Prince Tyagi Industry Study

8/3/2019 Prince Tyagi Industry Study

1/38

TO ANALYZE THE INDIANAUTOMOBILE INDUSTRY

INDUSTRY STUDY

2011

Submitted for the partial fulfillment of

the award

Of

POST GRADUATE DIPLOMA INMANAGEMENT

SUBMITTED BY

PRINCE TYAGIROLL NO 10061

UNDER THE SUPERVISION OFDr. MEENAKSHI

DEPARTMENT OF MANAGEMENT

INSTITUTE OF MANAGEMENT EDUCATION, SAHIBABAD


2/38

DECLARATION

I hereby declare that the project report entitled THE STUDY Of THE

ANALYSIS OF INDIAN AUTOMOBILE INDUSTY is my original work and

the Project Report has not formed the basis for the award of any degree,

diploma, associated, or other similar title.

Date:

Place: NOIDA

Signature:


3/38

ABSTRACT

INSTITUTE OF MANAGEMENT EDUCATION,

SAHIBABAD

ROLL NO.:

NAME OF THE STUDENT: PRINCE TYAGI

EMAIL ADDRESS: [email protected]

INDUSTRY STUDY TITTLE: TO ANALYZE THE INDIAN

AUTOMOBILE INDUSTRY I am a student of INSTITUTE OF

MANAGEMENT EDUCATION, SAHIBABAD. I did my industry study on

The analysis of Indian automobile industry. The main aim behind in this

project has undergone a detailed analysis of India automobile industry by

using Fundamental and Technical tools. In order to better understand the

performance of the industry we have made comparative analysis of two

players Tata motors as (leading player) and Maruti Suzuki.


4/38

(Signature of student)

DATE:

TABLE OF CONTENT

CHAPTER TOPICS PAGE

NO.

1. HISTORY OF INDIAN AUTOMOBILE

2. AUTOMOBILE INDUSTRY IN INDIA

3. OBJECTIVE OF THE STUDY

4. RESEARCH METHODOLOGY

5. DATA ANALYSIS AND INTERPRETATION

6. SWOT ANALYSIS

7. CONCLUSION

8. RECOMONDATION

9. LIMITATION OF THE STUDY

10. BIBLIOGRAPHY


5/38

HISTORY OF INDIAN AUTOMOBILE

INDUSTRY

The first car ran on India's roads in 1897. Until the 1930s, cars were imported

directly, but in very small numbers.

Embryonic automotive industry emerged in India in the 1940s. Mahindra &

Mahindra was established by two brothers as a trading company in 1945, and

began assembly ofJeep CJ-3A utility vehicles underlicense from Willys. The

company soon branched out into the manufacture oflight commercial

vehicles (LCVs) and agricultural tractors.

Following the independence, in 1947, the Government of India and the private

sectorlaunched efforts to create an automotive component manufacturing

industry to supply to the automobile industry. However, the growth was relatively

slow in the 1950s and 1960s due to nationalisation and the license raj which

hampered the Indian private sector. After 1970, the automotive industry started to

grow, but the growth was mainly driven by tractors, commercial vehicles and

scooters. Cars were still a major luxury. Japanese manufacturers entered the

Indian market ultimately leading to the establishment ofMaruti Udyog. A number

of foreign firms initiated joint ventures with Indian companies.

In the 1980s, a number of Japanese manufacturers launched joint-ventures for

building motorcycles and light commercial-vehicles. It was at this time that the

Indian government chose Suzuki for its joint-venture to manufacture small cars.

Following the economic liberalisation in 1991 and the gradual weakening of the

license raj, a number of Indian and multi-national car companies launched
http://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Mahindra_%26_Mahindra_Limitedhttp://en.wikipedia.org/wiki/Mahindra_%26_Mahindra_Limitedhttp://en.wikipedia.org/wiki/Jeep_CJhttp://en.wikipedia.org/wiki/Licensehttp://en.wikipedia.org/wiki/Willyshttp://en.wikipedia.org/wiki/Light_commercial_vehiclehttp://en.wikipedia.org/wiki/Light_commercial_vehiclehttp://en.wikipedia.org/wiki/Tractorhttp://en.wikipedia.org/wiki/Independence_of_Indiahttp://en.wikipedia.org/wiki/Government_of_Indiahttp://en.wikipedia.org/wiki/Private_sectorhttp://en.wikipedia.org/wiki/Private_sectorhttp://en.wikipedia.org/wiki/Nationalisationhttp://en.wikipedia.org/wiki/License_rajhttp://en.wikipedia.org/wiki/Japanhttp://en.wikipedia.org/wiki/Maruti_Suzukihttp://en.wikipedia.org/wiki/Motorcycleshttp://en.wikipedia.org/wiki/Suzukihttp://en.wikipedia.org/wiki/Small_carhttp://en.wikipedia.org/wiki/Liberalisationhttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Mahindra_%26_Mahindra_Limitedhttp://en.wikipedia.org/wiki/Mahindra_%26_Mahindra_Limitedhttp://en.wikipedia.org/wiki/Jeep_CJhttp://en.wikipedia.org/wiki/Licensehttp://en.wikipedia.org/wiki/Willyshttp://en.wikipedia.org/wiki/Light_commercial_vehiclehttp://en.wikipedia.org/wiki/Light_commercial_vehiclehttp://en.wikipedia.org/wiki/Tractorhttp://en.wikipedia.org/wiki/Independence_of_Indiahttp://en.wikipedia.org/wiki/Government_of_Indiahttp://en.wikipedia.org/wiki/Private_sectorhttp://en.wikipedia.org/wiki/Private_sectorhttp://en.wikipedia.org/wiki/Nationalisationhttp://en.wikipedia.org/wiki/License_rajhttp://en.wikipedia.org/wiki/Japanhttp://en.wikipedia.org/wiki/Maruti_Suzukihttp://en.wikipedia.org/wiki/Motorcycleshttp://en.wikipedia.org/wiki/Suzukihttp://en.wikipedia.org/wiki/Small_carhttp://en.wikipedia.org/wiki/Liberalisation


6/38

operations. Since then, automotive component and automobile manufacturing

growth has accelerated to meet domestic and export demands.

Following economic liberalization in India in 1991, the Indian automotive industry

has demonstrated sustained growth as a result of increased competitiveness andrelaxed restrictions. Several Indian automobile manufacturers such as Tata

Motors, Maruti Suzuki and Mahindra and Mahindra, expanded their domestic and

international operations. India's robust economic growth led to the further

expansion of its domestic automobile market which has attracted

significant India-specific investment by multinational automobile

manufacturers. In February 2009, a monthly sale of passenger cars in India

exceeded 100,000 units and has since grown rapidly to a record monthly high of

182,992 units in October 2009. From 2003 to 2010, car sales in India have

progressed at a CAGR of 13.7%, and with only 10% of Indian households owning

a car in 2009 (whereas this figure reaches 80% in Switzerland for example ) this

progression is unlikely to stop in the coming decade.Congestion of Indian roads,

more than market demand, will likely be the limiting factor.

SIAMis the apex industry body representing all the vehicle manufacturers, home-grown

and international, in India.

Automotive industry in India

The Automotive industry in India is one of the largest in the world and one of

the fastest growing globally. India's passenger car and commercial vehicle

manufacturing industry is the seventh largest in the world, with an annual

production of more than 3.7 million units in 2010.According to recent reports,

India is set to overtake Brazil to become the sixth largest passenger vehicleproducer in the world, growing 16-18 per cent to sell around three million units in

the course of 2011-12.In 2009, India emerged as Asia's fourth largest exporter

ofpassenger cars, behind Japan,South Korea, andThailand.
http://en.wikipedia.org/wiki/Economic_liberalization_in_Indiahttp://en.wikipedia.org/wiki/Tata_Motorshttp://en.wikipedia.org/wiki/Tata_Motorshttp://en.wikipedia.org/wiki/Maruti_Suzukihttp://en.wikipedia.org/wiki/Mahindra_and_Mahindrahttp://en.wikipedia.org/wiki/Economic_development_in_Indiahttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Automobile_manufacturershttp://en.wikipedia.org/wiki/Automobile_manufacturershttp://en.wikipedia.org/wiki/Society_of_Indian_Automobile_Manufacturershttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Automotive_industryhttp://en.wikipedia.org/wiki/Asiahttp://en.wikipedia.org/wiki/Asiahttp://en.wikipedia.org/wiki/Automobilehttp://en.wikipedia.org/wiki/Japanhttp://en.wikipedia.org/wiki/Japanhttp://en.wikipedia.org/wiki/South_Koreahttp://en.wikipedia.org/wiki/Thailandhttp://en.wikipedia.org/wiki/Thailandhttp://en.wikipedia.org/wiki/Economic_liberalization_in_Indiahttp://en.wikipedia.org/wiki/Tata_Motorshttp://en.wikipedia.org/wiki/Tata_Motorshttp://en.wikipedia.org/wiki/Maruti_Suzukihttp://en.wikipedia.org/wiki/Mahindra_and_Mahindrahttp://en.wikipedia.org/wiki/Economic_development_in_Indiahttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Automobile_manufacturershttp://en.wikipedia.org/wiki/Automobile_manufacturershttp://en.wikipedia.org/wiki/Society_of_Indian_Automobile_Manufacturershttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Automotive_industryhttp://en.wikipedia.org/wiki/Asiahttp://en.wikipedia.org/wiki/Automobilehttp://en.wikipedia.org/wiki/Japanhttp://en.wikipedia.org/wiki/South_Koreahttp://en.wikipedia.org/wiki/Thailand


7/38

As of 2010, India is home to 40 million passenger vehicles and more than 3.7

million automotive vehicles were produced in India in 2010 (an increase of

33.9%), making the country the second fastest growing automobile market in the

world.According to the Society of Indian Automobile Manufacturers, annual car

sales are projected to increase up to 5 million vehicles by 2015 and more than 9

million by 2020. By 2050, the country is expected to top the world in car volumes

with approximately 611 million vehicles on the nation's roads.

India's largest car manufacturing industry hub is based in and around Chennai,

also known as the "Detroitof India" with the India operations

ofFord,Hyundai, Renault and Nissan headquartered in the city and BMW having

an assembly plant on the outskirts. Chennai accounts for 60 per cent of the

country's automotive exports. Gurgaon and Manesarin Haryana are hubs where

all of the Maruti Suzuki cars in India are manufactured. TheChakancorridor

nearPune, Maharashtra is another vehicular production hub with companies

like General Motors, Volkswagen, Skoda,Mahindra and Mahindra, Tata

Motors, Mercedes Benz, Land Rover, Fiat and Force Motors having assembly

plants in the area. Ahmedabad with the Tata Nano plant and planned Ford

and Peugeot-Citroen plants, Halolagain with General

Motors, Aurangabad with Audi, Skoda and Volkswagen, Kolkatta with Hindustan

Motors, Noidawith Honda and Bangalore with Toyota are some of the other

automotive manufacturing regions around the country.
http://en.wikipedia.org/wiki/Indian_Road_Networkhttp://en.wikipedia.org/wiki/Indian_Road_Networkhttp://en.wikipedia.org/wiki/Chennaihttp://en.wikipedia.org/wiki/Detroithttp://en.wikipedia.org/wiki/Ford_India_Private_Limitedhttp://en.wikipedia.org/wiki/Hyundai_Motor_India_Limitedhttp://en.wikipedia.org/wiki/Renault_India_Private_Limitedhttp://en.wikipedia.org/wiki/Nissan_Motor_India_Private_Limitedhttp://en.wikipedia.org/wiki/BMW_India_Private_Limitedhttp://en.wikipedia.org/wiki/Gurgaonhttp://en.wikipedia.org/wiki/Manesarhttp://en.wikipedia.org/wiki/Manesarhttp://en.wikipedia.org/wiki/Haryanahttp://en.wikipedia.org/wiki/Maruti_Suzukihttp://en.wikipedia.org/wiki/Chakanhttp://en.wikipedia.org/wiki/Chakanhttp://en.wikipedia.org/wiki/Punehttp://en.wikipedia.org/wiki/Maharashtrahttp://en.wikipedia.org/wiki/General_Motors_India_Private_Limitedhttp://en.wikipedia.org/wiki/Volkswagen_Indiahttp://en.wikipedia.org/wiki/Skoda_Auto_India_Private_Limitedhttp://en.wikipedia.org/wiki/Skoda_Auto_India_Private_Limitedhttp://en.wikipedia.org/wiki/Mahindra_and_Mahindrahttp://en.wikipedia.org/wiki/Tata_Motorshttp://en.wikipedia.org/wiki/Tata_Motorshttp://en.wikipedia.org/wiki/Mercedes-Benz_Indiahttp://en.wikipedia.org/wiki/Land_Roverhttp://en.wikipedia.org/wiki/Fiat_Automobiles_India_Limitedhttp://en.wikipedia.org/wiki/Force_Motorshttp://en.wikipedia.org/wiki/Ahmedabadhttp://en.wikipedia.org/wiki/Tata_Nanohttp://en.wikipedia.org/wiki/Peugeot-Citroenhttp://en.wikipedia.org/wiki/Halolhttp://en.wikipedia.org/wiki/Halolhttp://en.wikipedia.org/wiki/General_Motors_India_Private_Limitedhttp://en.wikipedia.org/wiki/General_Motors_India_Private_Limitedhttp://en.wikipedia.org/wiki/Aurangabad,_Maharashtrahttp://en.wikipedia.org/wiki/Audi_Indiahttp://en.wikipedia.org/wiki/Skoda_Auto_India_Private_Limitedhttp://en.wikipedia.org/wiki/Volkswagen_Indiahttp://en.wikipedia.org/wiki/Kolkattahttp://en.wikipedia.org/wiki/Hindustan_Motorshttp://en.wikipedia.org/wiki/Hindustan_Motorshttp://en.wikipedia.org/wiki/Noidahttp://en.wikipedia.org/wiki/Honda_Siel_Cars_Indiahttp://en.wikipedia.org/wiki/Bangalorehttp://en.wikipedia.org/wiki/Toyota_Kirloskar_Motor_Private_Limitedhttp://en.wikipedia.org/wiki/Indian_Road_Networkhttp://en.wikipedia.org/wiki/Chennaihttp://en.wikipedia.org/wiki/Detroithttp://en.wikipedia.org/wiki/Ford_India_Private_Limitedhttp://en.wikipedia.org/wiki/Hyundai_Motor_India_Limitedhttp://en.wikipedia.org/wiki/Renault_India_Private_Limitedhttp://en.wikipedia.org/wiki/Nissan_Motor_India_Private_Limitedhttp://en.wikipedia.org/wiki/BMW_India_Private_Limitedhttp://en.wikipedia.org/wiki/Gurgaonhttp://en.wikipedia.org/wiki/Manesarhttp://en.wikipedia.org/wiki/Haryanahttp://en.wikipedia.org/wiki/Maruti_Suzukihttp://en.wikipedia.org/wiki/Chakanhttp://en.wikipedia.org/wiki/Punehttp://en.wikipedia.org/wiki/Maharashtrahttp://en.wikipedia.org/wiki/General_Motors_India_Private_Limitedhttp://en.wikipedia.org/wiki/Volkswagen_Indiahttp://en.wikipedia.org/wiki/Skoda_Auto_India_Private_Limitedhttp://en.wikipedia.org/wiki/Mahindra_and_Mahindrahttp://en.wikipedia.org/wiki/Tata_Motorshttp://en.wikipedia.org/wiki/Tata_Motorshttp://en.wikipedia.org/wiki/Mercedes-Benz_Indiahttp://en.wikipedia.org/wiki/Land_Roverhttp://en.wikipedia.org/wiki/Fiat_Automobiles_India_Limitedhttp://en.wikipedia.org/wiki/Force_Motorshttp://en.wikipedia.org/wiki/Ahmedabadhttp://en.wikipedia.org/wiki/Tata_Nanohttp://en.wikipedia.org/wiki/Peugeot-Citroenhttp://en.wikipedia.org/wiki/Halolhttp://en.wikipedia.org/wiki/General_Motors_India_Private_Limitedhttp://en.wikipedia.org/wiki/General_Motors_India_Private_Limitedhttp://en.wikipedia.org/wiki/Aurangabad,_Maharashtrahttp://en.wikipedia.org/wiki/Audi_Indiahttp://en.wikipedia.org/wiki/Skoda_Auto_India_Private_Limitedhttp://en.wikipedia.org/wiki/Volkswagen_Indiahttp://en.wikipedia.org/wiki/Kolkattahttp://en.wikipedia.org/wiki/Hindustan_Motorshttp://en.wikipedia.org/wiki/Hindustan_Motorshttp://en.wikipedia.org/wiki/Noidahttp://en.wikipedia.org/wiki/Honda_Siel_Cars_Indiahttp://en.wikipedia.org/wiki/Bangalorehttp://en.wikipedia.org/wiki/Toyota_Kirloskar_Motor_Private_Limited


8/38

OVERVIEW

The Indian Automobile Industry is manufacturing over 11 million vehicles and

exporting about 1.5 million every year. The dominant products of the industry are

two wheelers with a market share of over 75% and passenger cars with a market

share of about 16%. Commercial vehicles and three wheelers share about 9% of

the market between them. About 91% of the vehicles sold are used by

households and only about 9% for commercial purposes. The industry has

attained a turnover of more than USD 35 billion and provides direct and indirect

employment to over 13 million people.

The supply chain of this industry in India is very similar to the supply chain of the

automotive industry in Europe and America. This may present its own set of

opportunities and threats. The orders of the industry arise from the bottom of the

supply chain i. e., from the consumers and go through the automakers and

climbs up until the third tier suppliers. However the products, as channelled in

every traditional automotive industry, flow from the top of the supply chain to

reach the consumers.

Interestingly, the level of trade exports in this sector in India has been medium

and imports have been low. However, this is rapidly changing and both exports

and imports are increasing. The demand determinants of the industry are factors

like affordability, product innovation, infrastructure and price of fuel. Also, the

basis of competition in the sector is high and increasing, and its life cycle stage is


9/38

growth. With a rapidly growing middle class, all the advantages of this sector in

India are yet to be leveraged.

Note that, with a high cost of developing production facilities, limited accessibility

to new technology and soaring competition, the barriers to enter the IndianAutomotive sector are high. On the other hand, India has a well-developed tax

structure. The power to levy taxes and duties is distributed among the three tiers

of Government. The cost structure of the industry is fairly traditional, but the

profitability of motor vehicle manufacturers has been rising over the past five

years. Major players, like Tata Motors and Maruti Suzuki have material cost of

about 80% but are recording profits after tax of about 6% to 11%.

The level of technology change in the Motor vehicle Industry has been high but,

the rate of change in technology has been medium. Investment in the technology

by the producers has been high. System-suppliers of integrated components and

sub-systems have become the order of the day. However, further investment in

new technologies will help the industry be more competitive. Over the past few

years, the industry has been volatile. Currently, Indias increasing per capita

disposable income which is expected to rise by 106% by 2015 and growth in

exports is playing a major role in the rise and competitiveness of the industry.

Tata Motors is leading the commercial vehicle segment with a market share of

about 64%. Maruti Suzuki is leading the passenger vehicle segment with a

market share of 46%. Hyundai Motor India and Mahindra and Mahindra are

focusing expanding their footprint in the overseas market. Hero Honda Motors is

occupying over 41% and sharing 26% of the two wheeler market in India with

Bajaj Auto. Bajaj Auto in itself is occupying about 58% of the three wheeler

market.

Consumers are very important of the survival of the Motor Vehicle manufacturing

industry. In 2008-09, customer sentiment dropped, which burned on the

augmentation in demand of cars. Steel is the major input used by manufacturers

and the rise in price of steel is putting a cost pressure on manufacturers and cost


10/38

is getting transferred to the end consumer. The price of oil and petrol affect the

driving habits of consumers and the type of car they buy.

The key to success in the industry is to improve labour productivity, labour

flexibility, and capital efficiency. Having quality manpower, infrastructureimprovements, and raw material availability also play a major role. Access to

latest and most efficient technology and techniques will bring competitive

advantage to the major players. Utilising manufacturing plants to optimum level

and understanding implications from the government policies are the essentials

in the Automotive Industry of India.

Both, Industry and Indian Government are obligated to intervene the Indian

Automotive industry. The Indian government should facilitate infrastructure

creation, create favourable and predictable business environment, attract

investment and promote research and development. The role of Industry will

primarily be in designing and manufacturing products of world-class quality

establishing cost competitiveness and improving productivity in labour and in

capital. With a combined effort, the Indian Automotive industry will emerge as the

destination of choice in the world for design and manufacturing of automobiles.


11/38

OBJECTIVE OF THE STUDY

The objective of this project is deeply analyze our Indian

Automobile Industry for investment purpose by monitoring the

growth rate and performance on the basis of historical data.

The main objectives of the Project study are:

Detailed analysis of Automobile industry which is gearing

towards international standards

Analyze the impact of qualitative factors on industrys and

companys prospects

Comparative analysis of two tough competitors TATA Motors

and Maruti Suzuki

Application of various Technical Tools and Fundamental tools

(like Financial and Nonfinancial statements).

RESEARCH METHODOLOGY:

Research methodology is completely based on the secondary data.


12/38

Sources are the newspapaer and the websites which help to reach on a

result.

DATA ANALYSIS AND

INTERPRETATION


13/38

ANALYSIS OF AUTOMOBILE INDUSTRY

Over a period of more than two decades the Indian Automobile

industry has been driving its own growth through phases. With

comparatively higher rate of economic growth rate index against that

of great global powers, India has become a hub of domestic and

exports business. The automobile sector has been contributing its

share to the shining economic performance of India in the recent

years.

To understand this industry for the purpose of investment we need to

analyze it by following two approaches:

1). Fundamental Analysis (E.I.C Approach)

a. Economy

b. Industry

c. Company

2).Technical Analysis

1) FUNDAMENTAL ANALYSIS


14/38

a). ECONOMY

Economic analysis is the analysis of forces operating the overall

economy a country. Economic analysis is a process whereby strengthsand weaknesses of an economy are analyzed. Economic analysis is

important in order to understand exact condition of an economy.

GDP and Automobile Industry

In absolute terms, India is 16th in the world in terms of nominal factory

output. The service sector is growing rapidly in the past few years. Thisis the pie- chart showing contributions of different sectors in Indian

economy.

The per capita Income is near about Rs38,000 reflecting improvement

in the living standards of an average Indian.

Today, automobile sector in India is one of the key sectors of the

economy in terms of the employment.

Directly and indirectly it employs more than 10 million people and if we

add the number of people employed in the auto-component and auto

ancillary industry then the number goes even higher.

As the world economy slips into recession hitting the demand hard and

the banking sector takes conservative approach towards lending to

corporate sector, the GDP growth has downgraded it to 7.1 percent;


15/38

for 2008-09 and predicted it to be 6.5 per cent for FY 2009-10 Mr.

Montek Singh (Planning Commission of India). Following is the graph

showing a trend of Indian GDP trend in past 3 years.

Source:India Central Statistical Organization

The market value of Automobile Industry is more than US$8 bl. and

Contribution in Indian GDP is near about 5% and will be double by

2016. The automotive industry in India grew at a computed annualgrowth rate (CAGR) of 11.5 percent over the past five years, but

growth rate in last FY2008-09 was only

0.7% with passenger car sales shows 1.31% growth while Commercial

Vehicles segment slumped 21.7%.


16/38

Recession

All the major auto companies enjoyed the high growth ride till the mid

2008. But at the end of the year, industry had to face the hard truth

and witnessed the fall in sales compared to last year. In December

2008, overall production fell by 22 % over the same month last year.

Global recession has hit the Indian auto industry, India is strong and

growing industry but the impact of recession is evident now on

industry as sales & growth of automobile companies have declined.

Passenger Vehicles segment registered negative growth.

One of its supporting facts is that the sales in December 2008 for

passenger vehicles fell by 13.86% over

December 2007 Two Wheelers registered minor growth of 1.85 %

during April December 2008.

However, Two Wheelers sales recorded 15.43 percent fall in December

2008 over the same month last year. Although the sector was hit by

economic slowdown, overall production (passenger vehicles,

commercial vehicles, two wheelers and three wheelers) increased from

10.85 million vehicles in 2007-08 to 11.17 million vehicles in 2008-09.

Passenger vehicles increased marginally from 1.77 million to 1.83

million while two-wheelers increased from 8.02 million to 8.41 million.

Total number of vehicles sold including passenger vehicles,

commercial vehicles, two-wheelers and three-wheelers in 2008-09 was

9.72 million as compared to 9.65 million in 2007-08.

Inflation

Despite of negative inflation these days (-.21% on 22-Aug-09) we saw

an increasing trend of sales in auto sector. A moderate amount of

inflation is important for the proper growth of an economy like India


17/38

because it attracts more private investment. The fall in wholesale

prices from a year earlier is mainly due

to a statistical base effect and doesnt suggest contraction in demand,

the Reserve Bank of India said few week back, while revising its

inflation forecast for the FY through March to around 5% from 4%.

In last FY despite of skyrocketing oil prices (crude oil price has already

up to $130 compared to $20 per barrel five years back), Indian

automobile Industry was not as much affected and experts think that

Indian automobile industry will continue to grow this year despite all

obstacles- oil price hike, higher interest rates. However, the effect of

inflation has affected every sector which is related to car

manufacturing and production. The increase in the price of fuel and the

steel due to inflation has led to a slower growth rate of the car industry

in India. The effect of inflation has taken the rise in the price rate of the

cars by 3-4% which in turn suffices the need to meet the rise in price of

the raw materials to build a car. The car market and the car industry

witnessed a fall of 8-9%.

Current Scenario of Automobile Industry in Economy

With the latest available data Indian Automobile Industry is expected

to grow at 9%-10% in near future,

Two wheeler segment sales grew up by 12.8% with the modest 2.6%

growth rate, under this segment the market leader Hero Honda

registered growth of 12% in its domestic sales where as Bajaj Auto

disappointed as sales plunging by 23%, on the other hand car sales

has been grew up by a healthy 22.7%

in last February and Commercial Vehicles reported slower sales. It is

assumed that in coming festive season to meet demand, carmakers

going to produce 70000units/month more over the average

1.3lac/month with help of 5000 new hands.


18/38

Indian Automobile Industry at Global level:

India ranks 1st in the global two-wheeler market

India is the 4th biggest commercial vehicle market in the world

India ranks 11th in the international passenger car market

India ranks 5th pertaining to the number of bus and truck sold in the

world

India is the second largest tractor manufacturer in the world.

Projected Growth rate in Automobile Industry:

Passenger vehicle sales in the country will grow at a CAGR of 12 per

cent to touch 3.75 million units by 2014.

The domestic two-wheeler sales will grow at a CAGR of 8.8% by 2014

at 11.3 million units.

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% of the GDP and

providing additional employment to 25 million people by 2016.

b.) INDUSTRY ANALYSIS (AUTOMOBILE)

The current trends of the global automobile industry reveal that in the

developed countries the automobile industries are stagnating as a

result of drooping markets, whereas the automobile industry in the


19/38

developing nations, have been consistently registering higher growth

rates every passing year for their domestic flourishing domestic

automobile markets.

Being one of the fastest growing sectors in the world its dynamic

growth phases are explained by the nature of competition, Product Life

Cycle and consumer demand. The industry is at the crossroads with

global mergers and relocation of production centers to emerging

developing countries.

In 2009, estimated rate of growth of India Auto industry is going to be

9% .The Indian automobile sector is far from being saturated, leaving

ample opportunity for volume growth.

Segmentation of Automobile Industry

The automobile industry comprises of Heavy vehicles (trucks, buses,

tempos, tractors); passenger cars; Two-wheelers; Commercial Vehicles;

and Three-wheelers. Following is the segmentation that how much

each sector comprises of whole Indian Automobile Industry.

Industrial Analysis of any industry can be done based on the

following headings:

1. Five Forces Model


20/38

2. Industrial Life Cycle

3. SWOT Analysis

4. Industry Specific Index

1. Five Forces Model

Michael Porter identifies five forces that influence an industry. These

forces are

Degree of Rivalry

Despite the high concentration ratio seen in the automotive sector,

rivalry in the Indian auto sector is intense due to the entry of foreign

companies in the market. The industry rivalry is extremely high with

any being product being matched in a few months by the competitors.

This instinct of the industry is primarily driven by technical capabilities

acquired over years of gestation under the technical collaboration with

international players.

Threat of SubstitutesThe threat of substitutes to the automotive industry is fairly mild.

Numerous other forms of transportation are available, but none offer

the utility, convenience, independence and value offered by

automobiles. The switching cost associated with using a different mode

of transportation, may be high in terms of personal time, convenience

and utility.

Barriers to entry

The barriers to enter automotive industry are substantial. For a new

company, the startup capital required to establish manufacturing

capacity to achieve minimum efficient scale is prohibitive.

Although the barriers to new companies are substantial, establishing

companies are entering the new markets through strategic


21/38

partnerships or through buying out or merging with other companies.

However, a domestic company, with local knowledge and expertise,

has the potential to compete its home market against the global firms

who are not well established there.

Suppliers power

In the relationship between the industry and its suppliers, the power

axis is tipped in industrys favor. The industry is comprised of powerful

buyers who are generally able to dictate their terms to the suppliers.

Buyers Power

In the relationship between the automotive industry and its ultimate

consumers, the power axis is tipped in the consumers favor. This is

due to the fairly standardized nature and the low switching costs

associated with selecting from among competing brands.

3.) Industrial Life Cycle

The industrial life cycle is a term used for classifying industry vitality

over time. Industry life cycle classification generally groups industries

into one of four stages: pioneer, growth, maturity and decline.

In the pioneer phase, the product has not been widely accepted or

adopted. Business strategies are developing, and there is high risk of

failure. However, successful companies can grow at extraordinary

rates. The Indian automobile sector has passed this stage quite

successfully.

In the growth phase, the product market has been established and

there is at least some historical guide to ground demand estimates.

The industry is growing rapidly, often at an accelerating rate of sales

and earnings growth. Indian Automotive Industry is booming with a

growth rate of around 15 % annually.


22/38

The cumulative growth of the Passenger Vehicles segment during April

2007 March 2008 was 12.17 percent. Passenger Cars grew by 11.79

percent, Utility Vehicles by 10.57 percent and Multi Purpose Vehicles

by 21.39 percent in this period. The Commercial Vehicles segment

grew marginally at 4.07 percent. While Medium & Heavy Commercial

Vehicles declined by 1.66 percent, Light Commercial

Vehicles recorded a growth of 12.29 percent. Three Wheelers sales fell

by 9.71 percent with sales of

Goods Carriers declining drastically by 20.49 percent and Passenger

Carriers declined by 2.13 percent during April- March 2008 compared

to the last year. Two Wheelers registered a negative growth rate of

7.92 % during this period, with motorcycles and electric two wheelers

segments declining by 11.90 percent and 44.93% respect. However,

Scooters and

Mopeds segment grew by 11.64% and 16.63% respect.

The growth rate of the automobile industry in India is greater than the

GDP growth rate of the economy, so the automobile sector can be very

well be said to be in the growth phase.

As the product matures, growth slows as penetration reaches practical

limits. Companies began to focus on market share rather than growth.

Industry demand tends to follow the overall economy, but the scope of

growth of the automobile sector is very much possible in India due to

the inc reasing income of the middle class and their income as well as

standard of living.


23/38

4.) SWOT Analysis

A scan of the internal and external environment is an important part of

the strategic planning process.

Environmental factors internal to the firm usually can be classified as

strengths (S) or weaknesses (W), and those external to the firm can be

classified as opportunities (O) or threats (T). Such an analysis of the

strategic environment is referred to as a SWOT analysis. SWOT

analysis of the Indian automobile sector gives the following points:

Strengths

Large domestic market

Sustainable labor cost advantage

Competitive auto component vendor base

Government incentives for manufacturing plants

Strong engineering skills in design etc

Weaknesses

Low labor productivity

High interest costs and high overheads make the production

uncompetitive


24/38

Various forms of taxes push up the cost of production

Low investment in Research and Development

Infrastructure bottleneck

Opportunities Commercial vehicles: SC ban on overloading

Heavy thrust on mining and construction activity

Increase in the income level

Cut in excise duties

Rising rural demand

Threats

Rising input costs

Rising interest rates

Cut throat competition

5.) Industry Specific Index

Industry specific index also called as sectoral index are those indices,

which represent a specific industry sector. All stocks in a sectoral index

belong to that sector only. Hence an index like the BSE auto index is

made of auto stocks. Sectoral Indices are very useful in tracking the

movement and performance of particular sector.

BSE Auto Index comprises all the major auto stocks in the BSE 500

Index.


25/38

c.) COMPANY ANALYSIS (Maruti Suzuki & TATA

Motors)

The company analysis shows the longterm strenght of the company

that what is the financial Position of the company in the market where

it stand among its competitors and who are the key drivers of the

company, what is the future plans of the company, what are the

policies of government towards the company and how the stake of the

company divested among different groups of people.

Profile of Maruti Suzuki

Maruti Suzuki is one of India's leading automobile manufacturers and

the market leader in the car segment, both in terms of volume of


26/38

vehicles sold and revenue earned. Until recently, 18.28% of the

company was owned by the Indian government, and 54.2% by Suzuki

of Japan. As of May 10, 2007,

Govt. of India sold its complete share to Indian financial institutions.

With this, Govt. of India no longer has stake in Maruti Udyog.

The turnover for the fiscal 2008-09 stood at Rs. 203,583 Million & Profit

After Tax at Rs.

12,187ml.Maruti Suzuki India Ltd. has sold a total of 84,808 vehicles in

August 2009, an increase of

41.6%, compared to 59,908 vehicles in the same period of 2008. The

company's domestic sales in August

2009 increased 29.3% to 69,961 vehicles, compared to 54,113 vehicles

in August 2008. Total passenger

car sales in August 2009 increased 30.5% to 69,629 units, compared to

53,351 units in August 2008 The company's exports increased 156.2%

to 14,847 units, compared to 5,795 units in August 2008.

Profile of TATA MOTORS

Tata Motors Limited is Indias largest automobile company, reported

gross revenue (stand-alone) of

Rs.28599.27 crores (2007-08: Rs.33093.93 crores) in 2008-09, a year

marked by severe demand contraction in the automobile industry.

Revenues (net of excise) for the year were Rs. 25660.79 crores

compared to Rs.28739.41 crores in 2007-08, a decline of 10.7%. The

Profit before Tax was Rs.1013.76

crores compared to Rs.2576.47 crores in 2007-08, a decline of 60.7%.The Profit after Tax for the year was Rs.1001.26 crores compared to

Rs.2028.92 crores, a decline of 50.7%.

It is the leader in commercial vehicles in each segment, and among the

top three in passenger vehicles with winning products in the compact,

midsize car and utility vehicle segments. The company is the worlds


27/38

fourth largest truck manufacturer, and the worlds second largest bus

manufacturer.

A. FINANCIAL ANALYSIS

BALANCE SHEET

MARUTI SUZUKI


28/38

TATA MOTORS


29/38

INCOME STATEMENTS

MARUTI SUZUKI

TATA MOTORS


30/38

NON FINANCIAL ANALYSIS

TATA MOTORS

MARUTI SUZUKI


31/38

Government Policies Towards Indian

Automobile Industry

Automobile industry in India also received an unintended boost from

stringent government auto emission regulations over the past few

years. This ensured that vehicles produced in India conformed to the

standards of the developed world.Though it has an advantage in India, thanks to low costs and

government policies it soon faces stiff competition from it multinational

competitors all eyeing for a share in the ever growing Indian auto

sector. The policies adopted by Government will increase competition

in domestic market, motivate many foreign commercial vehicle

manufactures to set up shops in India, whom will make India as a

production hub and export to nearest market.

Bring in a minimum foreign equity of US $ 50 Million if a joint venture

involved majority foreign equity ownership

Automatic approval for foreign equity investment upto 100% of

manufacture of automobiles and component is permitted


32/38

FIIs including overseas corporate bodies (OCBs) and NRIs are

permitted to invest up to 49 percent of the paid-up equity capital of

the investee company, subject to approva of the board of directors and

of the members by way of a special resolution. .

Investments in making auto parts by a foreign vehicle maker will also

be considered a part of the minimum foreign investment made by it in

an auto-making subsidiary in India. The move is aimed at helping India

emerge as a hub for global manufacturing and sourcing for auto parts.

Specific component of excise duty applicable to large cars and utility

vehicles will be reduced to 15,000 rupees per vehicle from 20,000

rupees earlier.

The Proposal by the Govt. to set up an expert group to advise on a

viable and sustainable system of pricing petroleum products, as this

will surely had an impact on the Automobile Industry.

The announced reduction on the basic customs on bio-diesel is great

news for all companies working on environmental saving technologies

CONCLUSION

Indian Automobile Industry is in the growth phase and the

expected growth rate is 9-10% for FY2009-10 compare to

last year growth rate which was just 0.7% and the above

facts and figures in our study also support this truth.

Indian Automobile has a lot of scope for both two wheelers

and four wheelers due to development in infrastructure of

the country and especially the rural sector in which demand

of two wheeler has increased even in recession. According to

Indian Statistical Organization the per capita income


33/38

(Rs.38000) is increasing and national income at the rate of

14.4% which shows potential to buy vehicle in auto industry.

The growth rate of Indian Automobile is so fast that by 2016

Indian Industry will be world 7 largest manufacturer in all

sections.

The Indian auto market is still untapped the majority of the

people in country dont own a four wheeler and all the major

auto companies are trying to increase their sales by several

moves. Like TATA has launch NANO the peoples car and

now TATA motors is also planning to come out with anelectric car as well as hybrid car, moreover in two wheeler

segment many companies like Mahindra and Mahindra grow

even more than expectations.

From the Technical Analysis of both companies we come to

know that the share price of Maruti will move in the band of

Rs.1275 to Rs.1425 and that of TATA Motors will move in the

range of Rs. 430 to

Rs. 490 if certain correction made in the market.

We have also come to know that share price movement of

TATA Motors is just according to the movement of SENSEX,

whenever there is a negative sentiment in the market

regarding TATA Motors there is a steep fall in the stock price

of TATA Motors but we have seen quick recovery in its share

prices to regain its primary trend E.g as we seen in last 3-4

months TATA recovers approx.90% after downfall.


34/38

By analyzing the current trend of Indian Economy and

Automobile Industry we can say that being a developing

economy there is lot of scope for growth and this industry

still have to cross many levels so there is huge opportunities

to invest in and this is proving as more and more foreign

Companies setting up there ventures in India.

Recommendations

By analyzing the industry on various parameters with the

help of implementing Fundamental and

Technical tools we came to know that this industry has a lot

of potential to grow in future. So recommending to invest in

Automobile Industry have no doubt is going to be a good and


35/38

smart option because this industry is booming like never

before not only in India but all around the world. The returns

which came out of this industry were very impressive

recently, as if we take an example of TATA motors it gives

approx 90% return in a period of just 3 months while Maruti

Suzuki shows always a buy and hold position because there

is possibility of growth in future, same situation is in two

wheeler segment with market leader Hero-Honda a debt free

company also have bright future ahead. The numbers which

came out in the end of financial year 2009 prove that evenin the period of recession the overall sales went up is

sufficient to support to this fact. Through Technical analysis

of TATA Motors and Maruti it can be recommended that for

now Maruti share price shows that its a time to hold the

position or buy more shares as there is scope in further rise

in share prices until and unless any negative reaction or

sentiments comes in the Economy.

Investing in Maruti Suzuki for long time could be a good

option whereas in TATA motors there is a chance of getting

correction, as it already went on high side in a very short

period of time so holding the shares for long time could be a

wrong step, so at this point of time those who invested

earlier can book their profit or new investors can buy now

and sell with in short period of time by earning profit in short

period of time.


36/38

LIMITATIONS OF THE STUDY


37/38

BIBLIOGRAPHY


38/38

www.bseindia.com

www.googlefinance.com

www.yahoofinance.com

www.google.co.in

www.moneycontrol.com

www.worldfact.com

www.rbi.org.in

FDI statistic government of India

India Central Statistical Organization

Economic Times

Prince Tyagi Industry Study

Documents

Transcript of Prince Tyagi Industry Study