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Indian Auto Industry

Facts
• Second Largest two wheeler manufacturer
in the world
• Largest tractor and three wheeler
manufacturers in the world
• Fourth largest Commercial vehicle market
in the world
• Eleventh largest passenger car market in
the world

Trends Growth Potential


•Can become World’s third largest
• Growth of exports of 32.8 % FY 2008-09.
automobile market in 2030.
• Output of commercial vehicles has grown
2.8 times compared to the 2.2 times •By 2016, Automotive sector can DOUBLE its
increase in passenger cars percentage contribution to GDP from current
• For every passenger car turned out, there levels of 5% (US$50 billion) to 10% ($180
billion).
are almost 7 two-wheelers produced
The Growth Journey
Pre 1983 1983-1993 1993-2007
Closed market Japanisation - GOI- Delicensing of sector in
Suzuki joint venture to 1993
form Maruti Udyog • Global major OEMs
• Growth of market start assembly in India
limited by supply • Joint ventures with (Toyota, GM, Ford,
companies in Honda, Hyundai)
• Outdated models
commercial vehicles and • Imports allowed from
Players components Era of
April 2001; alignment of
• Hindustan Motors duty on components globalisation and
Players
• Premier and parts to ASEAN evolution of India
• Maruti Udyog levels as a global
• Telco • Hindustan Motors • Implementation of manufacturing hub
• Ashok Leyland • Premier VAT
• Mahindra & • Telco
Mahindra
• Ashok Leyland
• Mahindra & Mahindra
Automotive Companies in India
Major Indian Companies Major Multi-national companies
Booming Indian Economy
Key Growth Drivers
Auto Industry Numbers
• Overall Market
• Over all Production increased from 10.85 million vehicles in 2007-08 to 11.17
million vehicles in 2008-09
• Passenger vehicles increased marginally from 1.77 million to 1.83 million
• Two-wheelers increased from 8.02 million to 8.41 million

• Domestic Market
•  Vehicles sold including PV,CV 2W and 3W in 2008-09 was 9.72 million as
compared to 9.65 million in 2007-08.

• Exports
• Sales increased from 1.23mn units in 2007-08 to 1.53 million units in 2008-09
• As per the Automotive Mission Plan (AMP) 2006-2016 total turnover of the
automotive industry in India would be in the order of US$ 122 billion-159 billion
in 2016
Category wise numbers
Dominated by Motorcycles 80% , Scooters 14% Mopeds 6%

Two Wheeler Domestic - 7.25mn units . Hero Honda 42% & Bajaj 27% share CAGR – 9.5%
Exports 819000 units (07-08) . Bajaj Auto 59% TVS 17% share CAGR – 41%

Dominated by Cars 78% , MUV/SUV 22%


Passenger Vehicles Domestic – 1.5mn units Maruti-46% Tata-15% Hyundai 14% CAGR -14.8%
Exports - 217000 units (07-08) Maruti 66% Hyundai 24% CAGR – 26%

Dominated by M&HCV – Goods 48% Passenger 38% , Rest by LCV -14%


Commercial Vehicles Domestic – 487 thousand units , Tata-62% Ashok Leyland -15% CAGR- 22%
Exports – 59 thousand units, Tata 67% Ashok Leyland 12% CAGR -30.6%

Dominated by Passenger Carriers with 64% share , Goods Carrier -36%


Three Wheeler Domestic – 365 thousand units , Bajaj -42% Piaggio-41% CAGR- 10.5%
Export – 141 thousand units , Bajaj -97% CAGR -44.5%
The Indian Auto Components
Market
• Original Equipment Manufacturers (OEMs)
• Replacement Parts Production and Distribution : e.g. Air
filters, oil filers and replacement lights
• Rubber Fabrication : tyres, hoses, belts etc.
• Estimated component market size is US$ 6.7 bn
• The exports of auto components industry has grown at a
rate of nearly 30 per cent CAGR over the last four years.
Second Hand Automobile Market
• Used car market demand : 1.4 million cars annually
• Market Structure :
– Organized : 10%
– Unorganized : 90%
• Vendor Based – 30%
• Direct Dealings – 70%
• Certified used car dealers in India are – Maruti TrueValue, Honda Auto Terrace,
Ford Assured, Toyota U Trust, Hyundai Advantage, Mahindra and Mahindra’s First
Choice, General Motors - Chevrolet-OK
• Unorganized market lacks services like  -warranties, OEM equipments, insurance
and taxes
• Second hand market expected to grow at 12-15 per cent in the next five years to
touch a robust 2.5 million units and a turnover of Rs 50 thousand crore
• Estimations are that 50 percent of the used cars sales will be brought under
organized car market by 2013
Political - Legal Factors
Boosted Economic Growth Stunted Economic Growth
1 year 1 year
•6% cut in CENVAT, abolition of surcharge on •Differential excise duty for small and big cars.
income tax. •Customs duty for imported cars including hybrid
•Abolition of FBT, Reduction of excise duty on cars.
big cars. •Excise duty cut only for petrol driven trucks
•Encourage Urban Fleet Modernization
1-5 Years
•1-5 Years
- Providing Special Auto-component Parks •Existing Complex labor laws( 45 Central acts and 16
(SAP) and Special Economic Zones (SEZ) as in IT . associated rules)
Negative list of items and rules of •Not implementing country wide VAT
origin in FTAs / RTAs. (ASEAN Free Trade •Ambiguous policy in land acquisition for green field
Agreement) projects
- SIAM recommended the government on extending .
excise and sales tax benefits to customers who opt for 5-10 Years
scrappage
5-10 Yearsof their old vehicles •Poor execution of Infrastructure investments.
•Effective Implementation and Uniform (Construction of Highways of 16km per day against
the target of 32 km per day)
enforcement of GST
•Maintain a three tier tariff structure for raw
materials, intermediate goods, finished goods. •Absence of National Auto fuel Policy (NAFP)
•Revamp WTO compatible export promotional
schemes like DEPB, EOU and EPCG schemes
•AMP Plan 2006-16 set by govt
Economic Factors

1 year 1-5 year 5-10 years


•Investment in •Growing working
•Increased access to Infrastructure spending population (441 million
credit and lower interest can boost the people in 2015/16)
loans commercial vehicles
segment. •Upward migration of
household income levels
(600 million people have
annual income of more
than $10,200)

•Middle class expanding


by 30 - 40 million every
year

Can propel growth


Economic Factors
1 year 1-5 year 5-10 years
•Non- availability of
•Non-availability of Key supplier base with
•Impact of delayed raw material (like Steel) demanded capability
monsoon (85% of at cheap price. (Quality and Quantity).
normal, subsequent
impact on paddy •Poor execution of
cultivation) on rural •Possible increase of Infrastructure
demand. interest rates (by 2-2.5% investments.
BPLR) because of (Construction of
planned government Highways of 16km per
borrowing. day against the target of
32 km per day)

•Increase in crude oil


price($ 35/barrel to $ 70/
barrel in 14 months).

Can Stunt Growth


Social Factors
• A perfect marriage of rise in disposable income
• Rapid Urbanization of semi urban regions and demographic dividend (From US$ 556 per
• annum US$ 1150 by 2015)
Rising aspirational levels. Improvement in
living standards of middle class
• Increased spending on Fashion & lifestyle
comforts.
• Seeking “Value for money”- consumer behavior
• Increasing customer emphasis on aesthetics
and comfort.
Technological Factors
India as a Testing Hub : NATRIP
India : A Developing Hub for Compact
Cars
 Compact cars account for 70% of the total car market.
 Compact car sales increasing at about 20% each year
 Excise duty on small cars slashed from 24% to 12% in last three years
 Maruti Suzuki :
• New car plant to make 250,000 cars per  Tata Motors :
Tata Nano became a big success gaining worldwide
annum (total 800,000 cars/annum) popularity with Tata planning to increase capacity
• 10 new Component JVs to support new
Diesel Engine Plant.  Toyota :
 Hyundai : • Toyota Kirloskar motors planning to launch its
 Already a big player in the small car segment own small car in India by 2011
• Increase capacity to 600,000 cars per
annum over next 1 year.  General Motors :
 Nissan : • New Capacity to manufacture small cars at its
• Micra, UK  India Talegaon, Maharashtra plant with 80% local inputs.
– Four more models in India, involving a total investment Brought in Spark small car in 2007
of over Rs 2,000 crore.    Nissan-Renault :
 50:50 JV, to make 400,000 cars a year with an
 Ford : investment of over US $ 1 billion.
 Coming up with the $2500 car to compete with Tata
• Plans to unveil its small car with 1.2 ltr engine by Nano in 2011
2010
 Honda :
 Investing US $ 250 million in a new plant in  VW :
Rajasthan with capacity of 60,000 car per • Investing 400 million euro in a new plant in
year (First car to roll out in 2009). Pune. Operations are to start in second
half of 2009.
Break through future trends
•India will be a Automotive hub, led by small cars and auto component domains

•Export of automotive components to ASEAN,BRIC,EU and USA for OEMs as well as


Aftermarket

•Booming Automobiles (Particularly cars) second sales and remodeling

•Increased deployment of IT-enabled Automobile support systems like GPS,ABS,ASR and


Safety systems
.

•Quality Certification (Deming, Six Sigma,TQM,TS16949) amongst suppliers have attained


critical mass and the entire market will follow to get quality certifications.

•Will be a hub for optimal cost, high quality vehicular testing and terrain data acquisition
services

•Alternate fuel (Bio fuel, electricity) and environment friendly green engines (Bharat
emission norms)
References
• www.acmainfo.com
• www.wikipedia.org
• www.siamindia.com
• www.ibef.org
• Ernst & Young Auto Track
• www.economywatch.com
• www.business-standard.com
• The Economic Times
• Hindu Business Line
• www.automobileindia.com
• automobiles.mapsofindia.com

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