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Final_Cars

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									                                                [September 12, 2007]




REPORT ON:   THE CAR INDUSTRY

              Somaiya Institute of Management Studies and Research
                    Course: PGDM-I (Section B) 2007-09 batch
                            Group Number: 1
                             Prepared by :
                            Vaibhav G. Dongre (113)
                             Nilopam Dutta (114)
                             Sumit Gupta (120)
                             Prashans Jain (121)
                             Ramanathan S (146)
                             Kunal Gupta (159)
                             Prabhat Adivarekar (160)

                        The date of making presentation:
                              September 12, 2007
                                                               ~2~

Table of Contents

Contents ...........................................................................Error! Bookmark not defined.2
Abstract ............................................................................................................................... 3
Introduction ......................................................................................................................... 3
Global scenario ................................................................................................................... 3
Indian scenario .................................................................................................................... 4
Key players in India ............................................................................................................ 4
Market information ............................................................................................................. 4
Product categorization ........................................................................................................ 5
Market Drivers in India ....................................................................................................... 5
Key Trends .......................................................................................................................... 5
Government Policies and regulations ................................................................................. 6
Capital Investment & FDI Inflow ....................................................................................... 6
Recent Innovations.............................................................................................................. 6
Acquisitions and JV ........................................................................................................... 7
Summary ............................................................................................................................. 7
Annexure 1 .......................................................................................................................... 8
Annexure 2 .......................................................................................................................... 9
Annexure 3 ........................................................................................................................ 10
Reference .......................................................................................................................... 10
                                           ~3~


Abstract

Over the past few years it has been seen that Indian Car Industry is growing at a rapid
rate and has built a strong foundation for low cost manufacturing and engineering
competitiveness thus attracting many global original equipment manufacturers (OEMs)
like GM, Toyota, Honda, BMW, Nissan, etc., to leverage the India opportunity across the
value chain. Car component industry has also grown both domestic as well as on the
export front. Its strength in technology intensive parts is making India a component
sourcing hub for most global OEMs. Thus this car industry is becoming one of the
leading export hubs for the global community.

Introduction

Since, 1991 opening of the economy has changed the face of auto industry. Today, it is
amongst the main drivers of growth of Indian economy with an output multiplier of
2.24(for every Re.1 invested, auto sector gives back Rs.2.24 to the economy). In recent
years we have seen increasing number of global players entering Indian market by way of
Joint ventures, collaborations or wholly owned subsidiary. Sudden interest of major
global players has made Indian auto industry very competitive as India provides twin
benefit of ready market and Low cost manufacturing base for them. Currently Car
industry constitute 14% of automobile sector in terms of unit.

Global scenario

Car industry is one of the largest industries in the world, there are many players in world
manufacturing cars, among those are (a) General motors, Ford in USA (b) Daimler
Chrysler, Fiat, Lexus, Volkswagen, Renault, etc. in Europe (c) Toyota, Nissan, Honda,
Hyundai and Suzuki, etc. in Asia. Global market for cars forecast to increase by 3.8% to
50.7 m units in 2007 - an increase of almost 1.9 m units. Biggest contribution has to come
from developing Asia (excludes Japan) and the growth of that region, especially China.
Contribution of the Pacific Rim countries to the growing world market is, by 2009,
almost an additional five million units.
                                         ~4~

Indian scenario

The PAL entered the Indian market in mid 90 with Premier car, then Maruti started
capturing the Indian market with help of maruti 800 .The car industry in general has
grown at a CAGR of 13.5% p.a over the last 5 years, presently, India is 11th largest
passenger car market in the world and is expected to be the 7th largest market by 2016.
The Car industry has emerged as a key contributor to the Indian economy; currently India
has low car penetration with 3 cars in 1000 individuals. India is the fourth-largest car
market in Asia. Passenger cars come in great variety, starting from 2-seater electric car
REVA to 5-seater compact cars like Zen, Santro, Indica, etc. They come in all ranges–
economical and luxurious. The production, sales, export figures of Indian car industry
(units/annum) of last 5 yrs are given in Annexure 1 and sales, export figures ( revenue
wise) and growth trend for last 5 yrs are given in Annexure 2.

Key players in India

Player like Tata Motors, Maruti Udyog Limited, Mahindra & Mahindra, etc are the
leading Indian manufacturers in passenger cars segment, whereas many foreign players
such as Hyundai, Honda, Fiat, Ford, Toyota, Daimler Chrysler, etc are also serving the
segment. Maruti is the market leader with popular brands maruti 800, zen and alto.
Hyundai is second with santro ,accent etc,Tata motors is third with indica ,indigo etc,
Mahindra and Mahindra is leading player in utility vehicle with scorpio, Bolero etc,
Honda with brand civic.The market share, sales and export of each palyer is given in
Annexure 3.

Market information

The current market scenario is given below:
 Passenger car sales grew by 10.84% and crossed the 1 million mark in 2006-07 and
   record sales of 1,076,408 vehicles.
 Utility vehicles sales grew by almost 12.2% in April-May 2007 compared to the
   same period last year. Various manufacturers have entered this category and this
   segment is expected to grow at 20% by 2010.
                                             ~5~

 Multi utility vehicles sales grew by almost 21.93% in April-May 2007 compared to
   the same period last year.

Product categorization

 Category         Engine         Length            Market      Price range    Example
                    (cc)             (mm)          share         (lacs)
                                                     %
    Mini           < 800             <3350           19           2-3         Reva,800
 Small car       800-1200       3350-3800            56           3-5         Alto, zen
Mid segment     1100-1800       3800-4400            20           5-10       Ikon, accent
 Executive      1700-2400       4300-4850            3           10-20         Accord
  Luxury          >2400         4500-5100            2            >20           Bmw
                                                                               5series

Market Drivers in India

 Increase in disposable incomes.
 Rise in aspiration levels.
 Lowering interest rates.
 Wide variety and easy availability of financing options.
 High sensitivity to fuel prices.
 Lack of urban & rural public transportation infrastructure
 Flourishing service sector
 Growing working population
 Fast paced urbanization to rise from 28% to 40% by 2020
 Middle class expanding by 30 - 40 million every year

Key Trends

 Market evolution from Mini cars to Hatchbacks to Compact Sedans now evident.
 Increase in customer emphasis on aesthetics and comfort.
 Shrinking product life-cycles.
                                          ~6~

Government Policies and regulations

 In 2002, the Indian government formulated an auto policy that aimed at promoting
   integrated, phased, enduring and self-sustained growth of the Indian automotive
   industry
 Allows automatic approval for foreign equity investment upto 100%
   in the automotive sector and does not lay down any minimum investment criteria.
 Lays emphasis on R & D activities carried out by companies in India.
 Weighted tax deduction of upto 150% for in-house research and R & D activities
 India is expected to align its crash requirements and emission standards with
   European standards in the 2008 / 09 timeframe.
 Presently Bharat Stage III ( Equivalent to Euro III) is mandated in Metros and other
   large cities and Bharat Stage II ( Equivalent to Euro II) for the rest of the country.
 Bharat Stage IV ( equivalent to Euro IV) is expected to be introduced in the large
   Indian metros around 2009 and Bharat Stage III in the rest of the country.

Capital Investment & FDI Inflow

 Honda started investing $150m-$200m for the second automobile plant to compact
   cars by end-2010.
 Renault-Mahindra has already launched Logan sedan – one of the world’s cheapest
   cars.
 Nissan has unveiled plans to launch a compact car in 2009 with a huge investment of
   $908m in Chennai.
 Tata-Fiat is expected to invest $2.2 billion for a new, low cost car.
 Hyundai is doubling its Indian capacity to 600,000 cars at a cost of $1.12 billion.
 Honda Motors will spend $400 million to triple capacity to 150,000 units by 2010.
 General Motors is investing about $280 million in its second Indian plant in Pune,
   near Mumbai, where its capacity could more than double to 140,000 cars in a year.

Recent Innovations

 Solar car
                                         ~7~

   A solar car is an electric vehicle powered by solar energy derived from solar panels
   on the surface of the car. The conversion of the sun's energy directly into electrical
   energy is done by Photovoltaic cells.        Solar cars are not practical day-to-day
   transportation devices at present, but are primarily demonstration vehicles and
   engineering exercises. Solar cars compete in races such as the world solar challenge.
 Electrical Car
   The electric car is a battery electric vehicle (BEV) that utilizes chemical energy
   stored in rechargeable battery packs. Electric vehicles use electric motors and motor
   controllers instead of internal combustion engines (ICEs). Normally the cost of
   battery electric cars is higher than petrol or diesel cars. Also fuel costs are forced to
   be low due to the competitive price of electricity - fuel duty is zero-rated - and to the
   high efficiency of the vehicles themselves. They are also very energy efficient and
   carbon dioxide emissions is less.

Acquisitions and JV

Joint-ventures: Tata with Fiat, M &M with Renault, Maruti with Suzuki
Acquisitions: South Korea’s Daewoo Commercial Vehicle Co. in March 2004 by Tata
Motors for $102 million and Bharat Forge’s acquisition of German firm Carl Dan
Pedinghaus GmbH for euro 29 million, Mahindra & Mahindra, through its subsidiary
agreed to acquire 67.9 per cent stake in Jeco Holding AG, one of the top five forging
companies in Germany, for euro 140 million.

Summary

There is a vision statement, “By 2016 India will emerge as the destination of choice in
Asia for the design and manufacture of automobiles and automotive components. The
Indian automotive sector will contribute in a significant manner to India’s Gross
Domestic Product and employment opportunities”. This vision is reflected in the Auto
Mission Plan (AMP) 2006-2016 envisaging to double the sector’s contribution to GDP to
10 per cent and providing additional employment to 25 million people by 2016 with a
road map to attract $40 billion investment and sectoral output of $145 billion with
estimated exports of automobiles and components accounting for US$35-40 billion.
                                                 ~8~

Annexure 1

Passenger Car (units/annum)
Year                     2001-02     2002-03        2003-04        2004-05           2005-06
Sales                      509088       541491           696153         820179         882094
Production                 500301       557410           782562         960487        1045881
Exports                     49273        70263           125320         160670         170193




                                     Passenger Car Trend Analysis

               1200000

               1000000
 Units/Annum




               800000
                                                                                           Sales
               600000                                                                      Production
                                                                                           Exports
               400000

               200000

                    0
                         2001-02    2002-03      2003-04      2004-05      2005-06
                                                  Year
                                                       ~9~


Annexure 2

Passenger Car (Rs crore)

Category                2001-02           2002-03            2003-04      2004-05    2005-06

Sales
                             20909             22188            27046        36077       38689
Export
                              669               1242            2353          3463           3559


                                     Passenger car trend (Rs crore)


              45000
              40000
              35000
              30000
   Rs crore




              25000                                                                  sales
              20000                                                                  exports
              15000
              10000
               5000
                  0
                       2001-02       2002-03      2003-04     2004-05   2005-06
                                                  years




Growth rate

                                                   Growth rate in %
  % growth rate
              35
                                                             28.8
              30
              25                         20.7
              20
                                                                           12.7      % growth rate
              15
                       8.8
              10
              5
              0
                      2002-03           2003-04             2004-05       2005-06

                                                   years
                                              ~ 10 ~

Annexure 3

Key players and their market share

     Key players                Sales From           Total Market          Total number of
                                  April-             Share (in %)          exports in April
                               November 05-                                     05-06
                                    06
                                 2,91,182                  52.2                23,043

                                  1,07, 066                19.2                68,374

.
                                   24,348                  16.6                12,105

                                   24,348                  4.4                      31

                                   10,512                  1.9                     9,928


                                    31536                  5.7                      -
             and
others
         Ford India Pvt. Ltd
                2%

         Honda Siel cars       others
           India Ltd.            6%
              4%                                             Maruti Udyog
          Tata Motors                                        Hyundai Motors India Ltd.
             17%
                                                             Tata Motors
                                            Maruti Udyog
                                               52%           Honda Siel cars India Ltd.
                                                             Ford India Pvt. Ltd

         Hyundai Motors
                                                             others
            India Ltd.
              19%




Reference

www.imacs.in

www.auto.indiamart.com

www.siamindia.com

								
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