Professional Documents
Culture Documents
rh~s chapter defines thc ohjecllves of the study, outl~nesthe methodology employed lor c d n y ~ n y thc rcs~drcll out project. elucidates the kartous concepts relat~ng to the proble~nsunder revlen. projects
d
h~ghlighlsthe problems. strunyth\, weaknesses. opponunltles. and threats be~ngfaced by the four-wheeler n ~ a n u l a c t u r ~ n ~ndustry l n d ~ a In
IS
IS
I)
exarnlrlc thc structure and dc\elopment of the lndlan u t o m o b ~ l c Industry over a pcrlod I96O to 1996.
I)
exiunlne the Krylrldtur? P o l ~ c ~ Imposed hy the Government of l n d ~ a es on the Auto~noh~le I~ldustryfrom tlme to tlme.
3)
analyse
tllc brodd
trends
performance
4)
~dcntify vanous measures of financtal performance to analyse d~fferent wpects oifinanc~al management and p r o f i t a b ~ l ~ t ~ .
5)
study the strategic tssucs adopted by select Automobile unrts and the consequent gains. and
6)
11.2
The studles referred In Chapter I arc presentlnp the performance o f Autornob~le Industn and the problems k ~ n g faced by these unlts w~thout rnaklng any Indepth e n q u l n Into the ~ n t e r - r e l a t ~ o n s h ~ p s assoctated wlth the levels of operatlnp e f i c ~ e n c y and t h e ~ rconsequent Impact on financ~alperformance Further, none of the s t u d ~ e s
have made any systernatlc attempt to employ soph~stlcatedtechnlqucs to workout the ~nter-relat~onsh~ps associated wth d~fferent aspects o f operallng performance
rhrrefore. the present study was taken up to analyse the overall trends In operatlnp and financ~alperformances of select automob~lcunlts. by appropr~ately Ilnklng up the relevant aspects of pcrrormilnce Funher. this study 1s Intended to ernplo? dtfferen~
Though the word Automobtle Includes all types of Motor \'eh~cles. the present study focuses only on Four-Wheeler Manuhcturlng Industn. due to t h e ~ rrnan~fold accclerattng effect o n actlvltles In many sectors of the econorn? The stud? co\ers
almost all the firms that arc rnanufactur~ngFour-Wheelers. ~ncludlnpthe one unlt In puhllc sector vlz.. M a ~ l tldhog L.tmlred t The scope o f the study 1s to rcnarn extent
1996)
11.3
At present there are thirteen finns manufactur~ngautomobiles In India The study has chosen seven establ~shedfirms as these firms can he expected to demonstrate
d
~ndustry. wide product range. cxtensl\e rnanufdctur~ng ~nfrastructurc and scale of cq>cratlons 'The more recent entrants whlch h a \ c thc benefit of phased rnanufactunnp pro$rarnmes are expecled to ~ r ~ d ~ caa pdttern of' low-key inLestment heha\ lour hence te kept away from the study The seven sample firms are as follows
11.4
This study 1s based on data for the period 1962-63 through 1995-1996 choice
IS
The
largely dictaled hy the history of evolut~on the Four-wheeler manufactunns of T o r m p l t u l a t e some of the landmarks. 11 is ohservahle that until
Industry In lndla
1948. the manufacture of motor vehlcles as dlstlncl from assembly. was not undenaken In the country Hlndustan Motor Company was the first to take up the production o f
v~tal parts o f motor vehicles. The first pan~ally manufactured car In l n d ~ a was produced In 1949. However, real growth of the four-wheeler ~ndustrystarted only after 1953 T on when, on the recommendallon of the F ~ r s t a n f l Commlss~on Automob~leIndustry. only five manufacturers havlng a programme of complete manufacture o f four-wheelers uere permlttcd to contlnuu thelr operatlons
Mahlndra and Mahtndra l ~ m ~ t ewas a pnvate Ilmtted company 1111 15th d Junc.l9Sf, when
11 was
TELCO was
ree~steredas a publlc llrn~ted company tn 1945 for the manufacture o f locomot~ves and other englneenng goods In October 1954 The automobile dlvls~on the company started functlonlng of
commenced nianuCdctunng operatlons In the same year Thus the four-wheeler industry came into some shape only towards the end of the fifttes For thts reason the penod for the stud)
IS
chosen to b e g n w ~ r h1960-61
siunplc penod lor reasons of data ava~labtl~ty uhen statlst~calanalysls on this stud) staned
11.5
SOURCES OF DATA
O f f ~ c ~ aDlrcctory of Bombay Stock Exchange and The facts and figures l puhl~shed by Automob~le Manufacturers Assocrat~onof l n d ~ a from tlme to tlme ha\,e been the b a s ~ csource of data for the study Wherever rherc u e r e gaps In the a b o ~ r
sources, 11 was supplemented by the other sources ltke Annual Survey of Industries. Kothari's Year Book on Busrncss and lndustry and
CMIE.data base
magazines,
and dally
news papers like Flnanc~alExpress and Econom~cT ~ m e s For deflating the vanous values o f d~frcrent years. the cost of l ~ v l n g Index of lndustr~alworkers, wholesale pnce nnd~ceso f vch~clesand pans. machinery and transpon equtpment and some other m~scellaneousItems are drawn from the varlous issues of the Reserve Bank of l n d ~ a 13ulle11n The wholesale pncc lndex sene\ by CHANDHOK(1995) are used for Items for w h ~ c h data were not ava~lable the Reserve Bank of l n d ~ a the In Bulletln
In order to achleve the earher objecl~vesthe present study has evaluated the resources In d ~ f k r e n r ways The product~onof data drawn from the s a ~ d
units,
installed
and l~cencedcapacltlcs. cap~tal-outputratnos. trends n value-added, capltal [ormarlon n and thc sources tapped arc malyscxi to present the overall trends in slze of operat~ons In Automob~le Industry
11.6
For analyslng the Operarlng efficnency In Automobile Industr). the following measures havc been est~~iiated
I)
Degree of Capac~ty Ut1117at1on Trends in Productnv~ty - Kendnck. Solow and D I \ I S I pmduct~vlt) ~ lnd~ces have been c o n s t ~ c t c d
2)
3)
Operating-cost-respons~veness ratios
For evaluat~on the trends In financial performance Issues l ~ k epattern o r frnanclng. Investment. profiub~llty. s11. o f borrowings and such other related vanables have been est~mated The trends In financial performancr
IS
evaluated by work~ng-out
the necessary ratnos and necessary ~ n t e r - r e l a t ~ o n s h ~ p s In between perttnent ratlos have o l performance been nsorked out An aggregate cvaluat~on f d ~ f f e r e n aspects of financ~al
IS
In order lo eialuatc thc data drawn from the different automobtle fimls. d~ffcrcnt stat~stlcaltools and techniques are employed Some of them include the
(i)
C o m p o u n d G r o w t h rare:
III
IS
n = Number o f ycrrrs
(ii)
Correlation :
I n order to evaluate the ~ n t e r - r e l a l ~ o n s h ~ p between varlous vanables under study. a~rnplc correlallons are worked out The correlat~ons are extens~velyused to estlmate
the ~nter-rclationshtpbetween varlous types o f financial ratlos to underl~ne the relatne dssoclatlon between them The formula employed IS
\Vhere.
r
= =
=
Correlation co - elXc~ent
Co-vanance o f x.y Standard d e v ~ a t ~ o n x of
C,, (x,y)
O h
OY
The calculaled correlal~on o e f i c ~ c n t s c are tested for thelr s~gn~ficance fi\e at c u l l Ie\el
per
(ill)
M u l t i p l e L i n e a r Regression Equations:
I n order to estimate the degree nnd extent o f ~nrer-relat~onshlp between a dependent vartable and the number o f Independent variables. the multtple llnrar rcgrcsslon cquutlons are est~mated n I
Where,
lndcpcndent Var~ablcs
Y - Dcprndcnt Var~able
B
u
11.7
U'h~lc ni<)pvda.scooters. motorcycles and tempos constltutc the two and threeu'hccler scxtor. cars. jeeps. and comrnerc~al veh~clesconstltutc the (Four-uheeler, 4u1omob1lesector
Go\cnm\cnt regulations hlth respect lo the technolog~cal collahorat~ons. pnclng and dtstr~but~on character~sc devclopmcnts In the overall automohtle tndustry These the regulat~ons are d~rectly and ~nd~rectly tnfluenced the market. s ~ z e and structure alons wtth the usual Indust? level variables lthe tndustnal product~on. financtal assistance. etc Unlts operattny in the Industry respond to these through structural and strategic
financial and opcrallnp pol~ctes The Industry has faced two dlstlnct phases (ulth
respect to government rcgulat~ons/l~heral~sat~on) growth and developmen1 The In tts
tndustry was factng stnct government regulartons unttl 1981-82. thereafter select~ve relaxattons The four-wheeler manufacturns who have passed through both the phases are of controlled envtronment and l~beraltsat~on as follows.
Ashok Leyland Ltd ( A L ) B ~ J Tempo Ltd (BTL) ~ J DCM Toyota Ltd ( D C M ) E~cher Motors Lld ( E M L ) H~ndustan hlotors 1.td ( H M L ) Mahlndra and Mahlndra Ltd ( M Q M ) Marut1 Ildyoy L.td ( M U L ) Mah~ndra-Stssan L.td ( M N A L ) Premter Aulomohtles Ltd ( P A L ) S ~ p a n Autonioh~lcs ( S A L ) t L.td Standard Motor Products o r lndta Ltd (SMPI) Swaraj Md1d.1L.ld ISML) Tata Engtnecr~ny and Locomott\e Company Lld.(TELCO)
A bnef profile of there 13 untts in respect of year of establ~shment. producuon In terms of units
. . - - - - .
~
.
,
h -
.+
PAL.
. . -.. . -C. . . .
1 044
10017
. -
42315 16818
F A .. . -
1
1
---
637 131
561 b 2249
~
B'IL
I
I959
*j
3713
'
.1. .
.- -I
I0
I1
.
.~ .
tML
-.
1982
***
--
--
4357
***
-
1167
-
. - .. .+ .
j
1
SML MN.4L
. .. .--- -.. .. .
I983
-.
-1'
i.
'
I 004
***
-1-
1083
-
'
***
. . .
1 3371 -.+
1
2488
290
'
.*.
.I*
928 A - -
SAL
-
1073 - 1 9 4 8
NIL 1393
i ..I .-.
L
Source NOTE -
TOTAL
81588 L
.-A
,
.
525
NIL
49
( 0
345052
30
5094
66273
Aulomottve lndustr) o l l n d ~ a Facts and F~gures.1989.90. Assoclanon of lndtan Au~ornob~lc Manufacturers. Bombay, Slattst~cal Senlce. 1989-90 I @
***
- compnses
o f thirteen manuFdcturers have recorded a comhlned output o f 3.45.052 automobiles and u i t h a gross turnover o f Ks66.273 million during 1989-90 reached thi'. The industry has The
industry is currently marked by r s~gnificarit growth i n 11s level o f achie\ements In terms o f turnover and profitah~lity The above thirteen units can he strat~fied as established lirms (seven) and others a5 new entrants A b n e f sketch o f the industry's strengths. ueaknesses. opponunltlcs and threats 1 a lollows s s
Th~s ~ndustry~nhcrcritl? protides high dealer marglns w h ~ c h indirectly leads to an i n i p r w e d quailly o f iritcrfacc hetueen Ihe customer and manufacturer As most Indian auto ronipdnies arc t?ins up u i r h foreign majors. q u a l ~ t yo f the product is a l u a \ s assured Cherpcr Idhour and efficient management o f overheads are gettins trrnsl.~tc.d Into louer opcrdtinp costs A sidespread dealer network (although not cxhausli\c) along u i l h a 1 csldhlished h r m d loyalt) among existing players can be 1 capitalised upon Ilcmand lor automob~llseis purel) dependent on Indian-consumer spccific factors and
IS
Tradttionally. the itldustry has bee11 characlensed by a weak aner-sales senrice aCtlvltt~s lcadlng to the mushrooming of a
W~th hardly any projects worth thew name belng implemented to Improve the
emclency o f roads and h~ghways.t h ~ s o w l h m ~ g h tget stunted Over dependence on g Core~gn collaborators wlthoul a move towards ~ndlgenlsatlonmay prove harmful to most manufacturers In the long run
Opportunities :
uldenlng the opportunltncs In nxarhet The urban and scml-urban marker are h ~ t h e r to W~th cheaper costs of product~on.expon potenual c e n a ~ n l yexists In many
unldppcd
firni W ~ t h car-finance orfcrlng h ~ g h returns. Inno\,atl\e finance schemes are on offing to act as srlcs a ~ d s
Threats:
IS
l~kely
But then agaln, glven the financ~almusclc of new entrants. de\elopment of neu n ~ c h e s m~ght take place The lnev~tahle ~ k e petroleum prlces ~ncludlng h In d~esel. ~ l naturally w l dampen the splnts of a prospcctlve autoniob~le purchaser The growlng concern for a cleaner cnvlmnrnent has put a break on the prol~ferauon vehicles The not~ficattono f of the surface transport mlnlstry d e c l w n g new emlsston norms for the automobiles. forces
Although the
industry
lo
IS