Automobile Sector of India Presented by : DoaNaqvi Automobile Sector of India Presented by DoaNaqvi
INTRODUCTION • The word AUTOMOBILE is often defined as a self-propelled vehicle that may have two, three or four wheels and an internal-combustion engine, used for land transport. Therefore all vehicles like scooters, motorbikes, light and heavy motor vehicles (LMV’s and HMV’s) form a part of the automobile industry. • India represents one of the world’s largest automobile industries. The cumulative foreign direct investment (FDI) inflows into the Indian automobile industry during April 2000 to October 2013 was recorded at US$ 9,079 million, amounting to 4 per cent of the total FDI inflows (in terms of US$), as per data published by Department of Industrial Policy and Promotion (DIPP), Ministry of Commerce, Government of India.
INTRODUCTION • India is quietly becoming a production hub of high-end vehicles meant for export to China. • With the rapidly growing middle class, market oriented stable economy, availability of trained manpower at competitive cost, fairly well developed credit and financing facilities and local availability of almost all the raw materials at a competitive cost, India has emerged as one of the favorite investment destinations for automobile manufacturers. • Automobile industry of India can be broadly classified under passenger vehicles, commercial vehicles, three wheelers and two wheelers, with two wheelers having a maximum market share of more than 77%.
EVOLUTION OF THE INDIAN AUTOMOBILE INDUSTRY • While the genesis of the Indian Automotive Industry can be traced to the 1940s, distinct growth started in 1970s. • Between 1970 and 1984, cars were considered a luxury product; manufacturing was licensed, expansion was restricted; there were quantitative restrictions (QR) on imports. The market was dominated by six manufacturers- Telco (now Tata motors), Mahindra & Mahindra, Hindustan Motors, Premier Automobiles and Bajaj Auto. • The decade of 1985 to 1995 saw the entry of MarutiUdyog in the passenger car segment and Japanese manufacturers in the two wheelers and the light commercial vehicle segments.
EVOLUTION OF THE INDIAN AUTOMOBILE INDUSTRY • Economic liberalization, started in 1991, led to the delicensing of the passenger car in 1993. QR on imports continued. This decade witnessed the emergence of Hero Honda as a major player in the two wheeler segment and MarutiUdyog as the market leader in the passenger car segment. • Between 1995 and 2000 several international players entered the market. Advanced technology was introduced to meet competitive pressures, and environmental and safety imperatives. • Automobile companies started investing in service network to support maintenance of on-road vehicles. Auto financing started emerging as an important driver for demand.
EVOLUTION OF THE INDIAN AUTOMOBILE INDUSTRY • Starting in 2000, several landmark policy changes like removal of quantitative restrictions (QR) and 100% FDI through automatic route were introduced. • Indigenously developed vehicles were introduced in the domestic market and exports were given a thrust. • Auto companies started collaboration with financial firms to provide auto financing and insurance services to customers. • Manufacturers also introduced systems to improve capacity utilization and adopted quality and environmental management systems.
AUTOMOBILES 2 WHEELER 3 WHEELER PASSENGER VEHICLE COMMERCIAL VEHICLE L.C.V. M.C.V. H.C.V. MOTORCYCLE SCOOTERS SCOOTERETTES MOPEDS
As per Indian Motor Vehicles Act, 1988:- • Vehicles with a gross vehicle weight + maximum weight permitted to be loaded on vehicle (GVW) of more than 16 tonnes are classified as HCVs ( TATA Prima) • Vehicles with a GVW of 7.5-16 tonnes are classified as MCVs (TATA 407) vehicles with a GVW of less than 7.5 tonnes are classified as LCVs (TATA Ace & Mahindra Maximo)
INDUSTRY STATISTICS Market Segments Two wheelers segment accounted for about three quarters of the total automotive production in the country during FY13.
INDUSTRY STATISTICS Revenues Excluding three wheelers, trucks accounted for the largest share of revenues (47.8 per cent in 2011).
Major Developments & Investments • Tata Motors Ltd plans to invest about £30 million (US$ 49.17 million) in the National Automotive Innovation Campus (NAIC) for research and development (R&D). The investment would be made through its subsidiary Tata Motors European Technical Centre (TMETC) at the University of Warwick campus, UK. • Volvo India Pvt Ltd plans to set up truck and bus manufacturing facility in Malur, Karnataka, with an investment of Rs 974 crore (US$ 158.32 million). The facility is expected to give employment to about 2,125 people. • Manufacturing companies in Japan continue to view India as the top destination for investments—over China, Thailand, Vietnam, Brazil and Indonesia—in the next three years, according to Mr Masanori Nakano, Consul General of Japan in Chennai.
Major Developments & Investments • Tata Motors-owned Jaguar Land Rover (JLR) has entered into an agreement with the state of Rio de Janeiro to build a manufacturing plant in Brazil with an investment of Rs 4,626 crore (US$ 751.95 million). • JBM Auto has formed a joint venture (JV) with Italian bus maker Breda Menarini bus to manufacture luxury buses in India. The Indo–Italian venture plans to set up a plant at Kosi, near Faridabad in Haryana, and produce 2,000 buses every year initially, at an investment of Rs 500 crore (US$ 81.27 million). • Mahindra & Mahindra (M&M) plans to develop the world's first hybrid technology that can be deployed in vehicles with manual transmission and enhance fuel efficiency by almost 20 per cent.
Major Developments & Investments • Acquisition of Jaguar Land Rover has helped TATA Motors to register profit worldwide during the sluggish times. • Acquisition of SangyongMotor has helped Mahindra to improve/refine its own products and give the company a wider market to export its indigenous products. • By acquiring majority stake in Reva, Mahindra has been able to add an Electric Vehicle to its product line.
Major Developments & Investments • Amtek Auto has signed an agreement to buy Germany-based Kuepper Group of companies for about €200 million (US$ 272.73 million) in its second big European acquisition in 2013. • Honda Cars India will use the Ennore Port to export cars to South Africa. The infrastructure for car exports at Ennore Port is attractive and cost effective.
Government Initiatives • The Government of India plans to introduce fuel-efficiency ratings for automobiles to encourage sale of cars that consume less petrol or diesel, as per MrVeerappaMoily, Union Minister for Petroleum and Natural Gas, Government of India. The Union Budget 2013–14 added some incentives to the industry. The analysis by Deloitte on the Union Budget highlighted the following points: • The period of concession available for specified part of electric and hybrid vehicles till April 2013 has been extended up to March 31, 2015.
Government Initiatives • The basic customs duty (BCD) on imported luxury goods such as high-end motor vehicles, motor cycles, yachts and similar vessels was increased. The duty was raised from 75 per cent to 100 per cent on cars/motor vehicles (irrespective of engine capacity) with CIF value more than US$ 40,000; from 60 per cent to 75 per cent on motorcycles with engine capacity of 800 cc or more and on yachts and similar vessels from 10 per cent to 25 per cent. • In addition, an increase in excise duty from 27 to 30 per cent has been allowed for SUVs with engine capacity exceeding 1,500 cc, while excise duty was decreased from 80 to 72 per cent, in case of SUVs registered solely to be used for taxi purposes.
Government Initiatives • An exemption from BCD will be provided to lithium ion automotive battery for manufacture of lithium ion battery packs for supply to manufacturers of hybrid and electric vehicles. • The excise duty on chassis of diesel motor vehicles for transport of goods reduced from 14 per cent to 13 per cent. • The Government of India allows 100 per cent FDI in the automotive industry through automatic route.
Reasons for Growth Reasons that have resulted in a stupendous growth of Indian automobile industry- • Economic liberalization. • Increase in per capita income. • Various tax relief policies. • Launch of new models. • Easy accessibility of finance. • Exciting discount offers made by dealers. • Low-cost, high-skill manpower. • An abundance of engineering talent – the second largest in the world. • Well-developed, globally competitive Auto Ancillary Industry. • Among the lowest-cost producers of steel in the world.
SWOT ANALYSIS STRENGTHS • Domestic Market is large • Government provides monetary assistance for manufacturing • units • Reduced Labor cost WEAKNESSES • Infrastructural setbacks • Low productivity • Too many taxes levied by government increase the cost of production. • Low investments in Research & Development
SWOT ANALYSIS OPPORTUNITIES • Growing population of the country • Development of road infrastructure • Rising living standards • Increase in income levels • Increased demand of better technology • Rising rural demand • Reduction in Excise duty THREATS • Lack of technology in the Indian companies • Increase in import duties • Environmental concerns • Competition from foreign players
Innovation to maximize sales • Manufacturers bringing in frequent new products to keep the market abuzz. • Existing products refreshed with facelifts. • Bringing out “limited edition” products. • Unique finance schemes (eg. Zero percent interest, EMI waiver for an year , free fuel for an year etc.)
THE ROAD AHEAD • The vision of Automotive Mission Plan (AMP) 2006–2016 expects 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 gross domestic product (GDP) and providing additional employment to 25 million people by 2016.” • With special focus on exports of small cars, multi-utility vehicles (MUVs), two and three wheelers and auto components; the automotive sector’s contribution to the GDP is expected to double reaching a turnover worth US$ 145 billion in 2016, according to the AMP 2006–2016.
CONCLUSION • The automobile industry of India continues to be plagued by high inflation, rising fuel price and the unfavorable interest rate regime that is dampening customer interest. • Despite several cuts in excise duty by Government of India, the industry has yet to achieve its highest potential or growth • Rapid improvement in infrastructure including road, port, power and world class facilities for testing, certification, coupled with availability of trained manpower and enabling government policies to promote fair competition make Indian Automobile Industry more competitive in the world besides making the country a favourable destination for investment by global majors in auto industry.
REFERENCES • Media Reports • Press Releases • Department of Industrial Policy and Promotion (DIPP) • Automotive Component Manufacturers Association of India (ACMA) • Society of Indian Automobile Manufacturers (SIAM) • Union Budget 2013-14 Analysis by Deloitte