research report on indian automobile sector

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Research report on Indian Automobile Sector A research report on reasons for a huge boom and areas to invest in Indian Automobile Sector

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Research report on Indian Automobile Sector

A research report on reasons for a huge boom and areas to invest in Indian Automobile Sector

INDIAN AUTOMOBILE SECTOR

1. INTRODUCTION

2. STATISTICS

3. REASONS TO INVEST IN THIS SECTOR

4. FUTURE TREND

INTRODUCTION

Seventh-largest producer in the world with an average annual production of 17.5 Million vehicles.

4th largest automotive market by volume, by 2015. 7% of the country’s GDP by volume. 6 Million-plus vehicles to be sold annually, by 2020. According to the Confederation of Indian Industry, the automobile

sector currently employs over 80 lac people

As compared to the world:-

The Indian automobile industry today boasts of being

the second largest two wheeler manufacturer in the world,

the largest three wheeler market,

the second largest tractor manufacturer in the world,

the fourth largest car market and

the fifth largest commercial vehicle manufacturer in the world. 

Factors determine the growth of the industry Fuel economy and demand for greater fuel efficiency is a major factor that affects consumer purchase decision that will bring leading companies across two-wheeler and four-wheeler segment to focus on delivering performance-oriented products.

Sturdy and legal banking infrastructure Increased affordability, heightened demand in the small car segment and the surging income of

the Indian population India is the third largest investor base in the world The Government technology modernization fund is concentrating on establishing India as an

auto-manufacturing hub. Availability of inexpensive skilled workers Industry is perusing to elevate sales by knocking on doors of women, youth, rural and luxury

segments Market segmentation and product innovation

4 large auto manufacturing hubs across the country. 13 of the 29 states of India have Automotive Manufacturing Plants Telangana Haryana Himachal Pradesh Jharkhand Punjab Rajasthan Madhya Pradesh Uttar pradesh Uttarakhand Karnataka Tamil Nadu Gujarat Maharashtra

The majority of India's car manufacturing industry is based around three clusters in the south, west and north.

The southern cluster consisting of Chennai is the biggest with 35% of the revenue share. The western hub near Mumbai and Pune contributes up to 33% of the market and the northern cluster around the National Capital Region contributes 32%. Chennai, houses the India operations of Ford, Hyundai, Renault, Mitsubishi, Nissan, BMW,

Hindustan Motors, Daimler, Caparo, Mini, and Datsun. Chennai accounts for 60% of the country's automotive exports.

The automobiles sector is compartmentalized in four different sectors which are as follows:

1. Two-wheelers which comprise of mopeds, scooters, motorcycles and electric two-wheelers

2. Passenger Vehicles which include passenger cars, utility vehicles and multi-purpose vehicles

3. Commercial Vehicles that are light and medium-heavy vehicles

4. Three Wheelers that are passenger carriers and goods carriers.

Market share of the Automobile Sector :

The auto component industry, which is an important part of the automotive sector, comprises about 500 firms in the organized sector and more than 10,000 firms in the unorganized sector has been one of the fastest growing segments of Indian manufacturing.

The auto component industry is one of the few sectors in the economy that has a distinct global competitive advantage in terms of cost and quality. The value in sourcing auto components from India includes low labour cost, raw material availability, technically skilled manpower and quality assurance. An average cost reduction of nearly 15-20% has attracted several global automobile manufacturers to set base since 1991.

India’s process‐engineering skills, applied to re‐designing of production processes, have enabled reduction in manufacturing costs of components.

. Today, India has become the outsourcing hub for several global automobile manufacturers. In the coming years, innovation and cost pruning hold the key to meeting the global challenge of rising demand from developed countries and competition from other emerging economies. Several large Indian auto component manufacturers are already gearing to this  new  reality  and  are  in the  process  of  substantially  investing in  capacity expansion,  establishing  partnerships  in India and abroad, acquiring companies  overseas  and  setting  up  greenfield ventures, R&D facilities and design capabilities.

Employment generation in this sector:-The Indian automobile industry provides direct and indirect employment to over 17 million people as on 2012.

Direct employment includes personnel working with automobile manufacturing.

Indirect employment includes essentially in Manpower serving in the industry and market side enablers, infrastructure supporting industry and export - import facilitation in industry enablers and in market side enablers it is relating with trained drivers, traffic management, road infrastructure etc.,

STATISTICS1. Production output of the sector in last 5 years

2. Automobile production trend of last 5 years

3. Automobile Exports Trends in last 5 years

4. Employment generation and contribution towards GDP

5. Current FDI by Sector-wise

6. FDI Inflows in Automobile Industry in India (USD in million) From 2007-08 to 2012-13 (till October 2012)

Production output of the sector in last 5 years:

Automobile production trend of last 5 years:- Category 2009-10 2010-11 2011-12 2012-13 2013-14

( no of vehicles ) Passenger 23,57,411 29,82,772 31,46,069 32,31,058 30,72,651 Commercial 5,67,556 7,60,735 9,29,136 8,32,649 6,98,864 Three Wheeler 6,19,194 7,99,553 8,79,289 8,39,748 8,30,120 Two Wheeler 1,05,12,903 1,33,49,349 1,54,27,532 1,57,44,156 1,68,79,891

Grand Total 1,40,57,064 1,78,92,409 2,03,82,026 2,06,47,611 2,14,81,526

Automobile Exports Trends in last 5 years:- Category 2009-10 2010-11 2011-12 2012-13 2013-14

( no of vehicles ) Passenger 4,46,145 4,44,326 5,08,783 5,59,414 5,93,507 Commercial 45,009 74,043 92,258 80,027 77,056 Three Wheeler 1,73,214 2,69,968 3,61,753 3,03,088 3,53,392 Two Wheeler 11,40,058 15,31,619 19,75,111 19,56,378 20,83,938

Grand Total 18,04,426 23,19,956 29,37,905 28,98,907 31,07,893

Employment generation and contribution towards GDP:-

Current FDI by Sector-wise:

FDI Inflows in Automobile Industry in India (USD in million) From 2007-08 to 2012-13 (till October 2012)

Year USD in million

2007-08 675 2008-09 782 2009-10 1,236 2010-11 1,299 2011-12 923 2012-13 743

REASONS TO INVEST IN THIS SECTOR:-

Reasons for the growth of the sector

Why indian market is stable and suitable as compared to the other world

Why india has the biggest small car & 2 wheeler market as compared to others

Areas to invest in this sector

What govt is doing for the growth of the sector

Reasons for the growth of the sector Favorable demographics (1.2 billion people; ~60% below 30 years of age), expanding

population, low vehicle penetration (15 for every 1000 people), abundant availability of skilled talent, and a maturing automotive components segment have propelled India-based automotive companies to play an important role globally. While international companies are eyeing India for top line growth, the country also remains a favoured outsourcing hub for many automotive multinationals, not just for lower-cost manufacturing, but increasingly as a source of higher value innovation. India has a well-developed, globally competitive auto ancillary industry and established automobile testing and R&D centres. The country enjoys natural advantage and is among the lowest cost producers of steel in the world. 

Rapid urbanization drives the need for commercial transportation.

Reasons for the growth of the sector Back in 1950, agriculture accounted for more than 50 percent of India’s GDP; today, agriculture

accounts for only 15 percent and that share will shrink further. Consider the need to keep food cold: 30 percent of agricultural produce in India now perishes on route to the market due to refrigeration gaps in the supply chain; hence, there is a nationwide need for refrigerated trucks.

Rail transport once dominated the people-moving business. No more. Roadway passenger traffic is expected to increase from 40 percent of the total in 2007 to 55 percent by 2020.

Meanwhile, an expected increase in defence spending will prompt new demand for commercial vehicles intended for military use. Domestic manufacturers such as Tata and Ashok Leyland Ltd. dominate the military–commercial market with a diverse product portfolio, while foreign manufacturers like Daimler and AB Volvo remain niche players. The small commercial vehicle segment is growing most quickly, attracting new players both foreign and domestic.

Today, India boasts the world’s third-largest market for new commercial vehicles. Because it is also the world’s second-fastest-growing commercial market, its future looks even brighter.

Why Indian market is stable and suitable as compared to the other world

1. The Indian economy is booming. From 1998 through 2008, its GDP has grown at an average of more than 7 percent per year. Moreover, its contribution to world GDP is expected to increase from 2 percent in 2007 to 17 percent in 2050. Tremendous growth in wealth will produce significant increases in spending on discretionary items and consumer durables.

2. Local and international banks, well aware of the opportunities, have increased consumer credit available to middle-class borrowers. Even in the global recession during 2008, India’s middle class has been less affected than its counterparts in developed countries. In the second quarter of 2009, India’s economy grew by 6 percent while GDP in the U.S., Japan, Germany, and other countries declined.

This is because Indians can save upto 30% of their earnings. They have the highest capacity of savings in the world.

Why India has the biggest small car & 2 wheeler market as compared to others

1. The increase in the demand for small cars can be attributed to the aspirational lifestyle of people which makes them strive for a car early on in life. In order to avoid rush and congestion in buses or railways, people rather prefer to travel by their own vehicle and so cars and 2 wheelers have become the necessity of the urban people.

2. The overall age for owning a car has also decreased in recent years. 3. Further, with the growing affluence of the rural sector, owning a car, at least a small car, is a

foregone conclusion in modern India. 4. However, since small cars are more affordable and utilitarian, the demand for them has shot

through the roof. This rising demand for small cars is attracting companies like General Motors which has increased its yearly production in India to 140,000 vehicles.

Areas to invest in this sector Leveraging India as a global manufacturing hub for small cars and components. Utilizing India as an innovation hub for new/emerging vehicle categories given specific Indian

market requirements has led to the introduction of Small Commercial Vehicles (sub 1 ton), alternate fuel vehicles (CNG/LPG), and alternate mobility options such as fleet taxis, etc.

A lot of auto grade steel is currently imported. Investors keen on setting up plants for manufacture of auto grade steel will find a huge market opportunity in India. 

The automobile sector in Andhra Pradesh has a potential for US$ 1 billion investment and US$ 1.50 billion output, according to a recent analysis by Automotive Components Manufacturers’ Association of India (ACMA) and city-based Andhra Chamber of Commerce and Industry Federation (ACCIF).

What govt is doing for the growth of the sector The Government of India encourages foreign investment in the automobile sector and allows 100 per cent FDI

under the automatic route. To boost manufacturing, the government had lowered excise duty on small cars, motorcycles, scooters and commercial vehicles from 12 to 8 percent, on sports utility vehicles to from 30 to 24 per cent, on mid-segment cars from 24 to 20 percent and on large-segment cars to 24 per cent from 27 percent.

Some of the major initiatives taken by the Government of India are: The government’s decision to resolve VAT disputes has resulted in the top Indian auto makers namely,

Volkswagen, Bajaj Auto, Mahindra & Mahindra and Tata Motors announcing an investment of around Rs 11,500 crore (US$ 1.86 billion) in Maharashtra.

The Automobile Mission Plan for the period 2006–2016, designed by the government is aimed at accelerating and sustaining growth in this sector. Also, the well-established Regulatory Framework under the Ministry of Shipping, Road Transport and Highways, plays a part in providing a boost to this sector.

The Government of India-appointed SIAM and Automotive Components Manufacturers Association (ACMA) are responsible in working for the development of the Indian automobile industry.

The government plans to come out with policies to introduce clean fuels such as biodiesel, bioethanol and electricity for public transport vehicles and school buses in big cities to tackle air pollution.

The Lok Sabha passed the Motor Vehicles Amendment Bill, 2014, paving the way for regularisation of e-rickshaws.

The government has set up National Automotive Testing and R&D Infrastructure Project (NATRiP) at a total cost of US$ 388.5 million to enable the industry to be on par with global standards.

FUTURE TREND

Future of the sector

Employment generation and employment trend

Road ahead

Future of the sector As the auto-shows began in January 2014, the industry promised a blend of technology and

automotives. With the recession trend breaking its leashes form the past two years, 2014 is expected to get back on track with the sales of automobiles in the country.

Almost Self-governing cars are predicted to be on the streets by 2020 More than half the cars on the streets are going to be powered by diesel by 2020 Industry watcher Gartner indicates that 30 percent of motorists want parking info. The facility is

likely to come up after glitches in the infrastructure catch up. High Performance Hybrid cars are likely to gain greater popularity among consumers. The Indian automobile industry has a prominent future in India.

Employment generation and employment trend There are a wide range of jobs available in the automobile industry. With the number of

vehicles available on the road today, the need and requirement for people who can fix these machines is fast increasing. Careers like automobile technician, car or bike mechanics are a great option. Becoming a diesel mechanic is also a significant alternative. Diesel mechanics are responsible for repairing and servicing diesel engines. As they are also required to repair engines of trucks and buses, other than cars, they are provided with hefty wages.

If communication with people instead of repairing cars is what interests you, then you have the opportunity of becoming a salesperson or sales manager in an automobile company. Career opportunities in automobile design, paint specialists, job on the assembly line and insurance of vehicles is also available.

Employment Trends The Automotive Mission Plan for the period of 2006-2016 aims to make India emerge as a

global automative hub. The idea is to make India as the destination choice for design and manufacture of automobiles and auto components, with outputs soaring to reach US$ 145 billion which is basically accounting for more than 10% of the GDP. This would also provide further employment to over 25 million people by 2016 making the automobile the sunrise sector of the economy.

Road ahead India is probably the most competitive country in the world for the automotive industry. It

does not cover 100 per cent of technology or components required to make a car but it is giving a good 97 per cent, highlighted Mr Vicent Cobee, Corporate Vice-President, Nissan Motor’s Datsun.

The vision of AMP 2006-2016 sees India, “to emerge as the destination of choice in the world for design and manufacture of automobiles and auto components with output reaching a level of US$ 145 billion; accounting for more than 10 per cent of the GDP and providing additional employment to 25 million people by 2016.”

As of 2010, India is home to 40 million passenger vehicles. More than 3.7 million automotive vehicles were produced in India in 2010 (an increase of 33.9%), making the country the second (after China) fastest growing automobile market in the world the same year.