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Index

Sr. No. Contents Page no.

1 Introduction 3
2 Market size 3
3 Investments 3
4 Government Initiatives 4
5 Status of E-Mobility 4
6 Trends in Domestic Sales 5
7 Policies 6
8 Automotive Mission Plan 2016-26 8
9 Top Players 8
10 Important Ratios 9
Auto Components Industry
11 Introduction 10
12 Market size 10
13 Investments 10
14 Achievements 11
15 Government Initiatives 11
16 Top Players 13
17 Important Ratios 13
18 Road Ahead 13

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 Automobiles

1. Introduction

The Indian auto industry became the 4th largest in the world with sales increasing 9.5 per cent
year-on-year to 4.02 million units (excluding two wheelers) in 2017. It was the 7th largest
manufacturer of commercial vehicles in 2018.
The Two Wheelers segment dominates the market in terms of volume owing to a growing middle
class and a young population. Moreover, the growing interest of the companies in exploring the
rural markets further aided the growth of the sector.
India is also a prominent auto exporter and has strong export growth expectations for the near
future. Automobile exports grew 14.5 per cent during FY 2019. It is expected to grow at a CAGR
of 3.05 per cent during 2016-2026. In addition, several initiatives by the Government of India and
the major automobile players in the Indian market are expected to make India a leader in the two-
wheeler and four wheeler market in the world by 2020.

2. Market Size

Overall domestic automobiles sales increased at 6.71 per cent CAGR between FY13-19 with 26.27
million vehicles getting sold in FY19 .Domestic automobile production increased at 6.96 per cent
CAGR between FY13-19 with 30.92 million vehicles manufactured in the country in FY19
In FY19, year-on-year growth in domestic sales among all the categories was recorded in
commercial vehicles at 17.55 per cent followed by 10.27 per cent year-on-year growth in the sales
of three-wheelers.
Premium motorbike sales in India crossed one million units in FY18. During January-September
2018, BMW registered a growth of 11 per cent year-on-year in its sales in India at 7,915 units.
Mercedes Benz ranked first in sales satisfaction in the luxury vehicles segment according to J D
Power 2018 India sales satisfaction index (luxury).
Sales of electric two-wheelers are estimated to have crossed 55,000 vehicles in 2017-18.

3. Investments

In order to keep up with the growing demand, several auto makers have started investing heavily
in various segments of the industry during the last few months. The industry has attracted Foreign
Direct Investment (FDI) worth US$ 21.38 billion during the period April 2000 to March 2019,
according to data released by Department for Promotion of Industry and Internal Trade (DPIIT).
Some of the recent/planned investments and developments in the automobile sector in India are
as follows:

 Ashok Leyland has planned a capital expenditure of Rs 1,000 crore (US$ 155.20 million) to
launch 20-25 new models across various commercial vehicle categories in 2018-19.
 Hyundai is planning to invest US$ 1 billion in India by 2020. SAIC Motor has also announced to
invest US$ 310 million in India.
 Mercedes Benz has increased the manufacturing capacity of its Chakan Plant to 20,000 units
per year, highest for any luxury car manufacturing in India.
 As of October 2018, Honda Motors Company is planning to set up its third factory in India for
launching hybrid and electric vehicles with the cost of Rs 9,200 crore (US$ 1.31 billion), its
largest investment in India so far.

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  In November 2018, Mahindra Electric Mobility opened its electric technology manufacturing
hub in Bangalore with an investment of Rs 100 crore (US$ 14.25 million) which will increase
its annual manufacturing capacity to 25,000 units.

4. Government Initiatives

The Government of India encourages foreign investment in the automobile sector and allows 100
per cent FDI under the automatic route.
Some of the recent initiatives taken by the Government of India are -

 The government aims to develop India as a global manufacturing centre and an R&D hub.
 Under NATRiP, the Government of India is planning to set up R&D centres at a total cost of
US$ 388.5 million to enable the industry to be on par with global standards
 The Ministry of Heavy Industries, Government of India has shortlisted 11 cities in the country
for introduction of electric vehicles (EVs) in their public transport systems under the FAME
(Faster Adoption and Manufacturing of (Hybrid) and Electric Vehicles in India) scheme. The
government will also set up incubation centre for start-ups working in electric vehicles space.
 In February 2019, the Government of India approved the FAME-II scheme with a fund
requirement of Rs 10,000 crore (US$ 1.39 billion) for FY20-22.

5. Status of E-Mobility

Government of India has set its ambitious target of having 100% electric vehicle fleet by 2030 on
road and has been taking various steps to promote and to encourage the adoption of EVs
throughout the country. Despite the continued push by the Centre and various states for adoption
of electric mobility, presently, pure electric vehicle penetration in India is barely 0.1 % in private
vehicles, about 0.2 % in two-wheelers and nearly zero for commercial vehicles.

It is not to say that it will be a smooth ride. There are various issues that India has to work upon,
in order to successfully meet its goal of having 100% electric vehicle fleet on road by 2030. These
include the following:

• Lack of adequate charging Infrastructure: The lack of proper electric vehicle charging
infrastructure poses one of the greatest obstacles for 100% adoption of electric vehicles on
road by 2030 in the country. Currently, there are over 200 public charging points in India,
which stands as a huge outlier in comparison to china, Japan and the USA that have over
30,000 to 50,000 charging points.
• Shortage of Battery Raw Material: India falls extremely behind in the lithium and cobalt
reserves. It needs to speed up in securing lithium and cobalt. Cobalt’s reserve is extremely
low, limited only in Nagaland, Jharkhand and Orissa.
• Long charging time: Just like conventional vehicles rely on petrol pumps or gas stations for
refuelling, the mass adoption of electric vehicles mandates a robust charging infrastructure.
the charging process of EVs can take anywhere from 30 minutes (in case of fast charging) up
to 24 hours, depending on the capacity of the battery and motors. Most, however, take
around four to six hours to be fully charged, which is several times longer than the time it
takes to refuel a petrol/diesel car.

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 • Lack of Consumer awareness and price sensitivity: One of the key challenges faced by the EV
globally is the lack of consumer awareness about EVs. Traditionally, the Indian consumer is
extremely price sensitive and would be hesitant to invest in environmentally friendly products
that are too expensive. Unless the battery and other electro-mobility parts are economically
at par with the established ICE engine market, it is difficult for EVs to make a dent in the Indian
market. EVs are expensive primarily due to their costly batteries which are mostly imported.
The government also plans to set up a lithium ion battery-making facility under Bharat Heavy
Electricals. In parallel, gradual improvements in the other technologies including motors
would bring a decline in the overall costs of EVs and help set the base for market
establishment.

6. Trends in Domestic Sales

India is currently one of the largest markets in the world as far as automobile sales are concerned.
Car manufacturers raised a toast for the financial year 2017-18 as it turned out to be one of their
best in terms of sales. The industry registered double-digit growth between 1st April 2017 and
31st March 2018. The year also marked India surpassing Germany as the fourth largest automobile
market on a global scale to stand right behind China, the US, and Japan. According to data released
by the Society of Indian Automobile Manufactures (SIAM),

• Passenger Vehicles: the domestic sales of Passenger Vehicles (PVs) grew at 7.89 % to 32,87,965
(3.28 million) units in 2017-18, against 9.23 % in 2016-17.

1. Passenger Cars grew at 3.33 % to 2.17 million units,

2. Utility vehicles expanded at a strong 21% to 0.92 million units.

• Commercial vehicle: (CV) segment sales registered a strong growth of 20% in 2017-18,
significantly higher than 4% in 2016-17.

3. Medium and heavy vehicles grew 12.48% to 340,313 (0.34 mn) units,
4. Light vehicles expanded at over 25% to 516,140 (0.52 mn) units.

• Three-wheeler sales also hit a new record of 635,698 (0.63 mn) units, growing at a whopping
24% growth rate from the previous year.

5. passenger carriers grew nearly by 29%,

6. Goods carriers grew just under 8%.

• Two-wheelers also touched a new milestone of 20.19 million units last year, grew at 14.80%,
compared with 7% in 2016-17.

1. Motorcycle sales grew 13.69% to 12.61 million units,

2. Scooters expanded 20% to 6.71 million units.
3. Mopeds, declined over 3% to 0.85 million units.

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7. Policies

 Clear vision of Indian government to make India an auto manufacturing hub.

 Initiatives like ‘Make in India’, ‘Automotive Mission Plan 2026’, and NEMMP 2020 to give a
huge boost to the sector.
 Introduction of a new National Auto Policy and Faster Adoption and manufacture of Hybrid
and Electric Vehicles (FAME) II for a clean future in mobility to be launched soon.
 In February 2019, the Government of India approved the FAME-II scheme with a fund
requirement of Rs 10,000 crore (US$ 1.39 billion) for FY20-22.
 The Government of India has introduced a policy which allows organisations and researchers
to buy bulk data related to vehicle registrations on an annual basis.
 To install electric vehicle supply equipment (EVSE) infrastructure for the electric vehicles (EV),
various public sector firms, the railways and various ministries have come together to create
infrastructure and manufacturing components.

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8. Automotive Mission Plan 2016-26

The Automotive Mission Plan 2016-26 (AMP 2026) is the collective vision of Government of India
(Government) and the Indian Automotive Industry on where the Vehicles, Auto-components, and
Tractor industries should reach over the next ten years in terms of size, contribution to India’s
development, global footprint, technological maturity, competitiveness, and institutional
structure and capabilities. AMP 2026 also seeks to define the trajectory of evolution of the
automotive ecosystem in India including the glide path of specific regulations and policies that
govern research, design, technology, testing, manufacturing, import/ export, sale, use, repair, and
recycling of automotive vehicles, components and services. AMP 2026 is a document that is aimed
at multiple stakeholders in India and overseas, and seeks to communicate the Government and
industry’s intent and objectives pertaining to the Indian Automotive industry, comprising the
automotive vehicle manufacturers, the auto-component manufacturers and tractor
manufacturers who operate in India. Some of the key highlights of the Automotive Mission Plan
2026 are

• Indian automotive industry to grow 3.5 to 4 times of the current value of USD 74 billion to
USD 260 billion to 300 billion.
• By 2026, passenger vehicles likely to increase between 9.4 - 13.4 million units, commercial
vehicle between 2.0 - 3.9 million units, two wheeler to grow to 50.6 - 55.5 million, and tractors
to 1.5 - 1.7 million units.
• India to be among the top three automotive industries in the world.
• Contribute over 12 percent to India's GDP.
• Generate 65 million more jobs.
• AMP aims to make Indian automotive industry to be the engine of 'Make in India' initiative.
• The industry will look to increase exports multifold to reach 35-40 percent of overall output.
• AMP envisages to implement End of Life Policy for automotive vehicles and components.
• BSV norms to be adopted by 2019 and BSVI norms to be implemented 2023 for passenger vehicle.
• Auto Component to grow to Rs 593,500 crore (7.13B Euro) - Rs 732,000 crore (97.6B Euro).

9. Top Players
Market Cap
Name (Cr)
Maruti Suzuki 2,20,277
Hyundai India NA
Tata Motors 51595
Mahindra &
Mahindra 67126
Hero Motocorp 50388
Honda Motor
Company NA
TVS Motor Company 22432
Bajaj Auto Limited 92948
Ashok Leyland 24027
Eicher Motor 62900

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10. Important Ratios

1. Debt-to-Equity ratio: The debt-to-equity (D/E) ratio is calculated by dividing a company’s total
liabilities by its shareholder equity.
2. Inventory Turnover Ratio: Inventory turnover is a ratio showing how many times a company
has sold and replaced inventory during a given period. A company can then divide the days in
the period by the inventory turnover formula to calculate the days it takes to sell
the inventory on hand.
3. Return on Equity: Return on equity (ROE) is a measure of financial performance calculated by
dividing net income by shareholders' equity.

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 Auto Components Industry

11. Introduction

The Indian auto-components industry has experienced healthy growth over the last few years. The
auto-component industry of India has expanded by 18.3 per cent to reach at a level of US$ 51.2
billion in FY 2017-18.
The auto-components industry accounts for 2.3 per cent of India’s Gross Domestic Product (GDP)
and employs as many as 1.5 million people directly and indirectly each. A stable government
framework, increased purchasing power, large domestic market, and an ever increasing
development in infrastructure have made India a favourable destination for investment.

12. Market Size

The Indian auto-components industry can be broadly classified into the organised and
unorganised sectors. The organised sector caters to the Original Equipment Manufacturers
(OEMs) and consists of high-value precision instruments while the unorganised sector comprises
low-valued products and caters mostly to the aftermarket category.
The total value of India’s automotive exports stood at US$ 13.5 billion in 2017-18 as compared
US$ 10.9 billion in the year 2016-17. This has been driven by strong growth in the domestic market
and increasing globalisation (including exports) of several Indian suppliers. Growth is further
expected to accelerate to 8-10 per cent in FY19 due to pick up in global scenario.
According to the Automotive Component Manufacturers Association of India (ACMA), the Indian
auto-components industry is expected to register a turnover of US$ 100 billion by 2020 backed by
strong exports ranging between US$ 80- US$ 100 billion by 2026.

13. Investments

The Foreign Direct Investment (FDI) inflows into the Indian automotive industry during the period
April 2000 – March 2019 were recorded at US$ 21.38 billion, as per data by the Department for
Promotion of Industry and Internal Trade (DPIIT)).
Some of the recent investments made/planned in the Indian auto components sector are as
follows:

 Schaeffler India, the Indian arm of Germany’s automotive and industrial parts maker, is
planning to invest Rs 300 crore (US$ 46.66 million) per annum over FY18-19.
 As of December 2018, German automotive major Continental has planned investments of
Rs 180 crore (US$ 25.65 million) for setting up a premium surface materials facility in
Pune. The facility will have an initial capacity of five million square metres and is expected
to start production in 2020.
 In October 2018, IMI Precision Engineering inaugurated its second largest manufacturing
facility in the Asia Pacific region. The company is planning to expand its product and
technical offerings over the course of the next few years.
 As of September 2018, air-compressor manufacturer Elgi Equipments is going to invest Rs
18 crore (US$ 2.56 million) for setting up of a motor production facility in India. The facility
is expected to be commissioned in Q1 FY20.

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14. Achievements

Following are the achievements of the government in the past four years:

 The FAME – India Scheme formulated by Department of Heavy Industry led to a

continuous increase in registered OEMs and vehicle models. Also, the scheme enhanced
the sales of electric vehicles and about 261,507 electric/hybrid vehicles were supported
under the scheme up to December 6, 2018. In February 2019, the Government of India
approved the FAME-II scheme with a fund requirement of Rs 10,000 crore (US$ 1.39
billion) for FY20-22.
 Under National Automotive Testing and R&D Infrastructure Project (NATRiP) various
facilities including passive safety labs comprising of crash core facility and crash
instrumentations including dummies were established at ICAT-Manesar & ARAI-Pune
 To give a fresh thrust to e-mobility in public transport, Department of Heavy Industry
announced the launch of public & shared mobility based on electric powertrain.

15. Government Initiatives

The Government of India’s Automotive Mission Plan (AMP) 2006–2016 has come a long way in
ensuring growth for the sector. Indian Automobile industry is expected to achieve a turnover of
$300 billion by the year 2026 and will grow at a rate of CAGR 15 per cent from its current revenue
of $74 billion.
Government has come out with Automotive Mission Plan (AMP) 2016-26 which will help the
automotive industry to grow and will benefit Indian economy in the following ways:-

 Contribution of auto industry in the country’s GDP will rise to over 12 per cent
 Around 65 million incremental number of direct and indirect jobs will be created
 End of life Policy will be implemented for old vehicles

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16. Top Players

Market Cap
Name (Cr)
Bharat Forge Limited 21803
Bosch 49024
SPARK MINDA 9206
Samvardhana Motherson Group 42190
TVS Group NA
Exide 16345
Endurance technologies 15220
Amara Raja Battaries ltd 13030

17. Important Ratios

1. Price-to-earnings ratio: The price-to-earnings ratio (P/E ratio) is the ratio for valuing a
company that measures its current share price relative to its per-share earnings.
2. Return on equity: Return on equity (ROE) is a measure of financial performance calculated by
dividing net income by shareholders' equity.
3. Return on capital employed: Return on capital employed (ROCE) is a financial ratio that
measures a company's profitability and the efficiency with which its capital is used.
ROCE=EBIT/Capital Employed
where: EBIT=Earnings before interest and tax
Capital Employed=Total assets − Current liabilities

18. Road Ahead

The rapidly globalising world is opening up newer avenues for the transportation industry,
especially while it makes a shift towards electric, electronic and hybrid cars, which are deemed
more efficient, safe and reliable modes of transportation. Over the next decade, this will lead to
newer verticals and opportunities for auto-component manufacturers, who would need to adapt
to the change via systematic research and development.
The Indian auto-components industry is set to become the third largest in the world by 2025.
Indian auto-component makers are well positioned to benefit from the globalisation of the sector
as exports potential could be increased by up to US$ 30 billion by 2021E.

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REFERENCES

 www.ibef.org
 www.siamindia.com
 www.equitymaster.com
 www.screener.in

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