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PRESENTED BY : Shashank Kapoor Nidhi Aggarwal Amandeep Badwal Narayan

Indian Automobile Sector (Oligopoly to monopolistic transformation)

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PRESENTED BY:

Shashank Kapoor

Nidhi Aggarwal

Amandeep Badwal

Narayan

INTRODUCTION

The Automotive Industry in India is one of the larger markets in the

world and had previously been one of the fastest growing

globally, but is now seeing flat growth rates.

However production of passenger vehicles in India was recorded at

3.23 million in 2012-13 and is expected to grow at a compound

annual growth rate (CAGR) of 13 per cent during 2012-2021

AUTOMOBILE

2 WHEELERS 3 WHEELERSPASSENGER

VEHICLES

COMMERCIA

L VEHICLES

The growth journey

Initial YearsManufacturing was licensed•High Customs duty on import•Steep excise duties &sales tax

•2 Major players:Premier Automobiles Ltd.& Hindustan Motors

1980s•Entry of Maruti Udyog Ltd.•Better product,with government support.•Seller’s Market.•Long Waiting Periods.

Early to mid 90s

•Seller’s market and longwaiting periods.

•Delicensing in 1993.

•Decrease in customs &excise duty.

•Auto finance boom- moreplayers (foreign banks &non banking companies,better schemes).

Mid 90s – Early 2000s

•Buyers market.

•Easy Auto finance.

•Manufactures diversifying into related activities: finance lease, insurance and used car market.

Automotive Companies in India

Major Multi-National CompaniesMajor Indian Companies

Key Growth Drivers

Market shares

Passenger Vehicles

Market Share

Commercial Vehicles

Market Share

Sources:

For automobile sales and export data: Society of Indian Automobile Manufacturers (SIAM)For auto component

revenue and export data: The Automotive Component Manufacturers Association of India (ACMA)

Sales

Sources:

For automobile sales and export data: Society of Indian Automobile Manufacturers (SIAM)For auto component

revenue and export data: The Automotive Component Manufacturers Association of India (ACMA)

example

exports

Sources:

For automobile sales and export data: Society of Indian Automobile Manufacturers (SIAM)For auto component

revenue and export data: The Automotive Component Manufacturers Association of India (ACMA)

Transformation from

Oligopoly to

Monopolistic Market

What is Oligopoly market?

• Market structure is featured by a few firms.

• Strategic Interaction - Reaction to competitor’s pricing and

marketing strategies.

• Product can be homogenous or differentiated.

• Considerable barrier to entry for new firms.

• Possibility of Collusion, leading to

illegal price setting.

• On the other hand, if no collusion,

possibility of fierce competition

among the few firms.

What is Monopolistic market?

• Market structure characterized by many

firms.

• Product differentiation allows a Range

of prices.

• Monopoly over a small range of price.

• Barriers to entry and exit very minor.

• Branding, advertising and personal

selling to differentiate the product.

The Causes of Transformation – The First Big Step

• Sanjay Gandhi owned Maruti Technical Services Limited

which was liquidated.

• After his death, Indira Gandhi government collaborated with

Suzuki Motors, a Japanese firm, for collaboration –

Formation of Maruti Udyog Limited and renamed later

Maruti Suzuki in 2007.

+ =

The Causes of Transformation

• Policy changes introduced in 2 doses:

1. Partial de-regulation in 1985 – Eased licensing

requirements, allowed selective capacity-expansion, partial

relaxation of controls with regard to foreign collaboration, imports.

However, trade and investment regulations continued,

constraining growth of big business houses.

2. 1991 policy changes – Dispensed with bulk controls and

regulations

• Partial de-regulation allowed technology inflow into India.

• New Industrial Policy in July 1991 by Congress Government led by

Mr. Narsimha Rao:

It introduced Liberalization policies .

• April 1993 – Government removed motor cars from list of industries

reserved for compulsory licensing.

Effects of the Transformation

• New firms, including foreign players, entered with modern

engineering, efficient processes and modern shop-floor layouts.

• Indian automobile industry grew at 14.31% per annum in post-1991

era compared to 8.56% per annum during 1985-91.

• Delicencing of sector attracted many major Global OEMs

(GM, Ford, Honda, Hyundai etc.) to start assembly in India.

• Demand for small and compact cars by highly educated, well-

informed Indian customers.

• Easy Auto Finances attracted the buyers leading to sharp rise in the

demand.

Indian Automobile Industry – The Monopolistic Market

Current Trends in the Current

Monopolistic Automobile Market

• Considering huge market potential, production of passenger cars is

projected to grow at CAGR of 11% between 2010-11 and 2013-14.

Comparison:

• 1982

Number of manufacturers: 3

Vehicle sales: 20000

Number of models: 3

• 2011:

Number of manufacturers: 20

Vehicle sales: 23,80,000 approx.

Number of models: 78

KEY Competitors

Source: http://www.imaginmor.com/automobileindustryindia.html

example

KEY Competitors Contd…

Source: http://www.imaginmor.com/automobileindustryindia.html

KEY Competitors Contd…

Source: http://www.imaginmor.com/automobileindustryindia.html

KEY Competitors Contd…

Source: http://www.imaginmor.com/automobileindustryindia.html

Sources of data

www.wikipedia.org

www.automobileindia.com

www.investropedia.com

For automobile sales and export data: Society of Indian Automobile

Manufacturers (SIAM) and for auto component revenue and export

data: The Automotive Component Manufacturers Association of

India (ACMA)

Economic Times

http://www.imaginmor.com/automobileindustryindia.html