CHAPTER III Auto Industry Profile
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Transcript of CHAPTER III Auto Industry Profile
CHAPTER III
Auto Industry Profile
Introduction to Auto Sector
Automotive industry in India is one of the key sectors in the economy. After liberalization, the
auto industry has been described as sunrise sector of an Indian economy as this sector witnessed
remarkable growth. It has strong forward and backward linkages with other segments and
industry provides a strong multiplier effects on overall industrial growth. The increased
efficiency and productivity of auto industry results in reduced cost incurred for factor mobility.
The sector today provides large employment and earns foreign exchange by export. The
increasing mechanization in agriculture sector also facilitating in increasing agriculture
productivity. So auto industry meets the common expectation of the government through
employment, foreign exchange earnings and agriculture productivity. Today Indian auto industry
is competing with its western peers in developed and emerging markets through its advance
technology, designs, price and quality.
The story of steady growth in India begins in 1990s, has a strong connection with the auto
sectors growth. The radical change from static 3.5% annual growth rate to 9% is possible
because of auto industry growth. Today Indian auto industry is one of the largest in the India and
one of the fastest growing globally. It has become seventh largest producer of commercial and
passenger vehicles and produced 3.70 million units in 2010. If direction of growth remains the
same in future India will bypass Brazil to become 6th largest producer in passenger vehicle
segment. In India over 100 million vehicles had registered on its road in the year 2008 and out of
100 million, 77% or 77 million of these vehicles are two wheelers and 14 million are car, jeep
and taxi.
3.1) Structure of Indian Auto Industry
The Indian auto industry has now strong foothold across all vehicle segments and segmentation
is based on product type, uses and weights.
Indian auto industry has following segments
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Figure No. 3.1 — Segments in Indian automobile industry
r
Two Wheelers
IndianAutomobile
Sector
T
Three WheelersPasseneger
vehicles Commerical Vehicles
Indian consumers have broad array of vehicles at its disposal as his purchasing power has been
increasing day by day. Indian auto companies produce all types of vehicles for domestic
consumption and export. Detail classification of Indian Auto segment is shown in the following
table
Table 3.1 - Classification of automobile segment
Sr.No. Vehicle Type Segment
01 4 - Wheeler Passenger Vehicles Passenger Cars
Utility Vehicles
Commercial Vehicles Light Commercial Vehicles
(LCVs)
Medium Commercial Vehicles
(MCVs)
Heavy Commercial Vehicles
(HCVs)
02 3 Wheelers Passenger Carriers
Goods Carriers
03 2 Wheelers Scooters/ moped
Motorcycles
Electric 2-wheeler/ moped
Source - Mahipat Ranawat et.al.
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Figure no 3.2 shows that two wheelers segment has dominant share in Indian auto market as it
covers 76% of total market size. Two wheeler segment has witnessed the unprecedented grow th
in last decade due to rising demand by rural area and increased fuel efficiency. India has
emerged as world's second largest manufacturer of motorcycles and key 8 players in Indian
markets produced 13.80 million units in 2010-11. Indian two wheeler segment possesses
significant potential for future growth. After two wheeler segment, passenger vehicles segment is
on second rank with 16.25% market share. Then commercial vehicles and three wheelers
segment is ranked at 3rd and 4th with their respective share 4.36% and 3.39%. Indian automobile
industry has generated direct and indirect employment for around thirteen million people with
turnover more than $ 35 billion.
Figure No3.2-Auto segment and their market share in 2010-11
80
60
40
20
0
Passenger Vehicles Commerical Vehicles Three Wheelers Two Wheelers
Source: - Society for Indian Automobile Manufacturers (SIAM)
3.2) Decadal growth of Indian auto industry:-
In 1950s Indian government allowed to only seven car dealers to operate and 1960s witnessed
establishment 2 and 3 wheelers industry in India, in initial years growth in production remains
stagnated, 1980s witnessed major resurgence with opening up of Indian automobile market for
foreign auto manufacturers. 1990s witnessed robust growth as number of foreign players entered
in the domestic market through collaborations and partnership. Figure no.3.3 shows that
production numbers have steep increase after partial liberalization after 1980 and steeper
increase after full liberalization in 199!.The Table no. 3.2 shows production of automobiles in
numbers from 1960 to 2011. In 2010 India has crossed I Crore vehicle production from 40,000
vehicles of 1960. From 1960 -61 to 2010-11 there is continuous growth in automobile
production, but year 2000-01 and 2010-11 has witnessed robust. Maximum decadal growth in
observed in 1980 and 1990 with 347 .46% , after entry of Maruti Udyog Ltd. in Indian auto
market with other Japanese two wheeler manufacturers ( Yamaha and Kawasaki). The reason for
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■
16.25 4.36 3.39
Market Share (%)
60
slow growth in domestic automobile industry is highly regulation and infant industry policy to
protect domestic companies
Table No. 3.2 - Decadal growth of auto industry
Years
Production
Numbers Growth on base year (1960-61)
Growth Decade on
decade
1951-60 41535 - -
1961-70 181752 337.5876 337.59
1971-80 625143 1405.099 243.95
1981-90 2797241 6634.66 347.46
1991-00 5497416 13135.62 96.53
2001-10 11087997 26595.55 101.28
Figure no 3.3 - Decadal grow th of auto industry
Source:- L.G.Burange et.al.
3.3) Export of automotive products from India during 1990-2010
In 2007, Asian economies automotive export valued around US $ 265 billion in 2007 against
world export $ 1.2 trillion in 2007. Europe is leading region in global automotive export and
have 55% market share in total export. Asian economies enjoyed 22% market share in global
auto export in 2007 against 19.9 in 2000 and in Asian economies Japan has played key role in
auto export with $ 159 billion. Indian government liberalized foreign investment norms after
1991 resulted into robust export growth from India. India exports all types of vehicles , two
wheelers accounted for two third share of total export from India in 2007-08 in number of units
and passenger vehicles , three wheelers .commercial vehicles accounts 17.6%, 11.3%, 4.7%
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share respectively in total vehicle exports. Between 2001-2008, the automobile export growth
witnessed CAGR growth of over 31%. Almost 50% two wheeler export from India in 2007-08
consumed by Asian countries and sizeable volume of passenger vehicles were exported to
Europe with Latin America and African region, figure no.3.4 shows that over the years export
from India has continuously increased. In 1990 India exported auto products of value $198
million which increased to $ 588 million in 2000 and then very sleep increase is observed with
export of $7,939 million worth auto products. Such substantial change in auto export from Indian
base indicates opportunities for future Indian global leadership in auto industry.
Figure no 3.4 - Automotive export from India 1990-2010
Automotive export from India ($ Million)
____ ♦ $7,939—*-$£799
1990 1995 2000 2008 2009 2010
Source :- WTO (International Trade Statistics 2001 and 2011) ( Figures in million $)
3.4) History of Indian Automotive Industry
Indian history of the automobile industry can be broadly divided into three phases
> Before independence
> 1947-1983
> 1983-1993
> 1993-2010
1. Before independence:-
The first passenger car that the Indian people saw was in 1897, when a resident of Calcutta
brought the first car to India. The next there were four cars in Bombay the owners were
Jamshedaji Tata and three Parsis. During the year Dunlop opened its office for its pneumatic
tyres and India has no other alternative rather than to use imported cars and import was in small
number .
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In 1903, Samuel John Green of Simpson of Simpson and co,, Madras built Indian first
steam car and first steam bus in next two years which ran between Vijaywada and
Machilipatnam. This was first motor bus service in India. In 1928, General Motors of India Ltd
started assembling trucks and cars in Bombay. The first car assembled in India rolled off the
assembly on 4th December 1928. In next two year, Ford motors commenced its operations from
Madras, Calcutta and Bombay. In 1936 Addison & Co. Ltd commenced assembly of cars and
trucks in Madras. Premier Automobiles Ltd was established in 1944 at Bombay (Sharma
Ramchandran,2012).
II. 1st Phase (1947-1983)
Hindustan Motors Ltd., a Birla group company established in 1942 in Calcutta and started its
operations from 1948. It began with assembling of Morris Oxford cars and Bedford trucks
gradually indigenized the components. In 1957, the Morris Oxford sustainably indigenized and
reintroduced as Hindustan Ambassador.
After independence Indian government and private sector launched its efforts to create an
automotive component manufacturing industry to supplement Indian automobile industry. The
period after independence was marked by adverse government policies for auto industry as -
1 Steep excise duties and sales tax
2 High customs duty on import
3 Restriction on production by license agreement
Major players in this period in four wheeler segment were Hindustan Motors, Premier
Automobiles, Bajaj Tempo, TELCO (Tata Engineering and Locomotive Company), Ashok
Leyland, Mahindra and Mahindra were flourished in the license regime from 1950s to 1990s
w'hen India was closed to world and import.
Premier automobile was established in 1944 as a result of successful negotiations with Chrysler
Corporation in 1939, resulting in licenses to build Plymouth car and Dodge truck.In 1949 parts
were being made in India, starting with simpler Components and gradually building up to more
complex pieces.
The early years of Premier and Hindustan were marked by the low sales, due to the size of the
market. Only about 20,000 vehicles per year made in India, in 65 different models. To prevent
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foreign companies from dominating mass producing practices, the government set up steep
import duties on imported parts in 1954, allowing Indian parts to survive (Sharma Ramchandran,
2012).
Table No. 3.3 - Information of auto companies during 1st phase
Sr.No. Name of The Year of Name of Product
Company
Formation
01 Hindustan Motors 1942 Hindustan 10 (1949) , Baby Hindustan (1950),
Hindustan 14, Land master (1954), Ambassador
(1958), Contessa (1982)
02 Premier Automobiles 1944 Plymouth car (Under license of Chrysler
Corporation) 1949, Premier Padmini (1962), Fiat
124, Fiat Uno, Peugeot 309
Source- Individual website
III. 2nd phase (1983- 1993) :-
The real growth to Indian auto industry began in the 1980s when a number of Japanese
manufactures formed joint ventures with Indian players for producing motorcycles and light
commercial vehicles.
This period was witness of future auto industries changing structure. Important events during this
period which has changed the future of auto sector are as follows
This decade saw the entry of Maruti Udyog Ltd in the passenger car segment because of
government became interested in promotion of car production. After a careful search for joint
venture partner, Indian government formed Maruti Udyog Ltd with Japanese Suzukig
Corporation to manufacture a small car under the brand Maruti. The decade witnessed the
emergence of Hero Honda as a major player in the two wheeler segments with Kawasaki Bajaj,
Escorts Yamaha and Maruti Udyog as the market leader in the passenger car segment
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Table 3.4 Important events for auto industry during 80’s
Sr .No. Year Important Events
1 1983 Government of India formed Joint Venture with Suzuki
Motor Corporation to form Maruti Udyog Ltd.
2 1991 New Industrial Policy
3 1991 Auto Industry de-licensed
4 Other Joint Ventures (Hero Cycles + Honda)
with Japanese (Bajaj +Kawasaki)Corporations in 1980s (Escorts+ Yamaha)
Source - IBEF Report - Automotive market and opportunities
Following table no. 3.5 shows auto companies which had dominant market share in 1992-93 in
passenger vehicle segment. During the year production was of 163,600 units of passenger
vehicles and 75% of market share was controlled by Maruti Udyog’s Maruti 100, Esteem and
Omni. The presence of Maruti Udyog’s in India in 1990s caused to lose the shine of other
pioneer Indian passenger vehicle companies.
Table 3.5 Market share of auto companies in 1992-93
Company Main Products 1992/93 Market Share
Maruti Udyog Ltd (MUL) Maruti 100, Esteem, Omni 74.8%
Premier Automobiles Ltd
(PAL)
Premier Padmini ,NE118 9.4%
Hindustan Motors Ambassador, Contessa 13.4%
Tata Engg & Locomotive Tata Siera, Tata Estate 2.4%
Company Ltd
Total Passenger Vehicles (Units) 163,300
Source- Vishwanathan Krishan
IV. 3rd Phase (1993-2010) :-
This period has changed the face of the Indian automobile industry by governments landmark
decisions like removal of QRs on imports, 100% FDI through automatic route, ease in fund
raising. Global major players entered into the market to exploit the Indian auto market
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opportunities. Today India is the largest manufacturer of tractors, two wheelers and three-
wheelers in the world.
Table No. 3.6 - Important events in auto industry after 1991
Sr.No. Important Events 1993- 2010
1 Foreign Direct Investment in Indian automobile market up to 100%
2 Relaxation in foreign exchange and equity market regulation
3 Reduction on tariff on import
4 Refining banking policy
5 Diversification of manufactures into related activities - fleet management, finance,
lease and other related activities.
Source - IBEE Report - Automotive market and opportunities
Today India’s strong engineering base and expertise in the manufacturing of low cost, fuel
efficient cars has resulted in the expansion of manufacturing facilities from foreign auto players
like Hundai Motors, Nissan, Toyota, Volkswagen and Suzuki. Also these companies arc-
exporting their products to other Asian countries from India.
Table No. 3.7 - Types of passenger vehicle manufactures after liberalization
Types of passenger cars manufactures in India after complete liberalization
International Automakers Joint Ventures Domestic Manufactures
Hyundai Motor Co. Maruti Udyog Ltd. Tala Motors Ltd.
General Motors India Toyota Kirloskar Motor Mahindra and Mahindra Ltd.
Ford Motor Co. Honda Siel Cars Ltd. Hindustan Motors Ltd.
Volkswagen India Mahindra Renault Premier Automobile Ltd.
Source - 1BEF report -Automotive industry (2009)
3.5) Indian Auto Cluster
The India’s car manufacturing industry is based around three clusters in the south, west and
north.
" 66
Table No. 3.8 - Auto cluster in India
Sr.No. Name ofCluster
Location Operating Companies
1 South Chennai Ford, Hyundai, Renault, Nissan, BMW2 West Maharashtra General Motors, Volkswagen, Skoda, Mahindra
and Mahindra, Tata Motors, Mercedes Benz, Land Rover, Fiat, Force Motors , Skoda, Audi,
3 North Haryana Maruti Suzuki, Honda Siel, Hindustan Motors,LMLSource - IBEF Report - Automotive market and opportunitiesIndian car manufacturing industry is based around three clusters in the south, west and north.
The southern cluster is near Chennai is also called as “Detroit of India”. South hub has 35%
revenue share in auto market. Ford, Hyundai, Ford, Hyundai, Renault, Nissan has headquarters
in Chennai. This cluster contributes 60% of export of country’s automobile exports.
The western cluster near Mumbai - Pune is controlling one third of market. The plants of
General Motors, Skoda, Mahindra and Mahindra, Tata Motors, Mercedes Benz, Land Rover,
Fiat, Force Motors are located in Chakan corridor near Pune. Aurangabad has Volkswagen,
Audi, Skoda plants. Gurgaon and Manesar is Haryana form the northen cluster where Maruti
Suzuki is based near one third production of country’s auto production comes from this cluster.
Kolkata with Hindustan Motors , Noida with Honda and Bangalore with Toyota are other
locations but they contribute less.
3.6) Growth trends in Indian automobile industry
i) Production trend
Table no 3.9 shows that production trend in Indian auto industry is growing on year on year basis
between 2004-05 to 2010-11 except year 2007-08. This is clear that due to global financial
crises of 2008 Indian auto industry has suffered but its impact is very low and next consecutive
years it has shown steady growth at 66 %and 112% on base year.
Following table shows production trend in the Indian auto industry during 2004-05 to 2010-11
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Table No. 3.9 - Automobile production trend in during 2005- 2011
Category 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11PassengerVehicles
1209,876
1309,300
1545,223 1777,583 1838,593 2357,411 2987,296
Commercia1 Vehicles
353,703 391,083 519,982 549,006 416,870 567,556 752,735
ThreeWheelers
374,445 434,423 556,126 500,660 497,020 619,194 799,553
TwoWheelers
6529,829
7608,697
8466,666 8026,681 8419,792 10512,903
13376,451
Grand 8467,85 9743,50 11087,99 10853,93 11172,25 14057,06 17916,03Total 3 3 3 0 3 4 5YOY % Change
15 30 28 32 66 112
Source: - Society for Indian Automobile Manufacturers (SIAM)
ii) Sales trend
Table no3.10 shows sales trend in Indian auto industry between 2004-05 and 2010-11 and
overall period has satisfied growth in sales. It indicates the reversal trend in year 2007-08, from
28% in 2006-07 to 22% in 2007-08 and then slight growth in next year 2008-09 i.e. 23%. But the
reversal trend in Indian auto sales has resulted in robust growth during 2009-10 and 2010-11 at
55% and 96%.
Following table shows Automobile domestic sales trends in the Indian auto industry during
2004-05 to 2010-11
Table No. 3.10 - Automobile sales trend in during 2005- 2011
Category 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11PassengerVehicles
1061,572 1143,076 1379,979 1549,882
1552,703
1951,333
2520,421
CommercialVehicles
318,430 351,041 467,765 490,494 384,194 532,721 676,408
ThreeWheelers
307,862 359,920 403,910 364,781 349,727 440,392 526,022
TwoWheelers
6209,765 7052,391 7872,334 7249,278
7437,619
9370,951
11790,305
GrandTotal
7897,629 8906,428 10123,988 9654,435
9724,243
12295,397
15513,156
YOY %Change
13 28 22 23 55 96
Source: - Society for Indian Automobile Manufacturers (SIAM)
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iii) Export trend
Table no. 3.11shows export trend of auto product from India between 2004-05 and 2010-11.
Table no 3.9 and table no 3.10 showed that growth in production and sales has affected due to
crisis in 2007-08 and 2008-09. But the same is not visible in export trend of auto product from
India between 2004-05 and 2010-11. Table No. 3.11 shows overall stable and steady growth in
export of auto products from India indicates strong presence of Indian auto products all over the
world. India’s automobile exports have grown continuously reached $4.5 billion in 2009 with
United Kingdom became the India’s largest export market followed by Italy, Germany,
Netherlands and South Africa. Hyundai Motors India Ltd rolled out 30,00,000th car in August
2010 after 13 years of its operations and the biggest exporter form the country now ships more
than 250,000 cars annually from India.
Following table shows Automobile export trend in the Indian auto industry during 2004-05 to
2010-11
Table No. 3.11 - Automobile export trend in during 2005- 2011
Category 2004-05 2005-06
2006-07 2007-08 2008-09 2009-10 2010-11
PassengerVehicles
166,402 175,572 198,452 218,401 335,729 446,145 453,479
CommercialVehicles
29,940 40,600 49,537 58,994 42,625 45,009 76,297
ThreeWheelers
66,795 76,881 143,896 141,225 148,066 173,214 269,967
Two Wheelers 366,407 513,169 619,644 819,713 1004,174 1140,058 1539,590Grand Total 629,544 806,222 1011,529 1238,333 1530,594 1804,426 2339,333YOY %Change
28 61 97 143 186 271
Source: - Society for Indian Automobile Manufacturers (SIAM)
3.7) Global Production trend
Table no. 3.11 table shows original equipment manufacturer, their auto production in 2008 and
respective market share. It shows that Toyota of Japan is having largest global market share
withl3.3% , then General Motors at second rank with 11.9 market share , at third Volkswagen of
Germany with 9.3% market share. 77% of global auto market share was concentrated among 10
auto companies and no Indian company was placed in top 10 automobile companies in the world.69
Table No. 3.12 - Global production of auto products by companies, market share in 2008
Rank OEM Group HQ Location 2008 GlobalProduction
GlobalMarket Share(%)
CumulativeMarket Share(%)
01 Toyota Japan 92,37,780 13.3 13.302 GM United States 82,82,803 11.9 25.203 Volkswagen European Union 64,37,414 9.3 34.404 Nissan - Renault Japan/ European
Union58,12,416 8.4 42.8
05 Ford United States 54,07,000 7.8 50.606 Fiat- Chrysler European Union 44,17,393 6.4 56.907 Hyundai - Kia Korea 41,26,411 5.9 62.908 Honda Japan 39,12,700 5.6 68.509 PSA European Union 33,25,407 4.8 73.310 Suzuki Japan 26,23,567 3.8 77.0
Source:- Deloitte Report - A new era accelerating toward 2020 - An automotive industry
transformed
3.8) Partnerships of Indian Players with foreign firms
In last twenty years auto industry has changed its location preference by various reasons like low
cost of production, fast growing market, taxation structure, and government support. Earlier the
auto industry has prospered in North America, Europe and Japan. But now labour cost and cost
of production is high in these countries and this is forcing companies to relocate their operations.
In 21st century, the global auto products demand and production has witnessed a dramatically
shift from developed countries to developing countries. Table No 3.13 shows that swift increase
in demand and production in Asian countries between 2001 -07 and at the same time Western
Europe and North America regions shows fall in demand and production of cars. Following table
no. 3.13 shows the world car sales and production by sub regions between 2001 to 2007. In West
Europe, North America have negative trend in sales and production during 2001 and 2007. At
the same time, East Europe, Latin America, Asia JO, Asia - DK , Middle East , Africa have
positive trend in their sales and production during 2001 and 2007 and among them Asia DK has
prospered significantly.
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Table No. 3.13 - World car sales and production by sub regions 2001-07 ( million units)
Region 2001 2007 2001 to 2007 % ChangeSales Production Sales Production Sales (%) Production (%)
West Europe 14.93 15.00 14.82 14.24 -0.70 -5.10East Europe 2.13 2.45 4.42 5.07 107.50 106.90NorthAmerica
19.03 13.70 17.88 13.10 -6.0 -4.4
Latin America 2.80 3.71 4.28 5.24 52.9 41.2Asia- JO 4.90 8.40 5.14 10.24 4.9 21.9Asia - DK 3.58 4.67 9.78 11.52 173.20 146.70Middle East 1.00 - 2.18 - 118.00 -Africa 0.66 0.23 1.08 0.28 63.60 21.70Total 49.03 48.16 59.58 59.69 21.50 23.90Source:- Peter Wad
US, Western Europe and Japan are having high cost of labour as compare to developing
economies like Mexico, India, China and Brazil. Also these are very swiftly emerging
economies so attracting foreign companies to relocate their operations. India has been evolving
as manufacturing hub as well as fast growing auto market for Ford, General Motors, Chrysler,
Toyota, Honda, Nissan and BMW. Indian firms are increasingly partnering with foreign
companies across all segments. Such partnerships offers a foot hold to the foreign players into
the rapidly growing Indian Automobile Market, while contributing technology and monetary
assistance to the Indian Companies too.
3.9) SWOT analysis for Indian automobile industry
1) Strengths
a. Large domestic market and export base for Asian countries
b. Central and state government support for establishment of manufacturing unit
c. Low labour cost
2) Weakness
a. Infrastructural bottlenecks
b. Less productivity
c. Too many taxes imposed by central, state and local authorities which adversely
impact on cost of production
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3) Opportunities
a. Reduction in excise duty
b. Increasing demand from rural India
c. Continuous increasing income
4) Threats
a. Rising interest rate
b. Steep competition in Indian and foreign auto players
c. Increasing cost of raw materials
3.10) Future challenges and opportunities to automobile industry
Future challenges to Indian automobile industry
1) Rising input cost
Price of inputs like steel, non ferrous metals, rubber, glass have increased lot in last
decade and in turn overall production cost has increased. Cost escalation in auto product
input has adversely impacted the growth of Indian automobile industry.
2) Fuel price volatility
Fuel price volatility has considerable impact on the growth of auto industry. Steel,
aluminum which is major part of auto manufacturing directly affects by increase in oil
prices by transportation cost and polymer is one of the input used in auto manufacturing
is a derivative of crude oil. Secondly, the increased oil price has positive impact on
inflation and adversely affects to the saving and disposable income of the consumers in
turn affect to automobile demand. In last, increased oil prices affect overall run cost for
customer. Hence price instability of fuel affects the future prospectus of auto industry.
3) Growing competition
Competition in India’s automobile industry has been increasing in last decade. The
regulatory mechanism and market conditions helped the Indian OEMs to monopolistic or
oligopolistic market structure. After deregulation Indian automobile market is opened to
foreign auto players and over 20 foreign auto players entered into passenger car segment.
In the commercial vehicle segment, Indian companies Tata motors and Ashok Leyland
competition has been increasing with the emergence of Bharat Benz and Vovlo.
4) Environmental issues
As per estimates, automobile industry accounts for 25% of global anthropogenic GHG
emissions. Governments in developed countries are more serious on emission norms,72
punishing inefficient cars through fine, tax. Such government policies restrict export from
developing economies to EU, USA and Japan.
5) Low R & D orientation
The competitiveness of auto industry comes through increased productivity which force
for continuous innovation by auto players. But Indian auto players spend less from their
earnings as compare to global standards. Today Indian auto companies are designing
product for domestic market or for export, but they are not designing a vehicle for global
market to compete with international brands. Also Indian auto companies are more
focused on modification of existing models to improve performance and neglect
development of new models.
6) Infrastructure constraints
Insufficient road infrastructure and traffic congestion are bottleneck in the growth of
Indian auto industry. Road capacity addition is lagging behind traffic growth in last
decade. Port has insufficient infrastructure to handle the export and also challenges
associated with space for parking and setting up repair shop in yards. Improvement in
road infrastructure provides immense opportunity for Indian automobile industry and
well road to port connectivity help to enhance supply chain management strategies of the
vehicle manufactures. All those infrastructural bottlenecks need to be removed for
immediate prosperity of auto industry.
Future opportunities to Indian automobile industry
1) Addressing fuel price volatility
Fuel price is one of influential factor that affect to automobile demand, in order to
address fuel price volatility today automobile industry is innovating technologies and
inventing alternative use of energy. Hydrogen cars which are driven by fuel cells, electric
cars with rechargeable batteries, compressed air technology to drive the pistons in
specially designed engine are suggested thought to replace existing fossil fuel vehicles.
In next decade automobile industry will witness dramatic change in automobile products.
2) New generation cars
Today auto companies are differentiating in their product and services and it is
innovation which is going to drive future auto industry. Hence use of IT and electronics
in the automotive functionalities will be obvious like entertainment, navigation and
73
safety. According to IBM survey with major auto players future innovation in auto
industry is in software and electronics systems of vehicles.
3) Growing small car segment
The volatility in oil prices in 2008 from $140 at its peak to $40 realized the need for
small and fuel efficient vehicles by auto industry. Auto companies are also investing
heavily in research and development to reduce small car price, as rising income of middle
class Indian families enticing them to purchase small car.
4) Increasing collaboration for technology enhancement
Today auto companies are sharing new designs, technology through software among
designers, engineers, suppliers, customers. Such facilities help auto companies in
necessary adjustments and adaptations in designs as per requirements.
5) Recycling of design
The automobile industry is one of the industry which use recyclable materials. As world
natural resources are depleting and by giving due consideration to the conservation of
natural resources, auto companies are developing material that can easily be recycled.
6) Consumer preference
The dynamics of Indian automobile market is changing with customer changing
preferences for vehicles. Earlier two wheeler segment was considered by scooter which
has been dominated by motorcycles. This change in consumer preference was driven by
fuel efficiency, design and technological development. Hence by considering consumer
preference auto companies should design their products to maintain their market share.
74
3.11) Major Auto Players in Indian market in 2010
The following table no. 3.14shows major auto players in the Indian auto market in 2010 and their
market segments.
Table No. 3.14 - Major auto players and their segments in Indian market
Sr.No. Name Of Company Segments01 Ashok Leyland Ltd LCVs , M & HCVs, Buses02 Asian Motor Works M & HCVs03 Bajaj Auto Ltd Two and Three Wheelers04 BMW India Cars and MUV’s05 Daimler Chrysler India Cars06 Eicher Motors Ltd. LCVs , M & HCVs07 Fiat India Cars08 Force Motors LCVs , M & HCVs09 Ford India Cars and MU Vs10 General Motors India Cars and MU Vs11 Hero Honda Motors Ltd. Two Wheelers12 Hindustan Motors Cars, LCVs , M & HCVs13 Honda Two Wheelers, cars and MUVs14 Kinetic Motors Two Wheeler15 Mahindra and Mahindra Ltd. Three Wheelers, Cars, LCVs , M & HCVs,16 Maruti Suzuki Cars, MUVs, MPVs17 Piaggio Three wheelers, LCVs18 Royal Enfield Motors Two Wheelers19 Skoda Auto India Cars20 Suzuki Motorcycles Two Wheelers21 Swaraj Mazda Ltd LCVs , M & HCVs,Buses22 Tata Motors Ltd. LCVs , M & HCVs,Buses, MUVs23 Toyota Kirlsokar Cars, MUVs24 TVS Motor Company Two Wheelers25 Volvo India M & HCVs, Buses26 Volkswagen India Cars27 Yamaha Motor India Two WheelersSource - IBEF Report - Automotive market and opportunities
75
Company profile of Tata Motors Ltd
Established in 1945, Tata Motors' presence cuts across the length and breadth of India, Over 7.5
million Tata vehicles ply on Indian roads, since the first rolled out in 1954. The company's
manufacturing base in India is spread across Jamshedpur (Jharkhand), Pune (Maharashtra),
Lucknow (Uttar Pradesh), Panfnagar (Uttarakhand), Sanand (Gujarat) and Dharwad (Karnataka).
Tata Motors Limited is India's largest automobile company, with consolidated revenues of INR
1,65,654 crores (USD 32.5 billion) in 2011-12. It is the leader in commercial vehicles in each
segment, and among the top in passenger vehicles with winning products in the compact, midsize
car and utility vehicle segments. It is also the world's fourth largest truck and bus manufacturer.
Tata motor is founded by J.R.D. Tata by the mission "to be passionate in anticipating and
providing the best vehicles and experiences that excite our customers globally". Today it is
headed by Cyrus Pallonji Mistri. Tata motor is listed on Bombay stock exchange and National
stock exchange. It is engaged in heavy and medium commercial vehicle, light commercial
vehicle and passenger vehicle segment.
Following a strategic alliance with Fiat in 2005, it has set up an industrial joint venture with Fiat
Group Automobiles at Ranjangaon (Maharashtra) to produce both Fiat and Tata cars and Fiat
power trains. The company’s dealership, sales, services and spare parts network comprises over
3,500 touch points. Tata Motors, also listed in the New York Stock Exchange (September 2004).
has emerged as an international automobile company. Through subsidiaries and associate
companies, Tala Motors has operations in the UK, South Korea, Thailand. Spain. South Africa
and Indonesia. Among them is Jaguar Land Rover, acquired in 2008. Satrbus, Ace. Prima.
Ultra, 1581c, 407 Ex, Sumo, Safari , Indica are some famous auto brands belongs to Tata Motors
www.tatamotoi-s.com.
Company profile of Ashok Leyland Ltd
For over six decades, Ashok Leyland has been moving people and goods, touching customer and
millions across 50 countries worldwide. Ashok Leyland Ltd. is established in 1948, Today,
company is the flagship of the Hinduja Group, one of the largest commercial vehicle
manufacturers in India with a turnover of US $ 2.5 billion in 2011-12 having consistently
delivered profits to stake-holders since inception. Ashok Leyland buses safely carry 70 million
passengers to their destinations every day. Close to 700.000 of vehicles keep the wheels of
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economies turning and, as the largest supplier of logistics vehicles to the Indian Army, company
plays a critical role in keeping our borders safe. Today Ashok Leyland Ltd. is listed on Bombay
stock exchange and National stock exchange. Currently Ashok Leyland Ltd. is headed by
Dheeraj Hindjua with its 15,000 employees and it's headquarter is located at Chennai.
For company customers, company is committed to provide transport solutions that offer the best
operating economics while for users of vehicles, comfort and safety. This has driven to pioneer
concepts that have become industry norms fueled both by robust inherent R&D capabilities and
the strength of strategic alliances forged with global technology leaders. Ashok Leyland Ltd.
plants are located at Chennai, Bhandara, Alwar,Hosur, Pantnagar and with two facilities in
Prague (Czech Republic) and Ras A1 Khaimah (UAE). Ashok Leyland Ltd. is largely focusing
on heavy and medium commercial vehicle segment. Company produces Comet, Taurus, Bison
Tipper, Artik, Tusker Turbo (www.ashokleyland.com)
Company profile of Mahindra and Mahindra Ltd.
Founded in 1945 as a steel trading company, Mahindra & Mahindra Ltd. entered automotive
manufacturing in 1947 to bring the iconic Willys Jeep onto Indian roads. Over the years,
company has diversified into many new businesses in order to better meet the needs of
customers. M&M follow a unique business model of creating empowered companies that enjoy
the best of entrepreneurial independence and Group-wide synergies. This principle has led
growth of company into a US $15.9 billion multinational group with more than 155,000
employees in over 100 countries across the globe. Today, M&M operations span 18 key
industries that form the foundation of every modem economy: aerospace, aftermarket,
agribusiness, automotive, components, construction equipment, consulting services, defense,
energy, farm equipment, finance and insurance, industrial equipment, information technology,
leisure and hospitality, logistics, real estate, retail, and two wheelers. Federated structure enables
each business to chart its own future and simultaneously leverage synergies across the entire
Group’s competencies. In this way, the diversity of its expertise allows to bring customers the
best in many fields. M&M Ltd. is founded by K.C. Mahindra , J.C. Mahindra and M.G.
Mohhamad and currently company is headed by Anand Mahindra.
In 1947, company introduced India to the utility vehicle. More than 65 years later, company is
still India's premier utility vehicle (UV) company, but also grown quite a bit. In addition to
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making groundbreaking UVs like the Scorpio ar.d Bolero, Mahindra offers cars, pickups, and
commercial vehicles that are rugged, reliable, environmentally friendly, and fuel-efficient. M&M
is listed on Bombay stock exchange and National stock exchange and it’s headquarter is located
at Mumbai. M&M Ltd. is manufacturing auto products from its various plants located at Igatpuri,
Jaipur, Haridwar, Nagpur, Nashik. Companies global presence means customer can find
Mahindra vehicles on the roads—both paved and unpaved—of Australia, Europe, Latin America,
Malaysia, South Korea, and South Africa. Today company is engaged in cars and utility vehicles
segment and produces auto products like Marshal, Commander, Xylo, Scorpio, Verito and XUV
500 (www.mahindra.com).
Company Profile of Eicher Motors ltd
Eicher Motors Ltd is one of the leading manufacturer of commercial vehicles in India. Their
principal activity is manufacturing and selling of commercial vehicles, two wheelers and gears.
They are having their manufacturing facilities at Pithampur and Dewas in Madhya Pradesh,
Chennai in Tamil Nadu, Thane in Maharashtra and Gurgaon in Haryana. Eicher Motors Ltd was
incorporated in the year 1982. The company in technical collaboration agreement with
Mitsubishi Motor Corporation of Japan produced the Light Commercial Vehicle in India. The
commercial production was commenced in their plant at Pithampur in Madhya Pradesh, with the
launch of Canter truck in June 1986. The agreement with Mitsubishi ended in March 1994 after
successful transfer of technology and achieving total Indigenization. The demerger of Tractors,
Two-Wheelers, Engines and Gears businesses from Eicher Ltd was transferred to the company
with effect from April 1, 2003. In May 2008, the company signed a definitive agreement with
Aktiebolaget Volvo, Sweden for a formation of a joint venture company through transfer of the
existing Commercial Vehicle Business along with related Components and Design Services
Business. In August 2008, they transferred the Components and Design Services Business to
VECV, the joint venture company with effect from July 01, 2008. During the year ended
December 31, 2011, total exports in were 3,200 units, and total sales volume of Royal Enfield
was 74626 motorcycles. Currently company is headed by S. Sandilya and company is engaged in
light commercial vehicle segment. Eicher Motors Ltd. is listed on Bombay stock exchange and
National stock exchange. Company produces auto products like Eicher 10.90, Buses, Touch
buses, Tipper, Jumbo and Galaxy (www.eicher.in).
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Company Profile of SML Isuzu Ltd.
Incorporated in Jul.'83 as Swaraj Vehicles, Swaraj Mazda (SML) got its present name in 1984. It
has been jointly promoted by Punjab Tractors (PTL) in India and Mazda Motor Corporation &
Sumitomo Croporation in Japan. The company came out with a public issue in May '85 to part-
finance its projects. In October 2004, SML's Technical Assistance Agreement with Maza ended.
Subsequently on 18th August 2005, Maza sold to Sumitomo Corporation, Japan its entire
holding in SML of 1638000 equity shares representing 15.62% of the equity capital of SML.
SML's plant location is at Nawanshahar in Punjab. Starting from 2-wheel bases, its model range
now spans 5-wheel bases. Carrying capacities have spread from 3.0 ton to 6.0 ton in the goods
segment (GVW 5.8 to 8.8 ton) and from 12 to 41 seaters in the passenger segment. The company
has also the distinction of producing India's first factory finished buses. In recent years, Swaraj
Mazda has successfully introduced India's first 4-wheel drive LCVs and CNG mini-buses.
Current variety of specialty vehicles includes Police Vans, Ambulances (2 stretchers/4
stretchers), Dental Vans, Water Tankers, Fire Tenders, Dumper Placers, Bottle Carriers etc. On
the basis of design features and performance, over the years, its buses, ambulances and specialty
vehicles have acquired a distinct customer image and preference. In the year 2005, based on its
R&D efforts and guidance from Madza, 3 more wheel bases has been added of 2.8m, 3.9m and
4.7m.The GVW range has been raised to 9.8 Ton. Thus SML's current range of 5.8-9.8 Ton
GVW has 6 distinct models with several variants. Also in the passenger segment, from the
orginal 26 seater version, SML models is of 12-41 seat range. In 4 wheel drive vehicles, CNG
vehicles and Airbrake versions,has also be developed through SML's own efforts The effort has
been to build and nurture relationship with the customers by rendering better than the best
service. Its dealer outreach has grown to 135 (55 in 1986). In addition, it has 10 offices through
out the country to support and monitor a net work of 130 dealers and 55 Service Centres. The
company has absorbed Advanced Japanese Technology both through in-house activity as well as
through vendors and its products are in the last stages of indigenization. Company head office is
located at Chandigarh , India and it is headed by S.K. Tuteja, it is also listed on Bombay stock
exchange and National stock exchange. Company produces trucks like Isuzu NQR, SML
premium , SML prestige and bus like ISUZU LT 134 (www.smlisuzu.com)
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Company Profile of Maruti Suzuki India Ltd
Initially Maruti Suzuki was owned by 18.28% the Indian government and 54.2% by Suzuki of
Japan and Indian government issued an initial public offering of 25% of the company in June
2003. In May 2007, the Indian government sold its entire stake to Indian financial institutions
and no longer has any stake in Maruti Udyog. Maruti Suzuki India Limited (MSIL) is primarily
in the business of manufacture, purchase and sale of motor vehicles and spare parts
(automobiles). The other activities of the Company consist of facilitation of pre-owned car sales,
fleet management and car financing. Company has started its operations in year 1981 and its
headquarter is located at New Delhi. The Company offers a range of cars across different
segments. It offers 14 models with over 200 variants across the industry segments like Passenger
cars, utility vehicles and vans. The Company has five plants in the Gurgaon and Manesar areas
of Haryana equip Maruti Suzuki with a production capability of 1.55 million units per annum.
The Company is a subsidiary of Suzuki Motor Corporation. Currently company is headed by
R.C. Bhargava and company is engaged in passenger vehicle segment. The Company passenger
car include Alto, Alto-KlO, A-star, WagonR, Swift, Ritz and Estilo, off-roader Gypsy, SUV
Grand Vitara, sedans SX4, Swift DZire and Kizashi. During the fiscal year ended March 31,
2012 (fiscal 2012), the Company sold over 1.13 million vehicles, including 127,379 units of
exports (www.marutisuzuki.com).
Company Profile of Hero Honda Ltd
Hero MotoCorp Limited is the World's single largest two-wheeler motorcycle company. The
company is engaged in the manufacture of two wheelers motorcycles and its parts. The company
has three manufacturing facilities namely Dharuhera, Gurgaon at Haryana and Haridwar at
Uttarakhand. Company head office is located in New Delhi, India. The company offers a range
of bikes starting from CD Dawn, CD Deluxe, Splendor Plus, Splendor NXG, Passion and
Passion Pro.Hero MotoCorp Limited was incorporated in the year 1984 with the name Hero
Honda Motors Ltd. The company was established as a joint venture company between Honda
Motor Company of Japan and Hero group of India. In the year 1983, they signed a joint
collaboration agreement and formed the company. The joint venture between India's Hero Group
and Honda Motor Company, Japan has not only created the world's single largest two wheeler
company but also one of the most successful joint ventures worldwide. In the year 1985, the
company commenced their commercial production at Dharuhera plant in Haryana and introduced
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their first motorcycle, CD 100 in the market. Also, during the year, the Indian Promoter Group
and Honda Motor Co Ltd, Japan (Honda) entered into a Share Transfer Agreement (the
Agreement) on January 22, 2011. As per the terms of the Agreement, Honda had agreed to
transfer its entire shareholding of 26% in the Company to the Indian Promoter Group, bringing
an end to the joint venture between the two promoter groups of the company. The acquisition
was completed on March 22, 2011 and the shares held by Honda were transferred to the Indian
joint venture partner. In addition to the Agreement, the Indian Promoter Group and Honda also
entered into a License Agreement on January 1, 2011. As per this agreement, Honda has given to
the company, the right and license to manufacture, assemble, sell and distribute certain products
and their service parts under their Intellectual Property Rights. In July 2011, the company
changed their name from Hero Honda Motors Ltd to Hero MotoCorp Ltd
(www.heromotocomp.com).
Company Profile of Bajaj Auto Ltd.
Bajaj Auto Ltd is one of the leading two & three wheeler manufacturers in India. The company is
well known for their R&D, product development, process engineering and low-cost
manufacturing skills. The company is the largest exporter of two and three-wheelers in the
country with exports forming 18% of its total sales. The company has two subsidiaries, namely
Bajaj Auto International Holdings BV and PT Bajaj Indonesia. The company was incorporated
on April 30, 2007 as a wholly owned subsidiary of erstwhile Bajaj Auto Ltd (the holding
company) with the name Bajaj Investment & Holding Ltd. The company received the certificate
of commencement of business on May 7, 2007. The holding company operated in the segments,
such as automotive, insurance and investment, and others. Considering the growth opportunities
in the auto, wind-energy, insurance and finance sectors, the holding company de-merged their
activities into three separate entities, each of which can focus on their core businesses and
strengthen competencies. The auto business of the holding company along with all assets and
liabilities pertaining thereto including investments in PT Bajaj Auto Indonesia and in a few
vendor companies transferred to Bajaj Investment & Holding Ltd.As the part of the scheme,
Bajaj Holdings and Investment Ltd were renamed as Bajaj Auto Ltd. In April 9, 2007, the
company inaugurated their green field plant at Pantnagar in Uttarakhand. In the first year of
operations, the plant produced over 275,000 vehicles. The company's vehicle assembly plant at
Akurdi was shut down from September 3, 2007 due to higher cost of production
(wwwbaj aj auto.com).
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Company Profile of TVS Motors Ltd.
TVS Motor Company Ltd, the flagship company of TVS Group is the third largest two-wheeler
manufacturer in India. The company manufactures a wide range of two-wheelers from mopeds to
racing inspired motorcycles. The company is having their manufacturing plants at Hosur in
Tamilnadu, Mysore in Karnataka and Solan in Himachal Pradesh. They are also having one unit
located at Indonesia. Their subsidiaries include Sundaram Auto Components Ltd, TVS Motor
Company (Europe) BV, TVS Motor (Singapore) Pte Ltd, PT TVS Motor Company, Indonesia,
TVS Energy Ltd and TVS Housing Ltd. TVS Motor Company Ltd is a part of Sundaram Clayton
group in TVS group of companies. In the year 1979, Sundaram-Clayton Ltd started Moped
Division at Hosur to manufacture TVS 50 mopeds. In the year 1982, the company entered into a
technical know-how and assistance agreement with Suzuki Motor Co Ltd of Japan and in the
year 1985, they incorporated a new company Lakshmi Auto Components Pvt Ltd for the
manufacture of critical engines and transmission parts. In the year 1986, the company acquired
the assets of the moped division from Sundaram Clayton Ltd. Also, the name of the company
was changed from Indo Suzuki Motorcycles Ltd to TVS Suzuki Ltd The TVS group and Suzuki
Motor Corporation parted ways from their 15-year-old joint venture on September 27, 2001. The
shares held by the Suzuki Motor Corporation were acquired by Anusha Investments Ltd, a
wholly owned subsidiary of Sundaram-Clayton Ltd for Rs 9 crore. Thus, the company became a
subsidiary of Sundaram-Clayton Ltd with effect from November 15, 2001. Since, Suzuki Motor
Corporation ceased to be a shareholder of the company, the company cannot use the word
'Suzuki' as the part of their name and hence the name of the company was changed to TVS
Motor Company Ltd (www.tvsmotor.in)
References
1) Amar K. J. R. Nayak, Kalyan Chakravarti, Prabina Rajib, (2005), “Globalization process
in India : A Historical perspective since independence, 1947”, South Asian Journal of
Management ,vol. 12, pp. 1-16
2) L.G. Burange , Shruti Yamini ,(2008), “Competitiveness of firms in Indian automobile
industry ”, Department of Economics, University of Mumbai, Working paper No.
23/(8)/l/2008, pp.7
3) Mahipat Ranawat, Rajnish Tiwari (2009) “Influence of Government policies on industry
evelopment: The case of India’s automotive industry” working paper No 57 Technology
82.
and Innovation Management (University of Hamburg) retrieved from http://papers.ssm.
com/ soL3/ papers.cfm?abstract_id=l 583449,pp.5
4) “ Overview of the Indian Auto ” Panorama January 2011, Issue Seven, IIM Newletter,
pp.1-6
5) Peter Wad, (2010), “Impact of the global economic and financial crisis over the
automotive industry in developing countries ”, Working Paper no 16/2009, United
Nations Industrial Development Organization ,pp.6
6) Vishwanath Krishnan “ Indian Automotive Industry: Opportunities and challenges posed
by recent developments” for the University of Texas retrieved from
http://dspace.mit.edu/bitstream/handle/1721.1/1619/Krishnan.pdf. pp.2
Research Reports:-
1) “Automotive market and opportunities” (2010),Indian brand equity foundation ,pp. 2 -3
2) “Automotive industry” , 2009, Indian brand equity foundation ,pp. 5
3) “A new era - Accelerating toward 2020 - An automotive industry transformed ” 2009
Deloitte, pp.03
4) Centre for Monitoring Indian Economy(CMIE) - Industry market size and share ,
2007,pp.349-357
5) Centre for Monitoring Indian Economy(CMIE) - Industry market size and share ,
201 l,pp. 354-363
6) International trade statistics 2011, World Trade Organization , page no. 119
7) International trade statistics 2001, World Trade Organization , page no. 156
8) Sharma Ramchandran, (2012) “Growth of auto industry ”, Business and Management
Chronicle, pp.no.8-11
Websites
1) “Society of Indian Automobile Manufacturer” Official Website -
http://www.siamindia.com/
default.aspx
2) www.tatamotors.com
3) www.ashokleyland.com
4) www.mahindra.com
5) www.eicher.in
6) www.smlisuzu.com
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7) www.marutisuzuki.com
8) www.heromotocorp.com
9) www.bajajauto.com
10) www.tvsmotor.in
