Sector Analysis: Automobile

Group 4
Jaahnvi Mohan
Pasupuleti Om Sai Karthik
Raj Trikkha
Vaibhav Bajaj
Vivek Kumar Jaiswal

1
Industry Overview

7.1% Contribution to
India’s GDP 49% Share in GDP of the
manufacturing sector

DEMAND
India has one of the lowest per capita ownership (28 vehicles out of 1000). A 2-wheelers
rise in middle-class income and a large youth population may show strong
demand

COST ADVANTAGES Commercial

vehicles INDIAN
Auto manufacturing in India is 10-25% cheaper in comparison to Europe and Latin America. (Buses, AUTOMOBILES 3-wheelers
So, the Indian automobile industry has been receiving huge Foreign Direct Investments trucks, etc.)
(FDI) amounting to over $25 billion since 2000

Passenger
EXPECTATIONS vehicles
(cars, utility
Expected to reach $300 billion by 2026, as it’s one of the largest heavy vehicle markets in vehicles,
the world etc.)
Electric vehicles, especially two-wheelers are expected to increase sales in 2022-23, due to
government’s investment in charging stations and heavy FDIs into the electric vehicle
Market share of

81%
industry
two-wheelers Source1
2
Source2
Industry Timeline

1 Before 1982 2 1983 to

1992 3 1993 to
2020 4 2020
onwards

• Sector de-licensed in 1993.

• In FY22, a total of
• Major OEMs started
• Formation of Maruti Udyog 18,246,837 vehicles were
assembly operations in
in 1983 by the Indian manufactured.
• Closed Market India.
Government in association • In Jan 2022, the total
• 5 main players • Imports permitted from
with Suzuki and production of passenger
• Long waiting periods & April 2001.
commencement of vehicles, three-wheelers,
outdated models • Introduction of VAT in 2005
production two-wheelers, and
• Seller’s market • Automotive Mission Plan
• Component manufacturers quadricycles reached
2016-26 launched
entered the market via JVs 1,860,809 units.
• Bharat Stage IV emission
with Indian firms • Increased allocation of
norms since April 2017 and
• Transition to a buyer’s CAPEX in Union Budget 22-
to BSVI norms from 2020.
market 23 and high target for
• 26.36M vehicles produced
national highways.
in FY20

3
Source: IBEF
Product Offering

Automobile Sector

Two wheelers Passenger vehicle Commercial vehicles Three-Wheelers

Mopeds and Electric Light commercial

Passenger Cars Passenger Carriers
scooters vehicles

Medium & Heavy

Scooters Utility Vehicles commercial vehicles Goods Carrier

motorcycles Multi purpose

vehicles

4
Production & Sales in FY 2021-22

DOMESTIC SALES FY 2021-22

Total units produced Total units sold Exports

17,714,856 13,466,412 4,443,018

758,088 260,995 499,730

3,650,698 3,069,499 577,875

805,527 716,566 92,297

Although the sales of commercial, three-wheelers and passenger vehicles improved, the percentage of the overall sales dropped by 6% because of
the nosedive in two-wheeler sales, because of Covid-19 and high auto fuel prices. But these factors also helped increase the sales of electric vehicles
(EVs) by 300%
5
Source: SIAM
Major Players and Industrial Clusters

Delhi-Gurgaon-Faridabad

Jamshedpur

Sanand-Hansalpur-Vithalpu

Mumbai-Pune-Nashik-
Aurangabad

Kolkata

Chennai

6
Source: Money Control
Key Revenue Drivers
Economic Conditions
When the economy is good, more people
buy new cars, boosting the industry.
Economic recession reduces consumer and
business confidence and car
consumption. Automakers must plan
capacity for scale economies. Companies
plan capacity based on sales estimates,
which are affected by economic cycles.
Customer Demand & Interests
Second, consumer interest, preferences, and
demand. More choice is wanted. More
vehicles may be made-to-order with
multiple options, like premium cars. As
consumers seek more body shapes and
styles, the niche vehicle industry is
developing. On standard platforms, this has
led to various body morphologies.
Source: Technofunk
Globalization
Third, globalisation and industry influences.
Today's automobile sector is globally
competitive. Construction of overseas plants
and mergers amongst multinational
automakers increased globalisation of the
auto industry in the 1990s. Automobile
manufacturers invest in emerging markets
to cut costs.
Tech Innovations
Technology is the fourth important industry
driver. Automotive businesses use advanced
technologies to meet consumer quality and
pricing demands. Technological innovations
help automakers add value to vehicles and
overcome cost and profit pressures.
Government Regulations
Government is the fifth industry driver.
Emissions and recycling laws effect vehicle
technologies and construction. Many
countries have rigorous fuel economy and
emissions rules for automakers.
7
SWOT Analysis

1. Great Market potential – Vehicles made in India

have increased demand in Latin American, African, 1. Causing environmental Pollution – The Indian
and Southeast Asian Countries transport sector is responsible for 1/10th of the
Greenhouse gas emissions.

S W
2. Govt & Policy Support – Very strong policy support
extended by the government to manufacturers 2. Raw Material Dependent – The industry is
dependent on raw materials (Capital Intensive) –
3. Investment: Local and Foreign – India is attracting a availability of raw materials affects the supply of
lot of FDIs for its automobile industry the products

1. Emphasis on Public Transport 1. Diversifying product using technology - Electric

vehicles and fuel cell vehicles
2. E-vehicles industry is cost-intensive and hence

T O
affect the demand 2. Shared mobility demand is increasing as it is
affordable
3. Supply chain disruptions
3. High employment potential
4. Volatility in fuel prices

8
Source: ET, IBEF Industry Report
PESTEL Analysis

Legal Factors Political Factors

• Laws to decrease the number of vehicles on the
street
• Legal proceedings after accidents if faulty parts
• Tax laws and environmental laws of the international
market
• Govt Policy - Regulations regarding the production of
automobile parts to ensure safety
• Import and Export Policy - duties that are charged
• Geopolitical factors - Eg. War in Ukraine - supply chain
disruptions and an increase in the raw material costs

Economic Factors
Environmental Factors

ETLPSE
• Income of the people, taxes on luxury items
• 8% of the emission of greenhouse gases are i.e., GST Compensation Cess on luxury goods
due to the transport sector • Increase in prices of automobile parts
• Changing awareness of the people • Inflation - will affect the demand
regarding sustainability and environment • Rising Investments - India has significant cost
protection importance advantages - Auto firms save 10-25% on
operations vis-a-vis Europe and Latin America

Technological Factors Social Factors

• Innovative technology - for safety • Fashion statement - consider the choice of people
• Reduction on emissions - BS VI emissions • Population distribution - dense population and
• E-vehicles and fuel cell vehicles large families, 63.6% of the population - 15-64
• Automated cars - self driven cars years
• Culture and tendency of communities -

Source: Edrawmax 9
Government Initiatives & Support

•In February 2022, Mr. Nitin Gadkari, Minister of Road Transport and
Highways, revealed plans to roll out Bharat NCAP, India’s own vehicle
safety assessment program.
•In September 2021, the Union Minister for Road, Transport and Highways,
Mr. Nitin Gadkari announced that government is planning to make it
mandatory for car manufacturers to produce flex-fuel engines after getting
the required permissions from the Supreme Court of India. •In the Union Budget 2022-23, the government
laid out the following initiatives:
The government introduced a battery-swapping
•In August 2021, Prime Minister Mr. Narendra Modi launched the Vehicle Scrappage Policy, which aims to policy, which will allow drained batteries to be
phase out old polluting vehicles in an environmentally-safe manner. swapped with charged ones at designated
•The Indian government has planned US$ 3.5 billion in incentives over a five-year period until 2026 under a charging stations, thus making EV’s more
revamped scheme to encourage production and export of clean technology vehicles. viable for potential customers.
•As of June 2021, Rs. 871 crore (US$ 117 million) has been spent under the FAME-II scheme, 87,659 electric India’s National Highways would be expanded
vehicles have been supported through incentives and 6,265 electric buses have been sanctioned to various by 25,000 km in 2022-23 under the Prime
Minister’s Gati Shakti Plan.
state/city transportation undertakings.

•In February 2022, 20 carmakers, including Tata Motors Ltd, Suzuki Motor Gujarat, Mahindra and Mahindra, Hyundai and Kia India
Pvt. Ltd, were chosen to receive production-linked incentives (PLI) as part of the government's plan to increase local vehicle
manufacturing and attract new investment. The 20 automobile companies have proposed a total investment of around Rs. 45,000
crore (US$ 5.95 billion).

Source : IBEF 10
Latest Trends and Headlines
Tata Motors hires
Mckinsey to boost
Supply chain constraints to
Luxury vehicle sales may breach profitability of
2018 peak of 40,000 units next commercial vehicle continue affecting auto
year : Audi business sector this year, says
Around 17,000 luxury vehicles were
Mercedes-Benz India MD &
sold in India during Jan-June this
year, which is an increase of 55% CEO
over 11,000 units sold in the year-
earlier period. Consumers continue
to purchase top-end vehicles,
despite inflationary pressures and
long waiting periods. Hyundai Motor
launches first
electric sedan,
taking on Tesla

Riding the digital wave, India's

used car market is set to grow Toyota Kirloskar
at a compounded annual Motor launched the
growth of 11%, as people have zero-emission Mirai
been opting for pre-owned which is powered by
cars for personal mobility in
a hydrogen fuel cell
the pandemic amid the
ongoing supply shortages for battery pack with a
manufacturing new cars. range of 650 km
Source: ET 11