Automobile Industry

The Indian automobile industry is the tenth largest in the world with an annual
production of approximately 2 million units. Indian auto industry, promises to b
ecome the major automotive industry in the upcoming years and the industry exper
ts are hopeful that it will touch 10 million units mark.
Indian automobile industry is involved in design, development, manufacture, mark
eting, and sale of motor vehicles. There are a number of global automotive giant
s that are upbeat about the expansion plans and collaboration with domestic comp
anies to produce automobiles in India.
The major car manufacturers in India are Maruti Udyog, Hyundai Motors India Ltd.
, General Motors India Pvt. Ltd., Honda Siel Cars India Ltd., Toyota Kirloskar M
otor Ltd., Hindustan Motors etc.
The two-wheeler manufacturers in India are Honda Motorcycle & Scooter India (Pvt
.) Ltd., TVS, Hero Honda, Yamaha, Bajaj, etc. The heavy motors including buses,
trucks, auto rickshaws and multi-utility vehicles are manufactured by Tata-Telco
, Eicher Motors, Bajaj, Mahindra and Mahindra, etc.
Quick Facts:
• First Indian to own a car in India was Jamshedji Tata.
• First woman to drive a car in India was Mrs. Suzanne RD Tata.
• The passenger car and motorcycle segment in the Indian auto industry is growing
by 8-9 percent.
• Commercial vehicle will grow by 5.2 per cent.
• The first automobile in India was rolled in 1897 in Bombay.
• India is a potential emerging auto market.
• Motorcycles contribute 80% of the two-wheeler industry.
• Unlike the USA, the Indian passenger vehicle market is dominated by cars (79%).
• India is the largest two-wheeler manufacturer in the world.
• India's motorcycle segment will grow by 8-9 percent in the coming years. 11. Ind
ia is the fifth largest commercial vehicle manufacturer in the world. 12. India
has the number one global motorcycle manufacturer. 13. In Asia, India is the fou
rth largest car market.
Used car Market
The new chapter in the automobile industry is that of used cars. The massive dem
and of used cars indicates that cars are becoming increasingly popular. Those wh
o can't afford the luxury cars and their high prices are opting for used cars. I
n today's time, customers are conscious and diligently investing on car dealersh
ip. Car buyers are investing heavily a lot of time for both to sell a car and bu
y car. There's also a number of car websites that have offering detailed informa
tion on new car prices, used cars, car reviews, Chevrolet cars, jaguar cars and
luxury cars.
Market Share
At present major Indian, European, Korean, Japanese automobile companies are hol
ding significant market shares. In commercial vehicle, Tata Motors dominates ove
r 60% of the Indian commercial vehicle market. Tata Motors is the largest medium
and heavy commercial vehicle manufacturer.
Among the two-wheeler segment, including scooters and mopeds- motorcycles have-
major share in the market. Hero Honda contributes 50% motorcycles to the market
in which Honda holds 46% share in scooter and TVS makes 82% of the mopeds in the
country. In the three wheeler industry in India, Piaggio holds 40% of the marke
t share. Bajaj is the leader by making 68% of the three-wheelers.
Car manufacturers in India dominate the passenger vehicle market by 79%. Maruti
Suzuki is the largest car producer in India and has 52% share in passenger cars
and is a complete monopoly in multi purpose vehicles. In utility vehicles Mahind
ra holds 42% share. Hyundai and Tata Motors is the second and third car producer
in India.
Automobile Marketing in India
The competitive nature of the automobile industry has prompted the companies to
take up new and innovative marketing strategies to thwart the competition. The B
segment of cars is the segment which sees maximum competition as the consumer h
as a number of models to choose from and it's the volumes which drive the margin
s.
All the companies as a part of their marketing strategy offers a range of vehicl
es in all the segment to make sure that the customer is driving one of their veh
icles only.
Advertisements on the Audio visual medium are a rage as it gives the car makers
an opportunity to flaunt their cars. Flashy cars can be demonstrated on televisi
on but when it comes to the finer prints of the cars, print and online media com
es to the rescue.
The online medium offers a greater flexibility to the car companies since they c
ome with a lot of interactive features like demonstrating the interiors of the c
ar with its salient features.
The print medium on the other hand provides an opportunity to the car makers to
explain the function of a car in detail.
Celebrity endorsements and testimonial advertisements have come a long way and t
hey are also doing their bit to sell the cars. Super star Shahrukh Khan has been
associated with Hyundai Motor Company for a long time and he comes regularly on
television to promote the Santro car. Similarly Ford has roped in Junior Bachan
for the promotion of the latest offering from the company Ford Fiesta. On a sim
ilar note Saif Ali Khan and Rani Mukherjee is shown chasing each other with a Ch
evrolet aveo.
Aamir Khan who is considered to be one of the most talented actors in the indust
ry is frequently seen changing roles on screen to promote the Toyota Innova, a c
ar which is generations ahead of its predecessor Toyota Qualis.
Cricketers haven't been left behind in the race of promoting cars; Fiat Palio ha
d received a great thrust when the promotion of the car was taken up by the batt
ing maestro Sachin Tendulkar.In addition to the publicity and advertisement whic
h is done by the companies there are certain innovative strategies which are tak
en up by the companies to beat the competition from time to time.
GROSS TUNROVER OF THE AUTOMOBILE INDUSTRY IN INDIA
Year (IN USD MILLION)
2004-05 20,896
2005-06 27,011
2006-07 34,285
2007-08 36,612
2008-09 38,238
Conversion Rate Rs.40 = 1USD
Automobile Domestic Sales Trends (Number
of Vehicles)
Category 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09
2009-10
Passenger Vehicles 902,096 1,061,572 1,143,076 1,379,979
1,549,882 1,552,703 1,949,776
Commercial Vehicles 260,114 318,430 351,041 467,765 490,494 384,194 531,395
Three Wheelers 284,078 307,862 359,920 403,910 364,781 349,727 440,368
Two Wheelers 5,364,249 6,209,765 7,052,391 7,872,334
7,249,278 7,437,619 9,371,231
Grand Total 6,810,537 7,897,629 8,906,428 10,123,988
9,654,435 9,724,243 12,292,770
Domestic Market Share for 2009-10
Passenger Vehicles 15.86
Commercial Vehicles 4.32
Three Wheelers 3.58
Two Wheelers 76.23

Abstract
De-licensing in 1991 put the Indian automobile industry on a new growth trajecto
ry, which attracted foreign auto giants to set up their production facilities in
the country to take advantage of various benefits it offers. Large middle class
population, growing earning power and strong technological capability have been
boosting automobile demand for past few years. Despite economic slowdown, the I
ndian automobile sector is expected to see high growth in coming years, especial
ly in passenger cars segment.
The passenger vehicle market, which constitutes around 80% of automobile sales,
has immense growth potential as passenger car stock stood at around 11 per 1,000
people in 2008. Anticipating the future market potential, the production of pas
senger vehicle is forecasted to grow at a CAGR of around 10% from 2009-10 to 201
2-13.
The recent launch of Tata Nano has brought about a new revolution in the country
' s small car segment. Seeing the good initial response from consumers, many oth
er players in the industry are chalking out their plans to launch cars in this s
egment in the next few years. Other segments, such as two-wheelers, multi-purpos
e vehicle and light commercial vehicle, are also expected to witness fast growth
in coming years.
The report covers various aspects of the Indian automobile market and gives deta
iled analysis of its various segments such as passenger vehicle, commercial vehi
cle, utility vehicles, multi-purpose, two wheelers and three wheelers. Each sect
ion succinctly explains the current and future market trends, and developments i
n the Indian automobile market. There are immense opportunities for various indu
stry players including automobile manufacturers and players of automobile compon
ents.
Besides, we have also comprehensively analyzed the auto component industry and i
ts future outlook. The study has evaluated growth avenues available for the auto
mobile market, which include automotive design market, non-conventional vehicle
market, domestic tyre industry, India as global manufacturing hub, green car mar
ket etc.
Top 5 trends in Automotive Industry of 2010
The writing is clear on the wall…. Toyota at the helm of automotive industry has b
een bitten large by the recall bug. And that’s not just because of being at the to
p, but unforeseen to most admirers, because of the forced diversion from its bas
ic tenets of lean. And the other warlords like GM and Ford has its back against
the wall still scouting for buyers for Pontiac , while literally surrendering to
lesser mortals like Sichuan Tengzhong and Zhejiang Geely of China to shed its o
verladen baggage of Hummer and Volvo cars respectively, having tasted bitter pil
ls with its deals with Magna for Opel and Vauxhall, Roger Penske for Saturn and
Spyker for SAAB. VW, the European biggie had to tie-up with Suzuki Motors throug
h a 20% stakes and Engineering collaboration for next-generation mini-car, possi
bly Alto, to capture Indian market. Renault has similar plans of shrinking Europ
ean market and wants to enter China with Nissan’s help to reach the 1 million magi
c figures in China. Chrysler which has a close relationship with Fiat has planne
d its product plan till 2014 with amalgamation of Fiat platforms in Chrysler’s bra
nds like Dodge and Jeep by 2013. With these far reaching changes sweeping the i
ndustry there are some converging trends which emerge in the automotive industry
in 2010
The Top 5 trends in automotive industry in 2010 will be:
1. Acceleration in Merger and Acquisition: As cash-strapped organizations
in US and Europe look for “saviors” for some of their brands or subsidiaries, there
will be an emergence of “Young Turks” from fast-growing markets like India (Tata Mot
ors, Mahindra etc.) and China (Geely, Chery etc.). In addition there will be str
ategic partnerships between automotive OEMs with contrasting strengths (like Suz
uki and VW or Chrysler and Fiat) to leverage their strengths on common platforms
.
2. Entry into new geographies: New markets like India (with 11% growth) an
d China (9% growth) holds strong promise. As US new car sales dipped from 15+ m
illion vehicles in 2006 to about 8+ million vehicles by the end of 2009, there i
s a shift in focus to these emerging markets. Some OEMs would leverage the exist
ing presence of their alliance partners to enable an entry strategy, like Renaul
t’s entry into China. With some other OEMs like GM, they have upgraded their GMDAT
offices in Korea to develop market attractive mini-cars for India and Korea.
3. Reducing time-to-market for alternate energy vehicles: Cornered by the “g
reen revolution” most automotive OEMs are forced to look for alternate energy sour
ces like hybrids, electric vehicles, ethanol, bio-diesel etc. Seeing the success
of Toyota Prius, all automotive OEMs are planning rapid prototyping and acceler
ate sourcing and commercialize their alternate fuel concept vehicles. This will
consequently lead to a major change in their supply chains including energy and
parts suppliers, pipeline and distribution agencies, energy storage and retail a
gencies.
4. Procurement collaboration: Automotive OEMs are coming closer to collab
orate. This collaboration has been presently been more mature in areas of procur
ement, with BMW and Daimler showing affinity towards development of a common pro
curement platform on the lines of COVISINT of GM. Even Tier-1 suppliers are movi
ng in this direction to collaborate for procurement from their lower-tier suppli
ers. This will serve three basic objectives; namely, de-risk OEMs against any su
pplier hegemony, enable procurement cost reduction through economies of scale an
d “right-sourcing” (instead of indiscriminate low-cost sourcing) and develop the des
ired traceability through the supply chain necessary for quality and regulatory
requirements.
5. Focus on vehicle SCM: As credit availability becomes elusive and OEMs s
tart depending more and more on their internal cash flows to finance investment
opportunities, supply chain optimizations become quite imperative for OEMs to pe
rpetuate sustenance. This supply-chain-restructuring needs to be carried out in
each of the legacy and emerging regions due to changing volume shift from US and
European markets to emerging markets of India and China. Sensing major increase
in volumes, organizations like Honda and VW have already taken-up measures to r
ationalize processes and optimize supply chains in emerging economies to meet th
e challenges of future.
As automotive OEMs start to settle after the severe crisis of 2009 (except Toyot
a who are still reeling under major recalls) it remains to be seen how these tre
nds would impact their performance in the next 12 months. It has been an observa
tion that as the markets start to blossom most OEMs lose retrospective and swing
back to the same age-old practices which has led to the crises. What is certain
is that the emerging OEMs are catching up fast on the heels of the US, German a
nd Japanese OEMs, and if they do not adapt to the changing market trends, surviv
al will be a challenge.

Automobile Domestic Sales Trends (Number

of Vehicles)
Category 2003-04 2004-05 2005-06 2006-07
2007-08
2008-09
2009-10
Passenger Vehicles 902,096 1,061,572 1,143,076 1,379,979
1,549,882 1,552,703 1,949,776
Commercial Vehicles 260,114 318,430 351,041 467,765 490,494 384,194 531,395
Three Wheelers 284,078 307,862 359,920 403,910 364,781 349,727 440,368
Two Wheelers 5,364,249 6,209,765 7,052,391 7,872,334
7,249,278 7,437,619 9,371,231
Grand Total 6,810,537 7,897,629 8,906,428 10,123,988
9,654,435 9,724,243 12,292,770

AUTO MOBILE DOMESTIC SALES TREND NO OF VEHICLES

CATEGORY 2006-2007 2007-2008 2008-2009 2009-2010
PASSENGER VEHICLES 1,379,979 1,549,882 1,552,703 1,949,77
6
COMMERCIAL VEHICLES 467,765 490,494 384,194 531,395
THREE WHEELERS 403,910 364,781 349,727 440,368
TWO WHEELERS 7,872,334 7,249,278 7,437,619 9,371,231
GRAND TOTAL 10,123,988 9,654,435 9,724,243 12,292,770

Automobile Exports Trends (Number of

Vehicles)
Category 2006-07 2007-08 2008-09 2009-10
Passenger Vehicles 198,452 218,401 335,729 446,146
Commercial Vehicles 49,537 58,994 42,625 45,007
Three Wheelers 143,896 141,225 148,066 173,282
Two Wheelers 619,644 819,713 1,004,174 1,140,18
4
Grand Total 1,011,529 1,238,333 1,530,59
4 1,804,619

AUTO MOBILE EXPORT TRENDS NO OF VEHICLES

CATEGORY 2006-2007 2007-2008 2008-2009 2009-2010
PASSENGER VEHICLES 198,452 218,401 335,729 446,146
COMMERCIAL VEHICLES 49,537 58,994 42,625 45,007
THREE WHEELERS 143,896 141,225 148,066 173,282
TWO WHEELERS 619,644 819,713 1,004,174 1,140,184
GRAND TOTAL 1,011,529 1,238,333 1,530,594 1,804,619

Automobile Domestic Sales Trends (Number

of Vehicles)
Category 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09
2009-10
Passenger Vehicles 902,096 1,061,572 1,143,076 1,379,979
1,549,882 1,552,703 1,949,776
Commercial Vehicles 260,114 318,430 351,041 467,765 490,494 384,194 531,395
Three Wheelers 284,078 307,862 359,920 403,910 364,781 349,727 440,368
Two Wheelers 5,364,249 6,209,765 7,052,391 7,872,334
7,249,278 7,437,619 9,371,231
Grand Total 6,810,537 7,897,629 8,906,428 10,123,988
9,654,435 9,724,243 12,292,770