Automobile Sector in India

Background of Automobile Sector in India:

Indian automobile industry has grown a lot since 1898, in the year 1989 the cars were seen on Indian streets for the first time. (http://business.mapsofindia.com/automobile/ ). India is an emerging market for worldwide auto-giants. With low labour cost many multinational companies are investing in India. India is the second most populated country in the World, and the growth rate of Indian economy is very high, which attracts the presence of huge demand in the Automobile Industry. (Nag, etal.; 2007) The Indian automobile market is dominated by Japanese and Indian manufacturers there are various multinational companies currently investing in India. Looking at the current scenario major foreign automobile manufacturers in India are Honda, Toyota, Fiat, Daimler Chrysler, etc. The major Indian operators are Maruti Udyog, TATA motors, Hindustan motors, etc. Automobile production in India grew substantially in the last five years. 77% of market share is captured by two wheelers. Passenger and commercial vehicles capture 19% market share in the current Indian automobile sector. (SIAM statistics for 2006-07)

Scenario of the Automobile Industry:

The Indian Auto Industry has a huge potential for growth. With a population of over one billion and an economic growth over 7%, the Automobile sector is one of the core industries of the Indian economy. With 4% contribution to the GDP, and nearly 5% of the total industrial output, the automobile sector has become a main contributor to the economy today. India today is the second largest two Wheelers manufacturers in the world, worlds largest motorcycle production takes place in India, second largest tractor production, the fifth commercial vehicle manufacturer in the world, fourth largest Car market in Asia, eleventh largest passenger car market in the world, fifth largest bus and truck market in the world (by volume).So it presents the complete scenario of the Indian Automobile sector. (http://www.grouptci.com/enroute/cover-story-apr07.pdf ) The Indian automobile sector has witnessed an extraordinary boom in recent years; this is due to the improvement in living standards of the middle class, and a significant increase in their disposable incomes. The industry is expected to touch the 10 million mark very soon, to which the commercial vehicle segment will be a major contributor. Industry experts estimate the Indian Automobile sales growth at a compounded annual growth rate (CAGR) of 9.5 per cent by 2010. India has made a mark in the global automobile industry (http://www.osec.ch/internet/osec/de/home/export/countries/in/export/economic_report.1|Page Robert Paul Ellentuck

RelatedBoxSlot-15131-ItemList-20055File.File.pdf/bb_India%20Automotive%20Industry%202008.pdf )

Production
Growth in consumer-spending habits has reshaped the industry which has spurred an enormous cost advantage in manufacturing, research and development (R&D), skilled labour, software, and design, encouraging leading automakers to perceive India as a global player in this sector. Marked by consistent growth at a frantic pace, the automobile industry recorded production of a wide variety of vehicles including over 2.06 million four-wheelers (passenger cars, light, medium and heavy commercial vehicles, multi-utility vehicles such as jeeps), and over 9 million two-and-three wheelers (scooters, motorcycles, mopeds, and three wheelers) - in 2006-07. (http://www.osec.ch/internet/osec/de/home/export/countries/in/export/economic_report.RelatedBoxSlot-15131-ItemList-20055File.File.pdf/bb_India%20Automotive%20Industry%202008.pdf ) The Production projections show that passenger car production is projected to cross three million units in 2014-15. Sales of passenger cars during 2008-09 to 2015-16 are expected to grow at a compounded annual growth rate of around 10%. Export of passenger cars is anticipated to rise more than the domestic sales during 2008-09 to 2015-16. Motorcycle sales will rise up, exceeding 10 Million units by 2012-13. (Maheshwari, 2009)

Production Units in India:

This Diagram is directly taken from http://www.acmainfo.com/

Manufacturing Units:
Automobile manufacturing units are located all over India. These are concentrated in some specific areas such as Chennai and Bangalore in the down south of India, Pune in the western area of India, the National Capital Region (NCR, which includes New Delhi and its suburban districts) in the north, Jamshedpur and Kolkata in the east and Pithampur in the central region. A new automobile production hub is being promoted in the state of Uttaranchal north in India. (http://www.osec.ch/internet/osec/de/home/export/countries/in/export/economic_report.RelatedBoxSlot-15131-ItemList-20055File.File.pdf/bb_India%20Automotive%20Industry%202008.pdf )

Competition in the Industry:

The Industry is divided into 4 segments, The Segment Key Players are: Commercial Vehicles: Tata Motors, Ashok Leyland, Swaraj Mazda, Mahindra & Mahindra, Force Motors, Eicher Motors.
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Passenger Vehicles: Tata Motors, Maruti Udyog, Honda Motors, Hyundai Motors, Toyota, Skoda, Mahindra & Mahindra, Daimler Chrysler, Hindustan Motors. Two Wheelers: Hero Honda, Honda Motors, Bajaj Auto, TVS Motors, Yamaha, Kinetic Engineering. Three Wheelers: Force Motors, Bajaj Auto, Piaggio India. (http://www.arc.unisg.ch/org/arc/web.nsf/1176ad62df2ddb13c12568f000482b94/43cf0caeed566f aac12571d30061daac/$FILE/India%20Symposium_IBEF_Sectoral%20Reports_Automotive.pdf ) (A report by KPMG for IBEF) Current Market Trend

Domestic Sales
The cumulative growth of the Passenger Vehicles segment during April 2007 March 2008 was 12.17 %, where Passenger Cars grew by 11.79 %, Utility Vehicles by 10.57 % and Multi Purpose Vehicles by 21.39 % The Commercial Vehicles segment grew marginally at 4.07 %. While Medium & Heavy Commercial Vehicles declined by 1.66 %, Light Commercial Vehicles recorded a growth of 12.29 %. Three Wheelers sales fell by 9.71 % with sales of Goods Carriers declining drastically by 20.49 % and Passenger Carriers declined by 2.13 % during April- March 2008 compared to the last year. Two Wheelers registered a negative growth rate of 7.92 % during this period, with motorcycles and electric two wheelers segments declining by 11.90 % and 44.93 % respectively. The Scooters and Mopeds segment grew by 11.64 % and 16.63 %. (http://www.siamindia.com/scripts/industrystatistics.aspx )

Exports
Automobile Exports in India is accounted to a growth of 22.30 % during the financial year of April 2007 March 2008.The growth was led by two wheelers segment which grew at 32.31 %. Commercial vehicles and Passenger Vehicles exports grew by 19.10 % and 9.37 % respectively. Exports of the Three Wheelers segment was declined by 1.85 %. (http://www.siamindia.com/scripts/industrystatistics.aspx ) The pie chart shows the category wise market share (in %) for the Indian automobile industry in the year 2008-09.
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The diagram below shows the domestic sales figure of various categories of automobiles in India from 2002 to 2008. Automobile Domestic Sales Trends (Number of Vehicles) Category 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 Passenger Vehicles 707,198 902,096 1,061,572 1,143,076 1,379,979 1,549,882 1,551,880 Commercial Vehicles 190,682 260,114

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318,430 351,041 467,765 490,494 384,122 Three Wheelers 231,529 284,078 307,862 359,920 403,910 364,781 349,719 Two Wheelers 4,812,126 5,364,249 6,209,765 7,052,391 7,872,334 7,249,278 7,437,670 Grand Total 5,941,535

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6,810,537 7,897,629 8,906,428 10,123,988 9,654,435 9,723,391 The above diagram and table is directly adapted from (http://www.siamindia.com/)

Role of Advertising in Indian Automobile:

The highly competitive automobile industry has prompted the manufacturers to take up new and innovative marketing strategies to cope with the current competition. In the consumer segment of cars it is the segment which has maximum competitors as the consumer has a choice of number of models, brands, pricing to go for. All the companies as a part of their marketing strategy offer a range of vehicles in all segments to make sure that the customer is driving one of their vehicles and not of the competitors. This increases the brand visibility, brand loyalty and further it adds brand value to the company. Advertisements on the Audio visual medium are considered to be one of the best as it gives car makers an opportunity to exhibit their cars. Flashy cars can be demonstrated on television by making a good advertisement but when it comes to the finer prints of the cars, print and online media comes to the best option available. The online medium of advertising offers a greater flexibility to car companies since they come with a lot of interactive features available like demonstrating the interiors of the car with its key features. The print medium on the other hand provides an opportunity to car makers to explain the function of a car in detail and give the user knowledge of various models and their key differences. Celebrity endorsements and testimonial advertisements also play a major role in selling the cars the consumers relate themselves to the brand ambassadors and then make the purchase decision. http://www.automobileindia.com/automobile-industry/automobile-marketing.html) When a buying decision is made lot of research is done, it depends upon personal traits that how important the buying decision is, is it a matter of high or low concern then the research is done accordingly. There are various sources through which information can be researched a study is given below: The above diagram is directly adapted from www.scibd.com (Google scholar)

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Consumer Behaviour of Automobile Buyers:

Consumer behaviour is defined as "the acts of individuals directly involved in obtaining and using economic and services, including the decision process that precede and determine these acts." (Engel et al, 1968)* (http://www.oppapers.com/essays/Buyer-Behaviour/8372 ) While buying cars consumer focus on factors like reliability, safety, price of the vehicle, fuel efficiency, after sales services etc. When consumer is in the buying cycle the important thing is how they rank the factors which influence vehicle buying decisions and then after obtaining a particular mix of all these factors on personal criteria the product is attained. (Dixit.; Kumar,; etal. 2009) In the buying behaviour decision we can relate automobile purchases to, the following generic model of consumer decision making process: =====>need recognition =====>information search =====>evaluation of alternatives =====>purchase decision =====>post purchase behaviour (Dixit, Kumar, etal. 2009) The various important factors of consumers choices for buying a vehicle are: The above diagram is directly adapted from www.scibd.com (Google scholar) Consumer generally considers different options while buying vehicles, suggestions are asked from family and friends regarding which vehicle and model to buy. Several vehicles are driven as a test drive and decision is taken on one vehicle to buy which satisfy all the criteria and needs. If the buying decision made is satisfactory and the consumer is fully satisfied and happy with the purchase repetitive purchases can take place in long term.

Internal Influence on Consumer Behaviour:

Personality. Life style. Motivation or drive. Involvement on intensity of interest.
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Group Influence on Consumer: Culture Social class Family. (http://www.sykronix.com/tsoc/courses/sales/sls_cons.htm ) Research Aims and Objectives: Undertake review of automobile industry in India. Undertake review on advertising effectiveness and evaluation. Recommendations on how industry should prioritise amongst different forms of advertisements.

Research Methodology:
In order to complete the research objectives the main methodology to be chosen is quantitative research through questionnaires and interviews on the basis of questionnaires. A hypothesis would be proposed and based on the hypothesis, a focus group and one-on-one interview will be conducted to get the desired output for the dissertation. Interviews: Interview with the automobile consumers as well as prospective consumers will be made to evaluate the key issues such as the persuasion on different mentality while buying a vehicle, the driving forces i.e. price, efficiency, brand, after sales services etc. The interviews to be conducted will be approximately 120 customers, the interviews will be structured, the purpose of the interview to get an insight of important criteria of the consumers. Questionnaire- After obtaining a detailed interview on different consumer behaviours the next step would be to formulate a questionnaire. Questionnaire would be distributed among consumer and prospective consumer to evaluate the key issues raised and to prove the hypothesis. The sample size consists of approximately 120 consumers in the sampling method interviews will be taken followed by structured questionnaires; the questionnaires would cover the purchasing criteria for automobile, importance of brand and advertising, then the data will be structured based on answers given by the consumer and record the importance and weightage of different purchase criteria. The sample constitutes of age of 30-45 years, income group of middle class and upper middle class, occupation to be chosen is self employed, managerial, higher managerial, administrative and professional. Life stage: Full nest I, II, III. Psychographics (VALS): Achievers, Experiancers, Believers.

Time Scale:

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The time scale is considered starting from 15th of June till 31st of August, the distribution of time is done as follows: 15th June - 4th July: Literature Review. 5th July - 24th July: Data Collection. 25th July 1st August: Drafting the literature review and interpretation of data. 2nd August 27th August: Final Dissertation writing and project completion.

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BIBLIOGRAPHY
1) Automobile Industry (Online) Main website- http://business.mapsofindia.com/ URL - http://business.mapsofindia.com/automobile/ Accessed on 2nd May, 2009. 2) Automobile Marketing in India (online) Main website www.automobileindia.com URL - http://www.automobileindia.com/automobile-industry/automobile-marketing.html Accessed on 28th April, 2009. 3) Dixit, S.; Kumar, T. etal. (2009) Factors Affecting Car Buying Behaviour of Consumers Institute of Management Studies, Ghaziabad Adapted from Google Scholar Main website www.srcibd.com URL - http://www.scribd.com/doc/8190161/Car-Buying-Behavior Accessed on 1st May, 2009. 4) Global Competitiveness of Indian Auto Component Industry& Its Sustainability. (Online) main website - http://www.acmainfo.com/ URL - http://acmainfo.com/docmgr/Status_of_Auto_Industry/Status_Indian_Auto_Industry.pdf Accessed on 24th April, 2009. 5) India Automotive Industry April, 2008. SBH India. New Delhi. (Online) main website www.osec.ch URL - http://www.osec.ch/internet/osec/de/home/export/countries/in/export/economic_report.RelatedBoxSlot-15131-ItemList-20055File.File.pdf/bb_India%20Automotive%20Industry%202008.pdf Accessed on 20th April, 2009. 6) Indian Brand Equity Foundation January, 2006. A report by KPMG for IBEF. (Online)
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URL http://www.arc.unisg.ch/org/arc/web.nsf/1176ad62df2ddb13c12568f000482b94/43cf0caeed566f aac12571d30061daac/$FILE/India%20Symposium_IBEF_Sectoral%20Reports_Automotive.pdf Accessed on 25th April, 2009. 7) Maheshwari, S. (2009) Indian Automobile Sector - A Booming Market PRlog Free Press Release. Delhi. URL - http://www.prlog.org/10218149-indian-automobile-sector-booming-market.html Accessed on 22nd April, 2009. 8) Nag, B.; Banerjee, S and Chatterjee, R (2007) Changing Features of the Automobile Industry in Asia: Comparison of Production, Trade and Market Structure in Selected Countries AsiaPacific Research and Training Network on Trade Working Paper Series, No 37 Taken from Google Scholar URL - http://www.unescap.org/tid/artnet/pub/wp3707.pdf Accessed on 28th April, 2009. 9) PERSONAL SELLING: CONSUMER BUYING BEHAVIOR (online) Main website - http://www.sykronix.com/ URL - http://www.sykronix.com/tsoc/courses/sales/sls_cons.htm Accessed on 3rd May, 2009. 10) Society of Indian Automobile Manufacturers May 2009 (online) Main website - http://www.siamindia.com/ URL - http://www.siamindia.com/scripts/market-share.aspx http://www.siamindia.com/scripts/domestic-sales-trend.aspx http://www.siamindia.com/scripts/industrystatistics.aspx Accessed on 27th April, 2009. 11) The Indian Commercial Vehicle Industry: Gearing Up published by In House magazine Group of TCI. (Online)
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URL - http://www.grouptci.com/enroute/cover-story-apr07.pdf Accessed on 20th April, 2009. 12) Working women buy products and services essentially the same as non working women. May 2006 URL - http://www.oppapers.com/essays/Buyer-Behaviour/8372 Accessed on 22nd April, 2009.

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