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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: PREPARED BY:


Dr. Mahendra Sharma 1. Swapnil Desai. ( 5)
Dr. Rohit Trivedi 2. Dhaval Oza . (12)
3. Minesh Patel. (21)
4. Pradip Patel ( 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 I
EXECUTIVE SUMMERY II
ACKNOWLEDGEMENT III
LIST OF TABLES VI
LIST OF CHARTS VII

CHAPTER 1: RESEARCH METHODOLOGY 1


1.1 RESEARCH OBJECTIVE 2

1.2 SOURCE OF DATA COLLECTION 3

1.3 RESEARCH TYPE 3

1.4 LIMITATION OF STUDY 3

CHAPTER 2: INTRODUCTION OF INDIAN AUTOMOTIVE INDUSTRY 4


2.1 OVERVIEW OF INDIAN AUTOMOBILE INDUSTRY 5
2.2 INTRODUCTION OF INDIAN COMMERCIAL VEHICLE INDUSTRY
8

CHAPTER 3: PROFILE OF MAJOR PLAYERS OF INDIAN COMMERCIAL VEHICLE


INDUSTRY 11
3.1 MAHINDRA & MAHINDRA 12
3.2 ASHOK LEYLAND 12
3.3 TATA MOTORS 13
3.4 EICHER MOTORS 14

CHAPTER 4: FACTORS AFFECTING INDIAN COMMERCIAL VEHICLE


INDUSTRY 15
4.1 FREIGHT OUTLOOK 16
4.2 FREIGHT RATES AND FUEL PRICE 16
4.3 POLICY INITIATIVES 16
4.4 REPLACEMENT CYCLE- 16
4.5 COMPETITION FROM INDIAN RAILWAYS 16
4.6 DEMAND SUPPLY SCENARIO 17
4.7 KEY SUCCESS FACTORS 17
4.8 KEY CONCERNS 18
4.9 OUTLOOK 18

CHAPTER 5: ENVIRONMENTAL ANALYSIS 19


5.1 PEST ANALYSIS 20
5.2 POLITICAL ANALYSIS 20
5.3 ECONOMIC ANALYSIS 22
5.4 SOCIAL ANALYSIS 23
5.5 TECHNOLOGICAL ANALYSIS 23

CHAPTER 6: SWOT ANALYSIS 25

CHAPTER 7: PORTER’S FIVE FORCE MODEL 30

CHAPTER 8: FINANCIAL ANALYSIS 34


8.1 INTER-FIRM COST STRUCTURE COMPARISON 35
8.2 INTER-FIRM FINANCIAL PERFORMANCE COMPARISON 36

CHAPTER 9: MARKETING DYNAMICS 40


9.1 SEGMENTATION 41
9.2 KEY BRANDS IN THE CV MARKET 42
9.3 ADVERTISMENT VOLUME, SALES PROMOTION AND MEDIA
OF SALES PROMOTION 43

CHAPTER 10: GLOBAL COMPETITIVE FORCE 46


10.1 COMPETITIVENESS OF INDIAN AUTOMOTIVE
MANUFACTURING 47
10.2 TAX STRUCTURE IN INDIA VIS-À-VIS OTHER COUNTRIES 47
10.3 LABOUR & LABOUR PRODUCTIVITY IN INDIA VIS-A-VIS OTHER
COUNTRIES 48
10.4 POWER COST IN INDIA VIS-À-VIS OTHER COUNTRIES 48

CHAPTER 11: FINDINGS 52

GLOSSARY OF TERMS 54
BIBILIOGRAPHY 55

LIST OF TABLES

TABLE 2.1 AUTOMOBILE PRODUCTION TRENDS 7


TABLE 2.2 AUTOMOBILE DOMESTIC SALES TRENDS 8
TABLE 3.1 SALES AND GROWTH OF COMMERCIAL VEHICLES OF M&M 12
TABLE 3.2 SALES AND EXPORTS OF COMMERCIAL VEHICLES OF ALL 13
TABLE 3.3 SALES AND EXPORTS OF COMMERCIAL VEHICLES OF TML 13
TABLE 3.4 SALES AND EXPORTS OF COMMERCIAL VEHICLES OF EML 14
TABLE 8.1 INTER-FIRM COST STRUCTURE COMPARISON 35
TABLE 8.2 INTER-FIRM FINANCIAL PERFORMANCE COMPARISONS 36
TABLE 8.3 M&HCV – PASSENGER CARRIER DOMESTIC SALES AND MARKET
SHARE 37
TABLE 8.4 M&HCV – GOODS CARRIER DOMESTIC SALES AND MARKET
SHARE 38
TABLE 8.5 LCV – PASSENGER CARRIER DOMESTIC SALES AND MARKET
SHARE 38
TABLE 8.6 LCV – GOODS CARRIER DOMESTIC SALES AND MARKET SHARE39
TABLE 9.1 MARKET SHARE AND CAGR 41
TABLE 9.2 INDUSTRY SEGMENTS OF COMMERCIAL VEHICLES 42
TABLE 9.3 KEY BRANDS IN THE CV MARKET 42
TABLE 10.1 TAX STRUCTURE IN INDIA VIS-À-VIS OTHER COUNTRIES 47
TABLE 10.2 LABOUR & LABOUR PRODUCTIVITY IN INDIA VIS-A-VIS OTHER
COUNTRIES 48
TABLE 10.3 POWER COST IN INDIA VIS-À-VIS OTHER COUNTRIES 48
TABLE 10.4 COST COMPETITIVENESS - INDIA VERSUS CHINA 49
TABLE 10.5 COST COMPETITIVENESS - INDIA VERSUS THAILAND 50
TABLE 10.6 COST COMPETITIVENESS - INDIA VERSUS BRAZIL 51
LIST OF CHARTS

CHART 2.1 STRUCTURE OF AUTOMOBILE INDUSTRY 6


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

 Non-Financial Analysis

2. 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.

 Financial Analysis

7. 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)


2002-03 2003-04 2004-05 2005-06 2006-07 2007-08
Category

Passenger
Vehicles 723,330 989,560 1,209,876 1,309,300 1,545,223 1,762,131
Commercial
Vehicles 203,697 275,040 353,703 391,083 519,982 545,176
Three
Wheelers 276,719 356,223 374,445 434,423 556,126 500,592
Two
Wheelers 5,076,221 5,622,741 6,529,829 7,608,697 8,466,666 8,026,049
Grand Total
6,279,967 7,243,564 8,467,853 9,743,503 11,087,997 10,833,948

Automobile Domestic Sales Trends (Number of Vehicles)


Category 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08
Passenger
Vehicles 707,198 902,096 1,061,572 1,143,076 1,379,979 1,547,985
Commercial
Vehicles 190,682 260,114 318,430 351,041 467,765 486,817
Three
Wheelers 231,529 284,078 307,862 359,920 403,910 364,703
Two
Wheelers 4,812,126 5,364,249 6,209,765 7,052,391 7,872,334 7,248,589
Grand Total
5,941,535 6,810,537 7,897,629 8,906,428 10,123,988 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
FY 08 % Market FY 07 % Market
Passenger Cars 25,891 Share2% 0 Share
Utility Vehicles 107,562 43% 92,305 41%
Total Of : Passenger
133,453 92,305
Vehicles

LCV FY 08 FY 07 Growth
Industry 62,150 62,586 -0.7%
M&M 10,403 8,651 20.3%
M&M share 16.7 13.8
Source; Bse capitaline
Major Models:
Utility Vehicles: Scorpio, Bolero, Pick-up, Commander, Hard-top etc.
Light commercial vehicles: 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
FY 08 % Market FY 07 % Market
M&HCV-Passenger Carriers 22,271 Share46% 15,452 Share41%
M&HCV-Goods Carriers 60,235 25% 67,302 26%
Total Of : M&HCV 82,506 82,754
LCV-Passenger Carriers 820 2% 343 1%
LCV-Goods Carriers 5 0% 3 0%
Total Of : LCV 825 346
Total Of : Comm. Vehicles 83,331 83,100
Source: SIAM
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 % Market Share
M&HCV-Passenger Carriers 21,776 45% 18,743 49%
M&HCV-Goods Carriers 157,625 64% 166,129 65%
Total Of : M&HCV 179,401 184,872
LCV-Passenger Carriers 18,575 55% 16,358 57%
LCV-Goods Carriers 141,697 65% 132,902 68%
Total Of : LCV 160,272 149,260
Total Of : Comm. Vehicles 339,673 334,132
(SOURCE: SIAM)
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 + Exports
FY 08 % Market FY 07 % Market
M&HCV-Passenger Carriers 2,148 Share4% 1,947 Share 5%
M&HCV-Goods Carriers 21,341 9% 17,589 7%
Total Of : M&HCV 23,489 19,536
LCV-Passenger Carriers 2,283 7% 1,915 7%
LCV-Goods Carriers 4,055 2% 6,621 3%
Total Of : LCV 6,338 8,536
Total Of : Comm. Vehicles 29,827 28,072
Source;SIAM
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 co-
operative 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 Eicher
Tata Motors M&M Leyland motors Industry

FY08 FY07 FY08 FY07 FY08 FY07 FY08 FY07 FY08 FY07
Raw
Materials 68.82 67.28 70.8 64.47 75.56 67.13 74.58 69.85 72.56 73.31
Staff cost 4.82 4.41 6.89 5.87 6.45 5.08 4.95 4.45 4.33 3.91
Other
expenditure 13.66 13.42 8.68 12.54 7.2 8.9 15.11 15.14 12 12.03

Depreciation 2.14 1.91 2.2 2.22 1.96 2.1 1.6 1.72 1.93 1.83
Interest 0.85 0.72 0.23 -0.75 0.62 0.08 0.62 0.66 0.53 0.45
Tax 2.52 2.46 1.66 2.93 1.41 2.5 1.42 1.57 3.11 3.2
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 Ashok Eicher


M&M
Motors Leyland Motors
Total Income 29,461.85 11,836.84 7,803.12 2,280.30
Var% 4.8% 13.1% 4.3% 15.0%
Total Expenditure 25,807.46 10,167.17 6,933.54 2,133.85
Var% 5.0% 15.3% 3.5% 15.9%
% net sales 87.6% 85.9% 88.9% 93.6%
Operating Profit 3,654.39 1,669.67 869.58 146.45
Var% 3.6% 1.3% 10.9% 2.9%
Adjusted Net Profit 1,879.43 973.8 477.72 63.23
Var% 0.2% -0.1% 12.2% 3.2%
PBIDTM (%) 12.4% 14.1% 11.1% 6.4%
APATM (%) 6.4% 8.2% 6.1% 2.8%
ROCE (%) 24.1% 25.7% 26.2% 16.2%
RONW (%) 27.7% 24.7% 23.9% 14.5%
EPS -Unit Cur. 46.63 46.24 3.53 21.59
Latest P/E Ratio 9.63 13.95 7.98 12.71
Market Capitalization 17,319.99 13,580.82 3,811.31 773.18
Source: Bse capitaline
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


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

Domestic Sales (Nos.) Market Share (%)


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


Domestic Sales (Nos.) Market Share (%)
Manufacturers FY07 FY08 YoY (%) FY07 FY08
Tata Motors Ltd. 11,892 13,317 12 50.09 48.11
Mahindra & Mahindra Ltd. 3,535 5,284 49 14.89 19.09
Force Motors Ltd. 3,698 4,330 17 15.58 15.64
Swaraj Mazda Ltd. 2,492 2,234 -10 10.5 8.07
Eicher Motors Ltd. 1,637 1,853 13 6.89 6.69
Ashok Leyland Ltd. 332 616 86 1.4 2.23
Total 23,742 27,683 17 100 100
( Source: SIAM)
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.) Market Share (%)
Manufacturers FY07 FY08 YoY (%) FY07 FY08
Tata Motors Ltd. 113,900 120,856 6 67.61 64.24
Mahindra & Mahindra Ltd. 43,186 49,860 15 25.63 26.5
Eicher Motors Ltd. 5,677 3,288 -42 3.37 1.75
Force Motors Ltd. 3,583 6,572 83 2.13 3.49
Swaraj Mazda Ltd. 2,047 2,610 28 1.22 1.39
Total 168,467 188,140 12 100 100

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 Share in 2001-2002 Share in 2007-2008 CAGR


Up to 3.5 tonnes (Pickups) 15% 36% 51.9%
5 - 7.5 tonnes (LCV) 25% 9% 5.1%
7.5 – 12 tonnes (Intermediate CV) 7% 9% 33.4%
12 – 16 tonnes( 4X2 FF/SF) 29% 17% 14.6%
16 – 25 tonnes (Multi Axles) 8% 21% 55.9%
25 tonnes and above (Tractor Trailers) 8% 21% 9.7%
In the following table shows that about individual industry segment.
COMPANY SEGMENT
Ashok Leyland LCVs, M&HCVs, Buses
Eicher Motors LCVs, M&HCVs, Buses
Mahindra & Mahindra Three Wheelers, Cars, MUVs, LCVs
Swaraj Mazda Ltd. LCVs, M&HCVSs, Buses
Tata Motors Cars, MUVs, LCVs, M&HCVs, Buses

9.2 Key Brands in The CV Market


Segment Key Brands and Companies to which they belong
LCV Passenger Stag (Ashok Leyland), Skyline, Cruiser, School (Eicher Motors), 709,
Cityride, Ace, Magic (Tata Motors )
LCV Goods 11.90, 10.95, 10.90 (Eicher Motors), Prestige, Super (Swaraj Mazda),
LPT709, SFC407, 207DI, Ace (Tata Motors)
M&HCV Viking, Cheetah, Panther (Ashok Leyland), 4923, 2523 (Asian Motor
Passenger Works), Globus, Starbus (Tata Motors), B7R (Volvo India)
M&HCV Goods 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. The industry has grown at over CAGR of 14% p.a over the last 5 years

3. 13th largest commercial vehicle market in the world


4. 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. Higher steel prices have been a key concern over the last two years.
9. Slowdown in the Indian economy would lead to lower investment in
infrastructure which in turn will affect the CV demand.
10. Rise in interest rates may prove to be a dampener on 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. In near future we are not seeing any substitute of commercial vehicle Industry.

14. 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.
GLOSSARY OF TERMS

SIAM - Society of Indian Automobile Manufacturers


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