A report on

An Analysis of Automobile Industry of India as a Market

Structure

By

Muhammad Anowar

Lovely Professional University

EXECUTIVE SUMMARY

Automobile industry is a symbol of technical marvel by human kind. Being one of the fastest

growing sectors in the world its dynamic growth phases are explained by nature of

competition, product life cycle and consumer demand. Today, the global automobile industry

is concerned with consumer demands for styling, safety, and comfort; and with labor relations

and manufacturing efficiency. The industry is at the crossroads with global mergers and

relocation of production centers to emerging developing economies.

Asia has become the major consumer as well as supplier of automobiles. India is

concentrating on Middle East and south Asia beside traditional developed country

destinations. With the gradual opening up of the component sector, now the challenge is for

individual governments to support the development of domestic critical component and sub-

system suppliers through, interalia, improvement in the investment environment, stronger

patent regimes and incentives for R&D.

CHAPTER 1

INTRODUCTION

India is an emerging market for worldwide auto-giants. Due to low cost of labour many

multinational companies are investing in India. Its automotive industry has grown very

rapidly from the middle of 1990’s. India is the second most populated country in the World,

and the growth rate of Indian economy is very high, which indicates the presence of huge

demand in different industrial sectors. Automobile industry is not the exception in this regard.

Indian automobile sector has huge demands from its own country. This demand also attracts

the 19 giant automobile suppliers throughout the world to come and invest in the Indian

automotive industry. Due to the contribution of many different factors like sales incentives,

introduction of new models as well as variants coupled with easy availability of low cost

finance with comfortable repayment options, demand and sales of automobiles are rising

continuously. Government has also contributed in this growth by liberalizing the norms for

foreign investment and import of technology and that appears to have benefited the

automobile sector.

The production of total vehicles increased from 4.2 million in 1998- 99 to 7.3 million in

2003-04. It is likely that the production of such vehicles will exceed 10 million in the next

few years. The increase in the exports of automobile sector is also due to the adaptation of

international standards. After a temporary slump during 1998- 99 and 1999-00, such exports

registered robust growth rates in last few years. Investment is also a major factor for this

growth of Indian automotive industry, with investment exceeding US$ 11.11 billion, the

turnover of the automobile industry exceeded US$ 13.22 billion in 2002-03. The turnover has

increased to US$ 18.5 billion by the end of 2004-05. Recently in 2006, Maruti invested US$

0.67 billion and Honda invested US$ 0.2 billion on small cars. It is expected that by the year

2016, the turnover of the Indian automobile sector could grow to $145 billion. Today, this

sector has emerged as a sunrise sector.

However, the overcapacity problem is haunting many of the players as demand may not go

up significantly. Hence, many players are looking for an external market for Indian

automobiles. The prospect of component industry is quite positive. The leading local firms

have established over 200 technical cooperation agreements with foreign firms to be able to

reach international standards in cost and manufacturing.

1.1 Facts

Second largest two wheeler manufacturer in the world.

Largest tractor and three wheeler manufacturer in the world.

Fourth largest commercial vehicle market in the world.

Eleventh largest passenger car market in the world.

1.2 Market Size of Indian Automobile Industry

The sales of Passenger Vehicles grew 3.9 per cent in FY 2014-15 over the same

period last year. Within the Passenger Vehicles segment, Passenger Cars and Utility

Vehicles registered a growth of 4.99 per cent and 5.30 per cent respectively.

The sales of Two Wheelers, Three Wheelers, Passenger Carriers, and Goods Carriers

registered a growth of 8.09 per cent, 10.80 per cent, 12.16 per cent and 5.27 per cent

respectively in FY 2014-15, over the same period last year.

As per data provided by Society of Indian Automobile manufacturers, the Indian Auto

industry produced a total 7.8 million vehicles in April-July 2015 as against 7.7 million

in April-July 2014, thereby indicating a growth of 1.8 per cent year-on-year.

Domestic Sales of Passenger Vehicles increased 7.46 per cent in April-July 2015 yoy.

Among Passenger Vehicles, cars grew 10.7 per cent while Utility Vehicles and Vans

declined by 0.32 per cent and 1.43 per cent respectively. Overall Commercial

Vehicles segment registered 5.63 per cent growth.

Three Wheelers sales fell by 8.41 percent, while sales of Passenger Carriers and

Goods Carriers fell by 9.25 per cent and 4.5 per cent respectively during the 4-month

period.

Two Wheelers sales increased marginally by 0.52 per cent, with, scooters and mopeds

growing relatively strongly by 9.45 per cent and 2.53 per cent respectively, while

motorcycles sales (largest segment in Two Wheelers) fell by 3.02 per cent.

In April-July 2015, overall automobile exports increased 8.6 per cent year-on-year.

Passenger Vehicles, Commercial Vehicles, Three Wheelers and Two Wheelers

reported increase of 2.94 per cent, 24.37 per cent, 28.96 per cent and 6.33 per cent

respectively during the period.

1.3 Growth Potential

Can become world’s third largest automobile industry market in 2030.

By 2016, automotive sector can double its percentage contribution to GDP from

current level of 5% (US$ 50 billion) to 10% (US $180 billion).

1.4 Government of India Initiatives

The Government of India encourages foreign investment in the automobile sector and allows

100 per cent FDI under the automatic route.

Some of the major initiatives taken by the Government of India are:

In the Union budget of 2015-16, the Government has announced to provide credit of

Rs 850,000 crore (US$ 127.6 billion) to farmers, to boost the tractors segment.

The government plans to promote eco-friendly cars in the country i.e. CNG based

vehicle, hybrid vehicle, and electric vehicle and also made mandatory of 5 per cent

ethanol blending in petrol.

The government has formulated a Scheme for Faster Adoption and Manufacturing of

Electric and Hybrid Vehicles in India, under the National Electric Mobility Mission

2020 to encourage the progressive induction of reliable, affordable and efficient

electric and hybrid vehicles in the country.

The Automobile Mission Plan (AMP) 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.

CHAPTER 2

TOP AUTOMOBILE COMPANIES IN INDIA

2.1 Tata Motors

Tata Motors is the largest automobile company of Asia headquartered in Mumbai, India.

Annual Projected revenue for 2010-11 is US$ 27.629 billion. Tata Motors enjoys 31.2% of

market share in the multi-utility vehicles, which in luxury car segment, it has 6.4% market

share. Most of the Tata Motors' vehicles are sold predominantly in India and over 4 million

vehicles have been produced domestically within India.

2.2 Maruti Suzuki India Limited

Maruti Suzuki India is an undisputed leader in the Indian automobile industry. Maruti Suzuki

started its journey in February 1981 as Maurti Udyog Limited, the company created history in

the Indian automobile market with its hugely popular four-wheeler model Maruti 800The

company became Maruti Suzuki India Limited on September 17, 2007.

2.3 Hyundai Motor India Limited

Hyundai Motor India Limited, founded in 1998 and a subsidiary of Korean auto giant

Hyundai Motor Company, is the second largest car manufacturer in India. It is also country's

largest passenger car exporter.

2.4 Mahindra & Mahindra Limited

Mahindra &Mahindra Limited is another auto-giant in India. A part of the Mahindra Group,

M&M is the largest SUV maker in the country. In September 2009, M&M registered a

domestic sale of record 26,921 units, comparing to 22,729 units in September 2008 (with an

increase of 18.4%).

2.5 General Motors India Private Limited

General Motors India Private Limited is another top player in Indian automobile industry. A

wholly-owned subsidiary of the auto giant General Motors, GM India saw a Y-o-Y sales

growth of 49% in September 2009 with a sale of 7,654 units, comparing to 5,154 units in

September 2008.

2.6 Hero MotoCorp Limited

In 2010, When Honda decided to move out of the joint venture, Hero Group bought the

shares held by Honda. Subsequently, in August 2011 the company was renamed Hero

MotoCorp with a new corporate identity.

2.7 Bajaj Auto

Bajaj Auto is the second largest two-wheeler manufacturer in India. It is also the fourth

largest two and three-wheeler maker in the world. In September 2009, Bajaj Auto sold

249,795 units of two-wheelers, comparing to 218,494 units in September 2008 (with a growth

rate of 14.3%). During September 2009, it also registered a growth of 12.4% in the domestic

two-wheeler sales and 19.9% in two-wheeler export.

2.8 Honda Cars India Limited

Honda Siel Cars India Limited, a joint venture between the Japanese auto giant Honda Motor

Company Limited and the Indian company Siel Limited, started its operation in December

1995. In September 2009, HSCI sold 5,794 units, comparing to 3,104 units in September

2008 (with a growth rate of 86.7%).

2.9 Toyota Kirloskar Motor Private Limited

Toyota Kirloskar Motor Private Limited is another top Indian automobile company. A joint

venture between the Japanese auto giant Toyota Motor Corporation and Kirloskar Group,

TKM has a number of car models including Innova, Corolla, Fortuner, Camry and the Land

Cruiser Prado. It sold 7,657 units in December 2009.

2.10 Hindustan Motors

Hindustan Motors is another top automobile company in India. It was once country's largest

car manufacturer before Maruti Udyog overpowered it. Its popular model 'Ambassador' has

been extensively used as government limousine as well as taxi cab in India.

CHAPTER 3

MARKET SHARE OF AUTOMOBILE COMPANIES IN INDIA

Indian automotive industry is one of the largest auto markets in the world. It has grown up

very fast in last one decade due to rising family income, changing lifestyle, low vehicle

penetration, easy finance availability, rapid urbanization and poor public transport system.

But current year auto market growth is in flat to negative due to slowdown in economy

growth. However market is expected to recover from next financial year 2014-15.

3.1 Cars and Utility Vehicles

India has produced more than 3.2 Million Cars & Utility vehicles in FY 12-13. Maruti

Suzuki, Hyundai, Mahindra & Mahindra, Tata Motors and Toyota companies stands

in top 5 In terms of market share, followed by Nissan, Ford, Honda, General Motors,

Volkswagen, Renault, Skoda, Fiat, etc.

3.2 Three Wheelers:

India has produced around 8.4 lakh three wheeler vehicles in FY 12-13. Bajaj Auto, Piaggio,

TVS, Mahindra & Mahindra and Atul Auto companies stands in top 5 In terms of market

share, followed by Scooters India, Force.

3.3 Two Wheelers:

India has produced more than 11.9 Million Motorcycles in FY 12-13. Hero MotoCorp, Bajaj,

Honda, TVS and Yamaha companies stands in top 5 In terms of market share, followed by

Royal Enfield, Mahindra & Mahindra, Suzuki etc.

3.4 LCV, M&HCV:

India has produced more than 8.3 Lakh LCV, M&HCV vehicles in FY 12-13. Tata, Mahindra

& Mahindra, Ashok Leyland, Eicher and Force companies stands in top 5 In terms of market

share, followed by Swaraj Mazda, Piaggio, AMW etc.

CHAPTER 4

SALIENT FEATURES OF AUTOMOBILE INDUSTRY IN INDIA

4.1 Market/ Demand Structure: Highest growth is observed in two-wheelers section,

followed by CVs. Passenger cars and Three-wheelers also showing high growth. Current

internal demand is low but rising very fast. Domestic production facilities are also increasing.

4.2 Ownership Structure: Market is dominated by Japanese and Indian players. Of late

other foreign companies are coming in and developing production facilities.

4.3 Trade Structure: Making an attempt to specialize in full vehicles. Component sector

though growing is still inefficient. Export to Europe, USA and SAARC countries. Strong

patent regulation is encouraging manufacturers to increasing production facilities including

supply.

4.4: Product Specialization: India is specializing in motorcycles and small cars. Component

industry is being developed and system and sub system suppliers are increasingly into it due

to country’s capability in R&D.

4.5 Tax Structure: High Corporate Income tax and import duties on CBUs. Differentiate

excise and sales tax on cars and other vehicles.

Table 1: Comparison of Tax Structure

Corporate Income Tax

36.75%

Tax on vehicles

Excise tax: Cars 24% Others 16%

Sales tax: Cars 12 % Others 4%

Import tariffs on CBU

All vehicles at 60%

CHAPTER 5

STATASTICAL ANALYSIS OF INDIAN AUTOMOBILE INDUSTRY

5.1 Industry performance in 2014-15

5.1.1 Production

The industry produced a total of 23,366,246 vehicles including passenger vehicles,

commercial vehicles, three wheelers and two wheelers in April-March 2015 as against

21,500,165 in April-March 2014, registering a growth of 8.68 percent over the same period

last year.

5.1.2 Domestic Sales

The sales of Passenger Vehicles grew by 3.90 percent in April-March 2015 over the

same period last year. Within the Passenger Vehicles segment, Passenger Cars and

Utility Vehicles grew by 4.99 percent and 5.30 percent respectively, while Vans

declined by (-) 10.19 percent in April-March 2015 over the same period last year.

The overall Commercial Vehicles segment registered a de-growth of (-) 2.83 percent

in April-March 2015 as compared to same period last year.

Three Wheelers sales grew by 10.80 percent in April-March 2015 over the same

period last year. Passenger Carriers and Goods Carriers grew by 12.16 percent and

5.27 percent respectively in April-March 2015 over April-March 2014.

Two Wheelers sales registered growth of 8.09 percent in April-March 2015 over

April-March 2014. Within the Two Wheelers segment, Scooters, Motorcycles and

Mopeds grew by 25.06 percent, 2.50 percent and 4.51 percent respectively in April-

March 2015 over April-March 2014.

5.1.3 Exports

In April-March 2015, overall automobile exports grew by 14.89 percent over the same

period last year.

Passenger Vehicles, Commercial Vehicles, Three Wheelers and Two Wheelers grew

by 4.42 percent, 11.33 percent, 15.44 percent and 17.93 percent respectively during

April-March 2015 over the same period last year.

5.2 Gross Turnover of the Automobile Manufacturers in India (In USD Million)

Table 2: Gross Turnover of the Automobile Manufacturers in India

2007-2008

2008-2009

2009-2010

2010-2011

2011-2012

2012-2013

36612

33250

43296

58583

66264

67607

5.3 Installed Capacity (In Million)

Table 3: Installed capacity

2011-2012

2012-2013

Four wheelers 5.81

Four wheelers 6.59

Two & Three wheelers 18.95

Two & Three wheelers 20.74

Engines 1.00

Engines 1.10

5.4 Industry Composition/Market Share

Table 4: Domestic market share (2014-2015)

Passenger Vehicles

13%

Commercial Vehicles

3%

Three Wheelers

3%

Two Wheelers

81%

5.5 Production Trends

Table 5: Automobile production trends in India

Category

2013-2014

2014-2015

Passenger Vehicles

30,87,973

32,20,172

Commercial Vehicles

6,99,035

6,97,083

Three Wheelers

8,30,108

9,49,021

Two Wheelers

1,68,83,049

1,84,99,970

Grand Total

2,15,00,165

2,33,66,246

5.6 Domestic Sales Trends

Table 6: Automobile domestic sales trends

Category

2013-2014

2014-2015

Passenger Vehicles

25,03,509

26,01,111

Commercial Vehicles

6,32,851

6,14,961

Three Wheelers

4,80,085

5,31,927

Two Wheelers

1,48,06,778

1,60,04,581

Grand Total

1,84,23,223

1,97,52,580

CHAPTER 6

PRACTICAL APPLICATION AND RELATING CONCEPTS WITH REAL WORLD

AND CONCLUSION

6.1 Indian Automobile Industry SWOT Analysis

6.1.1 Strengths

Domestic Market is large

Government provides monetary assistance for manufacturing units

Reduced Labor cost

6.1.2 Weaknesses

Infrastructural setbacks

Low productivity

Too many taxes levied by government increase the cost of production

Low investments in Research and Development

6.1.3 Opportunities

Reduction in Excise duty

Rural demand is rising

Income level is at a constant increase

6.1.4 Threats

Increasing rates of interest

Too much competition

Rising cost of raw materials

6.2 Various Challenges

In Indian Automotive Market, there are some challenges by virtue of which automobile

industry faces lot of problems. These challenges should be overcome and the challenges

are listed below:

Growth in input costs

Fuel price volatility

Slowdown in demand

Slowdown in USA

Production cuts

Growing competition

Changing consumer preferences

Environmental issues

Low R&D orientation

6.3 Future Technological Demands

Now from today, there are some future technological demands which should be fulfil in

future, those demands are listed below:

Fuel Efficiency

Emission Reduction

Safety and Durability

Cost Effectiveness

Innovative Features

Some of the innovative features are Key Less Entry, Electrically controlled

mechanisms, enhanced driving control, Composites, Long life Components, Soft feel

interiors.

6.4 Conclusion

India has the potential to develop into a significant market for automobile manufacturers.

Indian automotive industry holds significant scope for expansion, both in the domestic

market, where the vehicle penetration level is on the lower side as compared to world

average, and in the international market, where India could position itself as a manufacturing

hub.

Apart from meeting the advancing domestic demands, it is penetrating the international

market too. Favoured with various benefits such as globally competitive auto-ancillary

industry; production of steel at lowest cost; inexpensive and high skill manpower; entrenched

testing and R & D centres etc., the industry provide immense investment and employment

opportunities.

Our statistical analysis confirms that passenger car segment is getting highest attraction

compared to other segments. The analysis of variance states that the mean FDI received in

automobile industry segments has no significant difference. Therefore, it exhibits an

association of amount received during the study period in the respective segment. With the

effort of Government initiative automobile industry is rapidly growing and a special focus

given on exports. The automotive sector’s contribution to the GDP is expected to double,

reaching a turnover of US$ 145 billion in 2016, according to the Automotive Mission Plan

(AMP) 2006- 2016. The cumulative foreign direct investment (FDI) inflows into the Indian

automobile industry during the period April 2000-May 2014 was recorded at US$ 9,885.21

million, according to data published by Department of Industrial Policy and Promotion

(DIPP).

CHAPTER 7

REFERENCES

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4. http://www.currentweek.com/market-share-of-automobile-companies-in-india-

2013top-players-in-industry/

5. http://worldwidejournals.com/ijsr/file.php?val=November_2014_1416658913__22.pd

f

6. http://business.mapsofindia.com/automobile/top-automobile-companies.html

7. http://www.slideshare.net/niteshluthra/indian-auto-industry-analysis