CHAPTER III Auto Industry Profile Introduction to Auto Sector
Automotive industry in India is one of the key sectors in the economy. After liberalization, the auto industry has been described as sunrise sector of an Indian economy as this sector witnessed remarkable growth. It has strong forward and backward linkages with other segments and industry provides a strong multiplier effects on overall industrial growth. The increased efficiency and productivity of auto industry results in reduced cost incurred for factor mobility. The sector today provides large employment and earns foreign exchange by export. The increasing mechanization in agriculture sector also facilitating in increasing agriculture productivity. So auto industry meets the common expectation of the government through employment, foreign exchange earnings and agriculture productivity. Today Indian auto industry is competing with its western peers in developed and emerging markets through its advance technology, designs, price and quality.
The story of steady growth in India begins in 1990s, has a strong connection with the auto sectors growth. The radical change from static 3.5% annual growth rate to 9% is possible because of auto industry growth. Today Indian auto industry is one of the largest in the India and one of the fastest growing globally. It has become seventh largest producer of commercial and passenger vehicles and produced 3.70 million units in 2010. If direction of growth remains the same in future India will bypass Brazil to become 6th largest producer in passenger vehicle segment. In India over 100 million vehicles had registered on its road in the year 2008 and out of 100 million, 77% or 77 million of these vehicles are two wheelers and 14 million are car, jeep and taxi.
3.1) Structure of Indian Auto Industry
The Indian auto industry has now strong foothold across all vehicle segments and segmentation is based on product type, uses and weights.
Indian auto industry has following segments
58 Figure No. 3.1 — Segments in Indian automobile industry
Indian Automobile Sector
r T
Passeneger Two Wheelers Three Wheelers vehicles Commerical Vehicles
Indian consumers have broad array of vehicles at its disposal as his purchasing power has been increasing day by day. Indian auto companies produce all types of vehicles for domestic consumption and export. Detail classification of Indian Auto segment is shown in the following table
Table 3.1 - Classification of automobile segment
Sr.No. Vehicle Type Segment
01 4 - Wheeler Passenger Vehicles Passenger Cars Utility Vehicles Commercial Vehicles Light Commercial Vehicles (LCVs) Medium Commercial Vehicles (MCVs) Heavy Commercial Vehicles (HCVs) 02 3 Wheelers Passenger Carriers Goods Carriers 03 2 Wheelers Scooters/ moped Motorcycles Electric 2-wheeler/ moped
Source - Mahipat Ranawat et.al.
59 Figure no 3.2 shows that two wheelers segment has dominant share in Indian auto market as it covers 76% of total market size. Two wheeler segment has witnessed the unprecedented grow th in last decade due to rising demand by rural area and increased fuel efficiency. India has emerged as world's second largest manufacturer of motorcycles and key 8 players in Indian markets produced 13.80 million units in 2010-11. Indian two wheeler segment possesses significant potential for future growth. After two wheeler segment, passenger vehicles segment is on second rank with 16.25% market share. Then commercial vehicles and three wheelers segment is ranked at 3rd and 4th with their respective share 4.36% and 3.39%. Indian automobile industry has generated direct and indirect employment for around thirteen million people with turnover more than $ 35 billion.
Figure No3.2-Auto segment and their market share in 2010-11
80 76 60
40 ■ Market Share (%) 20 16.25 4.36 3.39 0 Passenger Vehicles Commerical Vehicles Three Wheelers Two Wheelers Source: - Society for Indian Automobile Manufacturers (SIAM)
3.2) Decadal growth of Indian auto industry:-
In 1950s Indian government allowed to only seven car dealers to operate and 1960s witnessed establishment 2 and 3 wheelers industry in India, in initial years growth in production remains stagnated, 1980s witnessed major resurgence with opening up of Indian automobile market for foreign auto manufacturers. 1990s witnessed robust growth as number of foreign players entered in the domestic market through collaborations and partnership. Figure no.3.3 shows that production numbers have steep increase after partial liberalization after 1980 and steeper increase after full liberalization in 199!.The Table no. 3.2 shows production of automobiles in numbers from 1960 to 2011. In 2010 India has crossed I Crore vehicle production from 40,000 vehicles of 1960. From 1960 -61 to 2010-11 there is continuous growth in automobile production, but year 2000-01 and 2010-11 has witnessed robust. Maximum decadal growth in observed in 1980 and 1990 with 347 .46% , after entry of Maruti Udyog Ltd. in Indian auto market with other Japanese two wheeler manufacturers ( Yamaha and Kawasaki). The reason for
60 slow growth in domestic automobile industry is highly regulation and infant industry policy to protect domestic companies
Table No. 3.2 - Decadal growth of auto industry
Production Growth Decade on Years Numbers Growth on base year (1960-61) decade
1951-60 41535 - - 1961-70 181752 337.5876 337.59 1971-80 625143 1405.099 243.95 1981-90 2797241 6634.66 347.46 1991-00 5497416 13135.62 96.53 2001-10 11087997 26595.55 101.28
Figure no 3.3 - Decadal grow th of auto industry
Source:- L.G.Burange et.al.
3.3) Export of automotive products from India during 1990-2010
In 2007, Asian economies automotive export valued around US $ 265 billion in 2007 against world export $ 1.2 trillion in 2007. Europe is leading region in global automotive export and have 55% market share in total export. Asian economies enjoyed 22% market share in global auto export in 2007 against 19.9 in 2000 and in Asian economies Japan has played key role in auto export with $ 159 billion. Indian government liberalized foreign investment norms after 1991 resulted into robust export growth from India. India exports all types of vehicles , two wheelers accounted for two third share of total export from India in 2007-08 in number of units and passenger vehicles , three wheelers .commercial vehicles accounts 17.6%, 11.3%, 4.7%
61 share respectively in total vehicle exports. Between 2001-2008, the automobile export growth witnessed CAGR growth of over 31%. Almost 50% two wheeler export from India in 2007-08 consumed by Asian countries and sizeable volume of passenger vehicles were exported to Europe with Latin America and African region, figure no.3.4 shows that over the years export from India has continuously increased. In 1990 India exported auto products of value $198 million which increased to $ 588 million in 2000 and then very sleep increase is observed with export of $7,939 million worth auto products. Such substantial change in auto export from Indian base indicates opportunities for future Indian global leadership in auto industry.
Figure no 3.4 - Automotive export from India 1990-2010
Automotive export from India ($ Million)
____ ♦ $7,939 —*-$£799
1990 1995 2000 2008 2009 2010
Source :- WTO (International Trade Statistics 2001 and 2011) ( Figures in million $)
3.4) History of Indian Automotive Industry
Indian history of the automobile industry can be broadly divided into three phases
> Before independence > 1947-1983 > 1983-1993 > 1993-2010
1. Before independence:-
The first passenger car that the Indian people saw was in 1897, when a resident of Calcutta brought the first car to India. The next there were four cars in Bombay the owners were Jamshedaji Tata and three Parsis. During the year Dunlop opened its office for its pneumatic tyres and India has no other alternative rather than to use imported cars and import was in small number .
62 In 1903, Samuel John Green of Simpson of Simpson and co,, Madras built Indian first steam car and first steam bus in next two years which ran between Vijaywada and Machilipatnam. This was first motor bus service in India. In 1928, General Motors of India Ltd started assembling trucks and cars in Bombay. The first car assembled in India rolled off the assembly on 4th December 1928. In next two year, Ford motors commenced its operations from Madras, Calcutta and Bombay. In 1936 Addison & Co. Ltd commenced assembly of cars and trucks in Madras. Premier Automobiles Ltd was established in 1944 at Bombay (Sharma Ramchandran,2012).
II. 1st Phase (1947-1983)
Hindustan Motors Ltd., a Birla group company established in 1942 in Calcutta and started its operations from 1948. It began with assembling of Morris Oxford cars and Bedford trucks gradually indigenized the components. In 1957, the Morris Oxford sustainably indigenized and reintroduced as Hindustan Ambassador.
After independence Indian government and private sector launched its efforts to create an automotive component manufacturing industry to supplement Indian automobile industry. The period after independence was marked by adverse government policies for auto industry as -
1 Steep excise duties and sales tax
2 High customs duty on import
3 Restriction on production by license agreement
Major players in this period in four wheeler segment were Hindustan Motors, Premier Automobiles, Bajaj Tempo, TELCO (Tata Engineering and Locomotive Company), Ashok Leyland, Mahindra and Mahindra were flourished in the license regime from 1950s to 1990s w'hen India was closed to world and import.
Premier automobile was established in 1944 as a result of successful negotiations with Chrysler Corporation in 1939, resulting in licenses to build Plymouth car and Dodge truck.In 1949 parts were being made in India, starting with simpler Components and gradually building up to more complex pieces.
The early years of Premier and Hindustan were marked by the low sales, due to the size of the market. Only about 20,000 vehicles per year made in India, in 65 different models. To prevent 63 foreign companies from dominating mass producing practices, the government set up steep import duties on imported parts in 1954, allowing Indian parts to survive (Sharma Ramchandran,
2012).
Table No. 3.3 - Information of auto companies during 1st phase
Sr.No. Name of The Year of Name of Product Company Formation 01 Hindustan Motors 1942 Hindustan 10 (1949) , Baby Hindustan (1950), Hindustan 14, Land master (1954), Ambassador (1958), Contessa (1982) 02 Premier Automobiles 1944 Plymouth car (Under license of Chrysler Corporation) 1949, Premier Padmini (1962), Fiat 124, Fiat Uno, Peugeot 309
Source- Individual website III. 2nd phase (1983- 1993) :-
The real growth to Indian auto industry began in the 1980s when a number of Japanese manufactures formed joint ventures with Indian players for producing motorcycles and light commercial vehicles.
This period was witness of future auto industries changing structure. Important events during this period which has changed the future of auto sector are as follows
This decade saw the entry of Maruti Udyog Ltd in the passenger car segment because of government became interested in promotion of car production. After a careful search for joint venture partner, Indian government formed Maruti Udyog Ltd with Japanese Suzukig Corporation to manufacture a small car under the brand Maruti. The decade witnessed the emergence of Hero Honda as a major player in the two wheeler segments with Kawasaki Bajaj, Escorts Yamaha and Maruti Udyog as the market leader in the passenger car segment
64 Table 3.4 Important events for auto industry during 80’s
Sr .No. Year Important Events 1 1983 Government of India formed Joint Venture with Suzuki Motor Corporation to form Maruti Udyog Ltd. 2 1991 New Industrial Policy 3 1991 Auto Industry de-licensed 4 Other Joint Ventures (Hero Cycles + Honda) with Japanese (Bajaj +Kawasaki) Corporations in 1980s (Escorts+ Yamaha)
Source - IBEF Report - Automotive market and opportunities
Following table no. 3.5 shows auto companies which had dominant market share in 1992-93 in passenger vehicle segment. During the year production was of 163,600 units of passenger vehicles and 75% of market share was controlled by Maruti Udyog’s Maruti 100, Esteem and Omni. The presence of Maruti Udyog’s in India in 1990s caused to lose the shine of other pioneer Indian passenger vehicle companies.
Table 3.5 Market share of auto companies in 1992-93
Company Main Products 1992/93 Market Share Maruti Udyog Ltd (MUL) Maruti 100, Esteem, Omni 74.8% Premier Automobiles Ltd Premier Padmini ,NE118 9.4% (PAL) Hindustan Motors Ambassador, Contessa 13.4% Tata Engg & Locomotive Tata Siera, Tata Estate 2.4% Company Ltd Total Passenger Vehicles (Units) 163,300
Source- Vishwanathan Krishan
IV. 3rd Phase (1993-2010) :-
This period has changed the face of the Indian automobile industry by governments landmark decisions like removal of QRs on imports, 100% FDI through automatic route, ease in fund raising. Global major players entered into the market to exploit the Indian auto market
65 opportunities. Today India is the largest manufacturer of tractors, two wheelers and three- wheelers in the world.
Table No. 3.6 - Important events in auto industry after 1991
Sr.No. Important Events 1993- 2010 1 Foreign Direct Investment in Indian automobile market up to 100%
2 Relaxation in foreign exchange and equity market regulation 3 Reduction on tariff on import 4 Refining banking policy 5 Diversification of manufactures into related activities - fleet management, finance, lease and other related activities.
Source - IBEE Report - Automotive market and opportunities Today India’s strong engineering base and expertise in the manufacturing of low cost, fuel efficient cars has resulted in the expansion of manufacturing facilities from foreign auto players like Hundai Motors, Nissan, Toyota, Volkswagen and Suzuki. Also these companies arc- exporting their products to other Asian countries from India.
Table No. 3.7 - Types of passenger vehicle manufactures after liberalization
Types of passenger cars manufactures in India after complete liberalization International Automakers Joint Ventures Domestic Manufactures Hyundai Motor Co. Maruti Udyog Ltd. Tala Motors Ltd. General Motors India Toyota Kirloskar Motor Mahindra and Mahindra Ltd. Ford Motor Co. Honda Siel Cars Ltd. Hindustan Motors Ltd. Volkswagen India Mahindra Renault Premier Automobile Ltd. Source - 1BEF report -Automotive industry (2009)
3.5) Indian Auto Cluster
The India’s car manufacturing industry is based around three clusters in the south, west and north.
" 66 Table No. 3.8 - Auto cluster in India
Sr.No. Name of Location Operating Companies Cluster 1 South Chennai Ford, Hyundai, Renault, Nissan, BMW 2 West Maharashtra General Motors, Volkswagen, Skoda, Mahindra and Mahindra, Tata Motors, Mercedes Benz, Land Rover, Fiat, Force Motors , Skoda, Audi, 3 North Haryana Maruti Suzuki, Honda Siel, Hindustan Motors,LML Source - IBEF Report - Automotive market and opportunities Indian car manufacturing industry is based around three clusters in the south, west and north. The southern cluster is near Chennai is also called as “Detroit of India”. South hub has 35% revenue share in auto market. Ford, Hyundai, Ford, Hyundai, Renault, Nissan has headquarters in Chennai. This cluster contributes 60% of export of country’s automobile exports.
The western cluster near Mumbai - Pune is controlling one third of market. The plants of General Motors, Skoda, Mahindra and Mahindra, Tata Motors, Mercedes Benz, Land Rover, Fiat, Force Motors are located in Chakan corridor near Pune. Aurangabad has Volkswagen, Audi, Skoda plants. Gurgaon and Manesar is Haryana form the northen cluster where Maruti Suzuki is based near one third production of country’s auto production comes from this cluster. Kolkata with Hindustan Motors , Noida with Honda and Bangalore with Toyota are other locations but they contribute less.
3.6) Growth trends in Indian automobile industry i) Production trend
Table no 3.9 shows that production trend in Indian auto industry is growing on year on year basis between 2004-05 to 2010-11 except year 2007-08. This is clear that due to global financial crises of 2008 Indian auto industry has suffered but its impact is very low and next consecutive years it has shown steady growth at 66 %and 112% on base year.
Following table shows production trend in the Indian auto industry during 2004-05 to 2010-11
67 Table No. 3.9 - Automobile production trend in during 2005- 2011
Category 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 Passenger 1209,87 1309,30 1545,223 1777,583 1838,593 2357,411 2987,296 Vehicles 6 0 Commercia 353,703 391,083 519,982 549,006 416,870 567,556 752,735 1 Vehicles Three 374,445 434,423 556,126 500,660 497,020 619,194 799,553 Wheelers Two 6529,82 7608,69 8466,666 8026,681 8419,792 10512,90 13376,45 Wheelers 9 7 3 1 Grand 8467,85 9743,50 11087,99 10853,93 11172,25 14057,06 17916,03 Total 3 3 3 0 3 4 5 YOY % 15 30 28 32 66 112 Change Source: - Society for Indian Automobile Manufacturers (SIAM) ii) Sales trend
Table no3.10 shows sales trend in Indian auto industry between 2004-05 and 2010-11 and overall period has satisfied growth in sales. It indicates the reversal trend in year 2007-08, from 28% in 2006-07 to 22% in 2007-08 and then slight growth in next year 2008-09 i.e. 23%. But the reversal trend in Indian auto sales has resulted in robust growth during 2009-10 and 2010-11 at 55% and 96%.
Following table shows Automobile domestic sales trends in the Indian auto industry during 2004-05 to 2010-11
Table No. 3.10 - Automobile sales trend in during 2005- 2011
Category 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 Passenger 1061,572 1143,076 1379,979 1549,88 1552,70 1951,33 2520,421 Vehicles 2 3 3 Commercial 318,430 351,041 467,765 490,494 384,194 532,721 676,408 Vehicles Three 307,862 359,920 403,910 364,781 349,727 440,392 526,022 Wheelers Two 6209,765 7052,391 7872,334 7249,27 7437,61 9370,95 11790,30 Wheelers 8 9 1 5 Grand 7897,629 8906,428 10123,988 9654,43 9724,24 12295,3 15513,15 Total 5 3 97 6 YOY % 13 28 22 23 55 96 Change Source: - Society for Indian Automobile Manufacturers (SIAM)
68 iii) Export trend
Table no. 3.11shows export trend of auto product from India between 2004-05 and 2010-11. Table no 3.9 and table no 3.10 showed that growth in production and sales has affected due to crisis in 2007-08 and 2008-09. But the same is not visible in export trend of auto product from India between 2004-05 and 2010-11. Table No. 3.11 shows overall stable and steady growth in export of auto products from India indicates strong presence of Indian auto products all over the world. India’s automobile exports have grown continuously reached $4.5 billion in 2009 with United Kingdom became the India’s largest export market followed by Italy, Germany, Netherlands and South Africa. Hyundai Motors India Ltd rolled out 30,00,000th car in August 2010 after 13 years of its operations and the biggest exporter form the country now ships more than 250,000 cars annually from India.
Following table shows Automobile export trend in the Indian auto industry during 2004-05 to 2010-11
Table No. 3.11 - Automobile export trend in during 2005- 2011
Category 2004-05 2005- 2006-07 2007-08 2008-09 2009-10 2010-11 06 Passenger 166,402 175,572 198,452 218,401 335,729 446,145 453,479 Vehicles Commercial 29,940 40,600 49,537 58,994 42,625 45,009 76,297 Vehicles Three 66,795 76,881 143,896 141,225 148,066 173,214 269,967 Wheelers Two Wheelers 366,407 513,169 619,644 819,713 1004,174 1140,058 1539,590 Grand Total 629,544 806,222 1011,529 1238,333 1530,594 1804,426 2339,333 YOY % 28 61 97 143 186 271 Change Source: - Society for Indian Automobile Manufacturers (SIAM)
3.7) Global Production trend
Table no. 3.11 table shows original equipment manufacturer, their auto production in 2008 and respective market share. It shows that Toyota of Japan is having largest global market share withl3.3% , then General Motors at second rank with 11.9 market share , at third Volkswagen of Germany with 9.3% market share. 77% of global auto market share was concentrated among 10 auto companies and no Indian company was placed in top 10 automobile companies in the world. 69 Table No. 3.12 - Global production of auto products by companies, market share in 2008
Rank OEM Group HQ Location 2008 Global Global Cumulative Production Market Share Market Share (%) (%) 01 Toyota Japan 92,37,780 13.3 13.3 02 GM United States 82,82,803 11.9 25.2 03 Volkswagen European Union 64,37,414 9.3 34.4 04 Nissan - Renault Japan/ European 58,12,416 8.4 42.8 Union 05 Ford United States 54,07,000 7.8 50.6 06 Fiat- Chrysler European Union 44,17,393 6.4 56.9 07 Hyundai - Kia Korea 41,26,411 5.9 62.9 08 Honda Japan 39,12,700 5.6 68.5 09 PSA European Union 33,25,407 4.8 73.3 10 Suzuki Japan 26,23,567 3.8 77.0
Source:- Deloitte Report - A new era accelerating toward 2020 - An automotive industry transformed
3.8) Partnerships of Indian Players with foreign firms
In last twenty years auto industry has changed its location preference by various reasons like low cost of production, fast growing market, taxation structure, and government support. Earlier the auto industry has prospered in North America, Europe and Japan. But now labour cost and cost of production is high in these countries and this is forcing companies to relocate their operations.
In 21st century, the global auto products demand and production has witnessed a dramatically shift from developed countries to developing countries. Table No 3.13 shows that swift increase in demand and production in Asian countries between 2001 -07 and at the same time Western Europe and North America regions shows fall in demand and production of cars. Following table no. 3.13 shows the world car sales and production by sub regions between 2001 to 2007. In West Europe, North America have negative trend in sales and production during 2001 and 2007. At the same time, East Europe, Latin America, Asia JO, Asia - DK , Middle East , Africa have positive trend in their sales and production during 2001 and 2007 and among them Asia DK has prospered significantly.
70 Table No. 3.13 - World car sales and production by sub regions 2001-07 ( million units)
Region 2001 2007 2001 to 2007 % Change Sales Production Sales Production Sales (%) Production (%)
West Europe 14.93 15.00 14.82 14.24 -0.70 -5.10 East Europe 2.13 2.45 4.42 5.07 107.50 106.90 North 19.03 13.70 17.88 13.10 -6.0 -4.4 America Latin America 2.80 3.71 4.28 5.24 52.9 41.2 Asia- JO 4.90 8.40 5.14 10.24 4.9 21.9 Asia - DK 3.58 4.67 9.78 11.52 173.20 146.70 Middle East 1.00 - 2.18 - 118.00 - Africa 0.66 0.23 1.08 0.28 63.60 21.70 Total 49.03 48.16 59.58 59.69 21.50 23.90 Source:- Peter Wad
US, Western Europe and Japan are having high cost of labour as compare to developing economies like Mexico, India, China and Brazil. Also these are very swiftly emerging economies so attracting foreign companies to relocate their operations. India has been evolving as manufacturing hub as well as fast growing auto market for Ford, General Motors, Chrysler, Toyota, Honda, Nissan and BMW. Indian firms are increasingly partnering with foreign companies across all segments. Such partnerships offers a foot hold to the foreign players into the rapidly growing Indian Automobile Market, while contributing technology and monetary assistance to the Indian Companies too.
3.9) SWOT analysis for Indian automobile industry
1) Strengths a. Large domestic market and export base for Asian countries b. Central and state government support for establishment of manufacturing unit c. Low labour cost 2) Weakness a. Infrastructural bottlenecks b. Less productivity c. Too many taxes imposed by central, state and local authorities which adversely impact on cost of production
71 3) Opportunities a. Reduction in excise duty b. Increasing demand from rural India c. Continuous increasing income 4) Threats a. Rising interest rate b. Steep competition in Indian and foreign auto players c. Increasing cost of raw materials
3.10) Future challenges and opportunities to automobile industry
Future challenges to Indian automobile industry
1) Rising input cost Price of inputs like steel, non ferrous metals, rubber, glass have increased lot in last decade and in turn overall production cost has increased. Cost escalation in auto product input has adversely impacted the growth of Indian automobile industry. 2) Fuel price volatility Fuel price volatility has considerable impact on the growth of auto industry. Steel, aluminum which is major part of auto manufacturing directly affects by increase in oil prices by transportation cost and polymer is one of the input used in auto manufacturing is a derivative of crude oil. Secondly, the increased oil price has positive impact on inflation and adversely affects to the saving and disposable income of the consumers in turn affect to automobile demand. In last, increased oil prices affect overall run cost for customer. Hence price instability of fuel affects the future prospectus of auto industry. 3) Growing competition Competition in India’s automobile industry has been increasing in last decade. The regulatory mechanism and market conditions helped the Indian OEMs to monopolistic or oligopolistic market structure. After deregulation Indian automobile market is opened to foreign auto players and over 20 foreign auto players entered into passenger car segment. In the commercial vehicle segment, Indian companies Tata motors and Ashok Leyland competition has been increasing with the emergence of Bharat Benz and Vovlo. 4) Environmental issues As per estimates, automobile industry accounts for 25% of global anthropogenic GHG emissions. Governments in developed countries are more serious on emission norms, 72 punishing inefficient cars through fine, tax. Such government policies restrict export from developing economies to EU, USA and Japan. 5) Low R & D orientation The competitiveness of auto industry comes through increased productivity which force for continuous innovation by auto players. But Indian auto players spend less from their earnings as compare to global standards. Today Indian auto companies are designing product for domestic market or for export, but they are not designing a vehicle for global market to compete with international brands. Also Indian auto companies are more focused on modification of existing models to improve performance and neglect development of new models. 6) Infrastructure constraints Insufficient road infrastructure and traffic congestion are bottleneck in the growth of Indian auto industry. Road capacity addition is lagging behind traffic growth in last decade. Port has insufficient infrastructure to handle the export and also challenges associated with space for parking and setting up repair shop in yards. Improvement in road infrastructure provides immense opportunity for Indian automobile industry and well road to port connectivity help to enhance supply chain management strategies of the vehicle manufactures. All those infrastructural bottlenecks need to be removed for immediate prosperity of auto industry.
Future opportunities to Indian automobile industry
1) Addressing fuel price volatility Fuel price is one of influential factor that affect to automobile demand, in order to address fuel price volatility today automobile industry is innovating technologies and inventing alternative use of energy. Hydrogen cars which are driven by fuel cells, electric cars with rechargeable batteries, compressed air technology to drive the pistons in specially designed engine are suggested thought to replace existing fossil fuel vehicles. In next decade automobile industry will witness dramatic change in automobile products. 2) New generation cars Today auto companies are differentiating in their product and services and it is innovation which is going to drive future auto industry. Hence use of IT and electronics in the automotive functionalities will be obvious like entertainment, navigation and
73 safety. According to IBM survey with major auto players future innovation in auto industry is in software and electronics systems of vehicles. 3) Growing small car segment The volatility in oil prices in 2008 from $140 at its peak to $40 realized the need for small and fuel efficient vehicles by auto industry. Auto companies are also investing heavily in research and development to reduce small car price, as rising income of middle class Indian families enticing them to purchase small car. 4) Increasing collaboration for technology enhancement Today auto companies are sharing new designs, technology through software among designers, engineers, suppliers, customers. Such facilities help auto companies in necessary adjustments and adaptations in designs as per requirements. 5) Recycling of design The automobile industry is one of the industry which use recyclable materials. As world natural resources are depleting and by giving due consideration to the conservation of natural resources, auto companies are developing material that can easily be recycled. 6) Consumer preference The dynamics of Indian automobile market is changing with customer changing preferences for vehicles. Earlier two wheeler segment was considered by scooter which has been dominated by motorcycles. This change in consumer preference was driven by fuel efficiency, design and technological development. Hence by considering consumer preference auto companies should design their products to maintain their market share.
74 3.11) Major Auto Players in Indian market in 2010
The following table no. 3.14shows major auto players in the Indian auto market in 2010 and their market segments.
Table No. 3.14 - Major auto players and their segments in Indian market
Sr.No. Name Of Company Segments 01 Ashok Leyland Ltd LCVs , M & HCVs, Buses 02 Asian Motor Works M & HCVs 03 Bajaj Auto Ltd Two and Three Wheelers 04 BMW India Cars and MUV’s 05 Daimler Chrysler India Cars 06 Eicher Motors Ltd. LCVs , M & HCVs 07 Fiat India Cars 08 Force Motors LCVs , M & HCVs 09 Ford India Cars and MU Vs 10 General Motors India Cars and MU Vs 11 Hero Honda Motors Ltd. Two Wheelers 12 Hindustan Motors Cars, LCVs , M & HCVs 13 Honda Two Wheelers, cars and MUVs 14 Kinetic Motors Two Wheeler 15 Mahindra and Mahindra Ltd. Three Wheelers, Cars, LCVs , M & HCVs, 16 Maruti Suzuki Cars, MUVs, MPVs 17 Piaggio Three wheelers, LCVs 18 Royal Enfield Motors Two Wheelers 19 Skoda Auto India Cars 20 Suzuki Motorcycles Two Wheelers 21 Swaraj Mazda Ltd LCVs , M & HCVs,Buses 22 Tata Motors Ltd. LCVs , M & HCVs,Buses, MUVs 23 Toyota Kirlsokar Cars, MUVs 24 TVS Motor Company Two Wheelers 25 Volvo India M & HCVs, Buses 26 Volkswagen India Cars 27 Yamaha Motor India Two Wheelers Source - IBEF Report - Automotive market and opportunities
75 Company profile of Tata Motors Ltd
Established in 1945, Tata Motors' presence cuts across the length and breadth of India, Over 7.5 million Tata vehicles ply on Indian roads, since the first rolled out in 1954. The company's manufacturing base in India is spread across Jamshedpur (Jharkhand), Pune (Maharashtra), Lucknow (Uttar Pradesh), Panfnagar (Uttarakhand), Sanand (Gujarat) and Dharwad (Karnataka). Tata Motors Limited is India's largest automobile company, with consolidated revenues of INR 1,65,654 crores (USD 32.5 billion) in 2011-12. It is the leader in commercial vehicles in each segment, and among the top in passenger vehicles with winning products in the compact, midsize car and utility vehicle segments. It is also the world's fourth largest truck and bus manufacturer. Tata motor is founded by J.R.D. Tata by the mission "to be passionate in anticipating and providing the best vehicles and experiences that excite our customers globally". Today it is headed by Cyrus Pallonji Mistri. Tata motor is listed on Bombay stock exchange and National stock exchange. It is engaged in heavy and medium commercial vehicle, light commercial vehicle and passenger vehicle segment.
Following a strategic alliance with Fiat in 2005, it has set up an industrial joint venture with Fiat Group Automobiles at Ranjangaon (Maharashtra) to produce both Fiat and Tata cars and Fiat power trains. The company’s dealership, sales, services and spare parts network comprises over 3,500 touch points. Tata Motors, also listed in the New York Stock Exchange (September 2004). has emerged as an international automobile company. Through subsidiaries and associate companies, Tala Motors has operations in the UK, South Korea, Thailand. Spain. South Africa and Indonesia. Among them is Jaguar Land Rover, acquired in 2008. Satrbus, Ace. Prima. Ultra, 1581c, 407 Ex, Sumo, Safari , Indica are some famous auto brands belongs to Tata Motors www.tatamotoi-s.com.
Company profile of Ashok Leyland Ltd
For over six decades, Ashok Leyland has been moving people and goods, touching customer and millions across 50 countries worldwide. Ashok Leyland Ltd. is established in 1948, Today, company is the flagship of the Hinduja Group, one of the largest commercial vehicle manufacturers in India with a turnover of US $ 2.5 billion in 2011-12 having consistently delivered profits to stake-holders since inception. Ashok Leyland buses safely carry 70 million passengers to their destinations every day. Close to 700.000 of vehicles keep the wheels of
76
JgtBIVa IJ UNjVtHSnVr KOLHAP economies turning and, as the largest supplier of logistics vehicles to the Indian Army, company plays a critical role in keeping our borders safe. Today Ashok Leyland Ltd. is listed on Bombay stock exchange and National stock exchange. Currently Ashok Leyland Ltd. is headed by Dheeraj Hindjua with its 15,000 employees and it's headquarter is located at Chennai.
For company customers, company is committed to provide transport solutions that offer the best operating economics while for users of vehicles, comfort and safety. This has driven to pioneer concepts that have become industry norms fueled both by robust inherent R&D capabilities and the strength of strategic alliances forged with global technology leaders. Ashok Leyland Ltd. plants are located at Chennai, Bhandara, Alwar,Hosur, Pantnagar and with two facilities in Prague (Czech Republic) and Ras A1 Khaimah (UAE). Ashok Leyland Ltd. is largely focusing on heavy and medium commercial vehicle segment. Company produces Comet, Taurus, Bison Tipper, Artik, Tusker Turbo (www.ashokleyland.com)
Company profile of Mahindra and Mahindra Ltd.
Founded in 1945 as a steel trading company, Mahindra & Mahindra Ltd. entered automotive manufacturing in 1947 to bring the iconic Willys Jeep onto Indian roads. Over the years, company has diversified into many new businesses in order to better meet the needs of customers. M&M follow a unique business model of creating empowered companies that enjoy the best of entrepreneurial independence and Group-wide synergies. This principle has led growth of company into a US $15.9 billion multinational group with more than 155,000 employees in over 100 countries across the globe. Today, M&M operations span 18 key industries that form the foundation of every modem economy: aerospace, aftermarket, agribusiness, automotive, components, construction equipment, consulting services, defense, energy, farm equipment, finance and insurance, industrial equipment, information technology, leisure and hospitality, logistics, real estate, retail, and two wheelers. Federated structure enables each business to chart its own future and simultaneously leverage synergies across the entire Group’s competencies. In this way, the diversity of its expertise allows to bring customers the best in many fields. M&M Ltd. is founded by K.C. Mahindra , J.C. Mahindra and M.G. Mohhamad and currently company is headed by Anand Mahindra.
In 1947, company introduced India to the utility vehicle. More than 65 years later, company is still India's premier utility vehicle (UV) company, but also grown quite a bit. In addition to
77 making groundbreaking UVs like the Scorpio ar.d Bolero, Mahindra offers cars, pickups, and commercial vehicles that are rugged, reliable, environmentally friendly, and fuel-efficient. M&M is listed on Bombay stock exchange and National stock exchange and it’s headquarter is located at Mumbai. M&M Ltd. is manufacturing auto products from its various plants located at Igatpuri, Jaipur, Haridwar, Nagpur, Nashik. Companies global presence means customer can find Mahindra vehicles on the roads—both paved and unpaved—of Australia, Europe, Latin America, Malaysia, South Korea, and South Africa. Today company is engaged in cars and utility vehicles segment and produces auto products like Marshal, Commander, Xylo, Scorpio, Verito and XUV 500 (www.mahindra.com).
Company Profile of Eicher Motors ltd
Eicher Motors Ltd is one of the leading manufacturer of commercial vehicles in India. Their principal activity is manufacturing and selling of commercial vehicles, two wheelers and gears. They are having their manufacturing facilities at Pithampur and Dewas in Madhya Pradesh, Chennai in Tamil Nadu, Thane in Maharashtra and Gurgaon in Haryana. Eicher Motors Ltd was incorporated in the year 1982. The company in technical collaboration agreement with Mitsubishi Motor Corporation of Japan produced the Light Commercial Vehicle in India. The commercial production was commenced in their plant at Pithampur in Madhya Pradesh, with the launch of Canter truck in June 1986. The agreement with Mitsubishi ended in March 1994 after successful transfer of technology and achieving total Indigenization. The demerger of Tractors, Two-Wheelers, Engines and Gears businesses from Eicher Ltd was transferred to the company with effect from April 1, 2003. In May 2008, the company signed a definitive agreement with Aktiebolaget Volvo, Sweden for a formation of a joint venture company through transfer of the existing Commercial Vehicle Business along with related Components and Design Services Business. In August 2008, they transferred the Components and Design Services Business to VECV, the joint venture company with effect from July 01, 2008. During the year ended December 31, 2011, total exports in were 3,200 units, and total sales volume of Royal Enfield was 74626 motorcycles. Currently company is headed by S. Sandilya and company is engaged in light commercial vehicle segment. Eicher Motors Ltd. is listed on Bombay stock exchange and National stock exchange. Company produces auto products like Eicher 10.90, Buses, Touch buses, Tipper, Jumbo and Galaxy (www.eicher.in).
78 Company Profile of SML Isuzu Ltd.
Incorporated in Jul.'83 as Swaraj Vehicles, Swaraj Mazda (SML) got its present name in 1984. It has been jointly promoted by Punjab Tractors (PTL) in India and Mazda Motor Corporation & Sumitomo Croporation in Japan. The company came out with a public issue in May '85 to part- finance its projects. In October 2004, SML's Technical Assistance Agreement with Maza ended. Subsequently on 18th August 2005, Maza sold to Sumitomo Corporation, Japan its entire holding in SML of 1638000 equity shares representing 15.62% of the equity capital of SML. SML's plant location is at Nawanshahar in Punjab. Starting from 2-wheel bases, its model range now spans 5-wheel bases. Carrying capacities have spread from 3.0 ton to 6.0 ton in the goods segment (GVW 5.8 to 8.8 ton) and from 12 to 41 seaters in the passenger segment. The company has also the distinction of producing India's first factory finished buses. In recent years, Swaraj Mazda has successfully introduced India's first 4-wheel drive LCVs and CNG mini-buses. Current variety of specialty vehicles includes Police Vans, Ambulances (2 stretchers/4 stretchers), Dental Vans, Water Tankers, Fire Tenders, Dumper Placers, Bottle Carriers etc. On the basis of design features and performance, over the years, its buses, ambulances and specialty vehicles have acquired a distinct customer image and preference. In the year 2005, based on its R&D efforts and guidance from Madza, 3 more wheel bases has been added of 2.8m, 3.9m and 4.7m.The GVW range has been raised to 9.8 Ton. Thus SML's current range of 5.8-9.8 Ton GVW has 6 distinct models with several variants. Also in the passenger segment, from the orginal 26 seater version, SML models is of 12-41 seat range. In 4 wheel drive vehicles, CNG vehicles and Airbrake versions,has also be developed through SML's own efforts The effort has been to build and nurture relationship with the customers by rendering better than the best service. Its dealer outreach has grown to 135 (55 in 1986). In addition, it has 10 offices through out the country to support and monitor a net work of 130 dealers and 55 Service Centres. The company has absorbed Advanced Japanese Technology both through in-house activity as well as through vendors and its products are in the last stages of indigenization. Company head office is located at Chandigarh , India and it is headed by S.K. Tuteja, it is also listed on Bombay stock exchange and National stock exchange. Company produces trucks like Isuzu NQR, SML premium , SML prestige and bus like ISUZU LT 134 (www.smlisuzu.com)
79 Company Profile of Maruti Suzuki India Ltd
Initially Maruti Suzuki was owned by 18.28% the Indian government and 54.2% by Suzuki of Japan and Indian government issued an initial public offering of 25% of the company in June 2003. In May 2007, the Indian government sold its entire stake to Indian financial institutions and no longer has any stake in Maruti Udyog. Maruti Suzuki India Limited (MSIL) is primarily in the business of manufacture, purchase and sale of motor vehicles and spare parts (automobiles). The other activities of the Company consist of facilitation of pre-owned car sales, fleet management and car financing. Company has started its operations in year 1981 and its headquarter is located at New Delhi. The Company offers a range of cars across different segments. It offers 14 models with over 200 variants across the industry segments like Passenger cars, utility vehicles and vans. The Company has five plants in the Gurgaon and Manesar areas of Haryana equip Maruti Suzuki with a production capability of 1.55 million units per annum. The Company is a subsidiary of Suzuki Motor Corporation. Currently company is headed by R.C. Bhargava and company is engaged in passenger vehicle segment. The Company passenger car include Alto, Alto-KlO, A-star, WagonR, Swift, Ritz and Estilo, off-roader Gypsy, SUV Grand Vitara, sedans SX4, Swift DZire and Kizashi. During the fiscal year ended March 31, 2012 (fiscal 2012), the Company sold over 1.13 million vehicles, including 127,379 units of exports (www.marutisuzuki.com).
Company Profile of Hero Honda Ltd
Hero MotoCorp Limited is the World's single largest two-wheeler motorcycle company. The company is engaged in the manufacture of two wheelers motorcycles and its parts. The company has three manufacturing facilities namely Dharuhera, Gurgaon at Haryana and Haridwar at Uttarakhand. Company head office is located in New Delhi, India. The company offers a range of bikes starting from CD Dawn, CD Deluxe, Splendor Plus, Splendor NXG, Passion and Passion Pro.Hero MotoCorp Limited was incorporated in the year 1984 with the name Hero Honda Motors Ltd. The company was established as a joint venture company between Honda Motor Company of Japan and Hero group of India. In the year 1983, they signed a joint collaboration agreement and formed the company. The joint venture between India's Hero Group and Honda Motor Company, Japan has not only created the world's single largest two wheeler company but also one of the most successful joint ventures worldwide. In the year 1985, the company commenced their commercial production at Dharuhera plant in Haryana and introduced
80 their first motorcycle, CD 100 in the market. Also, during the year, the Indian Promoter Group and Honda Motor Co Ltd, Japan (Honda) entered into a Share Transfer Agreement (the Agreement) on January 22, 2011. As per the terms of the Agreement, Honda had agreed to transfer its entire shareholding of 26% in the Company to the Indian Promoter Group, bringing an end to the joint venture between the two promoter groups of the company. The acquisition was completed on March 22, 2011 and the shares held by Honda were transferred to the Indian joint venture partner. In addition to the Agreement, the Indian Promoter Group and Honda also entered into a License Agreement on January 1, 2011. As per this agreement, Honda has given to the company, the right and license to manufacture, assemble, sell and distribute certain products and their service parts under their Intellectual Property Rights. In July 2011, the company changed their name from Hero Honda Motors Ltd to Hero MotoCorp Ltd (www.heromotocomp.com).
Company Profile of Bajaj Auto Ltd.
Bajaj Auto Ltd is one of the leading two & three wheeler manufacturers in India. The company is well known for their R&D, product development, process engineering and low-cost manufacturing skills. The company is the largest exporter of two and three-wheelers in the country with exports forming 18% of its total sales. The company has two subsidiaries, namely Bajaj Auto International Holdings BV and PT Bajaj Indonesia. The company was incorporated on April 30, 2007 as a wholly owned subsidiary of erstwhile Bajaj Auto Ltd (the holding company) with the name Bajaj Investment & Holding Ltd. The company received the certificate of commencement of business on May 7, 2007. The holding company operated in the segments, such as automotive, insurance and investment, and others. Considering the growth opportunities in the auto, wind-energy, insurance and finance sectors, the holding company de-merged their activities into three separate entities, each of which can focus on their core businesses and strengthen competencies. The auto business of the holding company along with all assets and liabilities pertaining thereto including investments in PT Bajaj Auto Indonesia and in a few vendor companies transferred to Bajaj Investment & Holding Ltd.As the part of the scheme, Bajaj Holdings and Investment Ltd were renamed as Bajaj Auto Ltd. In April 9, 2007, the company inaugurated their green field plant at Pantnagar in Uttarakhand. In the first year of operations, the plant produced over 275,000 vehicles. The company's vehicle assembly plant at Akurdi was shut down from September 3, 2007 due to higher cost of production (wwwbaj aj auto.com).
81 Company Profile of TVS Motors Ltd.
TVS Motor Company Ltd, the flagship company of TVS Group is the third largest two-wheeler manufacturer in India. The company manufactures a wide range of two-wheelers from mopeds to racing inspired motorcycles. The company is having their manufacturing plants at Hosur in Tamilnadu, Mysore in Karnataka and Solan in Himachal Pradesh. They are also having one unit located at Indonesia. Their subsidiaries include Sundaram Auto Components Ltd, TVS Motor Company (Europe) BV, TVS Motor (Singapore) Pte Ltd, PT TVS Motor Company, Indonesia, TVS Energy Ltd and TVS Housing Ltd. TVS Motor Company Ltd is a part of Sundaram Clayton group in TVS group of companies. In the year 1979, Sundaram-Clayton Ltd started Moped Division at Hosur to manufacture TVS 50 mopeds. In the year 1982, the company entered into a technical know-how and assistance agreement with Suzuki Motor Co Ltd of Japan and in the year 1985, they incorporated a new company Lakshmi Auto Components Pvt Ltd for the manufacture of critical engines and transmission parts. In the year 1986, the company acquired the assets of the moped division from Sundaram Clayton Ltd. Also, the name of the company was changed from Indo Suzuki Motorcycles Ltd to TVS Suzuki Ltd The TVS group and Suzuki Motor Corporation parted ways from their 15-year-old joint venture on September 27, 2001. The shares held by the Suzuki Motor Corporation were acquired by Anusha Investments Ltd, a wholly owned subsidiary of Sundaram-Clayton Ltd for Rs 9 crore. Thus, the company became a subsidiary of Sundaram-Clayton Ltd with effect from November 15, 2001. Since, Suzuki Motor Corporation ceased to be a shareholder of the company, the company cannot use the word 'Suzuki' as the part of their name and hence the name of the company was changed to TVS Motor Company Ltd (www.tvsmotor.in)
References
1) Amar K. J. R. Nayak, Kalyan Chakravarti, Prabina Rajib, (2005), “Globalization process in India : A Historical perspective since independence, 1947”, South Asian Journal of Management ,vol. 12, pp. 1-16 2) L.G. Burange , Shruti Yamini ,(2008), “Competitiveness of firms in Indian automobile industry ”, Department of Economics, University of Mumbai, Working paper No. 23/(8)/l/2008, pp.7 3) Mahipat Ranawat, Rajnish Tiwari (2009) “Influence of Government policies on industry evelopment: The case of India’s automotive industry” working paper No 57 Technology
82. and Innovation Management (University of Hamburg) retrieved from http://papers.ssm. com/ soL3/ papers.cfm?abstract_id=l 583449,pp.5 4) “ Overview of the Indian Auto ” Panorama January 2011, Issue Seven, IIM Newletter, pp.1-6 5) Peter Wad, (2010), “Impact of the global economic and financial crisis over the automotive industry in developing countries ”, Working Paper no 16/2009, United Nations Industrial Development Organization ,pp.6 6) Vishwanath Krishnan “ Indian Automotive Industry: Opportunities and challenges posed by recent developments” for the University of Texas retrieved from http://dspace.mit.edu/bitstream/handle/1721.1/1619/Krishnan.pdf. pp.2 Research Reports:- 1) “Automotive market and opportunities” (2010),Indian brand equity foundation ,pp. 2 -3 2) “Automotive industry” , 2009, Indian brand equity foundation ,pp. 5 3) “A new era - Accelerating toward 2020 - An automotive industry transformed ” 2009 Deloitte, pp.03 4) Centre for Monitoring Indian Economy(CMIE) - Industry market size and share , 2007,pp.349-357 5) Centre for Monitoring Indian Economy(CMIE) - Industry market size and share , 201 l,pp. 354-363 6) International trade statistics 2011, World Trade Organization , page no. 119 7) International trade statistics 2001, World Trade Organization , page no. 156 8) Sharma Ramchandran, (2012) “Growth of auto industry ”, Business and Management Chronicle, pp.no.8-11
Websites
1) “Society of Indian Automobile Manufacturer” Official Website - http://www.siamindia.com/ default.aspx 2) www.tatamotors.com 3) www.ashokleyland.com 4) www.mahindra.com 5) www.eicher.in 6) www.smlisuzu.com
83 7) www.marutisuzuki.com 8) www.heromotocorp.com 9) www.bajajauto.com 10) www.tvsmotor.in