2. • India is a global leader in the automotive sector, backed
by its domestic production capacity, market size, and
exports.
• India is the world’s largest tractor manufacturer
• 2nd largest two-wheeler manufacturer
• 2nd largest bus manufacturer
• 5th largest heavy truck manufacturer
• 6th largest car manufacturer
• 8th largest commercial vehicle manufacturer
Naveen Kumar M
3. • Overall, the Indian automotive industry is a major employment
creator, GDP contributor, and FDI earner.
• The automotive industry accounts for 49% of the country’s
manufacturing gross domestic product (GDP), 7.1 % of the
country’s GDP, 26% of Industrial GDP.
• For every vehicle produced, direct and indirect employment
opportunities are generated with the employment of 13
persons for each truck, 6 persons for each car and 4 for each
three-wheeler, and 1 person for two-wheelers.
• Key initiatives one of the major initiative take by the
government was allowing foreign direct investment (FDI) in the
automobile industry through 100% FDI under the automatic
route.
4. • The improvement in the industry growth was also reflected
in the stock market performance of S&P BSE Auto index.
5. The Indian Automobile sector consists of four
segments viz.
Passenger Vehicles
Commercial Vehicles
Two-wheeler
Three-wheeler
6. • Two-wheeler
A total of 19.9 m two-wheelers was sold in FY16, a growth
of a 5% over the previous year. While the year started at a
good note but the industry headwinds like Demonetization,
GST, BS norms led to a slowdown. The hit on profitability
was higher than the hit on the volumes because most of the
two-wheeler players offloaded their inventory on hefty
discounts post the implementation of BS Norms.
• Three-wheeler
The worst hit segment due to economic headwinds was the
three-wheeler industry. While the exports markets have
been lurching from last three years, the domestic market
also struggled in FY 17 and overall volumes were down by
17% YoY.
7. • Commercial Vehicle
After good growth in last year and a decent start to FY17, the
medium and heavy commercial vehicles (M/HCVs) (this includes
light commercial vehicles) also suffered due to GST,
Demonetization and implementation of new BS norms. The
volumes for the year grew by 4% and that was because most of
the companies in the sector opted for hefty discounts to offload
the old BS inventory.
• Passenger Vehicle
One of the only segment that proved to be resilient amid the
ongoing uncertainties in the automobile segment in FY17 was
Passenger Vehicles (PV). The overall PV segment grew at 11% YoY
with passenger cars growing by 6% YoY and utility vehicles
growing by 40% YoY. The Indian four-wheeler segment is going
through a shift from passenger vehicles to utility vehicles. The
industry has seen a flurry of new launches by all the participants
in this space.
8. Market Size
20.65
21.5
23.36 24.02 25.33
29.07
FY13 FY14 FY15 FY16 FY17 FY18
Number of automobiles produced (in Mn)
CAGR 7.08%
Source: KPMC survey
10. P – Projected
Source: CARE Ratings
Category FY19 P*
CVs 18-20%
PVs 8-10%
Two & Three wheelers 17-19%
Growth in Sales
11. Sector Composition
13%
3%
3%
81%
Share Of Each In Total Production volume
(FY18)
Passenger Vehicle
Commercial Vehicle
Three Wheelers
Two Wheelers
Source: KPMC survey
12. Key Trends
40
1000
Luxury Cars in 2017 Premium Motorbikes in FY 18
Sales Of Luxury Vehicles ('000 units)
Source : KPMC survey
14. Automobile Industry Life cycle
India’s automobile market has grown steadily over the last 7 to 8
years, with the exception of the previous two years where the
effects of the global downturn, the two-wheeler and three-
wheeler segments, which were until then experiencing high
growth or gaining volumes.
15. • Supply
The Indian automobile market has some amount of excess capacity.
• Demand
Demand is Largely cyclical in nature and dependent upon economic
growth and rise in income levels. Further, it is inversely related to the
interest rates and fuel prices as 85% of the total vehicles are bought
on credit.
• Barriers to entry
High capital costs, technology, distribution network, and availability
of auto components.
• Bargaining power of suppliers
Low, due to stiff competition.
• Bargaining power of customers
Very high, due to availability of options.
• Competition
High. Expected to increase even further.
16. SWOT Analysis
STRENGTHS
1. Continuous product innovation & technological and
advancement.
2. Growth shifting to Asian markets.
3. Increasing demand of value for money vehicle.
4. Increase in demand for luxury commercial vehicles.
WEAKNESES
1. Bargaining power of consumers.
2. Growth rate of automobile industry.
17. OPPORTUNITIES
1. Introducing fuel-efficient vehicles.
2. Changing lifestyle and customer groups.
3. Original equipments manufactures priorities.
THREATS
1. Volatility in the fuel prices.
2. Intense competition.
3. High fixed cost and investment in R&D.
19. The Government of India aims to make
automobile manufacturing the main driver of
"Make in India" initiative, as it expects,
• The passenger vehicles market to triple to 9.4 million units by
2026.
• Commercial vehicles production is expected to grow to 2.0
million units annually by 2026.
• Two wheelers production is expected to grow to 50.6 million
units annually by 2026.
• Three wheelers production is expected to increase to 0.95 million
units by 2026. as highlighted in the Auto Mission Plan (AMP)
2016-26.
20. The government plans to promote eco-friendly cars in the
country—i.e. CNG-based vehicles, hybrid vehicles, and electric
vehicles—and also to make mandatory 5% ethanol blending in
petrol.
21. The government has formulated a Scheme for Faster Adoption
and Manufacturing of Electric and Hybrid Vehicles in India,
under the National Electric Mobility Mission 2020, to
encourage the progressive introduction of reliable, affordable,
and efficient electric and hybrid vehicles into the country.
22. The Automobile Mission Plan (AMP) for the period 2006-2016,
designed by the government is aimed at accelerating and
sustaining growth in this sector. Also, the well-established
Regulatory Framework under the Ministry of Shipping, Road
Transport and Highways, plays a part in providing a boost to this
sector.
23. Faster Adoption and Manufacturing of Hybrid and Electric
Vehicles (FAME) scheme to address the global demand for
innovative and fuel economy vehicles. This will incentivize the
development, manufacture, and promotion of hybrid/electric
vehicles market (XEVs) that include,
• mild hybrid
• full hybrid vehicles (HEVs)
• plug in hybrids (PHEVs) and
• pure electric vehicles (PEVs)
• It was launched on April 1, 2015, targeting a market
penetration of 6 to 7 million vehicles per year by 2020.
24. • Hybrid vehicles now attract excise duty at 12.5%
• Electric vehicles attract excise duty at 6% as against the excise
duty of 30%, 27%, 24%, and 12.5% applicable on vehicles with
conventional fuel.
25. REASONS TO INVEST
• By 2020, India is expected to be the third largest automotive
market by volume in the world, after China and USA.
• The presence of large automotive clusters in the country: Delhi-
Gurgaon-Faridabad in the north, Mumbai-Pune-Nashik-
Aurangabad in the west, Chennai- Bengaluru-Hosur in the south
and Jamshedpur-Kolkata in the east.
• Global car majors have been ramping up investments in India to
cater to growing domestic demand. These manufacturers plan to
leverage India's competitive advantage to set up export-oriented
production hubs.
• India offers a comparative cost advantage of roughly 10-25
percent in comparison to that in Europe and Latin America.
• Increasing disposable incomes in the rural agri-sector.
26. • Successful government policies such as Automotive Mission Plan
(2006-16) and further rollout of Automotive Mission Plan (2016-
26) providing the much required thrust to the sector.
• A greater push has been given by government schemes such as
FAME and NEMMP 2020 to promote Electric cars.
• Charging of a uniform tax rate on complete vehicles and inputs to
further boost domestic production using local supplies.
• Research & Development (R&D) hub: strong support from the
government in the setting up of National Automotive Testing and
R&D Infrastructure Project (NATRIP) centres. Private players such
as Hyundai, Suzuki, GM are keen to set up an R&D base in India.
• The interest of foreign manufacturers setting up their facilities is
further supported by the presence of a large pool of skilled and
semi-skilled workers and a strong educational system.
