Automobile INDUSTRY ANALYSIS Presented by: RAKESHKUMAR N K. Kohinoor business school
History Indian market before independence was seen as a market for imported vehicles while assembling of cars manufactured by General Motors and other brands was the order of the day. Indian automobile industry mainly focused on servicing, dealership, financing and maintenance of vehicles. Later only after a decade from independence manufacturing started. Indias Transportation requirements were met by Indian Railways playing an important role till the 1950s. Since independence the Indian automobile industry faced several challenges and road blocks like manufacturing capability was restricted by the rule of license and could not be increased but still it lead to growth and success it has achieved today.
Automobile industry Tenth largest in the world with an annual production of approximately 2 million units Expected to become one of the major global automotive industries in the coming years AUTOMOBILE PASSENGER COMMERCIAL 2 WHEELER 3 WHEELER VEHICLE VEHICLE
India is….• Largest three wheeler market in the world• 2nd largest two wheeler market in the world• 4th largest passenger vehicle market in Asia• 4th largest tractor market in the world• 5th largest commercial vehicle market in the world
Evolution of Automobile Industry Early to mid 90sInitial Years •Seller’s market and long Mid 90s – Early 2000sManufacturing was licensed waiting periods•High Customs duty on import •Buyers market•Steep excise duties & •Delicensing in 1993•sales tax •Increase in•2 Major players: •Removal of capacity IndigenizationPremier Automobiles Ltd restrictions& Hindustan Motors •Easy Auto finance •Decrease in customs &1980s excise •Manufactures•Entry of MUL, better product, diversifying into relatedwith government support •Auto finance boom- activities: finance lease, more players (foreign fleet management,•Seller’s Market banks & non banking insurance and used car companies, better market•Long Waiting Periods schemes.
Automotive industry crisis• global financial crisis in the auto industry that began during the latter half of 2008• weakened by the substantially more expensive automobile fuels linked to the 2003-2008 oil crisis• the global financial crisis and the related credit crunch placed pressure on the prices of raw materials• In 2009, the vehicle companies of the world are being hit hard by the economic slowdown across national boundaries
BUDGET 2008-09consumption-driven growthpolicy on inclusive growthattempt to address farmers woes
Pre-budget Demands of theAutomotive Industry• The adoption of a uniform excise structure of 16 percent across all passenger cars and utility vehicles• The reduction of excise duty on two-wheelers and three-wheelers from 16 percent to 8 percent to offset declining sales• The provision of benefits for the development of hybrid technology• The offer of liberal credit to the agricultural sector to encourage the purchase of tractors
Budget Proposals Directly Impactingthe Indian Automotive Industry
Analysis of current scenario High interest rates, high domestic oil prices and inadequate vehicle financing have continued to affect the overall automobiles sector The current slowdown in economic growth and automobiles industry has further deteriorated due to the global financial market crisis which has created volatility in stock markets and exchange rates and aggravated lack of liquidity
Continued….... Automobile companies are reducing production by shutting plants for a few days to avoid inventory build-up and in anticipation of seeing further downside
Volume Growth of Automobile Sector in Print during 2008 Compared to 2007, Print advertising of Automobiles dropped by 13% during 2008..
Share of categories of Automobile sector in Print during 2008Passenger Vehicles were the front runners in Print advertising with64% share followed by ‘Motorcycle’ and ‘Commercial Vehicles’ with17% and 7% share respectively during 2008.
State-wise share of Automobile sector in Print during 2008
Tally of Automobile Advertisers in Print during 2008• 4% rise in number of Automobile advertisers in Print during 2008 compared to 2007
Usage of Sales Promotions ad campaigns in the Automobile sectorMore than 55% of Automobile ads in Print were for Sales Promotionduring 2008.
KEY ENABLERS KEY CHALLENGES • Favorable Demographics •Cost Pressure • Improving income curve •High Expectations • Reducing interest rates •Inadequate Infrastructure DevelopmentKey Focus Areas• Product development( includes collaboration, new products developed)• Vendor base (quality of vendors, skill levels , size etc.)• Manufacturing capability( quality levels, productivity & skill levels, technology )• Service levels• Supply chain• Labor law• Leverage ITKey Features of Future Auto Policy• Foreign Direct Investment• Import tariff• Incentives for Research and Development (R&D)• Environmental Aspects• Other measures
Top & Major Manufacturers in Automobile Industry Maruti Udyog Ltd. General Motors India Ford India Ltd. Eicher Motors Bajaj Auto Daewoo Motors India Hero Motors Hindustan Motors Hyundai Motor India Ltd. Royal Enfield Motors Telco TVS Motors DC Designs Swaraj Mazda Ltd
SWOT OF AUTOMOBILE INDUSTRY:STRENGTHSLarge domestic market-Sustainable labor cost advantage- Government incentives for manufacturing plants-Strong engineering skills in design-Able to achieve significant gains in productivityWEAKNESSESLow labor productivity-High interest costs and high overheads-Rising cost of production-Low investment in Research and Development
OPPORTUNITIESCommercial vehicles-Heavy thrust on mining and construction activity-Increase in the income level-Cut in excise duties-Rising rural demandTHREATSRising interest rates-Cut throat competition-Lack of technology for Indian Companies
STRATEGY EMPLOYED BY AUTOMOBILE TATA MOTORSBreadth Strategy: It has employed breadth strategy in terms of producing different range of products inautomobile sector.For example Commercial vehicles Truck manufacturer Bus manufacturer Passenger car Military vehicles Tata two stretcher ambulance
Innovators:Tata came with the concept of innovation of smallest 4- Wheleer vehicle in world withTATA NANO.Also Tata would be launching lithium battery car called Tata Indica by 2010.Market Differentiation:TATA ACE was first mini truck.-It was specifically marketed for transporters and single truck owners for city and ruralownersIt has become the first choice of transporters and is still rated as number one utilityvehicle in low weighted transport vehicles.-It is such a huge success that its electric version is also launched.
Cost Control Strategy:Tata Nano is the biggest example of cost cutting strategy with first ever car for Rs 1 lakh. It’s the cheapest ever new car manufactured, popularly known ascommon man’s car.
MAHINDRA AND MAHINDRABreadth Strategy (Globally):It has widely developed breadth strategy in terms of global expansion. Mahindra group has a global presence.-Its global subsidiaries include: Mahindra Europe based in Italy Mahindra USA Inc. Mahindra South Africa Mahindra China Tractor Co. Ltd It also manufactures jeeps and SUV as per the needs of people considering theGeographical aspects also. Certain models of jeep used for tracking and other adventurer purpose which arelaunched in other countries and not even released in Indian markets.
BAJAJ AUTOInnovators: They were the first company to come with concept of gearless 2 – wheeler vehicles thatwas BAJAJ SUNNY.-Also they came with first DTSI – engine called BAJAJ PULSAR. These two 2-wheeler vehicles were a big revolution in Indian market.Cost cutting strategy: Bajaj Sunny was the cheapest two wheeler gearless vehicle sold in Indian market. Also Bajaj is coming with its smallest and cheapest 4 wheeler cars in terms of competition with Tata Nano.
HONDA CIVIC HYBRIDInnovators:It has come with luxury cars which run on hybrid battery.A new revolution for energy conservation technique where battery will getcharged while the car runs on petrol and then will automatically get switched to battery mode. It does save a considerable amount of fuel consumption and themileage is also extraordinary for this high end sedan cars.
BMWMarket DifferentiationThey are the one who have in a true sense differentiated the market for luxurycar. They have made an impression that a BMW is owned only by high society people.Thus they manufacture luxury cars targeting only such section of society with allhigh end luxuries that can be provided in a car at a considerably high price.
MARUTI UDYOGBreadth Strategy: It employs breadth strategy in terms of huge production of vehicles..-Maruti was first company in India to mass produce and sell a million cars It was highly claimed for bringing a market revolution in India and became the marketleader in auto mobile sector. Geographically Maruti services and service stations are found in every part and corner of IndiaCost cutting: Maruti has been a leader only due to its very important strategy that it has always provided cheapest and great quality cars affordable by Indian consumers. One of the major reason was also the maintenance of the Maruti cars which iscomparatively very cheaper compared to other companies. No one was able to break market of Maruti Fronti for decades only due its pricingstrategy MILE AND SNOW CLASSIFICATION STATEGY
BAJAJ AUTOANALYZERS:BAJAJ AUTO is planning to launch its 2 lacs small car is an example of analyzer.It followed the strategy of TATA Nano and found that there were a definite class and adefinite feasible market of people interested in small and cheap cars.-Thus it very tactfully copied the strategy employed by Tata Auto
AUDI INDIAANALYZERSAudi did also launched its range of luxury cars in India after waiting for the results andthe success of BMW in India.They did analyzed Indian Market and the response to the launch of BMW and thenentered the Indian Market.
MAHINDRA&MAHINDRAREACTORS: Mahindra group initially was just dealing with under licensing of iconic Willy’s Jeep inIndia. The company then branched out in manufacturing light commercial vehicles, tractors andthen commercial vehicles.-Today it is the leading manufacturer of SUV’S in India.PROACTORS: As already mentioned above following companies can be listed as proactors: HONDA CIVIC HYBRID TATA NANO BAJAJ AUTOBreadth Strategy: The Hero Honda group has been India’s no.1 seller of Motorcycles when you areconsidering the numbers. The Hero Honda has a varied range of Motorcycles in its product portfolio ranging fromhigh mileage, sports bike, and also the medium segment. It does cater its products toevery geographical location from rural India to urban India. It has proved to be the number one manufacturer of motorcycles all over India in almostall variants that it does have from 100 cc bikes to 225 cc bikes.
KAWASAKI-BAJAJ INDIAANALYZERS:They are the new entrants in the market with their 250 cc sports bike recently launchedwith the name Kawasaki Ninja 250 cc.They did also analyze the market for quite some time and then went on with the production of the Ninja as per the Indian roads, taste and pricing. The bike is the best betfor the Indian sports bike enthusiasts and the youth with the best experience as well as thesuitability for the Indian roads.