Indian automobile analysis: A study of selected companies

Prepared by,Name-Parveen BanoRoll no-042-BBA10F-0002Deshbandhu college for girls

contentIntroductionIndian automobile industry: an overview Automobile Industry -Global scenarioThe key players

Mahindra & Mahindra Maruti Suzuki Tata motors

Limitation

Introduction

It begins as earlier as 1960.

History of the automobile begins as early as 1769, with the creation of steam-powered automobiles capable of human transport In 1806.

The first cars powered by internal combustion engines running on fuel gas appeared, which led to the introduction in 1885 of the ubiquitous modern gasoline or petrol-fueled internal combustion engine.

Continued to next slide

Continued from previoues slide

Indian Automobile IndustryThree

Wheeler

Multi utility

vehiclesPasse

nger carriers

Good carriers

Commerical

vehicles

Passenger car

Mini vans

Small cars

Medium cars

Luxury

cars

Two wheele

rsMotor

cycles

Scooters

Mopeds

The automotive industry remains one of the highest revenue-earning industries in India and contributed over 5% to India’s GDP in 2009, providing direct and indirect employment to more than 13 million people.

Before going further it is necessary to understand the Indian car market classification.

The Indian automobile industry mainly constitutes the following four segments:

Passenger vehicle Commercial vehicle Two wheeler Three wheeler

Continued from previous slide

Source: society of Indian Automobile manufacturers (SIAM)

Passenger vehicle segment:

Passenger cars and utility vehicles are the main segments of the Indian passenger vehicle industry with the former accounting for ~80% the total volumes.

Within the passenger car segment, the mini and compact segment together accounts for around 80% of total volumes.

production0

200400600800

10001200

943

753

1006

743

year-2010 year-2011

Source: society of Indian Automobile manufacturers (SIAM)

Source: society of Indian Automobile manufacturers (SIAM)

Commercial vehicle segment

2004-05

2005-06

2006-07

2007-08

2008-09

2009-10

2010-11

0100000200000300000400000500000600000700000800000

commercial vehicle segment

Source: society of Indian Automobile manufacturers (SIAM)

TWO WHEELER SEGMENT

2004-05

2005-06

2006-07

2007-08

2008-09

2009-10

2010-11

02000000400000060000008000000

10000000120000001400000016000000

Two wheeler segment

Source: society of Indian Automobile manufacturers (SIAM)

THREE WHEELERS SEGMENT

2004-05

2005-06

2006-07

2007-08

2008-09

2009-10

2010-11

0

200000

400000

600000

800000Three wheeler segment

Source: society of Indian Automobile manufacturers (SIAM)

Segment wise Share in Total Automobile Exports in last 7 years

2004

-05

2005

-06

2006

-07

2007

-08

2008

-09

2009

-2010

2010

-2011

0

500000

1000000

1500000

2000000

2500000

passenger vehiclescommercial vehiclesThree WheelerTwo wheelerGrand total

Source: society of Indian Automobile manufacturers (SIAM)

Current Scenario of Automobile Industry in Economy 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 is the second largest tractor manufacturer in the world.

Industry clustersThe Indian automotive industry has been noticed to have grown in clusters, which are evident in and around Manesar in North, Pune in West, Chennai in South, Jamshedpur-Kolkata in East and Indore in Central India (GOI 2006a). ACMA (2008a) describes such a pattern of investments in the country as ‘regionally balanced’. Figure below indicates the distribution of manufacturing plants of major automobile players across different states and union territories in India.

Automobile industry :Global scenario

The maximum numbers of cars are produced in Japan, followed by Germany, South Korea, India and USA. These 5 countries are stand at the top when the production of cars is concerned.

Company analysis All the car manufacturers are

giving tough competition to each other by opting innovative and unique ideas to capture the market. The car market deals with different types of cars like big cars, small cars, sports cars, luxurious cars, etc. For those, who cannot afford to buy a new car can go for used cars.

Some of the major players are:

Mahindra & Mahindra Maruti Suzuki Tata Motors

The Mahindra Group (SWOT Analysis) Strength Mahindra has been one of the strongest brands in the Indian automobile

market Mahindra group give employment to over 110,000 employeesExcellent branding and advertising, and low after sales service cost

Weakness

Mahindra’s partnership with Renault did not live up to international quality standards through their brand Logan

Opportunity.

Tapping emerging markets across the world and building a global brand.Fast growing automobile market. Growing in the market through electric car Reva (controlling stake) and entry into two-wheeler segments.

Threats Government policies for the automobile sector across the world

Ever increasing fuel prices. Intense competition from global automobile brands Substitute modes of public transport like buses, metro trains etc

Analysis of Financial Information

PROFIT & LOSS ACCOUNT: The operating income of the company is increasing at good phase and the same root has been followed by operating expenses. In other words cost of sales is also increasing. As, a result the PAT of the company is also increasing at a fair way year. Thus, the earning of the company is stable.

Balance sheet: The basic funding source of the company is equity share capital & reserve. The dependency of borrowed capital is showing a decreasing trend and the major portion of capital is invested in fixed assts also the external investment of the company is showing a investment trend.

Cash Flow Statement: The company earning good quality of profit the same is also supported by the cash flow statement .Moreover increasing investment activity in last year is also supported by the cash flow although in 2011 there was negative net cash flow and that was basically due to the heavy outflow related investment activity.

MARUTI SUZUKI INDIA LIMITED Strengths

Maruti Udyog limited (MUL) is in a leadership position in the market with a market share of 48.74

Major strength of MUL is having largest network of dealers and after sales service centers in the country.

Alto still beats the small car segment with highest number of sales. MUL is the first automobile company to start second hand vehicle sales

through its True-value entity.

Weaknesses Low interior quality inside the cars when compared to quality players like

Hyundai and other new foreign players like Volkswagen, Nissan etc. Maruti hasn’t proved itself in SUV segment like other players.

Opportunities MUL can start R&D on electric cars for a much better substitute of the

fuel. Maruti’s cervo 600 has a huge potential in tapping the middle class

segment and act as a strong threat to Nano Export capacity of the company is giving new hopes in American and UK

markets

Threats MUL recently faced a decline in market share from its 50.09% to 48.09 %

in the previous year(2011) China may give a good competition as they are also planning to enter

into Indian car segment

Analysis of financial information-

Profit and loss- The operating income of the company is increasing gradually and the cost of the sales is also increasing at a fair ways year after year. Thus, the earning of the company is stable

. Balance sheet: The equity share capital of the company

remaining .And on the other hand the secured loans are increasing gradually but the unsecure loans are decreasing. . The increasing trends of fixed assts indicate that the most of the capital is invested in fixed assts but the external investment is fluctuating year after year.

Profits & loss: the operating income of the company is increasing

gradually and the same root has been followed by operating expenses. In the other word cost of the sales is also increasing at a fair ways year after year. Thus, the earning of the company is stable.

Tata Motors (SWOT Analysis)-

Strengths Market share leadership..  Innovation . Introducing Tata Nano.

Weaknesses Tata Motors is not well positioned in the luxury segment. Most of the automobiles Tata manufactures are based on

older platforms.

  Opportunities The Nano could sell well in other geographic markets. Product and services expansion Takeovers

Threats Rising material costs will create pressure to increase prices. There is a trending rise in diesel fuel costs which will hurt

Tata’s line of products

Analysis of financial information Profit and loss- The operating profit is showing a healthy increasing

trend. However the area of concern is that the EPS is very much fluctuating which means due to multiple financial factors.

Balance Sheet- Equity base is increasing but the company is not having preference capital. The company is also utilizing the leverage advantage by having suspension amount of secured and unsecured loan.

Cash flow- The operating activity is fluctuating i.e. high quality

profit is not guaranteed other fig. are more or less rational.

Ratio -All profitable ratios more or less stable and satisfactory. Current and quick ratios are showing a very poor position .interest coverage ratio is also very safe and showing an increasing trend which is optimistic.

Limitation of study

.

Sample size Lack of available and/or reliable

data Lack of prior research studies on

the topic

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