automobile_car_industry_overview

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1

A

Business plan

On

INDIAN AUTOMOBILE INDUSTRY (CAR SEGMENT)

Submitted To:

Prof. Sapovadia,

Prof. Kishor Barad & Prof. Ritu Sharma

PGDM Trimester II (Batch 2010-12)

Continuous Evaluation in Business Plan

Submitted By:

Mahesh Savaliya (1011012026)

SHANTI BUSINESS SCHOOL,

AHMEDABAD



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TABLE OF CONTENTS

No. Particulars Page No.

1 Overview of the industry 3

2 Major Indian Car Manufacturers 3

3 Multinational companies in India 4

4 Investment Scenario 4

5 Growth Trend 56 Gross turnover of the industry 5

7 Trend of production 6

8 Porter's Five Forces Analysis 6



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An Overview of the Indian Automobile Industry

In 2009, India became the fourth largest exporter of automobiles in Asia after Japan,

South Korea and Thailand. The Indian car market was the world's ninth largest in 2008 with

an annual production of over 2.3 million units. The amount of passenger cars sales per month

exceeded 100,000 units in February 2009.

After the liberalization of the Indian economy in 1991, the car market in India has

witnessed a tremendous growth due to competition and lesser restrictions. Tata Motors,Maruti Suzuki and Mahindra and Mahindra are some of the India car companies which have

expanded their domestic and international business.

History of the Indian Car Market in the 1940s, the India car industry was in an

embryonic stage. After independence, the Government of India and the private sector started

a manufacturing industry in 1953 for automotive components for supplying the automobile

industry. A number of Japanese manufacturers entered into joint-ventures in the 1980s for

manufacturing light commercial-vehicles and motorcycles. It was during this time that Suzuki

was chosen by the Indian government for entering into a joint venture for manufacturing of

small cars. In 1991, the economy was liberalized and the License Raj was gradually removed.

This allowed various Indian and foreign car companies to start operations here. The growth incar manufacturing and automotive component has increased steadily to meet domestic and

international demands.

India is now one of the world's largest manufacturers of small cars. New York

Times has stated that due to the India's strong engineering base and skills in manufacturing of

fuel-efficient, low-cost cars, numerous automobile companies like Nissan, Hyundai Motors,

Volkswagen, Toyota, and Suzuki have expanded their manufacturing facilities. Around

240,000 cars were exported from India by Hyundai Motors in 2008. By 2011, Nissan Motors

will export 250,000 vehicles produced in its Indian plant. By 2011, General Motors also willexport around 50,000 cars produced in its Indian plant.

Major Indian car manufacturers

y Ashok Leyland

y Maruti Suzuki

y Tata Motors

y Hindustan Motors

y Mahindra

y

Premiery Chinkara Motors

y Force Motors

y San Motors

y Hero Electric

y REVA

y Ajanta Group

y Tara International



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Cars manufactured by multinational companies in India

y BMW - 3 Series, 5 Series

y Mercedes-Benz - C-Class, E-Class

y Audi - A4, A6

y Skoda - Fabia, Octavia, Laura

y Volkswagen - Jetta, Passat

y Mitsubishi - Lancer, Lancer Cedia

y Ford - Ikon, Fiesta, Fusion, Endeavour

y Hyundai - Santro, i10, i20, Getz, Verna, Accent, Sonata

y Chevrolet - Spark, Aveo U-VA, Aveo, Optra, Cruze, Tavera

y Fiat - Palio, Grande Punto, Linea

y Honda - Jazz, City, Civic, Accord

y Renault - Logan

y Toyota - Corolla, Innova, Fortuner

Car Companies

Audi BMW Chevrolet Daewoo Motors

Fiat Force Motors Ford General Motors

Hindustan Motors Honda Hyundai Lamborghini

Maruti Mahindra Mercedes Mitsubishi

Nissan Motor Porsche Reva Electric Rolls-Royce Motor

San Motors Skoda Tata Toyota

Volvo Volkswagen

INVESTMENT SCENARIO:

It is expected that by the end of the year 2010 Indian automobile sector will be

investing a huge amount about Rs. 30000 crores. For example, Maruti Udhyog has plans of

investing Rs. 6500 crores; the TATA Motors is coming up with more investment of Rs. 2000crores in its compact car project. Not only the Indian companies but also foreign players like

Hyundai are coming up with the investment of more than Rs. 3800 crores in india.



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GROWTH TREND:

At present the industry is enjoying a growth rate of 14-17% p.a., with domestic sales

growth at 12.8%. The growth rate is predicted to double by 2015. As it is seen, the total

sales of passenger vehicles cars, utility vehicles and multi utility vehicles in the year

2005 reached the mark of 1.06 million. The current growth rate indicates that by 2012India will overtake Germany and Japan in sales volume.

GROSS TURNOVER OF THE INDUSTRY:

GROSS TURNOVER OF THE AUTOMOBILE INDUSTRY IN INDIA

Year ( In USD Million)

2004-05 20,896

2005-06 27,011

2006-07 34,285

2007-08 36,612

2008-09 38,238

0

10,000

20,000

30,000

40,000

50,000

2004-05 2005-06 2006-07 2007-08 2008-09

GROSS TURNOVER OF THE

AUTOMOBILE INDUSTRY IN INDIA

GROSS

TURNOVER OF

THE

AUTOMOBILE

EXPORTS TRENDS (No.of Vehicles)

Category 2004-05 2005-06 2006-07 2007-08

Passenger Vehicles 166,402 175,572 198,452 218,418

Commercial

Vehicles

29,940 40,600 49,537 58,999

Two Wheelers 366,407 513,169 619,644 819,847

Total 562,749 729,341 867,633 1,097,264



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DOMESTIC MARKET SHARE FOR 2009-10(In %)

Passenger Vehicles 15.86

Commercial Vehicles 4.32

Three Wheelers 3.58

Two Wheelers 76.23

TREND OF PRODUCTION:

Automobile Production Trends No. of

vehicles

Category 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10

Passenger

Vehicles

9,89,560 1209876 1309300 1545223 1777583 1838593 2351240

CommercialVehicles

275040 353703 391083 519982 549006 416870 566608

Three

Wheelers

356223 374445 434423 556126 500660 497020 619093

Two

Wheelers

5622741 6529829 7608697 8466666 8026681 8419792 10512889

Grand Total 7243564 8467853 9743503 11087997 10853930 11172272 14049830



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Porter's Five Forces Analysis

Porter's Five Forces, also known as P5F, is a way of examining the attractiveness of

an industry. It does so by looking at five forces which act on that industry. These forces are

determinants of that industry's profitability.

The five forces are:

1. The threat of new entrants In the auto manufacturing industry, this is generally a very low threat. Factors to

examine for this threat include all barriers to entry such as upfront capital requirements (it

costs a lot to set up a car manufacturing facility!), brand equity (a new firm may have none),

legislation and government policy, ability to distribute the product.

2. The bargaining power of buyers/customers In 2009 especially dealers were giving great deals to buyers to get the industry

moving. While quantity a buyer purchases is usually a good factor in determining this force,

even in the automotive industry when buyers only usually purchase one car at a time, theystill wield considerable power.

3. The threat of substitute products If buyers can look to the competition or other comparable products, and switch easily

(they have low switching costs) there may be a high threat of this force.

Product differentiation is important too. In the car industry, typically there are many

cars that are similar - just look at any mid-range Toyota and you can easily find a very similar

Nissan, Honda, or Mazda. However, if you are looking at amphibious cars, there may be little

threat of substitute products (this is an extreme example!).

4. The amount of bargaining power suppliers have In the car industry this refers to all the suppliers of parts, tires, components,

electronics, and even the assembly line workers. We know in the the auto unions are

tremendously powerful. But we also know that some suppliers are small firms who rely on

the carmakers, and may only have one carmaker as a client. So this force can be tricky to

evaluate.

5. The intensity of the competitive rivalry

We know that in most countries all carmakers are engaged in fierce competition.Tit-for-tat price slashes, ad campaigns, and product developments keep them on the edge of

innovation and profitability. Margins are low and pressure between rivals is high.

All major car-producing nations experience this intense rivalry. This obviouslyincludes foreign manufacturers like the US, Japan, Italy, France, the UK, Germany, China, India,

and more.



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