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A Project Report on A COMPREHENSIVE STUDY OF INDIAN COMMERCIAL ROAD VEHICLE INDUSTRY

SUBMITTED TO:
V.M.PATEL INSTITUTE OF MANAGEMENT For fulfillment of partial requirements of the subject Management Research Project – I of Semester III of MBA. GUIDED BY:
Dr. Mahendra Sharma Dr. Rohit Trivedi

PREPARED BY:
1. 2. 3. 4.

Swapnil Desai. Dhaval Oza . Minesh Patel. Pradip Patel

( 5) (12) (21) ( 24)

V.M. PATEL INSTITUTE OF MANAGEMENT GANPAT UNIVERSITY, KHERVA
DECLARATION FROM STUDENT

We hereby declare that the work incorporated in this report entitled “A COMPREHENSIVE STUDY OF INDIAN COMMERCIAL ROAD VEHICLE INDUSTRY” in fulfillment of the requirements for the award of Master of Business Administration (MBA) is the outcome of original study undertaken by us and it has not been submitted earlier to any other University or Institution for the award of any Degree or Diploma.

___________________ Swapnil Desai (05)

___________________ Dhaval Oza (12)

___________________ Minesh Patel (21)

___________________ Pradip Patel (24)

Date: Place:

CERTIFICATE FROM INSTITUTE This is to certify that the contents of this thesis entitled “A COMPREHENSIVE STUDY OF INDIAN COMMERCIAL ROAD VEHICLE INDUSTRY” by Swapnil Desai (05),

Dhaval Oza (12), Minesh Patel (21) and Pradip Patel (24) submitted to V.M.Patel Institute of Management for the Award of Degree Master of Business Administration (MBA) is original research work carried out by them under my supervision. This report has not been submitted either partly or fully to any other University or Institute for award of any degree or diploma to best of my knowledge.

Dr. Mahendra S. Sharma Director and Dean

Date: Place:

PREFACE
Master of Business Administration is a course, which combines both theory and its applications as its contents of study in the field of management. As part and parcel of this course, every aspirant has to prepare Market Research Report on particular Industry .The purpose of this report is to get the in depth knowledge regarding the Industry and enhance student’s analytical skill. One of the Indian booming Indian commercial vehicle industry which is being researched by our group from the management perspective. By studying Indian commercial vehicle industry from a management perspective we would be able analysis potential opportunity as well as threats of the commercial vehicle industry. Also, attractiveness of new entrant would be analysis with the help of Michael Porters five force model. Environmental scanning would be with the help of PEST analysis (Political, Economic, Social and Technology). The data for analysis is being collected through the Secondary sources like Internet, Newspaper and published Journals

EXECUTIVE SUMMERY

This report is the study of Indian commercial vehicles industry. This report has helped us to getting some very useful insight of the commercial vehicles industry. Tata Motor, Eicher motor, Mahindra & Mahindra, Swaraj mazda are the dominant player of the Indian commercial vehicle Industry. India is 13th largest commercial vehicle market in the world. The last five years industry has grown CAGR of 14%. Commercial vehicle’s Industry’s share in Indian automobile is 5.05% in the year 2007-08. The Industry which grew at a rate of above 25% over 2001-07 has grown by just 5% in FY08 so the economic fluctuation affect greatly to Indian commercial vehicle Industry. Ability to enhance and vary product mix, Sales and distribution service network, Access to new technologies are the key success factor of Indian commercial vehicle Industry. An Indian railway is the only one competitor of Indian commercial vehicle Industry but because of several advantage commercial vehicle Industry ruled over the Indian railway. In near future we are not seeing any substitute of commercial vehicle Industry. Indian commercial vehicle Industry use sales promotional tool as marketing tool most and for advertisement the print media is preferred by the most of the Indian players. Here we got chance to understand the fundamentals of Indian commercial vehicles industry and also identifies the position of the industry, that how they had built its image in the market.

ACKNOWLEDGEMENT

We express our deep and sincere thanks to our guide Dr. Mahendra Sharma and Dr. Rohit Trivedi Initially they helped us in selecting this project and then guided us throughout the project. Both of them also helped us by taking a lot of pain and sacrificing their personal valuable time in completion of this project report. We would like to thank Mr. Deepakbahi, Liberian, who took adequate care & effort in searching books, magazines, journals, etc. So that we could complete our project smoothly and well in stipulated timeframe. Last but not the least: we would like to cite our beloved parents and all our friends for their and encouragement, support and blessings. These pages could scarcely have been written without their help. We express our gratitude to the staff members of V.M. Patel Institute of Management, who directly or indirectly helped us.

TABLE OF CONTENT
PREFACE EXECUTIVE SUMMERY ACKNOWLEDGEMENT LIST OF TABLES LIST OF CHARTS CHAPTER 1: RESEARCH METHODOLOGY 1.1 1.2 1.3 1.4 RESEARCH OBJECTIVE SOURCE OF DATA COLLECTION RESEARCH TYPE LIMITATION OF STUDY I II III VI VII 1 2 3 3 3 4 5

CHAPTER 2: INTRODUCTION OF INDIAN AUTOMOTIVE INDUSTRY 2.1 2.2 8 CHAPTER 3: PROFILE OF MAJOR PLAYERS OF INDIAN COMMERCIAL VEHICLE INDUSTRY 3.1 3.2 3.3 3.4 MAHINDRA & MAHINDRA ASHOK LEYLAND TATA MOTORS EICHER MOTORS OVERVIEW OF INDIAN AUTOMOBILE INDUSTRY INTRODUCTION OF INDIAN COMMERCIAL VEHICLE INDUSTRY

11 12 12 13 14

CHAPTER 4: FACTORS AFFECTING INDIAN COMMERCIAL VEHICLE INDUSTRY 4.1 4.2 4.3 4.4 4.5 4.6 FREIGHT OUTLOOK FREIGHT RATES AND FUEL PRICE POLICY INITIATIVES REPLACEMENT CYCLECOMPETITION FROM INDIAN RAILWAYS DEMAND SUPPLY SCENARIO 15 16 16 16 16 16 17

4.7 4.8 4.9

KEY SUCCESS FACTORS KEY CONCERNS OUTLOOK

17 18 18 19 20 20 22 23 23 25 30 34 35 36 40 41 42 43 46 47 47 48 48 52 54

CHAPTER 5: ENVIRONMENTAL ANALYSIS 5.1 5.2 5.3 5.4 5.5 PEST ANALYSIS POLITICAL ANALYSIS ECONOMIC ANALYSIS SOCIAL ANALYSIS TECHNOLOGICAL ANALYSIS

CHAPTER 6: SWOT ANALYSIS CHAPTER 7: PORTER’S FIVE FORCE MODEL CHAPTER 8: FINANCIAL ANALYSIS 8.1 8.2 INTER-FIRM COST STRUCTURE COMPARISON INTER-FIRM FINANCIAL PERFORMANCE COMPARISON

CHAPTER 9: MARKETING DYNAMICS 9.1 9.2 9.3 SEGMENTATION KEY BRANDS IN THE CV MARKET ADVERTISMENT VOLUME, SALES PROMOTION AND MEDIA OF SALES PROMOTION CHAPTER 10: GLOBAL COMPETITIVE FORCE 10.1 10.2 10.3 10.4 COMPETITIVENESS OF INDIAN AUTOMOTIVE MANUFACTURING TAX STRUCTURE IN INDIA VIS-À-VIS OTHER COUNTRIES LABOUR & LABOUR PRODUCTIVITY IN INDIA VIS-A-VIS OTHER COUNTRIES POWER COST IN INDIA VIS-À-VIS OTHER COUNTRIES

CHAPTER 11: FINDINGS GLOSSARY OF TERMS

BIBILIOGRAPHY

55

LIST OF TABLES
TABLE 2.1 TABLE 2.2 TABLE 3.1 TABLE 3.2 TABLE 3.3 TABLE 3.4 TABLE 8.1 TABLE 8.2 TABLE 8.3 TABLE 8.4 TABLE 8.5 TABLE 8.6 TABLE 9.1 TABLE 9.2 TABLE 9.3 AUTOMOBILE PRODUCTION TRENDS AUTOMOBILE DOMESTIC SALES TRENDS SALES AND GROWTH OF COMMERCIAL VEHICLES OF M&M SALES AND EXPORTS OF COMMERCIAL VEHICLES OF ALL SALES AND EXPORTS OF COMMERCIAL VEHICLES OF TML SALES AND EXPORTS OF COMMERCIAL VEHICLES OF EML INTER-FIRM COST STRUCTURE COMPARISON INTER-FIRM FINANCIAL PERFORMANCE COMPARISONS SHARE M&HCV – GOODS CARRIER DOMESTIC SALES AND MARKET SHARE LCV – PASSENGER CARRIER DOMESTIC SALES AND MARKET SHARE MARKET SHARE AND CAGR INDUSTRY SEGMENTS OF COMMERCIAL VEHICLES KEY BRANDS IN THE CV MARKET 38 41 42 42 47 48 48 49 50 51 LCV – GOODS CARRIER DOMESTIC SALES AND MARKET SHARE39 38 7 8 12 13 13 14 35 36 37

M&HCV – PASSENGER CARRIER DOMESTIC SALES AND MARKET

TABLE 10.1 TAX STRUCTURE IN INDIA VIS-À-VIS OTHER COUNTRIES TABLE 10.2 LABOUR & LABOUR PRODUCTIVITY IN INDIA VIS-A-VIS OTHER COUNTRIES TABLE 10.3 POWER COST IN INDIA VIS-À-VIS OTHER COUNTRIES TABLE 10.4 COST COMPETITIVENESS - INDIA VERSUS CHINA TABLE 10.5 COST COMPETITIVENESS - INDIA VERSUS THAILAND TABLE 10.6 COST COMPETITIVENESS - INDIA VERSUS BRAZIL

LIST OF CHARTS
CHART 2.1 CHART 2.2 CHART 2.3 CHART 2.4 CHART 2.5 CHART 9.1 CHART 9.2 CHART 9.3 CHART 9.4 CHART 9.5 STRUCTURE OF AUTOMOBILE INDUSTRY CATEGORY WISE MARKET SHARE TRENDS IN AUTOMOBILE SECTOR IN 2007-08 COMMERCIAL VEHICLE PRODUCTIONS AND SALES TREND MEDIUM AND HEAVY CV SALES AND GROWTH TREND LARGE CV SALES AND GROWTH TREND SEGMENTATION OF COMMERCIAL INDUSTRY PRINT ADVERTISEMENT VOLUME OF AUTOMOBILE SECTOR MARKET SHARE IN PRINT ADVERTISEMENT OF AUTOMOBILE SECTOR PUBLICATIONS ADVERTISEMENT OF AUTOMOBILE SECTOR SALES PROMOTION OF AUTOMOBILE SECTOR 43 44 45 7 9 9 9 41 43 6

CHAPTER 1 RESEARCH METHODOLOGY

1.1

Research Objective

1.

The major objective of the project consists of comprehensive macro

level study of Indian Commercial vehicle Industry.


2.

Non-Financial Analysis
Identification & analysis of Competitive forces of the industry on the

basis of Michael Porter’s five force model. 3. Identification of threat and opportunities in the External business

environment with the help of OT (Opportunities, Threat) analysis. 4. In-depth analysis of factors affecting the business environment with

the help of Political, Economical, Social and Technological (PEST) analysis. 5. Strategic analysis to know about Strategies followed by the industry

in the current market scenario. 6. Comparative analysis would be undertaken so as to get insights into

how industry operation in one country differs with respect to that in another country and what are the major competitive force among the four major nation of commercial vehicle industry in the world.


7.

Financial Analysis
In order to know about financial health of industry Aggregate

Balance Sheet, Income & Expense Statement, Profit & Loss account, industry cost structure would be carried out and to intercomparison between four major players of Indian commercial vehicle Industry.

Marketing Analysis

8.

In order to know about the Industry’s Sales promotion programme

and which media they prefer for Advertisement

9.

Segmentation Analysis would be undertaken so as to know the

industry’s major player operate in which segment and how Industry is divide in various segment.

1.2 Sources of Data Collection
Data for the research project will be collected through Secondary data sources such as Books, magazines, internet and Business periodicals.

1.3 Research Type: Exploratory Research
Exploratory Research is being undertaken so we can find insights and understanding of Indian commercial vehicle industry.

1.4 Limitations of Study
Boundary surrounding the project is time and financial limits as well as we have to rely on secondary data.

CHAPTER 2 INTRODUCTION OF INDIAN AUTOMOTIVE INDUSTRY

2.1

Automobile Industry of India A Nations economy is well known from its transport system. For instant and rapid growth in economy, a well-developed and well-networked transportation system is essential. As India's transport network is developing at a fast pace, Indian Automobile Industry is growing too. Also, the Automobile industry has strong backward and forward linkages and hence provides employment to a large section of the population. Thus the role of Automobile Industry is very essential in Indian economy. Various types of vehicles are manufactured by the Automobile Industry. Indian Automobile Industry includes the manufacturing of trucks, buses, passenger cars, defense vehicles, two-wheelers, etc. The industry can be broadly segmented into the Car manufacturing, two-wheeler manufacturing and heavy vehicle manufacturing units. The major Car manufacturer are Hindustan Motors, Maruti Udyog, Fiat India Private Ltd., Ford India Ltd ., General Motors India Pvt. Ltd., Honda Siel Cars India Ltd. Hyundai Motors India Ltd., Skoda India Private Ltd., Toyota Kirloskar Motor Ltd. The two-wheeler manufacturing is dominated by companies like TVS, Honda Motorcycle & Scooter India (Pvt.) Ltd., Hero Honda, Yamaha, Bajaj, etc. The heavy motors like buses, trucks, defense vehicles, auto rickshaws and other multi-utility vehicles are manufactured by Tata-Telco, Ashok Leyland, Eicher Motors, Bajaj, Mahindra and Mahindra, etc. The Indian Automobile Market growth is expected to grow at a CAGR of 9.5 percent amounting to Rs. 13,008 million by 2010 which is a big in number. The Commercial Vehicle Segment has been contributing to the automobile market to a great extent. So as in passenger luxury cars now many foreign companies like Mercedes, Suzuki, Chevrolet, Honda, Mitsubishi, Toyota, Hyundai etc. have been investing in the Indian Automobile Market in various ways such as technology transfers, joint ventures, strategic alliances, exports, and financial collaborations like Maruti joined hands with Suzuki in passenger cars, same as Mahindra with Renault, hero joint ventures Honda in two wheeler segment, ashkoa with Leyland in commercial vehicle segment. The auto market in India can boast of attractive finance schemes, increasing purchasing power, and launch of the latest products. Investments in the automobile industry by the foreign companies in India help in strengthening the India’s economy.

India`s giant automotive manufacturer company TATA MOTORS has largest share in commercial vehicle. And now they have acquired the jaguar and range rover globally, capturing international market too, also they are exporting their key products in the international market.

Structure of Automobile Industry

Overview of Automobile Industry
• • • • • • • The industry has grown at over CAGR of 14% p.a over the last 5 years. In the year 2006-07, sales (domestic as well as exports) of the Indian automotive industry crossed the historic landmark of 10 million units. With the potential to emerge as one of the largest in the world. Presently, India is 2nd largest two wheeler market in the world 13th largest commercial vehicle market in the world 11th largest passenger car market in the world and is expected to be the 7th largest market by 2016. The industry has emerged as a key contributor to the Indian economy. The Indian automotive industry is highly competitive with a number of global and Indian companies present in the market.

Trends in Automobile Sector

( Source : SIAM)

Automobile Production Trends (Number of Vehicles)
Category Passenger Vehicles Commercial Vehicles Three Wheelers Two Wheelers Grand Total 723,330 203,697 276,719 5,076,221 6,279,967 989,560 275,040 356,223 5,622,741 7,243,564 1,209,876 353,703 374,445 6,529,829 8,467,853 1,309,300 391,083 434,423 7,608,697 9,743,503 1,545,223 519,982 556,126 8,466,666 11,087,997 1,762,131 545,176 500,592 8,026,049 10,833,948 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08

Automobile Domestic Sales Trends (Number of Vehicles)

Category Passenger Vehicles Commercial Vehicles Three Wheelers Two Wheelers Grand Total

2002-03 707,198 190,682 231,529 4,812,126 5,941,535

2003-04 902,096 260,114 284,078 5,364,249 6,810,537

2004-05 1,061,572 318,430 307,862 6,209,765 7,897,629

2005-06 1,143,076 351,041 359,920 7,052,391 8,906,428

2006-07 1,379,979 467,765 403,910 7,872,334 10,123,988

2007-08 1,547,985 486,817 364,703 7,248,589 9,648,094

(source: AIA) 2.2 An overview of Indian Commercial Vehicle Industry
The commercial vehicle (CV) Industry in India, as is the trend internationally, is cyclical, with periods of volume growth leading to investments in fleet capacity and subsequently to periods of correction. In spite of the inherent cyclical nature, the long-term growth prospects for the industry remain closely linked to the development of road infrastructure, growth in gross domestic product (GDP) and industrial production. The Indian CV industry is currently going through demand correction following one of the longest up-cycles in its history. The Industry which grew at a rate of above 25% over 2001-07 has grown by just 5% in FY08. The long up-cycle was driven by strong economic growth and investments in road infrastructure, besides favourable regulatory changes and a benign financing environment. The industry, on its part, has used its period of growth and the resulting financial surplus to invest in product development and improvement in operating efficiencies. These efforts have resulted in industry extending its presence into newer geographies and exports have increased at a CAGR of almost 40% over the last five years. Going forward this could help in mitigating the effect of down cycle to an extent.

Industry Growth
Over the last five years light commercial vehicles (LCV) and medium/ heavy commercial vehicle (M/HCV) segment have grown at a CAGR of 27% and 17% respectively. Although growth of these segments has shown similar trend, volume growth in the M/HCV segment has been more volatile. The demand for M/HCV goods carrier segment mainly depends on higher capacity addition at the fleet operator level and also prone to severe demand shocks.

The LCV segment, though cyclical, usually exhibits steadier demand patterns on account of wide usage range.

Overall Sales trend

Structure of Indian CV segment

The CV industry in India is split between the LCV and M/HCV segments, with the classification being based on gross vehicle weight (GVW). According to Industry norms, vehicles with GVW less than 7.5 tonnes are classified as LCVs while the ones heavier than these are termed M/HCVs. In terms of usage, CVs may be categorized as goods carriers and passenger carriers. Among the passenger carriers in the less than 7.5 tonnes GVW segment, those with sitting capacity up to 13 are categorized as utility vehicles (UVs, and not part of LCVs) while those with capacity over 13 passengers are grouped as LCVs. According to Crisis statistics, the overall CV industry is split between the LCV and M/HCV segments roughly in the ratio of 45:55.The Indian four-wheeler industry is duopolistic in nature with Mahindra and Mahindra (M&M) and Tata Motors holding a major share in LCV segment (90.8%) and Ashok Leyland (ALL) and Tata Motors holding a major share in M&HCV segment (88.6%).

CHAPTER 3 MAJOR PLAYERS OF INDIAN COMMERCIAL VEHICLE INDUSTRY

3.1 Mahindra & Mahindra

Mahindra & Mahindra (M&M): M&M is the dominant player in multi utility vehicle segment. In UV market The Company has around 51% market share in FY08. M&M has a market share of 11.2% in C-segment cars during FY08. M&M is second biggest player in the Indian LCV segment. The company has recently announced an investment of Rs 15 billion in the upcoming Greenfield Chakan facility in Pune. It plans to use the capacity for the production of LCV, M&HCV and UV at this plant with the initial capacity of around 2.5 lakh units.

Sales + Exports % Market FY 08
Passenger Cars Utility Vehicles Total Of : Passenger Vehicles 25,891 Share 2% 107,562 43% 133,453

FY 07
0 92,305 92,305

% Market Share
41%

LCV Industry M&M M&M share Source; Bse capitaline

FY 08 62,150 10,403 16.7

FY 07 62,586 8,651 13.8

Growth -0.7% 20.3%

Major Models:
Utility Vehicles: Light commercial vehicles: Scorpio, Bolero, Pick-up, Commander, Hard-top etc. Maxx Pickup, Maxx Maxi, and minibuses, Tourister.

3.2 Ashok Leyland
Ashok Leyland (ALL): ALL is the second-largest commercial vehicles manufacturer in India. The company plans to increase the installed capacity from 84,000 vehicles in FY08 to 184,000 vehicles by FY10 with a capital expenditure of Rs 30 billion over the next three years. Nissan Motor and ALL have stepped up planned investment in their three new joint venture companies to $575 million. The JV will set up manufacturing capacity of one lakh vehicles in the first phase which would be scaled up subsequently. The plant is expected to start production by FY10-11.

Sales + Exports % Market FY 08 M&HCV-Passenger Carriers M&HCV-Goods Carriers Total Of : M&HCV LCV-Passenger Carriers LCV-Goods Carriers Total Of : LCV Total Of : Comm. Vehicles Source: SIAM 22,271 60,235 82,506 820 5 825 83,331 46% Share 25% 2% 0%

FY 07 % Market 15,452 Share41% 67,302 26% 82,754 343 3 346 83,100 1% 0%

3.3 Tata Motors
Tata Motors (TML): TML is the world’s fifth largest and India’s largest medium and heavy commercial vehicle manufacturer. The company has plants in Jamshedpur, Pune, Lucknow, and Dharwad and R&D centers in Pune, Jamshedpur, and Lucknow in India and in South Korea, Spain and the UK. The company markets its products in Europe, Africa, Middle East, South Asia, South East Asia and Australia. Tata Motors has planned a capacity of 2.25 lakh units for Ace, the sub-one-tonne truck, while the existing capacity in Pune is just around 60,000 units a year. Recently, TML has acquired Jaguar and Land Rover from Ford Motors for $2.3 billion.

Sales + Exports FY 08 % Market Share FY 07
M&HCV-Passenger Carriers M&HCV-Goods Carriers Total Of : M&HCV LCV-Passenger Carriers LCV-Goods Carriers Total Of : LCV Total Of : Comm. Vehicles (SOURCE: SIAM) 21,776 157,625 179,401 18,575 141,697 160,272 339,673 45% 64% 55% 65% 18,743 166,129 184,872 16,358 132,902 149,260 334,132

% Market Share
49% 65% 57% 68%

In above table we can see that in all the segment of commercial vehicle Tata motors market share is going down compare to FY 2007 but still we can see that in all segment Tata motor’s market share is above 50% so there is doubt that Tata is No 1 Company in commercial vehicle Industry.

3.4 Eicher Motors

Eicher Motors (EML): EML produces commercial vehicles including trucks, buses, motorcycles, automotive gears and components. The company has sold 8.1% of promoter's holding to Swedish bus maker Volvo to form a joint venture, in which Volvo will pump up Rs 1,082 crores. The JV would be a subsidiary of EML, where Eicher would hold 54.4% equity and Volvo 45.6%. The manufacturing facility of Eicher Motors is located in Pithampur, Madhya Pradesh. The plant houses some top-of-the-line equipments, a robust infrastructure and has an annual production capacity of 30,000 vehicles. The company is one of the leading manufacturers of commercial vehicles in India with a 33% market share in the 7T-11T segment.

Sales + FY 08 % Market
M&HCV-Passenger Carriers M&HCV-Goods Carriers Total Of : M&HCV LCV-Passenger Carriers LCV-Goods Carriers Total Of : LCV Total Of : Comm. Vehicles Source;SIAM 2,148 Share4% 21,341 9% 23,489 2,283 4,055 6,338 29,827 7% 2%

Exports FY 07 % Market
1,947 Share 5% 17,589 7% 19,536 1,915 6,621 8,536 28,072 7% 3%

Eicher motor is another leading company in commercial vehicle Industry although we cannot compare it with Tata motor as EML’s market share is not more than 10% in any segment of Indian commercial vehicle industry. Eicher motor’s highest market share in medium and heavy commercial vehicle segment it has 9 % market share in multi and heavy goods carrier.

CHAPTER 4 FACTORS AFFECTING INDIAN COMMERCIAL VEHICLE INDUSTRY

4.1 Freight Outlook

CV sales have a direct correlation with the state of the freight industry, with growth in CV sales (MHCV trucks) closely tracking increase in freight movements. Strong economic activity in the country, especially in sectors like cement, mining, steel production, automobiles, consumer durables, food processing and food grain production, leads to increased demand for freight movement by road.

4.2 Freight Rates and Fuel Price
Truck operators’ profitability is most sensitive to freight rates and fuel prices (60-65% of the total cost). With other things remaining constant, operator profit before depreciation and tax rises 6.5% with a 1% rise in freight rates and 3.5% for a 1% decline in fuel prices.

4.3 Policy Initiatives
The CV industry has benefited from regulations like discouraging the use of old, polluting and uneconomical vehicles. The Supreme Court ban on overloading has also been very positive, leading to incremental volumes in the last two years. Further any government’s likely policy initiatives like scrapping vehicles more than 15 years old can potentially unleash a huge replacement demand. Further the industry is also expected to benefit from the proposed phase-out of Central sales Tax by 2010.

4.4 Replacement Cycle
Replacement cycle for trucks has been shrinking, declining from about 12 years to nearly seven years now. The proportion of trucks under five years of age rose from about 34% in FY02 to nearly 45% in FY06.

4.5 Competition from Indian Railways
Road transport competes with the Indian Railways (IR) for transportation of all major commodities, with roads having an edge in transportation of non-bulk commodities owing to point to point delivery with railways commanding a higher share in transportation of bulk commodities. Over the years, roads have gained an increasing preference vis-à-vis the railways and the share of road transport currently stands at about 65%.

4.6 Demand Supply Scenario

The significant part of the demand for new trucks comes from capacity additions by small fleet operators and first-time users. This along with policy changes like ban on overloading has led to significant addition in the truck population. Also with easy availability of finance at low interest rate helped in increase of capacity in the past five years. But as interest rates are set to increase it might lead to slight dampening in demand for M&HCV in near future. However, demand is likely to remain healthy for LCV owing to the rise in demand for small commercial vehicle for providing the last mile connectivity and the creation of hub and spoke models.

4.7 Key Success Factors
• Ability to enhance and vary product mix- A diverse and broad product mix enables a manufacturer to serve a wide variety of transportation solutions across different load levels. It also helps in building strong brand loyalty among customers. In addition the presence in business such as auto spares, buses, exports and defence helps companies to weather the cyclicity in CV sales. • Sales and distribution service network - A widespread sales and distribution setup enables the company to ensure a geographically diversified client profile. • Access to new technologies – In addition to matching competitor’s new products and upgraded machinery, technology is also going to be critical with emission norms are going to be stricter going forward. The requirement of updated technologies has driven domestic players into acquisition/collaborations/JVs with global majors. • Balance between outsourcing and in-house production - Companies with high integration level have higher fixed costs which results in higher profitability in robust growth scenario. However it also results in sharp drop in performance as they would be affected by lower sales volume backed by Industry cyclical nature. More over company’s proximity to their raw material and component suppliers help them in reducing procurement costs.

4.8 Key Concerns

Higher steel prices have been a key concern over the last two years. The CV industry has tackled this both by passing part of the costs through price hikes and also by optimizing their selling, advertising costs and treasury efficiencies.

Another concern is a slowdown in the Indian economy. This would lead to lower investment in infrastructure which in turn will affect the CV demand

Higher domestic inflation and increase in fuel prices are other major concerns. Without a concomitant increase in freight rates increase in fuel price will have a negative impact on demand for CVs.

Rise in interest rates may prove to be a dampener on the CV demand, especially given the fact that around 60-70% of vehicles purchased are financed.

4.9 Outlook
Although rise in interest rates and fuel price may dampen the growth of the sector in short run the long-term outlook for the domestic CV industry remains strong. The expected continuance of economic growth and investments in infrastructure will help the sector report robust growth going forward. The entry of new players in the industry and the significant capacity additions expected are however likely to keep the competitive pressures high. On the demand side, a combination of tightening regulatory norms (on emissions and vehicle scrapping) and increasing customer selectivity is expected to drive a shift towards high tonnage quality products. The top players in the domestic CV industry have robust financials, supported by strong cash accruals and a comfortable capital structure. These players are capable of funding their significant investment plans over the medium term without resorting to any large borrowings. Moreover, the ongoing capacity expansions are based largely on outsourcing models, which aim at better sharing of risks with component suppliers and lower the break-even levels. The significant export drives being made by the leading CV players are likely to lower the risks arising from concentration on the domestic market and mitigate the impact of cyclical downturns to an extent.

Chapter 5 Environmental Analysis

5.1 PEST Analysis
PEST analysis stands for "Political, Economic, Social, and Technological analysis" and describes a framework of macro environmental factors used in environmental scanning. PEST analysis is a useful strategic tool for understanding market growth or decline, business position, potential and direction for operations. Political factors include areas such as tax policy, employment laws, environmental regulations, trade restrictions and tariffs and political stability. Economic factors include the economic growth, interest rates, exchange rates and inflation rate. Social factors often look at the cultural aspects and include health consciousness, population growth rate, age distribution, career attitudes and emphasis on safety. Technological factors include ecological and environmental aspects and can determine barriers to entry, minimum efficient production level and influence outsourcing decisions. It looks at elements such as R&D activity, automation, technology incentives and the rate of technological change.

5.2
• • • • • • •

Political Environment
Indian government auto policy aimed at promoting an integrated, phased and Conducive growth of the Indian automotive industry. Allowing automatic approval for foreign equity investment up to 100 per cent, with no minimum investment criteria. Establish an international hub for manufacturing small, affordable passenger cars as well as tractors and two wheelers. Ensure a balanced transition to open trade at minimal risk to the Indian economy and local industry. Assist development of vehicles propelled by alternate energy sources. Laying emphasis on R&D activities carried out by companies in India by giving a weighted tax deduction for in-house research and R&D activities. Plan to have a terminal life policy for CV along with incentives for replacement for such vehicles.

Promoting multi-modal transportation and the implementation of mass rapid transport systems. ARAI provides technical expertise in R&D, testing, certification, homologation and framing of vehicle regulations and framing of vehicle regulations. ARAI is a cooperative industrial research association established by the automotive industry with the Ministry of Industries, Government of India. It works in harmony and complete confidence with its members, customers and the Government of India to offer the finest services, which earned for itself ISO 9001, ISO 14001, OHSAS 18001 and NABL accreditations. ARAI is well-equipped with state-of-the-art infra-structural facilities and highly qualified manpower.

The Indian Auto Industry is harmonizing both Safety & Emission regulations with International Standards for sustained growth of the Industry for combating the environment and become a global export hub. India has a well established and Regulatory Framework under the Ministry of Shipping, Road Transport and Highways in which SIAM (SOCIETY OF INDIAN AUTOMOBILE MANUFACTURERS plays a very important role. The entire stake holders are part of the regulation formulation setup. The ministry issues the notifications under the Central Motor Vehicle Rules and Motor Vehicles Act. The Safety Regulations are being aligned with the ECE regulation and the Road Map prepared by SIAM (SOCIETY OF INDIAN AUTOMOBILE MANUFACTURERS envisages alignment by 2010. The In use Vehicle Emission norms have been tightened with effect from 1 st October 2004 and computerization model has been developed by SIAM (SOCIETY OF INDIAN AUTOMOBILE MANUFACTURERS, which is already in place in the Major Metro Cities and would be extended throughout the country in a phased manner.

5.3
• • • • • • •

Economic Environment
The Indian economy has grown at 8.5 per cent per annum. The manufacturing sector has grown at 8–10 per cent per annum in the last few years. More than 90 per cent of the CV purchase is on credit. Finance availability to CV buyers has grown in scope during the last few years. The increased enforcement of overloading restrictions has also contributed to an increase in the number of CVs plying on Indian roads. Several Indian firms have partnered with global players. While some have formed joint ventures with equity participation, others have entered into technology tie-ups. Establishment of India as a Manufacturing hub, for mini, compact cars, OEMs, and for auto components India’s huge geographic spread- Mass transport system.

There is a very large transportation system in India for the public which helps the economy to the large scale.

Increasing road development

The new development of road system is contributing a lot towards the transportation system of the country. Better and wide roads and the material used to build the roads are very long lasting and environment friendly. With the better material used the life of the roads is increased which is helping the economy of the country as less expenses will occur.

Higher GDP growth

With the better transportation system the material is moved to different places in short time and easily which helps in increase of the GDP as more products can be made in same time.

Increasing Per Capita income

The per capita income of India is increasing due to which the buying power of the consumers has also increase.

Cheaper (decline interest rates) and easier finance scheme

The banking system in India is in a good shape. It provides people with easier and cheaper finance schemes which help the consumers to buy vehicles easily. This helps in the increase in sales of the automobile industry which also helps in the increase of country’s economy.

5.4
• • • • • •

Social Environments
Growth in urbanization, 4th largest economy by PPP (purchasing power parity) index. Upward migration of household income levels. Increase in PPP, led to the increase in market share of compact cars. 85% of Cars are financed in India (15% in China). Indian customers are highly discerning, educated and well informed. They are price sensitive and put a lot of emphasis on value for money the well-off. Preference for fuel efficient cars with low running costs. The Automotive Research Association of India (ARAI) has been playing a crucial role in assuring safe, less polluting and more efficient vehicles. Reducing pollution helps creating a better and healthy environment for the society. 85% of the cars in India are financed. The banks are giving finance options easily helping the people who cannot afford to buy themselves. Low interest rates translating to low financing and acquisition costs hence greater affordability. New measures are being taken to make the automobiles less polluting. This well help in reducing the exploitation of atmosphere. Better atmosphere gives better life.

5.5.
• • • •

Technological environment
With the entry of global companies into the Indian market, advanced technologies, both in product and production processes have developed. With the development or evolution of alternate fuels, hybrid cars have made entry into the market. Few global companies have setup their R&D centers in India. Government initiatives regarding tax rebates have led to global players setting up their R&D centers in India. India is harmonizing its Emission Norms for Four Wheelers with the European Regulation and has adopted Euro III, equivalent norms in 11 Metropolitan Cities from Apr 1 2005. .The Fuel Quality plays a very important role in meeting the stringent emission regulation. The fuel specifications of Gasoline and Diesel have been aligned with the Corresponding European Fuel Specifications for meeting the Euro II, Euro III and Euro IV emission norms. The use of alternative fuels has been promoted in India both

for energy security and emission reduction Delhi and Mumbai have more than 100,000 commercial vehicles running on CNG fuel. Delhi has the largest number of CNG commercial vehicles running anywhere in the World.

India is planning to introduce Biodiesel; Ethanol Gasoline blends in a phased manner and has drawn up a road map for the same. The Indian auto Industry is working with the authorities to facilitate for introduction of the alternative fuels. India has also setup a task force for preparing the Hydrogen road map. The use of LPG has also been introduced as an auto fuel and the oil industry has drawn up plans for setting up of Auto LPG dispensing station in major cities. The latest technology is being adopted by the companies and is being launched in India as well. One of the latest technologies is the Hybrid Engines which are launched by Honda motors in India. A lot of new safety measures are now taken into consideration before the car or any other motor vehicle is launched to ensure its safety and reliability.

CHAPTER 6 SWOT ANALYSIS

STRENGTH
1) Cost advantage- In India Indian automotive Industry is considered in manufacturing industry and In India they get the benefit of cost in terms of availability of labour at a lower level than other developed country. In India minimum labour rate is Rs 130 per shift and in developed country like USA the minimum labour rate is $6 per hour so there is vast difference in wage rate so it’s over biggest advantage.

2) Ability to enhance and vary product mix- A diverse and broad product mix enables a manufacturer to serve a wide variety of transportation solutions across different load levels. It also helps in building strong brand loyalty among customers. In addition the presence in business such as auto spares, buses, exports and defence helps companies to weather the cyclicity in CV sales. 3) Sales and distribution service network - A widespread sales and distribution setup enables the company to ensure a geographically diversified client profile. 4) Access to new technologies – In addition to matching competitor’s new products and upgraded machinery, technology is also going to be critical with emission norms are going to be stricter going forward. The requirement of updated technologies has driven domestic players into acquisition/collaborations/JVs with global majors. 5) Balance between outsourcing and in-house production - Companies with high integration level have higher fixed costs which results in higher profitability in robust growth scenario. However it also results in sharp drop in performance as they would be affected by lower sales volume backed by Industry cyclical nature. More over company’s proximity to their raw material and component suppliers help them in reducing procurement costs. 6) Strong engineering skill in design of vehicle- In India every year five lakh new skilled engineer come out so Indian automotive Industry can design more model so the human recourse is the one of the major strength of Indian CV industry.

WEAKNESS
1) Problem is to have quality workforce.

2) Low Investment in R &D - In India the investment rate in research and development is very low according to one survey Indian company spend around 0.4% on research and development where as in developed country they spend around 8% on research and development. 3) Infrastructure Bottle neck- In India the Infrastructure facility is at very bottle neck and the main roadblock factor for Indian automotive Industry is Infrastructure even today some of the village are not connected with the Road transport facility and one thing to be noted that The faster the Infrastructure growth the faster the growth of Industry and specially the automobile Industry has much concern with Infrastructure. Scarcity of Quality workforce- All though India is one of the biggest country who has wide range workforce but the

OPPORTUNITY
1) Supreme court make ban on overloading so for Indian CV industry it is the

opportunity because of the supreme rule the demand of truck will rise.

2) Government has heavy trust on manufacturing sector because it provide highest employment so by the time govt give some tax benefit and other non financial benefit too. Recently govt allot sez for promoting manufacturing sector.

3) Government cut down excise duty up to 8% from 40 % in 2001 so this step of government is the leading motivational factor for automotive industry.

4) Government’s plan to develop Infrastructure facility. As we know government many time announce to invest more in Infrastructure facility so it will be beneficial to CV industry.

THREAT
1) Higher steel prices have been a key concern over the last two years. The CV industry has tackled this both by passing part of the costs through price hikes and also by optimizing their selling, advertising costs and treasury efficiencies. 2) Another concern is a slowdown in the Indian economy. This would lead to lower investment in infrastructure which in turn will affect the CV demand 3) Higher domestic inflation and increase in fuel prices are other major concerns. Without a concomitant increase in freight rates increase in fuel price will have a negative impact on demand for CVs. 4) Rise in interest rates may prove to be a dampener on the CV demand, especially given the fact that around 60-70% of vehicles purchased are financed.

CHAPTER 7 PORTER FIVE FORCE MODEL

Porter’s Five Forces Analysis:
Michael Porter identified five forces that influence an industry. These forces are: (1) degree of rivalry; (2) threat of substitutes; (3) barriers to entry; (4) buyer power; and (5) supplier power. Like other industries operating under free market, capitalistic systems, viewing the automotive industry through the lens of Porter’s Five Forces can be helpful in understanding the forces at play.

Degree of Rivalry
Despite the high concentration ratios seen in the Indian, which typically signify that a lesser degree of competition is seen in the industry, rivalry in the India and the global automotive industry is intense. Clearly, the concentration ratios do not tell the whole story. The commercial vehicle industry in the India is no longer the playground of the Big 3 (Tata, Ashok Layland, and Eicher); global companies are also competing in the Indian market like Volvo, Hindustan Motors and Force Motors. U.S. companies have also globalized themselves. The commercial vehicle makers Volvo and Force Motors entered a fairly disciplined Indian market and have been very focused in growing their shares of the market. The great diversity of rivals in terms of cultures and associated philosophies has intensified rivalry in the industry. Market growth is slow in the established markets and companies must fight fiercely to eke out gains or prevent losses in market share. However, growth is potentially huge in the rapidly industrializing India; in these booming markets, companies could take advantage of the opportunities to reap handsome rewards. The degree of rivalry in the commercial vehicle industry is further heightened by high fixed costs associated with manufacturing trucks and the low switching costs for consumers when buying different makes and models.

Threat of Substitutes

The threat of substitutes to the commercial vehicle industry is fairly mild. Numerous other forms of transportation are available, but none offer the utility, capacity of carrying heavy loads, convenience, independence, and value afforded by automobiles. The switching costs associated with using a different mode of transportation, such as train, may be high in terms of personal time (i.e., independence), convenience, and utility (e.g., luggage capacity), but not necessarily monetarily (e.g., round trip train fare would most likely be less expensive than the cost of fuel consumed on a similar round trip, parking, vehicle insurance, and maintenance). Road transport competes with the Indian Railways (IR) for transportation of all major commodities, with roads having an edge in transportation of non-bulk commodities owing to point to point delivery with railways commanding a higher share in transportation of bulk commodities. Over the years, roads have gained an increasing preference vis-à-vis the railways and the share of road transport currently stands at about 65%. The exception to this statement occurs in the global urban areas with high population densities. In these areas, the substitutes available (e.g., loading small vehicles, Gov. Vehicles etc.) can be less costly than automobiles and thus alternative modes of transportation are often preferred. Also, there are inherent underlying social and cultural attitudes that keep people from owning automobiles in some parts of the world. India is constrained either by geography, race, class, or religion and the need for transportation of things is not as great, yet. Currently wants or needs are growing more and more in every region of India and commercial vehicle’s demand are growing more and more with it. However, the marketing arms of the global commercial vehicle manufacturers are certainly working very hard to change this paradigm, and with unprecedented production volumes worldwide, all signs indicate that they are succeeding. Most with the ability and means to transport things with commercial vehicles, each people in the society with the necessary infrastructure (e.g., roads and fuelling stations), will do so.

Barriers to Entry
The barriers to enter in the commercial vehicle industry are substantial. For a new company, the startup capital required to establish manufacturing capacity to achieve minimum efficient scale is prohibitive. A commercial automotive manufacturing facility is quite specialized and in the event of failure could not be easily retooled. Although the barriers to new companies are substantial, established companies are entering new markets through strategic

partnerships or through buying out or merging with other companies. In fact the barriers to entry for new (or different) markets may be quite low.

Buyer and Supplier Power
In the relationship between the commercial vehicle industry and its suppliers, the power axis is substantially tipped in the industry’s favor. The commercial vehicle industry is comprised of powerful buyers who are generally able to dictate their terms to their suppliers. There are specific characteristics that make members of the automotive industry powerful buyers. There is not a grand proliferation of companies manufacturing automotives and backward integration can and does occur. In the relationship between the commercial vehicle industry and its ultimate consumers, purchasers of finished vehicles, the power axis is tipped in the consumers’ favor. Mostly the customers are transport companies which are using the heavy or light transport vehicles for transporting things. Consumers wield the greatest power in this relationship due to the fairly standardized nature of the automotive commodity and the low switching costs associated with selecting from among competing brands. However, the commercial vehicle industry remains marginally powerful due to the large transportation ratio in India by road to producer ratio. The commercial vehicle industry is a dynamic place. With the forces above at play, and with history as a guide, it is safe to say that the commercial vehicle industry will continue to change, evolve, and adapt.

CHAPTER 8 FINANCIAL ANALYSIS

8.1

Inter-Firm Cost Structure Comparison
Ashok Leyland Eicher motors

Tata Motors

M&M

Industry FY07
73.31 3.91 12.03 1.83 0.45 3.2

FY08 FY07 FY08 FY07 FY08 FY07 FY08 FY07 FY08
Raw Materials Staff cost Other expenditure 68.82 4.82 13.66 67.28 4.41 13.42 70.8 6.89 8.68 2.2 0.23 1.66 64.47 5.87 12.54 2.22 -0.75 2.93 75.56 6.45 7.2 1.96 0.62 1.41 67.13 5.08 8.9 2.1 0.08 2.5 74.58 4.95 15.11 1.6 0.62 1.42 69.85 4.45 15.14 1.72 0.66 1.57 72.56 4.33 12 1.93 0.53 3.11

Depreciation 2.14 1.91 Interest 0.85 0.72 Tax 2.52 2.46 Source: BSE CAPITALINE

The above table shows the Inter firm cost structure comparison of four major players of Indian commercial vehicle Industry. The four major players are Tata motor, Mahindra& Mahindra , Ashok Leyland and Eicher motor are compared with Industry’s average cost structure. As we can see in above table the major cost they spending on Raw material almost above 50% of their spending on raw material. The main raw material is the steel and price of still is very fluctuating and the industry afraid of that fluctuation. In the year 2007 the most of the CV Company has to suffer loss because of increase in the price of steel. According to Industry average cost structure average spending on raw material is 73.31%. Eicher motor is the company who spending highest on Raw material it spend around 75% and Tata motor spend least on Raw material and the reason can be that Tata has its own steel plant so it is Tata’s plus point. See the Fy07 and FY 08 data the average spending on Raw material decrease around 1 % so this is because of decrease in price of steel. The second cost factor is staff cost Industry’s average spending on staff cost is 4.33% . Mahindra and Mahindra and ashok Leyland are the company whose spend on staff cost is around

6.5% . This is the cost which will be increasingly day by day. Another major cost of the industry is other expenses like marketing cost and miscellaneous expenses. This expense is above 12% in each major player. If we talk about the cost of depreciation than see the depreciation cost is not more than 2.5 in any firm in fact the depreciation cost in Eicher motor and Ashok Layland is decrease compare to last year this is indicate that that two companies has not invest in machinery during the year. If we talk about the cost of interest than it is the notable point that most of the commercial vehicle industry’s company are registered in share market and they are doing business on equity capital structure so they have not much more spending on interest in fact in the year 07 Mahindra has earned income of interest. It is the good sign that the company is using their own capital.

8.2

Inter-Firm Financial Performance Comparison (FY08)
Tata Motors
Total Income Var% Total Expenditure Var% % net sales Operating Profit Var% Adjusted Net Profit Var% PBIDTM (%) APATM (%) ROCE (%) RONW (%) EPS -Unit Cur. Latest P/E Ratio Market Capitalization Source: Bse capitaline 29,461.85 4.8% 25,807.46 5.0% 87.6% 3,654.39 3.6% 1,879.43 0.2% 12.4% 6.4% 24.1% 27.7% 46.63 9.63 17,319.99

M&M
11,836.84 13.1% 10,167.17 15.3% 85.9% 1,669.67 1.3% 973.8 -0.1% 14.1% 8.2% 25.7% 24.7% 46.24 13.95 13,580.82

Ashok
7,803.12 4.3% 6,933.54 3.5% 88.9% 869.58 10.9% 477.72 12.2% 11.1% 6.1% 26.2% 23.9% 3.53 7.98 3,811.31

Eicher
2,280.30 15.0% 2,133.85 15.9% 93.6% 146.45 2.9% 63.23 3.2% 6.4% 2.8% 16.2% 14.5% 21.59 12.71 773.18

Leyland Motors

As looking to the data it shows that highest var% in Eicher company as compare to last year where in the case M&M second highest change in var% by 13.1% and lower

change in the Ashok Leyland that is by 4.3%.similarly in the total expenditure as last year again it is Eicher motors and lower in the Ashok Leyland by 3.5%.changing in the net sale which is almost same for the all company that nearby 90%.operating profit of the company in this industry higher for Ashok Leyland company is 10.9% and lower as compare to another companies is only 1.3% of Mahindra &Mahindra company.higest net profit is Tata motors but as looking to var% it is for ashok Leyland. Profit before interest depreciation and tax, it highest for Mahindra &Mahindra and second for Tata motors then ashok Leyland and lower which is Eicher motors. Then profit after tax highest var in Mahindra & Mahindra and lower in the Eicher motors. return on capital employed highest in Ashok Leyland and lower in Eicher motors which is only 16.2% and earnings per share during that period Tata motors, M&M, Eicher motors and Ashok Leyland respectively 46.63%,46.24%,21.59% and 3.53%.and the finally P/E ratio highest for 13.95% for M&M , Eicher motors P/E ratio 12.71%,Tata motors P/E ratio 9.63% and Ashok Leyland P/E ratio 7.98%.looking to table market capitalization highest for Tata motors is 17,319.99 .M&M is 13,580.22,Ashok Leyland market capitalization is 3,811.31 and finally for Eicher motors market capitalization is 773.18.

M&HCV – Passenger Carrier
Domestic Sales (Nos.) Manufacturers Tata Motors Ltd. Ashok Leyland Ltd. Eicher Motors Ltd. Swaraj Mazda Ltd. Total Source: SIAM FY07 13,751 11,674 1,609 1,422 28,693 FY08 16,939 17,582 1,804 2,090 38,655 YoY (%) 23 51 12 47 35 Market Share FY07 47.92 40.69 5.61 4.96 100 (%) FY08 43.82 45.48 4.67 5.41 100

Medium and heavy commercial passenger vehicle’s domestic sales of all the major players of commercial vehicle industry are given above. As the details of financial year 07 and year 08 showing that Tata Motors Ltd. is having the highest sales in the first year but it decreased in the year 2008. Ashok Layland Ltd. is also getting higher sales in the year 2008 than Tata Motors Ltd. In compare with these both companies, Eicher Motors Ltd. and Swaraj Mazda Ltd. are having fewer sales. With respect to the market share in the year 2007 Tata Motors is

having 47.92% market share which is highest in two years and Ashok Layland Ltd. is having 45.48% market share in the year 2008.

M&HCV – Goods Carrier
Manufacturers Tata Motors Ltd. Ashok Leyland Ltd. Eicher Motors Ltd. Swaraj Mazda Ltd. Total Source: Bse capitaline Domestic Sales (Nos.) FY07 FY08 YoY (%) 159,630 65,069 17,149 4,300 246,863 149,099 57,846 20,666 3,663 232,339 -7 -11 21 -15 -6 Market Share (%) FY07 FY08 64.66 26.36 6.95 1.74 100 64.17 24.9 8.89 1.58 100

Medium and heavy commercial goods carrier vehicle’s domestic sales of all the major players of commercial vehicle industry are given above. As the details of financial year 07 and year 08 showing that Tata Motors Ltd. is having the highest sales 159630 in the first year 2007 as the passenger vehicle details but it decreased in the year 2008. Ashok Layland Ltd. is also getting half sales in the year 2007 and year 2008 than Tata Motors Ltd. In compare with all the companies, Eicher Motors Ltd. and Swaraj Mazda Ltd. are having very low market share. With respect to the market share in the year 2007 Tata Motors is having 64.66% market share which is highest in two years and Ashok Layland Ltd. is having 26.36% and 24.9% market share in the year 2007 and year 2008 respectively.

LCV – Passenger Carrier
Manufacturers Tata Motors Ltd. Mahindra & Mahindra Ltd. Force Motors Ltd. Swaraj Mazda Ltd. Eicher Motors Ltd. Ashok Leyland Ltd. Total ( Source: SIAM) Domestic Sales (Nos.) FY07 FY08 YoY (%) 11,892 3,535 3,698 2,492 1,637 332 23,742 13,317 5,284 4,330 2,234 1,853 616 27,683 12 49 17 -10 13 86 17 Market Share (%) FY07 FY08 50.09 14.89 15.58 10.5 6.89 1.4 100 48.11 19.09 15.64 8.07 6.69 2.23 100

Light commercial passenger vehicle’s domestic sales of all the major players of commercial vehicle industry are given above. As the details of financial year 07 and year 08 showing that Tata Motors Ltd. is having the highest sales 11892 and 13317 respectively. Mahindra &Mahindra Ltd., Force motors Ltd., Swaraj Mazda Ltd., Eicher Motors Ltd. and Ashok Layland Ltd are also getting lower sales in compare with Tata Motors Ltd in the year 2007 and year 2008. In compare with all the companies, Ashok Layland is having very low market share in this segment. With respect to the market share in the year 2007 Tata Motors is having 50.09% and 48.11% in the year 2007 and year 2008 respectively.

LCV – Goods Carrier
Domestic Sales (Nos.) Manufacturers FY07 FY08 YoY (%) Tata Motors Ltd. 113,900 120,856 6 Mahindra & Mahindra Ltd. 43,186 49,860 15 Eicher Motors Ltd. 5,677 3,288 -42 Force Motors Ltd. 3,583 6,572 83 Swaraj Mazda Ltd. 2,047 2,610 28 Total 168,467 188,140 12 Market Share (%) FY07 FY08 67.61 64.24 25.63 26.5 3.37 1.75 2.13 3.49 1.22 1.39 100 100

Light commercial goods carrier vehicle’s domestic sales of all the major players of commercial vehicle industry are given above. As the details of financial year 07 and year 08 showing that Tata Motors Ltd. is having the highest sales 120856 in the first year 2008 as the goods carrier vehicle details. Mahindra & Mahindra Ltd. is also getting half sales in the year 2007 and year 2008 than Tata Motors Ltd which is 43186 and 49860 respectively. In compare with all the companies, Eicher Motors Ltd. and Swaraj Mazda Ltd. and Force Motors Ltd. are having very low market share. With respect to the market share in the year 2007 Tata Motors is having 67.61% market share which is highest in two years and Mahindra & Mahindra Ltd. is having 25.63% and 26.5% market share in the year 2007 and year 2008 respectively.

CHAPTER 9 MARKETING DYNAMICS

9.1

Segmentation
Breakup of the industry by Segment

Commercial industry divided in to four segments. As looking to the data the highest CAGR in 16-25 tonnes trucks where the lower CAGR in 5-7 tonnes light commercial vehicles. Other having CAGR rather than LCV.

Description by gross vehicle weight Up to 3.5 tonnes (Pickups) 5 - 7.5 tonnes (LCV) 7.5 – 12 tonnes (Intermediate CV) 12 – 16 tonnes( 4X2 FF/SF) 16 – 25 tonnes (Multi Axles) 25 tonnes and above (Tractor Trailers)

Share in 2001-2002 15% 25% 7% 29% 8% 8%

Share in 2007-2008 36% 9% 9% 17% 21% 21%

CAGR 51.9% 5.1% 33.4% 14.6% 55.9% 9.7%

In the following table shows that about individual industry segment. COMPANY Ashok Leyland Eicher Motors Mahindra & Mahindra Swaraj Mazda Ltd. Tata Motors SEGMENT LCVs, M&HCVs, Buses LCVs, M&HCVs, Buses Three Wheelers, Cars, MUVs, LCVs LCVs, M&HCVSs, Buses Cars, MUVs, LCVs, M&HCVs, Buses

9.2 Key Brands in The CV Market
Segment LCV Passenger LCV Goods M&HCV Passenger M&HCV Goods Key Brands and Companies to which they belong Stag (Ashok Leyland), Skyline, Cruiser, School (Eicher Motors), 709, Cityride, Ace, Magic (Tata Motors ) 11.90, 10.95, 10.90 (Eicher Motors), Prestige, Super (Swaraj Mazda), LPT709, SFC407, 207DI, Ace (Tata Motors) Viking, Cheetah, Panther (Ashok Leyland), 4923, 2523 (Asian Motor Works), Globus, Starbus (Tata Motors), B7R (Volvo India) 4018H, 2214H, 2516H, 1613H, 1612H, ecomet (Ashok Leyland Ltd), Jumbo 20.16, Galaxy 30.25 (Eicher Motors), Sartaj (Swaraj Mazda), LPS 4018, LPT 2515 TCIC, LPT 2515 TC, LPT1613, SE 1613 (Tata Motors), FM9, FH12 (Volvo India), Mahindra Sarpanch

9.3 Advertisement volume, sales promotion and media of promotion

Source: Adex Compared to 2007, print advertising of Automobiles dropped by 13% during 2008. It was 100 during 2008.

Source: Adex

'Passenger Vehicles' were the front runners in Print advertising with 64% share followed by ‘Motorcycle’ and ‘Commercial Vehicles’ with 17% and 7% share respectively during 2008.

Source: Adex Maximum advertising of Automobiles in Maharashtra state followed by ‘Andhra Pradesh’ and ‘Uttar Pradesh’ state each with 10% share during 2008.

Source: Adex

More than 55% of Automobile ads in Print were for Sales Promotion during 2008.Among the Sales Promotion ads, ‘Multiple Promotion’ had the maximum share of 47% followed by ‘Discount Promotion’ and ‘Add on Promotion’ with 23% and 14% share respectively.

CHAPTER 10 GLOBAL COMPETITIVE FORCES

10.1 Competitiveness of Indian Automotive Manufacturing
In order to emerge as a manufacturing hub, India would face competition from other low cost countries such as • China • Thailand • Brazil We have compared the cost competitiveness of automotive (car and CV compared separately) manufacturing in India with respect to these countries in terms of factors like • • • Taxes and duties Cost of manufacturing (for example, power and fuel costs, labour costs, including productivity interest rates) Economies of scale Competitiveness of manufacturing in India can be improved by reducing the level of taxes and the cascading impact of taxes and by improving the business infrastructure

10.2 Tax structure in India vis-à-vis other countries
The burden of direct and indirect taxes is higher in India than in other countries

Source: GOI, Apectariff

Government of India announced an across the board excise duty reduction of four per cent across automobiles on December, 7 2008. In case of Bus chassis, Excise duty is further less at 8.18 per cent.

Import duty on heavy plates has been reduced to two per cent, but with a cap of 20,000 tonnes.

10.3 Labour & Labour Productivity in India vis-a-vis other countries

Source: GOI, Apectariff • • India compares favourably with other low cost countries in productivity adjusted labour cost Indian labour productivity in the manufacturing sector is on an increase with the application of production management techniques and many companies have doubled their productivity in last five years • Government of India has earmarked nearly Rs 10 billion for human resource skill development initiatives across industry sectors.

10.4 Power Cost in India vis-à-vis other countries

• • • • • •

Recent downturn across the global economy has forced the central banks of major countries to slash lending rates. Power cost in India is the highest amongst the competing countries However, power cost accounts for around 3 per cent of the overall cost structure, hence not a significant disadvantage Power costs in India varies by state and is as low as US$ 0.1 in states like Maharashtra With privatisation and competition in the emerging Indian power sector, cost of powers expected to come under control Interest rates in India are high as compared to competing countries, but expected to soften in the future

Cost Competitiveness - India versus China

Source: Government websites, discussions with leading automotive players, IMaCS Analysis

Indian manufacturers suffer from a cost disadvantage vis-à-vis Chinese manufacturers mainly because of higher level of taxes and their cascading impact, higher cost of labour (arising out of inflexible labour laws) and higher interest costs and power and fuel costs

Power costs in India vary from state to state, and are much lower than the average considered for calculations in the power surplus, hydroelectricity generating states.

Cost Competitiveness - India versus Thailand

Source: Government websites, discussions with leading automotive players, IMaCS Analysis • Indian vehicle manufacturers have a small cost disadvantage vis-à-vis Thai vehicle manufacturers, primarily due to higher level of taxes in India. The cost disadvantage has reduced by 2.23 per cent over last year in the case of small cars due to two consecutive cuts in excise duty announced by GOI in FY 2008-2009. • • However the large market potential and steady growth of the Indian market more than makes up for this disadvantage.

Cost Competitiveness - India versus Brazil

Source: Government websites, discussions with leading automotive players, IMaCS Analysis • • India is competitively positioned vis-à-vis Brazil in cars as well as CV India enjoys greater scale advantage as compared to Brazil in the case of cars as capacity utilisation in India is better, despite Brazil having larger installed capacities

CHAPTER 11 FINDINGS

1.

India`s giant automotive manufacturer company TATA MOTORS has largest

share in commercial vehicle. 2. 3. 4. The industry has grown at over CAGR of 14% p.a over the last 5 years 13th largest commercial vehicle market in the world Commercial vehicle’s Industry’s share in Indian automobile is 5.05% in the

year 2007-08. 5. The Industry which grew at a rate of above 25% over 2001-07 has grown by

just 5% in FY08 so the economic fluctuation affect greatly to Indian commercial vehicle Industry. 6. Tata Motor, Eicher motor, Mahindra & Mahindra, Swaraj mazda are the

dominant player of the Indian commercial vehicle Industry. 7. Ability to enhance and vary product mix, Sales and distribution service

network, Access to new technologies are the key success factor of Indian commercial vehicle Industry. 8. 9. 10. Higher steel prices have been a key concern over the last two years. Slowdown in the Indian economy would lead to lower investment in Rise in interest rates may prove to be a dampener on the CV demand,

infrastructure which in turn will affect the CV demand. especially given the fact that around 90% of vehicles purchased are financed 11. Cost advantage is the strongest point for the Indian commercial vehicle

Industry. 12. Indian railways is the only one competitor of Indian commercial vehicle

Industry but because of several advantage commercial vehicle Industry ruled over the Indian railway. 13. 14. players. In near future we are not seeing any substitute of commercial vehicle Industry. Indian commercial vehicle Industry use sales promotional tool as marketing

tool most and for advertisement the print media is preferred by the most of the Indian

GLOSSARY OF TERMS
SIAM - Society of Indian Automobile Manufacturers CAGR CV LCV HCV MCV GVW UV ALL M&M TML EML FY JV PBIDTM APATM ROCE RONW EPS - compound annual growth rate - Commercial Vehicle - Light Commercial Vehicle - Heavy Commercial Vehicle - Medium Commercial Vehicle - Gross Vehicle Weight - Utility Vehicle - Ashok Layland - Mahindra & Mahindra - Tata Motors Ltd - Eicher Motors Ltd - Financial Year - Joint Venture - Profit Before Interest Depreciation And Tex -Profit After Tex - Return on Capital Employed - Return on net worth - Earning Per Share

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