Indian Auto Industry Free Essays

The Indian Mid-Segment Passenger Car Industry Nitin Gupta* and Vaibhav Shekhar** The Indian car industry is one of the quickest developing vehicle enterprises on the planet. The low entrance level of vehicles in India combined with ascend in the extra cash of its working populace has made it an alluring goal for worldwide car producers. This case manages the average size vehicle section of the traveler vehicle industry in India. We will compose a custom paper test on Indian Auto Industry or on the other hand any comparable point just for you Request Now In 2009-10, this section represented around 12. % of the absolute traveler vehicles made in India and its Year-on-year (YoY) development rate was around 15%. The significant players in this portion incorporate Tata Motors, Maruti Suzuki, Hyundai Motors India, Ford India, General Motors India, Honda Siel India, Mahindra-Renault and Hindustan Motors. Notwithstanding the current players, different new players like Volkswagen, Nissan, Fiat, and so forth , have either as of now entered in this section or are going to enter. The case features different issues being looked by current just as new contestants in this section. The case gives comprehensive contemporary information on the medium size vehicle portion of the traveler vehicle industry in India. Examination of the case should be possible utilizing Porter’s five powers model. Numerous individuals purchase smaller vehicles today since they don't have the cash to purchase a car. So there is a high optimistic worth appended to fair size vehicles and more up to date vehicles at lower costs will just make more individuals consider getting them. †Pradeep Saxena, Head of the Auto Research Division at Consultancy Firm TNS1 Introduction Vehicle Industry is viewed as one of the key divisions of any economy; it is fit for being the driver of financial development on account of the two its regressive just as forward linkages with different areas of the economy. As indicated by the Automotive Mission Plan (2006-16), India is one of the quickest developing car enterprises on the planet. The sector’s share in Gross Domestic Product (GDP) rose from 2. 8% in financial year 1992-93 (April 1992-March 1993) to 5% in monetary year 2005-06 2 and it has been rising each year from that point forward. In the year 2009-10, Indian car industry created in excess of 2 million traveler vehicles and more than 0. 5 million business vehicles. 3 According to the Eleventh Five Year Plan4 (2007-12), after advancement in 1991, Indian * ** 1 2 3 4 Assistant Professor, IBS, Hyderabad, Andhra Pradesh, India. Email: prof. nitingupta@gmail. com Research Scholar, IBS, Hyderabad, Andhra Pradesh, India. Email: vaibhav. shekhar@yahoo. com http://timesofindia. indiatimes. com/articleshow/2888603. cms http://www. oppapers. om/articles/India-Automobile-Industry/155618 Society for Indian Automobile producers, accessible at http://www. siamindia. com/transfer/AMP . pdf Report by the Working Group on Automotive Industry, Eleventh Five Year Plan (2007-12), Department of Heavy Industries, Ministry of Heavy Industries and Public Enterprises, India (August 2006). The IUP Journal of Business Strategy, Vol. VII, No. 3, 2010  © 2010 IUP All Rights Reserved. . 60 Automotive Industry had enrolled a breathtaking de velopment of 17% during five monetary years running between 2000-01 and 2005-06. Till 2002-03, it had accomplished a speculation of INR6 50,000 cr (US$10. 99 bn7) which went up to INR 80,000 cr in 2007 (US$17. 58 bn8) with a turnover of INR 165,000 cr (US$36. 26 bn). In addition, a venture worth INR 35,000 cr (US$7. 69 bn) was in the pipeline. 9 According to the Annual Report (2007-08) of Ministry of Heavy Industries and Public Enterprises, Government of India, India is the second biggest bike maker on the planet, fifth biggest business vehicle producer on the planet, biggest maker of tractors on the planet and fourth biggest traveler vehicle showcase in Asia. This accomplishment of the Indian car industry could be credited to the Indian government’s choice to de-permit the segment followed by up to 100% remote direct speculation through programmed course which empowered the business to leave on another excursion since 1991. The above activities brought about setting up of assembling offices by major worldwide players. It brought about the monstrous upgrade of the creation level of autos (which included traveler vehicles, business vehicles, bikes and three heelers) from 2 million of every 1991 to 11. 17 million vehicles in 2008-09. 10 The above measures taken by the Indian Government made India the new platform for worldwide vehicle producers like Honda, Ford, Hyundai, General Motors, and so forth. Rising degree of salary of the Indians, accessibility of simple credit office, relaxations in guidelines by the Indian government as far as import taxes and value guidelines could be ascribed as significant purposes behind this upsurge. T he case focuses on the medium size vehicle fragment in India. It examines the purposes behind the development of this section and the contemporary development slants that it appears. The significant issues that the case raises are: How is the effect of different outer elements molding this section and what might be the eventual fate of this portion? Medium size Car Segment in India An average sized car11 is alluded to as a car whose size lay between a little measured vehicle (Mini and Compact) and a full-sized vehicle (Premium and Luxury). 12 It is for the most part valued between INR 3 lakh13 (US$6,953. 41) and INR 8 lakh (US$17,582. 2) with a conveying limit of 4 travelers (2 grown-ups and 2 kids). The significant players in this fragment incorporate Tata Motors, Maruti Suzuki, Hyundai Motors India, Ford India, General Motors India, Honda Siel India, Mahindra-Renault and Hindustan Motors (HM). Between the monetary years, 2004-05 and 2009-10, the creation of traveler vehicles in India rose from 1,027,858 units to 2,078,392 units, a remarkable ascent of over 100% underway in only five years. Be that as it may, during a similar timeframe (2004-05 to 2009-10), the 5 6 7 8 10 11 12 13 Indian Automotive Industry incorporates Automobile Industry and Auto Component Industry. INR = Indian Rupee. Conversion scale: 1 US$ = INR 45. 50 (pertinent as on March 20, 2010). Figures of 2007 has been taken from Annual Report 2007-08, Ministry of Heavy Industries and Public Enterprises, Government of India. Figures as on 2006-07. Source: Annual Report 2007-08, Ministry of Heavy Industries and Public Enterprises, Government of India. http://www. ibef. organization/industry/vehicles. spx Refer to Appendix for subtleties on characterization of traveler vehicles. http://auto. indiamart. com/vehicles/fair size vehicles. html 1 lakh = A Hundred Thousand. 61 The Indian Mid-Segment Passenger Car Industry creation of the medium size vehicles couldn't stay up with the gigantic increment in the traveler vehicles in India and it expanded by only 40. 5% (see to Table 1). Therefore, the portion of medium size vehicles concerning the all out traveler vehicles created dropped from over 18% in 2004-05 to under 13% in 2009-10 (see Table 2). Table 1: Total Production of Passenger Vehicles in India Indicator Total Production Total Mini Cars Production Total Compact Cars Production Total Mid-Size Cars Production Total Executive Cars Production Total Premium Cars Production Total Luxury Cars Production MUVs Production Figures in Units 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 1,027,858 1,112,794 1,322,739 127,175 614,137 187,345 26,673 5,017 140 67,371 98,047 714,985 200,019 27,660 5,333 89 66,661 99,400 881,665 212,763 39,478 4,477 249 84,707 ,531,545 1,619,095 2,078,392 81,179 245,972 44,166 5,745 525 105,333 62,323 229,239 33,526 7,527 543 102,128 69,195 263,352 42,293 9,092 375 151,908 1,048,625 1,183,809 1,542,177 Source: Center for Monitoring of Indian Economy: Industry Analysis Services Database Table 2: Segment-Wise Share in Production of Passenger Vehicles in India Indicator Total Mini Cars Production Total Compact Cars Production Total Mid-Size Cars Production Total Executive Cars Production Total Premium Ca rs Production Total Luxury Cars Production MUVs Production Figures in Percentages 2004-05 12. 7 59. 75 18. 23 2. 60 0. 49 0. 01 6. 55 2005-06 8. 81 64. 25 17. 97 2. 49 0. 48 0. 01 5. 99 2006-07 7. 51 66. 65 16. 09 2. 98 0. 34 0. 02 6. 40 2007-08 5. 30 68. 47 16. 06 2. 88 0. 38 0. 03 6. 88 2008-09 3. 85 73. 12 14. 16 2. 07 0. 46 0. 03 6. 31 2009-10 3. 33 74. 20 12. 67 2. 03 0. 44 0. 02 7. 31 Source: Center for Monitoring of Indian Economy: Industry Analysis Services Database An indication of developing economy in India is that since 2004-05 the offer of traveler vehicles consistently surpassed the creation of traveler vehicles (with the exception of in the year 2007-08) (allude to Tables 1 and 3). Between 2004-05 and 2009-10, the offer of traveler vehicles additionally indicated marvelous development of over 100% (allude to Table 3). Of the all out vehicles sold between 2004-05 and 2009-10, the portion of medium size vehicles dropped from only under 20% to simply over 14% (allude to Table 4). These patterns have started to cause considerable concern among the makers of the moderate size vehicles and they have begun to investigate the variables that are impacting such a pattern. 62 The IUP Journal of Business Strategy, Vol. VII, No. 3, 2010 Table 3: Total Sales of Passenger Vehicles in India Marker Total Car Sales Total Mini Car Sales Total Compact Cars Sales Total Mid-Size Cars Sales Total Executive Cars Sales Total Premium Cars Sales Total Luxury Cars Sales MUV Figures in Units 2004-05 1,047,109 124,447 617,837 206,888 25,646 5,876 155 66,260 2005-06 1,119,657 1,00,422 7,00,046 217,849 27,529 6,261 91 67,459 2006-07 1,353,574 96,103 890,504 235,355 40,964 5,978 249 84,421 2007-08 2008-09 2009-10 1,516,716 1,659,777 2,120,366 87,003 249,152 42,195 6,209 862 101,871 63,992 271,662 33,641 9,042 1,093 107,767 69,004 299,175 46,686 11,455 1,265 151,869 1,029,424 1,172,580 1,540,912 Source: Center for Monitoring of Indian Economy: Ind