Indian Automobile Industry Analysis Essay

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Today the automobile sector in India contributes 5% to the nation’s GDP, which makes it a prominent player throughout the economy. It will bring about around 19% of the Tax collection pertaining to financial year 2009-10. Subsequent have been the features of Automobile industry in past times financial year.

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The following desks and chart consist of the performance of Auto industry in previous years. Industry Aggregate (Rs in million)| | AMJ 10 (E)| Net Sales| 363904. 38| Change (%)| 39%| EBITDA| 64665.

22| Change (%)| 94%| Depreciation| 7303. 60| Interest| 3348. 58| Various other Income| 7118. 93| PBT| 61131. 97|. Tax| 16645. 21| Powerful tax rate| 27%| Reported PAT| 44486. 77| Modify % (Reported PAT)| 92%| Market Hat (Rs in bn)| 1647. 17| Resource: BSE India; Cygnus Research| Note: The aggregate consists of this companies- Bajaj Auto, Ashok Leyland, Tata Motors, TELEVISIONS Motors, Pressure Motors, Hero Honda, Escorts Ltd., Eicher Motors, Maruti Udyog Limited, Punjab Tractors Limited, Mahindra & Mahindra, and Hindustan motors Source: QPAC Of india Automobile sector Apr-Jun 2010 INDIAN VEHICLE INDUSTRY AND TRENDS Overview The car industry in India is a ninth largest in the world.

Following Japan, Southern region Korea and Thailand, last season, India emerged as your fourth largest ceder of cars. Several Of india automobile companies have spread their procedures globally. Indian auto market, which is presently growing with the pace of around 18 % per year, has become a warm destination for global auto players like Volvo, General Power generators and Kia. The Indian automobile industry is going by using a phase of rapid change and excessive growth. With new assignments coming up on a regular basis, the market is starting technological transform.

The major players are expanding their vegetation and focusing on mass modification, mass production. Yearly-Analysis Every year as the Indian human population grows the requirement for the travel will also expand, so it is obvious that the industry demand is definitely directly proportionate to the populace. Presently in India you will discover 100 people per automobile while the figure in china is 82. Indian automotive industry is strong and productive sector pertaining to the economy growth.

It gives nearly 5% of the employment towards the country’s population. Continue increasing quality ends in exports of automobile and ancillary market is boosting out the require in oversees business. The Indian auto-players are broadening their occurrence in oversees market. Within the last 5 years the foreign expenditure in this sector nearly bending. Production Craze: The Indian automotive industry confront a tough time during FY08 and its particular production had been almost stagnated.

From the early FY09, the industry began showing marginal growth regarding production and reached to 14. 04m units right up until FY10. Because of the huge insist in the household market company’s sale almost 88% with their00 production in the area and others 12% automobiles they export.

Domestic and Exports product sales trend: Regarding domestic revenue the industry is demonstrating positive way from the previous 3-years. During FY10 the industry home sales come to to doze. 29m units. The American indian exports will be increasing steadily form the earlier 5-years and reached to 1. 80m products in FY10. Earlier the industry counted on the foreign auto parts, but due to the increase in the global players in the country and establishing the plants ended painless move to the Indian auto-players.

INDUSTRY PERFORMANCE (YEARLY) Indian Car Industry Functionality (Apr-Mar)| | Production| Household Sales| Exports| | 2009| 2010| %| 2009| 2010| %| 2009| 2010| %| Passenger automobiles (PVs)|. Voyager Cars| 1516967| 1926484| 27| 1220475| 1526787| 25| 331535| 441710| 33| UVs| 219498| 272848| 24| 225621| 272733| 21| 3034| 2823| -7| MPVs| 102128| 151908| 49| 106607| 150256| 41| 1160| 1613| 39| Total PV| 1838593| 2351240| 28| 1552703| 1949776| 26| 335729| 446146| 33| Commercial vehicles (CVs)| M&HCVs| | | | | | | Traveler Carriers| 40995| 46026| 12| 34892| 43081| 24| 7456| 6069| -19| Goods Carriers| 151288| 204145| 35| 148603| 201977| 36| 9363| 14354| 53| Total M&HCVs| 192283| 250171| 30| 183495| 245058| 34| 16819| 20423| 21| LCVs| | | | | | |. Passenger Carriers| 28635| 34751| 21| 26952| 34421| 28| 5426| 2708| -50| Goods Carriers| 195952| 281686| 44| 173747| 251916| 45| 20380| 21876| 7| Total LCVs| 224587| 316437| 41| 200699| 286337| 43| 25806| 24584| -5| Total CVs| 416870| 566608| 36| 384194| 531395| 38| 42625| 45007| 6| 3-wheelers| Goods Carriers| 417434| 530203| 27| 268463| 349662| 30| 146914| 172505| 17| Total 3-Wheelers| 79586| 88890| 12| 81264| 90706| 12| 1152| 777| -33| Grand total| 497020| 619093| 25| 349727| 440368| 26| 148066| 173282| 17| 2-Wheelers|.

Scooter| 1161276| 1494409| 29| 1148007| 1462507| 27| 25816| 30125| 17| Motorcycles| 6798118| 8444852| 24| 5831953| 7341139| 26| 971018| 1103104| 14| Mopeds| 436219| 571070| 31| 431214| 564584| 31| 7300| 6905| -5| Electric Two Wheel| 24179| 2558| -89| 26445| 3001| -89| 40| 50| -| Total 2-Wheelers| 8419792| 10512889| 25| 7437619| 9371231| 26| 1004174| 1140184| 14| Grand Total| 11172275| 14049830| 26| 9724243| 12292770| 26| 1530594| 1804619| 18| source: SIAM; Cygnus Research| Demand-supply mismatch: The new capacity addition right up until 2012, may well anticipate a demand and supply mismatch in the short term. Demand is only expected to grow simply by 10-12% yearly. In 2009-10 the domestic auto sector was making use of 80-85% of its capability, but this could drop to 65% by simply 2012.

India may be in a similar position in 2012 while the global vehicle industry is within right now. A global capacity usage in 2009-10 was around 65%, down from 80 percent in 2008-09. In the near future it is expected the mismatch is likely to see between Demand and provide.

Capacity addition: Accoding to Fitch Evaluations, by 2012, the existing players in the market are required to add 0. 9m units to the installment payments on your 6m units’ capacity of the passenger automobile segment and 0. 6m units to the 0. 75m units’ capability of the business vehicle section. Meanwhile, global automakers whom currently simply assemble in India, are expected to set up creation units, in order to be more competitive with neighborhood players. Quarterly-Analysis Production Craze During AMJ10, the segmental market size of 2-wheeler was at 77%, followed by Traveling vehicles in 16% and after that followed by 3-wheelers at 4%. In this one fourth the total industry production improved by thirty-three.

27 to 4. 09m units coming from 3. 06m units in the previous year same period. The commercial car segment production has increased by simply 57. 11% to zero. 16m units and noted top among the segments. Product sales and Exports Trend Through the past two years the sale of the vehicles are increasing within this quarter because of the domestic require made by the festive time and the export products are weak.

In terms of sales commercial vehicles sales acquired increased by 55% during AMJ10 and stood in top against AMJ09. Voyager vehicle product sales increased by 33% subsequent to Business Vehicles and stood at 0. 55m units then 2 and 3-wheelers. The whole Indian car exports during AMJ10 elevated by fifty nine. 30% to 0. 58m units against 0. 36m units. The 3-wheeler portion stood in top in- terms of exports by simply 150.

33% increase then C. Versus and G. V. SEGMENTAL ANALYSIS FROM THE INDUSTRY (QUARTERLY) Automobile Product sales Performance in AMJ (in terms of Volume)| We PASSENGER VEHICLES| | AMJ’09| AMJ’10| % change| A. Passenger Cars| 324, 985| 433, 641| 33%| N. UVs| sixty, 969| 76, 432| 25%| C. MPVs| 31, 965| 44, 493| 39%| TOTAL (A+B+C)| 417, 919| 554, 566| 33%| II. BUSINESS VEHICLES (CVs)| M&HCVs| | | | A. Traveler Carriers| several, 482| 11, 574| 55%| B. Products Carriers| 23, 408| fifty nine, 642| 90%| TOTAL (A+B)| 38, 890| 71, 216| 83%| LCVs| | | | A. Passenger Carriers| 9, 601| 11, 566| 20%| W. Goods Carriers| 48, 376| 67, 095| 39%| TOTAL (A+B)| 57, 977| 80, 661| 36%|. TOTAL COMMERCIAL VEHICLES (CVs)| 96, 867| 149, 877| 55%| III.

THREE WHEELERS| A. passenger carrier| 72, 339| 84, 298| 17%| B. goods carrier| 18, 963| 20, 855| 10%| TOTAL (A+B)| 91, 302| 105, 153| 15%| IV TWO WHEELERS| A. scooters| 317, 400| 470, 323| 48%| W. motor cycles| 1, 689, 716| two, 097, 415| 24%| C. mopeds| 128, 738| 157, 588| 22%| TOTAL (A+B+C+D)| 2, one hundred thirty five, 854| a couple of, 725, 326| 28%| Total volume (units)| 2, 741, 942| 3, 534, 922| 29%| Origin: SIAM; Cygnus Research| SEGMENTAL PERFORMANCE Two-wheelers Note: Require is predicted on the base of country population basics and the basic year is definitely taken as 2150 for predictions. The Indian 2-wheeler sector has reported a 26% (Y-o-Y) progress in FY10 with revenue at 9. 37m products as against 7. 43m units bought from FY09.

For the exports entrance, the 2-wheeler industry with 1 . 14m shipments in FY10 placed a growth of 14% (Y-o-Y). Hero Honda Motors Ltd. (HHML), the world’s major two wheeler manufacturer continued to rule the total 2-wheeler industry which has a market share of 48. 10%. In the motor bike segment, the domestic revenue grew 26% (Y-o-Y) to 7. 34m units even though the exports grew 14% (Y-o-Y) to 1. 10m shipments in FY10. Hero Honda focused the motorcycle space using a market share of 44% and then Bajaj Automobile (21%) and TVS Power generators (15%).

Market Penetration The two-wheeler market is growing by a good phase in the country and expected a presence of 92 per every a thousand people by the end of 2010. The segment expects big demand over the following 5 years. The industry is anticipated to sell almost 26. 56m units until 2015. The segment is usually expected to face a tough time this year, due to the hefty compilation by the low cast cars as well as the alternative electronic digital vehicles.

Via 2012 the segment is expected to increase at the CAGR of 19% till 2015. Segment Boosters. New roll-outs, coupled with low base and festive (marriage) season, helped the 2- wheeler market post a remarkable volumes expansion for the month of May 2010. While the low base helped Bajaj Automobile Ltd. (BAL) posts a rise of 62% (Y-o-Y) in total sales over the same month of the previous fiscal.

Three Wheelers The 3-wheeler industry posted an extraordinary growth of 26% (Y-o-Y) to 0. 44m units in FY10 since against zero. 34m units sold in the last fiscal. For the exports front side, the 3-wheeler industry reported 17% (Y-o-Y) growth with 0. 17m units shipments in FY10.

The traveler carrier part reported larger growth in the domestic marketplace at 0. 34m products 30% (Y-o-Y), while the goods carrier part posted a 12% (Y-o-Y) growth pertaining to FY10. Around the exports front, the voyager carrier part posted a 17% (Y-o-Y) growth with 0. 17m unit deliveries, while the items segment posted a 33% (Y-o-Y) decline with exports of 777 units in FY10. Market share and players performance: Piaggio Vehicles ongoing to control the 3-wheeler industry having a market share of 41% then Bajaj Vehicle (35%) and Mahindra & Mahindra (11%).

In this 3-wheeler segment 81% sub-segment is definitely captured simply by Passenger providers, which is mainly for the agricultural people shifting long distances. The remaining 19% is have cargo or goods carriers; there are the versatile cars suitable for equally intra and inter-city transfer. Segment Booster gadgets In provincial and non-urban areas 3-wheelers are generally used since substitutes pertaining to buses. They will thrive as a result of very poor open public transport and shorter trip distances. A number of the opportunities of this segment will be; the inability of state government to supply the required range of buses, lack of political is going to to privatize general public transport and free up prices.

Increasing volume of 3-wheelers on these routeswill bring download availability form 10-12% to 6-8%, people for 80% of the excursions. PRINCIPLE USING 3-WHEELERS| Segments| Primary uses| Fuel used| Forecasted 3-yearsCAGR| In-city| Home-Office, Home-shopping, Schoolchildren, Home-Railways or perhaps Air port. | Petrol/LPG/CNG| 10%| Rural| Stage coach| Diesel| 11%| Cargo| Wholesaler to retailerRetailer to get rid of user distribution| Diesel/CNG| -6%| Growth individuals and Indian in the world auto industry (2010) Growth Motorists of Of india Auto Market| India in world production|? Increasing industrial and agricultural end result? Rising per capita cash flow?

Favourable demographic distribution with rising working population and middle class? Urbanisation? Raising disposable earnings in rural agri-sector?

Accessibility to a variety of motor vehicle models meeting diverse requirements and personal preferences? Greater value of vehicles? Easy fund schemes? Good government procedures? Robust production|?

Well-developed, worldwide competitive automobile ancillaryindustry? Proven automobile assessment and R&D centers? Amongst one of the lowest cost producers of steel on the globe? World’ssecondlargestmanufactureroftwo wheeler?

Fifthlargestmanufacturerofcommercial vehicles? Largest companies of vehicles in the world? Fourth largest passenger car industry in Asia?

India is a second most significant two-wheeler marketplace in the world.? 11th largest traveler car market in the world? Expectedtobetheseventhlargestauto industry simply by 2016| Inter- firm Evaluation: Two – Wheelers Functional Performance The sales figure of Hero Honda can be estimated to improve by 33. 73% in revenue conditions from Rs3824. 40m in AMJ09 to Rs51116.

77m in AMJ10. Hero Honda scooter section, pleasure sales have been developing at an average of 16000 units a month, it also crossed its land mark of 4. 5m unit sales for FY10. Bajaj Automobile is estimated to show a clear , crisp increase in product sales figure by simply 33% coming from Rs 233384. 70m in AMJ09 to Rs31230. 88m in AMJ10, this has been led by their two video game changing brands, Pulsar and Discover, with clocked robust quantities.

TVS Motor is estimated to show a boost of 34% in sales from Rs9886. 97m in AMJ09 to Rs13254. 32m in AMJ10. Its mobility scooter and motorcycle segment sales grew by simply 24% and 15% correspondingly; exports had been increased by 22% to 20067 devices during May.

The recently launched TV SETS Jive as well as the TVS Wego have reinforced better amount growth to get the month of Drive. Two-Wheeler Rs (m)| | AMJ 2009 (A)| AMJ 10 (E)| Growth| Bajaj Auto| 23384. 70| 31230. 88| thirty-three.

55| Leading man Honda| 38224. 40| 51116. 77| thirty-three. 73| TVS| 9886. 97| 13254. 32| 34. 06| Source: BSE India; Cygnus Research| Economic Performance The entire sale of every one of the companies is expected to go up. In case of TV SETS Motors OPM will improve primarily due to reduction in other expenses and uncooked material price. The operational performance of Hero Honda has also increased and is directly reflected in the OPM and NPM expansion which has elevated by 837bps and 486bps respectively. Bajaj Autos OPM and NPM have been increased by 94bps and 170 bps factors respectively.

General in terms Leading man Honda was standing in top position with regards to operational and financial functionality. | Bajaj Auto| Main character Honda| TVS| | AMJ 09 (A)| AMJ 10 (E)| AMJ 09 (A)| AMJ twelve (E)| AMJ 09 (A)| AMJ 12 (E)| Net sales| 23384. 70| 31230. 88| 38224. 40| 51116.

77| 9886. 97| 13254. 32| NPM (%)| 12. 55| 13. 25| 13. 08| 18. 95| 1 ) 84| 2 . 85| OPM (%)| 18. 45| 19. 38| seventeen. 01| twenty-five. 38| 6. 33| 6. 01| Origin: BSE India; Cygnus Research| Cost Structure Analysis Expense Structure (as % of Net sales) AMJ09 Vs AMJ10| Company| Hero Honda| Bajaj Auto| TVS Motors| Industry| Year| 09| 10| 09| 10| 09| 10| 09| 10| (Increase)/Decrease in Stock| zero. 33| -2. 33| installment payments on your 04| 1 . 34| several. 15| four. 49| -0. 74| zero. 68| Ingestion of natural materials| 67. 42| 62. 86| 60. 60| 64. 04| 67. 61| 60. 50| sixty five. 91| sixty two. 41| Buy in share in trade| 0. 00| 0. 00| 3. 51| 3. 67| 1 . 62| 1 . 88| 4. 44| 5. 55| Staff cost| 3. 62| 2 . 76| 4. 83| 2 . 98| 5. 29| 4. 87| 5. 34| 3. 86| Other expenditure| 11. 62| 11. 32| 10.

57| 8. 59| 15. 99| 22. 26| 12. 33| 9. 73| Depreciation| 1 . 19| zero.

86| 1 ) 41| 0. 12| installment payments on your 57| 1 ) 89| installment payments on your 63| 2 . 01| Fascination & Financial Charges| -0. 14| -0. 10| 0. 26| zero. 00| 1 . 73| zero.

91| 1 . 25| 0. 92| Tax| 3. 99| 7. 69| 5. 22| 6. 11| 0. 19| 0. 76| 2 . 62| 4. 57| Source: BSE India; Cygnus Research|. Uncooked material cost forms the major chunk of cost pertaining to two-wheeler companies followed by different expenditure, personnel cost. With regards to raw material, staff expense and other expenses the overall performance of Bajaj is better in comparison to its peers. Overall, Bajaj auto can be efficient by operational standpoint. It has dropped its overall cost structure by 164 bps to 86.

84% from 88. 44% because the percentage of sales during AMJ09. Tenir Five Forces model Here is the analysis of Auto Sector with help of the porter’s five compelled model. This can be common for auto sector in India.

Supply | Some sum of surplus capacity. although India can be capable of manufacturing 5. some m automobiles a year by 2014, domestic demand probably will edge up to between a few. 5 and 4. almost eight m models. | Require | Largely cyclical in nature and dependent upon economical growth and per household income. Seasonality is also a vital factor. | Barriers to entry | High capital costs, technology, distribution network, and availability of auto components. | Negotiating power of suppliers | Low, due to stiff competition. | Bargaining power of customers | Very high, as a result of availability of options. | Competition | Excessive. Expected to maximize even further. | Now whenever we make the five-force model for 2 wheelers:

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