Automobile Industry Term paper

7/30/2019 Automobile Industry Term paper

1/77

NAME: GAUTAM TAHLANI

ROLL NO: 168

SEMESTER: V

COURSE: BACHELOR OF BUSINESS ADMINISTRATION

MENTOR: PROF. MOHAMMED FEROZ

TOPIC: THE AUTOMOBILE INDUSTRY

DATE: 20-12-2012

Term Paper submitted in Partial fulfillment

of

The requirements of the Graduate Degree

in

BACHELOR OF BUSINESS

ADMINISTRATION (HONOURS)

J.D.BIRLA

INSTITUTE At the

JADAVPUR

UNIVERSITY At

KOLKATA

1 | P a g e


2/77

ACKNOWLED GEM ENT

I would like to express my gratitude to all those who gave me their support to complete mydissertation. I express my feelings and gratitude and sincere thanks to the director of our

college, Dr. Asit Datta.

I am deeply indebted to my mentor/supervisor, Mr. MOHAMMED FEROZ for his

unending support, direction and guidance throughout the course of research of material for

the project as well as for the final compilation.

I would also like to express my heartfelt thanks to the coordinators and staff of the

Learning Resource Centre of our college, who assisted me to avail the relevant books and

allowed me to carry out the necessary research for my project work. The various

websites from which information was acquired have proved to be very helpful and valuable

sources of information in my project.

I would further like to acknowledge my parents and friends for their indispensable support to

make this project a success.

2 | P a g e


3/77

INDEX

Sl No. Contents Pg. No.

1. Introduction 7-8

2. Literature Review

2.1 Overview. 10-11

2.2 History. 11

2.3 Latest Developments. 11-12

2.4 Growth of Automobile Industr y. 12-13

2.5 Characterist ics of Indian Automobile Market. 13-14

2.6 Exports. 16

2.7 S.W.O.T. Analys is. 15-17

2.8 PESTLE Analys is. 17-19

2.9 Segments of Automobile Industry. 19-22

2.10 Economy 22

2.11 Factors Influenc ing Growth of This Industry. 22-25

2.12 Industry Profile. 25-26

3. Research Methodol ogy. 27-31

4. Hypot hesis. 32-33

5. Data Analysis. 34-41

3 | P a g e


4/77

6. Result.

6.1 Findings. 41-42

6.2 Recommendat ions. 42-43

7. Conclusion. 44-45

8. Limitations. 46-47

9. Annexure. 48-78

10. Bibliography.79

4 | P a g e


5/77

1. INTRODUCTION

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

demonstrated sustained growth as a result of increased competitiveness and relaxed 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 attracted

significant India-specific investment by multinational automobile manufacturers. According to

New York Times, India's strong engineering base and expertise in the manufacturing of low-

cost, fuel-efficient cars has resulted in the expansion of manufacturing facilities of several

automobile companies like Hyundai Motors, Nissan, Toyota, Volkswagen and Suzuki.

We are all well aware of the fact that, for decades the Indian automobile industry was way

behind some of the most influential economies in the world like USA and Japan. Coming to the

automotive trends, today, the Indian automobile industry is one of the most vibrant, modern and

upbeat automobile markets in the world. It is also the second largest two-wheeler market in the

global map. The Indian automotive industry has flourished like never before in the recent years.

The automobile industry in India is the

Ninth largest in the world.

This extra-ordinary growth that the Indian automotive industry has witnessed is a result of a

two major factors namely, the improvement in the living standards of the middle class, and an

increase in their disposable incomes. Moreover, the liberalization steps, such as, relaxation of

the foreign exchange and equity regulations, reduction of tariffs on imports, and refining thebanking policies, initiated by the Government of India, have played an equally important role

in bringing the Indian Automotive industry to great heights. It is estimated that the sale of

passenger cars have tripled compared to their sale in the last five years. It's also to be noted that

the demand for luxurious models, SUVs, and mini-cars for family owners, have shot up,

largely due to increase in the consumer's buying capacity. The increased demand for Indian

automobiles has resulted in a large number of multinational auto companies, especially from

Japan, U. S. A., and Europe, entering the Indian market and working in collaboration with the

Indian firms. Also, the institutionalization of automobile finance has further paved the way to

sustain a long-term high growth for the industry.

OVER V I E W OF THE A U TO S E G M ENT

Indians have emerged as avid car enthusiasts sporting their prized possessions as status symbols and

speed machines. Foreign car companies have discovered the Indian consumer as well as the R & D

potential in the Indian technical fraternity and are setting up manufacturing plants right and left across

5 | P a g e


6/77

the country at lower costs. The Indian automobile industry is currently experiencing an unprecedented

boom in demand for all types of vehicles. This boom has been triggered primarily by two factors: (1)

increase in disposable incomes and standards of living of middle class Indian families estimated to be as

many as four million in number; and

(2) The Indian government's liberalization measures such as relaxation of the foreign exchange and

equity regulations, reduction of tariffs on imports, and banking liberalization that has fueled financing-

driven purchases.

Industry observers predict that passenger vehicle sales will triple in five years to about one million, and as

the market grows and customer's purchasing abilities rise, there will be greater demand for higher-end

models which currently constitute only a tiny fraction of the market. These trends have encouraged many

multinational automakers from Japan, U. S. A., and Europe to enter the Indian market mainly through

joint ventures with Indian firms. India is increasingly becoming a global automotive hub both for the

vehicles and component industry. India is fast integrating itself into the world economy and open to

international automotive companies, who are increasingly investing in India.

2. LITERATURE REVIEW

6 | P a g e


7/77

2.1 Overview

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

growing globally. India manufactures over 17.5 million vehicles (including 2 wheeled

and 4 wheeled) and exports about 2.33 million every year. It is the world's secondlargest manufacturer of motorcycles, with annual sales exceeding 8.5 million in 2009.

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 vehicle producer 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 of passenger cars, behind Japan, South Korea, and Thailand. 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.

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 hasattained 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 channeled 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 is the sector is high and increasing and the life cycle stage is

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 Indian Automotive sector are

7 | P a g e


8/77

high and these barriers are study. 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.

As noted by NMCC (2006), competitiveness of manufacturing sector is a very broad multi-dimensional concept that embraces numerous aspects such as price, quality, productivity,efficiency and macro-economic environment. The OECD definition of competitiveness, which ismost widely quoted, also considers employment and however, many OEMs also provide orupgrade technologies of auto-component manufacturers to build up supply chain sustainability,while being exposed to international competition, as features pertaining to competitiveness.There are numerous studies on auto industry in India, published by industry associations,consultancy organizations, research bodies and peer-reviewed journals. In this section, variousstudies on the Indian auto industry are reviewed, under different heads pertaining tocompetitiveness, namely, global comparisons, policy environment and evolution of the Indianauto industry, productivity, aspects related to supply-chain and industrial structure and

technology and other aspects.

The competitive advantage of the automobile companies are maintained through their different

strategic management and marketing management processes. Strategic management is a field

that deals with the major intended and emergent initiatives taken by general managers on behalf

of owners, involving utilization of resources, to enhance the performance of firms in their

external environments. The soaring growth of the automobile companies is how they create the

basis of competition. The basis of competition relates to how an organization will produce its

product offerings, together with the basis as to how it will act within a market structure, and

relative to its competitors, like - A differentiation approach, in which a multitude of market

segments are served on a mass scale. An example will include the array of products producedby Unilever, or Procter and Gamble, as both forge many of the world's noted consumer brands

serving a variety of market segments, or a cost-based approach, which often concerns economy

pricing.Marketing Management on the other handpackages and clearly communicates the best

strategic thinking to meet the decision-making needs of knowledgeable executives managing

real-world businesses. If the company has obtained an adequate understanding of the customer

base and its own competitive position in the industry, marketing managers are able to make

their own key strategic decisions and develop a marketing strategy designed to maximize the

revenues and profits of the firm. The selected strategy may aim for any of a variety of specific

objectives, including optimizing short-term unit margins, revenue growth, market share, long-

term profitability, or other goals. Marketing management often makes use of various

organizational control systems, such as sales forecasts, sales force and reseller incentive

programs, s a les f o rce ma n a g e ment s y stem s , and c usto m e r r elationship ma n a g e ment tools

(CRM). Recently, some software vendors have begun using the term "m a rk e ti n g op e r a ti ons

m a n a g e men t " or "ma r k e ti ng r e sour c e man a g e men t " to describe systems that facilitate an

integrated approach for controlling marketing resources. In some cases, these efforts may be

8 | P a g e
http://en.wikipedia.org/wiki/Sales_force_management_systemhttp://en.wikipedia.org/wiki/Customer_relationship_managementhttp://en.wikipedia.org/wiki/Marketing_Operations_Managementhttp://en.wikipedia.org/wiki/Marketing_Operations_Managementhttp://en.wikipedia.org/wiki/Marketing_Resource_Managementhttp://en.wikipedia.org/wiki/Customer_relationship_managementhttp://en.wikipedia.org/wiki/Marketing_Operations_Managementhttp://en.wikipedia.org/wiki/Marketing_Operations_Managementhttp://en.wikipedia.org/wiki/Marketing_Resource_Managementhttp://en.wikipedia.org/wiki/Sales_force_management_system


9/77

linked to various supp l y c h a in m a n a g e ment systems, such as e nte r p rise re s our c e planni n g

(ERP), mat e ri a l r e qui r e ments pl a nning (MRP), e f fi c ient c onsum e r re sponse (ECR), and

invento r y man a g e ment systems.

For the auto industry, it was easier to choose which brands to benchmark. The largest auto

brands together have significantly greater market share than all the other automanufacturers. We chose the corporate brand rather than the product brand as automobile

company reputations are built on the corporate brands first and foremost. With product

brands in a state of flux, given all the issues affecting the auto industry, we also saw this as

a more useful approach to take.

2.2 History

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 of Jeep CJ-3A utility vehicles under license from Willys. The company soon

branched out into the manufacture of light commercial vehicles (LCVs) and agricultural

tractors. 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 of Jeep CJ-3A

utility vehicles under license from Willys. The company soon branched out into the

manufacture of light commercial vehicles (LCVs) and agricultural tractors. Following

economic liberalization in India in 1991, the Indian automotive industry has demonstrated

sustained growth as a result of increased competitiveness and relaxed restrictions. Several

Indian automobile manufacturers

Such as Tata Motors, Maruti Suzuki and Mahindra and Mahindra, expanded their domestic

and international operations.

2.3 Latest developments

After recent slowdown in industry globally, industry is back on progress path with a bright

looking future ahead. Indian automobile industry is ready to rule export market. According to

KPMG, Indian auto manufacturers are likely to soon join the bandwagon of established

international automobile giants, such as Toyota, Hyundai, Volkswagen and Honda, as they are

well positioned to significantly increase their market share in the coming five years (till 2014).

Indian automakers are likely to see good response for their products in the international market

due to low cost advantage. The Indian automobile industry is going through a technological

9 | P a g e
http://en.wikipedia.org/wiki/Supply_chain_managementhttp://en.wikipedia.org/wiki/Enterprise_resource_planninghttp://en.wikipedia.org/wiki/Enterprise_resource_planninghttp://en.wikipedia.org/wiki/Material_requirements_planninghttp://en.wikipedia.org/wiki/Efficient_Consumer_Responsehttp://en.wikipedia.org/wiki/Inventory_managementhttp://en.wikipedia.org/wiki/Inventory_managementhttp://en.wikipedia.org/wiki/Supply_chain_managementhttp://en.wikipedia.org/wiki/Enterprise_resource_planninghttp://en.wikipedia.org/wiki/Enterprise_resource_planninghttp://en.wikipedia.org/wiki/Material_requirements_planninghttp://en.wikipedia.org/wiki/Efficient_Consumer_Responsehttp://en.wikipedia.org/wiki/Inventory_managementhttp://en.wikipedia.org/wiki/Inventory_management


10/77

change where each firm is engaged in changing its processes and technologies to sustain the

competitive advantage and provide customers with the optimized products and services.

Starting from the two wheelers, trucks, and tractors to the multi utility vehicles, commercial

vehicles and the luxury vehicles, the Indian automobile industry has achieved tremendous

amount of success in the recent years. The automobile industry had a growth of 15.4 % during

April-January 2007, with the average annual growth of 10-15% over the last decade or so.

Consistent growth and dedication have made the Indian automobile industry the secondlargest

tractor and two-wheeler manufacturer in the world. It is also the fifth-largest commercial

vehicle manufacturer in the

World. Not only the Indian companies but also the international car manufacturing companies

are focusing on compact cars to be delivered in the Indian market at a much smaller price.

Moreover, the automobile companies are coming up with financial schemes such as easy EMI

repayment systems to boost sales.

2.4 GROWTH OF THE AUTOMOBILE INDUSTRY

India's automobile exports have grown consistently and reached $4.5 billion in 2009, with

United Kingdom being India's largest export market followed by Italy, Germany, Netherlands

and South Africa. India's automobile exports are expected to cross $12 billion by 2014.

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 is getting transferred to the

end consumer. The price of oil and petrol affect the driving habits of consumers and the type of

10 | P a g e


11/77

car they buy.

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

capital efficiency. Having quality manpower, infrastructure improvements, 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. Utilizing manufacturingplants 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 favorable 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.

2.5 Characteristics of the Indian automobile market

1. The Tax and Duty structure: 60% of the final showroom price comprises of variousforms of duties and taxes. There is excise duty, import duties on components, Central Sales

tax, state sales tax, Octroi, Road tax. All this heavily affects the pricing strategies of the

automobile companies.

2. Differential taxation: The sales tax structure is not standardized across the country. At

present it varies between 4% and 12% from state to state. This leads to a substantial differencein prices across different states. This has caused many a problem to dealers in states having

higher rates of sales tax because customers who are in the know of things do not hesitate to buy

vehicles from neighboring states, which have lower sales tax. Moreover, there are tax benefits

in buying from Union territories also. The sales tax structure has just recently been standardized

at 12%.

This has resulted in price increase in some states, which had lower rates.

3. Reasons for buying: For many Indian buyers the reason for buying a car is not for

transportation, utility or anything else. The primary motive is to use it as a tax saving device!!!Businesses in India get depreciation benefits on their assets. So purchasing of a car is done in

order to save on taxation by claiming depreciation on the vehicles value. This leads to another

characteristic of the market, which is the March, and September end buying rush. The tax system

allows for 40% depreciation on the asset value if an asset is purchased before the 31st of March

and 20% depreciation benefit if it is purchased before the 30th of September in a financial year.

Nearing the end of these months demand spurts drastically and there is a mad rush to get delivery

11 | P a g e


12/77

of the vehicles and get them registered before the month end. Dealers who have ready stock, and

thus can give immediate delivery are in an advantageous position in these times. Even the Road

Tax Office makes a quick buck by backdating registrations for those who could not procure their

vehicles before the deadline.

4. Comparatively less evolution to the medium and premium segment: In the mid1990s most of the new foreign players who came into the market, came in with mid-sized cars

because they felt that the Indian market, like other developing markets, would evolve from the

small cars to the mid-sized segment. This, however, has not happened and even today the

strongest segment, both, in terms of volumes and growth is the small car segment. Growth in the

mid-sized and premium segments has been sluggish and slow. These still remain small volume

segments. This has led to manufacturers rethinking their strategies towards small sized cars.

5. Role of rumors and word of mouth: Buyers in India are a closely-knit group. The socialsystem in India is also tilted towards joint families. Word of mouth and peer opinion play a very

significant part in deciding which make of car to buy. Rumors about price discounts, mileage or

quality problems in cars spread like wild fire and have seriously affect sales.

6. The Prices sensitive market: The buyer in India is very price sensitive. Demographicsshow that 20% of the Indian population is under poverty line and 60% consists of middle class.

The segments are very price sensitive and always go for the economic options. That is why we

see that most of the Indian automobile companies market their cars on price and have many

upgraded versions in the A and B segment.

7. Most number of Players: The Indian automobile industry has the more number of playersthan any other country in the world. Whereas, in the other countries, there are normally six toseven players at a time.

8. Foreign Companies: Most of the Indian automobile companies are either wholly ownedsubsidiaries of any foreign company or a joint venture between an Indian Company and a

foreign

Company.

9. High Growth rate: Indian automobile market is growing faster than the world automobilemarket. The world automobile market is growing at 2% per annum, whereas the Indian

automobile market is growing at five to six percent per annum.

10. Domination of Compact cars: In other countries it is the mid-size segment that isdominating the market, whereas the compact size passenger cars dominate the Indian passenger

car market.

12 | P a g e


13/77

2.6 Exports

India's automobile exports have grown consistently and reached $4.5 billion in 2009, with

United Kingdom being India's largest export market followed by Italy, Germany, Netherlands

and South Africa. India's automobile exports are expected to cross $12 billion by 2014.

2.7 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 classifieds strengths (S) orweaknesses (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 labour cost advantage

Competitive auto component vendor base.

Government incentives for manufacturing plants.

Strong engineering skills in design etc

Weakness

Low labour productivity.

High interest costs and high overheads make the production uncompetitive.

Various forms of taxes push up the cost of production.

Low investment in Research and Development.

Infrastructure bottleneck.

13 | P a g e


14/77

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

The automobile industry in India has posted a rather good performance in the past few months

and one of the sectors that is benefiting from the downstream good effects is the auto ancillarysector that supplies inputs to build automobiles.

So hunky dory are things for the sector is that things like interest rate hikes and raw material

hikes would be temporary glitches for the sector. The growth in auto sales volumes

has resulted in a significant improvement in capacity utilization and operating cash

flow for the auto suppliers, said Pragya Bansal, an analyst with Fitch Ratings. The

Ratings agency feels that Indias auto suppliers will in 2011 have stable and may inface have better prospects on the back of improved profitability and better demand.

The auto ancillary industry gets demand from OE (Original Equipment) manufacturers and

the replacement market, said Avinash Gupta, Vice President Research Equity, and BonanzaPortfolio. OE demand is dependent on the number of new cars sold and the replacement

market

is dependent on the age of vehicles and number of vehicles. Whilst demand from the

replacement market is expected to be good demand from OE manufacturers may face a bit of

pressure. The OEM market growth numbers would moderate a bit because of base effect, said

Gupta.

14 | P a g e


15/77

But overall, regardless of the rate of growth in the auto sector growth per se will be there.

Rising industrial production, credit, and consumer confidence will all lead to a demand for

autos and consequently for auto ancillaries. And yes the global markets, which had taken a

beating in the wake of the 2008 crash are expected to bounce back at least as far as automotives

go. The growth will be boosted by exports as global automotive demand picks up in 2011,said Bansal. The demand in the developed world is going to pick up, and in that case the

demand from overseas would also come back to the industry, said Gupta.

There are various new facets that will be coming into the industry in 2011. According to

inputs from Fitch Ratings the growth momentum that started in 2010 will continue in 2011.

Original equipment manufacturers would resort to aggressive marketing to get market share.

The replacement market will also contribute substantially to growth. In 2010 a combination of

capacity constraints as also strong demand from OEMs mean that this demand segment will

also be a focus for growth for the auto ancillary segment in 2011.

There are however some hurdles that the industry will have to face and of these imports are

one. The international trade policy that India has entered into/is negotiating with many of itstrading partners could make the domestic auto sector highly competitive over the medium

term. These trade agreements aim to reduce trade barriers and promote free trade across

partner countries, said Bansal. Interest rates for vehicles have been on the rise and are

currently hovering in the 15 to 17 per cent bracket. But even this will have a minor impact on

the industry. The interest rates have a significant impact in case of commercial vehicles and

tractors. The effect in the personal vehicles segment is relatively smaller. The ancillary

industry would be impacted accordingly, said Gupta. The budget that is expected to be

presented at the end of February may be something that will affect the industry. An increase in

excise duties would hit the industry. The most major factor would be any weakening in the

demand for automobiles that would affect demand for automotive ancillary products. But at

this point of time market observers are positive on the sector. Fitch Ratings expects the

ratings of Indian auto suppliers to largely remain stable with a positive bias emerging, due to

improved profitability and better demand prospects, said Fitch Ratings Bansal.

This is a dynamic sector of Indian economy. India is aspiring to become global hub for small

cars. Indian component manufacturers are also looking for buyers overseas. In case the

economy in the developed world picks up then the demand for auto and auto components could

pick up. The sectors offer good investment opportunity to the long term investors, said

Bonanzas Gupta.[ Monday, January 31, 2011By Manik K. Malakar, afternoon]

2.8 PESTLE ANALYSIS

Political

In 2002, the Indian government formulated an auto policy that

15 | P a g e


16/77

aimed

at promoting integrated, phased, enduring and self-sustained growth of the

Indian automotive industry

Allows automatic approval for foreign equity investment up to 100% in the

automotive sector and does not lay down any minimum investment criteria.

Formulation of an appropriate auto fuel policy to ensure availability of adequate amount of

appropriate fuel to meet emission norms Confirms the governments intention on

harmonizing the regulatory standards with the rest of the world. Indian government auto

policy aimed at promoting an integrated, phased and conductive growth of the Indian

automobile industry. Allowing automatic approval for foreign equity investment up to 100%

with minimum investment criteria. Establish an international hub for manufacturing small,

affordable passenger cars as well as tractor and two wheelers. Ensure a balanced transition to

open trade at minimal risk to the Indian economy and local industry. Assist development of

vehicle propelled by alternate energy source. Lying emphasis on R&D activities carried out

by companies in India by giving a weighted tax deduction of up to 150% for in house

research and R&D activities. Plan to have a terminal life policy for CVs along with

incentives for replacement for such vehicles. Promoting multi-model transportation and the

implementation of mass rapid transport system.

Economic

The level of inflation Employment level per capita is right. Economic pressures on the

industry are causing automobile companies to reorganize the traditional sales process.

Weighted tax deduction of up to 150% for in-house research and R & D activities. Govt. has

granted concessions, such as reduced interest rates for export financing. The Indian economyhas grown at 8.5% per annum. The manufacturing sector has grown at 8-10 % per annum in

the last few years. More than 90% of the CV purchase is on credit. Finance availability to CV

buyers has grown in scope during the last few years. The increased enforcement of

overloading restrictions has also contributed to an increase in the no. of CVs plying on Indian

roads. Several Indian firms have partnered with global players. While some have formed joint

ventures with equity participation, other also has entered in to technology tie-ups.

Establishment of India as a manufacturing hub, for mini, compact cars, OEMs and for auto

components.

Social

Since changed lifestyle of people, leads to increased purchase of automobiles, so automobile

sector have a large customer base to serve. The average family size is 4, which makes it

favorable to buy a four wheeler. Growth in urbanization, 4th largest economy by ppp index.

Upward migration of household income levels. 85% of cars are financed in India. Car priced

below USD 12000 accounts for nearly 80% of the market. Vehicles priced between USD

16 | P a g e


17/77

7000-

12000 form the largest segment in the passenger car market. Indian customers are highly

discerning, educated and well informed. They are price sensitive and put a lot of emphasis

on value for money. Preference for small and compact cars. They are socially acceptable

even amongst the well off. Preference for fuel efficient cars with low running costs.

Technological

More and more emphasis is being laid on R & D activities carried out by companies in India.

Weighted tax deduction of up to 150% for in-house research and R & D activities. The

Government of India is promoting National Automotive Testing and R&D Infrastructure

Project (NATRIP) to support the growth of the auto industry in India Technological solutions

helps in integrating the supply chain, hence reduce losses and increase profitability. Customized

solutions (designer cars, etc) can be provided with the proliferation of technology Internet

makes it easy to collect and analyze customer feedback With the entry of global companies into

the Indianmarket, advanced technologies, both in product and production process has developed. With

the development or evolution of alternate fuels, hybrid cars have made entry into the

market. Few global companies have setup R &D centers in India. Major global players like

audits, BMW, Hyundai etc have setup their manufacturing units in India.

Legal

Legal provision relating to environmental population by automobiles. Legal provisions relating

to safety measures. Confirms the governments intention on harmonizing the regulatory

standards with the rest of the world Indian government auto policy aimed at promoting anintegrated, phased and conductive growth of the Indian automobile industry. Establish an

international hub for manufacturing small, affordable passenger cars as well as tractor and two

wheelers. Ensure a balanced transition to open trade at minimal risk to the Indian economy

and local industry.

Environmental

Physical infrastructure such as roads and bridges affect the use of automobiles. If there is good

availability of roads or the roads are smooth then it will affect the use of automobiles. Physical

conditions like environmental situation affect the use of automobiles. If the environment ispleasant then it will lead to more use of vehicles. Technological solutions helps in integrating

the supply chain, hence reduce losses and increase profitability. With the entry of global

companies into the Indian market, advanced technologies, both in product and production

process have developed. With the development or evolution of alternate fuels, hybrid cars have

made entry

into the market. Few global companies have setup R &D centers in India. Major global

17 | P a g e


18/77

players like Audi, BMW, and Hyundai etc have setup their manufacturing units in India

2.9 Segments of the Automobile Industry

Heavy co mmercial veh i cles:

In India the commercial vehicles are graded according to their Gross Vehicle Weight

(GVW). It is as under:

LCV: Intermediate commercial vehicle with GVW of 8 to 10 ton

MCV: Medium commercial vehicles with GVW of 10 to 15 ton.

HCV: GVW of 16 ton and above.

But the gradation apart, the segment is more recognizes by its utility such as the vehicles which

carry passenger are called buses and those specializing in carrying loads as trucks. Since 80% of

commercial vehicles are purchased on credit, the availability of credit is a major factor

influencing demand. The credit squeeze affects the demand negatively. The other important

factors influencing demand of CV are depreciation norms, diesel prices and changes in the

Motor Vehicle Act.

Ligh t commer cial veh icles:

Like the Heavy vehicles segment, the LCV, which are also essentially freight carriers are

equally important. Small freight loads over small distance are transported through these

vehicles. In India in rural areas, these vehicles also ferry passengers over short distances.

This segment is much more populated and competitive than the HCV. The liberalization ofgovernment policy with respect to foreign, technical and financial collaboration lead to a

sudden spurt in technical collaboration in LCV segment.

The LCV segment is populated with six players with Telco being the traditional market leader

by a wide margin.

P asseng e r c a r se g me n t:

The first motorcar on the streets of India was seen in 1898. Mumbai had its first taxicabs in theearly

1900. Then for the next fifty years, cars were imported to satisfy domestic demand. The Indian

car industry can be classified, based on the price of the car into four segments. The demand for

passenger cars can be segmented on the basis of the user segment as those bought by taxi

operators, government/non government institutions, individual buyers etc. A major portion of

the demand in India accrues mainly from personal vehicle owner.

The demand for cars is dependent on a number of factors. The key variables are per capita

18 | P a g e


19/77

income, introduction of new models, availability & cost of car financing schemes, price of

cars, incidence of duties and taxes depreciation norms, fuel cost and its subsidization, public

transport facilities etc. The first four factors have positive relationship with the demand

whereas others have an inverse relationship with demand for cars.

Tw o Wh eelers S egmen t:

The two-wheeler segment like the passenger is very heterogeneous and could be split on basis

of usage, load capacity, stroke engine, utility and appeal. In India it is generally sub-

segmented into Motorbikes, Scooters and Mopeds. The promotional and marketing outgo

would rise steadily for the two-wheelers producers; the emphasis would now be on aesthetics,

design, and product positioning and market segmentation. As a result, the consumer would be

the ultimate beneficiary with the choice of more models with superior features.

Sp ecial Util ity Veh icles:

This segment is also a very important segment but finds very less mention among the analysts

in spite of its direct bearing on the economy. The probable reason for this trend is that the

vehicle seems mundane and lacks the glamour of the luxury cars. The segment comprises of

Tractors, Earth Moving Equipments and Material Handling.

The transformation of the Indian market for passenger cars is remarkable. A few years ago

you had a choice between three cars. Now the Indian car market has around thirty cars for the

consumers. From a stage where the consumer had to wait for months to get a car, the market

has turned in favor of the buyer. With new models and recession in the economy,manufacturers are doing everything to attract the consumers. In comparison with the kind of

cars available in developed countries, Indias passenger cars may appear primitive even today,

when a much wider choice is available than in earlier years.

Earlier, the choice was between three cars. The Ambassador from Hindustan Motors was phasedout from the European market before 1960. This car is still used by all the government agenciesand you still find that most taxis are of this make. For the urban employed class it was PremierPadmini, a Fiat version of the same vintage. Then came Maruti a 798 cc from Maruti Suzuki,which became the most popular car in the country.

The opening up of the economy and liberalization attracted investments form different parts ofthe globe. The result was wide range of cars in the Indian market. The joint venture betweenGovernment of India and Suzuki Motors of Japans produced Maruti 800 (798 cc), Omni E (796cc), Maruti Zen (993 cc), Maruti 1000 (970 cc) and Maruti Esteem (1298 cc). Hindustan Motorsoffer Ambassador ISZ (1817 cc), Contessa GLX (1817 cc). Other than the older models likePremier Padmini (1366 cc) and Premier 118 NE, the market now has new cars, including FiatUno (999 cc (1171 cc), Daewoo Cielo (1498 cc), Peugeot 309 (1360 cc), Opel Astra (1597 cc),Ford Escort (1299 cc), Honda City (1343 cc), and Mercedes E220 (2199 cc).

19 | P a g e


20/77

Until the 1980s the automobile industry in this country had charted an uneventful course. The

scenario showed a limited number of manufacturers, low levels of production and the use of

anachronistic technology. Hindustan Motors, for example, have continued with the use of the

old reliable Ambassador, making only cosmetic changes in the 1957-designed body. Premier

Auto did the same with the Fiat body that was newly introduced in 1964.

For a long time, owning a personal four-wheeler was considered a luxury in India, and a

limited road network with poor road surface did not help matters much. Production showed

only a very gradual upward curve from the 1950s until the early 1980s before Maruti came

into the scene.

Though the consumers are happy about the variety of cars available, the manufacturers are

worried. The drop in the demand and the inventory pile-up in most of the production units are

hitting the bottom line. Though all players claim that they are not in the market for short-term

gains, they admit that the present condition is far from attractive.

With sales remaining stagnant or going down, car manufacturers have started going all out

to win the customers. For the first time, car manufacturers in India offered heavy discounts.

Easy finance offers, free accessories and attractive warranty offers are the other soaps

offered now.

2.10 Economy

Around the world, there were about 806 million cars and light trucks on the road in 2007,

consuming over 260 billion US gallons (980,000,000 m3) of gasoline and diesel fuel yearly.The automobile is a primary mode of transportation for many developed economies. The

Detroit branch of B oston Consult ing G r oup predicts that, by 2014, one-third of world

demand will be in the four B R I C markets (Brazil, Russia, India and China). Other

potentially powerful automotive markets are I r a n and I ndo n e si a .[ 8] Emerging auto markets

already buy more cars than established markets. According to a J.D. Power study, emerging

markets accounted for 51 percent of the globalli gh t - v e hicle sales in 2010. The study expects

this trend to accelerate.

2.11 FACTORS INFLUENCING GROWTH OF THIS INDUSTRY

The factors playing a key role in the Indian automobile industry trends are as follows:

Competition:

With the coming of the multinationals, an immense pressure has grown on the Indian

companies. As a result, a lot of joint ventures have taken place, some others have invested

20 | P a g e
http://en.wikipedia.org/wiki/Boston_Consulting_Grouphttp://en.wikipedia.org/wiki/Boston_Consulting_Grouphttp://en.wikipedia.org/wiki/BRIChttp://en.wikipedia.org/wiki/Iranhttp://en.wikipedia.org/wiki/Indonesiahttp://en.wikipedia.org/wiki/Light_commercial_vehiclehttp://en.wikipedia.org/wiki/Light_commercial_vehiclehttp://en.wikipedia.org/wiki/Boston_Consulting_Grouphttp://en.wikipedia.org/wiki/Boston_Consulting_Grouphttp://en.wikipedia.org/wiki/BRIChttp://en.wikipedia.org/wiki/Iranhttp://en.wikipedia.org/wiki/Indonesiahttp://en.wikipedia.org/wiki/Light_commercial_vehicle


21/77

heavily on R&D

to build their own empires and the rest have perished.

Customer:

Armed with higher buying power and an ever increasing expectation from products and

services, the customer is undoubtedly the king and has propelled a fierce competition among

the major players in the market.

Growth in the road infrastructure increases demand for vehicles:

Indian highways and roads have improved a lot in quality and connectivity in the last 20

years. Projects like the Golden Quadrilateral aim to make even remote areas accessible by

road. Some of the National Highways are of international standards. This has made road

transport a viable, cost effective and speedy option both for goods and passenger traffic.

Urbanization changes the face of Indian auto industry:

Joint families in towns and villages have given away to migration of the younger generation

to cities in search of better opportunities. The new-age educated migrants and nuclear

families (many with double income couples) have a higher purchasing power. Presently, the

rate of

spread of urbanization is 30% which is likely to increase by 40% in 2030 (UN). Urbanization

has promoted infrastructural development and it is estimated to spread at a rate of $500 billion

in the

next 5-6 years.

Rising working class and middle class contribute to increased demandof automotives:

Post 1980s, a surging economy has created millions of new jobs in the private sector. This has

lead to a lot of prosperity in the working class and the middle income households. They are

able to provide for food, clothing and education and also are able to think of owning luxuries

like vehicles. According to the Planning Commission report, between the year 2003 and 2009,

130 million people would have been added to the working population. According to a finding

from McKinsey, the middle income group will grow from 50 million to 550 million by 2025.

Exhaustive range of options in price and models of automotives:

Indian consumer in 70s and 80s had to choose between and Premier Padmini or an

Ambassador. Now there are at least 123 different models of cars from 30 odd manufacturers

available. The price of the compact cars like Tatas Nano has made the world sit up and take

note of the truly unbeatable price points.

21 | P a g e


22/77

Attractive Finance Schemes for purchase of automotives:

Most nationalized and foreign banks have very tempting finance options and low interest

rates for purchase of cars and two wheelers. There are specialized companies that finance the

commercial vehicles. All this has made the dream of owning a vehicle an easy reality.

Pollution and Safety Norms:

Cars as well as two-wheelers have met the most stringent international norms of pollution.

Euro II vehicles have become the norm of the day all over India. Unfortunately, in the Indian

context, safety in motor vehicles is a relatively neglected area. Bad roads coupled with the

absence of adequate safety features in the vehicles such as airbag and crumple zone needs

immediate attention. But awareness is on the increase and the use of seat belts while driving

has been made mandatory.

Government:Unlike in the past, the Indian Government has gone through a total role reversal by becoming

the enabler rather than the controller. In the recent past it has started providing better

infrastructure, favorable atmosphere to attract investments and implementing growth oriented

economic

policies.

2.11.1 CONTRI BUTI ON TO THE ECONOMY

India is one of the fastest growing automobiles market in India. The automotive industry is one

of the highest revenue-earning industries in India and contributes 4.4% to Indias GDP and17.0% to the indirect tax collection. It is one of the largest sources of employment due to its

deep backward linkages (in metals such as steel, copper plastics, paint, glass, electronics,

capital equipment, warehousing and logistics) and forward linkages (including dealership

retails, credit and financing, logistics, advertising, repair and maintenance, petroleum products,

gas stations, insurance, service parts, etc). It provides direct and indirect employment to more

than 13 million people. In recent years, the automobile industry has seen an upsurge in its

exports to other countries.

Today, the Indian automobile industry is the worlds largest motorcycle manufacturer, the

second largest two-wheeler and tractor manufacturer, the fifth largest commercial vehiclemanufacturer and the fourth largest car maker in Asia. Apart from serving the domestic market,

the Indian auto sector has also become a sourcing hub for the global auto giants. In short, the

Indian automotive industry is set for exponential growth in the future.

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

22 | P a g e


23/77

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.

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 is the sector is high and

increasing and the life cycle stage is growth. With a rapidly growing middle class, all the

advantages of this sector in India are yet to be leveraged.

2.12 I NDUSTRY PROFI LE

After recent slowdown in industry globally, industry is back on progress path with a bright

looking future ahead. Indian automobile industry is ready to rule export market. According to

KPMG, Indian auto manufacturers are likely to soon join the bandwagon of established

international automobile giants, such as Toyota, Hyundai, Volkswagen and Honda, as they are

well positioned to significantly increase their market share in the coming five years (till 2014).

Indian automakers are likely to see good response for their products in the international market

due to low cost advantage. The Indian automobile industry is going through a technological

change where each firm is engaged in changing its processes and technologies to sustain the

competitive advantage and provide customers with the optimized products and services.

Starting from the two wheelers, trucks, and tractors to the multi utility vehicles, commercialvehicles and the luxury vehicles, the Indian automobile industry has achieved tremendous

amount of success in the recent years. As per Society of Indian Automobile Manufacturers

(SIAM) the market share of each segment of the industry is as follows:

The automobile industry had a growth of 15.4 % during April-January 2007, with the average

annual growth of 10-15% over the last decade or so. Consistent growth and dedication have

made the Indian automobile industry the secondlargest tractor and two-wheeler manufacturer

in the world. It is also the fifth-largest commercial vehicle manufacturer in the world. Not only

the Indian companies but also the international car manufacturing companies are focusing on

compact cars to be delivered in the Indian market at a much smaller price. Moreover, the

23 | P a g e


24/77

automobile companies are coming up with financial schemes such as easy EMI repayment

systems to boost sales.

There have been exhibitions like Auto-expo at Pragati Maidan, New Delhi to share the

technological advancements. Besides, there are many new projects coming up in the

automobile industry leading to the growth of the sector.

The Government of India has liberalized the foreign exchange and equity regulations and has

also reduced the tariff on imports, contributing significantly to the growth of the sector.

Having firmly established its presence in the domestic markets, the Indian automobile sector is

now penetrating the international arena. Vehicle exports from India are at their highest levels.

The leaders of the Indian automobile sector, such as Tata Motors, Maruti and Mahindra and

Mahindra are leading the exports to Europe, Middle East and African and Asian markets.

The Ministry of Heavy Industries has released the Automotive Plan 2006-2016, with the motive

of making India the most popular manufacturing hub for automobiles and its components in

Asia. The plan focuses on the removal of all the bottlenecks that are inhibiting its growth in the

domestic as well as international arena.

24 | P a g e


25/77

3. RESEARCH METHODOLOGYACCORDING TO N.G. DAS (STATISTICAL METHODS)

INTRODUCTION TO RESEARCH METHODOLOGY

Research is common parlance refers to a search for knowledge. One can also define research asa scientific and systematic search for pertinent information on a specific topic. In fact, research

is an art of investigation. According to Clifford Woody research comprises defining and

redefining problems, formulating hypothesis or suggested solutions, collecting, organizing and

evaluating data, making deductions and reaching conclusions; and at last carefully testing the

conclusions to determine whether they fit the formulating hypothesis. Like every subject this

topic of the handloom sector has also been thoroughly researched and the relevant information

has been rightly used.

DATA:

Data is a collection of facts, such as values or measurements. It can be numbers,words, measurements, observations or even just descriptions of things.

The term data refers to qualitative or quantitative attributes of a variable or set of variables. Data(plural of "datum") are typically the results of measurements and can be the basisof graphs, images, or observations of a set of variables. Data are often viewed as the lowestlevel of abstraction from which information and then knowledge are derived. Raw data refers toa collection of numbers, characters, images or other outputs from devices that collectinformation to convert physical quantities into symbols that are unprocessed.

Quantitative Data:

The term qualitative data is used to describe a type of information that can be counted orexpressed numerically. This type of data is often collected in experiments, manipulated andstatistically analyzed. Quantitative data can be represented visually in graphs, histograms,tables and charts.

Qualitative Data:

Quantitative data are those which focus on numbers and frequencies rather than on meaning

and experience. Quantitative data (e.g. experiments, questionnaires and psychometric tests)provide information which is easy to analyze statistically and fairly reliable. Quantitative

data are associated with the scientific and experimental approach and are criticized for not

providing an in depth description.

Qualitative data are concerned with describing meaning, rather than with drawing statistical

inferences. What qualitative data (e.g. case studies and interviews) lose on reliability they

25 | P a g e


26/77

gain in terms of validity. They provide a more in depth and rich description.

There are two methods of collecting data. They are:

Primary Data

It is a term for d a t a collected on source which has not been subjected to processing or any

other manipulation. It is the Data that has been c omp i led for a specific purpose, and has not

been collated or merged with others. Primary data is always collected from first-hand

experience.

Secondary Data

Secondary data is data collected by someone other than the user. Common sources of secondarydata for social science include censuses, surveys, organizational records and data collectedthrough qualitative methodologies or qualitative research. Primary data, by contrast, arecollected by the investigator conducting the research.

Secondary data analysis saves time that would otherwise be spent collecting data and,particularly in the case of quantitative data, provides larger and higher-quality databases thanwould be unfeasible for any individual researcher to collect on their own. In addition to that,analysts of social and economic change consider secondary data essential, since it isimpossible to conduct a new survey that can adequately capture past change and/ordevelopments.

COR RELA TIO N

The word correlation is used to denote the degree of association between variables. If twovariables x and y are so related that variations in the magnitude of one variable tend to beaccompanied by variations in the magnitude of other variables, they are said to be correlated. Ify tends to increase as x increases, the variables are said to be positively related. If y tends todecrease as x increases the variables are negatively correlated. If the values of y are not affectedby changes in the value of x, the variables are said to be uncorrelated.

Properties of correlation coefficient

The correlation coefficient r is independent of the choice of both origin and scale ofobservations the correlation coefficient r is a pure number and is independent of the unitsof measurement. The correlation coefficient r lies between 1& +1.

26 | P a g e
http://en.wikipedia.org/wiki/Datahttp://en.wiktionary.org/wiki/compiledhttp://en.wikipedia.org/wiki/Datahttp://en.wiktionary.org/wiki/compiled


27/77

Formulae,

REGRES SION A NALYSI S:

Regression analysis is a statistical tool for the investigation of relationships between variables.

Usually, the investigator seeks to ascertain the causal effect of one variable upon anotherthe

effect of a price increase upon demand, for example, or the effect of changes in the money

supply upon the inflation rate. To explore such issues, the investigator assembles data on the

underlying variables of interest and employs regression to estimate the quantitative effect of

the

causal variables upon the variable that they influence. The investigator also typically assesses the

statistical significance of the estimated relationships, that is, the degree of confidence that

the true relationship is close to the estimated relationship.

METHOD:

The method of least squares assumes that the best-fit curve of a given type is the curve that

has the minimal sum of the deviations squared (least square error) from a given set of data.

Suppose that the data points are , , ..., where is the independent

variable and is the dependent variable. The fitting curve has the deviation (error)

from each data point, i.e., , , ..., .

According to the method of least squares, the best fitting curve has the property that:

In regression analysis the researcher specifies an empirical model. For example, a very

common model is the straight line model which is used to test if there is a linear relationship

between dependent and independent variable. If a linear relationship is found to exist, the

variables are said to be correlated. However, correlation does not prove causation, as both

variables may be correlated with other, hidden, variables, or the dependent variable may

"reverse" because the independent variables, or the variables may be otherwise spuriously

27 | P a g e


28/77

correlated.

R2:

R-Square (R^2) is the proportion of variation in the dependent variable (Y) that can be explained

by the predictors (X variables) in the regression model. The value r2

is a fraction between 0.0and

1.0, and has no units. The r2

value of 0.0 means that knowing X does not help you predict Y.

When r2

equals 1.0, all points lie exactly on a straight line with no scatter. Knowing X lets

you

predict Y perfectly.

Adjusted R2:

Adjusted R-Square is computed using the formula 1-((1-R^2)*(N-1)/(N-k-1)).

When the number of observations (N) is small and the number of predictors (k) is large, there

will be a much greater difference between R-Square and adjusted R-Square (because the ratio

of (N-1)/(N-k-1) will be much less than 1).

By contrast, when the number of observations is very large compared to the number of

predictors, the value of R-Square and adjusted R-Square will be much closer because the ratio

of

(N-1)/(N-k-1) will approach 1.

Degrees of Freedom:

In statistics, the number of degrees of freedom is the number of values in the final calculationof a statistic that are free to vary.

Estimates of statistical parameters can be based upon different amounts of information ordata. The number of independent pieces of information that go into the estimate of aparameter is called the degrees of freedom (df). In general, the degrees of freedom of anestimate is equal to the number of independent scores that go into the estimate minus the

number of parameters estimated as intermediate steps in the estimation of the parameter itself(which, in sample variance, is one, since the sample mean is the only intermediate step).

P-VALUE:

P value is associated with a test statistic. It is "the probability, if the test statistic really were

distributed as it would be under the null hypothesis, of observing a test statistic [as extreme as,

or more extreme than] the one actually observed."The smaller the P value, the more strongly the

28 | P a g e


29/77

test rejects the null hypothesis, that is, the hypothesis being tested.A p-value of .05 or less

rejects the null hypothesis "at the 5% level" that is, the statistical assumptions used imply that

only 5% of the time would the supposed statistical process produce a finding this extreme if the

null hypothesis were true.

WHAT IS HYPOTHESIS?

Hypothesis testing is a common practice in science that involves conducting tests and

experiments to see if a proposed explanation for an observed phenomenon works in

practice. A hypothesis is a tentative explanation for some kind of observed phenomenon,

and is an

important part of the scientific method. The scientific method is a set of steps that is

commonly employed by those in scientific fields to give scientific explanations for various

phenomena.

Null hypothesis:

A type of hypothesis used in statistics that proposes that no statistical significance exists in a

set of given observations. The null hypothesis attempts to show that no variation exists

between variables, or that a single variable is no different than zero. It is presumed to be true

until statistical evidence nullifies it for an alternative hypothesis.

Alternative hypothesis:

Alternative hypothesis is the "hypothesis that the restriction or set of restrictions to be tested

does NOT hold." Often denoted H1. Synonym for 'maintained hypothesis. In hypothesis testing,

the null hypothesis and an alternative hypothesis are put forward. If the data are sufficiently

strong to reject the null hypothesis, then the null hypothesis is rejected in favor of an alternative

hypothesis. For instance, if the null hypothesis were that 1= 2 then the alternative hypothesis

(for a two-tailed test)would be 1 2.

29 | P a g e


30/77

4. HYPOTHESIS

PRODUCTION VALUE OF H.C.V.

H01: = 0 (No influence of production of medium and heavy commercial vehicles on sales of medium

and heavy commercial vehicles in India)

H11: 0 (influence of production of medium and heavy commercial vehicles on sales of medium

and heavy commercial vehicles in India)

EXPORT VALUE OF H.C.V.

H01: = 0 (No influence of exports of medium and heavy commercial vehicles on sales of medium and

heavy commercial vehicles in India)

H11: 0 (influence of exports of medium and heavy commercial vehicles on sales of medium and


DOMESTIC CONSUMPTION OF H.C.V.

H01: = 0 (No influence of Domestic Consumption of L.C.V. on Sales Value in India)

H11: 0 (Influence of Domestic Consumption of Light Commercial vehicles on Sales Value

of Light Commercial vehicles in India)

IMPORT VALUE OF M.H.C.V.

H01: = 0 (No influence of imports of medium and heavy commercial vehicles on sales of medium and


H11: 0 (influence of imports of medium and heavy commercial vehicles on sales of medium and


DOMESTIC CONSUMPTION OF M.H.C.V.

H01: = 0 (No influence of Domestic Consumption of M.H.C.V. on Sales Value of in India)

H11

: 0 (Influence of Domestic Consumption of M.H.C.V. on Sales Value in India)

30 | P a g e


31/77

MARKET SIZE OF M.H.C.V.

H01: = 0 (No influence of Market Size of M.H.C.V. on Sales Value in India)

H11: 0 (Influence of Market Size of M.H.C.V. on Sales Value of in India)

PETROLEUM PRICES ON SALES OF M.H.C.V.

H01: = 0 (No influence of petroleum prices of M.H.C.V. on Sales Value in India)

H11: 0 (Influence of petroleum prices of M.H.C.V. on Sales Value of in India)

PCY ON SALES OF M.H.C.V.

H01

: = 0 (No influence of Market Size of M.H.C.V. on Sales Value in India)

H11: 0 (Influence of Market Size of M.H.C.V. on Sales Value of in India)

31 | P a g e


32/77

5. Data Analysis

T a bl e -1

Shows the yearly sales value data of Light commercial vehicles in India and depicts the rise inthe sales value of Light Commercial vehicles in India from 2448.4 crores to 18772.1 crores

through the years 2001 to 2011. It shows a constant growth in the sales value of Light

Commercial vehicles in India.

T a bl e -2

Shows the yearly exports value data of Light commercial vehicles in India and depicts the rise

in the exports value of Light commercial vehicles in India from 227.6 crores to 828.2 crores

through the years 2001 to 2011.

T a bl e -3

Shows the yearly imports value data of Light commercial vehicles in India and through the years

2003 to 2011.

T a bl e -4

Shows the yearly domestic consumption data of Light commercial vehicles in India and depicts

the rise in the domestic consumption of Light commercial vehicles in India from 2220.8 crores

to 17944.4 crores through the years 2001 to 2011. It shows a constant growth in the domestic

consumption of Light commercial vehicles in India.

T a bl e -5

Shows the yearly Market Size data of Light commercial vehicles in India and depicts the rise

in the Market Size of Light commercial vehicles in India from 2448.4crores to 18772.6 crores

through the years 2001 to 2011. It shows a constant growth in the market size of Light

commercial vehicles in India.

T a bl e -6

Shows the yearly sales value data of Medium and Heavy commercial vehicles in India anddepicts the rise in the sales value of Medium and Heavy commercial vehicles in India

from 5596.5 crores to 38719.9 crores through the years 2001 to 2011. It shows a constant

growth in the sales value of Medium and Heavy Commercial vehicles in India.

32 | P a g e


33/77

T a bl e -7

Shows the yearly exports value data of Medium and Heavy commercial vehicles in India and

depicts the rise in the exports value of Medium and Heavy commercial vehicles in India

from 382.8 crores to 1838.5 crores through the years 2001 to 2011.

T a bl e -8

Shows the yearly imports value data of Medium and Heavy commercial vehicles in India and

the import value of Medium and Heavy commercial vehicles in India from 38.1 crores to 315.5

crores through the years 2001 to 2011.

T a bl e -9

Shows the yearly domestic consumption data of Medium and Heavy commercial vehicles in

India and depicts the rise in the domestic consumption of Medium and Heavy commercial

vehicles in India from 5251.8 crores to 37196.9 crores through the years 2001 to 2011. It shows

a constant growth in the domestic consumption of Medium and Heavy commercial vehicles in

India.

T a ble - 10

Shows the yearly Market Size data of Medium and Heavy commercial vehicles in India and

depicts the rise in the Market Size of Medium and Heavy commercial vehicles in India

from 5634.6crores to 39035.3 crores through the years 2001 to 2011. It shows a constant

growth in the market size of Medium and Heavy commercial vehicles in India.

T a bl e- 1 1

Shows the yearly Sales(in Rs. crores) and Exports Value(in Rs. crores) data of Light

Commercial vehicles in India along with their correlation coefficient. The correlation coefficient

is 0.775172 which shows there is a medium correlation between the Sales of Light Commercial

vehicles in India and the Exports Value of Light Commercial vehicles in India.

T a bl e -1 2

Shows the yearly Sales(in Rs. crores) and Imports Value(in Rs. crores) data of Light

Commercial vehicles in India along with their correlation coefficient. The correlation coefficientis 0.306847 which shows there is a weak correlation between the Sales of Light Commercial

vehicles in India and the Imports Value of Light Commercial vehicles in India.

33 | P a g e


34/77

T a bl e- 1 3Shows the yearly Sales(in Rs. crores) and Domestic Consumption (in Rs. crores) data of Light

Commercial vehicles in India along with their correlation coefficient. The correlation coefficient

is 0.999590308 which shows there is a very high and very strong correlation between the Sales

of Light Commercial vehicles in India and the Domestic Consumption Value of Light


T a bl e - 1 4

Shows the yearly Sales(in Rs. crores) and Market Size(in Rs. crores) data of Light Commercial

vehicles in India along with their correlation coefficient. The correlation coefficient is

0.999999952 which shows there is a very high and very strong correlation between the Sales of

Light Commercial vehicles in India and the Domestic Consumption Value of Light Commercial

vehicles in India.

T a bl e - 1 5

Shows the yearly Sales(in Rs. crores) and Exports Value(in Rs. crores) data of Medium and

Heavy Commercial vehicles in India along with their correlation coefficient. The correlation

coefficient is 0.864926 which shows there is a strong correlation between the Sales of Medium

and Heavy Commercial vehicles in India and the Exports Value of Medium and Heavy


T a bl e - 1 6

Shows the yearly Sales(in Rs. crores) and Imports Value(in Rs. crores) data of Medium and


coefficient is 0.630585 which shows there is a medium correlation between the Sales of Medium

and Heavy Commercial vehicles in India and the Imports Value of Medium and Heavy


T a bl e - 1 7

Shows the yearly Sales(in Rs. crores) and Domestic Consumption(in Rs. crores) data of Medium

and Heavy Commercial vehicles in India along with their correlation coefficient. The correlation

coefficient is 0.999702 which shows there is a very strong correlation between the Sales of

Medium and Heavy Commercial vehicles in India and the Domestic Consumption of Mediumand Heavy Commercial vehicles in India.

T a bl e - 1 8

34 | P a g e


35/77

Shows the yearly Sales(in Rs. crores) and Market Size Value(in Rs. crores) data of Medium and


coefficient is 0.999949 which shows there is a very strong correlation between the Sales of

Medium and Heavy Commercial vehicles in India and the Market Size Value of Medium

and Heavy Commercial vehicles in India.

T a bl e - 1 9

The regression equation to show the influence of Exports value of Light Commercial vehicles on

Sales Value of Light Commercial vehicles in India is given by:

Y= + X

Y= 1225.358628+17.75729855 X

Here y is the dependent variable which is Sales, and x is the independent variable which isExports Value.

The R2

value is given by 0.600891316

The R2

value is given by 0.600891316 means that the dependency of Sales Value on Export

value is of 60.08%. This means that 60.08% of the variation is explained and 39.92%

remains unexplained.

The computed P-value at 95% confidence level is 0.005067084 which is less than 0.05. This

is the confidence with which the null hypothesis is rejected and the alternate hypothesis is

accepted. This regression equation shows that there is influence of Exports value of LightCommercial vehicles on Sales of Light Commercial vehicles in India.

T a bl e - 2 0

The regression equation to show the influence of Imports value of Light Commercial vehicles on


Y= + X

Y= 7532.878799+832.7018337 X

Here y is the dependent variable which is Sales, and x is the independent variable which is

Imports Value.

The R2


The R2

value is given by 0.094155241 means that the dependency of Sales Value on Imports


35 | P a g e


36/77

remains

unexplained. The computed P-value at 95% confidence level is 0.421888634 which is more than0.05. This is the confidence with which the null hypothesis is accepted and the alternatehypothesis is rejected. This regression equation shows that there is influence of Imports value ofLight Commercial vehicles on Sales of Light Commercial vehicles in India.

T a bl e - 2 1

The regression equation to show the influence of Domestic Consumption of Light

Commercial vehicles on Sales Value of Light Commercial vehicles in India is given by:

Y= + X

Y= 117.0122287+1.034000252 X


Domestic Consumption.

The R2


The R2

value is given by 0.999180785 means that the dependency of Sales Value on

Domestic Consumption is of 99.91%. This means that 99.91% of the variation is explained

and 0.09% remains unexplained.

The computed P-value at 95% confidence level is 3.33593E-15 which is less than 0.05. This


accepted. This regression equation shows that there is influence of Domestic Consumption of

Light Commercial vehicles on Sales of Light Commercial vehicles in India.

T a ble- 2 2

The regression equation to show the influence of Market Size of Light Commercial vehicles on


Y= + X

Y= 0.199548945+0.999831835X


Market Size.

The R2


The R2

value is given by 0.999999905 means that the dependency of Sales Value on Market

Size is of 99.99%. This means that 99.99% of the variation is explained and 0.01% remains

36 | P a g e


37/77

unexplained.The computed P-value at 95% confidence level is 6.50609E-33 which is less than

0.05. This is the confidence with which the null hypothesis is rejected and the alternate

hypothesis is accepted. This regression equation shows that there is influence of Market Size of

Light Commercial vehicles on Sales of Light Commercial vehicles in India.

T a bl e - 2 3

The regression equation to show the influence of Exports value of Medium and Heavy

Commercial vehicles on Sales Value of Medium and Heavy Commercial vehicles in India

is given by:

Y= + X

Y= 2846.500004+16.27336343X


Exports Value.

The R2


The R2

value is given by 0.748096224 means that the dependency of Sales Value on Export



The computed P-value at 95% confidence level is 0.000587238 which is less than 0.05. This


accepted. This regression equation shows that there is influence of Exports value of Medium and

Heavy Commercial vehicles on Sales of Medium and Heavy Commercial vehicles in India.

T a bl e - 24

The regression equation to show the influence of Imports value of Medium and Heavy

Commercial vehicles on Sales Value of Medium and Heavy Commercial vehicles in India

is given by:

Y= + X

Y= 10440.11344+48.28399893X


Imports Value.

The R2


37 | P a g e


38/77

The R2

value is given by 0.397637058 means that the dependency of Sales Value on Imports value

is of 39.76%. This means that 39.76% of the variation is explained and 60.24% remains

unexplained.

The computed P-value at 95% confidence level is 0.037521304 which is less than 0.05. This is the

confidence with which the null hypothesis is rejected and the alternate hypothesis is

accepted. This regression equation shows that there is influence of Imports value of Medium and

Heavy Commercial vehicles on Sales of Medium and Heavy Commercial vehicles in India.

T a bl e - 2 5

The regression equation to show the influence of Domestic Consumption of Medium and Heavy

Commercial vehicles on Sales Value of Medium and Heavy Commercial vehicles in India is given by:

Y= + X

Y= 109.5482334+1.038602155X


Domestic Consumption.

The R2


The R2

value is given by 0.9994049 means that the dependency of Sales Value on Domestic

Consumption is of 99.94%. This means that 99.94% of the variation is explained and 0.06%


The computed P-value at 95% confidence level is 7.91662E-16 which is less than 0.05. This is the

confidence with which the null hypothesis is rejected and the alternate hypothesis is accepted. This

regression equation shows that there is influence of Domestic Consumption of Medium and Heavy

Commercial vehicles on Sales of Medium and Heavy Commercial vehicles in India.

T a bl e - 2 6

The regression equation to show the influence of Market Size of Medium and Heavy Commercial

vehicles on Sales Value of Medium and Heavy Commercial vehicles in India is given by:

Y= + X

Y= 6.408653889+0.991738818X


Market Size.

38 | P a g e


39/77

The R2


The R2

value is given by 0.999898944 means that the dependency of Sales Value on Market Size is of

99.98%. This means that 99.98% of the variation is explained and 0.02% remains unexplained.

The computed P-value at 95% confidence level is 2.71226E-19 which is less than 0.05. This is theconfidence with which the null hypothesis is rejected and the alternate hypothesis is accepted. This

regression equation shows that there is influence of Market Size of Medium and Heavy Commercial

vehicles on Sales of Medium and Heavy Commercial vehicles in India.

Table-27

Shows the yearly data of Petroleum pricies in India and depicts the rise in the Petroleum prices in

India through the years 2000 to 2010. It shows a constant growth in the petroleum prices in India.

Table-28

Shows the yearly data of per capita Income in India and depicts the rise in the Per capita income in

India through the years 2000 to 2010. It shows a constant growth in the per capita income in India.

Table-29

The regression equation to show the influence of Petroleum Prices on Sales Value of Medium and

Heavy Commercial vehicles in India is given by:

Y= + X

Y= 14763.66+0.971X


Petroleum Prices.

The R2

value is given by 0.0236511967679632

The R2

value is given by 0.0236511967679632 means that the dependency of Sales Value on

Petroleum prices is of 2.37%. This means that 2.367% of the variation is explained and 0.06%


The computed P-value at 95% confidence level is 0.651651968116609 which is more than 0.05. This

is the confidence with which the null hypothesis is accepted and the alternate hypothesis is rejected.

This regression equation shows that there is no influence of Petroleum Prices on Sales of Medium and

Heavy Commercial vehicles in India.

6. RESULTS39 | P a g e

7/30/2019 Automobile Industry T

Documents

Automobile Industry Term paper