Automobile industry profile
INDUSTRIAL PROFILE “In India there are 100 people per vehicle, while this figure is 82 in China. It is expected that Indian automobile industry will achieve mans motorization status by 2014” AUTOMOBILE INDUSTRY AN OVERVIEW In India, as in many other countries, the auto industry is one of the largest industries. It is one of the key sectors of the economy. The industry comprises of automobile and the auto components sectors and encompasses commercial vehicles, multi utility vehicles, passenger cars, two-wheelers, three-wheelers, tractors and related auto components. The industry has shown great advances since deli censing and opening up of the sector to foreign direct investment (FDI) in 1993. It has deep forward and backward linkages with the rest of the economy, and hence, has a strong multiplier effect. This results in the auto industry being the driver of economic growth and India is keen to use it as a lever of accelerated growth in the country. Since the first car rolled out on the streets of Mumbai (then Bombay) in 1898, the Automobile Industry of India has come a long way. During its early stages the auto industry was overlooked by the then Government and the policies were also not favorable. The liberalization policy and various tax reliefs by the Govt. of India in recent years have made remarkable impacts on Indian Automobile Industry, which is currently growing at the pace of around 25% per annum, has become a hot destination for global auto players like Volvo, General
Motors, Ford, Hyundai, Tata motors and other big players who are emerging slowly. Today Indian automotive industry is fully capable of producing various kinds of vehicles and can be divided into 03 broad categories: Cars, two-wheelers and heavy vehicles. A well developed transportation system plays a key role in the development of an economy, and India is no exception to it. With the growth of transportation system the Automotive Industry of India is also growing at rapid speed, occupying an important place on the ‘canvas’ of Indian economy. During the early stages of its development, Indian automobile industry heavily depended on foreign technologies. However, over the years, the manufacturers in India have started using their own technology evolved in the native soil. The thriving market place in the country has attracted a number of automobile manufacturers including some of the reputed global leaders to set their foot in the soil looking forward to enhance their profile and prospects to new heights. At present about 75 percent of India’s automobile industry is made up by small cars, with the figures ranking the nation on top of any other country on the globe. Over the next two or three years, the country is expecting the arrival of more than a dozen new brands making compact car models. The automobile sector of India is the seventh largest in the world. In the year, the country manufacturers about 2.6 million cars making up an identifiable chunk in the world’s annual production of about 73 million cars in a year. EVOLUTION OF THE AUTOMOBILE INDUSTRY IN INDIA In India, since the early 1940s when the auto industry rolled out first passenger car, its significance in the economy has progressively increased. However, from its
early days until the mid-1980s for two-wheelers and LCVs, and until the early 1990s for passenger cars, the focus of development of the automotive industry has been on import substitution. The current low penetration levels in India in all three segments of the industry, namely commercial vehicles, passenger cars and two wheelers and under-exploitation of the potential of this industry to foster. The growth of the economy have resulted in the auto industry contributing a relatively low (nearly 5 per cent) share of industrial output in India compared to the 8-10 per cent range in other developing countries such as Mexico and Brazil and much higher (15-17 per cent range) in developed countries such as the United States and Germany. Even the share of employment is low at 2.5 per cent for the auto industry in India compared to 3-7 per cent in developing countries and around 15 per cent in mature economies. The economic liberalization that dawned in India in the year 1991 has succeeded in bringing about a sustained growth in the automotive production sector triggered by enhanced competitiveness and relaxed restrictions prevailing in the India soil. A number of Indian automobile manufacturers including Tata Motors, Maruti Suzuki, Mahindra and Mahindra, and TVS motors have dramatically and internationally to attain its rightful place in the world trade. A global recession for last two year notwithstanding, the industry has shown appreciable resilience and adjusted to the challenges of the environment. There are at present 13 manufacturers of passenger cars and multi utility vehicles, 7 manufacturers of commercial vehicles, 11 of 2 or 3 wheelers and 10 tractors besides 4 manufacturers of engines. The industry has an investment of a sum exceeding US$ 10 billion. During 1999-2000 the turnover of the automotive industry as a whole was US$ 12.5 billion approximately. The industry employs
500,000 people directly and more than 10 million people indirectly and is now inhabited by global majors in keen competition. The Automobile industry in India is the seventh largest in the world with an annual production of over 2.6 million units in 2009. In 2009, India emerged as Asia’s fourth largest exporter of automobiles, behind Japan, South Korea and Thailand. By 2050, the country is expected to top the world in car volume with approximately 611 million vehicles on the nation’s roads. Indian automobile industry has matured in last few years and offers differentiated products for different segments of the society. It is currently making inroads into the rural middle class market after its inroads into the urban markets and rural rich. In the recent years Indian automobile sector has witnessed a slew of investments. India is on every major automobile player’s radar. Indian automobile industry is also fast becoming an outsourcing hub for automobile companies worldwide, as indicated by the zooming automobile exports from the country. Due to rapid economic growth and higher disposable income it is believed that the success story of the Indian automobile industry is not going to end soon. Automobile industry in India also received an unintended boost from stringent government auto emission regulations over the past few years. This ensured that vehicles produced in India conformed to the standards of the developed world. CURRENT STATUS OF THE AUTOMOTIVE INDUSTRY The industry over a period of time has installed a robust capacity as given below:
TWO AND THREE WHEELERS
SEGMENT KNOWHOW Among the two-wheelers segments, motorcycles have major share in the market. Hero Honda 50% motorcycles to the markets. In it Honda holds 46% share in scooter and TVS makes 82% of the mopeds in the country. 40% of the threewheelers are used as goods transport purpose. Piaggio hold 40% of the market share. Among the passenger transport, Balaji is the leader by making 68% of the three-wheelers contribution to the market. Cars dominate the passenger vehicle market by 79%. Maruti Suzuki has 52% share in passenger cars and is a complete monopoly in multipurpose vehicles. In commercial vehicle, Tata Motors dominates the market with more than 60% share. Tata Motors is also the world’s fifth largest medium & heavy commercial vehicle manufacturer. The passenger car and motorcycle segment in India auto market is growing by 8-9 per cent. The two-wheelers segment will close 11.5% rise by 2007. Commercial vehicle to grow by 5.2%. passenger vehicle exports have grown over five times and two-wheelers exports have reached more than double. Exports of auto components, whose manufacturing costs are 30-40 per cent lower than in the West, have grown at 25% a year between 2000 to 2005. FACTS ABOUT THE AUTOMOBILE INDUSTRY
The first automobile in India rolled in 1897 in Bombay. India is being recognized as potential emerging auto market. Foreign players are adding to their investments in India auto industry. Within two-wheelers, motorcycles contribute 80% of the segment size. Unlike the USA, the Indian passenger vehicle market is dominated by cars (79%). Tata Motors dominates over 60% of the Indian commercial vehicle market. 2/3rd of auto component production is consumed directly by OEMs. India is the largest three-wheeler market in the world. India is the largest two-wheeler manufacturer in the world. India is the second largest tractor manufacturer in the world. India is the fifth largest commercial vehicle manufacturer in the world. The number one global motorcycle manufacturer is in India. India is the fourth largest car market in Asia – recently crossed the 1 million mark. CURRENT SCENARIO OF THE AUTOMOBILE INDUSTRY According to Commerce Minister Kamal Nath, India is an attractive destination for global auto giants like BMW, General Motors, Ford and Hyundai who were setting base in India, despite the absence of specific trade agreements.
On the cost front of Indian automobile industry, OEMs are eyeing India in a big way, investing to source products and components at significant discounts to home market. On the revenue side, OEMs are active in the booming passenger car market in India. By 2011, India is expected to witness over Rs 40,000 crore of investment. The automobile industry in India is on an investment overdrive. Be it passenger car or two-wheelers manufacturers, commercial vehicle makers or three-wheelers companies – everyone appears to be in a scramble to hike production capacities. EMERGING TRENDS IN THE AUTOMOBILE INDUSTRY Globalization is pushing auto majors to consolidate, to upgrade technology, enlarge product range, access new markets and cut costs. They have resorted to common platforms, modular assemblies and systems integration of component suppliers and e-commerce. The component industry is undergoing vertical integration resulting into emergence of ‘ systems and assembly suppliers’ rather than individual component suppliers. Thus, while most component suppliers are integrating into tier 2 and tier 3 suppliers, larger manufacturers and multinational corporations (MNCs) are being transformed into tier 1 companies. To meet the concomitant testing and certification activities relating to higher safety and emission norms, testing infrastructure in the country is being overhauled. A substantive state funding is being planned in upgrading the testing infrastructure with participation of industry. Environmental pollution and the need to conserve existing supply of fossil fuels have led to search for alternative fuels. In addition to supporting Greenfield research in this area, an ambitious phased programme to
upgrade carbon fuel quality commensurate with higher emission norms is also being undertaken. CONCLUSION Easier and faster mobility of people and goods across the regions, countries and continents is a cherished yearning of mankind. The automobile industry’s potential for facilitating this mobility s enormous. Wheels of development across the globe would have to be powered by this industry. However, a seamless development of this industry across countries and continents alone will help in realization of this objective. For such seamless and barrier-free development of the sector, countries will have to come together and develop better understanding. Industry across countries will have to meet challenges of newer technologies, alternative fuels and affordability of automobiles by people at large through constructive cooperation. The earlier we are able to achieve this the better it would be for the world development.