Country Analysis India With Special Reference To The Automobile Sector


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A presentation covering the Indian Automobile Sector

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  • Ernst & Young analysis, passenger vehicle sales in the country will grow at a CAGR of 12 per cent to touch 3.75 million units by 2014 as against 1.89 million units at the end of 2008-09
  • Two wheelers - Majority of exports are to Bangladesh, Sri Lanka, Bhutan and Nepal• PV - Exports are made to South America, Africa, Europe, Latin America and the Middle East.CV - Major portion of the exports are to Sri Lanka, Gulf countries and Africa 3 Wheelers Auto exports to Sri Lanka, Egypt, Nepal, Bangladesh among other countries
  • Country Analysis India With Special Reference To The Automobile Sector

    1. 1. COUNTRY ANALYSIS- India<br />With special reference to the Automobile Industry<br />KhageshAgarwal (05/09)<br />SaurabhAgarwal (33/09)<br />Anubha Jain (111/09)<br />Sulabh Jain (147/09)<br />DeepeshBansal (153/09)<br />
    2. 2. Country Analysis<br />To anticipate and foster changes in the business environment is a prerequisite to success<br />Building a holistic picture that integrates:<br />
    3. 3. Strategy<br />National strategy is reflected in the goals and policies of the decision maker<br />It can be deduced from the govt. actions and statements<br />
    4. 4. Policies:<br />govt. actions aimed towards achievement of national goals<br />influence resource mobilization and allocation<br />the form of the market<br />country‘s external orientation (inward or outward)<br />
    5. 5. Context<br />Focuses on the national resources, the players and the rules of the game.<br />As a country analyst, we must identify:<br /><ul><li> scarcity/abundance
    6. 6. remuneration
    7. 7. elasticity of demand/supply</li></ul>of the resources<br />
    8. 8. Players in the game:<br />Bring about transformation of resources<br />Firms, government organizations, NGO’s and social groups<br />
    9. 9. Rules of the game:<br />Understanding the code of conduct<br />Defining what is right/wrong<br />Can be both formal and informal<br />International Dimension:<br />Resolving conflicts arising of cross-cultural dimensions<br />Knowledge of policies towards outside world<br />Outside of forces that influence our policies<br />
    10. 10. Policy evaluation<br />Examining inter-relationships between components<br />Benchmarking performance against standards<br />Evaluate relationships between policies and national development<br />The effect of policy on <br />resource mobilization<br />resource allocation across competing sectors<br />efficiency of resource mobilization<br />
    11. 11. INDIACountry analysis<br />
    12. 12. Source:<br />
    13. 13.
    14. 14.
    15. 15.
    16. 16. [Auto Industry Analysis]<br />
    17. 17. Indian Auto Industry<br />Facts<br /><ul><li>Second Largest two wheeler manufacturer in the world
    18. 18. Largest tractor and three wheeler manufacturers in the world
    19. 19. Fourth largest Commercial vehicle market in the world
    20. 20. Eleventh largest passenger car market in the world</li></ul>Growth Potential<br /><ul><li>Can become World’s third largest automobile market in 2030.
    21. 21. By 2016, Automotive sector can DOUBLE its percentage contribution to GDP from current levels of 5% (US$50 billion) to 10% ($180 billion).</li></ul>Trends<br /><ul><li>Growth of exports of 32.8 % FY 2008-09.
    22. 22. Output of commercial vehicles has grown 2.8 times compared to the 2.2 times increase in passenger cars
    23. 23. For every passenger car turned out, there are almost 7 two-wheelers produced </li></li></ul><li>The Growth Journey<br />
    24. 24. Automotive Companies in India<br />Major Indian Companies<br />Major Multi-national companies<br />
    25. 25. The Key PlayerS<br />Passenger vehicle<br />Twowheeler<br />
    26. 26. Booming Indian Economy<br />
    27. 27. Key Growth Drivers<br />
    28. 28. Auto Industry Numbers<br />Overall Market<br />Over all Production increased from 10.85 million vehicles in 2007-08 to 11.17 million vehicles in 2008-09<br />Passenger vehicles increased marginally from 1.77 million to 1.83 million <br />Two-wheelers increased from 8.02 million to 8.41 million<br />Domestic Market <br /> Vehicles sold including PV,CV 2W and 3W in 2008-09 was 9.72 million as compared to 9.65 million in 2007-08.<br />Exports<br />Sales increased from 1.23mn units in 2007-08 to 1.53 million units in 2008-09<br />As per the Automotive Mission Plan (AMP) 2006-2016 total turnover of the automotive industry in India would be in the order of US$ 122 billion-159 billion in 2016<br />
    29. 29. Category wise numbers<br />Two Wheeler <br />Dominated by Motorcycles 80% , Scooters 14% Mopeds 6%<br />Domestic - 7.25mn units . Hero Honda 42% & Bajaj 27% share CAGR – 9.5%<br />Exports 819000 units (07-08) . Bajaj Auto 59% TVS 17% share CAGR – 41%<br />Passenger Vehicles<br />Dominated by Cars 78% , MUV/SUV 22%<br />Domestic – 1.5mn units Maruti-46% Tata-15% Hyundai 14% CAGR -14.8%<br />Exports - 217000 units (07-08) Maruti 66% Hyundai 24% CAGR – 26%<br />Dominated by M&HCV – Goods 48% Passenger 38% , Rest by LCV-4%<br />Domestic – 487 thousand units , Tata-62% Ashok Leyland -15% CAGR- 22%<br />Exports – 59 thousand units, Tata 67% Ashok Leyland 12% CAGR -30.6%<br />Commercial Vehicles<br />Three Wheeler<br />Dominated by Passenger Carriers with 64% share , Goods Carrier -36%<br />Domestic – 365 thousand units , Bajaj -42% Piaggio-41% CAGR-10.5%<br />Export – 141 thousand units , Bajaj -97% CAGR -44.5%<br />
    30. 30. The Indian Auto Components Market<br />Original Equipment Manufacturers (OEMs)<br />Replacement Parts Production and Distribution : e.g. Air filters, oil filers and replacement lights <br />Rubber Fabrication : tyres, hoses, belts etc.<br />Estimated component market size is US$ 6.7 bn<br />The exports of auto components industry has grown at a rate of nearly 30 per cent CAGR over the last four years.<br />
    31. 31. Political - Legal Factors<br />Stunted Economic Growth<br />Boosted Economic Growth<br />1 year <br /><ul><li>6% cut in CENVAT, abolition of surcharge on income tax.
    32. 32. Abolition of FBT, Reduction of excise duty on big cars.
    33. 33. Encourage Urban Fleet Modernization</li></ul>1 year <br /><ul><li>Differential excise duty for small and big cars.
    34. 34. Customs duty for imported cars including hybrid cars.
    35. 35. Excise duty cut only for petrol driven trucks
    36. 36. 1-5 Years - Providing Special Auto-component Parks (SAP) and Special Economic Zones (SEZ) as in IT . Negative list of items and rules of origin in FTAs / RTAs. (ASEAN Free Trade Agreement)</li></ul>- SIAM recommended the government on extending excise and sales tax benefits to customers who opt for scrappage of their old vehicles<br />1-5 Years <br /><ul><li>Existing Complex labor laws( 45 Central acts and 16 associated rules)
    37. 37. Not implementing country wide VAT
    38. 38. Ambiguous policy in land acquisition for green field projects</li></ul>5-10 Years<br /><ul><li>Poor execution of Infrastructure investments. (Construction of Highways of 16km per day against the target of 32 km per day)
    39. 39. Absence of National Auto fuel Policy (NAFP)</li></ul>5-10 Years<br /><ul><li>Effective Implementation and Uniform enforcement of GST
    40. 40. Maintain a three tier tariff structure for raw materials, intermediate goods, finished goods.
    41. 41. Revamp WTO compatible export promotional schemes like DEPB, EOU and EPCG schemes
    42. 42. AMP Plan 2006-16 set by govt</li></li></ul><li>Economic Factors<br /> 1 year<br /> 1-5 year<br /> 5-10 years<br /><ul><li>Increased access to credit and lower interest loans
    43. 43. Investment in Infrastructure spending can boost the commercial vehicles segment.
    44. 44. Growing working population (441 million people in 2015/16)
    45. 45. Upward migration of household income levels (600 million people have annual income of more than $10,200)
    46. 46. Middle class expanding by 30 - 40 million every year</li></ul>Can propel growth<br />
    47. 47. Economic Factors<br /> 1 year<br />5-10 years<br />1-5 year<br /><ul><li>Impact of delayed monsoon (85% of normal, subsequent impact on paddy cultivation) on rural demand.
    48. 48. Non- availability of supplier base with demanded capability (Quality and Quantity).
    49. 49. Poor execution of Infrastructure investments. (Construction of Highways of 16km per day against the target of 32 km per day)
    50. 50. Increase in crude oil price($ 35/barrel to $ 70/ barrel in 14 months).
    51. 51. Non-availability of Key raw material (like Steel) at cheap price.
    52. 52. Possible increase of interest rates (by 2-2.5% BPLR) because of planned government borrowing.</li></ul>Can Stunt Growth<br />
    53. 53. Social Factors<br />Rapid Urbanization of semi urban regions<br />Rising aspirational levels. Improvement in living standards of middle class<br />Increased spending on Fashion & lifestyle comforts.<br />Seeking “Value for money”- consumer behavior<br /> Increasing customer emphasis on aesthetics and comfort.<br />A perfect marriage of rise in disposable income and demographic dividend (From US$ 556 per annum US$ 1150 by 2015)<br />
    54. 54. Technological Factors<br />
    55. 55. India as a Testing Hub : NATRIP<br />
    56. 56. India : A Developing Hub for Compact Cars<br /><ul><li>Compact cars account for 70% of the total car market.
    57. 57. Compact car sales increasing at about 20% each year
    58. 58. Excise duty on small cars slashed from 24% to 12% in last three years
    59. 59. Tata Motors :</li></ul> Tata Nano became a big success gaining worldwide popularity with Tata planning to increase capacity<br /><ul><li>Toyota :</li></ul> • Toyota Kirloskar motors planning to launch its own small car in India by 2011 <br /><ul><li>General Motors :</li></ul> • New Capacity to manufacture small cars at its Talegaon, Maharashtra plant with 80% local inputs.<br /><ul><li>Brought in Spark small car in 2007
    60. 60. Nissan-Renault :
    61. 61. 50:50 JV, to make 400,000 cars a year with an investment of over US $ 1 billion.
    62. 62. Coming up with the $2500 car to compete with Tata Nano in 2011
    63. 63. VW :</li></ul> • Investing 400 million euro in a new plant in Pune. Operations are to start in second<br /> half of 2009.<br /><ul><li>Maruti Suzuki :</li></ul> • New car plant to make 250,000 cars per annum (total 800,000 cars/annum)<br /> • 10 new Component JVs to support new Diesel Engine Plant.<br /><ul><li>Hyundai :</li></ul>Already a big player in the small car segment<br /> • Increase capacity to 600,000 cars per annum over next 1 year.<br /><ul><li>Nissan :</li></ul> • Micra, UK  India<br /><ul><li>Four more models in India, involving a total investment of over Rs 2,000 crore. 
    64. 64. Ford :</li></ul> • Plans to unveil its small car with 1.2 ltr engine by 2010<br /><ul><li>Honda :
    65. 65. Investing US $ 250 million in a new plant in Rajasthan with capacity of 60,000 car per year (First car to roll out in 2009).</li></li></ul><li>Break through future trends<br /><ul><li>India will be a Automotive hub, led by small cars and auto component domains
    66. 66. Export of automotive components to ASEAN,BRIC,EU and USA for OEMs as well as Aftermarket
    67. 67. Booming Automobiles (Particularly cars) second sales and remodeling
    68. 68. Increased deployment of IT-enabled Automobile support systems like GPS,ABS,ASR and Safety systems</li></ul>.<br /><ul><li>Quality Certification (Deming, Six Sigma,TQM,TS16949) amongst suppliers have attained critical mass and the entire market will follow to get quality certifications.
    69. 69. Will be a hub for optimal cost, high quality vehicular testing and terrain data acquisition services
    70. 70. Alternate fuel (Bio fuel, electricity) and environment friendly green engines (Bharat emission norms)</li></li></ul><li><ul><li>Favorable Demographics
    71. 71. Improving income curve
    72. 72. Reducing interest rates
    73. 73. Cost Pressure
    74. 74. High Expectations
    75. 75. Inadequate Infrastructure Development </li></ul>KEY CHALLENGES<br />KEY ENABLERS<br />Key Focus Areas<br /><ul><li>Product development( includes collaboration, new products developed)
    76. 76. Vendor base (quality of vendors, skill levels , size etc.)
    77. 77. Manufacturing capability( quality levels, productivity & skill levels, technology )
    78. 78. Service levels
    79. 79. Supply chain
    80. 80. Labor law
    81. 81. Leverage IT </li></ul>Key Features of Future Auto Policy<br /><ul><li>ForeignDirectInvestment
    82. 82. Importtariff
    83. 83. Incentivesfor Research and Development (R&D)
    84. 84. EnvironmentalAspects
    85. 85. Other measures </li></li></ul><li>References<br /><br /><br /><br /><br />Ernst & Young Auto Track<br /><br /><br />The Economic Times<br />Hindu Business Line<br /><br /><br /><br />
    86. 86. THANK<br />YOU<br />