Driving on the Global Highway Car Exports

Manoj Aggarwal (16) Deepak kr Sharma (09) Neeraj Luthra (20) Ritesh Singh (30) Umesh Garg (42) Heena Gambhir (12)

•India has for long been billed as a small-car sourcing hub for the world. •The Indian car exports story is just about the small car. This year, manufacturers in India expect to sell 1.8 million vehicles abroad, 75% of them being small cars. •India is Suzuki’s largest export base for small cars, contributing about one-third to its global turnover. •It was the entry of Hyundai in 1996 that kick-started car exports from India. The South Korean carmaker was drawn to India by the country’s low-cost manpower, a good vendor base and a growing domestic market. •The global small car business is highly competitive and operates on thin margins. India’s cost advantage is obviously a big draw for manufacturers.

” •“In small cars. “After transportation and logistics costs.” says Michael Boneham. •“Our local economies of scale make us competitive in European markets. president.WHAT THEY SAY! •“Compared with developed markets. we can still deliver a low-cost. director-marketing and sales at Hyundai Motors India. Ford India.” says Arvind Saxena. . chairman. there’s 10-15% minimum reduction in production costs in India. India can be as competitive as anybody in the world. fuel-efficient car at a good price to our export markets.” says RC Bhargava. Maruti Suzuki India.

. • Different Company has different strategy to produce and export cars. • Hyundai has 50:50 approach. They increase our manufacturing efficiency and purchasing efficiency. • Nissan has export orientation approach. • Maruti has a domestic focus.Domestic VS Export Strategy • Exports are major driver of profitability.

Units 600000 400000 200000 0 460 400 310 300 2 70 0 1 0 1 80 0 1 0 0 9 0 76 0 Units INDIAN AUTO INDUSTRY HAS THE POTENTIAL TO EMERGE AS ONE OF THE LARGEST IN THE WORLD .

SIAM said. •Overall vehicle exports from India grew by 17.90 per cent at 18.30. •The country's largest exporter Hyundai Motor India witnessed an export growth of 12.31.658 units compared with 2.Indian car exports soar 33 per cent in 2009-10 •Passenger car exports from India touched 4. registering an over two-fold jump in overseas sales at 1.594 units in 2008-09.85. Society of Indian Automobile Manufacturers . .75 per cent at 2.344 units in the year-ago period.535 units in the previous financial year.000 units in FY'10 against 3.835 units in the previous fiscal.156 units in 2009-10 against 68.53.619 units in the last financial year. •Domestic market leader Maruti Suzuki India was a distant second.46.46.04. while the same stood at 15.

The UK Govt gave £2. Around 45.000 small cars including Hyundai i10. Santro and Maruti suzuki A-Star moved out from India into European markets. • • • Fore School of Management – WMG XIX .000 nearly 2 years ago.000 bonus to anyone scrapping a car that was over 10 years old.i20 . The Korean MNC’s exports from its plant in Chennai raced to 270.Scrappage Scheme • Incentives given to European consumers scrapping old cars for newer ones that are gentle on the environment.000 cars in 2009 from 127.

Now they have produced 1. we can still deliver a lowcost. Labour cost (wages per hour) in India is one-sixth of that in industrialised nations such as Japan. fuel efficient car at a good price to our export markets.Low Cost • • • • • The South Korean carmaker was drawn to India by the country’s low cost manpower.6 million unit till date. After transportation and logistics costs. Many company has located their plant near port so they can save the logistics expenditure. Hyundai Production unit has shifted from Korea to India. Western Europe and the US. a good vendor base and growing domestic market. In India. The production cost is 10-15% less in compare to any other country. Fore School of Management – WMG XIX .

Sales Trends Fore School of Management – WMG XIX .

Toyota.CURRENT SCENARIO •Most European countries withdrew the incentives to scrap old cars earlier this year as a result. But some of the world’s leading car makers like Ford. Indian vehicle exports are just 1% of worldwide exports. •Hyundai Motor India and Maruti Suzuki India took the maximum benefit of this scrappage incentive programme. Suzuki and Volkswagen believe they can still fill up the ships leaving Indian shores — with or without incentives. Indian exports shrunk 2% (during the first eight months of this financial year). . •At $3 billion.the window of opportunity closed. Nissan.

Expectation Automobile Exports Fore School of Management – WMG XIX .

Export-High Risk • FTA’s cans swing decision in favour or against • Recessions can result in unused capacity .

• Indian companies ready price value wise for.Iran. Russia and Latin America . Chile. Indonesia. Australia. Egypt.Hedging the risk • Global sourcing hubs and flexible platforms • Logistics-export orders transported through sea-hence large warehousing and pre delivery inspection at ports• R&D design capability • Emerging markets-Algeria.

Political-legal factors Economic Factor Social Factor Technological Factor .

PoliticalLegal Factors .

Government reduced excise duty rates on small cars. the Government of India (Gol) reduced the excise duty on small cars from 24% to 16% to encourage small-car manufacturing in the country. In 2006.• • • India Govt reduces the effective duty on cars to 6. • • .5% from 10%.5 %. Free trade agreements which promote better trade terms between countries. The EU works on a generalised system of preferences where goods from a certain developing country are given a special trafic benefit of 3.

Mass transport system.  Cheaper (decline interest rates) and easier finance scheme.  Growing concept of second vehicle in urban India .  Increasing road development.  Increasing Per Capita income.  Replacement of aging four wheelers. Higher GDP growth  India’s huge geographic spread.  Graduating from two wheeler to four wheeler.

driving demand for new segments Low interest rates translating to low financing and acquisition costs hence greater affordability. 85% of Cars are financed in India. .Growth in urbanization Changing lifestyles.

India’s R & D and design capabilities has well known in all over the world. Maruti has invested 9.000 crore rupees to build two plants at Manesar and enhance capacity of R&D centre.• R&D centres set up by various international manufacturers in India are confined to the basic localisation of imported parts and data services. • • • The Suzuki has invest 1200-1500 crore rupees in building an R & D centre and test track in Rohtak. . This is first centre in all over the world which is situated in outside the Japan.

Growth Drivers for Indian Car Exports .


electricals.Competitiveness of Indian automotive industry • • In order to emerge as a manufacturing hub. India faces competition from other low-cost countries such as:-China-Thailand-Brazil IMaCS has compared the cost competitiveness of manufacturing six automotive component groups (engine. tax reforms and with improving business infrastructure. suspension and braking. equipment and others) in India with respect to these countries in terms of factors such as:-Taxes and duties-Cost of manufacturing (for example. transmission and steering. • . labour costs)-Economies of scale •Competitiveness of manufacturing in India is improving with the reduction of tax levels. power and fuel costs.

increase in number of customers due to cost reduction B A D1 D2 0 Number of cars exported/ locally sold .Shift in the Demand Curve Price . easier financing. FTAs etc 2. Growth in income levels.Scrappage IncentiveEuropean consumer. 1.

Price Movement Along the Demand Curve C Local economies of scale are allowing better pricing from component suppliers hence reducing cost A D1 0 Number of cars sold .

How an Increase Demand Affects the Equilibrium Price Exports and local demand shifting the demand and supplies to increase with many manufacturers joining Supply New equilibrium P¹ Pº Initial equilibrium Higher end models launched and sold D2 D1 0 1 2 3 4 5 6 7 higher quantity sold. 10 11 Quantity of cars .

Y Positive Income elasticity of demand D The increasing income is pushing up the demand for cars P A Income D B S O Quantity X .

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