than doubled its market share from 1.6% a year ago. As a group, VW is present with entire range of brands: there's Audi at the luxury end; and Skoda, which extends from the mass segment (with the Fabia) to the luxury (the Superb). Between January and June, the three brands grew by 500% with sales of nearly 38,000 units, says Chacko.
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Toyota has been present in India since 1999 when it launched utility vehicle Qualis. Over the years, it captured consumer mind space with bestselling brands like the Corolla, Innova, Camry and Fortuner. Yet these brands addressed only 12% of the Indian car bazaar. The more recent launches of the mid-size sedan Etios and small car Liva have changed the name of the game-now Toyota can pull in close to half of the country's potential car buyers. That's a significant shift for Toyota, from the higher end to the mass market. We have entered a new segment with new customers and aspirations," acknowledges Toyota Kirloskar's Singh. "Etios will now be our flagship product as it was developed and adapted for India. And for the next two years our focus will be on the compact segment (where the Liva is positioned)," adds Singh. Toyota intends to increase dealerships from 159 to 175 by the end of 2011, 40-45 % of them in tier-II markets.

SMALL PACKAGES The advantage for brands like VW and Toyota is that they are distinctly more aspirational than a Maruti. The flip side, however, is that nobody knows, and straddles, the small car segment as well as Maruti does. And that's the segment that every car maker with mass market ambitions is attempting to crack. GM is there with the Beat, which is now in diesel too, and Ford with Figo (petrol and diesel). And Honda Siel, a distant No 10, is banking on the Brio compact to score some gains. So where does that leave a Johnnie-come-lately like a Renault? The French auto major dissolved a joint venture with the Mahindras last April, and started independent operations this May. The market share game is not priority for Renault at this point in time; establishing the brand over the next 12 months is. To that end Renault recently launched the Fluence sedan in the Rs 15 lakh price bracket. "Brand Renault is not well established in India. With the launch of the Fluence we are showing Renault's capabilities in design, styling, innovation, technology and value-formoney products," says Marc Nassif, MD, Renault India. Renault plans to follow up with the launch of the SUV Koleos this year; in 2012, it will launch mass market cars, including a hatchback, the affordable SUV Duster and another yet unnamed car. "In two years, we will launch mass market products and have 100 dealership outlets in 70 cities, so 2013 will be the first fully functional year and we expect to sell 100,000 cars by 2014," explains Nassif. That's when he says Renault will reach a critical mass in the Indian market. "Phase two of our operations will take us to a goal of reaching a 5% market share," adds Nassif. In South America and Brazil, the company got a 5% share in
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8-10 years. Renault may be a late entrant but its advantage may well be that it won't have to traverse as long learning curve as the likes of the Detroit majors, Honda and Toyota had to. Meantime, other global majors like Peugeot-Citroen are looking to kickstart their India operations. "New entrants have outlined an aggressive strategy with several new launches lined up in the next three to four years. Cost and product differentiation will hold the key," says PwC's Majeed. It's going to be a no-holds-barred skirmish for share in one of the world's fastest growing markets. Who ends up on the victorious side is a matter of conjecture as of now, but there's little doubt about one big winner in this battle: the spoilt-for-choice Indian consumer.

Fiat Signs Deal to Supply Diesel Engines to Maruti

Italian carmaker Fiat and Japans Suzuki Motor Corporation have inked an agreement to supply 1 lakh diesel engines to Maruti Suzuki India,which will help the countrys largest carmaker to manufacture more engines,and thereby prune the rapidly growing waiting list.The two auto giants agreed to supply Fiats 1.3 litre-multijet engine licensed by Fiat India Automobile,which is a joint venture between Fiat and Tata Motors to Suzukis Indian arm,Maruti Suzuki India.The JV company will supply up to 100,000 engines annually to Maruti beginning January this year for a period of three years.

Stepping on the gas:

To grab a bigger share of the Indian automobile market, late entrant Nissan Motor is following a strategy somewhat different from its Japanese counterparts: Two years ago, when Nissan Motor India, a 100 per cent subsidiary of Nissan Motor Ltd Japan, was celebrating the start of production of its made-in-India compact car, Nissan Micra, from its manufacturing plant at Oragadam, near Chennai, Toshiyuki Shiga, chief operating officer, Nissan Motor Company, had said, The start of commercial production of Nissan Micra is the beginning of a new chapter for us in India. One message came through loud and clear from his statement. That the Asias No 2 car manufacturer (with a share of 7.5 per cent in the region) may be a late entrant in one of the top 10 automobile producing markets in the world (No 7 in 2010 with an annual turnover of $35 billion against No 15 in 2000) but it was no push-over. Mind you, in its home market, Nissan is already the second largest car manufacturer, surpassing Honda in 2011 with Toyota still very much the dominant first.
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Indeed, Nissan Motor India hasn't looked back since then. The company has gone on to sell 22,022 units in the domestic market till January this year, unveiled two new models the Nissan Sunny sedan in September 2011 and the Nissan Evalia, a multi-utility vehicle showcased at the Delhi auto expo earlier this year and slated for launch in August and has put competition in a fix with a heady mix of killer pricing and aggressive retail expansion strategy. While the sales figures tell a story of steady growth, its overall strategy shows how it is following a path somewhat different from what its Japanese counterparts in India, such as Honda Motor, Toyota and to an extent Suzuki, are following in the country. First, lets look at some figures: Nissan Motor India reported its highest ever monthly sales in India this February with a total of 5,371 units, registering an over two-fold jump over February 2011. In the same month last year, the company had sold a total of 2,081 units. From the figures available, it is evident that the Nissan Sunny, the entry-level sedan that was launched in the country in September 2012, has been a big contributor to the companys sales by logging 3,130 units in February 2012. In turn, the introduction of the diesel variant in January 2012 has given sales of the Sunny a huge leg up. The Nissan Micra too showed impressive numbers in February 2012 registering total sales of 2,198 units. The other models in the companys line-up in India, the Nissan Teana, the X-Trail and the 370Z, contributed the rest. From the looks of it, the tales of rising inflation, the hardening of interest rates and the increase in fuel prices are not going to dampen the spirits of the companys brass. Says Kiminobu Tokuyama, managing director, Nissan Motor India, We hope to cross sales of 30,000 units this year and touch 1 lakh in the year 2013. While Nissan has a little over 1 per cent of the 2.3 million vehicles units Indian car market, Tokuyama says its performance shows, among other things, that there is a growing acceptance of Japanese technology and quality in India than ever before. Of course, the thing to remember is that the company has a small base in India. In other words, for companies like Maruti Suzuki and Hyundai that have a significantly larger base, even a small growth percentage can mean much higher sales volume than Nissan. Also, the year seems to have begun on a positive note for most automobile brands. Sales of market leader Maruti Suzuki grew 2 per cent in January 2012 compared to January 2011; that of No 2 Hyundai Motor India and Tata Motors grew 11 per cent in the same month over January 2011. Toyota Kirloskar logged 246 per cent growth, while Ford India and General Motors skidded with 8 per cent and 22 per cent respectively.

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Staying relevant Now look at its strategy. While Nissan started its operations in India in 2005, with the launch of the Nissan X-Trail (T30), which was imported as a completely-built unit (CBU), the company really took the decision to go all out with the launch of the compact car Micra realising that affordable small models dominate Indias car market, accounting for around 70 per cent of the sales. In this it has followed the strategy of South Koreas Hyundai Motor which entered the market in 1996 and immediately began targeting the small car sector where formerly state-run Maruti Suzuki had a virtual monopoly. Even luxury brands like BMW AG and Daimlers Mercedes-Benz plan to bring compact cars to India. Now compare this with, say, a Ford Motor Company, which entered India around the same time as Hyundai but has struggled ever since with sluggish sales of bigger and costlier vehicles. Hyundai India sold 616,000 cars in 2011, around five times Fords total. It is only now that the company is saying India will be the small-car hub for Asia Pacific and Africa for Ford Or consider Honda. Despite being having a presence in India for about 14 years now and after ruling Indias premium car segment for years, Honda has faltered in recent years. It held less than 0.74 per cent of the market share in January 2012, according to reports. The Japanese car maker also failed to act fast on the markets rapid shift towards diesel vehicles. Petrol currently costs 50 per cent more than diesel which remains subsidised. Hondas sales fell 32 per cent in the first 10 months of the current fiscal while the passenger vehicle market grew 1.45 per cent. It remains the only carmaker in the country with an all-petrol line-up even though more than 40 per cent of the cars sold in India are now diesel-powered.Nissan has been careful to cover its flanks it offers both the Sunny and the Micra in diesel variants, which contribute a big chunk of their sales in India. And catering to the expectations of the small car market in India, Nissan claims to offer a combination of price, fuel-efficiency and eco-friendliness, power and safety features, besides value adds like low turning radius, iKey among others. The company has also been attempting higher localisation in its diesel enginepowered cars. The company currently produces diesel engines for the Micra and the Sunny partly with imported components and partly with locally procured components but is working on higher localisation of the engine. Indeed, one important aspect of the Micra is that from the very beginning, more than 85 per cent of its parts are procured through local vendors (96 in total) and 50 per cent of them are located within Chennai.Also many global automakers have moved low-cost export operations to India recently. Says Abdul Majeed, partner and leader, automotive practice, PricewaterhouseCoopers India, Auto companies should also exploit the Indian location for their global strategy. For example, starting R&D base here, re86

directing component suppliers, exporting components to other countries etc. Only then a global auto company can exploit the potential of a country in a holistic way.Currently, a majority chunk of Nissans production has been directed towards exports with the made-inIndia Micra being sold in several markets globally. During the April 2011-January 2012 period, the Oragadam plants total production for Nissan stood at 103,437 units and the company exported 84,416 units of India-built Micra cars during the period. The company exported 60,000 Micra sub-compacts last fiscal year, 80 per cent of the vehicles production. Experts say that for a relatively late entrant like Nissan, a key determinant of success will be how fast it is able to ramp up its distribution network. In a country like India the task becomes slightly complicated as the distribution and after-sale services have to be custommade for different market segments.In its focus on having a wide retail footprint, Nissan has followed Suzuki in India. Dinesh Jain, CEO, Hover Automotive India, Nissans sales and marketing partner in India, says, Nissan wants to play it big. At the launch time of Micra we had 14 operating dealers and then in the next 20 months we opened 50 dealerships across India. By the end of next financial year, we should be 100-plus. It took seven to 10 years for many other original equipment manufacturers to reach such numbers that we have. We are already catering to about 75 per cent of the market for cars in India across 20 states and Union Territories. While Jain seems content with the companys growth figures, rising input costs have recently compelled Nissan to hike the prices marginally. Going forward In the next one year, Nissan plans to focus on expanding its distribution network and improving brand visibility besides launching new models. Another focus area will be beefing up its portfolio of luxury cars in the country. In the pipeline is the launch its premium car brand Infiniti, which is likely to drive up competition in the car space with Toyota also drawing up plans to get the Lexus. Nissan wants to assemble the brand in India, rather than importing the cars as CBUs. The reason is simple: It has to compete with manufacturers like Mercedes Benz and BMW in the space, which have places a great onus on localisation. Localisation will help keep the prices low (CBUs attract high import duty). Plus Indias car assembly regulations mandate higher local content.Capacity expansion is also on the cards for Nissan. It is currently running on a production capacity of 2 lakh units at our plant in Chennai. By the end of March it hopes to increase the production capacity to 4 lakh units. Depending on demand, the company is looking to export its India-made cars to some markets of Europe, Africa and West Asia, while sales in India will remain its first priority, Tokuyama says.
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Hyundai poaches another executive from Maruti Suzuki:

South Korean carmaker Hyundai Motor India has poached Rakesh Srivastava, the marketing head for the northern region for Maruti Suzuki, and placed him as the vice-president for its sales operations across India. Hyundai Motor India is the main rival to the market leader Maruti Suzuki India. Maruti Suzuki still rules the Indian market with a 38% market share, while Hyundai comes a distant second with 15% of the pie. They compete with bigger global rivals like Toyota, General Motors, Volkswagen, Honda and Ford.Hyundai confirmed the move. "Rakesh Srivastava has joined Hyundai Motor India as vice-president national sales with effect from April 2, 2012," the company said in an email response. Srivastava was until recently the chief general manager & commercial business head at Maruti Suzuki India. He was the zonal head for the entire north market, which is the largest and most crucial market for any carmaker in India.Analysts tracking the auto industry say the north plays a decisive role for the success of any automotive company. "It's the largest market with customers carrying higher propensity to spend. It's the largest market for luxury cars and predominantly consumers end up buying top-end variants across all segments right from compact Alto to top-end Mercedes Benz S Class," said a Mumbai based analyst.Maruti spokesperson did not deny the development, but declined to comment.This is the second major placement for Hyundai after it snared Arvind Saxena, another marketing veteran from Maruti, into its fold as vice-president marketing & sales in November 2005. Saxena is now a key member of the HMIL team and drives the entire operation for the Korean company in a leadership role - as director, sales and marketing in India.

Is India ready for a green drive?

Three lakh electric vehicles on the roads by 2020 would mean a reduction of over 16 lakh metric tons of pollution and savings of over Rs 3,700 crore in foreign exchange over the same period.Go Green is the motto for all leading economies of the world, as reflected by the increasing focus on electric vehicles. US President Obama has envisioned a target of one million electric cars on US roads by 2015 and allocated USD 2.4 billion to boost the development of electric vehicles. Almost 17 European Union nations including UK, France, Belgium, Italy and Spain provide specific tax rebates to promote usage of electric cars.China has also joined the green initiative and has

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plans to produce one million electric vehicles annually by 2015. However in India, we are still testing the waters to understand the sustainability of these vehicles in the long run. The Ministry of New and Renewable Energy has been the frontrunner in taking initiatives for promotion and adoption of electric vehicles. In November 2010, the ministry formulated the Alternative Fuels for Surface Transportation Programme under which it provided 20 per cent subsidy to the manufacturers. The Prime Minister Dr Manmohan Singh also announced the formulation of an apex body, the National Council for Electric Mobility (NCEM) which would have representation by various ministries to devise a holistic policy for promotion of electric vehicles in the country. The main advantage of electric vehicles besides low pollution is that running cost of an electric vehicle is much lower vis--vis conventional vehicle. Also increasing crude oil prices are driving demand for these vehicles. Electric vehicles are becoming popular among housewives and students who dont have stringent commuting requirements. Once the supportive government policies are formulated the market for these vehicles would become developed. Besides, India also has the maximum market potential owing to an established auto component infrastructure, low manufacturing and R&D costs, mechanical hardware availability, high urban congestion and the presence of a large domestic market.Price positioning is the main concern for electric and hybrid vehicles, owing to the expensive battery costs. Reva is priced at a price point which is comparable to other petrol-driven Asegment cars while similarly Toyota Prius is positioned in a price category which falls in the luxury segment. The high price combined with low consumer awareness and environmental sensitivity is leading to the big question on whether India is ready for such vehicles. In fact, most manufacturers are planning to launch vehicles in other countries or have already launched electric cars globally like Nissan with Leaf and Mitsubishi with iMiEV. However, they are playing it safe in India by watching the government movements and would eventually target Indian market only if the policies formulated under National Council for Electric Mobility are favorable.Besides price, infrastructure is also another concern for electric vehicles in India. Since these cars can run approximately 80 km on one charge, they are recommended for short distances as charging infrastructure is not developed in the country. There have been initiatives under which BSES in Delhi established charging ports in 50 locations across its sub-stations in the city. Likewise in Bangalore, parking spaces in malls and offices have been equipped with charging points for electric cars. However, it is important to develop rapid charging stations which can provide quick charging in lesser time.

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The key challenge here is that for a developing country like India where we are struggling to deal with problem of electricity shortage, do we have enough resources to build charging infrastructure for electric vehicles. Also it is difficult to assess in the long run, if we are trying to reduce the carbon footprint by decreasing the fuel-driven vehicles, or on the contrary are we burning more coal in the thermal stations to generate the required electricity for charging these vehicles. As per statistics in India, transport contributes to 7 per cent of total greenhouse gas emissions while electricity contributes to 35 per cent.Customer perception and outlook further pose the challenge of product acceptability in India. Electric vehicles are perceived to be under powered vehicles at higher cost. The cars can only cover short distance of about 80 km per charge and hence the value proposition for electric vehicle as a first car is also currently non-existent as compared to the petrol vehicle.The whole phenomenon of electric vehicles have picked up in the recent years owing to the increasing oil prices and pressure on developed nations to reduce the carbon footprint. It is interesting to note that electric vehicles were introduced in 1830s while back in 1900, a majority of the total vehicles in the US and the UK were electricity based. Thus it is certainly a case of reinventing the wheel with India still gearing up to join the green drive. Globally, smart cities are being developed which are focused on promoting electric vehicles usage. Indian government is also planning four smart cities in Manesar, Shendra, Changodar and Dahej to be built along the Dedicated Freight Corridor. These cities are being designed in association with Japanese firms like Hitachi, Mitsubishi and Toshiba and would be would be based on successful models of Japanese cities Kitakyushu, Toyota City and Yokohoma. Smart cities are going to be built under the main objective of 3-Rs: Recycle, Reuse and Reduce. It would focus on promoting energy-efficient facilities with networking function along with environmentally friendly public transportation system and personal vehicles. Special purpose companies would be established for project implementation, operation, maintenance and management of smart cities. Japanese corporations such as Hitachi, Mitsubishi, JGC Corp and Toshiba are working along with State and Central governments to design and build these eco-friendly smart cities.By 2020, Indias population in cities is expected to grow manifold to a staggering 200 million while pollution is expected to grow by five times as compared to 2010. With this tremendous growth has emerged a very critical issue of keeping air and noise pollution in urban areas under control. It is desired to have 3 lakh electric vehicles on the roads by 2020, including three-wheelers, cars, and scooters which could result in a reduction of over 16 lakh metric tons of pollution by 2020, savings of over Rs 3,700 crore in foreign exchange and significant health costs savings.
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Government initiatives are going to be one of the major drivers for bridging the gaps between consumers and electric cars manufacturers. Reduction in cost of vehicles and providing special benefits of parking, charging infrastructure and rebates would boost the adoption of these vehicles in future. Various companies are also taking initiatives to promote electric vehicles as a part of their corporate social responsibility. All leading manufacturers are eyeing India as a key market for the electric vehicles provided the government implements favorable policies. Consumers are also gradually becoming conscious about the use of cleaner technologies with the key question now being, Are we ready to bring about the green wave of change?

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5.3

Government Policies Towards Indian Automobile Industry

Automobile industry in India also received an unintended boost from stringent government auto emission regulations over the past few years. This ensured that vehicles produced in India conformed to the standards of the developed world. Though it has an advantage in India, thanks to low costs and government policies it soon faces stiff competition from it multinational competitors all eyeing for a share in the ever growing Indian autosector. The policies adopted by Government will increase competition in domestic market, motivate many foreign commercial vehicle manufactures to set up shops in India, whom will make India as a production hub and export to nearest market. Bring in a minimum foreign equity of US $ 50 Million if a joint venture involved majority foreign equity ownership. Automatic approval for foreign equity investment upto 100% of manufacture of automobiles and component is permitted. FIIs including overseas corporate bodies (OCBs) and NRIs are permitted to invest up to 49 percent of the paid-up equity capital of the investee company, subject to approval of the board of directors and of the members by way of a special resolution. Investments in making auto parts by a foreign vehicle maker will also be considered a part of the minimum foreign investment made by it in an auto-making subsidiary in India. The move is aimed at helping India emerge as a hub for global manufacturing and sourcing for auto parts. Specific component of excise duty applicable to large cars and utility vehicles will be reduced to 15,000 rupees per vehicle from 20,000 rupees earlier. The Proposal by the Govt. to set up an expert group to advise on a viable and sustainable system of pricing petroleum products, as this will surely had an impact on the Automobile Industry. The announced reduction on the basic customs on bio-diesel is great news for all companies working on environmental saving technologies.

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CHAPTER VI INDIA AND CHINA: OVERVIEW OF THE INDUSTRY

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6.1

India and China :overview of the auto Industry

China and India account for less than 1% of the cars in use today with fewer than 10 cars per thousand people. These countries represent a huge potential market in the long term. There might have been evidences of rapid growth in the short term but the options are limited for potential entrants. The market on the Pacific rim alone cannot support the kind of volumes expected to run sustainable operations in these countries. Domestic car sales in China is xpected to grow at 10% each year and is expected to account for over 15% of the global growth in the car sales. The Auto Industry contributes to nearly 4% of Indias GDP whereas a higher percentage is deployed in the case of china .Both countries had long followed strict FDI norms into these sectors and high import tariffs to support domestic players. With the accession to WTO and the liberalization of the two economies, a large number of global p layers have set up plants in India and China and in the process burnt their fingers in anticipation of the large volumes. Given the capacity intensive nature of the industry, the logic of Cheap-labor has not worked to be too profitable ,as the auto majors have realized .In addition ,these countries have one of the worst cost structures for the car industry, given the inefficient supply chains and fragmented distribution systems. Thus not too many car manufacturers have reached their economies of scale so far.

6.2

Framework for the Analysis:

6.2.1 Assessment of the Chinese threats & weaknesses of the Indian Players
Two Wheelers: Import of two wheelers in the Indian market is unlikely to pose a serious threat to Indian players despite the low price tags mainly due to two reasons-low perceived quality levels of the Chinese vehicles and widespread availability of retail financing for twowheelers in India which makes Indian bikes easily available to all household. The low-end Indian models competing essentially on price might have to bear the marginal decrease in sales due to the imports. The government has also imposed strict emission norms, which act as non-tariff barriers to Chinese imports. Component Exports: The area of major competition for the Indian auto industry is in the component sector. Firstly, global sourcing of components from china brings savings of nearly 17-20% to the table(as against the 15-17% in the case of India) mainly due to tehri scale of
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economies ,lower power costs(0.061 kWhr/USD in china as against 0.095 kWhr/USD in India)reduced freight, local government concessions, lower transactional costs(30% lower for auto components manufacturers in China).With the increasing competition for orders from global OEMs, Indian component exporters might lose out in the price wars if they start with a higher cost base. Component Imports: The structure of the component industry in India shows a largely fragmented industry (implying low scale operations0with just 28 players with a turnover of greater than 30 million USD. Hence the Chinese dragon could eat away a diverse set of small and medium enterprises in India through low cost imports of components (primarily in lowend, low-technology parts).

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CHAPTER VII RECOMMENDATIONS

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RECOMMENDATIONS
The imperatives for all the firms in the Indian auto industry as follows: Increase scale of operation through Greenfield projects or M&As (to prevent subscale manufacturers from losing out to global majors. Increase the quality consciousness of workers through training programmes (utilize the Ministry of Industry automotive cess fund for conducting training programs to boost productivity of SMEs in the component industry) Leverage IT to drive down transaction costs and time-to-market. Improve spending on R&D and employ flexible manufacturing to design and produce new products. Utilize existing relationships with MNC carmakers to achieve global recognition. Learn from strategic alliances formed with other firms worldwide-utilize the exposure to different companies with complementary capabilities and a mutual interest in cooperation. It is the time for Indian manufacturing sector as a whole to hone its competitive edge. They would have to develop new competencies and radically overhaul existing ones if required and companies which view their international expansion, as an opportunity to learn would find it perfectly feasible to do so.

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CHAPTER VIII CONCLUSION

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CONCLUSION
Indian Automobile Industry is in the growth phase and the expected growth rate is 9-10% for FY2009-10 compare to last year growth rate which was just 0.7% and the above facts and figures in our study also support this truth. Indian Automobile has a lot of scope for both two wheelers and four wheelers due to development in infrastructure of the country and especially the rural sector in which demand of two wheeler has increased even in recession. According to Indian Statistical Organization the per capita income (Rs.38000) is increasing and national income at the rate of 14.4% which shows potential to buy vehicle in auto industry. The growth rate of Indian Automobile is so fast that by 2016 Indian Industry will be world 7 largest manufacturer in all sections. The Indian auto market is still untapped the majority of the people in country dont own a four wheeler and all the major auto companies are trying to increase their sales by several moves. Like TATA has launch NANO the peoples car and now TATA motors is also planning to come out with an electric car as well as hybrid car, moreover in two wheeler segment many companies like Mahindra and Mahindra. Disaggreaation of the automotive value chain has led to increased competition, declining margins, increasing disadvantages of being subscale and emergence of a certain set of new oppurtunities for Indian Firms. There are certain choices that could decide the future existence of the Indian auto firms choosing to ally or saty alone and also choice of segment of the value chain to focus on component suppliers and module suppliers.

Critical Issues and Future Trends The critical issue facing the Indian passenger car industry is the attainment of break-even volumes. This is related to the quantum of investments made by the players in capacity creation and the selling price of the car. The amount of investment in capacities by passenger car manufacturers in turn depends on the production Threat from the new players: Increasing Most of the major global players are present in the Indian market; few more are expected to enter. Financial strength assumes importance as high are required for building capacity and maintaining adequacy of working capital. Access to distribution network is important. Lower tariffs in post WTO may expose Indian companies to threat of imports.
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Rivalry within the industry: High There is keen competition in select segments. (compact and mid size segments). New multinational players may enter the market.

Market strength of suppliers: Low A large number of automotive components suppliers. Automotive players are rationalizing their vendor base to achieve consistency in quality.

Market strength of consumers: Increasing Increased awareness among consumers has increased expectations. Thus the ability to innovate is critical.Product differentiation via new features, improved performance and aftersales support is critical.Increased competitive intensity has limited the pricing power of manufacturers.

Threat from substitutes: Low to medium With consumer preferences changing, inter product substitution is taking place (Mini cars are being replaced by compact or mid sized cars).Setting up integrated manufacturing facilities may require higher capital investments than establishing assembly facilities for semi knocked down kits or complete knocked down kits. In recent years, even though the ratio of sales to capacity (an important indicator of the ability to reach break-even volumes) of the domestic car manufacturers have improved, it is still low for quite a few car manufacturers in India. India is also likely to increasingly serve as the sourcing base for global automotive companies, and automotive exports are likely to gain increasing importance over the medium term. However, the growth rates are likely to vary across segments. Although the Mini segment is expected to sustain volumes, it is likely to continue losing market share; growth in the medium term is expected to be led largely by the Compact and Mid-range segments. Additionally, in terms of engine capacity, the Indian passenger car market is moving towards cars of higher capacity. This apart, competition is likely to intensify in the SUV segment in India following the launch of new models at competitive prices.

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CHAPTER IX BIBLIOGRAPHY

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BIBLIOGRAPHY
MAGZINES: Business Today Business World

News Papers: The Economic Times The Indian Express The Business Standard The Hindustan Times

WEBSITES: www.googlefinance.com www.yahoofinance.com www.google.co.in www.moneycontrol.com www.worldfact.com www.rbi.org.in FDI statistic government of India India Central Statistical Organization Economic Times Some more.. EBSCO HOST(database) PROWESS(database) INDIA STATS(database) Peterson, Lewis and Jain: Managerial Economics

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