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BUSINESS ENVIRONMENT

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Automobile Industry

Indian Automobile Industry Overview


Indian Auto Industry Can Touch $300 Billion Mark by 2026: Study
Parameters
Value
Global Ranking
Importance to economy
Turnover
US $73 billion
Share in national GDP
6%
Share in Manufacturing GDP
22%
Share in excise duty collection
21%
Employment
More than 13.1 million people
FDI inflows
US $6.96 billion

Commercial
Vehicles
domestics Sales
growth of 17.4%
CAGR (FY03-12)

Passenger Vehicles
(cars,vans,multiutility) domestics
Sales growth of

15.7%% CAGR
(FY03-12)

Three Wheelers

1st

Two- Wheelers

2nd

Commercial Vehicles

5th

Passenger Cars

7th

Two Wheelers
domestic sales
growth 12.1%
CAGR (FY03-12)

Three Wheelers
growth 9.2%
CAGR (FY03-12)

Political
No min criteria for FDI
Automatic approvals for FDI in Indian Automobile Market and the country can export
without paying taxes
--a big opportunity for automobile FDI growth exists in India.

Union Budget,2014 Finance Ministry


Retention of the excise duty cut benefits & elimination of customs duty on
components : car and bike prices in India will remain pretty much the same
Implementation of the Goods and Service Tax (GST) in the auto industry
Reduction in steel prices

Abolishment of tax for income up to Rs. 2.5 lakh, allocation of Rs. 14,389 crore for
roads in villages might help the industry in the long run.

In the pipeline
an announcement on incentives for electric vehicles

Economic
The investment climate is positive. A slew of poilicies
implemented to promote foreign direct investment (FDI) of up
to 100 per cent. This is done by imposing heavy duties on
import of vehicles while promoting import of components and
machinery
In current budget, the government maintained the custom
duty on import of CBU and SKD of new cars at 61.8%

Higher expectation of GDP growth 5.5%, excise duty cuts and


launch of more models will lead to recovery of sales of cars and
UVs.
The automobile industry attracted the total FDI equity inflow of
Rs. 482 billion or $9.8 billion between 2000 and 2014 which
makes 4.51% of total FDI inflow to India
The industry currently accounts for almost 7 per cent of the
countrys GDP and employs about 19 million people both
directly and indirectly. Future projected: USD 145 billion by
2016, contribution to GDP: 10% in 2016, employment: 25
million

Social

Indian families are


becoming increasingly
nu-clear

Increasing
distances
between
workplace and
residence.

Preference for
small and compact
cars. Small cars
becoming socially
acceptable

Indian customers are


highly discerning,
educated and well
informed.

Increase in % of
working women.

Increasing
propensity
to spend

Price
sensitive.
Emphasis
on value for
money

Technological
Government of India promoting National Automotive Testing and R&D
Infrastructure Project (NATRIP) to support the growth of the auto industry in India.

200% weighted deduction under section 35(2AB) of the Act available for
in-house R&D facility , 175%weighted deduction on outsourced R&D
from approved Institutions
Dealer Management System (DMS) s/w soln enabling auto companies to
offer improved & consistent service across country, & consolidate
customer/retail data to improve their offerings & react to market changes
faster.

Automotive industries in the developed economies invest 5-8% of their


revenues on R&D, while in India the investment is less than 1%.
Increased thrust on green vehicles

Hybrids becoming much more popular


Introduction of Laser Technology helping in decreasing manufacturing time.

Legal
Nodal Ministry for regulation - Ministry of Shipping, Road Transport &
Highways
Principal instruments of emission norms and safety standards in India
Motor Vehicles Act, 1988 (MVA)
Central Motor Vehicles Rules ,1989 (CMVR)

Legal provisions for preventing pollution


The Air (Prevention and Control of Pollution) Amendment Act,1987
Empowers Central and State pollution control boards to meet

with grave emergencies of air pollution


Bharat stage emission standards
All new vehicles manufactured have to conform to new
standards

SWOT Analysis

TATA Motors

SWOT Analysis
Strong Domestic Player

Tata Brand Name


Founded in 1868
66% of Equity is owned by
Tata Sons Unique Trustee
ownership model

56 % Market Share in CV
segment in FY 14
Sold 441,791 Units of CV*

Great Accessibility

Global Presence
JLR is currently profiting centre
17,406 Cr PAT in FY 14 **
Tata Daewoo has 2/3rd Market
share in South Korea

Over 3500 Customer touch


point in India & 6600
Globally

R&D

*Crisil Reports
**Annual Report 2014

Team of 4500 Engineers


Expenditure of 3.9% of Revenue
from Operations

SWOT Analysis
Limited Customer Base

UV segment

Customer base in Indian


Sub continent only
Need to grow in Europe
and US as Tata Brand

Market share of 12.79% in


FY 14
Declined by 34% in last F 14

Not Luxury Brand


Lacks products in Luxury
segment
In English Tat means
rubbish

Poor Product Design

No major changes in Indica


and Indigo Design over the
years

Product Quality Issues

Incidences of Nano catching fire

SWOT Analysis
Expanding Product Line

New product Awaited in FY 15


Prima LX Trucks
Bolt Premium
Hatchback
Zest

Expanding into new


Geographic Areas
Currently strong in Indian
subcontinent
Great Opportunity in Latin
America and Africa

Acquisition of Rivals
Acquisition of rivals
Daewoo in 2004

JLR in 2008

Nano Market in 3rd World


countries
Worlds cheapest car
Costs little more than
motorbike

SWOT Analysis
Rising Cost of
Manufacturing

Intense Competition in CV, UV


and Passenger cars segment
Bharat Benz is
capturing market
rapidly
New entrants in CV
Aggressive strategies
of Maruti and
Mahindra

Environmental Regulations
Increased focus on
Sustainability from
government
Stringent Emission norms

Leading pressure on
increasing prices of
products
Impact on profit
margins

T
Rising Fuel costs

Pushing customers back


from buying automobile

IFAS Matrix
Internal Strategic

Weight

Rating

Factors (1)

(2)

(3)

Weighted
Score
(4)

Remarks
(5)

Strengths
Tata Brand Name .10

0.35

Tata Brand has very good perception among customers

4.2

0.63

. It is associated with being Indian sometimes


Tata has very strong presence in CV segment.
India has very large market for automobile

Great Accessibility .10

0.40

In trucks business how easily spare parts and servicing


centres are available are is the key issue.

Global presence

.15

It adds value to overall brand and ensures that

Strong Domestic

.15

3.5

Player

.05

company captures all the emerging markets in the


world.
R&D

.10

3.5

.35

Strong R & D is essential for survival of any company


and Tata has very good R & D facilities and expenditure

IFAS Matrix(contd..)
Internal

Weight

Rating

Strategic

(2)

(3)

Weighte
d Score
(4)

Remarks
(5)

Factors (1)

Weaknesses
UV segment

.15

.30

UV segment in India is expanding rapidly and weak


presence in that is alarming situation for any automobile

.10

.30

company.
Customer is strength of any business so limiting it
wouldnt be advisable.

Not Luxury Brand

.05

.10

Tata is very big group still it is not associated with luxury.

Poor Product

.10

.30

Product is the face of any company. If that is not strong

Limited Customer
Base

Design
Product quality
issues

enough it wont survive.


.10

.30

Product quality is very important now a days. So poor


quality product means end of business straight away.

EFAS Matrix
Internal

Weight

Ratin

Strategic

(2)

Factors (1)

Weighte
d Score
(4)

Remarks
(5)

(3)

Opportunities
Expanding product
line

.10

4.5

.45

Innovative products are in line for Tata in coming


years . So we expect it would capture in CV and

Acquisition of rivals

.10

.40

hatchback segments.
Acquiring rival companies adds advantage of new
technology and diverse portfolio in business.

Expanding into new


geographic areas

.15

4.2

.63

Expansion in Africa and Latin America would


make Tata Motors truly market leader.

Nano in 3rd World

.20

.80

Nano will definitely hit in the 3rd world countries

countries

due to low cost.

EFAS Matrix(contd..)
Internal

Weight

Strategic

(2)

Factors (1)

Ratin Weighte
d Score
g
(4)
(3)

Remarks
(5)

Threats
Intense competition in
CV, UV segment

.15

.45

Day by day CV and UV segment is becoming more and


more competitive. So it is area of concern for Tata

Motors
.10

.30

Increasing cost of raw material and Labour is hampering


profit margins of the Tata motors.

Environmental
regulations

.05

.20

Stringent norms of emissions and governments policies


on environment are affecting business of automobile
industry as a whole.

Rising cost of Fuel

.15

.45

As cost of fuel increases customer becomes less inclined

Rising cost of
Manufacturing

towards buying an automobile which affects sales of


automobile company.
Total

3.68

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