Automobile IndustryIndia is one of the largest Automobile Industry inthe world. The automobile industry accounts for about 7.1 per cent of the GrossDomestic Product (GDP). The Two Wheelers segment has 80 per cent market shareis the leader of Automobile market owing to a middle class and youngpopulation. The growing interest of the companies in exploring the ruralmarkets further led to the growth of the Automobile sector.
The overallPassenger Vehicle segment has about 14 per cent of market share.India is an auto exporter and has strong exportexpected growth for the near future. In2017 exports of PV and Commercial Vehicles (CV) registered a growth of 16.
20per cent and 4.99 per cent respectively, over 2016.Several initiatives by theGovernment of India in the Indian market are expected to make India a leader inthe 2Wheeler and Four Wheeler market in the world in future.Market Sizeand CharacteristicsProduction of passenger vehicles, commercialvehicles, three wheelers and two wheelers grew at 5.
48 % in 2017 to 25,316,044vehicles from 24,016,599 vehicles in 2016.The sales of passenger vehicles,commercial vehicles and two wheelers grew by 9.28 per cent, 4.20 per cent and 7per cent during the period April-March 2017.
India’s electric vehicle sales increased 38 percent to 22,000 units during 2015-16 and expected to rise further on the back ofcheaper energy storage costs and the Government’s vision to see about sixmillion electric and hybrid vehicles in India by 2020.Market TrendsIn order to keep up with the growing marketdemand, several auto makers have invested heavily in various segments duringthe last few months. The industry has attracted Foreign Direct Investment worthabout US$ 17.40 billion during April 2000 to June 2017, this is according todata released by Department of Industrial Policy and Promotion (DIPP).
Some major investments and developments in theautomobile sector in India are: JSW Energy, has signed a Memorandum of Understanding with the Gujarat government to set an electric vehicle-manufacturing company costing around Rs 4,000 crore (US$ 613 million) which has the capacity to produce about 2,00,000 electric vehicles every year. Tata Motors would invest Rs 4,000 crore (US$ 612 million) in 2017 and a major portion will go to passenger vehicles Rs 2,500 crores (US$ 375 million) and the remaining Rs 1,500 crore ($225 million) will be invested in the business over the next about next five years. Electric car maker Tesla Inc. will introduce its products in India sometime in the summer of 2018. Kia Motors is expected that it would sign a memorandum of understanding with the Government of Andhra Pradesh (AP) to set up a factory in Anantapur district and the company will invest around US$ 2 billion on the plant and it will be manufacturing about 3 lakhs car per annum. Several automobile manufacturers, from global majors Audi to Indian manufacturers such as Maruti Suzuki and Mahindra & Mahindra, are exploring the possibilities to introduce driverless cars for India market segment. BMW would manufacture a local version of below-500 CC motorcycle, the G310R, in TVS Motor’s plant in Tamil Nadu, for local roads.
Hero MotoCorp Ltd seeks to enhance its participation in the Indian electric vehicle market by pursuing its internal EV program by investing Rs 205 crore (US$ 30.75 million) to acquire around 26-30 per cent stake in Bengaluru-based technology start-up. Ford Motor Co. plans to invest about Rs 1,300 crore (US$ 195 million) to help build a global technology and business centre, which will be designed as a hub for product development, mobility solutions and business services for India local and other markets worldwide. GovernmentInitiativesThe Government encourages foreign investment inautomobile sector and allows 100 per cent FDI under the automatic route in anyform which has led to immense growth the past year.Some of the initiatives taken by the Governmentare:• Plan to introduce biofuel vehicles for road andwater transportation. Cut fossil fuel imports and look for alternative whichhave low cost like methanol.•India has extended support to the industry by increasingcustom duty on commercial vehicles from 10 per cent to 40 per cent and reducingduty on chassis for ambulance manufacturing to 12.
5 per cent.• TheGovernment plans to introduce a Green Urban Transport Scheme with a centralassistance of around Rs 25,000 crore, aimed at boosting the growth of urbantransport on low carbon for reduction in pollution, and providing a frameworkfor funding urban mobility projects at National and State level with minimumrecourse to budgetary support by using innovative financing methods ofautomobile related projects.•automobiles manufacturing will the positioned asimportant under ‘Make in India’ initiative, as it passenger vehicles market isexpected to triple to 9.4 million units, as highlighted in the Auto MissionPlan 2016-28.•The government has a Scheme for Adoption andManufacturing of Electric Vehicles in India, Which comes under the National MobilityMission 2020 to encourage the progressive induction of reliable and efficientelectric vehicles in the country for constant growth.Road AheadTheautomobile industry is supported by highly skilled labour and innovation researchand development market which has led to further growth in the employment marketleading to job creation for both skill and unskilled workers.TheIndian automotive aftermarket is estimated to grow at around 12-15 per cent toreach US$ 17 billion by 2021 from around US$ 8 billion in 2017. It has thepotential to generate up to US$ 300 billion annual revenue by 2030, createabout 65 million jobs and contribute over 12 per cent to India’s GDP.
Theeminent components in which the automobile industry is trying to work upon:CAPACITYADDITION:1. Consideringlow cost of production, prominent auto companies are increasing theirproduction capacity in order to capture a dominant share in Indian automobileindustry.2. Most of theautomobile companies are eyeing India as an outsourcing hub.3.
With the totalinvestment of around US$ 163.7 million, Honda Motorcycle & Scooter Indiaexpanded its production of Activa in three variants at Ahmedabad plant.4.
Volvo hasstarted local assembly of its cars in India from October 2017.5. A new engineassembly line is being set up by the Volkswagen group in Aurangabad CATERINGINDIAN NEEDS:1. Most of thefirms including Ford & Volkswagen have adapted themselves to cater to thelarge Indian middle class by dropping their traditional structure and designs.2. This allowsthem to compete directly with domestic firms making the sector highlycompetitive.
LAUNCHOF NEW MODELS:1. Honda isplanning to launch three new car models in India by 2020 and will localise the enginesto keep the prices low.2. Fiat ChryslerAutomobiles India, launched its new Jeep brand Compass in February 2017, whichis going to be produced indigenously in Ranjangaon,, Maharashtra. India willprobably be the 4th manufacturing hub, globally, for the brand in next fiveyears.3.
In March 2017,Tata Motors’ new sports car was unveiled, under its new sub brand – TAMO, atthe Geneva International Motor Show. The show will displayed niche segmentmodels with advanced technologies.4.
In May 2017,Pune based Kinetic Green Energy and Power Solutions Ltd. has launched its 1stelectric 3- wheeler “Kinetic Safar”, This 3-wheeler is equipped with anadvanced lithium-ion battery. GROWTH DRIVERS1.
Rising incomeand a large young population.2. Greater availability of credit and financingoptions.3. Demand forcommercial vehicles increasing due to high level of activity in infrastructuresector.4.
Clear visionof Indian government to make India an auto manufacturing hub.5. Initiativeslike ‘Make in India’, ‘Automotive Mission Plan 2026’, and NEMMP 2020 to give ahuge boost to the sector.6.
Improving roadinfrastructure.7. Established auto ancillary industry giving therequired support to boost growth. 8.
5 per cent oftotal FDI inflows to India went into the automobiles sector. Market StructureAutomobileIndustry mainly deals with farm equipment, utility vehicles and commercialvehicles it holds different competitor segments for different vehicle segments.Forexample – For 2-Wheeler market Honda and Suzuki is the main competitor but whenit comes to trucks and busses Daimler and Eicher motors stand as the chiefcompetitors.Competitorsof automobile industry across Geography Chiefcompetitors of Automobile industries:- Hindustan motors Toyota Tata Motors Honda Hyundai Maruti-Suzuki Ashok Leyland Comparison with Market Leader: Major competitors of across variousSegments:- Market share of each participant:Themarket share of Automobile Industry when the commercial vehicles category isconcerned has not changed much when compared to 2016 – Marketshare of 2 wheelers is: Characteristics of Competitorsand behavioral trait TATA MOTORS1. It is a marketleader in the commercial vehicle segment in India with a 42 per cent marketshare in FY17 and also a key player in the passenger vehicle segment.
2. The companyhas been at the forefront of technology and innovation and launched thecheapest car in the world.3. Tata Motorsposted consolidated revenues of US$ 9.10 billion in Q1 FY18 and US$ 10.91billion in Q2 FY18.4. Tata Motorsare always on top when their Ethics and the corporate governance is considered.
Hence, they concentrate more on innovation and domination to acquire more andmore market share.5. Therefore, otherAutomobile industry compete on the grounds of innovation.Maruti-Suzuki 1. Maruti Suzukiis a majority owned subsidiary of Japanese conglomerate Suzuki.
2. It is now theundisputed market leader in the passenger vehicles segment in India with amarket share of 47 per cent in FY17.3. The companyhas made the most affordable cars for the Indian middle class for more thanthree decades.4. New models arebeing launched each year to hold the position of the leader in its home market.5. The companymainly works on the pricing strategy hence it is the price competitor withother automobile company’s.