CHAPTER 1

INTRODUCTION

[AN ANALYSIS OF AUTOMOBILE INDUSTRY] March 27, 2010

INTRODUCTION
The automobile industry is one of the largest industries in India as in many other countries. It plays a major role in the growth of economy in India. The automobile industry in India is the ninth largest in the world with an annual production of over 2.3 million units in 2008. The industry comprises automobiles and auto component sectors, which encompass passenger cars, two-wheelers, three-wheelers, tractors, commercial vehicles, multi- utility vehicles and components. Today, the Indian automobile industry is the world s largest motorcycle manufacturer, the second largest two-wheeler and tractor manufacturer, the fifth largest commercial vehicle manufacturer and the fourth largest car maker in Asia. Apart from serving the domestic market, the Indian auto sector has also become a sourcing hub for the global auto giants. In 2009, India emerged as Asia's fourth largest exporter of automobiles, behind Japan, South Korea and Thailand. The Government of India has introduced an ambitious project of setting up world-class automotive testing and R&D infrastructure to place India in the USD 6 trillion global automotive business. This book details the current status and factors influencing the growth of the Indian automobile industry; its future prospects and the success stories of some automobile giants in India. It also focuses on the future growth of the industry as a result of the newly adopted technologies and strategies. India is set to emerge not only as a large domestic market for automotive manufacturers, but also as a crucial link in the global automotive chain. Among other industries, the automotive industry in India is understood to be the most dynamic. It has been experiencing strong growth rates after de-licensing of the industry in 1991, when major economic reforms took place in India. In this report we have studied the various trends and changes that had occurred over the years in this industry, more specifically the passenger vehicle segment.

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OBJECTIVES
• • • •

To understand and analyze automobile industry in India and in global market. To understand challenges, threats, opportunities and weakness of industry. To understand Impact of industry on global market. To understand the future of this industry and its role in the growth of the Indian economy. To identify the changes those have taken place in the Automobile Industry over the past few years.

To identify the past and current overview of Automobile Industry.

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CHAPTER 2

LITERATURE REVIEW

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J and Inoue K. there are various technologies which are specially developed in order to facilitate automobile safety. Green . February 9). It was just one early sign that the focus on cost reduction had gone too far. one of these executives says. Ohnsman. antilock brakes and better airbags are the primary reason U. But the Toyota people were not ready to accept the fact that it was mainly due to cost reduction. market share. regulators to 51 deaths. They suggested that it got carried away chasing highspeed growth. Before company officials knew that runaway acceleration was causing crashes. that It's not true that by reducing cost automatically reduces quality. and the latest data from the National Highway Traffic Safety Administration suggest 2009 will be even better. inflating seatbelts. 8 million cars recalled due to mechanical failures linked by U. The authors talks about Those production mishaps occurred in 2006. It is considered as one of the fastest growing industry all over the world. autonomous breaks. 2010 According to Carney D. According to Sunil Kewalramani (Jan 7.[AN ANALYSIS OF AUTOMOBILE INDUSTRY] March 27.(2010. All that slowly dulled the commitment to quality embedded in Toyota's corporate culture. A combination of high-speed global growth and ambitious cost cuts led to the quality lapses that have tarnished the once-mighty brand. auto steering correction.S. To meet the customer need it has been observed that Alliance Business School | Group12 .A. a year after company President Katsuaki Watanabe boasted about having squeezed more than $10 billion from global operating costs in the previous six years—this despite an impressive run of profit growth and global market share gains in the middle of the last decade.S. 2007) There is a boom in Indian Automobile industry because of its demand in all the segments available in the society. talks about the production mishaps that happen with Toyota which led to death of many. Finance A 5 . Technologies such as stability-control systems. Still. 2008 had the lowest number of fatalities since 1961. These technologies include skidding airbags. They said. Then Toyota pushed even harder for more cuts. highway fatalities have steadily declined for decades. Here are five of the most promising. These are some of the technologies which might help the next generation in having a better and a more safer ride. engineers around the world are working on ever better ideas for safety tech. a simple manufacturing process would sometimes ignite small fires in a component as a direct result of corner-cutting. expandable door beams. and productivity gains year in and year out.

Of companies that provide all type of vehicles. Some giants in Car manufacturing are Audi. 2010 every week companies are coming up with new model of car or bike. The boom can easily be tracked by the presented statistics that car production increased from 7.[AN ANALYSIS OF AUTOMOBILE INDUSTRY] March 27. Mahindra & Mahindra Ford. In the search. Due to all these facts it has been found that technology management has become important in recent years to manage successfully all the processes. But the organizations are trying to realize their technological changes by connecting with different institution also. Maruti. Automobile companies are offering various premium cars to entry-level cars for the customers. Finance A 6 . also by realizing their investments related to advanced technologies companies can respond in better way to customer needs and expectations and sustainable competition. 23. Such performance of automobile Industry in India has bring in huge development and consumption of vehicles that encourages for potential growth in Indian auto part market. The process connected with these investments is very complex and also high cost involving. Researcher Suleyman Semiz (2009) after doing his research on Using advanced technology in automotive sector and Relationship of technology management.913 over a period of last three years in India. All the companies are providing servicing facility by their own service centres. Automotive sector is one of the sectors which are most affected by the changing of economical and social conditions. Gone are the days when people had to wait for their preferred vehicle. TATA worked hardly in order to bring in a low budget car for Indian market. From the result obtained in his research. Today. Alliance Business School | Group12 . 08. there are several institutions which are contributing to make automobile industry a success and they are financial institutions which are bringing people closer to their dream car or bike. the situation about technology management is considered by evaluating data related to using advanced technology in organizations. Skoda etc. Indian automobile sector do have no. BMW. The user can visit the service centre and consult about the problem of vehicle with the experts.330 to 13. Mercedes. he concluded that it is possible to maintain the manufacturing and productivity efficient by making right decisions at the right times. it has been stated that the problems are partly present in the implementation of the advanced production and management technologies and that the approach of the technology management is not completely adopted by the organizations. As now a day cars have become a need for today’s world.

According to just-auto. once many in number and significantly different in technical prescriptions in the world's many markets. The scrappage scheme may save the car industry. are now greatly reduced in number. But it had to be recalled. However. Curtis. at which the latest research and technology is showcased and discussed in great detail among the industry's community of researchers. under the combined influences of multiple forces. Finance A 7 . This is because e failed to take into account energy used to build a new car. It's not size that makes a recall bad. It does not take into account the energy used in scrapping older cars.l (2010) car sales have leapt. This is just the energy used to make new cars. Car sales rose because of this scheme. In 1980 Gm introduced Front drives X-cars to compete with cars all around the world. presenting a wide array of engineering and design options. Lighting technology has advanced at a staggering pace since the beginning of the 21st century. In 1960’s Detroit car markets faced stiff competition from German imports. At the same time buyers are demanding stylish lighting.T. In 1996 Ford recalled millions of vehicles due to faulty ignition modules. In order to bring down the price rate of ‘Pinto’ there was not only a cut in the interior design but also in the placement of fuel tank. Research by the US Department of Energy calculates that the average new car sold in 2009 required the energy equivalent of 1. This scheme may not save the planet but was economically successful. Lighting regulations. scientists. 2010 According to Dent.540 gallons of petrol to manufacture. it's the damage it does to the reputation of a company's products. There are numerous symposiums going on worldwide. According to John Pearley Huffman (2010) Toyota’s current recall crisis is massive but not unprecedented. This recall by Ford is largest till date. but not the planet. Globalization has led to competition among auto lighting manufacturers. Nor does it take into account the cost of transporting the new car from the point of manufacture to the point of sale. the lighting sector is unique in the degree of cooperation among its major and minor participants and its degree of global integration.com editorial team The profile of the automotive lighting industry has lately been undergoing rapid and significant change. marketers. Maladies on that car Alliance Business School | Group12 . regulators. as people trade in older vehicles for new ones.[AN ANALYSIS OF AUTOMOBILE INDUSTRY] March 27.

With only about 92. Alliance Business School | Group12 . The recalls were for everything from the emissions control systems to fuel systems and seatbelt retractors. Finance A 8 .[AN ANALYSIS OF AUTOMOBILE INDUSTRY] March 27. 2010 included everything from faulty fuel lines to steering gear that detached from its mounts to coil springs in the front suspension that could slip out of their seats.000 vehicles involved. the first recall of the Audi 5000 back in the 1980s was relatively puny in size. In 1976 Dodge Aspen and Plymouth Volare were recalled. But its effect was absolutely devastating to Audi's business in North America. Rust was the major problem.

[AN ANALYSIS OF AUTOMOBILE INDUSTRY] March 27. 2010 CHAPTER 3 GLOBAL SCENARIO Alliance Business School | Group12 . Finance A 9 .

with sales figures exceeding more than 1 million in the passenger car segment for the first time. But with a downward slide in the market share. Peter Drucker. Riding high on economical revival in many developing countries in Asia and Europe. and Nissan. vehicle operation and recycling in the global automobile sector. Volkswagen Group. Meanwhile UK.[AN ANALYSIS OF AUTOMOBILE INDUSTRY] March 27. Hybrid vehicles and green vehicles running on alternative Alliance Business School | Group12 . They were investing on engine modifications and related pollution-reducing technologies aimed at producing more fuel efficient vehicles. Fiat and Mitsubishi were all making a bee-line to set up their manufacturing units in India to tap the growing demand. it is noticed that despite fragmented views on the ratification of the Kyoto Protocol. Despite government controls. thereby setting the ground for the emergence of the New Six. General Motors. the automobile industry set standards in the manufacturing activity by contributing mass production techniques during the early 1910s. vying for setting up a cost-effective export base for meeting the demand from Asian markets. by providing employment to 1 out of 7 people either directly or indirectly. the industry’s global output touched 64. a further surge in demand was anticipated from the Chinese market. With industry reports on the highest growth in mobility in the world at 3% per annum. the global automobile industry of 2009 has come a long way as an emerging market leader in the manufacturing activity. Toyota. 2010 3. A booming economy and a low interest regime helped India to make its mark in the automobile sector in 2004. On analyzing the response of auto-manufacturers to climate change. The sale of commercial vehicles showed a record growth of 29% over 2003.6 million vehicles in 2005. Honda. the Big Three was fast losing their dominant position to Toyota. which came into force in February 2005. Ford. the Kyoto Protocol. Honda. Finance A 10 . . led to the emergence of a closed loop strategy encompassing production. It is hailed as the “Industry of Industries” by the management guru.7 million commercial vehicles in 2004. The Japanese soon followed by offering lean production techniques in the 1970s. China and India attracted the attention of global auto-makers. In the environment front.1 INTRODUCTION Taking a look back in the 1890’s which was referred as the “horseless carriage”. automakers were in the forefront of popularizing environment-friendly initiatives. served as the single largest customer for European auto-makers. Foreign auto-makers such as Mercedes Benz. the Chinese market boasted of sales of more than 2. Japanese players were the leaders in the light vehicle market and hybrid market.

he designed another. Both of these cars became popular and by 1865 could be frequently seen on the roads. Alliance Business School | Group12 . but no production cars were ever made by this company and it was dissolved in January 1901. was ready for road trials. but with little to no degree of commercial success due to the fact that there was no known fuel that could be safely internally combusted. When most people think of the first cars on the road. which ran at a speed of 3 kms/hour and drove it from Paris to Joinville. the first gasoline powered car. however. 1893 in Springfield. MA. which he called the Quadracycle.2 BIRTH OF A CAR The birth of the car as we know it today took several years and the works and developments of many people. the design for these vehicles were the basis for the first self-propelled vehicles and ultimately the basis for the design of the car we know today. It was not until 1885 that the first car rolled down the streets. Two years later. built by brothers Charles and Frank Duryear. The first steam-powered vehicle was designed by Nicolas-Joseph Cugnot and constructed by M. Brezin in 1769 and could attain speeds of up to 6 km/hour. Two years later. Ford would not offer a car for sale again until 1903. After several small changes to Lenoir's design. In September of 1893. Lenoir died broke before he could ever make any money or even enjoy his invention. after several small changes to Lenoir's design. He sold his first car. for $200 and used the money to build another car. much faster steam-driven engine. which offered significant savings on gasoline prices. giving people the idea that cars as we know them today have existed for a lot longer than they have. which was so fast that it rammed into a wall. built the first successful two-stroke gas driven engine. The first run on public roads was made on September 21. earlier attempts at steam powered road vehicles were successful. he again built an experimental vehicle by his gas-engine. However impractical as these cars may have been. With the financial backing of the Mayor of Detroit and other wealthy Detroiters. Several designs were developed for a car to run on the internal combustion engine during the early 19 th century.. Ford formed the Detroit Automobile Company in 1899. 3. A few prototypes were built. Unfortunately. using a mixture of hydrogen and oxygen to generate energy. they think Henry Ford. Finance A 11 . recording the world's first car accident. The next step towards the development of the car was the invention of the internal combustion engine. Jean Joseph Etienne Lenoir. These early steam-powered vehicles were so heavy that they were only practical on a perfectly flat surface as strong as iron. Francois Isaac de Rivaz designed the first internal combustion engine in 1807. In 1860. a Frenchman. 2010 fuels are proving to be commercially viable options with customers queuing up for these products. but it was not until 1896 that one of Henry Ford's cars could be seen on the road.[AN ANALYSIS OF AUTOMOBILE INDUSTRY] March 27.

496 1.870 659. 2010 The development of the automobile changed the face of small-town America.221 9. Finance A 12 Cars . we are finally realizing the long-term effects of transport by internal combustion and are looking for alternative forms of fuel and transportation.312 72.561.829.056 1.677 431.242 231.745 933.149 419.223 840.916.359 1.436 680. However.131 2.[AN ANALYSIS OF AUTOMOBILE INDUSTRY] March 27. after a century of automobiles. Henry Ford revolutionised the sector and results are very much significant today.436 6.963 1.590 125. Table 3. Egypt Finland France Germany Hungary India Indonesia Iran Italy Japan Malaysia Mexico Netherlands Poland Portugal Romania Russia 399.526.288 59.1-Production statistics Country Argentina Australia Austria Belgium Brazil Canada China Czech Rep.145.000 132. cars became less of luxury and more of a necessity.935 5. Conclusion Human had thirst for movements with help of machines was from the 18th century.241. As time passed.429 Alliance Business School | Group12 . The success of steam operated cars gave confidence to human to strive hard to achieve its dreams.577 285.000 2.737.485 18.195.469.423 940.882 342.

038 332.709 401. America.776 180.567 400.450.818 575. 2010 Country Serbia Slovakia Slovenia South Africa South Korea Spain Sweden Taiwan Thailand Turkey Ukraine UK USA Uzbekistan Supplementary Total 9. The below discussed are the automobile industries of the above prominent manufacturing countries as per the OICA statistics.358 195.309 621.124 3.619 3. followed by China.799 1.917 52. Alliance Business School | Group12 .049 252. Finance A 13 .478 1. These 5 countries are stand at the top when the production of cars is concerned.637.[AN ANALYSIS OF AUTOMOBILE INDUSTRY] March 27.233 321. Germany and Korea.943.776.287 138.206 Cars From the above table.446. we can see that the maximum numbers of cars are produced in Japan.

This demonstrates the steadily growing desire by foreign auto-related suppliers to improve the products. six in 2005. director general of the Japan Automobile Manufacturers Association's international department. three in 2004.3. 2010 3. Major players • • • Toyota Honda Nissan Alliance Business School | Group12 .[AN ANALYSIS OF AUTOMOBILE INDUSTRY] March 27. Wireless voice and data communications and GPS (Global Positioning System) location capabilities provide drivers with location-specific information. The expansion of telemetric systems increases the amount of computers and mobile communication technology used in vehicles and along roads. and services they supply to Japan's auto industry The growing number of auto-industry manufacturers and service providers setting up in Japan reflects the increasing willingness of Japanese auto makers to tie-up with foreign suppliers. Japanese automotive manufacturers are featuring more telemetric systems in their vehicles to keep them globally competitive. Finance A 14 . "But today they are shifting from merely procuring parts from foreign suppliers to working with them from the design and development stages. security and functionality-enhancing services that increase driver convenience. Japanese auto makers have been increasing their procurement of parts and technology abroad.1 JAPAN The Japan External Trade Organization (JETRO) has helped 11 foreign auto-related companies invest in Japan in 2007 (January-October period). creating a growth of opportunities for a large number of fields. safety and efficiency of the transportation system. and eight in 2006. up from one in 2003. And the foreign companies recognize that to remain globally competitive they cannot ignore the important business opportunity this represents. "While boosting the proportion of cars they make overseas." says Yoshihiro Yano.3 PROMINENT MANUFACTURING COUNTRIES 3. technologies.

China’s entry into the World Trade Organization agreement in the year 2001 gave a major thrust to its automotive industry. Japan and Canada. China is currently making an effort to super-specialise in auto-component sector.China’s major exporting destinations are the US. This research work suggests that the unpredictability of the Chinese consumer is a major concern for the manufacturers. Germany and the US. The major focus of this report is to look into the dynamics that is shaping up the automotive industry and then to assess what holds for its players in the near future.[AN ANALYSIS OF AUTOMOBILE INDUSTRY] March 27. which was growing at the rate of around 12% prior to the signing of the agreement. Major Players • Volkswagen • Mazda • Nissan Motor company Ltd • Honda Alliance Business School | Group12 . This growth was expected from a country whose economy has been growing steadily since the last 15 years and who has a vast base of consumers. The Chinese customer is not known for brand loyalty and the falling prices of the products have further added to their unpredictability.2 CHINA There are over 100 auto makers based in China which currently is the world's second largest car market. while its main importing sources are Japan.3. China's automobile industry has seen a phenomenal growth. The demand for auto-components produced in China is very high in domestic as well as international markets. The industry. 2010 • • • • • Mitsubishi Kawasaki Komatsu Yamaha 3. peaked to levels of around 40% within 2 years. In recent years. Finance A 15 .

and shackled to marketing and product strategies that have roots reaching back to the early 1900s. owes relatively little to the few retirees it has. and enjoys a variety of advantages because its Japanese. 3. Toyota and Honda.1: Biggest Sellers in China Source: JD Power Asia Pacific Domestic sales continue to be dominated by overseas brands like Volkswagen.and they have cars designed for the competitive global market that exists today. unionized. burdened with massive obligations to retirees.[AN ANALYSIS OF AUTOMOBILE INDUSTRY] March 27. Ford and Chrysler is Midwestern. their brand images and marketing strategies are more coherent -. Finance A 16 .Chery and Geely -. European and Korean owners launched operations in this country relatively recently. sells one basic Alliance Business School | Group12 . 2010 • General Motor • Hyundai motor company • Toyota • Suzuki Graph 3. Their factories are newer.S.3 AMERICA America has two auto industries.Toyota uses three brands in the U.The other American auto industry is largely Southern and non-union. to GM's eight -.3. Only two Chinese firms -. The one represented by GM.made the top ten list of annual passenger vehicle sales last year. Honda Co.

2010 Civic world-wide. Ford is engineering one Focus to take advantage of global economies of scale. Ford. Ford sells two different versions of its rival Focus compact car. AMERICA’S BIG 3 AUTOMOBILE CAR MAKERS In recent years. In 2008 Toyota became the largest car maker in the world. Honda and Nissan. and Chrysler face a host of problems.S.[AN ANALYSIS OF AUTOMOBILE INDUSTRY] March 27. Unappealing gas-guzzler product lines that are a step behind current auto buying trends aren't driving strong earnings.GM. Alliance Business School | Group12 . market until 2010. either. the Big 3 are trying to pad flagging normal sales rates with price incentives. Finance A 17 . instead. Ford and Chrysler are losing their ground to Toyota. but the new car won't hit the U. Legacy costs inherited from past manufacturing heydays in the form of costly pension and health care plans for retired employees add up to hundreds of billions of dollars. Major players • • GM Ford Chrysler Toyota Honda Motors Nissan • • • • With the rising fuel prices and increasing demand for environment friendly cars American giants. General Motors (GM). the recurring troubles of the American Big 3 automakers have been coming to a head.

Alliance Business School | Group12 .2 Market Shares of Big Three Source: mjperry.4 GERMANY Germany is considered to be the birthplace of the automobile since Karl Benz and Nikolaus Otto independently developed four-stroke internal combustion engines in the late 1870s. Germany was producing about 900 cars a year. At the same time. both because the possibility of longer term government subsidy remains unclear. Most now believe the level of sustainable US fleet replacement is closer to 14 to 15 million per year. with Benz fitting his design to a couch in 1887. While this will be an improvement over the 12 to 13 expected as the final tally for 2008. the quality of cars has improved considerably. Graph 3. 2010 However long-term survival still remains unclear. This situation meant that automakers came to expect 16 million new car sales annually in the US. Finance A 18 . which means that the average automobile can reliably be used for a decade. By 1901. and because many now believe that the US auto market was artificially inflated during the past decade. which led to the modern day motor car.com 3. illustrated by the following statistics: forty years ago only 6% of US households owned three or more cars.blogspot. in 2000 that number was 18%. Low interest loans and cheap leases led to a glut of consumption.[AN ANALYSIS OF AUTOMOBILE INDUSTRY] March 27.3. America currently has 244 million vehicles for its 202 million drivers. such a recovery will not be back to pre-recession levels.

By the mid1990s. 2010 Germany's auto industry is brimming with confidence and cash and even greater ambition. are not required-.at present. which were then being prepared. long vacations. Finance A 19 . short work weeks.3. inflexible labor practices. Germany was hobbled by sky-high wage and social costs. dwindling domestic demand. Major players in the market • General Motors • Toyota Motors • Ford • Nissan • Hyundai • Honda 3. accounting for one-fifth of the country's exports. Exports were at an all-time high. heavy taxes. an unfavorable exchange rate and much tougher competition. The automotive sector. Vehicle production in Germany last year amounted to a 4% increase over the previous year. Many of those problems remain but the obituaries. Then total vehicle production plunged 22% within a year -.5KOREA Alliance Business School | Group12 . It has leapt vigorously from the hospital bed to which it was confined after its world collapsed in 1993. ended the year with a trade surplus of $46 billion over the value of imports.a fall bigger than after the 1973 oil crisis.[AN ANALYSIS OF AUTOMOBILE INDUSTRY] March 27. following the post-reunification boom of the late 1980s and early 1990s.

production of a wider range of export models. Major players • • • Hyundai Kia Daewoo Alliance Business School | Group12 . foreign auto manufacturers were given wider access to the Korean market. but the growth rates between regions has varied far too greatly. In the wake of the trade negotiations between Korea and the US in 1995. Among these were redoubled efforts to control quality. The trade imbalance of Korean auto industry drew attention from advanced countries. and more aggressive marketing efforts. Change in domestic market directs Korean manufacturers in two ways: • • To develop more of larger cars and various types of vehicles like RVS to meet customers’ preferences To raise their competitiveness in price and quality to survive unprecedented power struggle among new and incumbent players. the tariff rates on imported cars in Korea now stand at 8%. the rapid rise was also due to aggressive efforts by Korean manufacturers to explore overseas markets. Korean-made cars are now being exported to a greater number of countries than ever as a result. Entering the ‘90s. however. which is an even lower level than in the EU. Now it faces a transitory period as domestic market growth drops to less than 5% despite more rapidly increasing overcapacity and it has to cope with greater competition pressure in both domestic and overseas markets.[AN ANALYSIS OF AUTOMOBILE INDUSTRY] March 27. The rise in exports of Korean-made cars was greatly influenced by external factors such as the appreciation of the Japanese Yen. expansion of after sales service networks. Korean auto manufacturers have been aggressive in recent years in expanding their overseas operations. Finance A 20 . After successive reduction s. The volume of exports did in fact rise substantially as export markets became diversified. especially to developing countries. Perhaps most importantly of all. This indicates that Korean manufacturers have not yet secured competitiveness overseas. exports of Korean-made cars rose rapidly for several reasons. 2010 Korean automotive industry drew world’s attention as it grew to be the 5’h largest producing country in two decades as a later comer.

2010 Conclusion: The west had dominated the automobile industry in 20th century. Hyundai etc gave good competition from Asia. Europe still leads when it comes to the stylish designs for the cars. Germany and United Kingdom are European car majors along with Italy. Alliance Business School | Group12 . Of late Asia challenged US and European car makers with efficient technology and easy access to the huge demands from India and China and other crowded Asian markets. Now China has become world’s production house and India s considered as home for small passenger cars. Finance A 21 . The high class performance has remained key utility of US and European cars. But companies like Toyota.[AN ANALYSIS OF AUTOMOBILE INDUSTRY] March 27.

Finance A 22 .[AN ANALYSIS OF AUTOMOBILE INDUSTRY] March 27. 2010 CHAPTER 4 INDIAN SCENARIO Alliance Business School | Group12 .

light. which is currently growing at the pace of around 18 % per annum. the Automobile Industry of India has come a long way. The liberalization policy and various tax reliefs by the Govt.1 INTRODUCTION: Automobile industry is one of the fastest growing industries of the world. medium and heavy commercial vehicles. three wheelers. is one of the key segments of the economy having extensive forward and backward linkages with other key segments of the economy. on roads of India. Some facts on Automobile industry in India:      India has the fourth largest car market in the world India has the largest three wheeler market in India India is the second largest producer of two wheelers in the world India ranks fifth in the production of commercial vehicles. General Motors and Ford. Alliance Business School | Group12 . Since the first car rolled out on the streets of Mumbai in 1898. mopeds. Today India is the largest three wheeler market in the world and is expected to take over China as the second largest automobile market. The well-developed Indian automotive industry ably fulfils this catalytic role by producing a wide variety of vehicles like passenger cars. in the coming years. multi-utility vehicles such as jeeps. the industry is set to grow further. Automobile industry made its silent entry in India in the nineteenth century. motorcycles. 2010 4. Since the launch of the first car in 1897. Hyundai Motors ranks second in car production in the world. comprising of the automobile and auto component sub sectors. Indian auto industry. has become a hot destination for global auto players like Volvo. of India in recent years have made remarkable impacts on Indian Automobile Industry. scooters. Finance A 23 . The automotive sector. tractors etc. India automobile industry has come a long way. During its early stages the auto industry was overlooked by the then Government and the policies were also not favorable.[AN ANALYSIS OF AUTOMOBILE INDUSTRY] March 27. With more than 2 million new automobiles rolling out each year. It contributes about 5 per cent in India's Gross Domestic Product (GDP) and 6 per cent in India's industrial production.

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4.2 INDIAN AUTOMOBILE INDUSTRY ASSOCIATIONS: The Indian automobile industry is represented by two associations which plays major role in the development of the industry. They are: ACMA (Automotive Component Manufacturers Association of India)  SIAM (Society of Indian Automobile Manufacturers)

4.2.1 ACMA The Automotive Component Manufacturers Association of India (ACMA) is the nodal agency for the Indian Auto Component Industry. Its active participation in various aspects has made it a vital catalyst for this industry's development. It’s main activities include:        trade promotion, technology up-gradation, quality enhancement collection and dissemination of information participation in international trade fairs, sending trade delegations overseas and bringing out publications on various subjects related to the automotive industry.

ACMA is represented on a number of panels, committees and councils of the Government of India through which it helps in the formulation of policies pertaining to the Indian automotive industry. 4.2.2 SIAM Society of Indian Automobile Manufacturers (SIAM) is the apex Industry body representing 38 leading vehicle and vehicular engine manufacturers in India. SIAM is mainly involved in: an important channel of communication for the Automobile Industry with the Government, National and International organisations.  The Society works closely withy all the concerned stake holders
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[AN ANALYSIS OF AUTOMOBILE INDUSTRY] March 27, 2010  actively participates in formulation of rules, regulations and policies related to the Automobile Industry.  aims to enhance exchanges and communication,  expand economics,  trade and technical cooperation between the Automotive Industry and its international counterparts.  aims to facilitate up gradation of technical capabilities of the Indian Industry to match the best practice worldwide. SIAM also interacts with worldwide experts to assess the global trends and developments shaping the Automotive Industry. It has been actively pursuing issues like Frontier Technologies viz. Telematics: Promotion of Alternative Fuels including Hydrogen Energy for automotive use through cell vehicles and Harmonisation of Safety and Emission Standards etc. SIAM has been striving to keep pace with the socio-economic and technological changes shaping the Automobile Industry and endeavour to be a catalyst in the development of a stronger Automobile Industry in India.

4.3 THE INDIAN AUTOMOBILE INDUSTRY
Evolution of Indian Automotive Industry While the genesis of Indian Automotive Industry can be traced to the 1940s, distinct growth decades started in the 1970s. Between 1970 and 1984 cars were considered a luxury product; manufacturing was licensed, expansion was restricted; there were quantitative restriction (QR) on imports and a tariff structure designed to restrict the market. The market was dominated by six manufacturers - Telco (now Tata Motors), Ashok Leyland, Mahindra & Mahindra, Hindustan Motors, Premier Automobiles and Bajaj Auto. The decade of 1985 to 1995 saw the entry of Maruti Udyog in the passenger car segment and Japanese manufacturers in the two wheelers and light commercial vehicle segments. Economic liberalization, started in 1991, led to the delicensing of the passenger car segment in 1993. QR on imports continued. This decade witnessed the emergence of Hero Honda as a major player in the two wheeler segment and Maruti Udyog as the market leader in the passenger car segment. Between 1995 and 2000 several international players entered the market. Advanced technology was introduced to meet competitive pressures, and environmental and safety imperatives.

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[AN ANALYSIS OF AUTOMOBILE INDUSTRY] March 27, 2010 Automobile companies started investing in service network to support maintenance of on-road vehicles. Auto financing started emerging as an important driver for demand. Starting in 2000, several landmark policy changes like removal of quantitative restrictions (QR) and 100 percent FDI through automatic route were introduced. Indigenously developed (Made in India) Vehicles were introduced in the domestic market and exports were given a thrust. Auto companies started collaboration with financial firms to provide auto financing and insurance services to customers. Manufacturers also introduced systems to improve capacity utilization and adopted quality and environmental management systems. In 2003, Core-group on Automotive R&D (C.A.R.) was set up to identify priority areas for automotive R&D in India. Following the economic reforms of 1991, the automobile section underwent delicensing and opened up for 100 percent Foreign Direct Investment. A surge in economic growth rate and purchasing power led to growth in the Indian automobile industry, which grew at a rate of 17% on an average since the economic reforms of 1991. The industry provided employment to a total of 13.1 million people as of 2007, which includes direct and indirect employment. The export sector grew at a rate of 30% per year during early 21st century. However, the overall contribution of automobile industry in India to the world remains low as of 2007. Increased presence of multiple automobile manufacturers has led to market competitiveness and availability of options at competitive costs. India was one of the largest manufacturers of tractors in the world in 2005-06, when it produced 2,93,000 units. India is also largely self-sufficient in tyre production, which it also exports to over 60 other countries. India produced 6.5 crore tyres in 2005-06. 4.3.1 Before Independence Before independence India was seen as a market for imported vehicles. The assembling of cars manufactured by General Motors and other leading brands was the order of the day. Indian auto industry focused on servicing, dealership, financing and maintenance of vehicles. Manufacturing started only after a decade from independence. 4.3.2 After Independence Till the 1950s the Indian Railways played a pivotal role in meeting India's transportation needs. The railways used to carry 90 per cent of the total freight, while road transport accounted for the balance. But in the current context the dynamics have changed. Surface transport accounts for 65% of freight movement and 80% of passenger movements. The slow growth of railway
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[AN ANALYSIS OF AUTOMOBILE INDUSTRY] March 27, 2010 infrastructure has been partly due to administrative reasons, partly due to difficulty in acquiring land and partly due to high capital cost involved for every additional railway line. The Indian automobile industry faced several challenges and road blocks to growth since independence. Manufacturing capability was restricted by the rule of license and could not be increased. The total production of passenger cars was limited to 40,000 a year for nearly three decades. This production was also confined to three main manufacturers Hindustan Motors, Premier Automobiles and Standard Motors. There was no homegrown expertise or research & development initiative. It was difficult to import scientific know how and vital spare parts and cumbersome to recruit foreign technical experts. The pricing was kept under control by the government. Here was the contradiction, a passenger car was thought to be a premium product only for the rich, yet it came under the purview of protection of a socialist regime. Initially labor was unskilled and had to go through a process of learning through trial and error. But to the credit of these workers, it was they who developed the skill set required for future expansion in the industry. The earlier automobiles were a domestic version of prominent International Brands. The Morris Oxford popular in the 1950s, became the Ambassador, the Fiat 1100 became the Premier Padmini. By 1960s nearly 98% of the product was developed indigenously. By the end of 1970s, significant changes in the automobile industry were witnessed. Initiatives like joint ventures for light commercial vehicles did not succeed. New models like Contessa, the Rover and the Premier 118NE, hit the market.

4.3.3 Socialistic Pattern of Growth India by and large followed a socialist system till the later part of 1980s.The government focused on development through heavy, long gestation, capital intensive projects like steel manufacturing. The quality of the finished good and customer feedback were not given much priority. As a result the country missed a golden opportunity to accelerate to a faster growth trajectory by at least 2 decades. 4.3.4 The Pioneering Achievements Mr. J.R.D Tata's role in the development of the Indian automobile industry has to be mentioned. The Tata group set up a high standard Engineering Research Centre (ERC) in 1965 to facilitate technological advancement. Mr. Tata pioneered the indigenization of scientific knowledge for trucks in collaboration with Mercedes Benz. The launch of Maruti 800 in 1983 changed the dynamics of the passenger car sector in India. It was also known as the people’s car. 4.3.5 Stability in the Market
Alliance Business School | Group12 , Finance A 27

4. 4.  The policies and reforms are oriented towards manufacturing hub for small cars. 5.5 VARIOUS SEGMENTS: The Indian automobile industry mainly constitutes the following four segments:  Passenger vehicle Alliance Business School | Group12 . but as sharing of best practices.  More than 125 fortune 500(including large auto companies) have research and development centres in India. from being an importer of automobiles to a manufacturer. This attribute cannot be considered as a weakness.  The companies which are present in India can leverage India’s leadership in IT industry. This phenomenon can be compared to the business collaboration in the outsourcing industry.  Most leading component manufacturers are QS and ISO certified. Stable Economic Policies:  India has continuity in reforms and policies. Finance A 28 . Large and growing domestic demand:  Demand growth expected to be around 10% CAGR making India one of the fastest growing markets. 4. 3. India positioned itself as one of the leading low cost manufacturing sources. 6. Export Potential:  Increased outsourcing has led to a large potential to export components and vehicles to other markets. 2010 The Indian automobile industry has come a long way since independence. Proven Product Development capabilities:  Industry in India has capabilities to develop complete vehicles and systems. from having minimum foreign collaborations to joint ventures.[AN ANALYSIS OF AUTOMOBILE INDUSTRY] March 27.4 ATTRACTIVENESS OF THE INDUSTRY 1. High Quality Standards:  12 Indian component manufacturers have won the Deming Prize for quality. 2. Competitive Manufacturing Cost:  After introduction of VAT.

Commercial vehicles and three wheelers segment are having very negligible market share of 3. respectively. 4. better technology and the younger generation today prefer to own two wheeler bikes. Over the last 5-6 years the compact car segment in particular has been the focus for most OEMs.siamindia. safety.[AN ANALYSIS OF AUTOMOBILE INDUSTRY] March 27. 2010  Commercial vehicle  Two wheeler  Three wheeler Graph 4.com The above graph displays the market share of the various segments in Indian automobile sector. Within the passenger car segment.1 Passenger vehicle segment: Passenger cars and utility vehicles are the main segments of the Indian passenger vehicle industry with the former accounting for ~80% the total volumes.6%. Two wheelers segment have the highest market share of 76. The main reason of two-wheelers segment having highest market share is Economical price. Finance A 29 .5. the mini and compact segment together accounts for around 80% of total volumes.95% and 3.49%. followed by the passenger vehicle segment having 15. leading to a large number of product introductions and the segment has outperformed the rest of Alliance Business School | Group12 . fuel-efficiency.1 source: www.96% market share.

The segment has also witnessed the highest number of launches over the past 12-18 months with major ones being Ritz. Being the largest segment by volume.4. 4. i10. the domestic sales of passenger cars were considerably lower than the units produced.6% during the same period.4% whereas. Finance A 30 . the production of passenger car has increased remarkably with a growth rate of 60. the compact car segment is also intensely competitive with the presence of seven players with as many 16 offerings. 2010 the industry in terms of growth.com The above graph shows the trends in the growth of passenger car segment in terms of domestic sales and productions. Zen Estilo (from MSIL). i20 (from HMIL) and Indica Vista (from Tata Motors Limited . Over the years (2002-2009). Passenger vehicle segment: Small cars Mid size cars Premium cars Luxury cars Graph 4. This was due to the recessionary effects on supply and demand.1: Small car market The small car market in India is increasing by leaps and bounds. The indigenous market for small cars now occupies a substantial share of around 70% of the annual car production in India Alliance Business School | Group12 . A-Star.TML).2 Source: www.siam. the domestic sales has increased with a growth rate of 54.[AN ANALYSIS OF AUTOMOBILE INDUSTRY] March 27. In th years 2007-2009.

Tata Motors has launched Nano in March 2009. with the growing affluence of the rural sector.500. Tata Motors is also going through a process of decisionmaking. in order to gain control of the small car market in India.000 vehicles. The various reasons for the growth of the mid-size car market in India are  The economy in the country is rising leaving the people with a lot of disposable income. 4. However. Honda has also decided to increase its manufacturing capacity in India to 100. A mid-size car is an automobile which have a size that is between a compact and a car of full size. 3-8 lakh. the mid-size car market in India is growing at the rate of around 20% per year. This shows how fast the growth is taking place in the market of mid-size car in India. This money is being spent by the people in buying the mid-size car. Further. It is no wonder therefore. The Maruti 800 which is the most preferred car among the Indian middle classes can now be bought at a lower cost. Alliance Business School | Group12 . In India the mid-size car price ranges between Rs. since small cars are more affordable and utilitarian. which cost as less as US$ 2. owning a car. The various reasons for the growth of the small car market in India are The increase in the demand for small cars can be attributed to the aspirational lifestyle of people which makes them strive for a car early on in life. Finance A 31 . innovation. It typically has the capacity to carry 4 passengers. the demand for them has shot through the roof. to launch a variety of mini-cars in association with Fiat. This rising demand for small cars is attracting companies like General Motors which has increased its yearly production in India to 140. The main players in the car market like Tata Motors and Maruti Udyog are fiercely competitive and more or less all the automobile companies in India that have forayed into the production of small cars are trying to out-do each other in terms of design. and technology. Although the automobile market in India is growing at 7% per year.2: Mid Size car market The mid-size car market in India has grown tremendously in the last few years. at least a small car. The overall age for owning a car has also decreased in recent years.000 very soon.4. pricing.[AN ANALYSIS OF AUTOMOBILE INDUSTRY] March 27. that most of the latest car launches in India have been in the mid-size segment. is a foregone conclusion in modern India. 2010 of about one million.

3: Premium Car Market in India The premium car market in India has registered a fair amount of growth in the last few years. This has led to the reduction in the prices of the mid-size cars. This enables them to buy the mid-size car which further boosts the mid-size car market in India. The youth in the country are earning high pay packages due to the IT boom in the country. A premium car is a luxurious automobile which effectively blends cargo capacity and passenger space for the sake of style and grandeur. The IT boom in the country has resulted in the youth earning high pay packages.4. the manufacturers of these cars target the high-income group of people and there are a lot of such takers in the Indian car market. The government in relation to the automobile industry have taken out various polices such as reducing the import tariffs and also relaxing the equity regulations. which have further boosted the premium car market in India. Alliance Business School | Group12 . Cars belonging to this segment usually have a carrying capacity of 5 passengers. This enables them to buy premium cars. This has reduced the prices of automobiles giving a boost to the premium car market in India. The prices of the premium cars in the Indian market range between Rs.[AN ANALYSIS OF AUTOMOBILE INDUSTRY] March 27. As the premium cars are expensive.    Many loan schemes have been launched by the financial institutions and automobile manufacturers.   4. 7-15 lakhs. 2010  Various loan schemes have been launched by the automobile manufacturers and financial institutions giving a boost to the market of mid-size car in India. The government have reduced the import tariffs and also relaxed equity regulations with regard to the automobile industry in India. The various reasons for the growth of the premium car market in India are  The economy of the country is rising as a result of which the people have more disposable income which they are spending on buying premium cars. Finance A 32 .

5 COMMERCIAL VEHICE SEGMENT: With India being the next large and lucrative market after China. The luxury cars in the Indian market are very expensive. A luxury car is a luxuriously styled automobile which is designed to give satisfaction and comfort to its owner. 20 lakh. 60 billion in the coming year to create capacities. the Indian CV Alliance Business School | Group12 . A luxury car typically has carrying capacity of 4 passengers.4: Luxury Car Market in India The luxury car market in India has registered a fair amount of growth in the last few years and is growing at the rate of 25% per year. With global majors planning to invest around Rs. Various loan schemes have been launched by the automobile manufacturers and the financial institutions. with price tags that start from Rs. These have helped to reduce the prices of the luxury cars.[AN ANALYSIS OF AUTOMOBILE INDUSTRY] March 27. With the IT boom in the country many youngsters are earning high pay packages which enable them to buy luxury cars. 2010 4. The various reasons for the growth of the luxury car market in India are  The economy is rising in the country which has given the people more disposable income which they are spending in buying luxury cars. Finance A 33 . Hence. And this have further given boost to the market of luxury car in India. global players are entering the Indian market in association with local partners. This has made it very easy for the people to buy luxury cars and this has boosted the luxury car market in India. which in turn have led to the growth of the luxury car market in India    4. Besides.4. The government have formulated many polices such as the relaxation of equity regulations and the reduction of import tariffs pertaining to the automobile industry. local players are also diversifying their business to have a sizeable share in the total commercial vehicle market. luxury cars can only be afforded by the people who belong to the high income group and there are a lot of such takers in the Indian automobile market.

[AN ANALYSIS OF AUTOMOBILE INDUSTRY] March 27. Finance A 34 . Key Market drivers: a) Road Network Development b) Low interest rates. c) Wide variety and easy availability of financing options. Technology trends in the global commercial vehicle industry are being increasingly driven by tighter emission standards and demanding customer requirements. d) High sensitivity to Fuel prices Commercial vehicle segment Buses Ambulance Trucks Defense Vehicles Tractors Construction Equipments Alliance Business School | Group12 . These are set to dictate tougher tasks to new product development teams worldwide in terms of providing products with high 'value-cost' equation. 2010 market is likely to get crowded.

the domestic sales and the production of the commercial vehicles are shown. difficulty in availability of vehicle finance. 4.[AN ANALYSIS OF AUTOMOBILE INDUSTRY] March 27. It shows a remarkable decrease in the domestic sales as well as the production of the vehicles in the year 2008-2009. lower freight rates. . The domestic sale went down by 27% and the production went down by 31%.all on the back of the global financial crisis. stricter appraisal norms for financing .3 Source: www.com In the above graph.6 TWO WHEELER SEGMENT: Motorcycles Scooters Scooterettes/Mopeds Alliance Business School | Group12 .siamindia. Finance A 35 . This change was mainly because commercial vehicle (CV) industry faced challenging times in 2008-09 due to reduction in cargo and passenger traffic. 2010 Graph 4.

major growth trends have been seen in the motorcycle segment over the last four to five years. In the last few years. The country stands next to China and Japan in terms of production and sales respectively. 4.1: Two Wheeler Market in India India is the second largest producer of two-wheelers in the world. The two-wheeler market in India is the biggest contributor to the automobile industry with a size of Rs. The domestic sales decreased by 5% over the years whereas the production decreased by 4. namely motorcycles. Foreign firms have already taken initiatives to own their two-wheeler subsidiaries in India.siamindia. One good Alliance Business School | Group12 .000 million. scooters. These have been produced by combining two or more twowheeler segments. and mopeds.6. This decline was mainly due to the dominance of the market by the passenger car and the growth of small car segment. 100. 2010 Source: www. The two.[AN ANALYSIS OF AUTOMOBILE INDUSTRY] March 27. and most of them are Japanese firms. Foreign collaborations have been playing a major role in the growth of the Indian two-wheeler market. the Indian two-wheeler industry has seen spectacular growth.wheelers segment experienced a decline in the sales and production of products from year 2007-2009.5%.com The above graph shows the trend in the domestic sales and production of two-wheelers segment. The modern two-wheeler firms in India have been manufacturing new categories of two wheelers such as Step Thrus and Scooterettes. Among the 3 segments of the Indian two wheeler market. Finance A 36 . The two-wheeler market in India comprises of 3 types of vehicles.

2010 reason for such increase in demand for motorcycles is due to its resistance and balance even on bad road conditions.    However. In the same period the motorcycle exports from India was 321. at present are doing good business. and steady two-wheelers such as motorcycles had been felt.07 was 7. 4.Due to opportunities offered by multinationals the disposable incomes of salaried individuals have increase manifold.2 Two Wheelers Manufacturers . Most of the rural areas in India do not have decent roads and hence the need for good.321 units.[AN ANALYSIS OF AUTOMOBILE INDUSTRY] March 27.6.07 the total number of the two wheelers and three wheelers produced in India.Today. shock-resistant. Increase in consumer's salary .548. Constant petrol prices . Finance A 37 . Delay in initiation of Mass Transport System . The sales pertaining to two wheelers in the period 2006 . the government of India has been working on reducing subsidies on kerosene and diesel which will keep petrol prices at more or less the same level. and other duties have been lowered by the Government The latest two wheelers are fitted with economic engines The present generation is using more two wheelers The options of financing has become easier and user friendly Economical price Safety Alliance Business School | Group12 . In the period 2006 .857.41 %. the two-wheeler market in India is a fast growing market due to its technological advancements in product manufacturing and emphasis on design innovation. The following are the main factors that affect two-wheeler sales in India  Increase in credit and financing for auto vehicles . excise.Growth Factors        The general income level has increased The taxes.Two-wheeler loans and financing has been on the rise. The Two Wheelers Manufacturers in India.Probably a future threat to the twowheeler market. which was a growth of 11. the implementation of the mass transport system has been delayed. were around 9 million. The growth of the two wheelers sector was noteworthy in the past few years.

siamindia. There has been a consistent growth in the sales and production of the three wheelers segment till the year 2007.com The above displayed graph shows the trend in the domestic sales and production of the threewheelers segments from year 2002-2009.7 THREE WHEELERS SEGMENT: In the three wheeler segment. the three wheeler manufacturers are more into the passenger three wheelers. Alliance Business School | Group12 . Mahindra & Mahindra has got the Champion range of three wheelers. the classification is broadly in terms of carriage and passenger vehicles. From 2007 to 2008. Finance A 38 .[AN ANALYSIS OF AUTOMOBILE INDUSTRY] March 27. From the year 2007 to 2009 there is a decrease of around 11% in the production of the vehicles. This segment consists:  Carriage purpose  Passenger purpose Graph 4. There are Champion pick up and Champion delivery vans while the Champion Passenger carrier is mostly seen in the western parts of the country.5 Source: www. Since the former does have a very limited capacity to carry goods and is not preferred by many. But in the year 2008 and 2009 there is a decrease in the production as well as the sales of the three wheelers. 2010  Fuel-efficient  Comfort level 4.

The introduction of tailor made finance schemes. and other vehicles. powered by the increase in the income is the primary growth driver of the automobile industry in India. is one of the key segments of the economy having extensive forward and backward linkages with other key segments of the economy. It is expected that the Automobile Industry in India would be the 7th largest automobile market within the year 2016 It contributes about 6 per cent in India's Gross Domestic Product (GDP) and 6 per cent in India's industrial production and its contribution to GDP is expected to grow by 10% in 2016. Throughout high school and college he perfected his designs. Now. 4. c) Inadequate urban & rural public transportation infrastructure d) Low initial ownership cost e) Self-employment opportunity for large segment of urban youth 4. The Automobile Industry is one of the fastest growing sectors in India. easy repayment schemes has also helped the growth of the automobile sector.8 INDIAN AUTOMOBILE INDUSTRY AND GDP The Role of Automobile Industry in India GDP has been phenomenon.1 Electric cars: As a seventh-grader. at the age of 26. Ideal for congested Indian roads and tropical conditions.8. 2010 there was a decrease of 11.8% in the domestic sale and during 2008-2009. The automotive sector.8 IMPACT OF SMALL AND HYBRID CARS: 4. Key Market drivers: a) “Last Mile” Transportation needs. b) High product manoeuvrability & drivability. Worden is head of the Solectria electriccar company. He has sold more than seventy of his Force cars so far. James Worden began building electric cars. This was mainly due to the restrictions put by the government due to financial crisis. the sales decreased by 4% again. The increase in the demand for cars. Finance A 39 . comprising of the automobile and auto component sub sectors.[AN ANALYSIS OF AUTOMOBILE INDUSTRY] March 27. An electric car is Alliance Business School | Group12 .

completed a new ultra-low carbon vehicle assembly plant in Bangalore.000 cars annually. In late 2009 REVA Electric Car Company. Honda Accord Hybrid. 4. Small cars are generally very economic. In time. has brought about renewed interest in electric cars.[AN ANALYSIS OF AUTOMOBILE INDUSTRY] March 27. Alliance Business School | Group12 . and provide better safety. Electric cars are specifically a variety of electric vehicle created or adapted for use on the road.3 Small cars: The small car segment is the easiest place to find fuel-thrifty autos. The trend is clear. Finance A 40 . As of 2009. a plug-in hybrid which uses a fully electric drive train supplemented by a gasoline-powered electric generator to extend its range. increased concerns over the environmental impact of gasoline cars. making use of techniques such as regenerative braking to improve its efficiency over comparable gasoline cars. in place of more common propulsion methods such as the internal combustion engine (ICE). and Ford Hybrid Escape. expect to sell 1 million a year by themselves within a shorter period of time. almost all cars will be hybrids as these cars are eco-friendly. The small car class also is where you can find the lowest-priced new cars.2 The Impact of Hybrid Cars on the Automotive Industry Hybrid market has been estimated to increase to some 3 million cars year within a decade and some. while not being hampered by the limited range inherent to current battery electric cars. with notable models including the Toyota Prius and the forthcoming Chevrolet Volt. 4. manufactured in Bangalore.8. such as Toyota. the maker of the REVAi. combining a internal combustion engine power train with supplementary electric motors to run the car at idle and low speeds. also known as the G-Wiz. In recent years. The hybrid electric car has become the most common form of electric car. the world’s most popular battery electric car is the REVAi. the worlds largest dedicated to building EVs with a capacity of 30. Hybrid cars are now sold by most major manufacturers. 2010 an alternative fuel automobile that uses electric motors and motor controllers for propulsion. and Central America. easy to manage. India and sold in 24 countries including India and others in Europe. Asia. along with reduced consumer ability to pay for fuel for gasoline cars. despite high initial costs. Popular hybrid cars include Toyota Prius (Motor Trend magazine’s car of the year for 2004). costefficient.8. costeffective and easy to handle and maintain. which are perceived to be more environmentally friendly and cheaper to maintain and run.

there will be a fall in the sales of used car and compact cars. This will lead to a glut of used cars and a fall in valuations of used cars.  The loans are easier and to top it is readily available. His will lead to path breaking innovations and will take india’s well developed auto industry which has already achieved global standards a step further.4 million cars annually buying a second hand car has a lot of advantages:  The cost of car is significantly lower than new car. A second hand car will always have the issue of repair and Alliance Business School | Group12 . Emerging small car segment would hamper the monopoly practiced by this company to a greater extent. Tata Nano.9 USED CAR MARKET: Second hand or used cars are an integral part of the car market.g. 4.5 lakhs. People prefer purchasing a second hand car because it proves to be more economical as compared to buying a brand new car. There will be very soon an increase in competition between various players as all of them are coming up with new products e. This would have a great impact on the two-wheeler market segment.  the depreciation is lesser. Auto component manufacturers: Small car manufacturing company would involve the group of auto component suppliers right from the stage of conception. According to a recent estimate the used car market demand is 1. The small car segment is planning to take away at least 10% of the market share from the two-wheeler market. With a new car available for as low as 1. 2010 The effect of small cars on the automobile industry includes: Impact on other market players: The car manufacturer which is most affected by the small car segment is maruti Suzuki. Finance A 41 . Impact on used car market: The other causality of small car will be the used car market.[AN ANALYSIS OF AUTOMOBILE INDUSTRY] March 27. Hyundai etc Impact on two-wheeler manufacturer: The stated target market of small car is the two wheeler buyers.

people from lower segment of society would prefer a second hand car instead of owning a motor bike or scooter. People would prefer a second hand car instead of buying a new car because it is much more economic and cost-efficient. Certified Used Cars: To combat fraudulent car dealers the reputable car dealers in cooperation with manufacturers have come up with a way of certifying cars to assure that the customers are paying the right price for the right product. Mahindra & Mahindra and Tata Motors for light commercial vehicles. Therefore. 2010 maintenance since it has already been used so the need for maintenance would be more in the case of a second hand car than for a new car. there is an element of threat attached to the other segments of the automobile industry. The key destinations for exports are SAARC countries. Mahindra & Mahindra for MUVs.10 EXPORTS: The industry has adopted the global standards and this was manifested in the increasing exports of the sector. medium and heavy commercial vehicles. European Union (Germany. The branded used car chains have realized the potential for used car market. Belgium. Middle East and North America. Mahindra plans to increase its numbers to 300 outlets in five year’s time. Honda Auto Terrace. relaxation of the foreign exchange and equity regulations. Used car outlets will spread into II tier cities in the next couple of year. India and ASEAN). This move made by the dealers and manufacturers subjects the cars to rigorous tests and thorough inspection. Maruti Udyog. Aided by the liberalization steps taken by the government of India. the Indian automobile industry is on a fast growth track for exports. the Netherlands and Italy). With the increasing used car demand. growing used car market is having greater impact on the Indian automobile industry. UK. Similarly. The Alliance Business School | Group12 . financing terms. Finance A 42 . Mahindra and Mahindra’s First Choice and many more are yet come to India. Bajaj Auto for two and three wheelers and Mahindra & Mahindra and TAFE for tractors. and reduction of tariffs on imports. Tata Motors and Hyundai Motor India are key exporters for passenger cars. Hyundai Advantage. Some industry watchers predict that 50 percent of the used cars sales will be brought under organized car market by 2013. Ford Assured. Dealers and manufacturers may then add certain advantages like extended warranties. 4. Maruti TrueValue already has 270 outlets and plans to increase them a few hundred more in five years. Some of the well known certified used car dealers in India are – Maruti TrueValue. Also global auto companies are increasingly sourcing components and vehicles from low cost countries. A 3% growth in global demand is anticipated over the next five years and it will be led by Asia (mainly by China. service perks just like in the case of purchasing a new car. Other car manufacturers plan the same. such as.[AN ANALYSIS OF AUTOMOBILE INDUSTRY] March 27. Toyota U Trust. refining the banking policies.

siamindia.33 3 335739 42673 148074 1004174 1. 2010 outsourcing pie is slowly extending to services like engineering design and other business processes.896 619.7 82 79 72.005 12.432 68. It is clear from the graph that the exports of the automobiles in India has increased considerably over the years.713 1.05 2 479. But the exports in commercial vehicle segment has reduced from the year 2008-2009 by 38.66 0 So urce: www.530. Table 4.68 2 307.366 179.994 141.011. On the other hand.22 2 2006-07 2007-08 2008-09 % Growth (02-09) 78.144 265.600 76.54 4 200506 175. there is an increase of merely 4% from 20082009. the exports of passenger vehicle and two-wheeler vehicles increased by Alliance Business School | Group12 .6 04 129.57 2 40.40 7 629. Finance A 43 .30 8 198.452 49.com The above graph shows the number of units exported in each segment from year 2002-2009.795 366.28 70. India is well positioned to take advantage of the outsourcing opportunities.16 9 806.91 9 200405 166.[AN ANALYSIS OF AUTOMOBILE INDUSTRY] March 27.940 66.225 819.55 71.2% and in case of three-wheeler segment.401 58.52 9 218.881 513.40 2 29.1 Year-wise Export growth CATEGORY 2002200303 PASSENGER VEHICLES COMMERCIAL VEHICLES THREE WHEELERS TWO WHEELERS GRAND TOTAL Graph 4.29 1 17.255 43.644 1.238.537 143.

the cost of production becomes extremely less. As per the graph. especially the small cars.7 Source: www. which is getting increasingly tough in the developed markets under the pressure of high input cost. stricter appraisal norms for financing all on the back of the global financial crisis. thereby luring people who are not in a position to own expensive luxury cars. lower freight rates. On the back of cheap labor and raw material cost. One of the key factors responsible for the growth of the Indian automobile industry is its low cost advantage. Finance A 44 . While three wheeler and commercial vehicles have comparatively lower growth rate. Besides this. There are several well-equipped small passenger Alliance Business School | Group12 . difficulty in availability of vehicle finance. 2010 34% and 18% respectively during the same period. which is further supporting the country’s auto industry. India is rapidly emerging as a quality auto component manufacturing base.55% respectively over the years. the cost competition. Moreover. the percentage growth in exports of various segment has been shown from the year 2002 to 2009. Graph 4. The commercial vehicle (CV) industry faced challenging times in 2008-09 .[AN ANALYSIS OF AUTOMOBILE INDUSTRY] March 27. This was mainly due to increased demand in two-wheeler and passenger vehicles. two wheeler vehicles and the passenger vehicles are among those segments which reported the highest growth rate of 82% and 78.com In the above displayed graph.reduction in cargo and passenger traffic.siamindia. This ultimately leads to low cost of end product. will provide an additional edge to the Indian automobile industry in increasing its passenger car sales in overseas markets.

Crosslink International Wheels. In 1997.7 billion industry. While over the year 2008-2009. as a result of which India-manufactured small passenger cars are gaining good response in the overseas markets. General Motors (GE) and Ford. the size of the auto component industry was US$ 2. it has increased to about 6 % only. Ford and Volkswagen. India is now a supplier of a range of high-value and critical automobile components to global auto makers such as General Motors. amongst others. Robert Bosch. Export of Auto Components: The Indian auto component industry is one of India's sunrise industries with tremendous growth prospects. auto parts maker of Germany has relocated manufacture of certain products to MICO. From a low-key supplier providing components to the domestic market alone.8 Source: www. 2010 car assembling plants.acmainfo. Graph 4. Malaysia's leading automobile security provider Alliance Business School | Group12 . It has gone upto around 70. Toyota. the industry has emerged as one of the key auto components centers in Asia and is today seen as a significant player in the global automotive supply chain. Jai Parabolic Springs (JPSL) is a leading manufacturer of parabolic springs in India and has bagged two major orders from international auto majors.4 billion and now in 2004-05 it has become US$ 8. Finance A 45 .[AN ANALYSIS OF AUTOMOBILE INDUSTRY] March 27. India.12%. Investments in the auto ancillary sector are rising rapidly.com The graph shows the increase in number of units of auto components exported over the years 2002-2009.

[AN ANALYSIS OF AUTOMOBILE INDUSTRY] March 27. French automobile group has placed orders for components worth US$ 10 million with Indian companies.  Potential to harness global brand image of the parent company. Fiat India exported components worth US$ 8.3 million in 2004-05 to its operations in South Africa.  Global hub policy for small car like Hyundai. Suzuki. Economics of scale due to domestic market. Finance A 46 .com Analysis of Indian Exports: Strengths  Cost competitiveness in terms of labor and raw material. 2010 Wheels Electronic SDN. PSA Peugeot Citroën. is setting up its manufacturing unit at Baddi to make India the export hub for the SAARC region.  Established manufacturing base. Weakness  Perception about quality.acmainfo. GKN Driveline and Dubai based auto ancillary major Parts International plans for an investment in India.9 Source: www. Graph 4. etc.  Infrastructure bottlenecks Alliance Business School | Group12 .

Malaysia. 2010 Opportunities  Huge export markets such as Europe. America. Thailand.  External Factors: Improve infrastructure (ports. Finance A 47 . Africa.  Attaining economies of scale & scope. Threats  China. etc).  Continuous cost reduction for global competitiveness.  Supply chain management (logistics).  Improve EXIM regulations.  Alliance Business School | Group12 .  Many other countries also have strategies for export Export Imperatives: Internal Factors: Attaining high quality for global standards. etc.[AN ANALYSIS OF AUTOMOBILE INDUSTRY] March 27. roads. and others for Indian cars.

[AN ANALYSIS OF AUTOMOBILE INDUSTRY] March 27. 2010 CHAPTER 5 INDUSTRY ANALYSIS Alliance Business School | Group12 . Finance A 48 .

running with 3 vehicle assembly plants at Gurgaon and 1 vehicle assembly plant at Manesar. Alto. Swift. Maruti Suzuki started as a government company. For those. luxurious cars. etc. Some of the major players are: 5. who cannot afford to buy a new car can go for used cars. WagonR. 2010 5. Company started its production in the year 1983 and launched Maruti 800. The car market deals with different types of cars like big cars. In short 'A people's car'. Finance A 49 . Gypsy. This sector has responded with an exponential progress in the number of new models launched in the last few months. Versa. A subsidiary of Suzuki Motor Corporation (SMC) of Japan. Dzire. SX4 and Grand Vitara.[AN ANALYSIS OF AUTOMOBILE INDUSTRY] March 27. sports cars.1 MAJOR PLAYERS The Car industry in India has seen a tremendous growth and seems to be the fastest growing sector in the world. The Government of India identified the need for a small car for the Indian masses. the Maruti Suzuki India Limited headquartered in Delhi. The result. The product portfolio of the company consist 11 models with around 100 variants including Maruti 800.1. Browse through the extensively researched categories of cars and get the most updated information related to cars. with Suzuki as a minor partner. Also Maruti have 16 Regional offices. Omni. This on-line platform will provide you a complete database of car owners who are willing to sell cars. all the car manufacturers are giving tough competition to each other by opting innovative and unique ideas to capture the market. Hence.1 MARUTI SUZUKI INDIA LIMITED The Maruti story began in the year when scooters had a waiting period and the Indian car customer had limited options. The craze for cars among people is growing day-by-day. the company's product range has widened and ownership has changed hands. Alliance Business School | Group12 . environment friendly yet contemporary in technology. Over the years. a car that would be economical. small cars. to make a people's car for middle class India. Maruti Suzuki India Limited (MSIL) was born in February 1981. Zen.

2002. Finance A 50 .000 sales mark within 52 months of launch. Tata Motors is India’s only fully integrated automobile manufacturer with a portfolio that covers trucks. the company launched 'Hyundai Accent' and in May 8. the company launched new luxury car 'Sedan Sonata'. It is one of the largest companies in the Tata group now. The company was incorporated in the year 1996. Tata Motors’ Engineering Research Alliance Business School | Group12 . The collaboration ended in 1969 Tata Motors has since grown from strength to strength.1. utility vehicles and passenger cars. the company increased the installed capacity of Motor Vehicle from 124. In October 14.1. the company launched 'Accent VIVA' and in September 6.7 billion in the year 2008-09. The Company has spread its manufacturing facilities across India by setting up plants at Jamshedpur. Tata Motors entered into collaboration with Daimler Benz of Germany in 1954 to manufacture commercial vehicles. During the year. the company commenced exporting car to Western Europe and Eastern Europe. 1998. 2002.000. it launched 'Santro zipDrive'.3 TATA MOTORS Established in 1945. In August 16. 1999 the company emerged as the second largest auto-manufacturer in the country. 2010 5. Tata Motors has the unique distinction of giving India it’s first and only indigenously built passenger car -The Tata Indica. This is coupled with a nation-wide sales.2 HYUNDAI MOTORS INDIA LIMITED Hyundai Motor India Limited (HMIL) is a wholly owned subsidiary of Hyundai Motor Company. The company has a fully integrated state-of-the-art manufacturing plant near Chennai. HMIL presently markets 54 variants of passenger cars across segments. the company was selected as the 'Car Maker of the Year' by Overdrive. 5.[AN ANALYSIS OF AUTOMOBILE INDUSTRY] March 27. Hyundai Santro (Atos Prime) makes its world debut in India and in March 31. 2002. In September 27. In October 10. it launched Santro Automatic Transmission. with a total income of US$ 14. service and spare parts network. The Indica launched in 1998 reached the 250. Pune and Lucknow. the company launched 'Accent CRDi'. South Korea and is the second largest car manufacturer and the largest passenger car exporter from India. In July 18. 1999. buses. 200l. 2000. More than 4 million Tata vehicles ply on Indian roads making Tata a dominant force in the Indian automobile industry. During the year 2003-2004.800 to 160. During the year.

Consequent of this. the company launched new model namely. Economic. 5. Besides. 'Ford international Service lnc. the company launched SUV model vehicle namely Ford Endeavor and in the same year the company extensive and well equipped network of 93 dealership covering 73 cities. the company offers sale and purchase of used vehicles.'. USA. Endeavour.[AN ANALYSIS OF AUTOMOBILE INDUSTRY] March 27. bought shares of the company held by Mahindra and Mahindra Limited. Ford received approval to increase its stake in the joint venture to 92. it expanded to dealership in 106. 5. Additionally. It was a 50:50 joint venture with Mahindra and Mahindra Limited. dynamic and futuristic automobile manufacturer with more than 130 models spanning a wide range of Commercial Vehicles. Tata Motors provides the wheels for India's growth. and urban activity vehicles. During the year 2004-05. Mondeo. luxury. 2010 Centre has over 900 scientists and engineers dedicated to product and process development. Passenger Cars and Multi-Utility Vehicles. technology up gradation and new product introduction. The Company was rechristened as Ford India Limited. the Company works with leading international design and styling houses. is wholly owned subsidiary of Ford Motor Co. and Technological analysis" and describes a framework of macro environmental factors used in the environmental scanning component of strategic management.000 vehicles per annum. sports utility.18%.2 PEST ANALYSIS PEST analysis stands for "Political. Ford Fusion in December 2004 and in the same year. India. Social. During the year 2003-2004. Ford offers its vehicles under Ikon. Ford is based in Chengalpattu. a wholly owned subsidiary of Ford Motor Company. Ford India Ltd.4 FORD INDIA LIMITED Ford India Private Limited manufactures and markets automobiles. In November 1998. Ford India was established in 1995. Limited (MIFL). It set up 250 acre manufacturing plant near Chennai with an investment of over US$ 354 million and capacity to manufacture 100. Ford Motor Company received government approval to establish Mahindra Ford India. Finance A 51 . The company offers passenger.1. It is a part of the external analysis when conducting a strategic analysis or doing market research Alliance Business School | Group12 . and Fusion brand names. India's most reliable. During the same year. the company wholly owned subsidiary of 'Ford Motor Company USA'.

2010 and gives a certain overview of the different macro environmental factors that the company has to take into consideration. business position. The automobile sector in India is growing by 18 percent per year. The Government formulated the Auto Policy for India with a vision to establish a globally competitive industry in India and to double its contribution to the economy by 2010. cost-effectiveness. which envisages a phased programme for introducing Euro emission and fuel regulations by 2010. advanced technology. India has a welldeveloped and competent Auto Ancillary Industry along with automobile testing and Alliance Business School | Group12 . 5. Some of the policy initiatives include: Automatic approval for foreign equity investment up to 100 per cent of manufacture of automobiles and component is permitted. National Automotive Fuel Policy has been announced. It intends to promote Research & Development in automotive industry by strengthening the efforts of industry in this direction by providing suitable fiscal and financial incentives.2. An analysis of the following four components of the macroenvironment can help you to think how your business should respond to these external influences. Advantages of FDI in the Automobile Sector in India The basic advantages provided by India in the automobile sector include.[AN ANALYSIS OF AUTOMOBILE INDUSTRY] March 27. potential and direction for operations. Besides. 100% FDI allowed FDI Inflows to Automobile Industry have been at an increasing rate as India has witnessed a major economic liberalization over the years in terms of various industries. and efficient manpower. It is a useful strategic tool for understanding market growth or decline. Finance A 52 . 100% Foreign Direct Investment (FDI) is allowed in the automobile industry in India which has led to a turnover of USD 12 billion in the Indian auto industry and USD 3 billion in the auto parts industry.1 Political factors The Government of India (GOI) has identified the automotive sector as a key focus area for improving India’s global competitiveness and achieving high economic growth.

the per capita income of India was $1032 a year.2% in 2006-07. Because of huge population there is increase in mass transportation system. According to March 2009 data.2 Economical factors High GDP Growth Automobile industry currently contributes 6% to India’s GDP and it is expected to increase to 10% in 2016. Finance A 53 . This high rise in the per capita income of people has enabled them to spend more products like mobile. Increase in house hold's income levels and the growth of 7. India expects the automobile sector to double its share of gross domestic product to 10 per cent and contribute $25 billion in export earnings in a decade. Rapid increase in disposable income of Middle class The per capita income of India has gone up as much as 14. the trade minister said on Thursday.2. The automobile sector in India ranks third in manufacturing three wheelers and second in manufacturing of two wheelers 5. India’s Huge Geographic Spread –Mass Transport System India’s huge geographic connectivity has lead to increase in transportation system. Due to geographic and religious diversity in India there is increase in mass transportation system. So it has huge impact on environment.2% in the GDP have resulted in this increase of the per capita income of the people. Usually the demand of cars and other heavy carriage vehicles is on the rise in upper middle class and bikes and small cars will come in the segment of lower Alliance Business School | Group12 .[AN ANALYSIS OF AUTOMOBILE INDUSTRY] March 27. Kamal Nath also said the government would consider incentives for exporters of cars and auto-part makers and keep policy favourable to help auto makers sustain high growth in output. 2010 R&D centers. This high rise in the per capita income has also increased the savings of the people. The rise in income levels of the Indians and the emergence of the consuming class that has higher propensity to spend offers great opportunities for growth to companies across various sectors. Population spread throughout India is very dense thus there is a uniform growth in the automobile sector. This shows that automobile industry is one of the major contributors for GDP growth. health.

Alliance Business School | Group12 . Cars now more for convenience than status symbol Now a days since the price of bike is also equivalent so cars are no more a status symbol. Finance A 54 . and scooter while today there is a drastic shift towards faster and expensive cars. Consumer has become the king and he determines the price of the product i. This has lead to increase in demand of automobile industry. 5.e. fast motor bikes and scooty. Population growth has also lead to greater market penetration.4 Technological factors Research and Development Institutions Various researches are going on in the automobile industry to change the trends and to develop efficient vehicles. 2010 middle class and middle class. Growing concept of Second Vehicle in Urban India Change in lifestyle has lead to buying of more than one vehicle within the same family because of increased independence of family members. Car manufacturers are now able to offer their product to large number of people.[AN ANALYSIS OF AUTOMOBILE INDUSTRY] March 27. ambassador. Fuel efficiency is also targeted in these institutions and thus soon hybrid electric cars or cars with hydrogen fuel will be available in the markets. This has caused increase in demand for automobiles leading to market segmentation and offering wide variety of products. For instance that Indian market was once dominated by moped.2. rather people now prefer cars more for convenience. In a survey it was found by researchers that the middle class is expanding 30-40 million every year.3 Social factors Growth in Urbanization There has been increase in urbanization in India which has lead to increase in competition.2. This has also created more option for consumers. 5. Increase in Population India’s population is increasing at a fast pace. cars and two wheelers.

Opportunities.[AN ANALYSIS OF AUTOMOBILE INDUSTRY] March 27. India is the third largest producer of small Alliance Business School | Group12 .1 Strengths: Large & cheap labour pool In India for skilled labour. the wage rate is fixed around Rs. and Threats involved in a project or in a business venture. those are helpful to achieving the • Threats: external conditions which could do damage to the business's performance 5. which is very less compared to wage rate in developed countries.350/hr. The small car sub-segment is hotly contested by several car makers. It involves specifying the objective of the business venture or project and identifying the internal and external factors that are favourable and unfavourable to achieving that objective • Strengths: attributes of the organization those are helpful to achieving the objective. which leads to low cost of production Leading small car market The Indian passenger car market is known to be one of the most price sensitive car markets in the world. Thus automobile industry is encouraged to make higher investment in research and development.3 SWOT ANALYSIS SWOT Analysis is a strategic planning method used to evaluate the Strengths. Weaknesses. 2010 Increased Government involvement in Technology Development Government is also taking initiatives in development of technology in automobile industry. Finance A 55 .3. 5. This provides encouragement to manufacturers as government provides them with subsidiaries which can be used in research and development. • Weaknesses: attributes of the organization those are harmful to achieving the objective. • Opportunities: external conditions objective.

Global automotive majors such as Hyundai and Suzuki already have establishments to produce small cars in India. According to an analysis done by the Population Research Centre. especially the lack of engineers. Bajaj Auto is also bringing out a small car by 2010–2012 in collaboration with Renault and Nissan in the same price range Rising income and favourable demographic trends Per capita incomes in India are rising and the demographic changes taking place are expected to fuel further growth in the Indian economy through increase in demand for products. For instance. The number of available people (trained engineers) is much less than the Alliance Business School | Group12 . Thus increasing incomes combined with a very large young population will drive growth of the automotive industry as an automobile is a symbol of increasing prosperity for the young Indian consumer. India has one sixth of the world’s total population. Given the current projections for the Nano. and Volkswagen are finalizing their small car plans. Finance A 56 . India can become the world’s second largest market for small cars soon. 2010 cars in the world after Brazil and Japan. 67 per cent of the Indian population will be aged between 15 and 64 in 2025. Renault. Ford. Small cars account for 71 per cent of the domestic market of passenger cars. 5. India’s second largest motorcycle manufacturer.8 in 2007. Institute for Economic Growth in India. and companies like Honda.2 Weakness Lack of skilled labour Quality and quantity of skilled labour is problematic. priced at USD 2 500 making it the world’s cheapest car. The median age in India was 24.3.[AN ANALYSIS OF AUTOMOBILE INDUSTRY] March 27. Toyota has announced plans of setting up a new small car manufacturing plant by 2010 with an annual production capacity of 100 000 units. Tata Motors has launched Nano.

R&D India’s ability to perform its own automotive R&D is perceived as a gap between India’s domestic companies and the international automotive companies they compete with. with every global manufacturer setting up its production plant in India. According to the UNIDO International Yearbook of Industrial Statistics 2008.5% of sales on research & development. especially in the areas of power train and alternative fuels.3. quality.[AN ANALYSIS OF AUTOMOBILE INDUSTRY] March 27. then it needs to get on par with those competitors in terms of scale. The cost of running full-scale R&D programs is beyond the grasp of some Indian original equipment manufacturers (OEMs) and many suppliers. labour churn. which is very less compared to global manufacturers. where employees move to rival firms for better compensation or conditions. 5. Low growth in supply side There are concerned about whether India’s automotive suppliers are developing rapidly enough to go beyond India’s own market and meet the needs of the global market. India after China has the maximum growth potential. India is envisaged to be the third largest automobile market in the world by 2030 only behind USA and China. With the availability of cheap labour and materials India is turning out to be the production hub. and delivery capability.3 Opportunities Growth potential With saturated markets in developed nations. India ranks 12th among the world’s top 15 automotive nations Shorting replacement cycle Alliance Business School | Group12 . 2010 demand. Indian manufacturers spend around 0. is a growing problem. Also many Indian OEMs and suppliers have relied on their foreign partners for technology for so long that they have not developed their own competencies. If India is to compete with established global manufacturers and suppliers on the world stage. Finance A 57 .

which will not completely stop the growth of automobiles but will make these significantly more expensive.[AN ANALYSIS OF AUTOMOBILE INDUSTRY] March 27. Alternates in the market With the improvement in the railways and introduction of Metro. Finance A 58 . Key destinations of exports are the SAARC countries. 5. The industry exported 15 per cent of its passenger car production. Tata Motors and Hyundai Motors. Middle East and North America. Alliance Business School | Group12 . 26 per cent of three-wheelers production and 7 per cent of two-wheelers production in 2006–2007. European countries.5 years) in 2005. Increasing oil prices Increase in oil prices.4 Threats Competition from foreign players India’s exports have increased marginally but China’s export zoomed by a billion dollars. Growth in exports The Indian automotive industry is gaining worldwide recognition with a steady increase in the rate of growth of exports. China now exports 10 times more components than India where as Thailand does 3 times more compared to India. The key exporters for passenger cars are Maruti Suzuki. people have started using them as their mode of transportation. the key exporter for MUVs is Mahindra & Mahindra. Automotive exports crossed the USD 1 billion mark in the year 2003–2004. 10 per cent of commercial vehicles production. and increased to USD 2.76 billion in the year 2006–2007. 2010 The average time taken to upgrade or replace a vehicle has declined sharply from an average of 61 months (5 years) in 2002 to 53 months (4.3.

[AN ANALYSIS OF AUTOMOBILE INDUSTRY] March 27.1 Bargaining power of suppliers Suppliers of raw materials. quality of work and pricing. 2010 5. These are: 5. components. The bargaining power of suppliers arises from low Cost of inputs relative to selling price of the product.2 Bargaining power of customers The Bargaining Power of Customers is the ability of customers to put the firm under pressure and it also affects the customer's sensitivity to price changes. Porter of Harvard Business School in 1979. The higher is the ratio the better is the bargaining power of the firm. Finance A 59 . The automotive industry is comprised of powerful buyers who are generally able to dictate their terms to their suppliers. 5.3 Threat of new entrants Alliance Business School | Group12 . labour. and services (such as expertise) to the firm can be a source of power over the firms.4.4. Further higher is the buyer volume greater is the power of the buyer to bargain. Further the threat of forward integration by suppliers relative to the backward integration by firms.4 PORTER’S FIVE FORCES Porter's five forces analysis is a framework for the industry analysis and business strategy development developed by Michael E. This depends on buyer concentration to firm concentration ratio. but also on environmental and social standards. Consumers yield 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.4. 5. Therefore car manufacturers are evaluating suppliers not only on technical skills. As a result of this brand loyalty is fading in this industry. It uses concepts developed in Industrial Organization (IO) economics to derive five forces which determine the competitive intensity and therefore attractiveness of a market.

Indian Railways has one of the largest and busiest rail networks in the world. Chennai. which owns and operates most of the country's rail transport. Kolkata. 2010 With the expected entry of more than 10 car manufacturers and introduction of new models from the existing players there is threat to the domestic market. luggage capacity). 60 Alliance Business School | Group12 . 5. such as train.4 million employees. convenience. with more than 1. These companies’ offer better styles together with great technology. Finance A .327 kilometres (39.350 mi). But with the introduction of Metro and improvement in Railways system and low Air fares things have changed.. may be high in terms of personal time (i. With the Indian population largely composed of the youth lying between the age sectors of 18-35 these are great attractions for such segments. Numerous other forms of transportation are available. convenience.4.000 locomotives of rolling stock. As a result of these facts the demand for such vehicles would be more thus posing a threat to the local players. but none offer the utility. independence).000 coaches and 8. Indian Railways Indian Railways is the state-owned railway company of India. Since local players don’t have hybrid technology they have to rely on their lower price tag so as to remain competitive.e.4 Threat of substitute product The threat of substitutes to the automotive industry is fairly mild. IR owns over 200. The upcoming segment is that of a niche market comprising of the hybrid cars. 50. independence. The switching costs associated with using a different mode of transportation.[AN ANALYSIS OF AUTOMOBILE INDUSTRY] March 27. Suburban rail Many cities have their own dedicated suburban networks to cater to commuters. This includes vehicles running on energy other than petrol such as electric cars. Suburban networks operate in Mumbai. but not necessarily monetarily.. and utility (e.g. transporting over 18 million passengers and more than 2 million tonnes of freight daily. covering 6. The railways traverse the length and breadth of the country. and value afforded by automobiles. It is the world's largest commercial or utility employer.909 stations over a total route length of more than 63.000 wagons.

with dedicated tracks mostly lay on a flyover. the Kolkata Metro. When speaking about small cars. and Chennai have their own metro networks.4. Air Deccan. Maruti Suzuki dominates the Indian car market with 50 percent share in the industry. Suburban trains that handle commuter traffic are mostly electric multiple units. They usually have nine coaches or sometimes twelve to handle rush hour traffic. Finance A 61 . The India car industry is being dominated by the major players like Hindustan Motors. Kingfisher Airlines. Pune and Lucknow. Jet. General Motors. and colours. These airlines connect more than 80 cities across India. Kolkata. 5.. have led to a fiercely competitive market. innovation. IndiGo Airlines and Air India are the most popular brands in domestic air travel in order of their market share. New Delhi. Five years back. air travel was a dream for the majority of the Indian population. However. Hyderabad. Jet Airways.5 Competitive rivalry The constant changes in the existing car models with regard to design. Maruti Udyog Ltd. Air travel India's booming economy has created a large middle-class population in India. Whereas car brands like the Hyundai and General Motors are very close to Maruti Suzuki. namely the New Delhi Metro. A standard coach is designed to accommodate 96 seated passengers. even though the Mumbai-Delhi air corridor was ranked 6th by the Official Airline Guide. Of these. Indian and Kingfisher also operate overseas routes after the liberalisation of Indian Aviation. but the actual number of passengers can easily double or triple with standees during rush hour. With the presence of so many domestic as well as foreign car manufacturers imparting path breaking models in the market. But rapid economic growth has made air travel more and more affordable in India.[AN ANALYSIS OF AUTOMOBILE INDUSTRY] March 27. Hyundai Motors India Ltd. etc. the competition among them has become very tough and rigid. 2010 Delhi. and the Chennai MRTS. the winning model 'Hyundai i10' Alliance Business School | Group12 . technology. a large section of country's air transport system remains untapped. Fierce competition among the major car players can be witnessed in the Indian Car industry.

performance.[AN ANALYSIS OF AUTOMOBILE INDUSTRY] March 27. The car has captured everyone's attention with its style. Wagon R standing against the Hyundai i10 has maintained the brand image of Maruti Suzuki with comparable sales score. 2010 cannot be neglected. Finance A 62 . CHAPTER 5 COMPANY ANALYSIS Alliance Business School | Group12 . and reliability.

and debt collection over a year. the more capable the company is of paying its obligations. A high ratio implies either strong sales or ineffective buying. This analysis gives insights about soundness of the company in terms of its financial aspects. This can result in volatile earnings as a result of the additional interest expense. A high debt/equity ratio generally means that a company has been aggressive in financing its growth with debt.[AN ANALYSIS OF AUTOMOBILE INDUSTRY] March 27. The higher the current ratio. It also opens the company up to trouble should prices begin to fall. Alliance Business School | Group12 . excess inventory. It briefs about company’s capacity to pay back its liabilities. inventory. It indicates what proportion of equity and debt the company is using to finance its assets. Debt-Equity Ratio It is a measure of a company's financial leverage calculated by dividing its total liabilities by stockholders' equity. High inventory levels are unhealthy because they represent an investment with a rate of return of zero. Finance A 63 . A low turnover implies poor sales and. 2010 COMPANY ANALYSIS 6. effective use of its inventories. receivables). The ratio is mainly used to give an idea of the company's ability to pay back its short-term liabilities (debt and payables) with its short-term assets (cash. Inventory Turnover Ratio A ratio showing how many times a company's inventory is sold and replaced over a period. Current Ratio It is a liquidity ratio that measures a company's ability to pay short-term obligations. therefore.1Ratio Analysis Introduction The ratio analysis tells about the financial capabilities of companies. The current ratio can give a sense of the efficiency of a company's operating cycle or its ability to turn its product into cash.

This ratio used to determine how easily a company can pay interest on outstanding debt. The lower the interest cover. 2010 Interest Coverage Ratio Interest cover is a measure of the adequacy of a company's profits relative to interest payments on its debt. • Maruti- Suzuki Ford • Hyundai Hindustan motors Alliance Business School | Group12 . Maruti-Suzuki and Hyundai represents top two players. Companies taken: We have chosen five companies on the basis market share. The lower the ratio. Debtors Turnover Ratio = Total Sales / Debtors.[AN ANALYSIS OF AUTOMOBILE INDUSTRY] March 27. Ford and Hindustan Motors represent bottom two and Tata represents middle level player in terms of market shares. In simple words it indicates the number of times average debtors (receivable) are turned over during a year. the more the company is burdened by debt expense. Finance A 64 . Debtor Turnover Ratio Debtor turnover ratio indicates the velocity of debt collection of a firm. the greater the risk that profit (before interest) will become insufficient to cover interest payments.

61 2.36 .26 .53 .64 3.20 .38 .59 2.45 1.8 1.1 2.09 .96 3. 2010 • Tata 6.21 2009 .9 .17 2006 .9 .27 1.34 .06 .04 .33 1.51 .[AN ANALYSIS OF AUTOMOBILE INDUSTRY] March 27.1 Debt/equi ty Maruti Hyundai Tata motors Hindustan Motors Ford Industry avg 2005 .8 Source: Capitaline database and Tata motors annual reports Alliance Business School | Group12 .10 . Finance A 65 .05 1.1.23 2008 .5 2.15 2007 .1Debt-Equity Ratio: Table6.41 .

42 1.97 1.13 .11 1. Finance A 66 .88 .31 Source: Capitaline database and Tata motors annual reports Graph 6.01 2006 1.42 2009 1.71 1.1 Observations: • For all the five years Ford and Hindustan motors have high debt equity ratios. • Maruti Suzuki is not aggressive while raising the debt while for remaining players debt ratio is fluctuating relatively 6.1.27 1.00 .2 Alliance Business School | Group12 .9 1. which also exceeds the industry average.36 1.88 1.14 .74 1. This shows that they have taken more debt as compared to rest of the players.92 .24 .73 1.89 .09 2007 1.83 .87 .68 1.83 1.39 2008 1.2Current Ratio: Table6.45 .2 Currrent ratio Maruti Hyundai Tata motors Hindustan Motors Ford Industry avg 2005 1.52 1. 2010 Graph6.[AN ANALYSIS OF AUTOMOBILE INDUSTRY] March 27.16 .03 .

3 Inventory turnover 2005 24.46 12.56 2009 23.13 ratio Maruti Hyundai Tata motors Hindustan Motors Ford Industry avg Source: Capitaline database and Tata motors annual reports Graph 6.35 10.55 10.78 6.06 12.99 9.78 2006 19.11 13.79 2008 24. Finance A 67 .69 24.32 8.29 10.97 2007 21.74 9. 2010 Observations: • Ford and Hindustan motors have currents ratios for all the years (2005-09) below the industry average • Maruti. Hyundai and Tata motors have current ratios close to respective industry averages in all the years 6.18 8.84 18.1.81 11.92 7.3 Inventory Turnover Ratio Table 6.37 12.07 11.43 9.[AN ANALYSIS OF AUTOMOBILE INDUSTRY] March 27.10 9.02 8.9 9.3 Alliance Business School | Group12 .08 14.57 14.36 14.23 7.

79 2008 24.35 10.11 13.37 12.32 8.92 7.99 9.97 2007 21.69 24.36 14.74 9.56 2009 23.78 2006 19.23 7.9 9.43 9.[AN ANALYSIS OF AUTOMOBILE INDUSTRY] March 27.29 10.46 12.4 Debtor turnover 2005 24. 2010 Observations: • Maruti is taking less time as compared to all other players to convert inventory into sales.02 8.08 14.84 18.57 14.81 11.06 12.18 8. its inventory turnover ratios are higher than industry averages for the respective years • Ford and Hindustan Motors should decrease their inventory turnover days to compete well 6.55 10. Finance A 68 .4 Debtor Turnover Ratio: Table 6.13 ratio Maruti Hyundai Tata motors Hindustan Motors Ford Industry avg Source: Capitaline database and Tata motors annual reports Alliance Business School | Group12 .78 6.07 11.10 9.1.

84 7. 6.20 2008 43.79 2009 33.623 -1.58 -0.45 2007 61.62 8. Finance A 69 .00 5.47 6.5 Interest Coverage 2005 37.[AN ANALYSIS OF AUTOMOBILE INDUSTRY] March 27.45 7.26 8 -4.35 0.58 2006 86.86 2. All other companies are below the industry standard and have to decrease their debtor days.4 • Maruti has high ratio which implies that it is able to recover debt faster.25 47.16 -1.35 1.1.66 -7.78 241.9 1. 2010 Graph 6.98 -2.5 Interest Coverage Ratio: Table 6.66 ratio Maruti Hyundai Tata motors Hindustan Motors Ford Industry avg Source: Capitaline database and Tata motors annual reports Graph 6.62 1.5 Alliance Business School | Group12 .06 -2.25 5.26 8.86 0.63 51.67 8.

2. Hindustan motors and Tata motors have low interest coverage ratio.[AN ANALYSIS OF AUTOMOBILE INDUSTRY] March 27.2 Profitability Ratios: 6. Tata Motors performance in general is satisfactory. Conclusion Though companies are competing with each other but their strategies and priorities seems to be different like in case of Maruti Suzuki and Hindustan Motors which weren’t aggressive while raising the debt but has good interest cover while same interest cover showed fluctuations in case of Hyundai. which implies that they are burdened by debt. 6.6 Operating Profit 2005 (%) Alliance Business School | Group12 . Finance A 70 2006 2007 2008 2009 .1 Operating Profit (%) Table 6. Ford as compared to Maruti Suzuki did well in Debt raising. 2010 Observations: • • Maruti and Hyundai have good interest coverage ratio. Ford.

56 13.80 -3.73 34.2 Return on Capital Employed (%) Table 6.7 Return Capital Employed (%) Maruti Hyundai Hindustan Motors Ford Industry avg 31.19 8.41 -1.08 Industry avg 9.87 -11.65 7.98 28.85 2.37 Motors Ford 1.7 Alliance Business School | Group12 .64 -5.86 -14.71 3.76 On 2005 2006 2007 2008 2009 Source: Capitaline database and Tata motors annual reports Graph 6.84 7.54 32.45 3.21 -11.49 12 9.41 9.[AN ANALYSIS OF AUTOMOBILE INDUSTRY] March 27. 2010 Maruti Hyundai Hindustan 10.47 7.57 17.6 • Maruti and Hyundai are able to earn good profits when compared to Hindustan motors and ford.94 7. Finance A 71 .23 -6.51 7.for Hindustan motors we can see negative operating profit margin.81 -4.93 30.07 7.05 8.28 32.44 -4.68 35.35 12.72 29.43 Source: Capitaline database and Tata motors annual reports Graph 6.2.35 10.52 35. 6.46 17.63 20.2 -4.29 .5 3.

R&D Focus = R&D Expense / Net Sales Table 6.009 2006 0.091 97 0.0097 7 0.019 54 0.0833 2009 0.00842 2008 0.0857 0 0.8 Companie s Hyundai 2005 0.0100 0.105 4 Hindustan Motors Tata Motors Maruti 0.026 63 0.1 Research and Development Expense Ratio: It provides an insight into the company’s interest to develop new technology. 6.3.0587 Alliance Business School | Group12 .how ever there is a declining trend over the period of 2007-09.1394 0.018 45 0. Finance A .00476 72 2007 0.0113 2 0. The two ratios are: 6.[AN ANALYSIS OF AUTOMOBILE INDUSTRY] March 27.007 0.0079 0. when industry average also decreased.0068 0.00595 5 0. 2010 • Maruti and Hyundai are getting good returns on capital employed .3 Special Ratios: Two ratios apart from traditional ratios were also considered.014 2 0.

Finance A .9 Companies Hyundai Hindustan Motors Tata Motors Maruti Ford 1.03 2006 1. Table 6.71 1. as they want to enter all the segments and cater to all class of people.[AN ANALYSIS OF AUTOMOBILE INDUSTRY] March 27.99 1 2009 0.83 1.8 As we can see Hyundai and Tata’s have been very keen on developing new cars.09 0.87 Alliance Business School | Group12 .73 2.89 0.Current Liabilities)/Net Sales The long term solvency position of a firm usually measured in terms of its working capital (current assets-current liabilities) over sales indicates the ability of a company to weather difficult financial periods. As the recession took its course Hyundai‘s R&D reduced due to less R&D as their sales were not up to margin.42 2.34 0.83 0.3.2 1. 2010 67 Ford 31 4 9 - Source: Capitaline database and Tata motors annual reports Graph 6.34 0.36 0.97 73 2005 1.88 2007 1.14 1.68 1.36 0.92 2008 0.52 2.16 1.74 1.2 Working Capital Ratio: Working Capital Ratio = (Current Assets. 6.27 0.

[AN ANALYSIS OF AUTOMOBILE INDUSTRY] March 27.9 Mar 06(12) 12.015. It also determines whether a co is able to pay all its liabilities with the assets it has.923. 6.10 42.10 Mar Maruti Ford 09(12) 20.88 Mar 08(12) 17. 2010 Source: Capitaline database and Tata motors annual reports Graph 6.696.71 Mar 05(12) 10.4 Industry Performance Net Sales Growth Comparative Analysis (w.9 Working capital ratio determines the solvency of the co.943.235. As we can see Tata motors and Maruti have been able to pay their creditors and other liabilities due to the cash generated internally and also because of their capacity to convert their assets into cash very easily and quickly.6 0 42. But they have always been able to sell their assets and recover cash quickly and pay their liabilities. Finance A .t previous year): Table 6.796.9 Mar 07(12) 14. Hyundai and Hindustan Motors also have been able to pay their liabilities but due to recession they have faced liquidity crunch and hence have lowered their capacity of repaying.3 0 34.r.891.333.776.90 30.530.8 74 Alliance Business School | Group12 .8 0 23.

90 Hyundai 15.65 25.293.5 Company wise Sales Forecast: Hyundai Table 6.10 6.088.694 Net Crores) Graph 6.185.[AN ANALYSIS OF AUTOMOBILE INDUSTRY] March 27.762.66 28.11 2009 Sales(In 15695.21 2011 18738.7 456.8 7 Hindustan Motors Tata 626. 2010 0 10. Finance A 75 .118.415.537.114.5 9 1 8.339.55 7.51 27.14 9 7 Source: Capitaline database and Tata motors annual reports Graph 6.726 2010 17217.9 666.11 Alliance Business School | Group12 .49 3 6.30 1.03 704.83 17.522.02 20.305.

492 2011 4598. 2010 Tata Motors Table 6.[AN ANALYSIS OF AUTOMOBILE INDUSTRY] March 27.94 2010 32010.14 2011 33671.12 Net Crores) 2009 Sales(In 38654.34 Graph 6.13 Net 2010 Sales(In 4317.415 76 Alliance Business School | Group12 .12 Hindustan motors Table 6.454 2012 4879. Finance A .

5 2012 55564.14 Maruti Table 6.67 Crores) 2011 52107.13 Ford Table 6.[AN ANALYSIS OF AUTOMOBILE INDUSTRY] March 27.67 Graph 6. Finance A 77 .15 Alliance Business School | Group12 .14 2010 Net Sales(In 13831. 2010 Crores) Graph 6.

[AN ANALYSIS OF AUTOMOBILE INDUSTRY] March 27. Finance A 78 . 2010 2010 Sales(In 25062.62 2012 28643.6 2011 26853.9 Net Crores) Graph 6.15 Alliance Business School | Group12 .

Finance A 79 .[AN ANALYSIS OF AUTOMOBILE INDUSTRY] March 27. 2010 CHAPTER 7 FUTURE OUTLOOK Alliance Business School | Group12 .

According to the Hubbert peak theory. 2008 saw many improvements in the lowering of CO2 emissions into the atmosphere. is that "Most of the observed increase in globally averaged temperatures since the mid-20th century is due to the observed increase in greenhouse gas concentrations. There is general concern that worldwide fuel shortages could intensify the unrest that exists in the region. Other concerns which have fuelled demand revolve around the concept of Peak oil. more efficient hybrids.g. any method of powering an engine that does not involve solely petroleum (e. Alliance Business School | Group12 . the potential for peak oil . electric car. leading to further conflict and war. particularly in. indicating an increasing popularity of alternative fuels. 2010 FUTURE OUTLOOK As the environmental impact of global warming rose to the forefronts of our awareness. particularly in.[AN ANALYSIS OF AUTOMOBILE INDUSTRY] March 27. This is due to general environmental. petrol-electric hybrid. There is growing perceived economic and political need for the development of alternative fuel sources. and while car companies like Toyota paved the way with their groundbreaking Prius. and the possibility of further restrictions on greenhouse gas emissions. when the production levels peak. and geopolitical concerns of sustainability.8 million alternative fuel vehicles sold. every other company is chomping at their heels developing better. The major environmental concern. economic. the majority of the known petroleum reserves are located in the Middle East. creating cars which are leaning further and further away from their dependence on gasoline. there were 1. Since burning fossil fuels are known to increase greenhouse gas concentrations in the atmosphere. Alternative Fuel Vehicle refers to a vehicle that runs on a fuel other than "traditional" petroleum fuels (petrol or diesel). they are a likely contributor to global warming. which could cause a major energy crisis. so consumer demands for greener methods of transportation rose to the top of the automotive industry’s list of priorities. tightening environmental laws. Finance A 80 . solar powered). demand for oil will exceed supply and without proper mitigation this gap will continue to grow as production drops. Lastly. In 2007. Due to a combination of heavy taxes on fuel. which predicts rising fuel costs as production rates of petroleum enters a terminal decline.

and even the stored energy of compressed air. Essentially all the power comes from petroleum. The company’s goal has been to create fuel savings and to reduce C02 emissions in tomorrow’s vehicles. The first compressed air car was invented by a French engineer named Guy Negre. alternative forms of combustion such as GDI and HCCI. The source for air is a pressurized carbonfibber tank holding air at 3. which could also be used to air condition the car. achieving around 70 miles per gallon (3. Air is delivered to the engine via a rather conventional injection system. alternative fuel vehicles – clever use of a battery. Finance A 81 . 2010 work on alternative power systems for vehicles has become a high priority for governments and vehicle manufacturers around the world. of themselves. merely means that a more efficient but less powerful engine can be used. The only exhaust is cold air (−15 °C). Other research and development efforts in alternative forms of power focus on developing fuel cells. Unique crank design within the engine increases the time during which the air charge is warmed from ambient sources and a two stage process allows improved heat transfer rates.4 litres per 100 km). The following are some of the most innovative technological leaps forward in our journey to put greener vehicles on the road: Air Engine The air engine is an emission-free piston engine that uses compressed air as a source of energy. This non-adiabatic expansion has the potential to greatly increase the efficiency of the machine. Efficiency of operation is gained through the use of environmental heat at normal temperature to warm the otherwise cold expanded air from the storage tank. Thermal Energy Recovery System In November 2008. The first hybrid vehicle available for sale in the United States was the Honda Insight. Hybrid vehicles such as the Toyota Prius are not.000 lbf /in² (20 MPa). motor/generator.[AN ANALYSIS OF AUTOMOBILE INDUSTRY] March 27. a France-based developer of waste heat regeneration technologies won the Power train Innovation of the Year Award at the Professional Motorsport World Expo in Cologne with its Thermal Energy Recovery System (TERS). By focusing their Alliance Business School | Group12 . The expansion of compressed air may be used to drive the pistons in a modified piston engine.

lowering emissions by 15% and increasing fuel efficiency by 20% thanks to direct injection technology. direct fuel injection technology is the way to go. they’ve managed to create a waste heat recovery (WHR) system which captures and redirects this heat to improve engine performance while lowering harmful emissions and improving fuel savings by 15-35% under all driving conditions.5L “EcoBoost” engine. For longer distances the car runs on a gas tank. which is typically made of carbon.[AN ANALYSIS OF AUTOMOBILE INDUSTRY] March 27. but also has a drawback. GDI engines inject highly-pressurized fuel directly into the combustion chamber of each cylinder which not only increases engine performance. Keeping the batteries charged for as long as possible is the ultimate goal for any electric care company. Silicon has a much higher capacity than carbon. known as Li-ion batteries. Alliance Business School | Group12 . This brings us to the heart. The plug-in electric hybrid features a revolutionary propulsion system that permits the car to cover over 64 km without using any gas. simple to implement. Electric cars use rechargeable lithium-ion batteries. of the electric car: the battery. even Ford’s 2010 Mustang comes a twin turbo 3. but they’re making huge strides towards redeeming themselves with the new Chevrolet Volt. The electrical storage capacity of a Li-ion battery is limited by how much lithium can be held in the battery’s anode. Finance A 82 . where fuel is injected through the intake ports before entering the cylinders. but also increases fuel efficiency while reducing CO2 emissions by as much as 25%. They are ironically the same company that tried to squash the electric car. Nanowire Batteries While many feared that GM was a something of the past. Gasoline Direct Injection (GDI) Engines When it comes to going green. As opposed to multi-point injection (MPI). 2010 attention on the heat normally lost through the exhaust. The unit is compact. and Volvo are introducing their new cars with directly fuelled engines. Mercedes. they released what promises to be the vehicle of the future. which serves to recharge its batteries rather than running its engine. Companies like GM. and requires little to no maintenance. literally. lightweight.

Ford and General Motors. are investing in hydrogen fuel cells instead. degrading the performance of the battery. and Hyundai/Kia also have fuel cell vehicle prototypes on the road. energy consumption. One primary area of research is hydrogen storage. Chrysler. the hydrogen is turned into electricity through fuel cells which then powers electric motors. In combustion. But.[AN ANALYSIS OF AUTOMOBILE INDUSTRY] March 27. they do not fracture. Honda. making automotive history. to try to increase the range of hydrogen vehicles while reducing the weight. BMW's Clean Energy internal combustion hydrogen car has more power and is faster than hydrogen fuel cell electric cars. Toyota. The other major car companies like Daimler. This expand/shrink cycle typically causes the battery to pulverize. the only by product from the spent hydrogen is water. Finance A 83 . Hydrogen (Fuel Cell) A hydrogen car is an automobile which uses hydrogen as its primary source of power for locomotion. transit agencies across the globe are running Alliance Business School | Group12 . unlike other silicon shapes. then shrinks during use as the lithium is drawn out of the silicon. The nanowires inflate four times their normal size as they soak up lithium. the hydrogen is "burned" in engines in fundamentally the same method as traditional gasoline cars. In fuel-cell conversion. These cars generally use the hydrogen in one of two methods: combustion or fuelcell conversion. A BMW hydrogen prototype (H2R) using the driveline of this model broke the speed record for hydrogen cars at 300 km/h (186 mi/h). 2010 Silicon placed in a battery swells as it absorbs positively charged lithium atoms during charging. This reduces pre-detonation. Mazda has developed Wankel engines to burn hydrogen. In addition. each with a diameter one-thousandth the thickness of a sheet of paper. so the hydrogen burns in a different part of the engine from the intake. and complexity of the storage systems. The lithium is stored in a forest of tiny silicon nanowires. Nissan. VW. Hydrogen reacts with oxygen inside the fuel cells. The Wankel uses a rotary principle of operation. which produces electricity to power the motors. With either method. The most efficient use of hydrogen involves the use of fuel cells and electric motors instead of a traditional engine. a problem with hydrogen fueled piston engines.

introduced in 1999. 2010 prototype fuel cell buses. can get up to 70 miles on a kilogram of hydrogen Hybrid Method A hybrid vehicle uses multiple propulsion systems to provide motive power. which use gasoline (petrol) and electric batteries for the energy used to power internal-combustion engines (ICEs) and electric motors. Alliance Business School | Group12 . but they can provide a normal driving experience when used in combination during acceleration and other manoeuvres that require greater power. This most commonly refers to gasoline-electric hybrid vehicles. Honda now offers the Civic as an optional hybrid. It was the first mass-produced hybrid automobile sold in the United States. the Prius first went on sale in Japan in 1997. Finance A 84 . These power plants are usually relatively small and would be considered "underpowered" by themselves. such as the new Honda Clarity. The car was introduced to the worldwide market in 2000 and almost 160. 2008 Toyota had announced that it had reached a sales figure surpassing the mark of one million units.[AN ANALYSIS OF AUTOMOBILE INDUSTRY] March 27. and North America as of the end of 2003. The Honda Insight is a 2-seater hatchback hybrid automobile manufactured by Honda. Manufactured by Toyota. which was launched in America. and produced until 2006.000 units had been produced for sale in Japan. Fuel cell vehicles. Europe. The Toyota Prius is one of the world's first commercially mass-produced and marketed hybrid automobiles. As of May 15.

[AN ANALYSIS OF AUTOMOBILE INDUSTRY] March 27. Finance A 85 . 2010 CHAPTER 8 Alliance Business School | Group12 .

The most important way to avoid the threat of substitutes and competitions a marketer must think upon differentiation. Alliance Business School | Group12 . Ford as compared to Maruti Suzuki did well in Debt raising. The next analysis was the Ratio Analysis where in we did a comparative analysis which showed that even though companies are competing with each other but their strategies and priorities seems to be different like in case of Maruti Suzuki and Hindustan Motors which weren’t aggressive while raising the debt but has good interest cover while same interest cover showed fluctuations in case of Hyundai. it is difficult for suppliers to execute much of their power. Economical. Social improvements like urbanization and growth in population will also have a positive effect on the Industry. This analysis tells us about the precaution to be taken in order to sustain in the market. According to our analysis. The first analysis conducted by us was the PEST analysis. Tata Motors performance in general is satisfactory. recession and stiff competition. The next analysis that was done by us was the Porters Five forces analysis.[AN ANALYSIS OF AUTOMOBILE INDUSTRY] March 27. Finance A 86 . merger and acquisition or other strategic partnerships. Because of huge market. advance technology and huge demand are development indicators of industry and substantiate its growing potential in Indian market. Increased Per capita income will definitely result in increase of sales. Social and Technological factors that affect the Automobile Industry. Barriers for new entrants are significant because of huge capital requirements but that can be solved through joint ventures. The strengths that we found of the Indian Automobile Industry were availability of labour. 2010 CONCLUSION We conducted various analyses to study the Automobile industry. Opportunities consisted of the new developments like hybrid cars etc whereas the threats were the global economic meltdown. In PEST analysis we studied the Political. The third analysis that we conducted was the SWOT Analysis. The buying power of customers can not be avoided in oligopoly market but wide variety of models will make sure that marketer is retaining its customers. The weaknesses displayed by the industry consisted of low investment in R&D and prolongation of new technologies. the political decisions related to 100% FDI and automotive mission plan will boost the auto industry further.

Hybrid cars are now being launched in the market. So alternative fuels like bio-diesel.000. Many new cost efficient and fuel efficient models are being launched in the market. 2010 The future of Automobile Industry looks very promising. Renault is also following the Tata by launching a new car at the price of Rs 150. Alliance Business School | Group12 . 00. Many new inventions like Air Engine car and Thermal Energy Recovery system have taken this Industry to a new level all together. There is a technological dawn. Tata Nano leads the cost effective cars revolution by being the cheapest car available at a minimal price of Rs 1.000 only.[AN ANALYSIS OF AUTOMOBILE INDUSTRY] March 27. Finance A 87 . Fuel has always played an important role in automobile industry because for large presence of middle class market is sensitive to the changing fuel prices. solar energy or alternative cars like hybrid cars are now being viewed as the solution for this.

2010.co.[AN ANALYSIS OF AUTOMOBILE INDUSTRY] March 27.uk/tol/driving/news/article The lighting sector’s open and cooperative culture Alliance Business School | Group12 .co.timesofindia.htm?chan=magazine+channel_top+stories • Scrappage scheme ‘fails to cut pollution’ Dent.co.businessweek.com www.com/automotive/new_cars • • • • • • • • The Humbling of Toyota Alan Ohnsman.ey.February 21) Retrieved February 24 .com www.T.com/magazine/content/10_12/b41710325839 67. 5:00PM EST Retrieved from businessweeks website http://www.in www. 2010 Retrieved February 20. Jeff Green and Kae Inoue March 11.d February 2. 2010 REFRENCES • • www. Curtis. I(2010.timesonline.popularmechanics.tatamotors.com www.marutisuzuki.hyundai.com Capitaline database Top 5 Next-Gen Auto-Safety Technologies Carney. 2010 from Popularmechanics website http://www. 2010. Finance A 88 .scribd.in www.co.in www.siam. from Sunday times website http://www.

com/automotive/new_cars • Boom in Indian Automobile Industry Sunil Kewalramani (Jan 7. 2007) Scientific Research and Essay Vol. February 11) Retrieved February 20. 4 January. 001-008. Finance A 89 .just-auto.P (2010. 5 (1). February 12) Retrieved February 20. 2010.com/article 5 Most Notorious Recalls of All Time Huffman. 2010 Alliance Business School | Group12 . from just-auto website http://www. pp. 2010 Editorial team (2008. 2010 from Popularmechanics website http://www.J.[AN ANALYSIS OF AUTOMOBILE INDUSTRY] March 27.popularmechanics.