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TO ANALYZE THE INDIANAUTOMOBILE INDUSTRY
INDUSTRY STUDY
2011
Submitted for the partial fulfillment of
the award
Of
POST GRADUATE DIPLOMA INMANAGEMENT
SUBMITTED BY
PRINCE TYAGIROLL NO 10061
UNDER THE SUPERVISION OFDr. MEENAKSHI
DEPARTMENT OF MANAGEMENT
INSTITUTE OF MANAGEMENT EDUCATION, SAHIBABAD
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DECLARATION
I hereby declare that the project report entitled THE STUDY Of THE
ANALYSIS OF INDIAN AUTOMOBILE INDUSTY is my original work and
the Project Report has not formed the basis for the award of any degree,
diploma, associated, or other similar title.
Date:
Place: NOIDA
Signature:
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ABSTRACT
INSTITUTE OF MANAGEMENT EDUCATION,
SAHIBABAD
ROLL NO.:
NAME OF THE STUDENT: PRINCE TYAGI
EMAIL ADDRESS: [email protected]
INDUSTRY STUDY TITTLE: TO ANALYZE THE INDIAN
AUTOMOBILE INDUSTRY I am a student of INSTITUTE OF
MANAGEMENT EDUCATION, SAHIBABAD. I did my industry study on
The analysis of Indian automobile industry. The main aim behind in this
project has undergone a detailed analysis of India automobile industry by
using Fundamental and Technical tools. In order to better understand the
performance of the industry we have made comparative analysis of two
players Tata motors as (leading player) and Maruti Suzuki.
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(Signature of student)
DATE:
TABLE OF CONTENT
CHAPTER TOPICS PAGE
NO.
1. HISTORY OF INDIAN AUTOMOBILE
2. AUTOMOBILE INDUSTRY IN INDIA
3. OBJECTIVE OF THE STUDY
4. RESEARCH METHODOLOGY
5. DATA ANALYSIS AND INTERPRETATION
6. SWOT ANALYSIS
7. CONCLUSION
8. RECOMONDATION
9. LIMITATION OF THE STUDY
10. BIBLIOGRAPHY
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HISTORY OF INDIAN AUTOMOBILE
INDUSTRY
The first car ran on India's roads in 1897. Until the 1930s, cars were imported
directly, but in very small numbers.
Embryonic automotive industry emerged in India in the 1940s. Mahindra &
Mahindra was established by two brothers as a trading company in 1945, and
began assembly ofJeep CJ-3A utility vehicles underlicense from Willys. The
company soon branched out into the manufacture oflight commercial
vehicles (LCVs) and agricultural tractors.
Following the independence, in 1947, the Government of India and the private
sectorlaunched efforts to create an automotive component manufacturing
industry to supply to the automobile industry. However, the growth was relatively
slow in the 1950s and 1960s due to nationalisation and the license raj which
hampered the Indian private sector. After 1970, the automotive industry started to
grow, but the growth was mainly driven by tractors, commercial vehicles and
scooters. Cars were still a major luxury. Japanese manufacturers entered the
Indian market ultimately leading to the establishment ofMaruti Udyog. A number
of foreign firms initiated joint ventures with Indian companies.
In the 1980s, a number of Japanese manufacturers launched joint-ventures for
building motorcycles and light commercial-vehicles. It was at this time that the
Indian government chose Suzuki for its joint-venture to manufacture small cars.
Following the economic liberalisation in 1991 and the gradual weakening of the
license raj, a number of Indian and multi-national car companies launched
http://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Mahindra_%26_Mahindra_Limitedhttp://en.wikipedia.org/wiki/Mahindra_%26_Mahindra_Limitedhttp://en.wikipedia.org/wiki/Jeep_CJhttp://en.wikipedia.org/wiki/Licensehttp://en.wikipedia.org/wiki/Willyshttp://en.wikipedia.org/wiki/Light_commercial_vehiclehttp://en.wikipedia.org/wiki/Light_commercial_vehiclehttp://en.wikipedia.org/wiki/Tractorhttp://en.wikipedia.org/wiki/Independence_of_Indiahttp://en.wikipedia.org/wiki/Government_of_Indiahttp://en.wikipedia.org/wiki/Private_sectorhttp://en.wikipedia.org/wiki/Private_sectorhttp://en.wikipedia.org/wiki/Nationalisationhttp://en.wikipedia.org/wiki/License_rajhttp://en.wikipedia.org/wiki/Japanhttp://en.wikipedia.org/wiki/Maruti_Suzukihttp://en.wikipedia.org/wiki/Motorcycleshttp://en.wikipedia.org/wiki/Suzukihttp://en.wikipedia.org/wiki/Small_carhttp://en.wikipedia.org/wiki/Liberalisationhttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Mahindra_%26_Mahindra_Limitedhttp://en.wikipedia.org/wiki/Mahindra_%26_Mahindra_Limitedhttp://en.wikipedia.org/wiki/Jeep_CJhttp://en.wikipedia.org/wiki/Licensehttp://en.wikipedia.org/wiki/Willyshttp://en.wikipedia.org/wiki/Light_commercial_vehiclehttp://en.wikipedia.org/wiki/Light_commercial_vehiclehttp://en.wikipedia.org/wiki/Tractorhttp://en.wikipedia.org/wiki/Independence_of_Indiahttp://en.wikipedia.org/wiki/Government_of_Indiahttp://en.wikipedia.org/wiki/Private_sectorhttp://en.wikipedia.org/wiki/Private_sectorhttp://en.wikipedia.org/wiki/Nationalisationhttp://en.wikipedia.org/wiki/License_rajhttp://en.wikipedia.org/wiki/Japanhttp://en.wikipedia.org/wiki/Maruti_Suzukihttp://en.wikipedia.org/wiki/Motorcycleshttp://en.wikipedia.org/wiki/Suzukihttp://en.wikipedia.org/wiki/Small_carhttp://en.wikipedia.org/wiki/Liberalisation8/3/2019 Prince Tyagi Industry Study
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operations. Since then, automotive component and automobile manufacturing
growth has accelerated to meet domestic and export demands.
Following economic liberalization in India in 1991, the Indian automotive industry
has demonstrated sustained growth as a result of increased competitiveness andrelaxed restrictions. Several Indian automobile manufacturers such as Tata
Motors, Maruti Suzuki and Mahindra and Mahindra, expanded their domestic and
international operations. India's robust economic growth led to the further
expansion of its domestic automobile market which has attracted
significant India-specific investment by multinational automobile
manufacturers. In February 2009, a monthly sale of passenger cars in India
exceeded 100,000 units and has since grown rapidly to a record monthly high of
182,992 units in October 2009. From 2003 to 2010, car sales in India have
progressed at a CAGR of 13.7%, and with only 10% of Indian households owning
a car in 2009 (whereas this figure reaches 80% in Switzerland for example ) this
progression is unlikely to stop in the coming decade.Congestion of Indian roads,
more than market demand, will likely be the limiting factor.
SIAMis the apex industry body representing all the vehicle manufacturers, home-grown
and international, in India.
Automotive industry in India
The Automotive industry in India is one of the largest in the world and one of
the fastest growing globally. India's passenger car and commercial vehicle
manufacturing industry is the seventh largest in the world, with an annual
production of more than 3.7 million units in 2010.According to recent reports,
India is set to overtake Brazil to become the sixth largest passenger vehicleproducer in the world, growing 16-18 per cent to sell around three million units in
the course of 2011-12.In 2009, India emerged as Asia's fourth largest exporter
ofpassenger cars, behind Japan,South Korea, andThailand.
http://en.wikipedia.org/wiki/Economic_liberalization_in_Indiahttp://en.wikipedia.org/wiki/Tata_Motorshttp://en.wikipedia.org/wiki/Tata_Motorshttp://en.wikipedia.org/wiki/Maruti_Suzukihttp://en.wikipedia.org/wiki/Mahindra_and_Mahindrahttp://en.wikipedia.org/wiki/Economic_development_in_Indiahttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Automobile_manufacturershttp://en.wikipedia.org/wiki/Automobile_manufacturershttp://en.wikipedia.org/wiki/Society_of_Indian_Automobile_Manufacturershttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Automotive_industryhttp://en.wikipedia.org/wiki/Asiahttp://en.wikipedia.org/wiki/Asiahttp://en.wikipedia.org/wiki/Automobilehttp://en.wikipedia.org/wiki/Japanhttp://en.wikipedia.org/wiki/Japanhttp://en.wikipedia.org/wiki/South_Koreahttp://en.wikipedia.org/wiki/Thailandhttp://en.wikipedia.org/wiki/Thailandhttp://en.wikipedia.org/wiki/Economic_liberalization_in_Indiahttp://en.wikipedia.org/wiki/Tata_Motorshttp://en.wikipedia.org/wiki/Tata_Motorshttp://en.wikipedia.org/wiki/Maruti_Suzukihttp://en.wikipedia.org/wiki/Mahindra_and_Mahindrahttp://en.wikipedia.org/wiki/Economic_development_in_Indiahttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Automobile_manufacturershttp://en.wikipedia.org/wiki/Automobile_manufacturershttp://en.wikipedia.org/wiki/Society_of_Indian_Automobile_Manufacturershttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Automotive_industryhttp://en.wikipedia.org/wiki/Asiahttp://en.wikipedia.org/wiki/Automobilehttp://en.wikipedia.org/wiki/Japanhttp://en.wikipedia.org/wiki/South_Koreahttp://en.wikipedia.org/wiki/Thailand8/3/2019 Prince Tyagi Industry Study
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As of 2010, India is home to 40 million passenger vehicles and more than 3.7
million automotive vehicles were produced in India in 2010 (an increase of
33.9%), making the country the second fastest growing automobile market in the
world.According to the Society of Indian Automobile Manufacturers, annual car
sales are projected to increase up to 5 million vehicles by 2015 and more than 9
million by 2020. By 2050, the country is expected to top the world in car volumes
with approximately 611 million vehicles on the nation's roads.
India's largest car manufacturing industry hub is based in and around Chennai,
also known as the "Detroitof India" with the India operations
ofFord,Hyundai, Renault and Nissan headquartered in the city and BMW having
an assembly plant on the outskirts. Chennai accounts for 60 per cent of the
country's automotive exports. Gurgaon and Manesarin Haryana are hubs where
all of the Maruti Suzuki cars in India are manufactured. TheChakancorridor
nearPune, Maharashtra is another vehicular production hub with companies
like General Motors, Volkswagen, Skoda,Mahindra and Mahindra, Tata
Motors, Mercedes Benz, Land Rover, Fiat and Force Motors having assembly
plants in the area. Ahmedabad with the Tata Nano plant and planned Ford
and Peugeot-Citroen plants, Halolagain with General
Motors, Aurangabad with Audi, Skoda and Volkswagen, Kolkatta with Hindustan
Motors, Noidawith Honda and Bangalore with Toyota are some of the other
automotive manufacturing regions around the country.
http://en.wikipedia.org/wiki/Indian_Road_Networkhttp://en.wikipedia.org/wiki/Indian_Road_Networkhttp://en.wikipedia.org/wiki/Chennaihttp://en.wikipedia.org/wiki/Detroithttp://en.wikipedia.org/wiki/Ford_India_Private_Limitedhttp://en.wikipedia.org/wiki/Hyundai_Motor_India_Limitedhttp://en.wikipedia.org/wiki/Renault_India_Private_Limitedhttp://en.wikipedia.org/wiki/Nissan_Motor_India_Private_Limitedhttp://en.wikipedia.org/wiki/BMW_India_Private_Limitedhttp://en.wikipedia.org/wiki/Gurgaonhttp://en.wikipedia.org/wiki/Manesarhttp://en.wikipedia.org/wiki/Manesarhttp://en.wikipedia.org/wiki/Haryanahttp://en.wikipedia.org/wiki/Maruti_Suzukihttp://en.wikipedia.org/wiki/Chakanhttp://en.wikipedia.org/wiki/Chakanhttp://en.wikipedia.org/wiki/Punehttp://en.wikipedia.org/wiki/Maharashtrahttp://en.wikipedia.org/wiki/General_Motors_India_Private_Limitedhttp://en.wikipedia.org/wiki/Volkswagen_Indiahttp://en.wikipedia.org/wiki/Skoda_Auto_India_Private_Limitedhttp://en.wikipedia.org/wiki/Skoda_Auto_India_Private_Limitedhttp://en.wikipedia.org/wiki/Mahindra_and_Mahindrahttp://en.wikipedia.org/wiki/Tata_Motorshttp://en.wikipedia.org/wiki/Tata_Motorshttp://en.wikipedia.org/wiki/Mercedes-Benz_Indiahttp://en.wikipedia.org/wiki/Land_Roverhttp://en.wikipedia.org/wiki/Fiat_Automobiles_India_Limitedhttp://en.wikipedia.org/wiki/Force_Motorshttp://en.wikipedia.org/wiki/Ahmedabadhttp://en.wikipedia.org/wiki/Tata_Nanohttp://en.wikipedia.org/wiki/Peugeot-Citroenhttp://en.wikipedia.org/wiki/Halolhttp://en.wikipedia.org/wiki/Halolhttp://en.wikipedia.org/wiki/General_Motors_India_Private_Limitedhttp://en.wikipedia.org/wiki/General_Motors_India_Private_Limitedhttp://en.wikipedia.org/wiki/Aurangabad,_Maharashtrahttp://en.wikipedia.org/wiki/Audi_Indiahttp://en.wikipedia.org/wiki/Skoda_Auto_India_Private_Limitedhttp://en.wikipedia.org/wiki/Volkswagen_Indiahttp://en.wikipedia.org/wiki/Kolkattahttp://en.wikipedia.org/wiki/Hindustan_Motorshttp://en.wikipedia.org/wiki/Hindustan_Motorshttp://en.wikipedia.org/wiki/Noidahttp://en.wikipedia.org/wiki/Honda_Siel_Cars_Indiahttp://en.wikipedia.org/wiki/Bangalorehttp://en.wikipedia.org/wiki/Toyota_Kirloskar_Motor_Private_Limitedhttp://en.wikipedia.org/wiki/Indian_Road_Networkhttp://en.wikipedia.org/wiki/Chennaihttp://en.wikipedia.org/wiki/Detroithttp://en.wikipedia.org/wiki/Ford_India_Private_Limitedhttp://en.wikipedia.org/wiki/Hyundai_Motor_India_Limitedhttp://en.wikipedia.org/wiki/Renault_India_Private_Limitedhttp://en.wikipedia.org/wiki/Nissan_Motor_India_Private_Limitedhttp://en.wikipedia.org/wiki/BMW_India_Private_Limitedhttp://en.wikipedia.org/wiki/Gurgaonhttp://en.wikipedia.org/wiki/Manesarhttp://en.wikipedia.org/wiki/Haryanahttp://en.wikipedia.org/wiki/Maruti_Suzukihttp://en.wikipedia.org/wiki/Chakanhttp://en.wikipedia.org/wiki/Punehttp://en.wikipedia.org/wiki/Maharashtrahttp://en.wikipedia.org/wiki/General_Motors_India_Private_Limitedhttp://en.wikipedia.org/wiki/Volkswagen_Indiahttp://en.wikipedia.org/wiki/Skoda_Auto_India_Private_Limitedhttp://en.wikipedia.org/wiki/Mahindra_and_Mahindrahttp://en.wikipedia.org/wiki/Tata_Motorshttp://en.wikipedia.org/wiki/Tata_Motorshttp://en.wikipedia.org/wiki/Mercedes-Benz_Indiahttp://en.wikipedia.org/wiki/Land_Roverhttp://en.wikipedia.org/wiki/Fiat_Automobiles_India_Limitedhttp://en.wikipedia.org/wiki/Force_Motorshttp://en.wikipedia.org/wiki/Ahmedabadhttp://en.wikipedia.org/wiki/Tata_Nanohttp://en.wikipedia.org/wiki/Peugeot-Citroenhttp://en.wikipedia.org/wiki/Halolhttp://en.wikipedia.org/wiki/General_Motors_India_Private_Limitedhttp://en.wikipedia.org/wiki/General_Motors_India_Private_Limitedhttp://en.wikipedia.org/wiki/Aurangabad,_Maharashtrahttp://en.wikipedia.org/wiki/Audi_Indiahttp://en.wikipedia.org/wiki/Skoda_Auto_India_Private_Limitedhttp://en.wikipedia.org/wiki/Volkswagen_Indiahttp://en.wikipedia.org/wiki/Kolkattahttp://en.wikipedia.org/wiki/Hindustan_Motorshttp://en.wikipedia.org/wiki/Hindustan_Motorshttp://en.wikipedia.org/wiki/Noidahttp://en.wikipedia.org/wiki/Honda_Siel_Cars_Indiahttp://en.wikipedia.org/wiki/Bangalorehttp://en.wikipedia.org/wiki/Toyota_Kirloskar_Motor_Private_Limited8/3/2019 Prince Tyagi Industry Study
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OVERVIEW
The Indian Automobile Industry is manufacturing over 11 million vehicles and
exporting about 1.5 million every year. The dominant products of the industry are
two wheelers with a market share of over 75% and passenger cars with a market
share of about 16%. Commercial vehicles and three wheelers share about 9% of
the market between them. About 91% of the vehicles sold are used by
households and only about 9% for commercial purposes. The industry has
attained a turnover of more than USD 35 billion and provides direct and indirect
employment to over 13 million people.
The supply chain of this industry in India is very similar to the supply chain of the
automotive industry in Europe and America. This may present its own set of
opportunities and threats. The orders of the industry arise from the bottom of the
supply chain i. e., from the consumers and go through the automakers and
climbs up until the third tier suppliers. However the products, as channelled in
every traditional automotive industry, flow from the top of the supply chain to
reach the consumers.
Interestingly, the level of trade exports in this sector in India has been medium
and imports have been low. However, this is rapidly changing and both exports
and imports are increasing. The demand determinants of the industry are factors
like affordability, product innovation, infrastructure and price of fuel. Also, the
basis of competition in the sector is high and increasing, and its life cycle stage is
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growth. With a rapidly growing middle class, all the advantages of this sector in
India are yet to be leveraged.
Note that, with a high cost of developing production facilities, limited accessibility
to new technology and soaring competition, the barriers to enter the IndianAutomotive sector are high. On the other hand, India has a well-developed tax
structure. The power to levy taxes and duties is distributed among the three tiers
of Government. The cost structure of the industry is fairly traditional, but the
profitability of motor vehicle manufacturers has been rising over the past five
years. Major players, like Tata Motors and Maruti Suzuki have material cost of
about 80% but are recording profits after tax of about 6% to 11%.
The level of technology change in the Motor vehicle Industry has been high but,
the rate of change in technology has been medium. Investment in the technology
by the producers has been high. System-suppliers of integrated components and
sub-systems have become the order of the day. However, further investment in
new technologies will help the industry be more competitive. Over the past few
years, the industry has been volatile. Currently, Indias increasing per capita
disposable income which is expected to rise by 106% by 2015 and growth in
exports is playing a major role in the rise and competitiveness of the industry.
Tata Motors is leading the commercial vehicle segment with a market share of
about 64%. Maruti Suzuki is leading the passenger vehicle segment with a
market share of 46%. Hyundai Motor India and Mahindra and Mahindra are
focusing expanding their footprint in the overseas market. Hero Honda Motors is
occupying over 41% and sharing 26% of the two wheeler market in India with
Bajaj Auto. Bajaj Auto in itself is occupying about 58% of the three wheeler
market.
Consumers are very important of the survival of the Motor Vehicle manufacturing
industry. In 2008-09, customer sentiment dropped, which burned on the
augmentation in demand of cars. Steel is the major input used by manufacturers
and the rise in price of steel is putting a cost pressure on manufacturers and cost
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is getting transferred to the end consumer. The price of oil and petrol affect the
driving habits of consumers and the type of car they buy.
The key to success in the industry is to improve labour productivity, labour
flexibility, and capital efficiency. Having quality manpower, infrastructureimprovements, and raw material availability also play a major role. Access to
latest and most efficient technology and techniques will bring competitive
advantage to the major players. Utilising manufacturing plants to optimum level
and understanding implications from the government policies are the essentials
in the Automotive Industry of India.
Both, Industry and Indian Government are obligated to intervene the Indian
Automotive industry. The Indian government should facilitate infrastructure
creation, create favourable and predictable business environment, attract
investment and promote research and development. The role of Industry will
primarily be in designing and manufacturing products of world-class quality
establishing cost competitiveness and improving productivity in labour and in
capital. With a combined effort, the Indian Automotive industry will emerge as the
destination of choice in the world for design and manufacturing of automobiles.
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OBJECTIVE OF THE STUDY
The objective of this project is deeply analyze our Indian
Automobile Industry for investment purpose by monitoring the
growth rate and performance on the basis of historical data.
The main objectives of the Project study are:
Detailed analysis of Automobile industry which is gearing
towards international standards
Analyze the impact of qualitative factors on industrys and
companys prospects
Comparative analysis of two tough competitors TATA Motors
and Maruti Suzuki
Application of various Technical Tools and Fundamental tools
(like Financial and Nonfinancial statements).
RESEARCH METHODOLOGY:
Research methodology is completely based on the secondary data.
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Sources are the newspapaer and the websites which help to reach on a
result.
DATA ANALYSIS AND
INTERPRETATION
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ANALYSIS OF AUTOMOBILE INDUSTRY
Over a period of more than two decades the Indian Automobile
industry has been driving its own growth through phases. With
comparatively higher rate of economic growth rate index against that
of great global powers, India has become a hub of domestic and
exports business. The automobile sector has been contributing its
share to the shining economic performance of India in the recent
years.
To understand this industry for the purpose of investment we need to
analyze it by following two approaches:
1). Fundamental Analysis (E.I.C Approach)
a. Economy
b. Industry
c. Company
2).Technical Analysis
1) FUNDAMENTAL ANALYSIS
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a). ECONOMY
Economic analysis is the analysis of forces operating the overall
economy a country. Economic analysis is a process whereby strengthsand weaknesses of an economy are analyzed. Economic analysis is
important in order to understand exact condition of an economy.
GDP and Automobile Industry
In absolute terms, India is 16th in the world in terms of nominal factory
output. The service sector is growing rapidly in the past few years. Thisis the pie- chart showing contributions of different sectors in Indian
economy.
The per capita Income is near about Rs38,000 reflecting improvement
in the living standards of an average Indian.
Today, automobile sector in India is one of the key sectors of the
economy in terms of the employment.
Directly and indirectly it employs more than 10 million people and if we
add the number of people employed in the auto-component and auto
ancillary industry then the number goes even higher.
As the world economy slips into recession hitting the demand hard and
the banking sector takes conservative approach towards lending to
corporate sector, the GDP growth has downgraded it to 7.1 percent;
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for 2008-09 and predicted it to be 6.5 per cent for FY 2009-10 Mr.
Montek Singh (Planning Commission of India). Following is the graph
showing a trend of Indian GDP trend in past 3 years.
Source:India Central Statistical Organization
The market value of Automobile Industry is more than US$8 bl. and
Contribution in Indian GDP is near about 5% and will be double by
2016. The automotive industry in India grew at a computed annualgrowth rate (CAGR) of 11.5 percent over the past five years, but
growth rate in last FY2008-09 was only
0.7% with passenger car sales shows 1.31% growth while Commercial
Vehicles segment slumped 21.7%.
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Recession
All the major auto companies enjoyed the high growth ride till the mid
2008. But at the end of the year, industry had to face the hard truth
and witnessed the fall in sales compared to last year. In December
2008, overall production fell by 22 % over the same month last year.
Global recession has hit the Indian auto industry, India is strong and
growing industry but the impact of recession is evident now on
industry as sales & growth of automobile companies have declined.
Passenger Vehicles segment registered negative growth.
One of its supporting facts is that the sales in December 2008 for
passenger vehicles fell by 13.86% over
December 2007 Two Wheelers registered minor growth of 1.85 %
during April December 2008.
However, Two Wheelers sales recorded 15.43 percent fall in December
2008 over the same month last year. Although the sector was hit by
economic slowdown, overall production (passenger vehicles,
commercial vehicles, two wheelers and three wheelers) increased from
10.85 million vehicles in 2007-08 to 11.17 million vehicles in 2008-09.
Passenger vehicles increased marginally from 1.77 million to 1.83
million while two-wheelers increased from 8.02 million to 8.41 million.
Total number of vehicles sold including passenger vehicles,
commercial vehicles, two-wheelers and three-wheelers in 2008-09 was
9.72 million as compared to 9.65 million in 2007-08.
Inflation
Despite of negative inflation these days (-.21% on 22-Aug-09) we saw
an increasing trend of sales in auto sector. A moderate amount of
inflation is important for the proper growth of an economy like India
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because it attracts more private investment. The fall in wholesale
prices from a year earlier is mainly due
to a statistical base effect and doesnt suggest contraction in demand,
the Reserve Bank of India said few week back, while revising its
inflation forecast for the FY through March to around 5% from 4%.
In last FY despite of skyrocketing oil prices (crude oil price has already
up to $130 compared to $20 per barrel five years back), Indian
automobile Industry was not as much affected and experts think that
Indian automobile industry will continue to grow this year despite all
obstacles- oil price hike, higher interest rates. However, the effect of
inflation has affected every sector which is related to car
manufacturing and production. The increase in the price of fuel and the
steel due to inflation has led to a slower growth rate of the car industry
in India. The effect of inflation has taken the rise in the price rate of the
cars by 3-4% which in turn suffices the need to meet the rise in price of
the raw materials to build a car. The car market and the car industry
witnessed a fall of 8-9%.
Current Scenario of Automobile Industry in Economy
With the latest available data Indian Automobile Industry is expected
to grow at 9%-10% in near future,
Two wheeler segment sales grew up by 12.8% with the modest 2.6%
growth rate, under this segment the market leader Hero Honda
registered growth of 12% in its domestic sales where as Bajaj Auto
disappointed as sales plunging by 23%, on the other hand car sales
has been grew up by a healthy 22.7%
in last February and Commercial Vehicles reported slower sales. It is
assumed that in coming festive season to meet demand, carmakers
going to produce 70000units/month more over the average
1.3lac/month with help of 5000 new hands.
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Indian Automobile Industry at Global level:
India ranks 1st in the global two-wheeler market
India is the 4th biggest commercial vehicle market in the world
India ranks 11th in the international passenger car market
India ranks 5th pertaining to the number of bus and truck sold in the
world
India is the second largest tractor manufacturer in the world.
Projected Growth rate in Automobile Industry:
Passenger vehicle sales in the country will grow at a CAGR of 12 per
cent to touch 3.75 million units by 2014.
The domestic two-wheeler sales will grow at a CAGR of 8.8% by 2014
at 11.3 million units.
To emerge as the destination of choice in the world for design and
manufacture of automobiles and auto components with output reaching a
level of US$ 145 billion accounting for more than 10% of the GDP and
providing additional employment to 25 million people by 2016.
b.) INDUSTRY ANALYSIS (AUTOMOBILE)
The current trends of the global automobile industry reveal that in the
developed countries the automobile industries are stagnating as a
result of drooping markets, whereas the automobile industry in the
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developing nations, have been consistently registering higher growth
rates every passing year for their domestic flourishing domestic
automobile markets.
Being one of the fastest growing sectors in the world its dynamic
growth phases are explained by the nature of competition, Product Life
Cycle and consumer demand. The industry is at the crossroads with
global mergers and relocation of production centers to emerging
developing countries.
In 2009, estimated rate of growth of India Auto industry is going to be
9% .The Indian automobile sector is far from being saturated, leaving
ample opportunity for volume growth.
Segmentation of Automobile Industry
The automobile industry comprises of Heavy vehicles (trucks, buses,
tempos, tractors); passenger cars; Two-wheelers; Commercial Vehicles;
and Three-wheelers. Following is the segmentation that how much
each sector comprises of whole Indian Automobile Industry.
Industrial Analysis of any industry can be done based on the
following headings:
1. Five Forces Model
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2. Industrial Life Cycle
3. SWOT Analysis
4. Industry Specific Index
1. Five Forces Model
Michael Porter identifies five forces that influence an industry. These
forces are
Degree of Rivalry
Despite the high concentration ratio seen in the automotive sector,
rivalry in the Indian auto sector is intense due to the entry of foreign
companies in the market. The industry rivalry is extremely high with
any being product being matched in a few months by the competitors.
This instinct of the industry is primarily driven by technical capabilities
acquired over years of gestation under the technical collaboration with
international players.
Threat of SubstitutesThe threat of substitutes to the automotive industry is fairly mild.
Numerous other forms of transportation are available, but none offer
the utility, convenience, independence and value offered by
automobiles. The switching cost associated with using a different mode
of transportation, may be high in terms of personal time, convenience
and utility.
Barriers to entry
The barriers to enter automotive industry are substantial. For a new
company, the startup capital required to establish manufacturing
capacity to achieve minimum efficient scale is prohibitive.
Although the barriers to new companies are substantial, establishing
companies are entering the new markets through strategic
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partnerships or through buying out or merging with other companies.
However, a domestic company, with local knowledge and expertise,
has the potential to compete its home market against the global firms
who are not well established there.
Suppliers power
In the relationship between the industry and its suppliers, the power
axis is tipped in industrys favor. The industry is comprised of powerful
buyers who are generally able to dictate their terms to the suppliers.
Buyers Power
In the relationship between the automotive industry and its ultimate
consumers, the power axis is tipped in the consumers favor. This is
due to the fairly standardized nature and the low switching costs
associated with selecting from among competing brands.
3.) Industrial Life Cycle
The industrial life cycle is a term used for classifying industry vitality
over time. Industry life cycle classification generally groups industries
into one of four stages: pioneer, growth, maturity and decline.
In the pioneer phase, the product has not been widely accepted or
adopted. Business strategies are developing, and there is high risk of
failure. However, successful companies can grow at extraordinary
rates. The Indian automobile sector has passed this stage quite
successfully.
In the growth phase, the product market has been established and
there is at least some historical guide to ground demand estimates.
The industry is growing rapidly, often at an accelerating rate of sales
and earnings growth. Indian Automotive Industry is booming with a
growth rate of around 15 % annually.
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The cumulative growth of the Passenger Vehicles segment during April
2007 March 2008 was 12.17 percent. Passenger Cars grew by 11.79
percent, Utility Vehicles by 10.57 percent and Multi Purpose Vehicles
by 21.39 percent in this period. The Commercial Vehicles segment
grew marginally at 4.07 percent. While Medium & Heavy Commercial
Vehicles declined by 1.66 percent, Light Commercial
Vehicles recorded a growth of 12.29 percent. Three Wheelers sales fell
by 9.71 percent with sales of
Goods Carriers declining drastically by 20.49 percent and Passenger
Carriers declined by 2.13 percent during April- March 2008 compared
to the last year. Two Wheelers registered a negative growth rate of
7.92 % during this period, with motorcycles and electric two wheelers
segments declining by 11.90 percent and 44.93% respect. However,
Scooters and
Mopeds segment grew by 11.64% and 16.63% respect.
The growth rate of the automobile industry in India is greater than the
GDP growth rate of the economy, so the automobile sector can be very
well be said to be in the growth phase.
As the product matures, growth slows as penetration reaches practical
limits. Companies began to focus on market share rather than growth.
Industry demand tends to follow the overall economy, but the scope of
growth of the automobile sector is very much possible in India due to
the inc reasing income of the middle class and their income as well as
standard of living.
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4.) SWOT Analysis
A scan of the internal and external environment is an important part of
the strategic planning process.
Environmental factors internal to the firm usually can be classified as
strengths (S) or weaknesses (W), and those external to the firm can be
classified as opportunities (O) or threats (T). Such an analysis of the
strategic environment is referred to as a SWOT analysis. SWOT
analysis of the Indian automobile sector gives the following points:
Strengths
Large domestic market
Sustainable labor cost advantage
Competitive auto component vendor base
Government incentives for manufacturing plants
Strong engineering skills in design etc
Weaknesses
Low labor productivity
High interest costs and high overheads make the production
uncompetitive
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Various forms of taxes push up the cost of production
Low investment in Research and Development
Infrastructure bottleneck
Opportunities Commercial vehicles: SC ban on overloading
Heavy thrust on mining and construction activity
Increase in the income level
Cut in excise duties
Rising rural demand
Threats
Rising input costs
Rising interest rates
Cut throat competition
5.) Industry Specific Index
Industry specific index also called as sectoral index are those indices,
which represent a specific industry sector. All stocks in a sectoral index
belong to that sector only. Hence an index like the BSE auto index is
made of auto stocks. Sectoral Indices are very useful in tracking the
movement and performance of particular sector.
BSE Auto Index comprises all the major auto stocks in the BSE 500
Index.
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c.) COMPANY ANALYSIS (Maruti Suzuki & TATA
Motors)
The company analysis shows the longterm strenght of the company
that what is the financial Position of the company in the market where
it stand among its competitors and who are the key drivers of the
company, what is the future plans of the company, what are the
policies of government towards the company and how the stake of the
company divested among different groups of people.
Profile of Maruti Suzuki
Maruti Suzuki is one of India's leading automobile manufacturers and
the market leader in the car segment, both in terms of volume of
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vehicles sold and revenue earned. Until recently, 18.28% of the
company was owned by the Indian government, and 54.2% by Suzuki
of Japan. As of May 10, 2007,
Govt. of India sold its complete share to Indian financial institutions.
With this, Govt. of India no longer has stake in Maruti Udyog.
The turnover for the fiscal 2008-09 stood at Rs. 203,583 Million & Profit
After Tax at Rs.
12,187ml.Maruti Suzuki India Ltd. has sold a total of 84,808 vehicles in
August 2009, an increase of
41.6%, compared to 59,908 vehicles in the same period of 2008. The
company's domestic sales in August
2009 increased 29.3% to 69,961 vehicles, compared to 54,113 vehicles
in August 2008. Total passenger
car sales in August 2009 increased 30.5% to 69,629 units, compared to
53,351 units in August 2008 The company's exports increased 156.2%
to 14,847 units, compared to 5,795 units in August 2008.
Profile of TATA MOTORS
Tata Motors Limited is Indias largest automobile company, reported
gross revenue (stand-alone) of
Rs.28599.27 crores (2007-08: Rs.33093.93 crores) in 2008-09, a year
marked by severe demand contraction in the automobile industry.
Revenues (net of excise) for the year were Rs. 25660.79 crores
compared to Rs.28739.41 crores in 2007-08, a decline of 10.7%. The
Profit before Tax was Rs.1013.76
crores compared to Rs.2576.47 crores in 2007-08, a decline of 60.7%.The Profit after Tax for the year was Rs.1001.26 crores compared to
Rs.2028.92 crores, a decline of 50.7%.
It is the leader in commercial vehicles in each segment, and among the
top three in passenger vehicles with winning products in the compact,
midsize car and utility vehicle segments. The company is the worlds
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fourth largest truck manufacturer, and the worlds second largest bus
manufacturer.
A. FINANCIAL ANALYSIS
BALANCE SHEET
MARUTI SUZUKI
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TATA MOTORS
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INCOME STATEMENTS
MARUTI SUZUKI
TATA MOTORS
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NON FINANCIAL ANALYSIS
TATA MOTORS
MARUTI SUZUKI
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Government Policies Towards Indian
Automobile Industry
Automobile industry in India also received an unintended boost from
stringent government auto emission regulations over the past few
years. This ensured that vehicles produced in India conformed to the
standards of the developed world.Though it has an advantage in India, thanks to low costs and
government policies it soon faces stiff competition from it multinational
competitors all eyeing for a share in the ever growing Indian auto
sector. The policies adopted by Government will increase competition
in domestic market, motivate many foreign commercial vehicle
manufactures to set up shops in India, whom will make India as a
production hub and export to nearest market.
Bring in a minimum foreign equity of US $ 50 Million if a joint venture
involved majority foreign equity ownership
Automatic approval for foreign equity investment upto 100% of
manufacture of automobiles and component is permitted
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FIIs including overseas corporate bodies (OCBs) and NRIs are
permitted to invest up to 49 percent of the paid-up equity capital of
the investee company, subject to approva of the board of directors and
of the members by way of a special resolution. .
Investments in making auto parts by a foreign vehicle maker will also
be considered a part of the minimum foreign investment made by it in
an auto-making subsidiary in India. The move is aimed at helping India
emerge as a hub for global manufacturing and sourcing for auto parts.
Specific component of excise duty applicable to large cars and utility
vehicles will be reduced to 15,000 rupees per vehicle from 20,000
rupees earlier.
The Proposal by the Govt. to set up an expert group to advise on a
viable and sustainable system of pricing petroleum products, as this
will surely had an impact on the Automobile Industry.
The announced reduction on the basic customs on bio-diesel is great
news for all companies working on environmental saving technologies
CONCLUSION
Indian Automobile Industry is in the growth phase and the
expected growth rate is 9-10% for FY2009-10 compare to
last year growth rate which was just 0.7% and the above
facts and figures in our study also support this truth.
Indian Automobile has a lot of scope for both two wheelers
and four wheelers due to development in infrastructure of
the country and especially the rural sector in which demand
of two wheeler has increased even in recession. According to
Indian Statistical Organization the per capita income
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(Rs.38000) is increasing and national income at the rate of
14.4% which shows potential to buy vehicle in auto industry.
The growth rate of Indian Automobile is so fast that by 2016
Indian Industry will be world 7 largest manufacturer in all
sections.
The Indian auto market is still untapped the majority of the
people in country dont own a four wheeler and all the major
auto companies are trying to increase their sales by several
moves. Like TATA has launch NANO the peoples car and
now TATA motors is also planning to come out with anelectric car as well as hybrid car, moreover in two wheeler
segment many companies like Mahindra and Mahindra grow
even more than expectations.
From the Technical Analysis of both companies we come to
know that the share price of Maruti will move in the band of
Rs.1275 to Rs.1425 and that of TATA Motors will move in the
range of Rs. 430 to
Rs. 490 if certain correction made in the market.
We have also come to know that share price movement of
TATA Motors is just according to the movement of SENSEX,
whenever there is a negative sentiment in the market
regarding TATA Motors there is a steep fall in the stock price
of TATA Motors but we have seen quick recovery in its share
prices to regain its primary trend E.g as we seen in last 3-4
months TATA recovers approx.90% after downfall.
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By analyzing the current trend of Indian Economy and
Automobile Industry we can say that being a developing
economy there is lot of scope for growth and this industry
still have to cross many levels so there is huge opportunities
to invest in and this is proving as more and more foreign
Companies setting up there ventures in India.
Recommendations
By analyzing the industry on various parameters with the
help of implementing Fundamental and
Technical tools we came to know that this industry has a lot
of potential to grow in future. So recommending to invest in
Automobile Industry have no doubt is going to be a good and
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smart option because this industry is booming like never
before not only in India but all around the world. The returns
which came out of this industry were very impressive
recently, as if we take an example of TATA motors it gives
approx 90% return in a period of just 3 months while Maruti
Suzuki shows always a buy and hold position because there
is possibility of growth in future, same situation is in two
wheeler segment with market leader Hero-Honda a debt free
company also have bright future ahead. The numbers which
came out in the end of financial year 2009 prove that evenin the period of recession the overall sales went up is
sufficient to support to this fact. Through Technical analysis
of TATA Motors and Maruti it can be recommended that for
now Maruti share price shows that its a time to hold the
position or buy more shares as there is scope in further rise
in share prices until and unless any negative reaction or
sentiments comes in the Economy.
Investing in Maruti Suzuki for long time could be a good
option whereas in TATA motors there is a chance of getting
correction, as it already went on high side in a very short
period of time so holding the shares for long time could be a
wrong step, so at this point of time those who invested
earlier can book their profit or new investors can buy now
and sell with in short period of time by earning profit in short
period of time.
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LIMITATIONS OF THE STUDY
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BIBLIOGRAPHY
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www.bseindia.com
www.googlefinance.com
www.yahoofinance.com
www.google.co.in
www.moneycontrol.com
www.worldfact.com
www.rbi.org.in
FDI statistic government of India
India Central Statistical Organization
Economic Times