Automobile Industry

Automotive industry is the key driver of any growing economy. Due to its deep forward and
backward connections with almost every segment of the economy, the industry has a strong and
positive multiplier effect and thus propels progress of a nation.
The automotive industry comprises of the automobile and the auto component sectors. It includes
passenger cars; light, medium and heavy commercial vehicles; multiutility vehicles such as
jeeps, scooters, motorcycles, three wheelers, tractors, etc.; and auto components like engine
parts, drive and transmission parts, suspension and braking parts, electrical, body and chassis
parts; etc.
The Indian automotive industry has made rapid strides since delicensing and opening up of the
sector in !!. It has witnessed the entry of several new manufacturers with the stateofart
technology, thus replacing the monopoly of few manufacturers.
The norms for foreign investment and import of technology have also been liberali"ed over the
years for manufacture of vehicles. At present, ##$ foreign direct investment %&DI' is
permissible under the automatic route in this sector, including passenger car segment
The automobile sector in India has come a long way. This sector has reported high growth rate
from () percent to a worst negative growth in some segments during past years. The Indian auto
sector is one of the most vibrant industry. The automobile industry is one of India*s major
sectors; accounting for (($ of the country*s manufacturing +D,. The Indian auto industry,
comprising passenger cars, two-wheelers, three-wheelers and commercial vehicles, is the
seventh-largest in the world with an annual production of ../ million vehicles, of which (.0
million are e1ported. The Indian Auto market has the potential to dominate the +lobal auto
industry, provided, a conducive environment is created for potential innovators come up with
new pilot projects.
&or the year (#(-(#0, automobile sector has shown a sluggish growth, citing high ownership
costs like e1cise duty, the cost of registration, fuel costs, road ta1 and slow rural income growth.
2ver the ne1t few years, solid, but cautious growth is e1pected due to improved affordability,
rising incomes and untapped markets. All these give a promising opportunity for automobile
manufactures in India. According to 3ac4uarie e4uity research, passenger vehicle sales are
e1pected to double in the ne1t four years and growth is anticipated to be higher than) percent
from the past # years. In this paper, we have made an attempt to forecast the sales, production
and e1port trend for the Indian automobile industry over ne1t three years.
Table shows the +ross turnover of automobile Industry over the year
+5266 T75829:5 2& T;: A7T232<I=: 3A87&A>T75:56 I8 I8DIA %I8 76D
3I==I28'
(##)-#. (##.-#? (##?-#! (##!-# (##-
0#,@.) 0),)( 00,(/# @0,(!) /?,/?0
(USD Conversion Rate) @/ @# @) @. @)


Segmentation of Automobile Industry
The automobile industry comprises of ;eavy vehicles %trucks, buses, tempos, tractors';
passenger cars; Two-wheelers; >ommercial 9ehicles; and Three-wheelers. &ollowing is the
segmentation that how much each sector comprises of whole
Indian Automobile Industry.
Production
The cumulative production data for April-3arch (#0 shows production growth of only .(#
percent over the same period last year. The industry produced ,)?/,0// vehicles in 3arch (#0
as against ,?@/,?)? in 3arch (#(, which declined by %-' ?..# percent.

1,777,583 1,838,593
2,357,411
2,982,772 3,146,069 3,233,561
549,006 416,870 567,556 760,735 929,136 831,744
500,660 497,020 619,194 799,553 879,289 839,742
8,026,681
8,419,792
10,512,903
13,349,349
15,427,532
15,721,180
10,853,930
11,172,275
14,057,064
17,892,409
20,382,026
20,626,227
Automobile Production Trend
Passenger Vehicles Commercial Vehicles Three Wheelers
Two Wheelers ran! To"al
Domestic Sales during April-March 2013
The overall growth in domestic sales during April-3arch (#0 was (.) percent over the same
period last year. Ahile in 3arch (#0 overall sales fell by %-' ...) percent over 3arch (#(.
,assenger 9ehicles segment grew at (./ percent during April-3arch (#0 over same period last
year. ,assenger >ars declined by %-' ).)! percent, 7tility 9ehicles grew by /(.(# percent and
9ans grew only by .#? percent during April-3arch (#0 as compared to the same period last
year. ;owever, in 3arch (#0 passenger car sales further declined by %-' ((./ percent over
3arch (#(. Total passenger vehicles sales also declined by %-' 0.# percent in 3arch (#0
over same month last year.
The overall >ommercial 9ehicles segment registered de-growth of %-' -(.#( percent in April-
3arch (#0 as compared to the same period last year. Ahile 3edium B ;eavy >ommercial
9ehicles %3B;>9s' declined by %-' (0.? percent, =ight >ommercial 9ehicles grew at @.#@
percent. In 3arch (#0, 3B;>9s sales further declined by %-' ().) percent over 3arch (#(.
Three Aheelers sales grew by @.?. percent in April-3arch (#0. ,assenger >arriers grew by
?./? percent during April-3arch (#0 and +oods >arriers registered de-growth at %-' !.(#
percent during this period.
Two Aheelers registered growth of only (.!# percent during April-3arch (#0. 6cooters,
mopeds and motorcycles grew by @.(@ percent, ./0 percent and #.( percent respectively over
same period last year. ;owever, in 3arch (#0 all sub-segments of two wheelers, scooters,
motorcycles and mopeds registered de-growth at %-' 0.? percent, %-' ?.0( percent and %-' @./@
percent respectively.

1,549,882 1,552,703
1,951,133
2,501,542 2,618,072 2,686,429
490,494 384,194
532,721
684,905
809,532 793,150
364,781 349,194 440,392 526,024 513,251 538,291
7,249,278
7,437,619
9,370,951
11,768,910
13,435,769
13,797,748
9,654,435 9,723,710
12,295,197
15,481,381
17,376,624
17,815,618
Automobile Domestic sales trend
Passenger Vehicles Commercial Vehicles Three Wheelers
Two Wheelers ran! To"al
!ports
During April-3arch (#0, overall automobile e1ports registered de-growth of %-' .0@ percent
compared to the same period last year. ,assenger 9ehicles grew by !.#( percent, while the other
segments like >ommercial 9ehicles, Three Aheelers and Two Aheelers fell by %-'0.0/ percent,
%-' ).(( percent and %-' #..( percent respectively. In 3arch (#0, ,assenger 9ehicles, Two B
Three Aheelers grew by 0.#. percent, 0./ percent and ../# percent respectively. Ahile
>ommercial 9ehicles declined by %-' (?.00 percent.

2007# 2008 2008# 2009 2009# 2010 2010# 2011 2011# 2012 2012# 2013
218,410
335,729
446,145 444,326
507,318
554,686
58,994 42,625 45,009
74,043 92,663 79,944
141,225 148,066
173,214
269,968
362,876
303,088
819,713
1,004,174
1,140,058
1,531,619
1,947,198 1,960,941
1,238,342
1,530,594
1,804,426
2,319,956
2,910,055 2,898,659
Automobile Exports Trends
Passenger Vehicles Commercial Vehicles Three Wheelers
Two Wheelers ran! To"al
Impro"ed income prospects to dri"e t#o-#heeler sales in 2013-1$
After a robust (##-, growth in total domestic two wheeler sales slowed to @. per cent in
(#-(. In (#(-0, growth in domestic two-wheeler sales slowed further to (.! per cent, as
slow rise in incomes, especially in rural areas, and high fuel prices impacted consumer
sentiment. :1ports declined by per cent yo-y over a (. per cent growth in (#-(, mainly due
to the drop in e1port incentives post the withdrawal of the D:,< scheme, unfavorable policy
actions in key Asian markets and higher competition in African markets.
In (#0-@, growth is e1pected to recover modestly to )-? per cent on e1pectations of normal
monsoons aiding healthy rural incomes, recovery in urban incomes and lower fuel prices.
;owever, the growth will remain in single digits. 2ver the long term, the underpenetrated rural
market will hold the key to the industryCs growth.
Scooters to retain gro#th leadership% rural demand to dri"e motorcycle sales
+rowth in motorcycle and moped sales is likely to recover to /-. per cent in (#0-@, while
scooters sales growth will remain above-average at -0 per cent. :1pectations of normal
monsoons and higher minimum support prices %36,s' are likely to boost growth in domestic
sales of motorcycles and mopeds y-o-y across both segments while domestic sales of scooters
will be driven by higher urban incomes and new model launches. +rowth in motorcycle sales is
estimated to have slowed down to #. per cent in (#(-0, due to a muted rise in rural incomes
and weak consumer sentiment. Domestic scooter sales growth decelerated to @.( per cent in
(#(-0, following a rise of (/ per cent and @( per cent in (#-( and (##-, respectively. In
recent years, scooter sales have been driven by supply-side factors such as capacity e1pansions
and new model launches, even as demand grew rapidly. 6ales growth moderated in (#(-0 as
an increase in supply had catered to most of the pent-up demand towards the end of (#- ( and
poor urban consumer sentiment led to limited growth in fresh bookings. Aaiting periods on
popular models are now almost nil %after peaking at over )months in (#-('.
Demand for mopeds mainly comes from 4uasi commercial use by farmers, small businessmen
and shopkeepers in rural and semi-urban areas. In recent years, sales have also been driven by
improvement in supply; in order to widen its reach, T96 3otors, the only manufacturer, has built
new dealerships in the 8orth. AheelsC scheme, wherein buyers are given a usage demo, which
helps boost customer awareness and sales. ;owever, in (#(-0, growth in moped sales slowed
sharply to ./ per cent as rural incomes were affected by a poor monsoon and kharif output
&ro#th 'rend 'o#ard '#o (heeler Segment


!ports gro#th to remain robust #ith ne# launches by players
Two-wheeler e1ports grew by (. per cent in (#-(, as volumes remained buoyant despite the
discontinuation of the D:,< scheme during the year. In (#(-0, however, two-wheeler e1ports
fell by per cent owing to the following reasonsD
The withdrawal of the D:,< scheme and subse4uent reductions in incentives under the
Duty Drawback scheme %to ( per cent effective 2ctober (#(' forced players to hike
prices across markets. 6ince most of these are price-sensitive segments %economy
motorcycles account for over /# per cent of total e1ports', the price hikes directly
impacted demand.
7nfavorable policy actions in some major markets like 6ri =anka, wherein ## per cent
import duties were imposed on two-wheelers.
;igher competition in African markets where ;onda 3otorcycles %Eapan' and a number
of >hinese manufacturers entered the market with aggressively priced products.
In (#0-@, growth is e1pected to recover to -0 percent because of fewer policy-related
disruptions and
)* sales "olumes decline in 2012-13% to re"i"e in 2013-1$ on higher &DP e!pectations
Fey macroeconomic indicators such as II,, rail freight loading, mining, road awarding and
e1ecution, and growth in port traffic remained weak during (#(-0, thereby impacting >9
sales. >9 sales declined by ( per cent %y-o-y' in (#(-0, after growing by (?./ percent and ?
per cent respectively in (##- and (#-(.
6ales of medium and heavy commercial vehicles %3;>9s', which are directly linked to the
level of economic activity, declined by (/.! per cent in (#(-0 following deceleration in +D,
growth to /.# per cent. =ower industrial and agricultural output, weak transporter sentiments
weighed down by increase in fuel prices, high interest rates, inflation and higher vehicle prices
continued to impact 3;>9 sales. 2ther factors that had a bearing on sales growth were
availability of finance, and subdued freight rates. In contrast, =>9 sales proved to be relatively
resilient to the slowdown in +D, growth, and grew at /.! per cent.

$%CV &CV '(ses )ow 4
#0*3
#0*2
#0*1
0
0*1
0*2
0*3
0*4
0*09
0*3
0*07
#0*26
0*16
#0*04
2011#2012 2012#2013
&oods *ehicles (ea+er sentiments% lo#er &DP gro#th dragged do#n M,)* sales in 2012-
13
After recording a compounded annual growth rate %>A+5' of 0/.. per cent in (##?-#! and
(##!-#, growth in 3;>9 sales had moderated to ?.? per cent in (#-( following the
slowdown in +D, growth. After dipping to 0.! per cent in (#-(, industrial +D, continued to
slow down in (#(-0 precipitating a (/.! per cent fall in 3;>9 sales in (#(-0. During the
year, the slowdown in +D, impacted freight availability and rates, whereas the continuing rise in
fuel costs and high interest rates increased the cost of vehicle ownership, thus affecting
transporter sentiments. The following section offers a snapshot on factors that affected growth of
the various 3;>9 segments in (#(-0.
Intermediate commercial "ehicles -I)*s.D In a decelerating economy, I>9 sales typically
slacken a while after the economy slows down, as movement of goods from the primary
warehouse to the local distributor, for which these vehicles are used, slows down with a time lag.
Therefore, in (#(-0, I>9 off take fell at a relatively slower pace as compared with the other
segments.
Medium commercial "ehicles -M)*s.D 6imilar to I>9s, 3>9 sales volumes declined at a
slower pace than ;>9 sales in (#(-0. This is because transporters typically limit purchases of
higher tonnage vehicles during phases of economic slowdown.
Multi-a!le "ehicles -MA*s.D 3A9 sales declined sharply in (#(-0 owing to the weakness in
freight rates %in spite of a diesel price hike', low freight availability and weak transporter
sentiments.
'ippersD In (#(-0, tipper sales declined sharply, affected by the ban on illegal iron ore mining
and a sharp slowdown in the awarding of road projects during the year.
'ractor trailersD Tractor trailer sales declined sharply in (#(-0 owing to subdued industrial
+D, growth and slowdown in :GI3 traffic.
Ae e1pect 3;>9 sales to see a modest recovery in (#0-@ based on e1pectations of higher
+D, growth.
5ecovery in 3;>9 sales will, however, lag revival in +D, growth. &leet utili"ation levels of
transporters and spot freight rates will have to improve before a recovery is visible in 3;>9
sales.

+CVs $CVs $,Vs Ti--ers Trac"or Trailers
#0*5
#0*4
#0*3
#0*2
#0*1
0
0*1
0*2
0*3
0*4
0*5
21*10.
#11*10. #1*20.
42*00.
#1*90. #14*40. #17*80. #36*40. #23*00. #30*90.
MHCV SEGMENT GROTH
$%CV /0$01T 2011#2012 $%CV /0$01T 2012#2013
/)* sales relati"ely less impacted by economic slo#do#n
=ight commercial vehicles %=>9s' grew by /.! per cent in (#(-0 enabled by a ( per cent
increase in the sales of small commercial vehicle %6>9s; comprising sub-one tonne vehicles and
pick-ups'. +rowth in the 6>9 segment was led by a sharp growth in the pick-up segment and a
corresponding moderation in growth in the sub-one tonne category in (#(-0. The sub-one
tonne segment declined following a shift in demand from the mini truck %#../ tonne payload
category' to the small pick-up category %about .(/ tonne payload capacity' because of
aggressive marketing and financing initiatives undertaken by the 2:3s for pickups.
6ales of higher tonnage =>9s fell by ((.. per cent in (#(-0 with slowdown in freight demand,
and the shift in preference for 6>9 and I>9s. +oods three-wheeler off take is estimated to have
declined by ! per cent in (#(-0. ;owever, in (#0-@, three-wheeler sales is e1pected to show
a modest recovery led by a consumption-led revival in +D,.
Small truc+s continue to spur /)* sales
6mall commercial vehicles %6>9s', comprising minitrucks %less than tonne payload' and pick-
ups, will remain the fastest growing category in the light commercial vehicles %=>9s' segment.
=ed by player initiatives, pick-ups will continue to outrun sub-one tonne sales in the near term.
6ales of =>9s is e1pected to grow by #-( per cent in (#0-@. Ahile mini-trucks have almost
entirely replaced the use of large three-wheelers, sales of micro-trucks %an emerging class of
6>9s, with the #./-#.) tonne payload pitted against the smaller three-wheelers' will drive sales
growth.
Passenger *ehicles 0us sales gro#th fell in 2012-13
<us sales declined by @ per cent in (#(-0, owing to slowdown in demand from 6tate Transport
7ndertakings %6T7s' and cautious approach undertaken by private operators towards new
investments. Demand from private operators, particularly contract operators plying buses for
school and corporate segments, has been affected by the slowdown in the service sector
%especially the ITHITe6 sector' and the inability of these operators to pass on the continuous
increase in fuel cost. A revival in sales is, however, likely in (#0-@, with the e1pected
improvement in demand from contract operators, following a recovery in the services sector, as
well as from 6T7s.
P* sales gre# at sub-1 per cent le"els for second consecuti"e year
Domestic sales of cars and utility vehicles %79s' grew by merely ( per cent in (#(-0 despite a
low base in (#-(. Domestic car sales, which had increased by 0 per cent in (#-(, declined
by . per cent in (#(-0. +rowth was impacted due to weak macroeconomic growth, uncertainty
over income growth, increasing petrol prices, high interest rates and lower disposable income
caused by high inflation. Additionally, a lockout at market leader 3aruti 6u"uki India =tdCs
%36I=' 3anesar production facility, and the conse4uent disruption in production, impacted
growth marginally. 2n the other hand, domestic utility vehicles %79s', including vans, grew by
0( per cent during (#(-0 because of new model launches during the year and also due to
increased preference for diesel vehicles.
Domestic car and 2* sales to reco"er slo#ly in 2013-1$
According to >5I6I= 5esearch e1pects passenger vehicle sales to grow by /-. per cent in (#0-
@ over a ( per cent growth in (#(-0. 3acroeconomic recovery and decline in petrol prices
would aid a revival in small car sales. Ae e1pect utility vehicle sales to continue to grow, led by
new model launches. ;owever, growth will be capped at !- per cent on account of diesel price
hikes. =ong-term growth prospects will remain healthy until (#.-?, as passenger vehicle
penetration is currently at low levels.
!ports stage a reco"ery in 2012-13
:1ports of cars B utility vehicles %79s' grew by ! per cent in (#(-0 after a marginal decline
of #.@ per cent in (#-(. Aeak global demand, especially in :urope, one of the largest e1port
markets, had impacted demand in (#-(. In (#(-0, sluggish demand in :urope and increase
in import and e1cise duty rates in 6ri =anka, which accounts for nearly / per cent of the total
e1ports of players like 36I=, restricted growth to single digits.
;yundai 3otors India =td %;3I=', the largest e1porter from India, clocked ! per cent growth in
e1ports during
(#(-0, with its i# and i(# models performing well. ;3I= supplies to over ## destinations
across Aest
Asia, Asia ,acific and the :uropean region. 36I=, the second largest e1porter from India,
e1ports its cars to
:urope, Algeria, >hile, 6ri =anka and 8epal. :1port sales of 36I= declined by / per cent in
(#(-0 due to slower growth and increasing competition in the e1port markets as well as higher
import and e1cise duty rates on vehicle imports in 6ri =anka. In (#(-0, ;onda started
e1porting <rio to 6outh Africa, while 5enault started e1porting Duster to 6outh Africa. Also,
9olkswagen started e1porting ,olo and 9ento to the 3iddle :ast and Africa, adding to its
e1isting destinations in the 3iddle :ast and 6outh Africa. 3B3 started e1porting its 679, Gu9
/oo to :urope apart from its e1isting market, 6outh Africa. 3arket share of ;3I= remained
steady at @. per cent, while that of 36I= and 8issan fell with a decline in their e1ports during
the year. ;owever, the share of other players increased due to growth in the sales of ;onda,
9olkswagen, Toyota, 3B3 and &ord.

#0*2
#0*1
0
0*1
0*2
0*3
0*4
5.
3.
#0*01
20.
13.
14.
0*02
#7.
#10.
3.
32.
9.
CAr and !tilit" Vec#iles
2011#2012 2012#2013
Models launched in 2012-13 to aid gro#th
6everal new models were launched in (#(-0, especially in the 79 segment, boosting its
growth.
These model launches, along with the new l launches e1pected in (#0-@, will continue to drive
growth in 79 sales. Additionally, within the sedan segment, the super compact segment is
e1pected to see increasing 2:3 action, with players such as 3B3, Tata, 3aruti and ;onda
launching their models. 6ub-@m variants of e1isting models are e1pected to be launched in (#0-
@ as players seek to take advantage of the e1cise duty benefit on such cars.
The global automotive industry involves the manufacture and sales of automobiles and other
retail activities. The industry*s yearly growth rate is e1pected to e1ceed /./$ from (## to (#/,
reaching a value of more than I/. trillion by (#/, according to research from 3arket =ine.
The auto industry is a leading driver of global economic growth, says the International
2rgani"ation of 3otor 9ehicle 3anufacturers, and it has e1panded over 0#$ in the ten-year
period ending (##/. The industry is a leading employer throughout the world, with ! million
people involved in making )# million vehicles, or /$ of global manufacturing jobs. Indirect
employment from automotive activity is fivefold, representing /# million jobs connected
indirectly to the auto industry. 2ther industries involved in the manufacture and service of
vehicles include te1tiles, plastics, iron, steel, glass, aluminum, computer chips and rubber. The
industry also involves significant research and development activity, representing investment of
nearly I?/ billion. It is estimated that the manufacture of vehicles contributes more than I@0#
billion to the governments of () countries combined.

6afety plays a key role in the automotive industry with car manufacturers constantly investing in
safety technology to both avoid and lessen damage from collision, and improve braking systems,
lighting and stability. The industry is also involved in improving environmental safety by finding
alternatives to petroleum such as electricity, natural gas, hydrogen fuel cells, sustainable biofuels
and clean diesel. According to ,ike 5esearch, electric cars are soon to occupy a large share of the
market, including battery-powered electric vehicles %<:9s', hybrid electric vehicles %;:9s' and
plug-in hybrid electric vehicles %,;:9s'. ;:9s and ,;:9s combined are e1pected to reach a
market worth of almost 0 million by (#., driven by environmental initiatives such as purchase
incentives and rising fuel-economy standards.