ENVIRONMENT SCANNING

ON

PASSENGER CARS & JEEPS

Karan Sharma Rahul Bansal

Sumant Singh Bisen

WHY IS SCANNING IMPORTANT? Fast-paced information age

Focus on operational issues – crisis management

Old ways of doing business won’t allow us to keep pace

We need to move from reactive to proactive

Need to secure an ‘edge for the future’ – the future is a moving target

We need to know how the highly probable future will look – how can we influence the future today 2

ENVIRONMENTAL SCANNING

Global Trends & Drivers:

Demographic Technological Economic Socio-Cultural Political

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INTRODUCTION First self propelled car was built by Nicholas

Cugnot in 1769, equipped with a steam engine.

Henry Ford went several steps forward and in 1896 completed his first car, equipped with a two cylinder gasoline engine.

Ford Motor company was launched in 1903 and in 1908 introduced the modern mass production techniques.

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HISTORY Automotive industry in India started

developing in the 1940’s, distinct growth rates started only in 1970’s.

Decade 1985 to 1995 saw the entry of Maruti Udyog in the passenger car segment.

Mid of 1990’s the automobile industry started opening up.

Now it is one of the world fastest growing automotive industry growing at a compounded annual growth rate (CAGR) of 17% approx.

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STATISTICS About 8 million vehicles are produced

annually in the country in comparison to 72 million globally.

Second fastest growing industry.

Units sold last year: 15,47,985 Units exported last year: 2,18,418

There are seven major players in India: Suzuki, Hyundai, Tata, Honda, GM, Ford & Mahindra Renault. 6

CONTD…

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SALES & EXPORTS TREND

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ECONOMICTRENDS & DRIVERS

ECONOMIC ENVIRONMENT After seeing a 9 percent growth in last decade .

Indian economy is still holding its ground towards growth in midst of the current global financial crisis.

India is expected to grow at 6.3 percent in 2009 .

In 2007-08 per capita income was around 740 US $.

“India would continue to hold its position of second fastest growing economy .”

P.Chidambaram10

ADVANTAGES OF INDIAN ECONOMY India is among worlds youngest nation with

the median age of 25 years .

India has largest number of listed companies 10000 across 23 stock exchanges .

India has a healthy banking system with a network of 70000 branches .

India’s middle class will swell over by 10 times by 2025 from current size of 50 million to 538 million. 11

GLOBAL SCENARIO OF AUTOMOBILE INDUSTRY Global motor vehicle industry (four-wheeler)

contributes 5% directly to the manufacturing employment.

12.9 percent total manufacturing production value and 8.3 percent to the total industrial investment .

Total contribution to public revenue is US $ 560 billion.

Annual turnover is US $ 5.09 trillion which is equivalent to worlds sixth largest economy . 12

INDIAN AUTOMOTIVE INDUSTRY India is manufacturing 7.9 million vehicles

total and 1.5 million of which are passenger car .

Exports from India in automobile component manufacturing rose from US $ 1 billion in 2003-04 to 2.1 billion US $ in 2007-08.

Automobile sector provides direct employment to about 5 lakh persons .

Contribution to India’s GDP is 4.7 percent and 19 percent to India’s indirect tax revenue . 13

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SALES TREND IN INDUSTRY 12.85 % has been the average growth rate.

India is worlds 3rd largest small cars manufacturer in world .

Brazil and Japan hold the top two positions .

Small cars account for 71% of domestic market of passenger cars .

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EXPORTS

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CONCENTRATION OF AUTOMOBILE INDUSTRY

The Indian automobile industry is clustered in four major areas :-

North: Hindustan Motors , Honda , Tata Motors

East : Hindustan Motors , Tata motors.

South : Ford , Hindustan Motors , Mahindra and Mahindra , Toyota , Volvo , Hyundai , BMW .

West : Fiat, General Motors , Mahindra and Mahindra , Skoda , Tata Motors , Daimler Chrysler , Tata Motors

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DEMOGRAPHIC TRENDS & DRIVERS

GLOBAL PICTURE

World population is growing by 80-85 million people per year.

50% of the world’s population is under age 25.

88 countries have fertility rates lower than those required to replace.

As per the world bank data in 2007, 58.4% of the world’s population was literate.

World population will increase 50% by 2050 – 9.264 billion people according to estimates by United Nations

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CONTD…

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WORLD’S LARGEST COUNTRIES BY 2050

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Country 2050 Population (In Millions)

India 1,747

China 1,437

U.S. 420

Indonesia 297

Pakistan 295

Nigeria 282

Brazil 260

Bangladesh 231

DR of Congo 187

Philippines 150

INDIA’S COMPETITIVENESS COMPARED

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CONTD…

Factors adding to India’s competitiveness:1. Cheap labor2. Emergence of consuming class3. Growing middle class4. Increase in the number of working

women5. Prevalence of double income groups6. English speaking people

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TECHNOLOGICAL TRENDS & DRIVERS

EFFECT OF GROWING TECHNOLOGY

GLOBALLY Lean production system based on a just in

time manufacturing system is encouraged. Global production system. Locating assembly plants near major marketsNATIONALLY Companies are now incorporating ISO

certification. Total quality management is now a explicit

corporate goal28

PRESENT LEVEL OF TECHNOLOGY Today the main source of propelled fuels are

mainly Petrol & Diesel.

Substitutes are also there that cause less pollution but on the other hand Indian player are hardly paying any attention towards these issues.

This shows that a lot needs to be done at national level.

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EMERGING TRENDS

NATIONALLY The most critical intervention of the

government for automobile sector is the setting up of National Automotive Testing and R&D Infrastructure Project (NATRIP).

GLOBALLY Like any other technology, technology in cars

has changed tremendously over the period. It’s updated continuously so as to enhance the comfort level for the customers.

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CONTD… Some of the new emerging technologies are:

1. Navigation System2. Economy mode3. Curtain airbags4. Black Box technology5. Flat tires6. Cars that parks itself7. Water fuel technology8. Hybrid car technology

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LATEST TECHNOLOGY Weight watching material for cars which is

itself recyclable. E.g.: Aluminum & Carbon fibers

GINA (Geometry and Functions in “N” Adaption) is a latest innovation from BMW. Car can itself change its shape and is made of a special fabric which is totally recyclable.

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SOCIO-CULTURALTRENDS & DRIVERS

BACKUP FOR SOCIETY Automotive Industry has significant effect on

society both in long and short run .

A important industry for employment directly by way of production of automobiles and indirectly by feeder industries to automotive industry .

Employment is expected to grow upto 25 million by 2016 in the industry .

Almost for every one job directly by automotive industry further seven are created indirectly . 34

SENTIMENTS AFFECTING INDIAN VEHICLE BUYER

Fuel efficiency of the car and prices should be attractive for Indian Vehicle buyer .

Prices of car forms a large percentage of disposable income as compared to same income group in western countries.

In Indian market safety is still not concern for buyers where as fuel efficiency and price play a important role .

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NANO WAY Tata Nano the new peoples car .

Until now most automobile multinationals have focused their efforts of top 10% of Indian population.

Nano is cheapest car in the world and is expected to revolutionize travel in India.

Tata motors is focusing on 75% of two wheeler travelers . This car will bring change in society by appreciating standard of living in the society . 36

NANO NEGATIVITY Many environmentalist are in the view that

Tata Nano will kill Indian cities.

Looking at the capabilities of our administration we are sure that the infrastructure will not match the rapid growth of the vehicles .

Even when the infrastructure will scale up fast enough but then also more cars and more roads are eco-unfriendly .

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POLITICAL AND LEGALTRENDS & DRIVERS

OVERVIEW The automotive industry in India has come a

long way from its beginning state . The evolution of the industry is identified in four phases :-

1947-1965 1966-1979 - policies related to protection

1980-1990 - relaxation with means of technology acquisition.

1991-onwards- - liberalization related to FDI . 39

AUTOMOTIVE POLICY OF GOVT. OF INDIA

To establish a globally competitive Automotive industry in India and double its contribution to the economy by 2010.

Policy Objectives :-Establish an international hub for manufacturing passenger cars .

Assert development of vehicles propelled by alternative energy.

Raise this sector as a lever of industrial growth.Emerge as a global source of auto components.40

Match safety and environmental standards as per international standards.

Steer India’s software industry into automotive technology.

Modernization of the industry and facilitate design , Research and Development.

Foreign equity investment upto 100% of manufacture of automobiles and component is permitted .

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EXCISE DUTY Excise rate for automobile in all categories

have been declining over the years. Excise duty on small cars is 12% and on

large cars it is 24% . Excise duty on large car is highest for any

product in India . Excise on cars on longer cars then 4 meters

and with engine displacement of either over 1200cc petrol or 1500cc diesel would ought to come under 24% excise duty .

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EMISSION AND SAFETY STANDARDS In 1989 central motor vehicles rules came into

existence .

In 1991,the first state emission norms came into force for petrol vehicles and 1992 for diesel vehicles .

1995 April fitting of catalytic converters in new petrol cars in metros .

From April 2000, unleaded petrol is also available in the entire country . 43

CONTD… Euro 1 was introduced in EU in 1983 and in

India in 1996 .

Euro 2 was introduced in EU in 1996-97 and in India it was introduced in 2000.

Euro 3 norms have been implemented in many Indian states in phases.

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RECENT INITIATIVES OF THE GOVERNMENT The finance bill 2006 has given further boost

to automotive industry by reduction of excise duty for raw-materials.

Due to the constant persuasion by the department of heavy industry various advantages are given to the automotive sector to strength the capability of the sector.

Setting up of world class automotive testing and R&D infrastructure in the country to encourage localized R&D

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ASSOCIATIONS OF AUTOMOTIVE INDUSTRY Society of Indian Automotive manufacturers

(SIAM) the SIAM is the apex national association representing the auto industry .

Automotive Research Association of India (ARAI) it is cooperative industrial research association established by automotive industry with ministry of industry Government of India .

Western India Automobile Association (WIAA) is one of the premier and largest and motoring organization in Asia.

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CONTD…. Automobile Association of Upper India it has

history in providing services to Public and Transport Department ,police and customs.

Federation of Automobile Dealer Association is the apex national body representing automobile dealers of India .

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THANK YOU