Automobile Sector in India Essay

The Automobile 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 second largest manufacturer of motorcycles, with annual sales exceeding 8. 5 million in 2009. India’s passenger car and commercial vehicle manufacturing industry is the seventh, 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. 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. The Indian automobile industry, though in its nascent stage, is expected to set the ball rolling in the Indian Economy as well. 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. With the emergence of the financially sound middle class, the four-wheeler segment is set for tremendous growth and one can expect of more impetus to the economy from this sector. No wonder then that this industry has become the centre of attraction for most of the global automotive giants the world over. The factors playing a key role in the Indian automobile industry trends are as follows: 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 and a conducive atmosphere to attract investments and implementing growth oriented economic policies. 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 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. 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. Bikes: Keeping apace with the global trends the two-wheeler segment has witnessed tremendous growth both qualitatively and quantitatively. Bikes with higher engine capacities have done commendably well on the Indian roads. Bike styling and fuel efficiency has also seen major developments. In short, the Indian automotive industry is set for exponential growth in the future. Consistent growth and dedication have made the Indian automobile industry the second- largest tractor and two-wheeler manufacturer in the world. It is also the fifth-largest commercial vehicle manufacturer in the world. The Indian automobile market is among the largest in Asia. The key players like Hindustan Motors, Maruti Udyog, Fiat India Private Ltd, Tata Motors, Bajaj Motors, Hero Motors, Ashok Leyland, Mahindra & Mahindra have been dominating the vehicle industry. A few of the foreign players like Toyota Kirloskar Motor Ltd. , Skoda India Private Ltd. , Honda Siel Cars India Ltd. have also entered the market and have catered to the customers’ needs to a large extent. 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. 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. Year All Vehicles (in ‘000) Two Wheelers (in ‘000) Cars, Jeeps and Taxis (in ‘000) Buses (in ‘000) Goods Vehicles (in ‘000) Other Vehicles (in ‘000) 200154,99138,5567,0586342,9485,795 200258,92441,5817,6136352,9746,121 200367,00747,5198,5997213,4926,676 200472,71851,9229,4517683,7496,828 200580,04557,41710,4608224,0537,337 200688,06863,48711,5718794,3457,891 200796,80870,14112,8109364,6528,464 2008106,59177,58814,2221,0035,0189,065. Total Number of Vehicle Registrations in India from 2001 to 2008 Investment in Automobile Sector Nearly every automobile company is investing at a higher rate than ever before to achieve a high growth trajectory. The overall investment in the sector has been increasing quite rapidly. It is expected that by the end of 2010 Indian automobile sector will be investing a huge amount as Rs. 30,000 crores. Top ten players in the Indian automobile sector:- The domestic players as well as the foreign players dominate the Indian automobile sector. The key players contributing to the growth of the sector are discussed below. The key players in Indian automobile industry are: 1) Maruti Udyog Limited 2) Hero Motors Limited 3) Tata Group 4) Bajaj Auto Limited 5) Mahindra Group 6) Ashok Leyland 7) Yamaha Motor India 8) Hyundai Motors India Limited 9) Toyota Kirloskar Motor Private Limited 10) Honda Siel Cars India Limited Growth in the Sector At present the industry is enjoying a growth rate of 14-17% per annum, with domestic sales growth at 12. 8%. The growth rate is predicted to double by 2015. As it is seen, the total sales of passenger vehicles – cars, utility vehicles and multi-utility vehicles – in the year 2005 reached the mark of 1. 06 million. The current growth rate indicates that by 2012 India will overtake Germany and Japan in sales volumes. Financing schemes have become an important factor in the growth of automobile sales. More and more financial schemes are coming up with easy installment plans to lure the customers. Apart from domestic production, the industry is consistently focusing on the automobile exports. The auto component segment is contributing a lot in the export arena. The liberalized policies of the government are now making the companies go for more and more exports. The automobile exports are increasing year by year. According to the Society of Indian Automobile Manufactures (SIAM) automobile exports in the last five years are as follows:- Export trend over the last five years List of predictions for this year by looking at what the bygone year had given us. The Indian automobile industry is going through a phase of rapid change and high growth. With new projects coming up on a regular basis, the industry is undergoing technological change. The major players are expanding their plants and focusing on mass customization, mass production, etc. Domestic Sales Volumes Will Rise but Growth Could Come Down The 2010 calendar year was great for the Indian automobile industry, and sales of vehicles are expected to continue upward journey in 2011. However, the industry may not be able to copy the growth rates registered in the last two years. In the first half of 2010, the industry witnessed a steep 32% average monthly sales growth, which came down to 25% in the latter half. In addition, the year-on-year growth in sales is expected to be higher during the latter half of 2011 as compared to the growth in the first half of the year. Along with the high base effect of 2010, the awaited firm up of interest rates could also bring about the reduction in growth rates this year. Exports to Increase in 2011 Almost 65% of total automobile exports from India are two-wheelers, and as a result, performance of this segment has a major influence on overall auto export volumes. And after experiencing over 30% jump in exports in 2010, the industry is expected to register moderate growths in two-wheeler exports in 2011. Nonetheless, a competitive and aggressive approach from the original equipment manufacturers vehicle categories (commercial vehicles, passenger vehicles and two & three wheelers) would help bring an increase in overall export of vehicles from the Indian market in 2011. Additionally, there are many companies that want to make India their export hub, thereby increasing the chances of increasing exports. Healthy Economic Growth to Uplift Sales Healthy growth of the economy would drive the automobile sales in the domestic market. The chief growth drivers of the automobile industry in the Indian market would be stable economic environment, healthy IIP growth, favourable liquidity and availability of finance. Other things that would positively affect the Indian automobile industry include road network development activities, strong growth in construction activities and the expected healthy performance of the industrial sector. When it comes to personal transport vehicles, increase in disposable income and a strong line up of upcoming new launches is expected to boost demand and sales. The passenger vehicle industry (cars + utility vehicles) is expected to witness launch of as many as 30 new models/variants in 2011. Much in with 2010, 2011 will also see a lot of action in the small car segment. Sales of luxury cars is also going to grow at a fast pace. Sports utility vehicles (SUV), which have a relatively smaller market share in the Indian passenger vehicle market is also going to grow up tremendously as manufacturers have lined up 10 new model launches for the coming year. Indian car manufacturers are also doubling up their efforts to push their passenger vehicles into the rural and semi-urban markets, which would greatly enhance sales. Profit margins to improve marginally The Indian automobile is expected to record growth in revenues supported by in the domestic as well as export market. Nevertheless, as the commodity prices are expected to remain constant, the pressure on margins would increase largely. Besides, the entry of several other OEMs that have lined up elaborate investment plans is also going to benefit the industry in the domestic market. The new car launches that have been lined up for this year are going to increase expenditure on advertising and promotional activities. But that is no cause for the buyers as these companies are likely to transfer only a small part of the cost burden by increasing the car prices. Strategies that manufacturers are likely to adopt are: 1 > Commercial vehicles 2> New model launches 3> Product innovation would take prime importance to create new market segments 4> Launch new cars for the international market 5> Easy car finance options for potential customers 6> Competitive pricing Key Success Factors. The Key Success factors in the Motor Vehicle Manufacturing industry are: Efficiency factor – Improve labour productivity, labour flexibility, and capital efficiency Resource Availability – Quality manpower availability, infrastructure improvements, and raw material availability Effective cost controls – Close relationship with supplies and goods distribution channels. Establishment of export markets – Growth of export markets Having an extensive distribution/collection network – Goods distribution channels. Successful industrial relations policy – Ethical and tactical industrial relations Access to the latest available and most efficient technology and techniques – The degree of investment in technological improvements and product development Optimum capacity utilisation – The level of plant utilisation Management of high quality assets portfolio – Understanding implications from Government policies References:- Wikipedia Rcnos. com Managementparadise. com www. carazoo. com siamindia. com automobileindia. com.