Auto Industry Analysis

AUTO INDUSTRY ANALYSIS

Automobile industry Tenth largest in the world with an annual production of

approximately 2 million units

Expected to become one of the major global automotive industries in the coming years

AUTOMOBILE

2 WHEELER 3 WHEELERPASSENGER

VEHICLECOMMERCIAL

VEHICLE

India is….• Largest three wheeler market in the world• 2nd largest two wheeler market in the world• 4th largest passenger vehicle market in Asia• 4th largest tractor market in the world• 5th largest commercial vehicle market in the

world

Evolution of Automobile Industry

Initial Years Manufacturing was licensed•High Customs duty on import•Steep excise duties & •sales tax•2 Major players: Premier Automobiles Ltd & Hindustan Motors

1980s•Entry of MUL, better product, with government support

•Seller’s Market

•Long Waiting Periods

Early to mid 90s

•Seller’s market and long waiting periods

•Delicensing in 1993

•Removal of capacity restrictions

•Decrease in customs & excise

•Auto finance boom- more players (foreign banks & non banking companies, better schemes.

Mid 90s – Early 2000s

•Buyers market

•Increase in Indigenization

•Easy Auto finance

•Manufactures diversifying into related activities: finance lease, fleet management, insurance and used car market

Trends in Automobile sector

Continue………….

Automobile Production Trends (Number of

Vehicles)

Category 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08

Passenger Vehicles

723,330 989,560 1,209,876 1,309,300 1,545,223 1,762,131

Commercial Vehicles

203,697 275,040 353,703 391,083 519,982 545,176

Three Wheelers

276,719 356,223 374,445 434,423 556,126 500,592

Two Wheelers

5,076,221 5,622,741 6,529,829 7,608,697 8,466,666 8,026,049

Grand Total

6,279,967 7,243,564 8,467,853 9,743,503 11,087,997 10,833,948

Automobile Domestic Sales Trends(Number of Vehicles)

Category 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08

Passenger Vehicles

707,198 902,096 1,061,572 1,143,076 1,379,979 1,547,985

Commercial Vehicles

190,682 260,114 318,430 351,041 467,765 486,817

Three Wheelers

231,529 284,078 307,862 359,920 403,910 364,703

Two Wheelers

4,812,126 5,364,249 6,209,765 7,052,391 7,872,334 7,248,589

Grand Total

5,941,535 6,810,537 7,897,629 8,906,428 10,123,988 9,648,094

Automotive industry crisis

• global financial crisis in the auto industry that began during the latter half of 2008

• weakened by the substantially more expensive automobile fuels linked to the 2003-2008 oil crisis

• the global financial crisis and the related credit crunch placed pressure on the prices of raw materials

• In 2009, the vehicle companies of the world are being hit hard by the economic slowdown across national boundaries

BUDGET 2008-09

• consumption-driven growth • policy on inclusive growth• attempt to address farmer's woes

Pre-budget Demands of the Automotive Industry

• The adoption of a uniform excise structure of 16 percent across all passenger cars and utility vehicles

• The reduction of excise duty on two-wheelers and three-wheelers from 16 percent to 8 percent to offset declining sales

• The provision of benefits for the development of hybrid technology

• The offer of liberal credit to the agricultural sector to encourage the purchase of tractors

Budget Proposals Directly Impacting the Indian Automotive Industry

Analysis of current scenario

High interest rates, high domestic oil prices and

inadequate vehicle financing have continued to affect

the overall automobiles sector

The current slowdown in economic growth and

automobiles industry has further deteriorated due to the

global financial market crisis which has created

volatility in stock markets and exchange rates and

aggravated lack of liquidity

Continued…....

Automobile companies are reducing production by shutting plants for a few days to avoid inventory build-up and in anticipation of seeing further downside

Compared to 2007, Print advertising of Automobiles dropped by 13% during 2008..

Volume Growth of Automobile Sector in Print during 2008

Share of categories of Automobile sector in Print during 2008

'Passenger Vehicles' were the front runners in Print advertising with 64% share followed by ‘Motorcycle’ and ‘Commercial Vehicles’ with 17% and 7% share respectively during 2008.

State-wise share of Automobile sector in Print during 2008

Tally of Automobile Advertisers in Print during 2008

• 4% rise in number of Automobile advertisers in Print during 2008 compared to 2007

Usage of Sales Promotions ad campaigns in the Automobile sector

More than 55% of Automobile ads in Print were for Sales Promotion during 2008.

• Favorable Demographics • Improving income curve • Reducing interest rates

•Cost Pressure •High Expectations •Inadequate Infrastructure Development

KEY CHALLENGESKEY ENABLERS

Key Focus Areas• Product development( includes collaboration, new products developed)• Vendor base (quality of vendors, skill levels , size etc.)• Manufacturing capability( quality levels, productivity & skill levels, technology )• Service levels• Supply chain• Labor law• Leverage IT

Key Features of Future Auto Policy• Foreign Direct Investment

• Import tariff

• Incentives for Research and Development (R&D) • Environmental Aspects

• Other measures

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