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Automobile industry analysis

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Automobile Industry in India

Presentation by Amit Singh Bhadauriya , Roll Number -14BM60041

Automobile Industry in India

Automobile Industry in India INTRODUCTION

Indian Automotive Industry growth decades started in the 1970s. Between 1970 and 1984 cars were considered a luxury product; manufacturing was licensed, expansion was restricted; there were Quantitative Restriction (QR) on imports and tariff structure designed to restrict the market but starting in 2000, several landmark policy changes like QR and 100% FDI through automotive route were introduced. In 2003, Core group on Automotive R&D (C.A.R) was set up to identify priority areas for automotive R&D in India . Indian Auto Industry is 2nd in Two Wheelers, 3rd in Small Cars and 5th in Commercial Vehicles among the top 10 in World .

India is a global hub of automobile industry having:

15 Manufacturers of passenger cars and multi-utility vehicles 9 Manufacturers of commercial vehicles 16 Manufacturers of 2/3 wheelers 14 Manufacturers tractors 5 Manufacturers of engines

Sources : Automotive Mission Plan, 2006-2016, A Mission for Development of Indian Automotive Industry, [Online] Available: http://www.siamindia.com/upload/AMP.pdf Sunil Kakkar,Indian Auto Industry, the way forward, Maruti Suzuki India Ltd.Automobile Industry in India 3ADVANTAGE INDIA Automobile Industry in India Growing demand Strong growth in demand due to rising income, middle class, and a young population is likely to propel India among the worlds top five auto manufacturers by 2015 Growth in export demand is set to accelerate Innovation opportunities Tata Nano and the upcoming Pixel have opened up the potentially large ultra low-cost car segment Innovation is likely to intensify among engine technology and alternative fuelsRising investments India has significant cost advantages; auto firms save 10-25 per cent on operations vis--vis Europe and Latin America A large pool of skilled manpower and a growing technology base would induce greater investmentsPolicy support The government aims to develop India as a global manufacturing as well as R&D hub There has been a wide array of policy support in the form of sops, taxes and FDI encouragementAdvantage India Source: Automotive Mission Plan (20062016) Notes: R&D Research and Development; FDI Foreign Direct Investment; FY Indian Financial Year (April March); FY16E Estimated figure for Financial Year 201FY16E Market size: USD145 billionFY10 Market size: USD57.7 billion 4EVOLOLUTION OF INDIAN AUTOMITIVE SECTORAutomobile Industry in India Before 19820.4 million units (1982)1983920.6 million units (1992) 1993200711 million units (2007) 2008 onwards20.7 million units (FY13) Source: Tata Motors, Society of Indian Automobile Manufacturers (SIAM), Aranca Research Note: JV Joint Venture 5THE AUTOMATIVE MARKET IS SPLIT INTO FOUR SEGMENTSAutomobile Industry in India Automobiles Two-wheelersPassenger vehiclesThree-wheelersCommerce vehiclesMopeds

Scooters

Motor cycles

Electric two-wheelersPassenger Cars

Utility vehicles

Multi purpose vehicles

Light commercial vehicles

Medium and heavy commercial vehicles

Passenger carriers

Goods Carriers

ROBUST GROWTH IN REVENUES Automobile Industry in India Revenue Trend over the past few years (USD millions)CAGR = 17.7%36.6Market* break-up by revenues (2011)Total production of automobiles in India (million units)Source: Society of Indian Automobile Manufacturers (SIAM), Aranca ResearchMARKET BREAK-UP BY PRODUCTION VOLUME Automobile Industry in India Market share by volume (FY13) Source: Society of Indian Automobile Manufacturers (SIAM), Aranca ResearchMarket Leaders in each segments Automobile Industry in India

Source: Society of Indian Automobile Manufacturers (SIAM), Aranca ResearchAutomobile Industry in India Automobile Industry in India Notable Trends in Indian Automotive Sector Improving product- development capabilities Increasing R&D investments from both the government and the private sector Private sector innovation has been a key determinant of growth in the sector; two good examples are Tata Nano and Tata Pixel; while the former has been a success in India, the latter is intended for foreign markets Carmakers such as BMW, Audi, Toyota, Skoda, Volkswagen and Mercedes-Benz have started providing customised finance to customers through NBFCs Major MNC and Indian corporate houses are moving towards taking cars on operating lease instead of buying them Note: NBFCs - Non-Banking Finance Companies New product launchesAlternative fuels New financing options Large number of products available to consumers across various segments; this has gathered pace with the entry of a number of foreign players Reduced overall product lifecycle have forced players to employ quick product launches In FY11, the CNG market was worth more than USD330 million; CNG cars and taxis are expected to register a CAGR of 28 per cent over FY11FY14 The CNG distribution network in India is expected to increase to 250 cities by 2018 from 30 cities in 2009Automobile Industry in India 1 year1-5 year5-10 yearsIncreased access to credit and lower interest loansInvestment in Infrastructure spending can boost the commercial vehicles segment.

Growing working population (441 million people in 2015/16)

Upward migration of household income levels (600 million people have annual income of more than $10,200)

Middle class expanding by 30 - 40 million every year Can propel growth1 year1-5 year5-10 yearsImpact of delayed monsoon (85% of normal, subsequent impact on paddy cultivation) on rural demand.Non-availability of Key raw material (like Steel) at cheap price.

Possible increase of interest rates (by 2-2.5% BPLR) because of planned government borrowing.Economic FactorsNon- availability of supplier base with demanded capability (Quality and Quantity).

Poor execution of Infrastructure investments. (Construction of Highways of 16km per day against the target of 32 km per day)

Increase in crude oil price($ 35/barrel to $ 70/ barrel in 14 months). Can Stunt GrowthGovernment has allocated Rs 37,880 crore for National and State Highways, while an additional Rs 14,389 crore for road development in rural areas under the Pradhan Mantri Gram Sarak Yojna would expand demand for new vehicles.

Read more at:http://economictimes.indiatimes.com/articleshow/38137737.cms?adcode=voaauto&utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

Auto analysts believe that sales volume of the automobile companies will get a boost after finance minister left more money in hands of salaried employees. Arun Jaitley, union finance minister hiked the personal income tax limit to Rs2.5 lakh from Rs2 lakh and limit under 80C of income tax has risen by Rs50000 to Rs1.5 lakh, while presenting his maiden union budget.

These two measure announced in budget would led to approximately Rs10000-30000 more money in hand of salaried employee,..

Read more at:http://economictimes.indiatimes.com/articleshow/38139210.cms?adcode=voaauto&utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

"Hike in personal exemption limit and higher income tax would leave more money in hand of prospective customer. This would certainly boost sales volume of two-wheeler and hatchback passenger cars", said Basudep Banerjee, auto analyst of Antique stock broking. He added, "Post budget announcement two-wheeler volume likely to grow by 12% from earlier estimate of 8%. Companies such as Hero MotoCorpBSE 1.52 %, Maruti & TVS MotorBSE -9.89 % will be key beneficiary of budget announcement".

Read more at:http://economictimes.indiatimes.com/articleshow/38139210.cms?adcode=voaauto&utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

11Automobile Industry in India Social FactorsRapid Urbanization of semi urban regions Rising aspirational levels. Improvement in living standards of middle classIncreased spending on Fashion & lifestyle comforts.Seeking Value for money- consumer behavior Increasing customer emphasis on aesthetics and comfort.

A perfect marriage of rise in disposable income and demographic dividend (From US$ 556 per annum US$ 1150 by 2015)

Automobile Industry in India Technological FactorsAutomobile Industry in India Strong Policy Support Auto Policy 2002NATRiPsUnion Budget FY14 Automotive Mission Plan (AMP) 200616 Dept. of Heavy Industries & Public Enterprises Automatic approval for foreign equity investment up to 100 per cent; no minimum investment criteria Encourage R&D by offering rebates on R&D expenditure Set up at a total cost of USD388.5 million to enable the industry to be on par with global standards Nine R&D centres of excellence with focus on low-cost manufacturing and product development solutions Industries & Public Enterprises Worked towards reduction of excise duty on small cars and increase budgetary allocation for R&D Weighted increase in R&D expenditure to 200 per cent from 150 per cent (in-house) and 175 per cent from 125 per cent (outsourced) AMPs vision is to make India a preferred destination for designing and manufacturing of automobiles and achieve a market size

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