AUTOMOTIVE SECTOR

University Of Petroleum and Energy Studies

MBA (ISM) 2011-2013 SUBMITTED TO DR.ASHISH MANOHAR URKUDE SUBMITTED BY ISHA GUPTA AMAN AGARWAL ALOK PARMAR

AUTOMOBILE HISTORY IN BRIEF

The design of the Cugnot Steam Trolley (1769)

History of the automobile begins as early as 1769, with the creation of steam-powered automobiles capable of human transport In 1806. The first cars powered by internal combustion engines running on fuel gas appeared, which led to the introduction in 1885 of the ubiquitous modern gasoline or petrol-fueled internal combustion engine.

INDIA : An Introduction
INDIA

USA
307.007 million 50 (+14 dependent

Population States reaps)

: :

1.21 billion 28 (+ 7 Union Territories)

Geographical Area
GDP

3.3 mn sq km

9.6 mn sq kms

: $1.377 Trillion

$14.119Trillion

Why India
The economy of India is emerging. The following table show the ranking of India in the past four years.

AUTOMOBILE SECTOR

The automotive sector is one of the key segments of the economy having extensive forward and backward linkages with other key segments of the economy. It contributes about 4 per cent in India's Gross Domestic Product (GDP) and 5 per cent in India's industrial production. This sector has generated about 4.5 lakh of direct employment and about one crore of indirect employment. The Detroit branch of Boston Consulting Group predicts that, by 2014, one-third of world demand will be in the four BRIC markets (Brazil, Russia, India and China).

AUTOMOBILE SECTOR
India manufactures over 17.5 million vehicles (including 2 wheeled and 4 wheeled) and exports about 2.33 million every year. India holds huge potential in the automobile sector including the automobile component sector owing to its technological, cost and manpower advantage. India has a well developed, globally competitive Auto Ancillary Industry and established automobile testing and R&D centers.

India enjoys natural advantage and is among the lowest cost producers of steel in the world.
India's largest car manufacturing industry hub is based in and around Chennai, also known as the "Detroit of India "with the India operations of Ford, Hyundai, Renault and Nissan headquartered in the city and BMW having an assembly plant on the outskirts.

Landmark of Indian automobile industry

1897 First Person to own a car in India - Mr Foster of M/s Crompton 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 First Taxi in India 1924 Formation of traffic 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 1994 General Motors India - Opel brand launch 1995 Ford Motor Company 1995 Honda Siel Cars India 1995 REVA Electric Car Company 1995 Daewoo Motors 1996 Hyundai Motor Company 1997 Toyota Kirloskar Motors 1997 Fiat Motors (Re-Entry) 1998 San Motors 1998 Mitsubishi Motors 2001 koda Auto 2003 General Motors India - Chevrolet brand launch 2005 BMW 2007 Audi 2009 Land Rover and Jaguar

THE AUTO INDUSTRY IN INDIA

THE AUTO INDUSTRY IN INDIA

9th largest automobile industry . 2nd largest two-wheeler market. 7th largest Passenger Cars producers. According to recent reports, India is set to overtake Brazil to become the sixth largest passenger vehicle producer in the world 4th largest in Heavy Trucks. 2nd largest tractor manufacturer. In 2009, India emerged as Asia's fourth largest exporter of passenger cars. The monthly sales of passenger cars in India exceed 100,000 units.

AUTO SECTOR THIS YEAR

India is home to 40 million passenger vehicles and 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. India's passenger car and commercial vehicle manufacturing industry is the seventh largest in the world, with an annual production of more than 3.7 million units in 2010. 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 and Mahindra and Mahindra are focusing expanding their footprint in the overseas market. Hero Honda Motors 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.

GOVERNMENT SUPPORT:
The Industrial Policy of 1991 de-licensed the Automobile Industry in India, but passenger car was de-licensed in 1993. This took the Indian automobile production from 5.3 Million Units in 2001-02 to 10.8 Million Units in 2007-08. The other reasons attracting global auto manufacturers to India are the countrys large middle class population, growing earning power, strong technological capability and availability of trained manpower at competitive prices. These are the major findings of our new report, Indian Automobile Sector - A Booming Market.

KEY PLAYERS

Two Wheeler Launched in 2011

Honda CBR250R

Hero Honda Karizma R

Hero Honda CBZ X-Treme

Yamaha SZ

Indian 2-Wheeler Market

Motorcycle

50%

30%

13%

4%

1%

2%

<1%

<1%

15%
-

28%
82%

2%
-

46%
-

9% <1%
8% 10%

India is now the second largest two-wheeler market in the world

Hyundai Passenger Vehicle Market

Hyundai Elantra Hyundai Verna RB

Hyundai i40

Launched In 2011

2011 Toyota Land Cruiser

2011 Ford Fiesta

2011 Volkswagen Jetta

Indian Passenger Vehicle Market

Passenger Cars
Utility Vehicles Multi Purpose Vehicles

52% 2%
100%

17% 18%
-

19% 1%
-

42%
-

1% 21%
-

5% 1%
-

2% 10%
-

2% 1%
-

2%
<1%

1% -

4%
-

<1% -

<1% <1%
<1%

4th largest Passenger Vehicle Market in Asia

PRODUCTION, SALES AND EXPORT

PRODUCTION

PRODUCTION

SALES

EXPORTS

FUTURE OF

INDIAN AUTO INDUSTRY

Future prospect of Indian Automotive Sector

Nissan Motors plans to export 250,000 vehicles manufactured in its India plant by 2011. General Motors announced its plans to export about 50,000 cars manufactured in India by 2011. By 2010, India is expected to witness over Rs 30,000 crore of investment. Maruti Udyog has set up the second car with an investment of Rs 6,500 crore. Hyundai will bring in more than Rs 3,800 crore to India. Tata Motors will be investing Rs 2,000 crore in its small car project. General Motors will be investing Rs 100 crore and Ford about Rs 350 crore. Ashok Leyland and Tata Motors have each announced over Rs 1,000 crore of investment.

Future prospect of Indian Automotive Sector

Future prospect of Indian Automotive Sector is looking bright. Passenger car production in India is projected to cross three million units in 2014-15. Sales of passenger cars during 2008-09 to 201516 are expected to grow at a CAGR of around 10%. Export of passenger cars is anticipated to rise more than the domestic sales during 2008-09 to2015-16. Motorcycle sales will perform positively in future, exceeding 10 Million units by 2012-13. Value of auto component exports is likely to attain a double digit figure in 2012-13. Turnover of the Indian auto component industry is forecasted to surpass US$ 50 Billion in 2014-15.

Technological Environment

With the entry of global companies into the Indian market, advanced technologies ,both in product and production processes have developed. With the development or evolution of alternate fuels, hybrid cars have made entry into the market. Few global companies have setup their R&D centers in India. Major global players like Audi, BMW, Hyundai etc have setup their manufacturing units in India. Government initiatives regarding tax rebates has led to global players setting up their R&D centers in India. Govt. initiatives in establishing NATRIP network across the country will further lead to enhancing R&D and technological advancements.

Problems with Automobile Sector

Impact of Global Recession on Indian Car Industry

India is one of the few countries where car sales have been increasing in the course of the worldwide economic downturn. Passenger car sales rose 31% to 115,067 units in July from 87,901 units a year ago. The effect of inflation has taken the rise in the price rate of the cars by 3-4% which in turn suffices the need to meet the rise in price of the raw materials to build a car. The effect of inflation has affected not only the production and sales of Indian cars but also has significantly affected the car dealer, officials and car financers. Research and observations have led to the conclusion that in the year 2008, the car market and the car industry is expected to witness 8-9% fall

Some other Problems with Automobile Sector

Effect of Rising Fuel Prices on Car Sales. The cars today are run on petrol, diesel and gas. The price hike of all the three has led to a serious problem. The hike in petrol went by 5% whereas the price of diesel went up by 3%. The rise in the price of the fuel has depreciated the sales of cars by 8%.

Steps taken by government to overcome recession

Vehicle makers cut prices following a government reduction in value-added tax last December, part of a stimulus package to help the sector, and the central bank has made a series of rate cuts to spur the economy.

Steps taken by A leading company to overcome rescission

TATA Motors is shedding up to 3,000 temporary jobs at its Pune factory, weeks after its decision to cut production and dismiss a similar number of temporary workers at its Jamshedpur plant. The latest cuts could take the overall layoffs to around 6,000 workers.

UNEMPLOYMENT
During the recent recession, the unemployment rate soared to a peak of 10.1% in October 2009. Since that time, real GDP growth has not been sufficient to bring down unemployment and it stubbornly has remained just below 10%. In addition, job creation has been slow and has fallen well short of the 250,000 or more gains per month that are expected to characterize the early stages of a recovery. While the unemployment rate did recently fall to 9.4% in December 2010, this drop appear s to reflect a shrinking labor supply, as job searchers give up and exit the market, rather than a true improvement in economic conditions. Most recently, in December 2010, 103,000 nonfarm payroll and 113,000 private sector payroll jobs were created. Besides falling short of gains needed to fuel a recovery, these g ains were much less than consensus projections of 160,000 and 180,000, respectively.

Interest Rates
During the tightening of credit terms during therecession, average nominal interest rates rose to 8.4% and 10.0% for new and used car financing, respectively. They subsequentlyfell to near record lows and remain around 4 % for new and 8% for used car financing. Despite expansionary monetary policy, interest rates for new and used vehicles havebarely moved.Given the slack in the economy which is unlikely t o markedly decrease in 2011,it is also unlikely monetary policy will tighten or i nterest rates rise substantially in 2011. As a result, we do not expect interest r ate shocks to noticeably affect projected auto sales in 2011.

THE MAJOR PLAYERS OF AUTOMOBILE SECTOR

TATA

Current Share Price Rs. 764.90 . Tata Motors is a dual-listed company traded on both the Bombay Stock Exchange, as well as on the New York Stock Exchange. Nano the world's cheapest car. In 2008, Tata Motors acquired British Jaguar Land Rover (JLR), which includes the Daimler and Lanchester brand names. In 2010, Tata Motors acquired 80% stake in Italy-based design and engineering company Trilix for a consideration of 1.85 million. The acquisition is in line with the companys objective to enhance its styling/design capabilities to global standards.

Tata Motors' total sales (including exports) of Tata commercial and passenger vehicles in August 2011 were 64,078 vehicles, lower by 3% over August 2010. The company's domestic sales of Tata commercial and passenger vehicles for August 2011 were 59,874 nos., lower by 2% over 60,797 nos. sold in August last year. Exports The company's sales from exports at 4,204 vehicles in August 2011 are lower by 18% compared to 5,157 vehicles in August last year. The cumulative sales from exports for the fiscal at 24,861 nos. are higher by 15% over 21,641 nos. in the same period last year.

MARUTI SUZUKI

Current Share Price Rs. 1,103.05 Car market leader Maruti Suzuki India Limited sold a total of 91,442 vehicles in August 2011. This includes 14,356 units for export. The company had sold a total of 104,791 vehicles in August 2010. The disruption in production at Company's Manesar plant in end August adversely impacted the sales numbers during the month. The Swift, SX4 and A-star are being manufactured at the Manesar plant.

Kizashi was launched in February 2011.

Net income2,288.6 crore (US$510.36 million)(2010-2011). The company had sold a total of 59,908 vehicles in August 2008. On February, 24, 2010, Maruti Suzuki India, announced recalling of 100,000 A-Star hatchbacks to fix a fuel leakage problem. the company will replace the gaskets for all 100,000 A-Star cars

HONDA

Current Share Rs. 2,215.10 Honda has been the world's largest motorcycle manufacturer since 1959, as well as the world's largest manufacturer of internal combustion engines measured by volume, producing more than 14 million internal combustion engines each year.

Honda surpassed Nissan in 2001 to become the second-largest Japanese automobile manufacturer.
As of August 2008, Honda surpassed Chrysler as the fourth largest automobile manufacturer in the United States. Honda is the sixth largest automobile manufacturer in the world.

Honda Siel Cars India (HSCI) registered an impressive growth of 25% in August 2011. The company reported a robust 6,907 units in sales for the month of August 2011 as against 5,518 units in August 2010 making it the highest ever for the month.
This remarkable growth in sales is fuelled by the sales of Honda City. The company sold 5,819 units of the Honda City in August 2011 registering 35% growth from the 4,251 units sold in August 2010. American Honda Motor Co., Inc., posted August sales of 82,321 vehicles, a decrease of 27.2 percent, based on the daily selling rate*, American Honda yearto-date sales reached 770,265, down 6.0 percent versus last year. Although production limitations caused by the March 11 earthquake in Japan continue to improve, reduced vehicle supplies adversely affected August sales results.

HYUNDAI

Current share price $ 28.63 Two of the best-known Hyundai divisions are Hyundai Motor Company, the world's fourth largest automobile manufacturer by volume as of January 2011, and Hyundai Heavy Industries, the world's largest shipbuilder. In August, trend continue with over 58.500 units moved during the month, a 9 percent increase over the same period last year. The picture is even rosier when compared month over month, with a 21 percent increase from August 2010 till now. After its July 2007 launch, the i30 went on to increase its sales in Europe every year, attracting 115,000 buyers in 2010 the highestever annual sales figure for an individual Hyundai model in Europe and achieving total sales of more than 350,000 units up to mid-2011.

FORD

Current share rate $10.09 Ford is the second largest automaker in the U.S. and the fifth-largest in the world based on annual vehicle sales in 2010. In 2008, Ford produced 5.532 million automobiles. Ford Motor Companys August sales totalled 175,220, up 11 percent versus a year ago driven by 16 percent higher Ford brand sales and 25 percent higher sales for Lincoln. Ford Motor Credit Company reported net income of $383 million in the second quarter of 2011, a decrease of $173 million from a year earlier. For full-year 2011, Ford Credit continues to expect to be solidly profitable but at a lower level than in 2010 Automobiles Automotive parts

PRODUCTS

VOLKSWAGEN

Current share price 95.45

Volkswagen has announced that between January and August 2011, 3.34 million vehicles were delivered to customers, a rise of 12.1 per cent compared to August 2010.
During August 2011, 389,500 vehicles were delivered, 9.5 per cent over August 2010's 335,800. The most successful vehicle was the Volkswagen Jetta. In South America, 511,800 vehicles were delivered, an increase of 6.7 per cent compared to 2010's 479,800. Diesel vehicle sales up 37% in August 2011; VW Jetta TDI remains on top

CHEVROLET

Current share price $21.76 Chevrolet Sales India Private Limited is a division of General Motors India Private Limited which in turn is a subsidiary of General Motors of the United States. It is the 5th largest car maker in India after Maruti Suzuki, Hyundai, Tata and Mahindra. In the year 2010 (January to December), Chevrolet Sales India Private Limited sold 110,804 vehicles against 69,579 vehicles sold during the year 2009 (January to December) and reported a increase of 59% in sales. In North America, Chevrolet sells and produces a wide variety of automobiles, from subcompact cars to medium-duty commercial trucks, whereas in Europe, the brand name is used on automobiles produced in Korea by General Motors.

BAJAJ

Current Share Price Rs.1573.35. Bajaj Auto is a major Indian vehicle manufacturer started by Jamnalal Bajaj from Rajasthan in the 1930s. The Forbes Global 2000 list for the year 2005 ranked Bajaj Auto at 1,946. In 2006-07, overall two-wheelers sales was 8.47 million, but in 200708 the sale fell by 4.8% to 8.07 million. exports increased by 20.8% to Rs.20.48 billion. Bajaj Autos market share in motorcycles fell marginally from 33.5% in 2006-07 to 32.7% in 2007-08.

Hero Honda

Current Share Price Rs. 2209.25. The 2006 Forbes 200 Most Respected companies list has Hero Honda Motors ranked at 108. In 2010, When Honda decided to move out of the joint venture, Hero Group bought the shares held by Honda. Subsequently, in August 2011 the company was renamed Hero MotoCorp with a new corporate identity.

During the fiscal year 2008-09, the company sold 3.7 million bikes, a growth of 12% over last year. In the same year, the company had a market share of 57% in the Indian market.
The annual sales of the Company grew at 0.01 per cent during 200708. The sales in 2007-08 was 3,337,142 units, while compared to 3,336,756 units during the year 2006-07.

TVS MOTORS

Current Share Price Rs. 59.60 TVS Motor Company is the third largest two-wheeler manufacturer in India. It is India's only two-wheeler company to have won the Deming Prize awarded for commitment to quality control, received in 2002. The total number of two wheelers sold by the Company during the year 2007-08 was 1.28 million units, registering a fall of 16% over the previous year.

Vision 2020

SWOT Analysis
Strengths

Automobile industry is an established and an evergreen industry. India is the strongest player in the small car segment of the global automobile market Indian companies are the best cost innovators The automotive industry has long been known for its development and promulgation of the assembly-line.

STRENGTHS

Some of the greatest developments in the automotive supply chain lie in the development of Just-In-Time (JIT) inventory methods. Through the use of advanced technologies, assembly line manufacturing, and JIT inventory management, the automotive industry has been able to achieve significant gains in productivity.

WEAKNESS

Indian is lacking in proper infrastructure.

This is slowing the pace of growth of auto industry

Companies are not improving after sale services

Opportunities

The automotive ecosystem is in the midst of significant change, with increasing challenges in consumer demands, technology development, and globalization. While demand for incumbent technologies will remain strong, alternative power trains could capture more than 20 percent of the global market by 2020, depending upon boundary conditions such as fuel taxation and emissions regulation set by governments as well as oil price development. storage is in the heart of the next generation of efforts for fuel economy. More realistic scenario will emerge for technologies using Hydrogen as automotive fuel. Intelligent use of NCES (Non conventional energy sources) for powering Public Transport.

Threats

Global Crisis Companies not focusing on R & D are under great risk High competition from foreign players Lack of technology for Indian companies

Uttaranchal is Now getting transformed into one of the major automotive hubs as we can see some of the major automotive producers have already invested here.

Reference

WIKIPEDIA

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