Industry experts are of the opinion that FY18 was a landmark in the history of automobile sales in India.

The volume
of sales grew on the back of the momentum of the previous year to reach double-digit figures. This has happened for
the first time since the financial year 2012. The growth can be largely attributed to the improvement in the rural
economy and the after-effects of demonetisation.

The Society of Indian Automotive Manufacturers (SIAM) shared a report recently, showing domestic sales and
exports across all segments in the market recording a surge.

 The passenger vehicle market observed growth of 7.89%, selling 3.28 million units during FY 2018. The majority of
the units sold were utility vehicles, the sales of which independently surged by 20.97%. The sale of passenger cars
and vans also recorded a growth of 3.33% and 5.78% respectively during the same timeframe.
 As far as commercial vehicles are concerned, the total sales saw a growth of 19.94% during the last financial year.
The segment of Medium & Heavy Commercial Vehicles (M&HCVs) grew by 12.48% while the Light Commercial
Vehicles (LCV) segment observed growth of 25.42%. The sale of three-wheelers also grew by 24.19% between
April 2017 and March 2018.
Industry analysts are expecting to see the momentum of growth carry forward to the financial year 2018-19, across
most of the segments. There may be moderation in growth of commercial vehicles (CVs) sales though.

The industry is currently subjected to a series of investments in research and product development so that regulatory
changes such as BS VI emission norms are implemented. Investments are also being made for the implementation of
the government’s vision of an all- electric fleet by the year 2030. There are also reforms likely to come up in the
safety standards of four-wheelers in the country.
Driving Better Profits in Automotive
Understanding the role of each marketing vehicle in moving
consumers along the path to purchase is an on-going
challenge for automotive companies. MMA’s analytic
approach and framework has been adopted by some of the
largest global automotive brands to measure and optimize
their marketing investments across Brands, Nameplates,
Geographies and Consumer Segments.

An Automotive Marketing Strategy

Analysis Solution
Automotive companies face a number of unique marketing
challenges, coupled with extensive and powerful external
drivers of demand. To begin with, the automotive purchase
cycle is typically much longer than for most other household
purchases. This longer cycle increases the importance of
striking the right mix of short-term, sales-oriented messaging
and channels, vs. long-term, brand-focused marketing
investments. Lower-funnel initiatives, most notably Incentive
programs for Customers and Dealers, are constantly evolving
and costly to execute. Generally taking the form of Financing,
Leasing and Cash Back programs, Incentives are
continuously offered, thus making it difficult to discern their
ability to drive new versus repeat purchases. Major non-
marketing and external challenges include pricing, tariffs,
economic conditions, fuel prices, innovation and an intense
competitive environment. All of these factors combine to
create one of the most complex ecosystems and purchase
cycles among industries. At MMA, we are well-versed in
designing, building and executing analytic frameworks that
capture all of these complexities to help Automotive OEMs
better understand the impact of Marketing across all levels of
their business.
………

Indian automotive industry: The road ahead

Automotive Mission Plan 2006-16 focused broadly on five aspects: Economic growth,
passenger comfort, sustainability, quality, and cost competitiveness

Image: Shutterstock

Background of AMP 2006-16:

As per the ministry of heavy industries and public enterprises, for FY 2014, automotive industry
formed 7.1 percent of the GDP, 45 percent of the manufacturing GDP, contributed 4.3 percent to
exports, and 13 percent to excise revenues. During 2006-16, the industry created 19 million
additional jobs and saved 8.6 billion litres of fuel.
Source: Ministry of Heavy Industries and Public Enterprises

While a lot of ground has been covered under AMP 2006-16, the industry missed out on the
optimistic targets set under the plan. Infrastructure bottlenecks, delayed reforms, policy
stagnation, high interest rates, and global financial meltdown played a complex role in demand
disruption.

The challenges presented by demand disruption could have led to a race for innovation.
However, the message was ignored and we observe the following phenomenon:

 Most of the auto-component players are focused on plain vanilla manufacturing of

components with limited focus on integrated system. Some of the critical components,
especially for passenger cars segment such as engine, transmission, and electronic parts are
still being imported. According to the Automotive Component Manufacturers Association of
India (ACMA), during FY 2013-14, 21 percent of components were imported from China
alone, and the rest from Germany, Japan and South Korea
 Close to 2/3rd of auto-component exports still comprise traditional mechanical parts; value
added products such as high-end safety and advanced electronic parts form less than 10
percent of exports
 Almost all Indian OEMs have launched several new models, very few new launches can be
considered as cutting edge next generation models with the exception of a few
 While many of the global OEMs are increasing their designing focus in the Indian market,
most of the new launches in the Indian market are global successful models
  Still most of the component designs are provided by OEMs with limited capability to convert
a concept into a viable prototype
 After-market export potential has been largely ignored with most organised auto-component
players focusing largely on OEM sales. Aftermarket requires concentrated efforts to build
global supply chain - both on-shore and off-shore capabilities, brand positioning, improved
product portfolio and building pricing strategies

AMP 2016-26:

Based on the brief overview provided by the SIAM conference, AMP 2016-26 envisions at
developing India as one of the top three automotive manufacturing hubs in the world. An
optimistic revenue target of $300 billion for FY 2026 has been set.
Some of the salient features of AMP 2016-26 are as below:

1. Auto industry to contribute 13 percent to the GDP - present contribution is less than 10 percent
2. Creation of incremental 100 million jobs
3. Projected $80 billion in capex investments
4. BS V emission norms to be adopted by 2019; BS VI emission norms to be implemented by 2023
for passenger vehicle
5. AMP envisages to implement ‘end of life policy’ for old vehicles

‘Make in India’ or ‘Made in India’?

Vision AMP 2016-26 has been aligned with Make in India campaign which is essentially a Made
in India initiative. Made in India initiative has brand perception challenges and could be
overcome only by providing value added products and services such as improved safety features,
technological enhancements, and quality management.

National Automotive Testing and R&D Infrastructure Project

The government has already spent $280 million for creation of centres of excellence and crash
test centres. The centres would help the industry to comply with advanced norms and help in
implementing AMP.

The National Electric Mobility Mission (NEMM) Plan 2020

The National Electric Mobility Mission Plan 2020 and policy of Faster Adoption and
Manufacturing of (Hybrid &) Electric Vehicles in India aims at creating a vehicle base of ~7
million electric cars by 2020. The policy aims to provide incentives to buyers as well as suppliers
and for undertaking R&D initiatives, to create public charging infrastructure, to encourage retro-
 fitment of vehicles. National Automotive Board (NAB) under the supervision of the department
of heavy industries has been constituted for implementation of the plan.
Other policy initiatives

The government of India has extended support to the industry by increasing customs duty on
CBUs of commercial vehicles from 10 percent to 40 percent, reduction in duty on chassis for
ambulance manufacturing from 24 percent to 12.5 percent, extension in concession on select
parts used in the manufacture of electric & hybrid vehicles and weighted deduction up to 200
percent of expenditure on R&D for computation of expenses under Corporate Tax.

Implementation challenges

AMP lacks clarity on real-time benefits for making additional capital investments and requires
an implementation road map for AMP 2016-26.

The key challenges for meeting the targets set out in the plan are alignment with global emission
standards and safety norms, lack of infrastructure, urban congestion, integration of smart
concepts-vehicle to vehicle and vehicle to infrastructure, meeting efficiency needs, and
safeguarding intellectual property rights. Some of the other challenges are:

1. Customs duty and transfer pricing issues plaguing the industry

2. Implementation of simpler tax structures such as GST
3. End of Life Policy’ for old vehicles and ban on overloading - these are sensitive issues and may
not find patrons in the political fraternity
4. Lack of growth opportunities for auto industry players have attracted them to other sectors

BMR point of view

While we have launched ambitious policies in the past, such policies have become plagued by
reform stagnation and suffered subdued enthusiasm on incentivisation and implementation front.
To help the industry leapfrog into the next generation of opportunities, we believe that a two-way
road map has to be built by GoI as well as the Indian automotive industry. While the government
has to make serious efforts on policy implementation, industry has to take the onus for making
Make in India a truly Made in India campaign.