AUTOMOBILE

INDUSTRY
PRESENTED BY:
AMIT KUMAR
ASHISH RANJAN
CHANRASHEKHAR
CHANDRAMANI
SHWETA KUMARI
YASHASVI GOJA

OVERVIEW
The Indian Automobile Industry manufactures
over 11 million vehicles and exports about 1.5
million each year.
The dominant products of the industry are twowheelers with a market share of over 75% and
passenger cars with a market share of about
16%.
Commercial vehicles and three-wheelers share
about 9% of the market between them. About
91% of the vehicles sold are used by households
and only about 9% for commercial purposes.
The industry has a turnover of more than USD
$35 billion and provides direct and indirect
employment to over 13 million people.

 The supply chain is similar to the supply chain of

the automotive industry in Europe and America.
Interestingly, the level of trade exports in this
sector in India has been medium and imports
have been low. However, this is rapidly changing
and both exports and imports are increasing.
With a high cost of developing production
facilities, limited accessibility to new
technology, and increasing competition, the
barriers to enter the Indian Automotive sector
are high.
India has a well-developed tax structure. The
power to levy taxes and duties is distributed
among the three tiers of Government. The cost
structure of the industry is fairly traditional, but
the profitability of motor vehicle manufacturers
has been rising over the past five years.

 Tata Motors is leading the commercial vehicle

segment with a market share of about 64%. Maruti
Suzuki is leading the passenger vehicle segment
with a market share of 46%. Hyundai Motor India
Limited and Mahindra and Mahindra are focusing
expanding their footprint in the overseas market.
Hero MotoCorp is occupying over 41% and sharing
26% of the two-wheeler market in India with Bajaj
Auto. Bajaj Auto in itself is occupying about 58% of
the three-wheeler market.
Over the past few years, the industry has been
volatile. Currently, India's increasing per capita
disposable income which is expected to rise by
106% by 2015 and growth in exports is playing a
major role in the rise and competitiveness of the
industry.
The level of technology change in the Motor vehicle
Industry has been high but, the rate of change in
technology has been medium. Investment in the
technology by the producers has been high.

 The key to success in the industry is to improve

labour productivity, labour flexibility, and capital
efficiency. Having quality manpower, infrastructure
improvements, and raw material availability also
play a major role. Access to latest and most
efficient technology and techniques will bring
competitive advantage to the major players.
The role of Industry is and will primarily be in
designing and manufacturing products of worldclass quality establishing cost competitiveness
and improving productivity in labour and in
capital. With a combined effort, the Indian
Automotive industry will emerge as the
destination of choice in the world for design and
manufacturing of automobiles .
The Indian market offers endless possibilities for
investors.

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 CJ-3A utility vehicles under license from
Willys. The company soon branched out into the
manufacture of light commercial vehicles (LCVs) and
agricultural tractors.
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.
In the 1980, 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.

 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.
In February 2009, monthly sales of passenger cars
in India exceeded 100,000 units and has since
grown rapidly to a record monthly high of 182,992
units in October 2009.
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
SIAM is the apex industry body representing all

INDUSTRY DEFINATION
This class consists of units mainly engaged in
manufacturing motor vehicles or motor vehicle engines.
The primary activities of this industry are: Motor cars
manufacturing Motor vehicle engine manufacturing
The major products and services in this industry are:
Passenger motor vehicle manufacturing segment
(Passenger Cars, Utility Vehicles & Multi Purpose
Vehicles) Commercial Vehicles (Medium & Heavy and
Light Commercial Vehicles) Two Wheelers Three
Wheelers.
Supply Chain of Automobile Industry: The supply chain
of automotive industry in India is very similar to the
supply chain of the automotive industry in Europe and
America. The orders of the industry arise from the
bottom of the supply chain i. e., from the consumers and
goes through the automakers and climbs up until the
third tier suppliers.

CHANGES IN INDIAN AUTOMOBILE

INDUSTRY SUPPLY CHAIN SYSTEM:
Supply Chain of Automobile Industry: The supply
chain of automotive industry in India is now very
similar to the supply chain of the automotive industry
in Europe and America.
The orders of the industry arise from the bottom of
the supply chain i.e, from the consumers and goes
through the automakers and climbs up until the third
tier suppliers.
Main components of achieving this supply chain
system are:
Third Tier Suppliers.
Second Tier Suppliers.
First Tier Suppliers.

Role of each of the contributors

to the supply chain are
discussed below: Third Tier Suppliers: These companies provide basic
products like rubber, glass, steel, plastic and aluminium
to the second tier suppliers.
Second Tier Suppliers: These companies design vehicle
systems or bodies for First Tier Suppliers and OEMs. They
work on designs provided by the first tier suppliers or
OEMs. They also provide engineering resources for
detailed designs. Some of their services may include
welding, fabrication, shearing, bending etc.
First Tier Suppliers: These companies provide major
systems directly to assemblers. These companies have
global coverage to follow their customers to various
locations around the world. They design and innovate to
provide "black-box" solutions for the requirements of
their customers. Black-box solutions are solutions created
by suppliers using their own technology to meet the
performance and interface requirements set by
assemblers.

 First tier suppliers are responsible not only for the

assembly of parts into complete units like
dashboard, brakes-axle-suspension, seats, or
cockpit but also for the management of second-tier
suppliers.
Automakers/Vehicle Manufacturers/Original
Equipment Manufacturers (OEMs): After
researching consumers' wants and needs,
automakers begin designing models which are
tailored to consumers' demands. The design
process normally takes five years. These
companies have manufacturing units where
engines are manufactured and parts supplied by
first tier suppliers and second tier suppliers are
assembled. Automakers are the key to the supply
chain of the automotive industry. Examples of
these companies are Tata Motors, Maruti Suzuki,
Toyota, and Honda. Innovation, design capability
and branding are the main focus of these
companies.

 Dealers: Once the vehicles are ready they are

shipped to the regional branch and from there,
to the authorised dealers of the companies. The
dealers then sell the vehicles to the end
customers.
Parts and Accessory: These companies provide
products like tires, windshields, and air bags
etc. to automakers and dealers or directly to
customers.
Service Providers: Some of the services to the
customers include servicing of vehicles,
repairing parts, or financing of vehicles. Many
dealers provide these services but, customers
can also choose to go to independent service
providers.

KEY STATISTICS OF THE INDUSTRY:

1.The production of automobiles has greatly increased
in the last decade. It passed the 1 million mark during
2003-2004 and has more than doubled since
Car
Production

Year

% Change

Commercial

% Change

Total Vehicles
Prodn.

% Change

2011

3,038,332

7.3

888,185

22.42

3,926,517

10.4

2010

2,831,542

30.17

725,531

55.58

3,557,073

34.7

2009

2,175,220

17.83

466,330

-4.10

2,641,550

13.25

2008

1,846,051

7.74

486,277

-9.99

2,332,328

3.35

2007

1,713,479

16.33

540,250

-1.20

2,253,999

10.39

2006

1,473,000

16.53

546,808

50.74

2,019,808

19.36

2005

1,264,000

7.27

362,755

9.00

1,628,755

7.22

2004

1,178,354

29.78

332,803

31.25

1,511,157

23.13

2003

907,968

28.98

253,555

32.86

1,161,523

22.96

2002

703,948

7.55

190,848

19.24

894,796

8.96

2001

654,557

26.37

160,054

-43.52

814,611

1.62

2000

517,957

-2.85

283,403

-0.58

801,360

-2.10

1999

533,149

285,044

818193

2. AUTOMOBILE PRODUCTION
Type of
Vehicle
Passenger
Vehicles

2004-2005

1,209,876

2005-2006

2006-2007

2007-2008

2008-2009

2009-2010

2010-2011

1,309,300

1,545,223

1,777,583

1,838,697

2,357,411

2,987,296

Commercial
353,703
Vehicles

391,083

519,982

549,006

417,126

567,556

752,735

Three
Wheeler

374,445

434,423

556,126

500,660

501,030

619,194

799,553

Two
Wheelers

6,529,829

7,608,697

8,466,666

8,026,681

8,418,626

10,512,903

13,376,451

Total.

8,467,853

9,743,503

11,087,997

10,853,930

11,175,479

14,057,064

17,916,035

3.YEAR WISE GROWTH OVERALL

Year

2004-2005

2005-2006

2006-2007

2007-2008

2008-2009

Motor Vehicle
Production[

8,467,853

9,743,503

11,087,997

10,853,930

11,175,479

Industry
Revenue USD
Million[

24,379

26,969

30,507

32,383

33,342*

Exports (Units)[

629,544

806,222

1,011,529

1,238,333

1,530,660

Exports
(Revenue)

1,915

2,231

2,552

3,008

3,718*

PRODUCT AND SERVICE

SEGMENTATION:
The automotive industry of India is categorised
into passenger cars, two-wheelers, commercial
vehicles and three-wheelers, with two-wheelers
dominating the market.
More than 75% of the vehicles sold are twowheelers. Nearly 59% of these two-wheelers sold
were motorcycles and about 12% were scooters.
Mopeds occupy a small portion in the two-wheeler
market however; electric two-wheelers are yet to
penetrate.
The passenger vehicles are further categorised
into passenger cars, utility vehicles and multipurpose vehicles. All sedan, hatchback, station
wagon and sports cars fall under passenger cars.

 Multi-purpose vehicles or people-carriers are

similar in shape to a van and are taller than a
sedan, hatchback or a station wagon, and are
designed for maximum interior room.
Utility vehicles are designed for specific tasks.
The passenger vehicles manufacturing account
for about 15% of the market in India.
Commercial vehicles are categorised into heavy,
medium and light. They account for about 5% of
the market. Three-wheelers are categorised into
passenger carriers and goods carriers. Threewheelers account for about 4% of the market in
India.
Many services were introduced by automobile
company are :
1. Maintaince servicing.
2. Vehicle Insurance.
3. Vehicle finance schemes.
4. Test drive.

GROWTH OF AUTMOBILE
INDUSTRY SEGMENT WISE:Segment
Passenger Car(%)

10.22

10.39

9.91

10.65

12.42

Utility Vehicles (UVs) (%)

2.15

2.23

2.18

2.18

2.39

Multi Purpose Vehicles (MPVs) (%)

0.87

0.82

0.75

0.82

0.98

Total Passenger Vehicles[ (%)

13.25

13.44

12.83

13.65

15.79

Passenger Carriers (%)

0.36

0.32

0.32

0.28

0.43

Goods Carriers (%)

2.01

2.19

2.01

2.44

2.10

Total Medium & Heavy Commercial

2.37
Vehicles (%)

2.51

2.33

2.73

2.53

Passenger Carriers (%)

0.28

0.25

0.25

0.24

0.32

Goods Carriers (%)

1.17

1.27

1.36

1.67

1.77

Total Light Commercial Vehicles (%) 1.45

1.52

1.61

1.90

2.10

Total Commercial Vehicles (%)

3.82

4.03

3.94

4.63

4.63

Passenger Carriers (%)

2.56

2.17

2.39

2.34

2.51

Goods Carriers (%)

1.61

1.73

1.65

1.65

1.51

Total Three Wheelers (%)

4.17

3.90

4.04

4.00

4.01

Scoters/Scooterettee (%)

13.01

11.68

10.21

9.31

11.57

Motorcycles/Step-Throughs (%)

61.24

62.86

65.24

64.83

59.35

Mopeds (%)

4.52

4.08

3.74

3.52

4.47

Electric Two Wheelers (%)

0.07

0.19

Total Two Wheelers (%)

78.76

78.63

79.18

77.73

75.57

Grand Total(%)

100.00

100.00

100.00

100.00

100.00

2003-04

2004-05

2005-06

2006-07

2007-08

INDIAN AUTOMOBILE INDUSTRY

VOLATILTY: The level of volatility is medium.
Over the past few years, the Motor Vehicle
Manufacturing industry has become more volatile.
This has been the result of fluctuations in metal
prices and fuel prices, as well as changes in
legislation and assistance packages.
India's increasing per capita disposable income and
growth in exports is playing a major role in the rise
and the competitiveness of the industry.
According to the Economic Times of India, economic
liberalization allowing unrestricted Foreign Direct
Investment (FDI) and removing foreign currency
neutralisation and export obligations has been
also been one of the key to India's automotive
volatility.

INDIAN AUTOMOBILE MARKET

CHARACTERSTICS: The Indian Automotive Industry after de-licensing in
July 1991 has grown at a spectacular rate on an
average of 17% for last few years.
The industry has attained a turnover of USD $35.8
billion, (INR 165,000 crores) and an investment of USD
10.9 billion.
The industry has provided direct and indirect
employment to 13.1 million people. Automobile
industry is currently contributing about 5% of the
total GDP of India.
The projected size in 2016 of the Indian automotive
industry varies between $122 billion and $159 billion
including USD 35 billion in exports. This translates
into a contribution of 10% to 11% towards India's GDP
by 2016, which is more than double the current
contribution.

INDIAN AUTOMBILE INDUSTRY

DEMAND DETERMINANTS: Determinants of demand for this industry include
vehicle prices (which are determined largely by wage,
material and equipment costs) and exchange rates,
preferences, the running cost of a vehicle (mainly
determined by the price of petrol), income, interest
rates, scrapping rates, and product innovation.
Exchange Rate: Movement in the value of Rupee
determines the attractiveness of Indian products
overseas and the price of import for domestic
consumption.
Affordability: Movement in income determine the
affordability of new motor vehicles. Allowing
unrestricted Foreign Direct Investment (FDI) led to
increase in competition in the domestic market hence,
making better vehicles available at affordable prices.

 Product Innovation is an important determinant as

it allows better models to be available each year
and also encourages manufacturing of
environmental friendly cars.
Demographics: It is evident that high population of
India has been one of the major reasons for large
size of automobile industry in India. Factors that
may be augment demand include rising population
and an increasing proportion of young persons in
the population that will be more inclined to use and
replace cars. Also, increase in people with lesser
dependency on traditional single family income
structure is likely to add value to vehicle demand.
Infrastructure: Longer-term determinants of
demand include development in Indian's
infrastructure. India needs about $500 billion to
repair its infrastructure such as ports, roads, and
power units. These investments have been made
with an aim to generate long-term cash flow from
automobile, power, and telecom industries.

INDIAN AUTOMOBILE INDUSTRY

INTERNATIONAL MARKET STATUS:
The Indian automotive industry embarked a new journey in
1991 with de-licensing of the sector and subsequent opening
up for 100% foreign direct investment (FDI).
Since then almost all global majors have set up their
facilities in Indian taking the level of production from 2
million in 1991 to over 10 million in recent years.
The exports in automotive sector have grown on an average
compound annual growth rate of 30% per year for the last
seven years. The export earnings from this sector are over
USD 6 billion.
Even with this rapid growth, the Indian automotive industry's
contribution in global terms is very low. This is evident from
the fact that even thought passenger and commercial
vehicles have crossed the production figures of 2.3 million in
the year 2008, yet India's share is about 3.28% of world
production of 70.53 million passenger and commercial
vehicles. India's automotive exports constitute only about
0.3% of global automotive trade.

INDIAN AUTOMOBILE INDUSTRY

TRYING FOR: The automobile industry has defined its target in
the Automotive Mission Plan as To emerge as the
destination of choice in the world for design and
manufacture of automobiles with output reaching
a level of USD 145 billion accounting more than
10% of GDP and providing additional employment
to 25 million people by 2016.
In order to achieve these goals the following key
recommendations have been made in the
Automotive Mission Plan to the Indian Government
and Industry: Manufacturing and export of small cars, multiutility vehicles, two- and three-wheelers, tractors,
components to be promoted Care to be taken of
negative like and rules of the country with current
negotiation of Free Trade Agreement and Regional
Trade agreement with countries like Thailand,

 Trying to adapt a Attractive Tariff Policy which may

follow attractive investment. Specific measures will
be taken for expansion of domestic market.
Incremental investment of USD 35 to 40 billion to
Automotive Industry during the next 10 years.
National level Automotive Institute for training on
automobile at International Training Institutes (ITIs)
and Automotive Training Institute (ATIs) to be set
up.
An Auto Design Centre to be established at National
Institute of Design, Ahmadabad. National
Automotive Testing and R&D Implementation Project
(NATRIP) to act as Centre of Excellence for Technical
Design Data.
The profitability of motor vehicle manufacturers has
been rising over the past five years, mainly due to
rising demand and growth of Indian middle class
and industry is trying to continue it by focusing on
this segment.

EMMISION NORMS CHANGES

In tune with international standards to reduce vehicular
pollution, the central government unveiled the standards
titled 'India 2000' in 2000 with later upgraded guidelines as
'Bharat Stage'.
These standards are quite similar to the more stringent
European standards and have been traditionally
implemented in a phased manner, with the latest upgrade
getting implemented in 13 cities and later, in the rest of
the nation.
Delhi(NCR), Mumbai, Kolkata, Chennai, Bangalore,
Hyderabad, Ahmedabad, Pune, Surat, Kanpur, Lucknow,
Solapur, and Agra are the 13 cities where Bharat Stage IV
has been imposed while the rest of the nation is still under
Bharat Stage III.
These changes were very effective for indian automobile
industry to meet with international standards and and thse
standards of international market.

LANDMARK OF INDIAN
AUTOMOBILE INDUSTRY:
1897 First Person to own a car in India - Mr Foster
ofM/sCrompton Greaves Company, Mumbai.
1901 First Indian to own a car in India -Jamsetji
Tata.
1905 First Woman to drive a car in India Mrs.Suzanne RD Tata.
1905 Fiat Motors.
1911 FirstTaxi in India.
1924 Formation oftraffic police.
1928 Chevrolet Motors.
1942 Hindustan Motors.
1944 Premier Automobiles Limited.

 1945 Tata Motors.

1947 Mahindra &
Mahindra Limited.
1948 Ashok Motors.
1948 Standard Motors.
1974 Sipani Motors.
1981 Maruti Suzuki.
1994 Rover Company.
1994 Mercedes-Benz.

1995 Daewoo Motors.

1995 REVA Electric Car
Company.
1996Hyundai Motor
Company.
1997Toyota
KirloskarMotors.
1997FiatMotors (Re-Entry).
1998 San Motors.
1998Mitsubishi Motors.
2001 skoda Auto.

1994 General Motors

India-Opel brand
launch.

2003 General Motors IndiaChevrolet brand launch.

1995 Ford Motor

Company.

2007 Audi.

1995 Honda Siel Cars

India.

2005 BMW.
2009Land Rover and
Jaguar.

INDIAN AUTOBILE INDUSTRY KEY

COMPETITORS: Tata Motors: Market Share: Commercial Vehicles
63.94%, Passenger Vehicles 16.45% .
Maruti Suzuki India :Market Share: Passenger
Vehicles 46.07%.
Hyundai Motor India :Market Share: Passenger
Vehicles 14.15%
Mahindra & Mahindra: Market Share:
Commercial Vehicles 10.01%, Passenger
Vehicles 6.50%, Three Wheelers 1.31%.
Ashok Leyland: Market Share: Commercial
Vehicles 22%.

Hero MotoCorp is occupying over 41% and

sharing 26% of the two-wheeler market in India
with Bajaj Auto.

FUTURE EXPECTED GROWTH:

The government spending on infrastructure in
roads and airports and higher GDP growth in
the future will benefit the auto sector in
general. We expect a slew of launches in the
Segment 'B' and Segment 'C' of passenger cars.
Utility vehicle segment is expected to grow at
around 8% to 9% in the long-term.
In the 2-wheeler segment, motorcycles are
expected to witness a flurry of new model
launches. Though the market size is expected to
grow by 10% to 12%, competitive pressure
could keep prices and margins under control.
TVS, Honda and Hero Motocorp are poised to
benefit from higher demand for ungeared
scooters in the urban and rural markets.

 Riding the wave of structural changes taking

place in the country, the tractor industry
registered good growth in FY10 as well as FY11.
he strong performance continued in FY11 as
well as volumes grew by 20%. While good
monsoon is a positive for the sector, given the
fact that non-farm incomes have continued to
climb up, volumes should still hold up pretty
well despite a year or two of poor monsoons.
The longer-term picture is impressive in light of
poor mechanisation levels in the countrys farm
sector and the thrust of the government on
improving rural infrastructure.
With an estimated 40% of CVs plying on the
roads being 10 years old, demand for HCVs is
expected to grow by 7% to 8% over the long
term. While the industry is going through
cyclical hiccups currently, we expect this factor
to weaken in the future on account of strong
structural tailwinds. The privatisation of select
state transport undertakings bodes well for the

CHANGES WITNESSED:
End of licensee raj 1991 (DE licensing).
An amazing gear up in competition.
Technological up gradation.
Customer oriented market development.
Increased service facility's.
Development & growth of oil company's with
automobile company's in parallel way.
Development & growth of infrastructure
company's with automobile company's in indirect
way.
Formation of traffic police and increased road
safetymeasures

DRIVE
SAFE

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