Trend analusis on automobile industry

8/6/2019 Trend analusis on automobile industry

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CHAPTER 1:-INTRODUCTION

Indian Automobile Industry

The automobile industry is one of the largest industries in India is the ninth largest in the world withannual production of over 2.3 million units in 2008.In 2009,India emerge as the India 4th largest exportersof automobiles, behind Japan, South Corea and Thailand as in many other countries. Indian automobileindustry is involved in design, development, manufacture, marketing, and sale of motor vehicles. Thereare a number of global automotive giants that are upbeat about the expansion plans and collaboration withdomestic companies to produce automobiles in Indi. It plays a major role in the growth of economy inIndia. The industry comprises automobiles and auto component sectors, which encompass passenger cars,two-wheelers, three-wheelers, tractors, commercial vehicles, multi- utility vehicles and components.Today, the Indian automobile industry is the world s largest motorcycle manufacturer, the second largesttwo-wheeler and tractor manufacturer, the fifth largest commercial vehicle manufacturer and the fourth

largest car maker in Asia. Apart from serving the domestic market, the Indian auto sector has also becomea sourcing hub for the global auto giants. The Government of India has introduced an ambitious project of setting up world-class automotive testing and R&D infrastructure to place India in the USD 6 trillionglobal automotive business. This book details the current status and factors influencing the growth of theIndian automobile industry; its future prospects and the success stories of some automobile giants inIndia. It also focuses on the future growth of the industry as a result of the newly adopted technologiesand strategies.

The automotive sector, comprising of the automobile and auto component sub sectors, is one of the key

segments of the economy having extensive forward and backward linkages with other key segments of

the economy. It contributes about 4 per cent in India's Gross Domestic Product (GDP) and 5 per cent

in India's industrial production. The well-developed Indian automotive industry ably fulfils this catalytic

role by producing a wide variety of vehicles like passenger cars, light, medium and heavy commercial

vehicles, multi-utility vehicles such as jeeps, scooters, motorcycles, mopeds, three wheelers, tractors etc.

Since the first car rolled out on the streets of Mumbai (then Bombay) in 1898, the Automobile Industry of

India has come a long way. During its early stages the auto industry was overlooked by the then

Government and the policies were also not favorable. The liberalization policy and various tax reliefs by

the Govt. of India in recent years have made remarkable impacts on Indian Automobile Industry. Indian

auto industry, which is currently growing at the pace of around 18 % per annum, has become a hot

destination for global auto players like Volvo, General Motors and Ford.

Investment Opportunities:

In India, lots of investment opportunities exist in the following areas:� Establishing Research and Development Centers� Establishing Engineering Centers� Passenger Car Segment

A well developed transportation system plays a key role in the development of an economy, and India isno exception to it. With the growth of transportation system the Automotive Industry of India is alsogrowing at rapid speed, occupying an important place on the 'canvas' of Indian economy. After



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liberalization of Indian Economy in general and automobile industry in particular, considerable number of Multinational Companies are operating in India either as wholly owned subsidiaries or in collaborationwith their Indian partners.

Source: http://www.oppapers.com/essays/Automobile-Industrypcd-India/155453

Protectionism ± Early 1980s

This was the pre-1980 era where the manufacturing of automobiles especially cars was subject to strictlicensing, restrictive tariff structure and limited avenues for expansion. The advent of foreign technologycollaboration came with the inception of Maruti Udyog in collaboration with Suzuki of Japan in the passenger car segment. Indian roads saw the launch of Maruti 800. It was still not very easy to own a car,

first was affordability and next was a long waiting period.

Liberalization ± 1990s

In the early 1990s, with liberalization, some more Japanese manufacturers entered the two-wheeler and

the commercial vehicle segment in a collaborative arrangement. These period characterized joint venturesin India and the market started opening up. Automobile Industry was deli censed in July 1991 with theannouncement of the New Industrial Policy. The passenger car industry was, however, deli censed in

1993.

The abolition of the controls led to an avalanche of demand. The era of controls and protection came to anend. Curbs on capacity were done away with, decrease in customs and excise duties meant that a vehiclesstarted getting affordable. The entry of foreign banks with attractive auto finance schemes helped garner ahuge base of middle class population. However the market was still ruled by the sellers.

Globalization ± 2000s

Early 2000 however saw globalization of Indian auto industry. Several policy changes were introducedwith focus on boosting the auto exports. A Core Group on Automotive Research and Development (CAR)was established in 2003 for encouraging R&D activities. Foreign manufactures started looking at Indiafor sourcing auto components. The buyers started ruling the market due to the availability of choices inthe form of models, price points and brands. A vibrant economy meant an increase in the GDP and per capita income. These factors turned out to be significant contributors in pushing up the domestic demand.The vast geographic spread of India attracted foreign investments. The marquee brands from all over theworld started courting Indian consumers aggressively. The mature markets in the developed countries paled in comparison to the sheer numbers and the growth phase of the Indian auto industry.

For the commercial vehicles, the steady growth in Indian economy led to demand for trucks, tempos, buses etc. The IT and BPO culture that boosted exports and employment also pushed the sales of vehicles.

Indian economy also witnessed rapid industrialization. Factories needed transport both for goods and for their employees. The retail boom in India saw malls, supermarket chains mushrooming all over the urbanareas, pushed the demand for efficient logistics and that in turn increased the number of commercial

vehicles.

Source : http://www.india-reports.com/articles/Auto-Industry-India-Evolution-Growth.aspx



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Factors contributing to the increased demand of automotives and the growth

of Indian Auto sector

The convergence of government policies, economy¶s growth, people¶s purchasing power have allcontributed to the phenomenal growth of Indian Auto industry. Some of the important growthdrivers are explained below.

Rise in the industrial and agricultural output indirectly helps Indian Auto industry

Industrial and agricultural output increase has reflected in higher GDP and overall growth of the economy

which is about 9% in the last three years. Higher GDP means more purchasing power. Sales of vehicles

for domestic and commercial consumption have seen high growth in these three years too.

Growth in the road infrastructure increases demand for vehicles

Indian highways and roads have improved a lot in quality and connectivity in the last 20 years. Projects

like the Golden Quadrilateral aim to make even remote areas accessible by road. Some of the National

Highways are of international standards. This has made road transport a viable, cost effective and speedy

option both for goods and passenger traffic.

Rise in the Per capita income increases two/four wheeler sales

Industrial growth in the 70s, IT boom in the 1980s and BPO boom in the 1990s have transformed the

Indian middle class. The present generation is able to earn the same levels of salary that their parents were

earning after years of work. This has pushed up the demand for two and four wheelers. A rise in per

capita income is also indirectly responsible for the retail boom and industrial boom for consumer

durables. This has pushed up the demand for commercial vehicles to enable efficient distribution.

Urbanization changes the face of Indian auto industry

Joint families in towns and villages have given away to migration of the younger generation to cities in

search of better opportunities. The new-age educated migrants and nuclear families (many with double

income couples) have a higher purchasing power. Presently, the rate of spread of urbanization is 30%

which is likely to increase by 40% in 2030 (UN). Urbanization has promoted infrastructural development

and it is estimated to spread at a rate of $500 billion in the next 5-6 years

Rising working class and middle class contribute to increased demand of automotives

Post 1980s, a surging economy has created millions of new jobs in the private sector. This has lead to a

lot of prosperity in the working class and the middle income households. They are able to provide for

food, clothing and education and also are able to think of owning luxuries like vehicles. According to the

Planning Commission report, between the year 2003 and 2009, 130 million people would have been

added to the working population. According to a finding from McKinsey, the middle income group will

grow from 50 million to 550 million by 2025.



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Exhaustive range of options in price and models of automotives

Indian consumer in 70s and 80s had to choose between and Premier Padmini or an Ambassador. Now

there are at least 123 different models of cars from 30 odd manufacturers available. The prices of the

compact cars like Tata¶s Nano have made the world sit up and take note of the truly unbeatable price

points.

Attractive Finance Schemes for purchase of automotives

Most nationalized and foreign banks have very tempting finance options and low interest rates for purchase of cars and two wheelers. There are specialized companies that finance the commercial vehicles.

All this has made the dream of owning a vehicle an easy reality

Favorable Government Policies for the auto sector

Apart from a healthy growing economy, Indian auto industry has a lot to thank the government for the

amazing growth rates. The Indian government has introduced several industry specific programs.

The Indian Auto Policy of 2002, introduced measures like low entry barriers and investment incentives bythe local state governments. To encourage in-house research and development activities, Government hasintroduced policies that allow weighted tax deduction up to 150%.

National Automotive Testing and R&D Infrastructure Project (NATRIP) has been set up n in RaeBareilly, Ahmednagar, Pune, Manesar, Silchar, Indore and Chennai for strengthening the R&D

infrastructure.

Cost efficiencies contributing to lower production costs

According to a study by KPMG in 2007, India Automotive Study, the labour cost per hour hovers around$20 in UK, USA and Germany. In India, it works out to just $1.60. Due to the huge savings in the labour cost sourcing auto components and finished cars makes a lot of business sense to the auto manufacturerswho have global presence. The improved design capabilities and continuous improvement in quality has

been possible only because of the availability of skilled manpower like engineers and IT professionals.

The future of Indian Auto Industry

According to a report from United Nations Industrial Development Organization¶s (UNIDO) in

µInternational Yearbook of Industrial Statistics 2008¶, India enjoys 12th position amongst top 15

automakers in the world. India is at the 4th position amongst the auto makers of developing countries. By

2016 the size of the Indian automobile industry is expected to grow by 13%, to reach a mark of US$ 120-

159 billion. Presently, India is the 2nd largest two wheeler market in the world and fourth largest

commercial vehicle market worldwide. With allies in a strong economy, rising demand and financial

backing, Indian auto industry is standing at the threshold of success.





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CHAPTER 3:- DATA ANALYSIS

Demand Forecasting of Automobile Industries using Simple Moving Average.

W e calculate the moving averages for two, three and up to 6 Years.

The following table is showing the different errors for the Simple moving averages.

Errors from Total Production

According to that we came to know that MA-4 which is moving average for four Years has the minimumerror From Total Production. So we took the MA- 4 to forecast the value of Total Production of Automobile industries.

Errors from Total Passenger vehicles

According to that we came to know that MA-6 which is moving average for six Years has the minimumerror From Total Passenger vehicles Production. So we took the MA- 6 to forecast the value of Passenger

vehicles of Automobile industries.

Total Production

Moving AVG Error (AVG/n)

MA-2 9.19E+10

MA-3 1.97E+13MA-4 1.09E+14

MA-5 3.43E14

MA-6 9.39E+14

Minimum (MA-4) = 1.09E+14

Passenger vehicles


MA-2 2.93E+09

MA-3 4.38E+11

MA-4 2.47E+12

MA-5 8.03E+12

MA-6 2.29E+13

Minimum ( MA-6) = 2.29E+13



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Errors from Total Commercial vehicles

According to that we came to know that MA-6 which is moving average for six Years has the minimumerror From Total Commercial vehicle Production. So we took the MA- 6 to forecast the value of

Commercial vehicle of Automobile industries.

Errors from Total Three wheeler vehicles

According to that we came to know that MA-6 which is moving average for six Years has the minimumerror From Total Three wheeler Production. So we took the MA- 6 to forecast the value of Three Wheeler

vehicle of Automobile industries.

Errors from Total Two wheeler vehicles

According to that we came to know that MA-3 which is moving average for Three Years has theminimum error From Total Two wheeler Production. So we took the MA- 3 to forecast the value of TwoWheeler vehicle of Automobile industries.

Commercial vehicle


MA-2 4.25E+08

MA-3 3.83E+10MA-4 2.11E+11

MA-5 6.76E+11

MA-6 1.82E+12

Minimum ( MA-6) = 1.82E+12

Three wheeler


MA-2 2.22E+08

MA-3 4.23E+10

MA-4 2.33E+11

MA-5 7.38E+11

MA-6 1.98E+12

Minimum ( MA-6) = 1.98E+12

Two wheeler


MA-2 5.09E+10

MA-3 1.14E+13

MA-4 6.27E+13

MA-5 1.96E+14MA-6 5.34E+14

Minimum ( MA-3) = 1.14E+13



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Trend analysis of Automobile Industries

[Comparision Between Industries data and Our Calculated Data]

Industrial Data Calculated Data

Hear, we compare the both chart and conclude the following things.

y Potential Vehicles Sales in India (2015-16) of cars in industrial data is 2.65 Million Units and

Calculated data is 3.48 Million Units. Our calculated data is 0.83 more compare to the Industrial data.

y Commercial Vehical Sales in Industrial data is 0.64 and our calculated data is 0.83, Our calculateddata is 0.17 more compare to the Industrial data.

y Three Wheeler Sales in Industrial data is 0.87 and our calculated data is 0.82, Our calculated data is

0.05 less compare to the Industrial data.

y Two Wheeler Sales in Industrial data is 0.87 and our calculated data is 0.82, Our calculated data is

0.05 less compare to the Industrial data.

y Total Production Sales in Industrial data is 31.96 and our calculated data is 19.10, Our calculated data

is 12.86 less compare to the Industrial data.

3.4860.83 0.829

13.96

19.105

0

5

10

15

20

25

pass

vehic

com vehic three

whe

two whe total prod

Potential Vehicles Sales in India (2015-16)

Million Units



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Industrial Data

Calculated Data

Hear, we compare the both chart and conclude the following things.

y Projection for Production in the India Four Wheeler Industries, Year 2011-12 is Potential Vehicles

Sales in India of cars is 1.85 Million Units and Multi Utility Vehicals sales industrial data is

0.32Million Units and our Calculated data is 2.64 Million Units and Multi Utility Vehicals sales is

0.65,our calculated data of cars 0.79 more compare to the Industrial data and calculated data of Multi

Utility Vehicals is 0.33 more compare to the Industrial data.

y Year 2012-13 is Potential Vehicles Sales in India of cars is 1.93 Million Units and Multi Utility

Vehicals sales industrial data is 0.35Million Units and our Calculated data is 2.85 Million Units and

Multi Utility Vehicals sales is 0.70,our calculated data of cars 0.92 more compare to the Industrial

data and calculated data of Multi Utility Vehicals is 0.35 more compare to the Industrial data.

2.642.85

3.063.27

3.48

0.65 0.7 0.74 0.78 0.83

0

0.5

1

1.5

2

2.5

3

3.5

4

2011-12 2012-13 2013-14 2014-15 2015-16

Cars

M util Vehic

Projection for Production in the India Four Wheeler Industries (Million Units)



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Vehicals sales industrial data is 0.47 Million Units and our Calculated data is 3.48 Million Units and

Multi Utility Vehicals sales is 0.83,our calculated data of cars 0.91 more compare to the Industrialdata and calculated data of Multi Utility Vehicals is 0.36 more compare to the Industrial data.



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Conclusion

Moving averages can be effective tools to identify Demand forecasting. On the basis of MovingAverage Calculation we can identify the future demand of Automobiles, and it¶s saws that thedemand of automobile is increase on the all segment, and the total production is also increase.

In the trend analysis, we compare the automobile industrial data and our calculated data and mostof the result is our calculated data is more than the industrial data. In this comparison we are notconsider any other factor to comparison that¶s why our calculated data is more than the industrialdata.



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BIBLIOGRAPHY

Book

1. Managerial Economics by Dominic Salvatore 4th edition (page no ± 80-83)

Website

1. http://www.oppapers.com/essays/Automobile-Industrypcd-India/155453

(Date-11-10-2010)

2. http://www.india-reports.com/articles/Auto-Industry-India-Evolution-Growth.aspx

(Date-11-10-2010)

3. http://india-reports.in/transitions/india%E2%80%99s-position-in-the-global-auto-industry/ (Date-12-10-2010)

4. http://www.siamindia.com/scripts/production-trend.aspx (Date- 5-10-2010)

5. http://www.siamindia.com/scripts/export-trend.aspx (Date- 5-10-2010)

Trend analusis on automobile industry

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