The Indian Automotive Industry

A Perspective

New Delhi Insitute Of Management

State of the Global Automotive

Industry
Stagnant Sales except in Asia
Over Capacity in most Regions
Intense Product & Price Competition
Industry Margins Under Pressure
Most of Industry EVA negative
Global Focus to Asia for growth

In many ways, the Indian

Automotive
is unique
unique
Harsher operating Market
conditions pose
challenges for
product conceptualization, design and development:

Road inadequacy and quality

High Traffic density
Poor Fuel quality & variety (Gasoline, Diesel, CNG & LPG)

Manufacturing complexity higher despite lower volumes

compared to global standards
Large product portfolios

Product obsolescence policies not articulated and

enforced, entailing longer product life.
Firms able to maintain profitability even at low volumes.

India is expected to achieve mass

motorization status in 2014
Inhabitants/Vehicle

Vehicle Density vs. GDP/capita

India in
2012
100

Developing Markets

Mature Markets
Inhabitants/Vehicle
12

China in 2012
India in 2014

50

China in 2014
10

Mexico
South Korea
Brazil
Poland
Argentina
Czech Spain
Republic

2
$1,000

15

India

100

China

82

Germany
Canada

Australia
Italy

20

Belgium
Austria
UK Sweden

Japan

USA

France

25

30

Per Capita Income (US$ 000)

Note:
The above includes both Passenger Vehicles and Commercial Vehicles
Sources: Wards Auto Yearbook 2002, EIU, Goldman Sachs BRICs report, DRI 2002, A.T. Kearney analysis

35

40

Key Challenges facing the industry

Increasingly Stringent Emission
& Safety Regulations
Technological capability
Cost

Increase in input prices

Ferrous & Non-Ferrous Metals
Crude oil & derivatives
Natural rubber

Transition of Emission & Safety Regulations for Vehicles

India

YEAR

Emission Regulation
Metro Cities
Rest of Country

2000

BS 2 (Euro II)

BS 1 (Euro I)

Underbody Protection Devices

Advance Warning Triangles

2005

BS 3 (Euro III)

BS 2 (Euro II)

Spray Suppression, Noise

Norms, Headlamp levellers

2009

BS 4 (Euro IV)

BS 3 (Euro III)

ABS, Pedestrian Protection

(Expected)

Rising Customer Expectations

Product features
Quality & reliability

Integration with Global Markets

Lowering product life cycles
Reducing time-to-market for
new products
Threat of new competition

Safety Regulation

Indian 2-Wheeler Market

Competitive Scenario

Motorcycle

50%

30%

13%

4%

1%

2%

<1%

<1%

15%

28%

2%

46%

9% <1%

82%

8% 10%

Figures denote Mkt Share As on 31 March

2013

India is now the second

largest two-wheeler
market in the world
New Delhi Insitute Of Management

The Indian 2-Wheeler Industry

Indian 2-wheeler Industry

Similarity with Global Industry

Characteristics

Large variety of products & choice for the customer

(9 manufacturers, 70+ Models)

Basic transportation necessity as against fun & fashion

orientation of the Western Markets. (Primary transportation
vehicle for entire families)
Dis-similarity with Global
Industry

Product design & execution driven by economy rather

performance and power
Presence of strong home-grown players competing against
Global majors.

New Delhi Insitute Of Management

Key Market
Drivers

Increasing disposable incomes

Key Trends
Eclipse of scooter segment

Low operating cost

Higher fuel efficiency of Newgeneration motorcycles
Greater reliability resulting in
low maintenance cost

Emergence of new motorcycle subsegments

Economy

Low interest rates translating to

low financing and acquisition
costs hence greater affordability.
Inadequate urban & rural public
transportation infrastructure
Ease of use in congested city
centres

Executive
Performance

Shrinking product life-cycles

Indian 3-Wheeler Market

Sub-segments and Competitive Scenario

Sub
Segments

60%

68%

24%

Scooters
India

2%

1%

3%

3%

12%

13%

7%

6%

Passenger

40%

23%

40%

Goods
Figures denote Mkt Share as on 31 March,
2013

India is the largest threewheeler market in the world

New Delhi Insitute Of Management

The Indian 3-Wheeler Industry

Indian 3-wheeler Industry

Similarity with Global Industry

Characteristics

None.

Product unique to emerging markets in South / South-East

Asia & parts of Africa
Dis-similarity with Global
Industry

Product design & execution focus on technological

simplicity and ease of use.
Lesser competitive intensity as compared to other segments.

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Key Market
Drivers

Last Mile Transportation

needs.

Key Trends
Goods segment growing at faster
clip.

High product maneuverability

& driveability. Ideal for
congested Indian roads and
tropical conditions.
Inadequate urban & rural
public transportation
infrastructure
Low initial ownership cost
Self-employment opportunity
for large segment of urban
youth

Ability of product to meet

increasingly stringent emission &
safety regulations is doubtful.

Market push building up for product

upgradation.

Indian Passenger Vehicle Market Competitive Scenario

Passenger
Cars

52%

17%

19%

1%

5%

2%

2%

2%

1%

<1%

<1%

Utility
Vehicles

2%

18%

1%

42%

21%

1%

10%

1%

<1%

4%

<1%

Multi
Purpose
Vehicles

100%

<1%

Figures denote Mkt Share as on 31 March

2013

4th largest Passenger Vehicle Market

in Asia

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The Indian Passenger vehicle Industry

Indian Passenger Vehicle
Industry
Similarity with Global Industry

Characteristics
Multiple segmentation across & within major segments
Cars (A, B, C, D & E segments) (Hatchbacks, Sedans, Notchbacks, Station
Wagons & Saloons)
Utility Vehicles (Multi- & Sports Utility)

Large variety of products & choice for the customer

(13 manufacturers, 50+ Models)
Market dominated by Mini Cars & Hatchbacks (>80%)
High incidence of taxes in Car Prices.
(24% Excise Duty, 12.5% VAT, Local Taxes as applicable)

Dis-similarity with Global

Industry

Customer preference driven by value for money and cost of

ownership considerations rather than image, performance and
power.
(80% of cars sold are priced below USD 12000)
Large proportion of chauffer driven cars. Rear Passenger comfort
is a critical influence in purchasing decisions.
Emergence of strong domestic players (TATA, Mahindra).
Strong demand pull for Utility vehicles from Private Taxi segment.

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Cars per thousand population

Passenger Car Penetration is low in India

The low penetration

presents an opportunity
for industry players to
offer an affordable fourwheeled alternative to
the mass of 2-wheeler
customers

New Delhi Insitute Of Management

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Key Market
Drivers
Increasing
disposable
incomes

Rising aspirational levels

Low 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

Key Trends
Market evolution from Mini
cars to Hatchbacks to
Compact Sedans now evident

Increasing customer emphasis

on aesthetics and comfort.

Shrinking product life-cycles

Indian Commercial Vehicle Market Competitive Scenario

Medium &
Heavy CV Trucks

64%

24%

8%

3%

<1%

<1%

Buses L, M
& HCV

40%

30%

7%

5%

10%

6%

1%

1%

Light & Small

Comm Veh
Trucks

59%

<1%

32%

4%

3%

3%

<1%

Figures denote Mkt Share as on 31 March

2013
TATA Motors dominates over 60% of the Indian Commercial Vehicle
Market. It is also the Worlds fifth largest Medium & Heavy commercial
vehicle manufacturer.

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The Indian CV Industry

Indian CV
Industry

Characteristics

Similar with Global

CV Industry

Cyclical

Dis-similar to
Global CV Industry

Secular long term growth trend

Lower Power to Weight Ratios
Early stage of road development
Less degree of product
sophistication.
Strong price entry barriers created
by domestic players

New Delhi Insitute Of Management

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Key Market
Drivers
Growth
in Economic Activity
Road Network Development
Low interest rates.
Wide variety and easy availability of Financing
options.
High sensitivity to Fuel prices

Key Trends
Migration from erstwhile Basic
MCV Workhorse to Hub &
Spoke Model

Average Power To Weight Ratios

Of Selected Countries

Europe

Increasing Power to weight

ratio
Increasing customer emphasis
on aesthetics and comfort.
Arrival of Global Players
Divergence in Truck and Bus
Technology
Focus on Fully Built Transport
Solutions

Japan

Brazil
China
India

et n
k
ar i o
m cat
k ti
uc his
r
T p
so

Key Market
Drivers
Linked
to growth of OEM
Industry

Highly sensitive to input cost

escalation.

Key Trends
Indias emergence as low cost
global sourcing destination.
Indian ancillary manufacturers are
shifting focus from global aftermarket to global OEM supplies.

Competitiveness driven by
Manpower Large pool of
qualified engineers & skilled
technicians at lower cost
Lower investment cost
Through appropriate, low cost
automation.

Firms focus on operational

excellence to improve quality &
reliability of products.
(8 Deming Award winners)

Increasing relevance of Global Tier

1 suppliers (Bosch, Denso, Visteon,
Delphi)

Rotating Auto
Electricals
Tyres & Tubes

Heavy Forgings
Wheel Rims

Small Castings &

Forgings

Medium
Low

Product Complexity

High

The Indian Auto component industry is now transitioning from

being a supplier for the global aftermarket to becoming a fullscale global Tier 1 supplier

Hand Tools
Metal bonded &
Moulded Rubber Parts

Aftermarket

itio
s
n
Tra

Plastic Components

ath
P
n

Tier 2-n supplier

Tier 1 supplier

Customer complexity
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Opportunities for the industry are emerging both in the areas of

Automotive Manufacturing and Engineering Services

Manufacturing:

Engineering Services:

Emerging World hub:

Indian IT Majors offering on-shore and

off-shore engineering services to Global
IT players.

Small Cars (Suzuki, Hyundai)

Castings & Forgings

(e.g. TCS, TATA Technologies, Infosys,

Satyam)

Regional Sourcing base

Aggregates for Entire Vehicle Programs
(e.g. Transmissions for Toyota IMV)

Globalisation opportunities for Indian

Manufacturers
Increasing exports of Made In India
vehicles
Establishing manufacturing facilities at
foreign locations (e.g. TVS Indonesia)
Contract Manufacturing (e.g. Sub-150cc
Bajaj motor cycles for Kawasaki)
Growth through Mergers & Acquisitions
(TATA Motors acquisition of Daewoo
Commercial Veh, Korea & Hispano,
Spain

Global Auto & Auto component majors

putting up Development Centres in
India, either on their own or in
partnership with local players
(e.g. General Motors, Daimler Chyrsler,
Johnson Controls, Delphi, Bosch)

Independent Indian OEMs focusing on

upgrading their design & engineering
capabilities.
(e.g. TATA Motors European Development
Centre & Acquisition of INCAT plc, UK)

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Thank You

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