With the contribution of 22% to the country’s manufacturing GDP, the automobile industry has emerged as one among India’s major sectors. India has become a hub for many global players. Currently Indian automobile industry comprises of 15 manufacturers of passenger cars and multi-utility vehicles, 9 manufacturers of commercial vehicles, 16 manufacturers of two / three wheelers, 14 manufacturers of tractors, 5 manufacturers of engines. The Indian auto industry, comprising passenger cars, two wheelers and commercial vehicles is the seventh largest in the world with an annual production of 17.5 million vehicles, of which 2.3 million are exported. Two-wheelers dominate the Indian market; more than 75% of vehicles sold are two-wheelers. In 2009-10, Indian passenger car industry was one of the few markets globally that evaded the recessionary trend and it has been witnessing steady growth over the past few years. The industry’s growth is driven by various factors such as the economic growth of the country, rising disposable income, relatively low car penetration and availability of financing options. The sector’s potential has attracted various foreign OEMs to India and has also led many established domestic and foreign automobile players to adopt capacity expansion strategies. Many established foreign players in India, are also positioning themselves as key contenders to offer low-cost car manufacturing capabilities. However, the industry is struggling with various challenges such as of rising commodity prices, labour costs, interest rates and increased competition.
According to the survey done by IBEF (Indian Brand Equity Foundation) by 2020, India’s share in global passenger vehicle market will reach 8% which was 4% during 2010-11. The passenger vehicle sales is expected to increase from 3.2 million in FY2013to 9 million in FY2020E. There are so many reasons favouring this growth. Some of them are discussed below.
Strong growth in demand due to rising income, middle class, and the young population is likely to propel India among the world’s top five auto manufacturers by 2015. Growth in export demand is also set to accelerate.
New players in ultra-low-cost car segment
Innovation is likely to intensify among engine technology and alternative fuels.
Significant cost advantages; auto firms save 10 to 25 per cent on operation compared with Europe or Latin America Large pool of skilled man power and growing technology base.
Government aims to develop India as global manufacturing as well as R&D hub. There has been wide array of policy support in form of sops taxes and FDI encouragement.
Rising Family income
Favourable Duty Structure
Poor Public Transport System
Low Car Penetration
Exchange of Cars
Changing Life Style
The Automotive market is split into four segments
The performance of each segment is given below
(Source: SIAM, Aranca Research)
From the graph it can be evidently seen that production of automobiles increased at a CAGR of 12.2 % over FY05-13. Also it is very clear that passenger vehicles was the fastest growing segment, representing a CAGR of 15.4%.
Let’s focus towards passenger car industry. Passenger vehicles are projected to grow 5-7 per cent in FY14. Passenger car segment is estimated to expand 3-5 per cent. SUVs are projected to increase at 11-13 per cent. Indian luxury car market expanded at a CAGR of 30 per cent, with 23,000 units in 2011 (about 1 per cent of passenger car market in India). The market is dominated by players such as BMW, Mercedes, Audi, and Jaguar. India has world’s 12th largest HNI (High Net-worth Individual) population, with a growth rate of 20.8 per cent (highest among top 12 countries), with expansion in education and realty sectors, and...
Please join StudyMode to read the full document