International Journal of Mechanical Engineering and Technology (IJMET) Volume 9, Issue 7, July 2018, pp. 916–931, Article ID: IJMET_09_07_099 Available online at http://iaeme.com/Home/issue/IJMET?Volume=9&Issue=7 ISSN Print: 0976-6340 and ISSN Online: 0976-6359 © IAEME Publication Scopus Indexed EMERGENCE OF AUTOMOBILE INDUSTRY IN INDIAN CONTEXT - A CONCEPTUAL STUDY Krishna Reddy Research Scholar, K L Business School, K L deemed to be University, KLEF Guntur, Andhra Pradesh, India P V Vijay Kumar Reddy Assistant Professor, K L Business School, K L deemed to be University, KLEF, Guntur, Andhra Pradesh, India ABSTRACT Automobile Industry today is one of the Profitable Industry. India is one of the fastest growing economies in the world. Automobile industry had seen many ups and downs in India prior to liberalization. The liberalization of Indian economy enabled India to advance itself in many sectors. Automobile is one such sector wherein India has seen tremendous improvements. The Indian auto industry is one of the largest in the world. The industry accounts for 7.1 per cent of the country's Gross Domestic Product (GDP). Keywords: Automobile industry and Indian economy Cite this Article: Krishna Reddy and P V Vijay Kumar Reddy, Emergence of Automobile Industry in Indian Context - A Conceptual Study, International Journal of Mechanical Engineering and Technology, 9(7), 2018, pp. 916–931. http://iaeme.com/Home/issue/IJMET?Volume=9&Issue=7 1. INTRODUCTION Automobile Industry today is one of the Profitable Industry. India is one of the fastest growing economies in the world. Automobile industry had seen many ups and downs in India prior to liberalization. The liberalization of Indian economy enabled India to advance itself in many sectors. Automobile is one such sector wherein India has seen tremendous improvements. The Indian auto industry is one of the largest in the world. The industry accounts for 7.1 per cent of the country's Gross Domestic Product (GDP). The overall Passenger Vehicle (PV) segment has 14 per cent market share. The Indian Automobile market owing to a growing middle class and a young population. Moreover, the growing interest of the companies in exploring the rural markets further aided the growth of the sector (1) .[https://www.ibef.org] By 2026 the Indian automotive industry will be among the top three of the world in engineering, manufacturing and export of vehicles and auto components and will encompass http://iaeme.com/Home/journal/IJMET 916 [email protected] Emergence of Automobile Industry in Indian Context - A Conceptual Study safe, efficient and environment friendly conditions for affordable mobility of people and transportation of goods in India Comparable with global standards, growing in value to over 12% of India’s GDP and generating an additional 65 million jobs (2) [Automotive Mission Plan 2016-26 ] 1.1. Passenger car sales Domestic/Export sales Figure 1 Passenger Car Penetration Source: SIAM,,May 2018 2. AUTOMOTIVE PROFILE Automobile industry, the business of producing and selling self-powered vehicles, including passenger cars, trucks, farm equipment, and other commercial vehicles. By allowing consumers to commute long distances for work, shopping, and entertainment, the auto industry has encouraged the development of an extensive road system, made possible the growth of suburbs and shopping centers around major cities, and played a key role in the growth of ancillary industries, such as the oil and travel businesses. The auto industry has become one of the largest purchasers of many key industrial products, such as steel. The large number of people the industry employs has made it a key determinant of economic growth. Automobile is self-propelled vehicle which is used for the transportation of passenger and good upon the ground. A vehicle is machine which is used for the transportation of passengers and goods. Car, bus truck, jeep, tractor, scooter, motor cycles are the example of automobiles. 2.1. Auto Mobile Overview The Automotive Industry is comprised primarily of the world’s largest passenger automobile and light truck manufacturers. Through broad dealership networks, most members of the industry sell vehicles in the global market, covering developed and emerging countries. Automotive manufacturers offer a variety of makes and models, though there tends to be limited brand integration at the marketing, advertising, and dealership levels. The bulk of these companies operate production facilities in multiple geographic regions. The price of gasoline (and diesel fuel) is an important factor influencing customer demand. Indeed, the rise and fall of gas prices since the 1970s has caused buyers to place varying degrees of emphasis on vehicle fuel efficiency, durability, engine power, and quality. Accordingly, market categories and product lineups evolve to meet customer preferences. Examples are crossovers, which combine the features of an SUV and the traditional car, and hybrids, utilizing the benefits of gasoline and alternative power (electric) sources. In order to stay profitable, manufacturers and dealers must properly gauge demand and carry the optimal mix of autos for each period in the business cycle. To assist customers with purchases, and support sales, many companies offer low-rate financing programs and attractive incentives, such as discounts and cash back. Warranties, covering defects and repairs, are another means to lure drivers into showrooms. The auto industry is both capital and labor-intensive. These http://iaeme.com/Home/journal/IJMET 917 [email protected] Krishna Reddy and P V Vijay Kumar Reddy companies have to manage numerous costs and expenses associated with facilities, materials, parts, equipment, product development, and employment. At times, the prices of key raw materials, such as steel, can surge to record levels, requiring a nimble hedging strategy. Research & development and marketing and advertising expenses will have a discernible impact on the cost budget, as well. Too, given the seasonal nature of demand and new product launches, effective working capital management is crucial in supporting sales and controlling costs and expenses. The Automotive Industry is an important segment of the global economy, and its performance often tracks that of the broader business cycle. Investors seeking above-average price appreciation need to accurately time that cycle when taking a stake in this industry. Some of the group’s stocks offer a modest dividend to support investor loyalty. According value line.com caution that many of these equities carry low marks for Stock Price Stability and Earnings Predictability (3). www.valueline.com/tocks/Industries/Industry_Analysis__Automotive) Dated September 11, 2015. 2.2. Car Segments Car segments as per SIAM (Society of Indian Automobile Manufacturers) Common people like me always confuse between the car type and car segment. It has always been a difficult situation to identify a car type and to guess which segment it falls in. Following are the specific categories of all vehicles sold in India as outlined by the Society of Indian Automobile Manufacturers (SIAM). Using the SIAM classification ensures that no vehicle type will slip through the net. These classifications help consumers to compare and identify similar vehicles and makes car buying process as easy as possible. It also helps identify other similar vehicles for consumers to compare against, to help make the car-buying process much easier (4). The classification of segment is done on the basis of the length of the vehicle (Passenger car segment) Table 1 Car Segments and Classifications Segment Classification & Length Car Models A1 Segment Mini – Up to 3400mm M800, Nano A2 Segment Compact – 3401mm~4000mm Alto, wagon r, Zen,i10,A-star,Swift,i20,palio,indica etc A3 Segment Midsize : 4001 to 4500mm City, Sx4, Dzire, Logan, Accent, Fiesta, Verna etc) A4 Segment Executive : 4501 to 4700mm Corolla, civic, C class, Optra, Octavia etc) A5 Segment Premium : 4701 to 5000mm Camry, E class, Accord, Sonata, Laura, Superb etc) A6 Segment Luxury : Above 5000mm Mercedes S class, 5 series etc B1 Segment Van : Omni, Versa, Magic etc Omni, Versa, Magic etc B2 Segment MUV/MPV Innova, Tavera, Sumo etc SUV SUV CRV, Vitara etc Segment Source: Society of Indian Automobile Manufacturers (SIAM). 2018 2.3. Classification of Cars based on body shape 2.3.1. According SIAM Classification of Cars based on body Shape describe as below 1. Box (Van/Mpv) – It means Engine area, Passenger area & luggage area all in one box. There wont be separate compartment. For eg. Omni, Ace Magic, Versa 2. Two Box (Hatchback) – It means Engine are has a separate cabin while Passenger area and luggage area are together. For eg. M800, Alto, Santro, i10, A*, Swift etc. http://iaeme.com/Home/journal/IJMET 918 [email protected] Emergence of Automobile Industry in Indian Context - A Conceptual Study 3. Three Box (Sedan/Saloon/Notchback) – It means Engine area, Passenger area & luggage area all are having different cabin. For eg. SX4, City, Fiesta, Dzire, Ambassador, Indigo CS etc. 4. Estate/Station Wagon – Its nothing but sedan whose roof is extended till the rear to create more boot space. For eg. Indigo Marina, Octavia Combi, etc. 5. SUV (Sports Utility Vehicle) – These vehicles have large tyres, higher seating, higher ground clearance. The engine area is separate, but the passenger & luggage area are enclosed together. Most of these vehicles are equipped with either 4 wheel drive system or has the option for that. For eg. CRV, SAFARI, GRAND VITARA, PAJERO etc. 6. Semi Notchback – Its a sedan whose boot door can be opened like a hatchback (wagon r, swift), where the rear wind shield too opens along with the boot door. Unlike sedan whose rear wind sheild is always fixed. There are only few examples for SEMI NOTCHBACK – Skoda Octavia, Accent Viva. 2.4. Automobile Market Segmentation The automobile market is split into four main segments, viz., two-wheelers, passenger vehicles, commercial vehicles & three-wheelers Figure 2 Automobile market Segmentation 3.