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Automobile industry analysis

  1. 1. Automobile Industry in India Presentation by – Amit Singh Bhadauriya , Roll Number -14BM60041
  2. 2. Automobile Industry in India Contents : • Introduction of Automobile Industry in India • Advantage India • Market Overview and Trends • Growth Drivers • Effect of Macroeconomic Policies • Success Stories • Opportunities • Useful Information • Current and future outlook of auto industry
  3. 3. INTRODUCTION Indian Automotive Industry growth decades started in the 1970s. Between 1970 and 1984 cars were considered a luxury product; manufacturing was licensed, expansion was restricted; there were Quantitative Restriction (QR) on imports and tariff structure designed to restrict the market but starting in 2000, several landmark policy changes like QR and 100% FDI through automotive route were introduced. In 2003, Core group on Automotive R&D (C.A.R) was set up to identify priority areas for automotive R&D in India . Indian Auto Industry is 2nd in Two Wheelers, 3rd in Small Cars and 5th in Commercial Vehicles among the top 10 in World . India is a global hub of automobile industry having: • 15 Manufacturers of passenger cars and multi-utility vehicles • 9 Manufacturers of commercial vehicles • 16 Manufacturers of 2/3 wheelers • 14 Manufacturers tractors • 5 Manufacturers of engines Sources : Automotive Mission Plan, 2006-2016, A Mission for Development of Indian Automotive Industry, [Online] Available: http://www.siamindia.com/upload/AMP.pdf Sunil Kakkar,“Indian Auto Industry, the way forward”, Maruti Suzuki India Ltd. Automobile Industry in India
  4. 4. ADVANTAGE INDIA Automobile Industry in India Growing demand • Strong growth in demand due to rising income, middle class, and a young population is likely to propel India among the world’s top five auto manufacturers by 2015 • Growth in export demand is set to accelerate Innovation opportunities • Tata Nano and the upcoming Pixel have opened up the potentially large ultra low-cost car segment • Innovation is likely to intensify among engine technology and alternative fuels Rising investments Advantage India • India has significant cost advantages; auto firms save 10-25 per cent on operations vis-à-vis Europe and Latin America • A large pool of skilled manpower and a growing technology base would induce greater investments Policy support • The government aims to develop India as a global manufacturing as well as R&D hub • There has been a wide array of policy support in the form of sops, taxes and FDI encouragement FY16E Market size: USD145 billion FY10 Market size: USD57. 7 billion Source: Automotive Mission Plan (2006–2016) Notes: R&D – Research and Development; FDI – Foreign Direct Investment; FY – Indian Financial Year (April – March); FY16E – Estimated figure for Financial Year 201
  5. 5. Automobile Industry in India EVOLOLUTION OF INDIAN AUTOMITIVE SECTOR • Closed market • Five players • Long waiting periods and outdated models • Seller’s market • Joint venture (JV): Indian government and Suzuki formed Maruti Udyog; commenced production in 1983 • Component manufacturers entered the market via JV • Buyer’s market • Sector de-licensed in 1993 • Major original equipment manufacturers (OEMs) started assembly operations in India • Imports permitted from April 2001 • Introduction of value- added tax in 2005 • More than 35 market players • Removal of most import controls • Indian companies gaining acceptance on a global scale • Setting up of National Automotive Board to act as facilitator between the government and industry Before 1982 0.4 million units (1982) 1983–92 0.6 million units (1992) 1993–2007 11 million units (2007) 2008 onwards 20.7 million units (FY13) Source: Tata Motors, Society of Indian Automobile Manufacturers (SIAM), Aranca Research Note: JV – Joint Venture
  6. 6. Automobile Industry in India THE AUTOMATIVE MARKET IS SPLIT INTO FOUR SEGMENTS Automobiles Two-wheelers Passenger vehicles Commerce vehicles Three-wheelers  Mopeds  Scooters  Motor cycles  Electric two-wheelers  Passenger Cars  Utility vehicles  Multi purpose vehicles  Light commercial vehicles  Medium and heavy commercial vehicles  Passenger carriers  Goods Carriers
  7. 7. ROBUST GROWTH IN REVENUES Automobile Industry in India Revenue Trend over the past few years (USD millions) 70 60 50 40 30 20 10 0 30.5 Market* break-up by revenues (2011) 36.6 47.8% 33.3 43.3 58.6 FY07 FY08 FY09 FY10 FY11 31.8% 20.04% Trucks Cars Two-wheelers Total production of automobiles in India (million units) 6.5 Passenger Vehicles Commercial Vehicles Two Wheeler Three Wheeler 8.5 8.4 13.4 15.5 15.9 1.2 1.3 1.8 3 3.1 3.2 0.4 0.4 0.5 0.6 0.4 0.5 0.8 0.8 0.8 0.8 0.8 0.8 20 15 10 5 0 FY05 FY07 FY09 FY11 FY12 FY13 Source: Society of Indian Automobile Manufacturers (SIAM), Aranca Research
  8. 8. Automobile Industry in India MARKET BREAK-UP BY PRODUCTION VOLUME Market share by volume (FY13) 77 51 4 4 Two Wheelers Passenger Vehicles Commercial Vehicles Three Wheelers 5.9 15.3 78.7 Mopeds Scooters Motor Cycles 70.6 29.4 LCV MCV & HCV 81.7 18.3 Passenger Carrier Goods Carrier 80.7 19.7 Passenger Cars Utility Vehicles Source: Society of Indian Automobile Manufacturers (SIAM), Aranca Research
  9. 9. Market Leaders in each segments Automobile Industry in India Source: Society of Indian Automobile Manufacturers (SIAM), Aranca Research
  10. 10. Automobile Industry in India Notable Trends in Indian Automotive Sector Improving product-development New product launches Alternative fuels New financing capabilities • Increasing R&D investments from both the government and the private sector • Private sector innovation has been a key determinant of growth in the sector; two good examples are Tata Nano and Tata Pixel; while the former has been a success in India, the latter is intended for foreign markets options • Carmakers such as BMW, Audi, Toyota, Skoda, Volkswagen and Mercedes-Benz have started providing customised finance to customers through NBFCs • Major MNC and Indian corporate houses are moving towards taking cars on operating lease instead of buying them Note: NBFCs - Non-Banking Finance Companies • Large number of products available to consumers across various segments; this has gathered pace with the entry of a number of foreign players • Reduced overall product lifecycle have forced players to employ quick product launches • In FY11, the CNG market was worth more than USD330 million; CNG cars and taxis are expected to register a CAGR of 28 per cent over FY11–FY14 • The CNG distribution network in India is expected to increase to 250 cities by 2018 from 30 cities in 2009
  11. 11. Automobile Industry in India 1 year 1-5 year 5-10 years •Increased access to credit and lower interest loans •Investment in Infrastruct ure spending can boost the commercial vehicles segment. •Growing working population (441 million people in 2015/16) •Upward migration of household income levels (600 million people have annual income of more than $10,200) •Middle class expanding by 30 - 40 million every year Can propel growth 1 year 1-5 year 5-10 years •Impact of delayed monsoon (85% of normal, subsequent impact on paddy cultivation) on rural demand. •Non-availability of Key raw material (like Steel) at cheap price. •Possible increase of interest rates (by 2-2.5% BPLR) because of planned government borrowing. Economic Factors •Non- availability of supplier base with demanded capability (Quality and Quantity). •Poor execution of Infrastructure investments. (Construction of Highways of 16km per day against the target of 32 km per day) •Increase in crude oil price($ 35/barrel to $ 70/ barrel in 14 months). Can Stunt Growth
  12. 12. Automobile Industry in India Social Factors • Rapid Urbanization of semi urban regions • Rising aspirational levels. Improvement in living standards of middle class • Increased spending on Fashion & lifestyle comforts. • Seeking “Value for money”- consumer behavior • Increasing customer emphasis on aesthetics and comfort. • A perfect marriage of rise in disposable income and demographic dividend (From US$ 556 per annum US$ 1150 by 2015)
  13. 13. Automobile Industry in India Technological Factors Frugal Engineering is the way forward ‘Upgradeable’ green cars : Plug and play style engines to replace old ones: the Tata Nano model Downsize the cars without losing out on interior space. Lower cost, low fuel consumption , less material usage and less pollution Grants and Incentives for R&D work 100% grant for fundamental research, 75% for pre-competitive technology, 50%for product development Extension of 150% weighted deduction on R&D expenditure Developing India as a Testing hub: National Automotive Testing and R&D Infrastructure Project Investment of INR 17.18 Billion (about USD 380 million) in setting up, inter alia, independent automotive testing centers within the three automotive hubs in the country Setting up of comprehensive Testing and Validation facilities including Field Tracks for Agricultural Tractors, Trailers, Construction Equipments and various other off-road vehicles at Rae Bareilly in Northern India Collaborations and Foreign Tie ups for research and technology transfer Developing engines for bio-fuels, electric or hybrid vehicles
  14. 14. Automobile Industry in India Strong Policy Support Auto Policy 2002 NATRiPs Union Budget FY14 Automotive Mission Plan (AMP) 2006–16 Dept. of Heavy Industries & Public Enterprises • Automatic approval for foreign equity investment up to 100 per cent; no minimum investment criteria • Encourage R&D by offering rebates on R&D expenditure • Set up at a total cost of USD388.5 million to enable the industry to be on par with global standards • Nine R&D centres of excellence with focus on low-cost manufacturing and product development solutions Industries & Public Enterprises • Worked towards reduction of excise duty on small cars and increase budgetary allocation for R&D • Weighted increase in R&D expenditure to 200 per cent from 150 per cent (in-house) and 175 per cent from 125 per cent (outsourced) • AMP’s vision is to make India a preferred destination for designing and manufacturing of automobiles and achieve a market size of USD154 billion by 2016 • Setting up of a technology modernisation fund focussed on SMEs • Establishment of automotive training institutes, auto design centres and special auto parks • Proposal to allocate USD2.7 billion for JNNURM to bolster sales volumes of Medium and Heavy Commercial Vehicles (MHCV) • Two wheelers consumption is going to increase to 12% from 8% expected earlier . Notes: SME – Small and Medium Enterprises, R&D - Research and Development, NATRiP – National Automotive Testing and R&D Infrastructure Project, AMP - Automotive Mission, JNNURM - Jawaharlal Nehru National Urban Renewal Mission
  15. 15. Automobile Industry in India Key financial ratios of Maruti Suzuki & Tata Motors Maruti Suzuki India Ltd Industry :Automobiles - passenger cars Mar-13 Mar- 12 Mar- 11 Mar- 10 Mar- 09 Mar- 08 Mar- 07 Mar- 06 Mar- 05 Mar- 04 Key Ratios Debt-Equity Ratio 0.08 0.05 0.04 0.07 0.09 0.1 0.06 0.04 0.08 0.11 Long Term Debt-Equity Ratio 0.01 0 0.02 0.05 0.06 0.07 0.06 0.04 0.08 0.11 Current Ratio 0.85 1.08 1.13 1.19 1.22 1.13 1.52 1.73 1.42 1.37 Turnover Ratios Fixed Assets 2.84 2.98 3.69 3.34 2.9 3.13 3.1 2.95 2.77 2.43 Inventory 26.99 24.6 31.15 30.27 23.89 24.18 21.74 19.06 24.11 23.84 Debtors 41.58 44.83 50.01 36.56 29.1 29.97 24.69 23.69 20.69 16.24 Interest Cover Ratio 14.77 35.74 125.3 5 108.2 4 29.91 43 61.63 86.78 37.25 21.47 PBIDTM (%) 9.5 7.88 10.15 13.93 9.63 14.89 15.05 13.93 13.48 12.91 PBITM (%) 5.71 5 7.67 11.35 6.58 12.19 13.47 12 10.05 8.43 PBDTM (%) 9.12 7.74 10.09 13.83 9.41 14.61 14.83 13.8 13.21 12.52 CPM (%) 8.08 6.58 8.08 10.4 7.68 10.93 10.66 9.99 9.83 10.11 APATM (%) 4.29 3.7 5.6 7.82 4.63 8.23 9.08 8.06 6.4 5.63 ROCE (%) 15.16 12.69 23.15 31.95 15.76 30.51 35.63 34.68 31.28 25.34 RONW (%) 12.48 10.06 17.81 23.58 12.08 22.67 25.38 24.19 21.42 18.59 Source :http://www.capitaline.com Tata Motors Ltd Industry :Automobiles – HCVs and MCVs Year 20130 3 20120 3 20110 3 20100 3 20090 3 20080 3 20070 3 20060 3 20050 3 20040 3 No.Of Companies 4 9 9 10 7 8 8 6 5 5 Key Ratios Debt-Equity Ratio 0.97 0.94 1 1.03 0.9 0.66 0.55 0.57 0.52 0.49 Long Term Debt-Equity Ratio 0.96 0.92 0.86 0.67 0.52 0.39 0.36 0.5 0.49 0.45 Current Ratio 0.96 0.99 0.77 0.62 0.73 0.92 1.1 1.13 0.99 0.91 Turnover Ratios Fixed Assets 2.07 2.54 2.41 2.19 2.19 3.22 3.62 3.13 3.04 2.55 Inventory 9.58 11.14 11.49 10.87 9.08 10.74 11.64 11.18 12.58 11.75 Debtors 16.76 18.52 17.09 15.65 17.16 24.55 25.72 20.46 18.98 14.67 Interest Cover Ratio 1.6 2.58 2.77 2.73 1.63 5.79 8.2 7.45 8.69 6.96 PBIDTM (%) 7.2 7.88 9.68 10.72 7.58 9.32 10.18 10.35 10.52 11.56 PBITM (%) 4.07 5.22 7.02 7.95 4.56 7.31 8.31 8.14 8.3 9.08 PBDTM (%) 4.65 5.85 7.15 7.8 4.79 8.06 9.17 9.26 9.56 10.26 CPM (%) 4.56 5.26 6.27 6.75 4.68 6.66 7.25 7.52 7.73 7.41 APATM (%) 1.43 2.61 3.61 3.98 1.66 4.65 5.38 5.31 5.51 4.93 ROCE (%) 6.19 9.02 10.91 10.97 6.83 19.65 27.28 25.74 29.48 31.18 RONW (%) 4.27 8.75 11.2 11.17 4.72 20.63 27.39 26.08 29.57 24.97
  16. 16. Current and future outlook of auto industry Automobile Industry in India Current Scenario Future Trend •India will be a Automotive hub, led by small cars and auto component domains •Export of automotive components to ASEAN,BRIC,EU and USA for OEMs as well as Aftermarket •Booming Automobiles (Particularly cars) second sales and remodeling •Increased deployment of IT-enabled Automobile support systems like GPS,ABS,ASR and Safety systems . •Quality Certification (Deming, Six Sigma,TQM,TS16949) amongst suppliers have attained critical mass and the entire market will follow to get quality certifications. •Will be a hub for optimal cost, high quality vehicular testing and terrain data acquisition services •Alternate fuel (Bio fuel, electricity) and environment friendly green engines (Bharat emission norms) Auto analysts believe that sales volume of the automobile companies will get a boost after finance minister left more money in hands of salaried employees . Post budget announcement two-wheeler volume likely to grow by 12% from earlier estimate of 8%. Companies such as Hero MotoCorp , Maruti & TVS Motor will be key beneficiary of budget announcement".  Luxury cars launch :German luxury car maker BMW launched the all new BMW ActiveHybrid 7 sedan. German luxury car maker Porsche launched its compact sports utility vehicle Macan in India . Mercedes-Benz launched the AMG version of its sedan CLA 45 .  Bajaj Auto sales rise 3 per cent in June  Domestic passenger car sales up 14.76 per cent in June 2014  Volkswagen plans Rs 1500-cr investment in India  Bajaj Auto reports marginal rise in Q1 profit at Rs 740 crore  Maruti June sales up 33 pc at 1,12,773 units  Nissan India sales up over two-fold in May  Hero MotoCorp sales up 6 per cent in May  Mid range cars launch :Honda launches MPV Mobilio at Rs 6.49 lakh . Nissan rolls out new Sunny; priced from Rs 7.29 lakh . Ford India launches 2014 Fiesta at Rs 7.69 lakh. Mahindra XUV500 Sportz launched at Rs 13.68 lakh  Domestic car sales up 3.08%, bikes 11.71% in May Source : http;//Businesstoday.intoday.in/categorylist/22/1/auto.html and http://economictimes.indiatimes.com/industry/auto/articlelist/13359412.cms
  17. 17. Automobile Industry in India Thank you !!!!

Editor's Notes

  • Government has allocated Rs 37,880 crore for National and State Highways, while an additional Rs 14,389 crore for road development in rural areas under the Pradhan Mantri Gram Sarak Yojna would expand demand for new vehicles.  Read more at: http://economictimes.indiatimes.com/articleshow/38137737.cms?adcode=voaauto&utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

    Auto analysts believe that sales volume of the automobile companies will get a boost after finance minister left more money in hands of salaried employees. Arun Jaitley, union finance minister hiked the personal income tax limit to Rs2.5 lakh from Rs2 lakh and limit under 80C of income tax has risen by Rs50000 to Rs1.5 lakh, while presenting his maiden union budget.  These two measure announced in budget would led to approximately Rs10000-30000 more money in hand of salaried employee, ..  Read more at: http://economictimes.indiatimes.com/articleshow/38139210.cms?adcode=voaauto&utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

    "Hike in personal exemption limit and higher income tax would leave more money in hand of prospective customer. This would certainly boost sales volume of two-wheeler and hatchback passenger cars", said Basudep Banerjee, auto analyst of Antique stock broking. He added, "Post budget announcement two-wheeler volume likely to grow by 12% from earlier estimate of 8%. Companies such as Hero MotoCorpBSE 1.52 %, Maruti & TVS MotorBSE -9.89 % will be key beneficiary of budget announcement".  Read more at: http://economictimes.indiatimes.com/articleshow/38139210.cms?adcode=voaauto&utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst
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