Automobile Industry Essay Example for Free

Automobile Industry Essay Strong demand growth due to rising incomes, growing middle class, and a young population is likely to propel India among the world’s top five auto-producers by 2015 Growth in export demand is also set to accelerate. Tata Nano and the upcoming Pixel have opened up the potentially large ultra low cost car segment Innovation is likely to intensify among engine technology and alternative fuels. Advantage India Rising investments Policy support India has significant cost advantages; auto firms save 10-25 per cent on operations in India compared to Europe and Latin America A large pool of skilled manpower and a growing technology base will induce greater investments. The government aims to develop India as a global manufacturing as well as RD hub There has been a wide array of policy support in the form of sops, taxes and FDI encouragement. FY10 Market size: USD57.7 billion Notes: RD – Research and development, FDI – Foreign direct investment; FY – Indian financial year (April – March); FY16E – estimated figure for financial year 2016; estimates are from the government’s Automotive Mission Plan (2006 – 2016) ADVANTAGE INDIA. For updated information, please visit www.ibef.org. 3. Automotives AUGUST 2012 Contents ï  ¶ Advantage India ï  ¶ Market overview and trends ï  ¶ Growth drivers ï  ¶ Success stories: Maruti, Tata Motors ï  ¶ Opportunities ï  ¶ Useful information For updated information, please visit www.ibef.org 4 Automotives AUGUST 2012 Evolution of the Indian automotives sector 20.4 million units (2012) 11 million units (2007) 2008 onwards 0.6 million units (1992) 1983 1992 0.4 million units (1982) Before 1982 †¢ Closed market †¢ Only 5 players †¢ Joint venture (JV) Indian government and Suzuki to form Maruti Udyog; started production in 1983 †¢ Component manufacturers also entered via JV route †¢ Buyer’s market 1993 -2007 †¢ Sector de-licensed in 1993 †¢ Major original equipment manufacturers (OEMs) started assembly in India †¢ Imports allowed from April 2001 †¢ Introduction of value added tax in 2005 †¢ More than 35 players in the market †¢ Removal of most import controls †¢ Indian companies gaining global identity †¢ Long waiting periods and outdated models †¢ Seller’s market Source: Tata Motors, Society of Indian Automobile Manufacturers (SIAM), Aranca Research, Notes: JV – Joint Venture MARKET OVERVIEW AND TRENDS For updated information, please visit www.ibef.org 5 Automotives AUGUST 2012 The automotives market is split into four segments Automobiles Two-wheelers Passenger vehicles Commercial vehicles Three-wheelers Mopeds Passenger cars Light commercial vehicles Passenger carriers Scooters Utility vehicles Motorcycles Multi-purpose vehicles Medium and heavy commercial vehicles Goods carriers Electric twowheelers For updated information, please visit www.ibef.org MARKET OVERVIEW AND TRENDS 6 Automotives AUGUST 2012 Revenues have been growing at a strong pace → Gross turnover of automobile manufacturers in India expanded at a CAGR of 17.7per cent over FY07-1 1 Excluding three wheelers, cars account for the largest share of revenues (66.2 percent in 2010) Revenue trends over the past few years in USD million 70.0 60.0 50.0 40.0 30.5 30.0 20.0 10.0 0.0 FY07 FY08 FY09 FY10 FY11 66.2% 36.6 33.3 21.5% Trucks Cars 58.6 CAGR: 17.7% 43.3 → Market* break-up by revenues (2010) 12.3% Two Wheelers Source: SIAM, Datamonitor, Aranca Research Note: *does not include three wheelers For updated information, please visit www.ibef.org MARKET OVERVIEW AND TRENDS 7 Automotives AUGUST 2012 Sector’s growing strength evident from rise in total production figures Total production of automobiles in India (million units) 16.0 → → 12.0 7.6 8 8.4 10.0 8.0 6.0 1.3 0.4 0.4 1.2 0.4 0.4 1.6 0.6 0.5 1.3 0.5 0.6 1.8 2.4 4.0 6.5 8.5 Notes: CAGR – Compound annual growth rate 10.5 Passenger vehicles was the fastest growing segment during that period with a CAGR of 14.5 per cent 14.0 13.4 0.8 0.8 3.0 2.0 0.0 FY05 FY06 FY07 FY08 FY09 0.4 0.5 FY10 0.6 0.6 FY11 FY12 Passenger Vehicle Three Wheelers Commercial Vehicle Two Wheelers Source: SIAM, Aranca Research For updated information, please visit www.ibef.org MARKET OVERVIEW AND TRENDS 0.8 0.8 3.1 15.5 Automobiles production increased at a CAGR of 13.2 per cent over FY05-12 18.0 8 Automotives AUGUST 2012 Market break-up by production volume → Two wheelers dominate production volumes; in FY12, the segment accounted for more than three quarters of total automotives production in the country Market share by volume (FY12) → In fact, India is the world’s second largest two wheeler producer; the country is also the fourth largest commercial vehicle producer 4% 4% 16% Two Wheelers Passenger Vehicle Commercial Vehicle Three Wheelers 76% Source: SIAM, Aranca Research For updated information, please visit www.ibef.org MARKET OVERVIEW AND TRENDS 9 Automotives AUGUST 2012 Market break-up of individual segments by production volumes †¦ (1/2) Shares in production of passenger vehicles (FY11) Shares in production of commercial vehicles (FY11) 11.5% Passenger cars 8.1% 36.0% MCV HCV Passenger Carriers MCV HCV Goods Carriers LCV Passenger Carriers 49.7% 6.1% LCV Goods Carriers Utility vehicles/multipurpose vehicles 88.5% Source: SIAM, Aranca Research Notes: LCV – Light commercial vehicle; MCV – Medium commercial vehicle; HCV – Heavy commercial vehicle For updated information, please visit www.ibef.org MARKET OVERVIEW AND TRENDS 10 Automotives AUGUST 2012 Market break-up of individual segments by production volumes †¦ (2/2) Shares in production of three wheelers (FY12) Shares in production of two wheelers (FY12) 15.8% Goods carriers 15.6% 5.3% Mopeds Motorcycles Passenger carriers Scooters 84.2% 79.1% Source: SIAM, Aranca Research For updated information, please visit www.ibef.org MARKET OVERVIEW AND TRENDS 11 Automotives AUGUST 2012 Exports have also grown strongly †¦ (1/2) → Automobiles export volumes increased at a CAGR of 22.4 per cent over FY05–FY12 Over this period, the fastest growth was in the two wheeler segment (25.8 per cent) followed by three wheelers (21.9 per cent) Exports of automobiles from India (million units) 2 1.8 1.6 1.4 1.2 1 0.8 0.6 0.4 0.2 0 2 0.5 0.6 0.8 1 0.5 1.1 0.5 1.5 0.4 0.5 0.3 0.2 0.03 0.1 → 0.2 0.04 0.1 0.2 0.05 0.1 0.2 0.06 0.1 0.04 0.2 0.04 0.2 0.08 0.3 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 Passenger Vehicle Commercial Vehicle Three Wheelers Two Wheelers Source: SIAM, Aranca Research For updated information, please visit www.ibef.org MARKET OVERVIEW AND TRENDS 0.1 0.4 12 Automotives AUGUST 2012 Exports have also grown strongly †¦ (2/2) → Two wheelers accounted for the largest share in exports (by volume) at 67 per cent in FY12 Passenger vehicles account for a sizeable 18 per cent of overall exports Exports shares by volume (FY12) → 18% Passenger Vehicle 3% 12% 67% Commercial Vehicle Three Wheelers Two Wheelers Source: SIAM, Aranca Research For updated information, please visit www.ibef.org MARKET OVERVIEW AND TRENDS 13 Automotives AUGUST 2012 Presence of a clear leader in each segment of the market → The automotives industry is concentrated with market leaders in each segment commanding a share of over 40 per cent Market Leader Passenger Vehicles MCVs HCVs LCVs Three Wheelers 45% 16% Others 15% 7% 63% 23% 7% 59% 30% 4% 4% 41% 40% 10% Motorcycles Scooters 59% 24% 7% 6% 51% 21% 14% Source: SIAM, Aranca Research Notes: Data is for FY10 10% For updated information, please visit www.ibef.org MARKET OVERVIEW AND TRENDS 14 Automotives AUGUST 2012 Notable trends in the Indian automotives sector †¢ Large number of products available to consumers across various segments; this New product launches has gathered pace with the entry of a number of foreign players †¢ Reduced overall product lifecycle have forced players to employ quick product launches Improving productdevelopment capabilities †¢ Increasing RD investments from both the government and the private sector †¢ Private sector innovation has been a key determinant of growth in the sector; two good examples are Tata Nano and Tata Pixel – while the former has been a success in India, the latter is intended for foreign markets †¢ In FY11, the CNG market was worth more than USD330 million and CNG cars Alternative fuels and taxis are expected to register a CAGR of 28 per cent over FY11-FY14 †¢ The CNG distribution network in India is expected to increase to 250 cities by 2018 from 30 cities in 2009 For updated information, please visit www.ibef.org MARKET OVERVIEW AND TRENDS 15 Automotives AUGUST 2012 Contents ï  ¶ Advantage India ï  ¶ Market overview and trends ï  ¶ Growth drivers ï  ¶ Success stories: Maruti, Tata Motors ï  ¶ Opportunities ï  ¶ Useful information For updated information, please visit www.ibef.org 16 Automotives AUGUST 2012 Sector has been benefitting from strong demand and product innovation Growing demand Growing demand Policy support Strong government support Increasing investments Rising incomes, young population Inviting Greater availability of credit and financing options Goal of establishing India as an automanufacturing hub RD focus; GOI has set up technology modernisation fund Large domestic market Policy sops, FDI encouragement Resulting in Rising investments from domestic and foreign players Greater innovation in products; market segmentation Strong growth in exports as well Strong projected demand making returns attractive Notes: GOI – Government of India; For updated information, please visit www.ibef.org GROWTH DRIVERS 17 Automotives AUGUST 2012 Rising incomes and a growing middle class driving domestic demand growth Rising incomes; growing middle class †¢ Changing income dynamics of India’s population 70 million households Aspirers: annual income INR90,000200,000 Seekers: annual income INR200,000500,000 Strivers: annual income INR500,0001,000,000 Globals: annual income INR1,000,000 Personal (nominal) disposable income is expected to rise annually at 8.5 per cent over FY11-15 Rising middle class – size of the middle class expected to touch 550 million by 2025 from 50 million in 2010 Favourable demographics – a young population is also driving up the demand for cars Demand for commercial vehicles have got a boost due to development of roadways and greater market access 60 50 40 30 20 10 0 2005 Strivers 2010 Seekers 2015 Deprived Deprived annual income