Automobile sector

The Indian automobile industry has come a long way since in the first car ran on the
streets of
Bombay (now Mumbai) in 1898. The initial years of the industry were characterized by
unfavorable
government policies. The real big change as we see in the industry today, started to take
place with
the liberalization policies that the government initiated in the 1991. The liberalization
policies had a
salutary impact on the Indian economy and the automobile industry in particular.
The automobile industry in the country is one of the key sectors of the economy in terms
of the
employment opportunities that it offers. The industry directly employs close to around 0.2
million
people and indirectly employs around 10 million people. The prospects of the industry also
has a
bearing on the auto-component industry which is also a major sector in the Indian
economy directly
employing 0.25 million people.
All is not well with the automobile industry the world over currently with the slowdown that
has
gripped most of the major economies of the world. The incidents of 9/11 have also
contributed to an
already ailing global economy. The gap between the manufacturing capacity volume and
the assembly
volume is growing by the day and has the worried the manufacturers. This state of affairs
has ggered a lot of cutthroat competition and consolidation in the industry. Cost reduction
initiatives
have come to be the in thing in the global industry today. Towards this direction, many
automobile
factories are being closed down.
The Indian automobile industry is a stark contrast to the global industry due to many of
the
characteristics, which are peculiar to India. The Indian automobile industry is very small in
comparison
to the global industry. Except for two wheelers and tractors segments, the Indian industry
cannot
boast of big volumes vis-a-vis global numbers.

Segmentation Of The Industry

The Indian automotive industry is segmented as follows:

Major Events in the Industry

Some of the major trends in the automobile industry are as follows
General
• Global auto industry driving critical changes in the Indian auto sector
• Indian becoming international manufacturing hub
• Auto majors go downstream
• Auto majors focus on cost reduction initiatives
Passenger Cars
• Industry witness a number of launches
• B segment loses some shine, D segment takes its place
• MNCs dominate all the segments, Maruti retains leadership status only in the A-
segment
• Super luxury cars arrive in India; BMW-7 is launched with a price tag of Rs. 6 million
• Maruti Udyog enters fleet management biz
Multi Utility Vehicle Segment
• Gradual shift in preference in favor of MUVs
• Maruti’s new MUV launch to power sales in the segment
• Pajero hits Indian roads at a cost of Rs 3.4 million
• Mahindras launch indigenously-built “Scorpio” targeted at the SUV segment.
• Bajaj rolls out Baghira
Commercial Vehicle Segment
• Economic slowdown takes toll on CV segment
• SC directive, a big boon and CV majors line up new CNG models
• Excess-carrying capacity haunts the CV industry
• Move towards stiff emission norms increase costs
• MCV and HCV segments witness price hikes
Two/Three Wheeler Segment
• Scooter biggies launch stripped down versions
• Style and mileage the key driver for sales in the motorcycle segment
• Changing the segment contours (re-segmentation)
• Romance with the scooter on the decline in favor of motorcycles
Tractor Segment
• 31-40 hp tractors rule the roost
• Regional players give established players a run for their money
• Tractor majors line up sleek models to rev up sales
• Entry of several foreign players intensify competition
• Farmers seen upgrading within segments and not from a lower segment to a higher one

Revenue Drivers
A GDP growth of more than 5 percent coupled with favorable policy decisions both in the
Budget
2001and EXIM Policy 2001 is bound to drive the growth in the industry in the face of a
sluggish
economic scenario. Some of the revenue drivers for different segments are listed below:
Passenger Car Segment
• Liberal financing schemes doled out by players as well as financial institutions
• The launch of new models across segments and the creation of new price points in the
Indian
market, especially in the higher end of the market.
• With the second hand car prices showing a steep fall, the demand for the same will
increase and
would also eat into the market for higher end two-wheelers.
Commercial Vehicle Segment
• Road infrastructure projects like the golden quadrilateral and the increase in
construction activity
in the wake of natural calamities.
• Implementation of infrastructure projects like the National Highway project
• Policy on scrapping of old vehicles above 20 years in age in New Delhi has led to a
demand for at
least 15,000 vehicles to be satisfied in a period of time.
Two/Three Wheeler Segment
• GOI’s policy to reduce the subsidy on diesel.
• Improvement in disposable income.
• Availability of liberal credit facility for vehicle purchase.
Tractor Segment
• Availability of easy credit
• Implementation of scientific farming practices
• Changing demand pattern in favour of higher capacity tractors would be an revenue
driver:
Crystal Gazing
The Indian automobile industry is likely to mature in the lines of the developed markets
and will move
towards a phase of consolidation even as the customers would get a whole lot of better
choices. The
ever-rising expectations of customers coupled with the increasing competition and costs,
would put
automobile manufacturers under increasing pressures. They would have to leverage on
economies of
scale to survive in the market place. In short the future holds a lot of challenges as well as
a lot of
opportunities. It is only manufacturers that get their volumes as well as their prices right
that can
hope to emerge unscathed.

CURRENT DOMESTIC SCENARIO

The Indian automotive industry an attractive industry going by the low level of vehicle
ownership
{Vehicles Per Capita=0.2(2020P) against a world average of 0.14(2020P)} prevailing in
the country.
Segmentation Of The Industry
Passenger Cars and Multi Utility Vehicle Segment
The passenger car segment in India is classified into A, B, C, D and E sub-segments. The
pricing and
the major players of each of the segments is as follows:

Multi Utility Vehicle Segment

The multi-utility segment has aroused interest of the major players as well as the
consumers, of late.
This segment is categorized into two: Urban Utility Vehicles and Sports Utility Vehicles.
Presently, all
the major players in the multi-utility segment including Mahindra, Tata Engineering &
Locomotive Co.,
Maruti Udyog, Bajaj Tempo, Hindustan Motors and Toyota Kirloskar Motor Pvt. Ltd. have
concentrated
on the urban-utility vehicles. Only now, in June 2002, has Mahindra come up with an
indigenous
sports-utility variant.
Commercial Vehicle Segment
The commercial vehicle segment in India can be classified into the light commercial vehicle
(LCV)
segment and the medium and heavy commercial vehicle (M&HCV) segment. The major
players in each
of the segments is as follows:

Two/Three Wheeler Segment

The two-wheeler segment in the country can be classified into the motorcycle, scooter and
the moped
sub-segments. The major players in the in the sub-segments are as follows:

Major Players Across The Different Sub-Segments In The Two-Wheeler Segment

Tractor Segment
The tractor is usually classified according to the power of the engine as less than 25 HP,
25-30 HP, 31-
40 HP and greater than 40 HP, 40-50 HP and greater than 51 HP. Some of the major
players in the
tractor segment include Mahindra & Mahindra, Escorts, Punjab Tractors, Tractors & Farm
Equipment,
Eicher, HMT, International Tractors, Bajaj tempo, Greaves and VST Tiller Tractors.

Hero Honda

Introduction