Automobile IndustryIndia is one of the largest Automobile Industry in the world.
The automobile industry accounts for about 7.1 per cent of the Gross Domestic Product (GDP). The Two Wheelers segment has 80 per cent market share is the leader of Automobile market owing to a middle class and young population. The growing interest of the companies in exploring the rural markets further led to the growth of the Automobile sector.
The overall Passenger Vehicle segment has about 14 per cent of market share.India is an auto exporter and has strong export expected growth for the near future. In 2017 exports of PV and Commercial Vehicles (CV) registered a growth of 16.20 per cent and 4.99 per cent respectively, over 2016.Several initiatives by the Government of India in the Indian market are expected to make India a leader in the 2Wheeler and Four Wheeler market in the world in future.Market Size and CharacteristicsProduction of passenger vehicles, commercial vehicles, three wheelers and two wheelers grew at 5.
48 % in 2017 to 25,316,044 vehicles from 24,016,599 vehicles in 2016.The sales of passenger vehicles, commercial vehicles and two wheelers grew by 9.28 per cent, 4.20 per cent and 7 per cent during the period April-March 2017. India’s electric vehicle sales increased 38 per cent to 22,000 units during 2015-16 and expected to rise further on the back of cheaper energy storage costs and the Government’s vision to see about six million electric and hybrid vehicles in India by 2020.Market TrendsIn order to keep up with the growing market demand, several auto makers have invested heavily in various segments during the last few months.
The industry has attracted Foreign Direct Investment worth about US$ 17.40 billion during April 2000 to June 2017, this is according to data released by Department of Industrial Policy and Promotion (DIPP).Some major investments and developments in the automobile sector in India are: JSW Energy, has signed a Memorandum of Understanding with the Gujarat government to set an electric vehicle-manufacturing company costing around Rs 4,000 crore (US$ 613 million) which has the capacity to produce about 2,00,000 electric vehicles every year. Tata Motors would invest Rs 4,000 crore (US$ 612 million) in 2017 and a major portion will go to passenger vehicles Rs 2,500 crores (US$ 375 million) and the remaining Rs 1,500 crore ($225 million) will be invested in the business over the next about next five years. Electric car maker Tesla Inc. will introduce its products in India sometime in the summer of 2018.
Kia Motors is expected that it would sign a memorandum of understanding with the Government of Andhra Pradesh (AP) to set up a factory in Anantapur district and the company will invest around US$ 2 billion on the plant and it will be manufacturing about 3 lakhs car per annum. Several automobile manufacturers, from global majors Audi to Indian manufacturers such as Maruti Suzuki and Mahindra & Mahindra, are exploring the possibilities to introduce driverless cars for India market segment. BMW would manufacture a local version of below-500 CC motorcycle, the G310R, in TVS Motor’s plant in Tamil Nadu, for local roads. Hero MotoCorp Ltd seeks to enhance its participation in the Indian electric vehicle market by pursuing its internal EV program by investing Rs 205 crore (US$ 30.75 million) to acquire around 26-30 per cent stake in Bengaluru-based technology start-up. Ford Motor Co. plans to invest about Rs 1,300 crore (US$ 195 million) to help build a global technology and business centre, which will be designed as a hub for product development, mobility solutions and business services for India local and other markets worldwide. Government InitiativesThe Government encourages foreign investment in automobile sector and allows 100 per cent FDI under the automatic route in any form which has led to immense growth the past year.
Some of the initiatives taken by the Government are:• Plan to introduce biofuel vehicles for road and water transportation. Cut fossil fuel imports and look for alternative which have low cost like methanol.•India has extended support to the industry by increasing custom duty on commercial vehicles from 10 per cent to 40 per cent and reducing duty on chassis for ambulance manufacturing to 12.5 per cent.• The Government plans to introduce a Green Urban Transport Scheme with a central assistance of around Rs 25,000 crore, aimed at boosting the growth of urban transport on low carbon for reduction in pollution, and providing a framework for funding urban mobility projects at National and State level with minimum recourse to budgetary support by using innovative financing methods of automobile related projects.•automobiles manufacturing will the positioned as important under ‘Make in India’ initiative, as it passenger vehicles market is expected to triple to 9.4 million units, as highlighted in the Auto Mission Plan 2016-28.•The government has a Scheme for Adoption and Manufacturing of Electric Vehicles in India, Which comes under the National Mobility Mission 2020 to encourage the progressive induction of reliable and efficient electric vehicles in the country for constant growth.
Road AheadThe automobile industry is supported by highly skilled labour and innovation research and development market which has led to further growth in the employment market leading to job creation for both skill and unskilled workers.The Indian automotive aftermarket is estimated to grow at around 12-15 per cent to reach US$ 17 billion by 2021 from around US$ 8 billion in 2017. It has the potential to generate up to US$ 300 billion annual revenue by 2030, create about 65 million jobs and contribute over 12 per cent to India’s GDP.The eminent components in which the automobile industry is trying to work upon:CAPACITY ADDITION:1. Considering low cost of production, prominent auto companies are increasing their production capacity in order to capture a dominant share in Indian automobile industry.2. Most of the automobile companies are eyeing India as an outsourcing hub.3.
With the total investment of around US$ 163.7 million, Honda Motorcycle & Scooter India expanded its production of Activa in three variants at Ahmedabad plant.4. Volvo has started local assembly of its cars in India from October 2017.5. A new engine assembly line is being set up by the Volkswagen group in Aurangabad CATERING INDIAN NEEDS:1. Most of the firms including Ford & Volkswagen have adapted themselves to cater to the large Indian middle class by dropping their traditional structure and designs.
2. This allows them to compete directly with domestic firms making the sector highly competitive.LAUNCH OF NEW MODELS:1. Honda is planning to launch three new car models in India by 2020 and will localise the engines to keep the prices low.2. Fiat Chrysler Automobiles India, launched its new Jeep brand Compass in February 2017, which is going to be produced indigenously in Ranjangaon,, Maharashtra.
India will probably be the 4th manufacturing hub, globally, for the brand in next five years.3. In March 2017, Tata Motors’ new sports car was unveiled, under its new sub brand – TAMO, at the Geneva International Motor Show. The show will displayed niche segment models with advanced technologies.
4. In May 2017, Pune based Kinetic Green Energy and Power Solutions Ltd. has launched its 1st electric 3- wheeler “Kinetic Safar”, This 3-wheeler is equipped with an advanced lithium-ion battery. GROWTH DRIVERS1. Rising income and a large young population.2.
Greater availability of credit and financing options.3. Demand for commercial vehicles increasing due to high level of activity in infrastructure sector.4. Clear vision of Indian government to make India an auto manufacturing hub.5. Initiatives like ‘Make in India’, ‘Automotive Mission Plan 2026’, and NEMMP 2020 to give a huge boost to the sector.
6. Improving road infrastructure.7. Established auto ancillary industry giving the required support to boost growth. 8.
5 per cent of total FDI inflows to India went into the automobiles sector. Market StructureAutomobile Industry mainly deals with farm equipment, utility vehicles and commercial vehicles it holds different competitor segments for different vehicle segments.For example – For 2-Wheeler market Honda and Suzuki is the main competitor but when it comes to trucks and busses Daimler and Eicher motors stand as the chief competitors.Competitors of automobile industry across Geography Chief competitors of Automobile industries:- Hindustan motors Toyota Tata Motors Honda Hyundai Maruti-Suzuki Ashok Leyland Comparison with Market Leader: Major competitors of across various Segments:- Market share of each participant:The market share of Automobile Industry when the commercial vehicles category is concerned has not changed much when compared to 2016 – Market share of 2 wheelers is: Characteristics of Competitors and behavioral trait TATA MOTORS1. It is a market leader in the commercial vehicle segment in India with a 42 per cent market share in FY17 and also a key player in the passenger vehicle segment.2. The company has been at the forefront of technology and innovation and launched the cheapest car in the world.3.
Tata Motors posted consolidated revenues of US$ 9.10 billion in Q1 FY18 and US$ 10.91 billion in Q2 FY18.
4. Tata Motors are always on top when their Ethics and the corporate governance is considered. Hence, they concentrate more on innovation and domination to acquire more and more market share.5.
Therefore, other Automobile industry compete on the grounds of innovation.Maruti-Suzuki 1. Maruti Suzuki is a majority owned subsidiary of Japanese conglomerate Suzuki.2. It is now the undisputed market leader in the passenger vehicles segment in India with a market share of 47 per cent in FY17.3. The company has made the most affordable cars for the Indian middle class for more than three decades.
4. New models are being launched each year to hold the position of the leader in its home market.5. The company mainly works on the pricing strategy hence it is the price competitor with other automobile company’s.