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Analysis of Macro-environmental factors for Automobile Industry

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This presentation gives brief overview of the Indian Automotive sector.

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Page 1: Indian Automobile industry_PEST

Analysis of Macro-environmental factors

for Automobile Industry

Page 2: Indian Automobile industry_PEST

Automobile: An automobile or motor car is a wheeled motor vehicle for

transporting passengers; which also carries its own engine or motor.

History:

•Introduced to India in the late 1890’s and the manufacturing industry only took off after independence in 1947. •Introduced to India in the late 1890’s and the manufacturing industry only took off after independence in 1947.

•The protectionist economic policies of the government gave rise in the 1950's to the Hindustan Motors Ambassador.

•Hindustan Motors and a few smaller manufacturers such as Premier Automobiles, Tata Motors, Bajaj Auto, Ashok and Standard Motors held an oligopoly until India's initial economic opening in the 1980's.

•The maverick Indian politician Sanjay Gandhi championed the need for a "people's car"; the project was realized after his death with the launch of "people's car"; the project was realized after his death with the launch of a state-owned firm Maruti Udyog which quickly gained over 50% market share.

•Tata Motors exported buses and trucks to niche markets in the developing world.

Page 3: Indian Automobile industry_PEST

AUTOMOBILE

2 WHEELER 3 WHEELER PASSENGER VEHICLECOMMERCIAL

VEHICLE2 WHEELER 3 WHEELER PASSENGER VEHICLE

VEHICLE

L.C.V. I.C.V. H.C.V.

MOTORCYCLE SCOOTERS SCOOTERETTES MOPEDS

Page 4: Indian Automobile industry_PEST

Overview of Automobile Industry

• The industry has grown at over CAGR of 14% p.a over the last 5 years.

• In the year 2006-07, sales (domestic as well as exports) of the Indian automotive • In the year 2006-07, sales (domestic as well as exports) of the Indian automotive

industry crossed the historic landmark of 10 million units.

•With the potential to emerge as one of the largest in the world. Presently, India is

•2nd largest two wheeler market in the world

•13th largest commercial vehicle market in the world

•11th largest passenger car market in the world and is expected to be the 7th largest market by 2016 .market by 2016 .

• The industry has emerged as a key contributor to the Indian economy.

• The Indian automotive industry is highly competitive with a number of global and

Indian companies present in the market.

Page 5: Indian Automobile industry_PEST

Automotive sales for 2002-07

Sales(Million units)Sales in

units

(2006-07)

Share

in

Total

CAGR

(2002-

07)

6.25

7.29

8.53

9.71

11.12

2003

2004

2005

2006

2007(2006-07) Total

Sales

07)

Two Wheelers 8,476,686 76.2% 14.5%

Passenger Cars 1,578,176 14.2% 16.7%

Three-Wheelers 547,805 4.9% 20.5%

5.41

6.25

0 5 10 15

2002

2003

Commercial

Vehicles

517,648 4.7% 26.7%

Page 6: Indian Automobile industry_PEST

Automotive clusters in India

Delhi-Gurgaon-Noida-

Ghaziabad Ashok Leyland EnfieldNorth / Central South

Major automotive clusters - Mumbai-Pune-

Nasik-Aurangabad (West), Chennai -

Bangalore-Hosur (South) and Delhi-Gurgaon-

Faridabad (North)

Ghaziabad

Kolkata

Mumbai-Pune-Nasik

Aurangabad

Jamshedpur

Rajkot-Halol

Hyderabad

Ludhiana Haridwar

Pitampur

Ashok Leyland Enfield

Ford Greaves

Hindustan Motors Hyundai

M & M Tata

Toyota Kirloskar TVS Motors

Volvo

Ashok Leyland Eicher

Force Motors Hero Honda

Hindustan Motors Honda

Honda SIEL ICML

Kinetic LML

Majestic Maruti Suzuki

Piaggio Yamaha

Swaraj Mazda Tata Motors

Ashok Leyland Bajaj Auto

DaimlerChrysler

FIAT Force Motors

West

Hindustan Motors

Tata Motors

East

Aurangabad

Chennai Bangalore Hosur

Hyderabad FIAT Force Motors

GM Greaves Kinetic

M & M Premier

Skoda Tata Motors

Tata Motors

Source: SIAM, IMaCS analysis

Page 7: Indian Automobile industry_PEST

Overview of Passenger Vehicles Market

• Indian Passenger vehicle Industry has grown with CAGR of 15.5% from FY’2001-02 to

FY’2006-07.

• Significant increase in competition due to entry of global players.• Significant increase in competition due to entry of global players.

• Shrinking of mini car segment, and increasing share of compact cars in Indian market.

• Impressive growth of executive segment(D), with CAGR of 112% from FY’ 2001-02 to

FY’2006-07

• Indian Passenger vehicle industry is undergoing significant market dispersion.

• Emergence of India as Global manufacturing base for mini and compact cars.

• Exports from passenger vehicle segment has grown significantly, with a CAGR of 30%

from FY’2001-02 to FY’2006-07.

Page 8: Indian Automobile industry_PEST

Domestic Passenger Vehicle Industry

Sales Break-up of the Industry by

Segment for 2007

902.1

1061.3

1143.1

1379.1

2004

2005

2006

2007

000 units

22%

Segment for 2007

Passenger

Cars, 78%

SUVs/MUVs, 22%

675.1

707.2

0 500 1000 1500

2002

2003 78%

Page 9: Indian Automobile industry_PEST

Segment-wise Analysis of Passenger Vehicle

Market

Segment Description Share

in

2001-02

Share

in

2006-07

CAGR

A Mini cars, up to 3400 mm length 28% 7% -11%

B Compact cars, between

3401-4000 mm length

54% 70% 22%

C Mid size cars between 4001-4500

mm length

17% 18% 18.6%

D Executive cars between 0.2% 3.8% 112%D Executive cars between

4501 - 4700 mm length

0.2% 3.8% 112%

E Premium cars between

4701 - 5000 mm length

0.9% 1.18% 31.1%

F Luxury cars - above 5001 mm

length

0.0% 0.02% NA

Page 10: Indian Automobile industry_PEST

Market share of Key Players in

2006-07

Maruti Udyog Ltd. 46%

Segment Key Brands and Companies to which

they Belong

A Maruti 800.

B Alto, Wagon-R, Swift (MSuzuki), Indica (Tata)

Santro, Getz (Hyundai ), Palio (Fiat India)

C Esteem, SX4 (MSuzuki) TATA Indigo,

Verna, Elantra (Hyundai ), Honda City, Astra,

Aveo, Optra (GM), Logan

TATA Motors Ltd. 16%

Hyundai Motor India

Ltd.

14%

Mahindra &

Mahindra Ltd.

7%

Totyota 4%

Aveo, Optra (GM), Logan

(M&M), Icon, Fiesta (Ford ), Cedia (HM), Petra

(Fiat India)

D Civic (Honda), Opel Vectra (GM), Contessa

(HM), Skoda Octavia,

Mercedes C-class (Daimler Chrysler India)

E Sonata (Hyundai Motors),Honda Accord ,Corolla,

Camry (Toyota Kirloskar), Mondeo, Superb

(Skoda Auto), Mercedes E-class, 5 series (BMW

India)Totyota 4%

Others 13%

F Mercedes S-class, Maybach (DaimlerChrysler),

BMW 7 Series

SUV Grand Vitara (MSuzuki),Safari (Tata),

Tucsan (Hyundai Motors), CRV (Honda),

Scorpio, C-fusion, Endeavour (Ford),

MUV Omni, Versa (MSuzuki), Sumo, Indigo Marina

(Tata), Innova,Tavera, Bolero (M&M)

Page 11: Indian Automobile industry_PEST

Indian Passenger Vehicle Market – Competitive Scenario

Passenger

Cars 46% 16% 14% 7% 4% - - - - - - - -

Utility

Vehicles 2% 18% 1% 42% 21% 1% 10% 1% <1% - 4% - %

Multi

Purpose

Vehicles40% - - - - - - - - - - - -

4th largest Passenger Vehicle

Market in World

Page 12: Indian Automobile industry_PEST

Overview of Two-wheeler and CVs Market• The total sales of the Indian two wheeler industry has grown at a CAGR of 14.5 per cent

between FY’2001-02 and FY’2006-07.

• The motorcycles market had witnessed the fastest growth rate in the two wheeler segment, with a CAGR of 19.2%.

• Indian Two-wheeler market is characterized with intense competition with around 10 major players.

• Exports from two-wheeler industry has increased with a CAGR of 42.8%, from FY’2001-02 to FY’2006-07.

• The total sales of the Indian Commercial vehicles industry has grown at a CAGR of 26.1% between FY’2001-02 and FY’2006-07.26.1% between FY’2001-02 and FY’2006-07.

• With increased industrial production and investments in real estate CVs market has witnessed good growth.

• CV exports has grown from 12000 units in FY’2001-02 to 50,000 units in FY’2006-07, showing a CAGR of 33.2%.

Page 13: Indian Automobile industry_PEST

Segment-wise Analysis of Indian Two Wheeler

Market

Segment Description Share in 2001-02 Share in 2006-07 CAGR

A1 Scooter with engine 5% 0% -33.9%A1 Scooter with engine

capacity less than 75 cc5% 0% -33.9%

A2 Scooter with engine

Capacity ,75-125 cc 5% 10% 32.9%

A3 Scooter with engine

capacity between

125-250 cc

12% 1% -27.7%

B2 Motorcycle with engine

capacity between

75-125 cc

62% 66% 14.9%

B3 Motorcycle with engine 5% 17% 44.8%B3 Motorcycle with engine

capacity between

125-250 cc

5% 17% 44.8%

B4 Motorcycle with engine

capacity above 250 cc1% 1% 5.7%

C1 Mopeds 10% 5% -2.7%

Page 14: Indian Automobile industry_PEST

Segment-wise Analysis of Indian CVs Market

Description (by Gross

Vehicle Weight)Share in 2001-02 Share in 2006-07 CAGR

Up to 3.5 tonnes

(Pickups)

15% 36% 51.9%

(Pickups)

5 - 7.5 tonnes (LCV) 25% 9% 5.1%

7.5 – 12 tonnes

(Intermediate CV)

7% 9% 33.4%

12 – 16 tonnes( 4X2 29% 17% 14.6%12 – 16 tonnes( 4X2

FF/SF)

29% 17% 14.6%

16 – 25 tonnes

(Multi Axles)

8% 21% 55.9%

25 tonnes and above

(Tractor Trailers)

8% 21% 9.7%

Page 15: Indian Automobile industry_PEST

Market share of key players in 2006-07

Market Share of key Players in Two-

wheeler Industry

Hero Honda 42%

• Market Share of key

Players in Two-wheeler

Market Share of Key Players in CVs

Industry

Hero Honda 42%

Bajaj Motors 27%

TVS Motor co. 19%

HMSIL 9%

Players in Two-wheeler

IndustryTATA Motors 64%

Ashok Leyland 16%

M&M Ltd. 10%

Eicher Motors Ltd. 6%HMSIL 9%

Others 3%

Eicher Motors Ltd. 6%

Others 4%

Page 16: Indian Automobile industry_PEST

Indian 2-Wheeler Market

Competitive Scenario

Motorcycle 42% 27% 19% - - - - - -

- 15% 28% - 2% 46% 9% <1% -

- - 82% - - - 8% 10% -- - 82% - - - 8% 10% -

India is now the second largest

two-wheeler market in the

world

Page 17: Indian Automobile industry_PEST

Economic Environment

• The Indian economy has grown at 8.5 per cent per annum.

• The manufacturing sector has grown at 8–10 per cent per annum in the • The manufacturing sector has grown at 8–10 per cent per annum in the

last few years.

• More than 90 per cent of the CV purchase is on credit.

• Finance availability to CV buyers has grown in scope during the last few

years.

• The increased enforcement of overloading restrictions has also

contributed to an increase in the number of CVs plying on Indian roads.

• Several Indian firms have partnered with global players. While some have • Several Indian firms have partnered with global players. While some have

formed joint ventures with equity participation, others have entered into

technology tie-ups.

• Establishment of India as a Manufacturing hub, for mini, compact

cars, OEMs, and for auto components.

Page 18: Indian Automobile industry_PEST

� Increasing disposable incomes

� Rising aspirational levels

� Market evolution from Mini cars

to Hatchbacks to Compact Sedans

Key Market Drivers Key Trends

� Low interest rates.Wide variety and easy availability of Financing options.

� High sensitivity to Fuel prices

� Lack of urban & rural public

now evident

� Increasing customer emphasis on

aesthetics and comfort.

� Lack of urban & rural public transportation infrastructure

� Flourishing Service Sector� Shrinking product life-cycles

Page 19: Indian Automobile industry_PEST

Pre 1983 1983-1993 1993-2007

• Closed market

• Growth of market

• Suzuki, Japan and GOI joint

venture to form

• Delicencing of the sector in 1993

• Global major OEMs start

Indian Automotive Industry – Development and

Growth

• Growth of market

limited by supply

• Outdated models

venture to form

Maruti Udyog

• Joint ventures with

companies in commercial

vehicles and components

• Global major OEMs start

assembly in India

(GM, Ford, Honda, Hyundai, etc.)

• Imports allowed from April 2001;

alignment of duty on components

and parts to ASEAN levels.

• Easy auto finances.

• Implementation of VAT.

Players Players PlayersPlayers

• Hindustan Motors

• Premier

• Telco

• Ashok Leyland

• Mahindra & Mahindra

Players

• Maruti Udyog

• Hindustan Motors

• Premier

• Telco

• Ashok Leyland

• Mahindra & Mahindra

Players

• Entry of Global players

Page 20: Indian Automobile industry_PEST

• Indian government auto policy aimed at promoting an integrated, phased and

conducive growth of the Indian automotive industry.

• Allowing automatic approval for foreign equity investment up to 100 per cent, with

Current Political Environment

no minimum investment criteria.

• Establish an international hub for manufacturing small, affordable passenger cars

as well as tractors and two wheelers.

• Ensure a balanced transition to open trade at minimal risk to the Indian economy

and local industry.

• Assist development of vehicles propelled by alternate energy sources.

• Laying emphasis on R&D activities carried out by companies in India by giving a

weighted tax deduction of up to 150 per cent for in-house research and R&D weighted tax deduction of up to 150 per cent for in-house research and R&D

activities.

• Plan to have a terminal life policy for CV along with incentives for replacement for

such vehicles.

• Promoting multi-modal transportation and the implementation of mass rapid

transport systems.

Page 21: Indian Automobile industry_PEST

Social Environment

• Growth in urbanization, 4th largest economy by PPP index.

• Upward migration of household income levels.

• Increase in PPP , led to the increase in market share of compact cars.

• 85% of Cars are financed in India (15% in China).

• Cars priced below USD 12000 account for nearly 80% of the market.

• Vehicles priced between USD 7000 –12000 form the largest segment in the

passenger car market.

• Indian customers are highly discerning, educated and well informed. They are

price sensitive and put a lot of emphasis on value for money.

• Preference for small and compact cars. They are socially acceptable, even amongst • Preference for small and compact cars. They are socially acceptable, even amongst

the well-off.

• Preference for fuel efficient cars with low running costs. The Tata Indica has the

lowest running cost at US 8.5 cents per mile.

Page 22: Indian Automobile industry_PEST

Technological Environment

• With the entry of global companies into the indian market, advanced technologies ,both in product and production processes have developed.

• With the development or evolution of alternate fuels, hybrid cars have made entry into the market.

• Few global companies have setup their R&D centres in India.

• Major global players like audi, BMW,Hyundai etc have setup their manufacturing units in India.

• Government initiatives regarding tax rebates has led to global players setting up their R&D centres in India.

• Govt. initiatives in establishing NATRIP network across the country will further lead to enhancing R&D and technological advancements.

Page 23: Indian Automobile industry_PEST

New testing &

homologation center at

MANESAR

New testing center for

tractors & off-road

vehicles, accident data

analysis and specialised

driving training at RAE

BAREILLYHill Area driving

training center and

Regional In-Use

vehicle

management center

at SILCHAR

NATRIP Network

Up-gradation of VRDE

at AHMEDNAGAR

New complete

proving ground at

INDORE

Up-gradation of

ARAI at PUNE

New test &

homologation center

near CHENNAI

INDORE

Page 24: Indian Automobile industry_PEST

Environmental Scenario

Automotive regulations in India

Status of Indian Regulation

Number of regulations

Fully / Partially aligned 43

In process of being aligned 32

Items / Regulations to be covered 39

Total 114

Page 25: Indian Automobile industry_PEST

Emission Compliance

C VsTwo WheelersCars

Emission Standards Status

Already introduced

in Metros, Mini-

Metros .

From April 1, 2005

Entire Country

Already introduced

in Metros:Mini-

Metros, from Sept,

2003

Bharat Stage II

C VsTwo WheelersCars

From April 1, 2010From April1, 2008From April 1, 2010Bharat Stage IV

From April 1, 2005From April 1, 2008From April 1, 2005Bharat Stage III

Page 26: Indian Automobile industry_PEST

Growth Forecasts as per Automotive Mission

Plan

• The size of the Indian automotive industry is expected to grow at a rate of 13% per

annum over the next decade to reach around 31.96 Mn in 2016 from 11Mn in

2007.2007.

• The total investments required to support the estimated growth are around US$

120-159 billion by 2016.

Vehicle Type Number sold (in million units)

Two wheelers 27.80

Passenger vehicles 2.65Passenger vehicles 2.65

Three wheelers 0.87

CV 0.64

Total 31.96

Page 27: Indian Automobile industry_PEST

Thank You