Industry Performance in 2012-13

Production
The cumulative production data for April-March 2013 shows production growth of only 1.20 percent
over the same period last year. The industry produced 1,685,355 vehicles in March 2013 as against
1,845,868 in March 2012, which declined by (-) 8.70 percent.

Domestic Sales
The overall growth in domestic sales during April-March 2013 was 2.61 percent over the same period
last year. While in March 2013 overall sales fell by (-) 7.76 percent over March 2012.
Passenger Vehicles segment grew at 2.15 percent during April-March 2013 over same period last
year. Passenger Cars declined by (-) 6.69 percent, Utility Vehicles grew by 52.20 percent and Vans
grew only by 1.08 percent during April-March 2013 as compared to the same period last year.
However, in March 2013 passenger car sales further declined by (-) 22.51 percent over March 2012.
Total passenger vehicles sales also declined by (-) 13.01 percent in March 2013 over same month
last year.

The overall Commercial Vehicles segment registered de-growth of (-) -2.02 percent in April-March
2013 as compared to the same period last year. While Medium & Heavy Commercial Vehicles
(M&HCVs) declined by (-) 23.18 percent, Light Commercial Vehicles grew at 14.04 percent. In March
2013, M&HCVs sales further declined by (-) 26.16 percent over March 2012.
Three Wheelers sales grew by 4.87 percent in April-March 2013. Passenger Carriers grew by 8.58
percent during April-March 2013 and Goods Carriers registered de-growth at (-) 9.20 percent during
this period.
Two Wheelers registered growth of only 2.90 percent during April-March 2013. Scooters, mopeds and
motorcycles grew by 14.24 percent, 1.53 percent and 0.12 percent respectively over same period last
year. However, in March 2013 all sub-segments of two wheelers, scooters, motorcycles and mopeds
registered de-growth at (-) 3.18 percent, (-) 8.32 percent and (-) 4.54 percent respectively.

Exports
During April-March 2013, overall automobile exports registered de-growth of (-) 1.34 percent
compared to the same period last year. Passenger Vehicles grew by 9.02 percent, while the other
segments like Commercial Vehicles, Three Wheelers and Two Wheelers fell by (-)13.35 percent, (-)
16.22 percent and (-) 0.72 percent respectively. In March 2013, Passenger Vehicles, Two & Three
Wheelers grew by 3.07 percent, 3.51 percent and 7.50 percent respectively. While Commercial
Vehicles declined by (-) 28.33 percent.







Automobile Domestic Sales Trends (Number
of Vehicles)
Category 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13
Passenger
Vehicles
1,549,882 1,552,703 1,951,333 2,501,542 2,618,072 2,686,429
Commercial
Vehicles
490,494 384,194 532,721 684,905 809,532 793,150
Three
Wheelers
364,781 349,727 440,392 526,024 513,251 538,291
Two
Wheelers
7,249,278 7,437,619 9,370,951 11,768,910 13,435,769 13,797,748
Grand Total 9,654,435 9,724,243 12,295,397 15,481,381 17,376,624 17,815,618


INDUSTRY PROFILE OF TWO WHEELERS IN INDIA
The two-wheeler industry in India has been in existence since 1955. It consists of three segments

o Scooters

o Motorcycles

o Mopeds

The increase in sales volume of this industry is proof of its high growth. In 1971, sales were around 0.1
million units per annum. But by 1998, this figure had risen to 3 million units per annum.

Similarly, capacities of production have also increased from about 0.2 million units of annual capacity in
the seventies to more than 4 million units in the late nineties.

The two-wheeler industry in India began operations within the framework of the national industrial policy
as espoused by the Industrial Policy Resolution of 1956.

This resolution divided the entire industrial sector into three groups, of which one contained industries
whose development was the exclusive responsibility of the State, another included those industries in
which both the State and the private sector could participate and the last set of industries that could be
developed exclusively under private initiative within the guidelines and objectives laid out by the Five
Year Plans.

Private investment was channelised and regulated through the extensive use of licensing giving the
State comprehensive control over the direction and pattern of investment.

Entry of firms, capacity expansion, choice of product and capacity mix and technology, were all
effectively controlled by the State in a bid to prevent the concentration of economic power.

However due to lapses in the system, fresh policies were brought in at the end of the sixties.

These consisted of MRTP of 1969 and FERA of 1973, which were aimed at regulating monopoly and
foreign investment respectively. Firms that came under the purview of these acts were allowed to invest
only in a select set of industries.

This net of controls on the economy in the seventies caused several firms to

Operate below the minimum scale of efficiency

Under-utilize capacity and

Use outdated technology.

While operating below the minimum scale of efficiency resulted from the fact that several incentives
were given to smaller firms, the capacity under-utilization was the result of the capacity mix being
determined independent of the market demand.

The policy of distributing imports based on capacity, causing firms to expand beyond levels determined
by demand so as to be eligible for more imports. Use of outdated technology resulted from the
restrictions placed on import of technology through the provisions of FERA.

Recognition of the deleterious effects of these policies led to the initiation of reforms.

In 1975 which took on a more pronounced shape and acquired wider scope under the New Economic
Policy (NEP) in 1985. As part of these reforms, several groups of industries were delicensed and
broadbanding was permitted in select industries.

Controls over capacity expansion were relaxed through the specification of the operate below the
minimum scale of efficiency of production for several industries.

Foreign investment was allowed in select industries and norms under the MRTP Act were relaxed.
These reforms led to a rise in the trend rate of growth of real GDP from 3.7% in the seventies to 5.4%
in the eighties.

However the major set of reforms came in 1991 in response to a series of macroeconomic crises that hit
the Indian economy in 1990-91. Several industries were deregulated, the Indian rupee was devalued
and made convertible on the current account and tariffs replaced quantitative restrictions in the area of
trade.

The initiation of reforms led to a drop in the growth of real GDP between 1990 1992, but this averaged
at about 5.5% per annum after 1992. The decline in GDP in the years after reforms was the outcome of
devaluation and the contractionary fiscal and monetary policies taken in 1991 to address the foreign
exchange crisis.

Thus the Industrial Policy in India moved from a position of regulation and tight control in the sixties and
seventies, to a more liberalized one in the eighties and nineties.

The two-wheeler industry in India has to a great extent been shaped by the evolution of the industrial
policy of the country. Regulatory policies like FERA and MRTP caused the growth of some segments in
the industry like motorcycles to stagnate.

These were later able to grow (both in terms of overall sales volumes and number of players) once
foreign investments were allowed in 1981.

The reforms in the eighties like broadbanding caused the entry of several new firms and products
which caused the existing technologically outdated products to lose sales volume and/or exit the market.
Finally, with liberalization in the nineties, the industry witnessed a proliferation in brands.




INDUSTRY PROFILE OF AUTOMOBILES IN INDIA
PROFILE OF AUTOMOBILE SECTOR


The Indian automobile sector can be divided into several segments: 2 & 3 wheelers, Passenger cars,
Commercial vehicles (Heavy CVs/ Medium CVs/Light CVs), Utility vehicles (UVs) and Tractors.

Agricultural tractors and Earth Moving Machinery is an associated sector, which keeps the wheels of the
agrarian economy moving.

It is heavily reliant and aligned to the automobile and allied engineering sector and plays a significant
role in India.

The automotive Industry in India is now working in terms of the dynamics of an open market. Many joint
ventures have been set up in India with foreign collaboration, both technical and financial with leading
global manufacturers.

Also a very large number of joint ventures have been set up in the auto-components sector and the pace
is expected to pick up even further.

The industry is characterized by a very high percentage (75%) of production in the 2/3 wheelers sector.
India ranks as the largest manufacturer of motorcycles and second largest in manufacturing of scooters
in the world.

India today is also the second largest manufacturer of tractors, as well. The industry has intense forward
and backward integration.

The joint venture list indicates a wide variation ranging from 10% to 100%. The equity participation is
not regulated by Government but is market driven.

It depends upon the market perceptions of the joint venture partners and their business perceptions
primarily in terms of technological, financial and market strengths of the partners.

The setting up of joint ventures has also led to enhanced capacity creation in the vehicle sector,
particularly in the passenger car sector and the additional capacity is expected to mount by one million
passenger cars in the next 4-5 years.

The large volumes of investment including foreign direct investment in the automobile manufacturing
ventures and technical collaboration are propelling a quantum jump in up gradation of technology.
Domestic demand for passenger cars and multi utility vehicles is projected at 800,000 cars by 2004
A.D.

With increased production and capacity creation in the passenger car sector, foreign countries may use
India as an export hub. This tremendous growth is likewise triggering growth of the auto-component
segment.

In India, the vehicle population, currently at sixty million, is growing at a rate of more than 9% per
annum. Of this, 63 % are two/three wheelers. Growth rate has been very high for passenger cars and
2/3 wheeler vehicles.