The automotive industry in India is one of the largest in the world and one of the fastest growing globally

. India's passenger car and commercial vehicle manufacturing industry is the sixth largest in the world, with an annual production of more than 3.7 million units in 2010.[1] According to recent reports, India is set to overtake Brazil to become the sixth largest passenger vehicle producer in the world, growing 16-18 per cent to sell around three million units in the course of 2011-12.[2] In 2009, India emerged as Asia's fourth largest exporter of passenger cars, behind Japan, South Korea, and Thailand.[3] In 2010, India reached as Asia's third largest exporter of passenger cars, behind Japan and South Korea beating Thailand. As of 2010, India is home to 40 million passenger vehicles. More than 3.7 million automotive vehicles were produced in India in 2010 (an increase of 33.9%), making the country the second fastest growing automobile market in the world.[ History The first car ran on India's roads in 1897. Until the 1930s, cars were imported directly, but in very small numbers. Embryonic automotive industry emerged in India in the 1940s. Mahindra & Mahindra was established by two brothers as a trading company in 1945, and began assembly of Jeep CJ3A utility vehicles under license from Willys.[19] The company soon branched out into the manufacture of light commercial vehicles (LCVs) and agricultural tractors.[20] Following the independence, in 1947, the Government of India and the private sector launched efforts to create an automotive component manufacturing industry to supply to the automobile industry. However, the growth was relatively slow in the 1950s and 1960s due to nationalisation and the license raj which hampered the Indian private sector. After 1970, the automotive industry started to grow, but the growth was mainly driven by tractors, commercial vehicles and scooters. Cars were still a major luxury. Japanese manufacturers entered the Indian market ultimately leading to the establishment of Maruti Udyog. A number of foreign firms initiated joint ventures with Indian companies.[21] In the 1980s, a number of Japanese manufacturers launched joint-ventures for building motorcycles and light commercial-vehicles. It was at this time that the Indian government chose Suzuki for its joint-venture to manufacture small cars. Following the economic liberalisation in 1991 and the gradual weakening of the license raj, a number of Indian and multi-national car companies launched operations. Since then, automotive component and automobile manufacturing growth has accelerated to meet domestic and export demands.[21] Following economic liberalization in India in 1991, the Indian automotive industry has demonstrated sustained growth as a result of increased competitiveness and relaxed restrictions. Several Indian automobile manufacturers such as Tata Motors, Maruti Suzuki and Mahindra and Mahindra, expanded their domestic and international operations. India's robust economic growth led to the further expansion of its domestic automobile market which has attracted significant India-specific investment by multinational automobile

manufacturers.[22] In February 2009, monthly sales of passenger cars in India exceeded 100,000 units[23] and has since grown rapidly to a record monthly high of 182,992 units in October 2009.[24] From 2003 to 2010, car sales in India have progressed at a CAGR of 13.7%, and with only 10% of Indian households owning a car in 2009 (whereas this figure reaches 80% in Switzerland for example)[25] this progression is unlikely to stop in the coming decade.[26] Congestion of Indian roads, more than market demand, will likely be the limiting factor.[27] SIAM is the apex industry body representing all the vehicle manufacturers, home-grown and international, in India.[28] Starting its journey from the day when the first car rolled on the streets of Mumbai in 1898, the Indian automobile industry has demonstrated a phenomenal growth to this day. Today, the Indian automobile industry presents a galaxy of varieties and models meeting all possible expectations and globally established industry standards. Some of the leading names echoing in the Indian automobile industry include Maruti Suzuki, Tata Motors, Mahindra and Mahindra, Hyundai Motors, Hero Honda and Hindustan Motors in addition to a number of others. During the early stages of its development, Indian automobile industry heavily depended on foreign technologies. However, over the years, the manufacturers in India have started using their own technology evolved in the native soil. The thriving market place in the country has attracted a number of automobile manufacturers including some of the reputed global leaders to set their foot in the soil looking forward to enhance their profile and prospects to new heights. Following a temporary setback on account of the global economic recession, the Indian automobile market has once again picked up a remarkable momentum witnessing a buoyant sale for the first time in its history in the month of September 2009. The automobile sector of India is the seventh largest in the world. In a year, the country manufactures about 2.6 million cars making up an identifiable chunk in the world’s annual production of about 73 million cars in a year. The country is the largest manufacturer of motorcycles and the fifth largest producer of commercial vehicles. Industry experts have visualized an unbelievably huge increase in these figures over the immediate future. The figures published by the Asia Economic Institute indicate that the Indian automobile sector is set to emerge as the global leader by 2012. In the year 2009, India rose to be the fourth largest exporter of automobiles following Japan, South Korea and Thailand. Experts state that in the year 2050, India will top the car volumes of all the nations of the world with about 611 million cars running on its roads. At present, about 75 percent of India’s automobile industry is made up by small cars, with the figure ranking the nation on top of any other country on the globe. Over the next two or three years, the country is expecting the arrival of more than a dozen new brands making compact car models.

Recently, the automotive giants of India including General Motors (GM), Volkswagen, Honda, and Hyundai, have declared significant expansion plans. On account of its huge market potential, a very low base of car ownership in the country estimated at about 25 per 1,000 people, and a rapidly surging economy, the nation is firmly set on its way to become an outsourcing platform for a number of global auto companies. Some of the upcoming cars in the India soil comprise Maruti A-Star (Suzuki), Maruti Splash (Suzuki), VW Up and VW Polo (Volkswagen), Bajaj small car (Bajai Auto), Jazz (Honda) and Cobalt, Aveo (GM) in addition to several others. History of the Automobile industry in India

The economic liberalization that dawned in India in the year 1991 has succeeded in bringing about a sustained growth in the automotive production sector triggered by enhanced competitiveness and relaxed restrictions prevailing in the Indian soil. A number of Indian automobile manufacturers including Tata Motors, Maruti Suzuki and Mahindra and Mahindra, have dramatically expanded both their domestic and international operations. The country’s active economic growth has paved a solid road to the further expansion of its domestic automobile market. This segment has in fact invited a huge amount of India-specific investment by a number of multinational automobile manufacturers. As a significant milestone in its progress, the monthly sales of passenger cars in India exceeded 100,000 units in February 2009. The beginnings of automotive industry in India can be traced during 1940s. After the nation became independent in the year 1947, the Indian Government and the private sector launched their efforts to establish an automotive component manufacturing industry to meet the needs of the automobile industry. The growth of this segment was however not so encouraging in the initial stage and through the 1950s and 1960s on account of nationalization combined with the license raj that was hampering the private sector in the country. However, the period that followed 1970s, witnessed a sizeable growth contributed by tractors, scooters and commercial vehicles. Even till those days, cars were something of a sort of a major luxury. Eventually, the country saw the entry of Japanese manufacturers establishing Maruti Udyog. During the period that followed, several foreign based companies started joint ventures with Indian companies.

During 1980s, several Japanese manufacturers started joint-ventures for manufacturing motorcycles and light commercial-vehicles. During this time, that the Indian government selected Suzuki for a joint-venture to produce small cars. Following the economic liberalization in 1991 and the weakening of the license raj, several Indian and multinational car companies launched their operations on the soil. After this, automotive component and automobile manufacturing growth remarkably speed-up to meet the demands of domestic and export needs. Experts have an opinion that during the early stages the policies and the treatment by the Indian government were not favorable to the development of the automobile industry. However, the liberalization policy and various tax reliefs announced by the Indian government over the recent past have pronounced a significantly encouraging impact on this industry segment. Estimates reveal that owing to several boosting factors, Indian automobile industry has been growing at a pace of about 18% per year. Therefore, global automobile giants like Volvo, General Motors and Ford have started looking at India as a prospective hot destination to establish and expand their operations. Like many other nations India’s highly developed transportation system has played a very important role in the development of the country’s economy over the past to this day. One can say that the automobile industry in the country has occupied a solid space in the platform of Indian economy. Empowered by its present growth, today the automobile industry in the country can produce a diverse range of vehicles under three broad categories namely cars, two-wheelers and heavy vehicles.
Challenges in Automobile Industry Being a manufacturing vertical, usage of IT is always a challenge in this cluster. People especially those working at lower ranks are always skeptical about using IT which makes implementation and then execution of packages like CRM or ERP a big challenge. Automotive parts manufacturers or auto components industry is highly dependent on OEMs. This leads to pressure from OEMs for implementation of stringent controls over quality of component and reliability of delivery. In modern competitive environment local manufacturers of component are under huge pressure to adapt to global standards so that delivery and quality can be controlled. To overcome these challenges IT has a huge part to play. Challenges of automobile industry can be categorized into three levels depending on the size of the company. There are those who have basic IT structure in place and are looking to implement complex packages to gain competitive edge and then there are those who have small or negligible IT budget to lack of understanding about how IT can actually be helpful to them. According to the Automotive Manufacturers Association of India (AMAI), this sector is projected to grow at a CAGR of 10% till 2015-16 Potential of Indian automobile industry can be best understood by following features: India is the second largest two wheeler market, fourth largest commercial vehicle market, eleventh largest passenger-car market, and fifth largest bus and truck market. With these facts in mind, let's talk about auto-component sector in particular. This segments is further divided into five sub segments --engine parts, drive transmission and steering parts, suspension and brake parts, electric parts, and body and chassis. According to the Automotive Manufacturers Association of India (AMAI), this sector is projected to grow at a CAGR of 10% till 2015-16; India is projected to be among top five automotive economies by 2025. The Indian automotive industry is largely classified in four clusters --Chennai, Pune, Pithampur, and NCR. In view of such huge potential, the Government of India has launched a 10-year plan –-Automotive Mission Plan (AMP), 2006-16 which aims to make automobile industries' contribution to GDP more than 10% while providing employment to 250 lakh people.

One of the major problems faced by this sector is the poor condition of the roads. The road infrastructure is not properly developed. The condition of the highways is not up to the mark. A large number of the roads are single lane roads built almost 50 years ago. They hardly match the rapid pace at which the automobile industry is developing. Moreover, they are mostly used by bullock carts and two wheelers. It is believed that the condition of the roads would worsen with the introduction of bigger and increasing number of vehicles. Repair work is expected to incur expenses up to$30 billion. The privatization of the road infrastructure is not enough to solve the problem which has attained large proportions. The Road Development Program and its progress is expected to be a key factor in the growth of the auto industry in India.

The major players in the Indian automobile industry include Maruti Udyog, Mahindra& Mahindra, Hindustan Motors and Telco. They can be divided into four major sections namely Multinational Assemblers, Indian Assemblers, Multinational Component Makers and Indian Component Makers. While the Indian Assemblers boast of a proper distribution network, at the same time they fall short in with respect to product development and a known brand. The multinational assemblers, on the other hand, have a well developed production system and financial resources but are not well acquainted with the intricacies of the Indian market. Despite these challenges, the Indian automobile industry has managed to carve a niche for itself in the global auto sector. It continues to grow in the face of some stiff competition from other Asian auto markets.

Challenges ahead for the Indian Automotive Industry
• • • •

• • • • •

Never stopping Interest Rate hikes and Petrol hikes Global Economic Slowdown, with manufacturing contributing almost 80% to Indian IIP Government’s indecisiveness on future Diesel policy clarity Frequent Labour Unrest in Indian automobile industry. Maruti’s case has been wide known across the globe. Hyundai too was hit (though mildly) by Labour unrest. No incentives provided by Indian government for carrying out research on emerging technologies Poor Infrastructure to bring in Electric Vehicles in India Huge Supply Demand gap for alternative fuels like CNG, LPG High Tax structure for importing build in Electric Cars Government’s frequent policy/tax structure changes. Maharashtra has been hit majorly due to this

Positive points for Indian Automobile Industry
• • • • • •

Huge Investments in process by almost every major car maker. Presence of almost all major automakers in India shows interest & commitment towards market Luxury Car market growing by unimaginable 50% growth showing willingness to spend Growth in Income amongst the citizens and their capability to spend Willingness to accept newer models against earlier philosophy of sticking to Maruti vehicles With just 2.5 mn passenger car sales in a year, there lies huge untapped potential.

The market at present seems to be the strongest growing market among all those automobile market present across the globe. The challenges, if tackled well by the Government, the Indian Automobile Industry will achieve the said AMP 2016 and will be the third largest market by 2020 and will be the world’s largest market by 2050. What is needed is Swift Sales of the vehicles (already happening) along with Rapid decisions on the pending matters from Government end along with the Endeavour to grow within every carmaker. There has been a sudden spurt in the Indian Automobile Industry, especially since last two years when the industry posted double digits growth and turned the heads to the global car makers towards the Indian market. Since that time, there have been some big bets on the Indian Automotive Scenario a decade hence. Government has lined up some challenges in Automotive Mission Plan (AMP ) 2016 but we have seen major global slowdown in the current financial year, even the largest market of Automobiles, China has posted the lowest ever growth for November 2011 when compared to the last six months figures. Has the global Automobile market slowed down? How much will it affect the Indian Automobile industry? One on side, we can see some major investments happening across the sector by almost every major car maker – Ford, PSA & Maruti setting up new plants in Gujarat. Hyundai, VW & Renault building up their capacities to ramp up their production plans for the Indian market. The home made automobile majors including Tatas and Mahindras are launching the new models based on global platforms to keep pace with the foreign car makers and not to lose their pie of market share. On the other side, we have the lowest ever sales in last six months and SIAM revising the targets from earlier 12% to now 2-4%. It was also recently in news that the Industry body, SIAM will again be revising the growth targets after the upcoming 2012 Auto Expo. Now, the biggest question lies in, is this actually the slowdown of the market or is it one back step taken by the bull in order to take a big leap ahead?

Here’s what the 2012-13 Union budget means for the auto industry, as well as the customer

Fuel Prices: No direct price increase, but we can hear the government talking about increasing petrol prices in the coming days, murmurs of slowly decontrolling diesel prices are also getting stronger. Expect to see the diesel prices go up and the trend to continue in the coming years Extra tax on diesel cars: Breathe easy. No extra tax on diesel cars as of now. Excise Duty: The government has increased the excise duty on cars. Here’s the impact on various segments Luxury Cars: This segment will see the highest increment in prices. CBUs costing more than 40,000 dollars will have to face a flat 15% hike in excise duty. Shouldn’t impact the mainstream buyer much. Cars over 4 meters: A 3% increase in the excise duty for cars falling out of the ‘Small Car’ definition. These are cars more than 4 meters in length and powered by a motor bigger than 1.2 liters for petrol, and 1.5 liter for diesel driven cars. Expect the prices to increase slightly. Small cars: Cars coming under the Small Car definition will also witness a 2% increase in excise duty. Again, expect the prices to go up, but not as much as in the upper segments. Hybrids and EVs: No change in tax structure for parts imported for the manufacture of such vehicles. All in all, we see driving and riding getting more expensive, not by a great margin though. No new sops for the industry, but the government has allocated good funds for Infrastructural development. If implemented properly, and it’s a big if, it may help the auto industry grow that minute bit. We don’t see the auto industry reacting to this budget very positively.

Home » News Effect of Indian Budget 2012-2013 on Automobile sector

Effect of Indian Budget 2012-2013 on Automobile sector
by: Vimal Singh Panwar Posted on: 18 March, 2012 No Comment

Indian automobile sector received the budget 2012-2013 with mixed reviews and experienced a sign of relief after the budget. In the Budget 2012-2013, no increment of the tax on the diesel cars and subsidy on fuel. But increases in the excise duties can create a mark on the forehead of the planning department of sector and can increase the price in India. The budget 2012-2013 for the financial year 2013 got mixed reviews in the industry automobile industry as the possibility of increase the price in of the cars is de-motivating and on the other hand the subsidy and no increment in tax gives a reason to be happy. The auto analyst of PINC Research, Mumbai said about the budget that it is very good budget as far as automobile industry is concerned. He further stated that everyone was expecting some taxes but they didn’t come so it is encouraging for us. After the positive reviews for the budget for financial year 2013 by Mr. Mukherjee on Friday the share market also experienced some increment as the shares of Maruti Suzuki was on high after January 2011n and the shares of Mahindra and Mahindra also gained the increment of 6.1% and Tata motors gained the increase of 2.6%.

On the other hand the finance minister also announced the increase the excise duties which also provided a mark over the investors head and increased their worries. There will be an increase in the price of all the passengers and commercial vehicles with immediate effect. The finance minister increased the excise duties from the last financial year 2012 of 22% to 24% on the car segment which will increase the price of about 15000-18000 INR. And on the large and extra large vehicles it is increased to 27% which will certainly create a uplift in the price of vehicles. The head of Ford India and the head of General Motors India commented almost the same n the budget 2012-2013 that the company will definitely increase the price of cars in India as the effect of this budget and due to the increment of excise duty and the company will criticize the budget. So as to conclude the budget 2012-2013 will certainly increase the price of automobiles but subsidy on diesel can still be a convenient option to be ON-DRIVE. MARUTI SUZUKI
Maruti Suzuki financial results 2011-12
New Delhi, 28th April, 2012; The Board of Directors of Maruti Suzuki India Limited approved the financial results for the quarter ending March 31, 2012 and for the full year 2011-12 here today. Quarter 4 2011-12 Q4 2011-12 Net Sales Net Profit Rs. 114,864 Mn Rs. 6,398 Mn Q4 2010-11 Rs 97,967 Mn Rs. 6,599 Mn % change Up by 17.2% Up by 17.2%

Total Volume

360,334 nos

343,340 nos

Up by 4.9%

During the Quarter, the Company sold a total of 360,334 units as compared to 343,340 units in the same period previous year reflecting a growth of 4.9 per cent.

While adverse currency movements made a significant impact during the Quarter, the Company was able to largely offset it through localization and internal cost control. Financial Year 2011-12 2011-12 Net Sales Net Profit Rs. 347,059 Mn Rs. 16,351 Mn 2010-11 Rs. 358,490 Mn Rs. 22,887 Mn % change Down by 3.2% Down by 28.6%

Total Volume Domestic

1,133,695 nos 1,006,316 nos

1,271,005 nos 1,132,739 nos

Down by 10.8% Down by 11.2%


127,379 nos

138,266 nos

Down by 7.9%

For the year, the Company¿s bottomline was impacted by adverse currency movement and increased commodity prices. The overall slowdown in the car market, including the skew towards diesel cars, also affected performance.

Dividend maintained at 150 per cent
The Board of Directors recommended a dividend of 150 per cent (Rs 7.50 per share of face value Rs. 5/-) for 2011-12. The dividend in 2010-11 was also at 150 per cent.

Maruti Suzuki profit dips 28%
Hit by high commodity prices, sluggish sales and labour issues, car maker Maruti Suzuki India, on Saturday, reported 28.55 per cent decline in its net profit at Rs. 1,635.1 crore for the year ended March 31, 2012, the steepest decline in three years. The company had posted a net profit of Rs. 2,288.7 crore in the previous financial year. Commenting on the results, Maruti Suzuki India Managing Director and CEO Shinzo Nakanishi told reporters here that 2011-12 was a very challenging year for the auto industry. High inflation and interest rates along with high petrol prices impacted sales. The small car segment was particularly hit as the customers are very cost sensitive, Mr. Nakanishi added. He said the company suffered majorly due to its inability to supply more diesel cars and the market has shifted away from petrol cars, which is the main stay of Maruti Suzuki. The biggest fall in profit before this was 29.6 per cent decline to Rs.1,218 crore in 2008-09. “We also had labour unrest in Manesar which impacted sales,” Mr. Nakanishi said. On the cost side, a steep rise in yen along with fall in rupee also had an impact on performance, Mr. Nakanishi added. The company sold 11.34 lakh units during the year, down 10.8 per cent from 12.71 lakh units in 2010-11. With the company struggling to sell petrol cars, last year it gave discount on an average of about Rs. 13,250 on each model. And for its best selling model Alto, it was between Rs. 22,000 and Rs. 25,000. “There is a huge pressure to sell petrol cars and we had increased discount by about 12 per cent in the fourth quarter of this fiscal compared to the third,” Managing Executive Officer (marketing and sales) Mayank Pareek said.

The company's board recommended a dividend of 150 per cent (Rs. 7.5 per share of face value Rs. 5) for 2011-12.

Maruti to launch new hatchback around Diwali to take on Hyundai Eon, Tata Nano
The country's largest carmaker Maruti Suzuki India Ltd (MSIL) is all set to launch its new hatchback around Diwali in an attempt to regain its market share, which has been falling steadily over the years. "The work on the car is going on and the company is planning to launch it before Diwali. The car will be priced below Alto and above that of the Maruti 800. This will be a big booster for the company. At present, the company is working on the pricing of the diesel variant," a senior official from MSIL told Mail Today on the condition of anonymity. However, the company refused to comment on the upcoming car officially and said they do not comment on their future models. The parent Suzuki Motor Company already markets a mini-compact car in Japan with an engine capacity of less than 800 cc. This is the company's attempt to revive their bread-andbutter model, which once drove their volumes. According to sources, the company will launch a new entry-level hatchback before phasing out M800 as competition is mounting from Hyundai's Eon and with a diesel variant of the Nano being also on the anvil. Maruti Suzuki, which earlier use to account for over 50 per cent sales in the passenger car market, has lost its share to rivals such as Hyundai, which markets the hot-selling i10 and 120 models, and diesel variants of GM's Beat. The market share of Maruti is now down to around 40 per cent as the strike at the Manesar plant has also taken its toll. The sales of its mini-segment cars, including M800, AStar, Alto and WagonR, fell by 26.4 per cent to 30,720 units in April this year against 41,744 units in April 2011. Maruti Suzuki India on Tuesday reported a mere 3.6 per cent increase in total vehicle sales in the domestic market to 90,255 units during April 2012. The company's passenger car sales, which exclude vans and utility vehicles, in the domestic market declined by 1.3 per cent to 72,939 units last month from 73,905 units in the same month of 2011, it added. Sales of the DZiRE model last month rose by 31.5 per cent to 15,510 units, from 11,797 units in April last year. While its compact segment (Estilo, Swift and Ritz) saw a 43 per cent jump in sales to 26,072 units in April. The company is also facing continuous slide in sales of its mid- sized sedan SX4' s which by 69.8 per cent to a meager 634 units from 2,102 units sold in April 2011. Luxury sedan Kizashi also witnessed 91.4 per cent fall in sales at 3 units as against 35 units in the same month last year.

Mixed trend in auto sales Auto sales in April saw a polarising trend with Mahindra and Mahindra and Toyota posting robust double-digit growth while Tata Motors and others saw a fall in sales. M& M clocked 33 per cent jump in total sales of vehicles, including Scorpio, XUV500, Xylo, Bolero and Verito, at 20,558 units as against 15,459 units in April 2011. It reported 27 per cent rise in overall sales at 40,719 units. The firm sold 32,090 units in the same month last year. Toyota Kirloskar Motor also began the fiscal 2012-13 on a positive note logging 49 per cent sales growth last month over the same period in 2011. It sold 14,378 units in April 2012 against 9,681 units sold in April 2011. "The Etios series, Innova and Fortuner continued to register growth in April. However, the market sentiment seems to be," said Sandeep Singh, deputy managing director, marketing. Despite the lack of sales of Siel's diesel variant, Honda posted a growth of 252 per cent last month at 7,075 units as against 2,012 units in the corresponding month of 2011.

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