Indian Auto Industry Analysis

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Indian Auto Industry Analysis

  1. 2. Indian Auto Industry <ul><li>Facts </li></ul><ul><li>Second Largest two wheeler manufacturer in the world </li></ul><ul><li>Largest tractor and three wheeler manufacturers in the world </li></ul><ul><li>Fourth largest Commercial vehicle market in the world </li></ul><ul><li>Eleventh largest passenger car market in the world </li></ul><ul><li>Growth Potential </li></ul><ul><li>Can become World’s third largest automobile market in 2030. </li></ul><ul><li>By 2016, Automotive sector can DOUBLE its percentage contribution to GDP from current levels of 5% (US$50 billion) to 10% ($180 billion). </li></ul><ul><li>Trends </li></ul><ul><li>Growth of exports of 32.8 % FY 2008-09. </li></ul><ul><li>Output of commercial vehicles has grown 2.8 times compared to the 2.2 times increase in passenger cars </li></ul><ul><li>For every passenger car turned out, there are almost 7 two-wheelers produced </li></ul>
  2. 3. The Growth Journey Pre 1983 1983-1993 1993-2007 Era of globalisation and evolution of India as a global manufacturing hub Closed market • Growth of market limited by supply • Outdated models Players • Hindustan Motors • Premier • Telco • Ashok Leyland • Mahindra & Mahindra Japanisation - GOI- Suzuki joint venture to form Maruti Udyog • Joint ventures with companies in commercial vehicles and components Players • Maruti Udyog • Hindustan Motors • Premier • Telco • Ashok Leyland • Mahindra & Mahindra Delicensing of sector in 1993 • Global major OEMs start assembly in India (Toyota, GM, Ford, Honda, Hyundai) • Imports allowed from April 2001; alignment of duty on components and parts to ASEAN levels • Implementation of VAT
  3. 4. Automotive Companies in India Major Multi-national companies Major Indian Companies
  4. 5. Booming Indian Economy
  5. 6. Key Growth Drivers
  6. 7. Auto Industry Numbers <ul><li>Overall Market </li></ul><ul><li>Over all Production increased from 10.85 million vehicles in 2007-08 to 11.17 million vehicles in 2008-09 </li></ul><ul><li>Passenger vehicles increased marginally from 1.77 million to 1.83 million </li></ul><ul><li>Two-wheelers increased from 8.02 million to 8.41 million </li></ul><ul><li>Domestic Market </li></ul><ul><li>  Vehicles sold including PV,CV 2W and 3W in 2008-09 was 9.72 million as compared to 9.65 million in 2007-08. </li></ul><ul><li>Exports </li></ul><ul><li>Sales increased from 1.23mn units in 2007-08 to 1.53 million units in 2008-09 </li></ul><ul><li>As per the Automotive Mission Plan (AMP) 2006-2016 total turnover of the automotive industry in India would be in the order of US$ 122 billion-159 billion in 2016 </li></ul>
  7. 8. Category wise numbers Two Wheeler Passenger Vehicles Commercial Vehicles Three Wheeler Dominated by Motorcycles 80% , Scooters 14% Mopeds 6% Domestic - 7.25mn units . Hero Honda 42% & Bajaj 27% share CAGR – 9.5% Exports 819000 units (07-08) . Bajaj Auto 59% TVS 17% share CAGR – 41% Dominated by Cars 78% , MUV/SUV 22% Domestic – 1.5mn units Maruti-46% Tata-15% Hyundai 14% CAGR -14.8% Exports - 217000 units (07-08) Maruti 66% Hyundai 24% CAGR – 26% Dominated by M&HCV – Goods 48% Passenger 38% , Rest by LCV -14% Domestic – 487 thousand units , Tata-62% Ashok Leyland -15% CAGR- 22% Exports – 59 thousand units, Tata 67% Ashok Leyland 12% CAGR -30.6% Dominated by Passenger Carriers with 64% share , Goods Carrier -36% Domestic – 365 thousand units , Bajaj -42% Piaggio-41% CAGR- 10.5% Export – 141 thousand units , Bajaj -97% CAGR -44.5%
  8. 9. The Indian Auto Components Market <ul><li>Original Equipment Manufacturers (OEMs) </li></ul><ul><li>Replacement Parts Production and Distribution : e.g. Air filters, oil filers and replacement lights </li></ul><ul><li>Rubber Fabrication : tyres, hoses, belts etc. </li></ul><ul><li>Estimated component market size is US$ 6.7 bn </li></ul><ul><li>The exports of auto components industry has grown at a rate of nearly 30 per cent CAGR over the last four years. </li></ul>
  9. 10. Second Hand Automobile Market <ul><li>Used car market demand : 1.4 million cars annually </li></ul><ul><li>Market Structure : </li></ul><ul><ul><li>Organized : 10% </li></ul></ul><ul><ul><li>Unorganized : 90% </li></ul></ul><ul><ul><ul><li>Vendor Based – 30% </li></ul></ul></ul><ul><ul><ul><li>Direct Dealings – 70% </li></ul></ul></ul><ul><li>Certified used car dealers in India are – Maruti TrueValue, Honda Auto Terrace, Ford Assured, Toyota U Trust, Hyundai Advantage, Mahindra and Mahindra’s First Choice, General Motors - Chevrolet-OK </li></ul><ul><li>Unorganized market lacks services like  -warranties, OEM equipments, insurance and taxes </li></ul><ul><li>Second hand market expected to grow at 12-15 per cent in the next five years to touch a robust 2.5 million units and a turnover of Rs 50 thousand crore </li></ul><ul><li>Estimations are that 50 percent of the used cars sales will be brought under organized car market by 2013 </li></ul>
  10. 11. Political - Legal Factors Boosted Economic Growth <ul><li>1 year </li></ul><ul><li>6% cut in CENVAT, abolition of surcharge on income tax. </li></ul><ul><li>Abolition of FBT, Reduction of excise duty on big cars. </li></ul><ul><li>Encourage Urban Fleet Modernization </li></ul><ul><li>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><ul><li>- SIAM recommended the government on extending excise and sales tax benefits to customers who opt for scrappage of their old vehicles </li></ul><ul><li>5-10 Years </li></ul><ul><li>Effective Implementation and Uniform enforcement of GST </li></ul><ul><li>Maintain a three tier tariff structure for raw materials, intermediate goods, finished goods. </li></ul><ul><li>Revamp WTO compatible export promotional schemes like DEPB, EOU and EPCG schemes </li></ul><ul><li>AMP Plan 2006-16 set by govt </li></ul>Stunted Economic Growth <ul><li>1 year </li></ul><ul><li>Differential excise duty for small and big cars. </li></ul><ul><li>Customs duty for imported cars including hybrid cars. </li></ul><ul><li>Excise duty cut only for petrol driven trucks </li></ul><ul><li>1-5 Years </li></ul><ul><li>Existing Complex labor laws( 45 Central acts and 16 associated rules) </li></ul><ul><li>Not implementing country wide VAT </li></ul><ul><li>Ambiguous policy in land acquisition for green field projects </li></ul><ul><li>. </li></ul><ul><li>5-10 Years </li></ul><ul><li>Poor execution of Infrastructure investments. (Construction of Highways of 16km per day against the target of 32 km per day) </li></ul><ul><li>Absence of National Auto fuel Policy (NAFP) </li></ul>
  11. 12. Economic Factors 1 year 1-5 year 5-10 years <ul><li>Increased access to credit and lower interest loans </li></ul><ul><li>Investment in Infrastructure spending can boost the commercial vehicles segment. </li></ul><ul><li>Growing working population (441 million people in 2015/16) </li></ul><ul><li>Upward migration of household income levels (600 million people have annual income of more than $10,200) </li></ul><ul><li>Middle class expanding by 30 - 40 million every year </li></ul>Can propel growth
  12. 13. Economic Factors 1 year 1-5 year 5-10 years <ul><li>Impact of delayed monsoon (85% of normal, subsequent impact on paddy cultivation) on rural demand. </li></ul><ul><li>Non-availability of Key raw material (like Steel) at cheap price. </li></ul><ul><li>Possible increase of interest rates (by 2-2.5% BPLR) because of planned government borrowing . </li></ul><ul><li>Non- availability of supplier base with demanded capability (Quality and Quantity). </li></ul><ul><li>Poor execution of Infrastructure investments. (Construction of Highways of 16km per day against the target of 32 km per day) </li></ul><ul><li>Increase in crude oil price($ 35/barrel to $ 70/ barrel in 14 months). </li></ul>Can Stunt Growth
  13. 14. Social Factors <ul><li>Rapid Urbanization of semi urban regions </li></ul><ul><li>Rising aspirational levels. Improvement in living standards of middle class </li></ul><ul><li>Increased spending on Fashion & lifestyle comforts. </li></ul><ul><li>Seeking “Value for money”- consumer behavior </li></ul><ul><li>Increasing customer emphasis on aesthetics and comfort. </li></ul><ul><li>A perfect marriage of rise in disposable income and demographic dividend (From US$ 556 per annum US$ 1150 by 2015) </li></ul>
  14. 15. Technological Factors
  15. 16. India as a Testing Hub : NATRIP
  16. 17. India : A Developing Hub for Compact Cars <ul><li>Maruti Suzuki : </li></ul><ul><li>• New car plant to make 250,000 cars per </li></ul><ul><li> annum (total 800,000 cars/annum) </li></ul><ul><li>• 10 new Component JVs to support new </li></ul><ul><li>Diesel Engine Plant. </li></ul><ul><li>Hyundai : </li></ul><ul><ul><li>Already a big player in the small car segment </li></ul></ul><ul><li>• Increase capacity to 600,000 cars per </li></ul><ul><li>annum over next 1 year. </li></ul><ul><li>Nissan : </li></ul><ul><li>• Micra, UK  India </li></ul><ul><ul><li>Four more models in India, involving a total investment of over Rs 2,000 crore.   </li></ul></ul><ul><li>Ford : </li></ul><ul><li>• Plans to unveil its small car with 1.2 ltr engine by 2010 </li></ul><ul><li>Honda : </li></ul><ul><ul><li>Investing US $ 250 million in a new plant in </li></ul></ul><ul><li>Rajasthan with capacity of 60,000 car per </li></ul><ul><li>year (First car to roll out in 2009). </li></ul><ul><li>Tata Motors : </li></ul><ul><ul><li>Tata Nano became a big success gaining worldwide popularity with Tata planning to increase capacity </li></ul></ul><ul><li>Toyota : </li></ul><ul><li>• Toyota Kirloskar motors planning to launch its own small car in India by 2011 </li></ul><ul><li>General Motors : </li></ul><ul><li>• New Capacity to manufacture small cars at its Talegaon, Maharashtra plant with 80% local inputs. </li></ul><ul><ul><li>Brought in Spark small car in 2007 </li></ul></ul><ul><li>Nissan-Renault : </li></ul><ul><ul><li>50:50 JV, to make 400,000 cars a year with an investment of over US $ 1 billion. </li></ul></ul><ul><ul><li>Coming up with the $2500 car to compete with Tata Nano in 2011 </li></ul></ul><ul><li>VW : </li></ul><ul><li>• Investing 400 million euro in a new plant in </li></ul><ul><li>Pune. Operations are to start in second </li></ul><ul><li>half of 2009. </li></ul><ul><li>Compact cars account for 70% of the total car market. </li></ul><ul><li>Compact car sales increasing at about 20% each year </li></ul><ul><li>Excise duty on small cars slashed from 24% to 12% in last three years </li></ul>
  17. 18. Break through future trends <ul><li>India will be a Automotive hub, led by small cars and auto component domains </li></ul><ul><li>Export of automotive components to ASEAN,BRIC,EU and USA for OEMs as well as Aftermarket </li></ul><ul><li>Booming Automobiles (Particularly cars) second sales and remodeling </li></ul><ul><li>Increased deployment of IT-enabled Automobile support systems like GPS,ABS,ASR and Safety systems </li></ul><ul><li>. </li></ul><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. </li></ul><ul><li>Will be a hub for optimal cost, high quality vehicular testing and terrain data acquisition services </li></ul><ul><li>Alternate fuel (Bio fuel, electricity) and environment friendly green engines (Bharat emission norms) </li></ul>
  18. 19. References <ul><li>www.acmainfo.com </li></ul><ul><li>www.wikipedia.org </li></ul><ul><li>www.siamindia.com </li></ul><ul><li>www.ibef.org </li></ul><ul><li>Ernst & Young Auto Track </li></ul><ul><li>www.economywatch.com </li></ul><ul><li>www.business-standard.com </li></ul><ul><li>The Economic Times </li></ul><ul><li>Hindu Business Line </li></ul><ul><li>www.automobileindia.com </li></ul><ul><li>automobiles.mapsofindia.com </li></ul>

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