Jaipuria Institute Management






Submitted To :

Prof. V.V. Ratna
Submitted By : Ravi Pratap Singh Rituraj Singh 08_40 CFTR 08_37 CFTR

PGDM (RM) Batch 2008-2010

We express our sincere gratitude to respected Prof. V. V. Ratna, faculty of JAIPURIA INSTITUTE OF MANAGEMENT who has helped us to clarify our concepts by sharing his valued experiences through his teaching, which have thereby become an unconscious part of our ideas and thoughts while analyzing the facts and other documents necessary for this project report.

Without his sincere help and guidance, the project report would have not been accomplished. Lastly we would like to give our sincere thanks to the Library staff who had given us the opportunity to use all the resources available.


Introduction :
India is one of the fastest growing automobile industries in the world. After 1960, the automobile industry saw rapid growth and many automotive manufacturers started production. In 1920 one of the first companies was Hindustan Motors which produced the Ambassador; later, Fiat entered a collaboration with Premier. Chrysler entered India in the early 1960's. After 1990 Mercedes-Benz, Tata Motors, Ford, General Motors, Hyundai, Toyota, and Maruti (owned jointly by the Government of India and Suzuki) grew to be major forces in the country's economy. Honda came up in 1996 with the Honda City, then the Civic, CR-V, and the Accord. Also BMW started production for the local market due to import duty. Tata purchased Jaguar and Land Rover from Ford Motor Company in 2008. Automobile Industry in India is growing in a very high rate with more than 1 million passenger vehicle sales per annum and overall 10-15% growth annually. Now more and more foreign manufacturers are coming to India and existing companies are coming up with new models. India’s automotive industry is now $34 billion worth and expected to grow $145 in another 10 years. Indian Automobile industry is the tenth largest in the world with an annual production of approximately 2 million units.

Some Interesting Facts Automobile Industry :
• • • • • •



India is 2nd largest two wheeler market in the world. 4th largest commercial market in the world. 11th largest passenger car market and expected to become 7th largest by 2016. Sale of passenger cars in India is likely to grow at an average of 14.9% each year to touch 2.1 million mark by 2010. SUV segment grew by almost 12.2% in 2007 and expected to grow at 20% by 2010. MUV segment grew at 21.93% in 2007 and expected to grow at 32% in 2010.


Timeline of Indian automobile industry :
• • • • • • • • • • • • • • • • • • • • • • • • • • • • •

1897 First Person to own a car in India - Mr Foster of M/s Crompton Greaves Company 1901 First Indian to own a car in India - Jamshedji Tata 1905 First Woman to drive a car in India - Mrs. Suzanne RD Tata 1905 Fiat Motors 1911 First Taxi in India 1924 Formation of traffic police 1928 Chevrolet Motors 1942 Hindustan Motors 1944 Premier Auto Limited 1945 Tata Motors 1947 Mahindra Motors 1948 Ashok Motors 1948 Standard Motors 1974 Sipani Motors 1981 Maruti Udyog 1994 Rover Motors 1994 Mercedes Benz 1994 Opel 1995 Ford Motors 1995 Honda SIEL 1995 Reva Electric Car Company 1995 Daewoo Motors 1996 Hyundai Motors 1997 Toyota Kirloskar Motors 1997 Fiat Motors (Re-Entry) 1998 San Motors 1998 Mitsubishi Motors 2001 Skoda Auto 2003 Chevrolet Motors (Re-Entry)


Types Of Vehicles :
Passenger Vehicles In passenger vehicle segment still Maruti Udyog is the leader with around 52%, market share followed by Hyundai Motors with 19% and Tata Motors with 16%. Other players in this segment are Honda Siel Cars and Ford India Pvt. Ltd. Utility Vehicles Mahindra and Mahindra is the top player in this segment with a market share of 42% followed by Toyota Kirlosker and Tata Motors. Other manufacturers are Maruti Udyog, General Motors and Hyundai India.

Medium and Heavy Commercial Vehicles Tata Motors leads this segment with 61% market share followed by Ashok Leyland, Eicher Motos and Swaraj Mazda. Light Commercial Vehicles Passenger carriers segment leads by Tata Motors with 46% share followed by Mahindra and Mahindra, Swaraj Mazda and Force Motors. Good carriers segment also leads by Tata Motors with 58% market share. Other players in this segment are Mahindra and Mahindra, Swaraj Mazda and Force Motors.

An Overview :
The Indian Automotive Industry after de-licensing in July, 1991 has grown at a spectacular rate of 17% on an average for last few years. The industry has now attained a turnover of Rs. 1,65,000 crores (34 billion USD) and an investment of Rs. 50,000 crores. Over of Rs. 35,000 crores of investment is in pipeline. The industry is providing direct and indirect employment to 1.31 crore people. It is also making a contribution of 17% to the kitty of indirect


taxes. The export in automotive sector has grown on an average CAGR of 30% per year for the last five years. The export earnings from this sector are 4.08 billion USD out of which the share of auto component sector 1.8 billion USD. Automotive Industry, globally, as well in India, is one of the key sectors of the economy. Due to its deep forward and backward linkages with several key segments of the economy, automotive industry has a strong multiplier effect and acts as one of the drivers of economic growth. The developing Indian automotive industry produces a wide variety of vehicles: passenger cars, light, medium and heavy commercial vehicles, multi-utility vehicles such as jeeps, scooters, motor-cycles, mopeds, three wheelers, tractors and other agricultural equipments etc. The sector has tremendous potential for providing employment. This will increase the present figure of employment in manufacturing sector which presently is quite low at 12% as compared to the countries like Malaysia (50%); Korea (62%) and China (31%). The automobile industry, especially over a period of time, and particularly after liberalization, has installed a robust capacity. The installed capacity in different segments of automobile industry is as under : S.No. Segment Installed 1. Four Wheelers 2. Two & Three Wheelers Grand Total Capacity 1,590,000 7,950,000 9,540,000

The production of all categories of vehicles has grown at a rate of 16% per annum over the last five years. The last 5 years production figures are as follows: Production (in nos.) Category Passenger Car Multi Utility Vehicle Commercial Vehicles Two Wheelers 2003-04 564052 105667 162508 2004-05 608851 114479 203697 2005-06 842437 146103 275224 2006-07 960505 249149 350033 2007-08 1045881 263032 391078 7600801

4271327 5076221 2

5624950 6526547

Three Wheelers Total 9735216


276719 5316302

340729 6279967

374414 7229443

434424 8460648

Export of Vehicles: Automotive industry of India is now finding increasing recognition worldwide. While a beginning has been made in export of vehicles, the potential in this area still remains to be fully tapped. Significantly, during the last two years the export in this sector has grown specifically in export of cars and two / three wheelers. The table below indicates the performance during last six years. Export (in nos.) Category 07 2007-08 Passenger Car 170193 Multi Utility Vehicles 5579 Commercial Vehicles 40581 Two Wheelers 513256 Three Wheelers 76885 Total 629887 806494 2003-04 50088 3077 11870 104183 15462 2004-05 70828 1177 12255 179682 43366 184680 2005-06 126249 3067 17227 264669 68138 307308 2006160677 5736 29949 366724 66801 479350

Manufacturer Maruti Suzuki Mahindra & Mahindra Mahindra Renault Hyundai Tata Motors General Motors Honda

Feb-2009 70,625 14,720 1,008 21,215 19,039 4,921 5,579 2

Feb-2008 59,311 12,562 2,751 14,600 18,766 5,563 3,774

Change +19.1% +17.2% -63.4% +45.3% +1.5% -11.5% -47.8%

Key Players :
• •

• • • • • • • • • • • • •

MUL TATA Hyundai Honda Ford GM Sonalika International HM Force Toyota Kirloskar M&M Fiat Skoda Audi Mercedes Benz BMW Volkswagon Mitshubishi

Brief Description about the major players :
Maruti Udyog Limited :
MUL was incorporated on February 24, 1981, to meet the growing demand for a personal mode of transport caused by the lack of an efficient public transport system. Suzuki Motor Company was chosen from seven prospective partners worldwide. A license and a Joint Venture agreement were signed with Suzuki Motor Company (now Suzuki Motor Corporation of Japan) in October 1982, by which Suzuki acquired 26% share of the equity. MUL created history by going into production in a record 13 months. Maruti 800 was the first car that was launched in 1984. The car had an engine capacity of 796 cc, high fuel efficiency and the pricing was extremely competitive. Over the last 10 years, MUL has launched various models such as Omni, 1000, Zen, Esteem, 2

WagonR, Gypsy, Alto, Baleno and Vitara, targeting all segments of customers. MUL’s plant is located at Gurgaon in Haryana. It has an installed capacity of 350,000 vehicles. However, the company, through productivity improvement initiatives, would be easily able to produce 500,000 vehicles with its existing facilities. MUL manufactured 370,000 cars at its three plants in Gurgaon in FY 2002-03. The total manpower strength of the organization is 4,629, with an average age of all employees at 36.53 years.

Tata Motors Limited, formerly known as TELCO (TATA Engineering and Locomotive Company), is a multinational corporation headquartered in Mumbai, India. It is India's largest passenger automobile and commercial vehicle manufacturing company. Part of the Tata Group, and one of the world's largest manufacturers of commercial vehicles. The OICA ranked it as the world's 20th largest automaker, based on figures for 2006. Tata Motors was established in 1945, when the company began manufacturing locomotives. The company manufactured its first commercial vehicle in 1954 in a collaboration with Daimler-Benz AG, which ended in 1969. Tata Motors was listed on the NYSE in 2004, and by 2005 it was ranked among the top 10 corporations in India with an annual revenue exceeding INR 320 billion. In 2004, it bought Daewoo's truck manufacturing unit, now known as Tata Daewoo Commercial Vehicle, in South Korea. It also, acquired a 21% stake in Hispano Carrocera SA, giving it controlling rights in the company. Tata Motors launched their much awaited Tata Nano, noted for its Rs 100,000 price-tag, in January 2008.In March 2008, it finalised a deal with Ford Motor Company to acquire their British Jaguar Land Rover (JLR) business, which also includes theRover, Daimler and Lanchester brand names. The purchase was


completed on 2 June 2008. Tata Motors has its manufacturing base in Jamshedpur, Pantnagar, Lucknow, Ahmedabad and Pune.

Mahindra & Mahindra Limited :
Mahindra & Mahindra Limited is part of the US $6.7 billion Mahindra Group, an automotive, farm equipment, financial services, trade and logistics, automotive components, after-market, IT and infrastructure conglomerate. The company was set up in 1945 as Mahindra & Mohammed. Later, after the partition of India, Ghulam Mohammad returned to Pakistan and became that nation's first finance minister. Hence, the name was changed from Mahindra & Mohammed to Mahindra & Mahindra in 1948. Initially set up to manufacture general-purpose utility vehicles, Mahindra & Mahindra (M&M) was first known for assembly of the iconic Jeep in India. The company later branched out into manufacture of light commercial vehicles (LCVs) and agricultural tractors, rapidly growing from being a manufacturer of army vehicles and tractors to an automobile major with a growing global market. At present, M&M is the leader in the utility vehicle (UV) segment in India with its flagship UV, the Scorpio (known as the Mahindra Goa in Italy). M&M is India's largest SUV maker.

BAJAJ Auto Ltd. :
Bajaj Auto is a major Indian automobile manufacturer. It is India's largest and the world's 4th largest two- and three-wheeler market. It is based in Pune, Maharashtra, with plants in Akurdi and Chakan (near Pune),Waluj (near Aurangabad) and Pantnagarin Uttaranchal. Bajaj Auto makes and exports motorscooters, motorcycles and the auto rickshaw. The Forbes Global 2000 list for the year 2005 ranked Bajaj Auto at 1946. Over the last decade, the company has successfully changed its image from a scooter manufacturer to a two wheeler manufacturer. Its product range encompasses Scooterettes, Scooters and Motorcycles. 2

Its real growth in numbers has come in the last four years after successful introduction of a few models in the motorcycle segment. The company is headed by Rahul Bajaj who is worth more than US$1.5 billion. Low Cost Cars : Bajaj Auto says its $2,500 car, which it is building with Renault and Nissan Motor, will aim at a fuel-efficiency of 30 km/litre, or twice an average small car, and carbon dioxide emissions of 100 gm/km. It is a Tata Nano competitor. The Bajaj venture will have an initial capacity of 400,000 units, while Tata expects eventual demand of 1 million Nano.

The company manufactures automobiles, motorcycles, trucks, scooters, robots, jets and jet engines, ATV, water craft, electrical generators, marine engines, lawn and garden equipment, and aeronautical and other mobile technologies. Honda's line of luxury cars are branded Acura in North America, Hondura in Honduras and Ben Tian in China. More recently they have ventured into mountain bikes. Honda is the 6th largest automobile manufacturer in the world as well as the largest engine-maker in the world, producing more than 14 million internal combustion engines each year. In August 2008, Honda surpassed Chrysler as the 4th largest automobile manufacturer in the United States. Currently, Honda is the second largest manufacturer in Japan behind Toyota and ahead of Nissan.



Hyundai Group is a South Korean conglomerate company (chaebol) founded by Chung Ju-yung. The first company in the group was founded in 1947 as a construction company. With government assistance, Chung and his family members rapidly expanded into various industries, eventually becoming South Korea's biggest chaebol. The company spun off many of its better known businesses after the 1997 Asian financial crisis, including Hyundai Automotive Group, Hyundai Department Store Group, and Hyundai Heavy Industries Group. The Hyundai Group now focuses on elevators, container services, and tourism to Mount Kumgang. As of March 2007, Hyundai Engineering and Construction is the main shareholder of Hyundai Merchant Marine, which is the de-facto holding company of Hyundai Group

Toyota Motor Corporation is a multinational corporation headquartered inJapan, and currently the world's largest automaker. Toyota employs approximately 316,000 people around the world. In 1934, while still a department of Toyota Industries, it created its first product Type A engine and in 1936 its first passenger car the Toyota AA. The company was eventually founded by Kiichiro Toyoda in 1937 as a spinoff from his father's company Toyota Industries to create automobiles. Toyota currently owns and operates Lexus and Scion brands and has a majority shareholding stake in Daihatsu Motors, and minority shareholdings in Fuji Heavy Industries, Isuzu Motors, and Yamaha Motors. The company includes 522 subsidiaries. Toyota is headquartered in Toyota City and Nagoya (both in Aichi), and in Tokyo. In addition to manufacturing automobiles, Toyota provides financial services through its division Toyota Financial Services and also creates robots. Toyota Industries and Finance divisions form the bulk of the Toyota Group, one of the largest conglomerates in the


world. Toyota was hit hard during the 2008-2009 financial crisis and requested a loan from the Japanese government.

General Motors :
Gneral Motors Corporation (GM), founded in 1908, is the world's second-largest automaker after Toyota, ranked by 2008 global unit sales. GM was the global sales leader for 77 consecutive calendar years from 1931 to 2008. It manufactures cars and trucks in 34 countries. With global headquarters in Detroit, Michigan, GM employs 252,000 people around the world, and sells and services vehicles in some 140 countries. In 2008, 8.35 million GM cars and trucks were sold globally under the following brands: Buick, Cadillac, Chevrolet, GMC, GMDaewoo, Holden, Hummer , Opel, Pontiac, Saab, Saturn, Vauxhall and Wuling.

Cars by Price Range :

Maruti 800, Alto, Omni Reva Ambassador Fiat Palio Hyundai Santro, Getz Chevrolet Opel Corsa Maruti Zen, Wagon R, Versa, Esteem, Gypsy, Maruti Suzuki A-Star Ford Icon & Fiesta Tata Indica, Indigo XL, Indigo Marina Chevrolet Swing, Optra Magnum, Tavera Hyundai Accent, Elantra 2

Under Rs. 3 Lakhs
• • • • • • • •

Rs. 3-5 Lakhs

Rs. 5-10 Lakhs

• •

• • • • • • • • • • • • • • • • • • • • • • • • • • • •

Mahindra Scorpio Maruti Baleno Toyota Innova Tata Safari Mitsubishi Lancer, Mitsubishi Cedia Honda City ZX, Honda Jazz New Mahindra Bolero Hyundai Sonata Embera Fiat Linea Toyota Corolla, Toyota Corolla Altis Ford Mondeo & Endeavour Chevrolet Forester Skoda Octavia & Combi Honda Civic Honda CR-V Maruti Suzuki Grand Vitara Terracan & Tucson Mitsubishi Pajero Audi A4 Opel Vectra Honda Accord Mercedes C Class New Skoda Superb New Toyota Camry Audi A6, A8 & Audi TT BMW X5, 5 Series & 7 Series Mercedes E Class, S Class, SLK, SL & CLS-Class Porsche Boxster, Cayenne, 911 Carrera & Cayman S Toyota Prado Bentley Arnage, Bentley Continental GT & Flying Spur Rolls Royce Phantom Maybach

Rs. 10-15 Lakhs

Rs. 15-30 Lakh

Rs. 30-90 Lakhs

• •

Above Rs. 1 Crore

• •

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 automotive industry in the India is no longer the playground of the Big 3 (MUL, TATA, Hundai); global companies compete in the Indian market, while U.S. companies have globalized themselves. The car makers Honda and Hundai 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 automotive industry is further heightened by high fixed costs associated with manufacturing cars and trucks and the low switching costs for consumers when buying different makes and models.

Threat of Substitutes
The threat of substitutes to the automotive industry is fairly mild. Numerous other forms of transportation are available, but none offer the utility, 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, daily parking, car insurance, and maintenance). The exception to this statement occurs in the global urban areas with high population densities. In these areas, the substitutes available (e.g., walking, mass transit, bicycles, etc.) can be less costly than automobiles and thus 2

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 personal transportation is not as great, yet. The Indian dream of “a car in lifetime” is not what the rest of the world. Currently wants or needs. However, the marketing arms of the global automotive 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 own a vehicle, who live in a society with the necessary infrastructure (e.g., roads and fuelling stations), will do so.

Barriers to Entry
The barriers to enter the automotive industry are substantial. For a new company, the start up capital required to establish manufacturing capacity to achieve minimum efficient scale is prohibitive. An 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 automotive industry and its suppliers, the power axis is substantially tipped in the industry’s favour. The automotive 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 automotive industry and its ultimate consumers, purchasers of finished vehicles, the power axis is tipped in the consumers’ favour. Consumers wield the greatest power in this relationship due to the fairly standardized nature of the automotive commodity (a vehicle) and the low switching costs associated with selecting from among competing brands. However, the automotive industry remains marginally powerful due to the large customer to producer ratio. The automotive industry is a dynamic place. With the forces above at play, and with history as a guide, it is safe to say that the automotive industry will continue to change, evolve, and adapt. 2

New Entrants In Small Car Segment:

Players In Niche Segment :
• DC • Reva

Suggestions :
As India is a still a developing market, some Indian players launched their global level vehicles (Xenon XT by TATA, Grand Vitara by MUL, Xylo by M&M etc.) and make a strong presence among foreign players like Japanese and German makers. They made joint ventures, collaboration and strategic alliances to compete in the market. In Indian automobile market, there is a very tough competition in small car segment as demand is high because of the demographic and economic factor in India. The Second National Labour Commission recommendation that prior permission should not be required in respect of lay-off and retrenchment in an establishment of any employment size would be examined for its implementation in auto sector. The prior permission required in case of a unit employing more than 100 employees for closure of the establishment may be examined to raise it to 300. A Supplementary Unemployment Benefits (SUB) fund need to be encouraged to be created by the companies. This fund could be used to provide compensation to laid-off workers. Keeping in view the demand structure for styling and engineering design centres, it is suggested that the styling centre may be a part of National Institute of Design, Ahmedabad (NID). National Automotive Testing and R&D Implementation Project (NATRIP) may act as the nodal centre for providing data base for engineering design. (ii) Education and training to orient R&D to meet customer’s demand. (iii) Ensure flexibility to R&D personnel employed by National Labs, Universities 2

etc. to work in industry for a period of 3-4 years on deputation/sabbatical (iv) Electronics, megatronics and software capabilities for automotive engineers in IITs will be developed. (v) Set up facilities for E-learning and E-training to reach wider audience and be able to train more persons required to meet the demand. (vi) Encouraging OEMs to adopt existing training institutes or to set up new institutes for training The National Manufacturing Strategy has indicated that Industry would not only need to think big in terms of scale but also need to: (i) Invest in R&D and technology (ii) Have a continuing commitment for skills development and education (iii) Benchmark their performance against best in the industry (iv) Adopt best manufacturing practices and production techniques (v) Deliver on globally acceptable quality levels



Bibliography :
• • • •
• • • • • • •

TATA Motors MUL M&M Various Indian automobile surveys Ministry of Heavy Industries & Public Enterprises, Government of India. www.sify.com www.wikipedia.com www.hyundaimotor.com www.honda.com www.gm.com www.tata.com and other related websites.


Sign up to vote on this title
UsefulNot useful