Industry background

Driving the most luxurious car has been made possible by the stiff competition in the automobile
industry in India, with overseas players gathering the same momentum as the domestic
participants.

Every other day, we have been hearing about some new launches, some low cost cars – all
customized in a manner such that the common man is not left behind. In 2009, the automobile
industry is expected to see a growth rate of around 9%, with the disclaimer that the auto industry
in India has been hit badly by the ongoing global financial crisis.

The automobile industry in India happens to be the ninth largest in the world. Following Japan,
South Korea and Thailand, in 2009, India emerged as the fourth largest exporter of automobiles.
Several Indian automobile manufacturers have spread their operations globally as well, asking
for more investments in the Indian automobile sector by the MNCs.

Potential of the Automobile industry

In 2008, Hyundai Motors alone exported 240,000 cars made in India. Nissan Motors plans to
export 250,000 vehicles manufactured in its India plant by 2011. Similar plans are for General
Motors.

Turnover of Automobile Manufacturers(In USD Million)

Year In USD Million
2002-03 14,880
2003-04 16,544
2004-05 20,896
2005-06 27,011
2006-07 34,285

The figures show that the automobile sector in India has been growing robustly. The market
shares of the different types of vehicles will clearly depict the demand pattern in this sector.

Domestic Market Share for 2008-09

Passenger Vehicles 15.96%
Commercial Vehicles 3.95%
Three Wheelers 3.6%
Two Wheelers 76.49%

Automobile Companies
  Audi
 Bajaj Auto
 BMW
 Chevrolet
 DaimlerChrysler (Mercedes)
 Fiat
 Ford
 General Motors
 Hindustan Motors
 New Car Launches

 Hero Honda Motors

 Hyundai Motors
 Mahindra & Mahindra
 Maruti Udyog
 San Motors
 Skoda
 Tata Motors
 Yamaha Motors
 Top Automobile Companies

Notable Multi-national automobile manufacturers

Locally manufactured automobiles of MNCs

 Audi: A4, A6.

 BMW: 3 Series, 5 Series.
 Chevrolet: Spark, Aveo U-VA, Aveo, Optra, Cruze, Tavera.
 Fiat: Palio, Grande Punto, Linea.
 Ford: Ikon, Fiesta, Fusion, Endeavour
 Honda: Jazz, City, Civic, Accord.
 Hyundai: Santro, i10, Getz, i20, Accent, Verna, Sonata.
 Mercedes-Benz: C-Class, E-Class
 Mitsubishi: Lancer, Lancer Cedia.
 Renault: Logan
 škoda: Fabia, Octavia, Laura.
 Toyota: Corolla, Innova, Fortuner
 Volkswagen: Jetta, Passat.

Cars sold in India as Completely Built Units

 Audi: A8, TT, R8, Q5, Q7.

 Bentley: Arnage, Continental GT, Continental Flying Spur, Arnage.
  BMW: 6 Series, 7 Series, X3, X5, X6, M3, M5, M6 and Z4.
 Chevrolet: Captiva
 Fiat: 500.
 Honda: Civic Hybrid, CR-V.
 Hyundai: Tucson.
 Jaguar: XF, XK.
 Lamborghini: Gallardo, Murciélago.
 Land Rover: Range Rover, Range Rover Sport, Discovery 4, Freelander 2.
 Maybach: 57 and 62.
 Mercedes-Benz: CL-Class, CLS-Class, S-Class, SL-Class, SLK-Class, M-Class, Viano.
 Mitsubishi: Pajero, Montero, Outlander.
 Nissan: Teana, X-Trail.
 Porsche: 911, Boxter, Panamera, Cayman, Cayenne.
 Rolls Royce: Ghost, Phantom, Phantom Coupé, Phantom Drophead Coupé.
 škoda: Superb.
 Suzuki: Grand Vitara.
 Toyota: Camry, Land Cruiser, Land Cruiser Prado.
 Volkswagen: Touareg.
 Volvo: S80, XC90.

Indian Automobile Market

Besides a steady growth in India's fiscal system, the expansion of Indian middle class has also played a
major role in drawing the attention of international auto manufacturers towards the Indian Automobile
Market. Moreover, India is one nation which provides skilled workforce at cutthroat prices making itself
a preferable manufacturing centre.

The magnetism of the Indian markets and the decline of global auto industries such as Japan, Europe
and US have triggered the influx of new conglomerates along with huge capital investments in the
sector. Overseas auto players like Suzuki, Hyundai, Honda, etc have their manufacturing units in India
and are maximum utilization of their Indian functions to expand their business.

As per a recent research conducted by Deloitte, 2020 will witness the emergence of at least one Indian
auto firm that would not only feature among the best six car manufacturers but would also dominate
the international auto sector. Moreover, the global car sector would witness an enormous competence
building in low-priced nations like India and China as most of the producers would alter base from
industrial regions.

Domestic Automobile Market

As per statistics launched by Society of Indian Automobile Manufacturers (SIAM), the passenger car
transactions in domestic market have surged to 145,905 units in January 2010 against the 2009 sales of
110,300 units. This indirectly refers to the 32.28% growth in the domestic car sales. In January 2010, the
total sales of automobiles grew to 1,114,156 units as compared to the previous fiscal year's 768,698
units sales.

Segments of Indian Automobile Market

Two-wheeler automobile segment

In this segment, motorcycles accounts for major Indian Automobile market share. The chief players in
this segment is Hero Honda which delivers 50% motorbikes to the Indian market besides sharing 46% in
scooter market and TVS for 82% in moped market.

Three-wheeler automobile segment

Around 41% of the three-wheelers in India are utilized for merchandise transfer purpose. In this
segment Piaggio and Bajaj are the leading players with 40% and 68% of market share respectively.

Car segment

Accounting to 79%, Cars rule the passenger automobile in India. The chief players in this segment are
Maruti Suzuki and Mahindra. While Maruti Suzuki enjoys full-fledged monopoly in multi-purpose
automobiles sector with 52% of market share, Mahindra have 42% market share in utility vehicles.
However in the area of commercial automobiles, Tata Motors rule the Automobile Industry of India with
60% of market share besides being the fifth biggest producer in the world of medium & heavy
marketable vehicles.

Facts and figures on Various Segments of Indian Automobile Market

 Within the two-wheelers segment, motorcycles accounts for 80% of the sector volume.
 Cars rule the Indian passenger automobiles with 79% of market share
 More than half of the auto parts output is consumed by OEMs.
 India stands at the first rank in three-wheeler and two-wheeler markets, second in tractor
segment, fifth in commercial vehicles and first in motorcycle manufacturing
 In the entire Asia, India stands at the fourth position of car manufacturers by superseding the
benchmark of 1 million sales.

Future of Indian Automobile Market

In the financial year 2010, Automobile Industry of India is expected to witness a 10 to 12% of massive
growth in its vehicles sales. As per a research conducted by Indian Auto Sector Outlook, rivalry in the
nation's Automobile sector is anticipated to grow due to escalating influx of international original
equipment manufacturers (OEM).

Last Updated on 24 March 2010

Automobile Market

 Car Market
 Two-wheeler Market
 Heavy Vehicles Market
 Online Vehicle Market
 Market in Mumbai
 Market in Delhi
 Market in Kolkata
 Market in Bangalore
 Market in Chennai
 Market in Hyderabad

 Market in Chandigarh
 Market in Ahmedabad
 Market in Pune
 Market in Kanpur
 Market in Surat
 Market in Jaipur
 Market in Lucknow
 Market in Nagpur
 North Eastern States

Car Market in India

Over the last few decades. the car market in India have been in a burgeoning stage with all types of cars
flooding the market in order to meet the demands of Indian customers who are increasingly exposed to
state-of-the-world automobiles and want the best when it comes to purchasing a car.

It is expected that by 2030, the Indian car market will be the 3rd largest car market across the globe.
Small cars seem to be ruling the roost in the Indian automobile market with over 7.5 lakh small cars
being sold in India in 2006-07. The main encouraging factors for the success story of the car market in
India are the increase in the opportunity for new investments, the rise in the GDP rate, the growing per
capita income, massive population, and high ownership capacity.

The liberalization policies followed by the Indian government had been inviting foreign investors and
manufacturers to participate in the car market in India. The recent trend within the new generation to
get work in the software based sector has led to the rise in the income level and change in the lifestyle
which has further led to the increase in the demand for different varieties of cars among them.
Moreover, there are many financing companies providing easy car loans at reasonable interest rates and
affordable installments.

The car Market in India is crowded with all varieties of car models like the small cars, mid-size cars,
luxury cars, super luxury cars, and sports utility vehicles. Initially the most popular car model
dominating the Car Market in India was the Ambassador, which however today gave way to numerous
new models like Maruti, Fiat, Hyundai, BMW, and many others. Moreover, there are many other models
of cars in the pipeline, to be launched in the car market in India.

Some of the leading brands dominating the car market in India at present are Hindustan Motors, Reva
Electric Car Co., Fiat India Private Ltd., Daimler Chrysler India Private Ltd, Ford India Ltd., Honda Siel
Cars India Ltd., General Motors India, Hyundai Motors India Ltd., Skoda Auto India Private Ltd., and
Toyota Kirloskar Motor Ltd. Since the demand for foreign cars are increasing with time, big brands like
Mercedes Benz, Aston Martin, Ferrari, and Rolls-Royce have long since made a foray into the Indian car
market.

Two Wheeler Market in India

The two-wheeler market in India is the biggest contributor to the automobile industry with a size of
Rs.100,000 million. The two-wheeler market in India comprises of 3 types of vehicles, namely
motorcycles, scooters, and mopeds.

Foreign collaborations have been playing a major role in the growth of the Indian two-
wheeler market, and most of them are Japanese firms. The modern two-wheeler firms in
India have been manufacturing new categories of two wheelers such as Step Thrus and Scooterettes.
These have been produced by combining two or more two-wheeler segments. Foreign firms have already
taken initiatives to own their two-wheeler subsidiaries in India.

Among the 3 segments of the Indian two wheeler market, major growth trends have been seen in the
motorcycle segment over the last four to five years. One good reason for such increase in demand for
motorcycles is due to its resistance and balance even on bad road conditions. Most of the rural areas in
India do not have decent roads and hence the need for good, shock-resistant, and steady two-wheelers
such as motorcycles had been felt.

Some of the major players in the Indian motorcycles market are Hero Honda CBZ, Bajaj Pulsar, TVS and
Apache. Other brands include Splendor, Passion, Fiero, Victor, Star City, Boxer, CD Dawn, Karizma,
Caliber, etc. Having classified the motorcycle brands into economy, executive, and premium segments,
Bajaj stands as the leader in the economy segment, Hero Honda leads in the executive segment, and
there is a competition in the premium segment between Hero Honda and Bajaj.

The following are the main factors that affect two-wheeler sales in India:

 Increase in credit and financing for auto vehicles - Two-wheeler loans and financing has been on
the rise.
  Increase in consumer's salary - Due to opportunities offered by multinationals the disposable
incomes of salaried individuals have increase manifold.

 Constant petrol prices - Today, the government of India has been working on reducing subsidies
on kerosene and diesel which will keep petrol prices at more or less the same level.

 Delay in initiation of Mass Transport System - Probably a future threat to the two-wheeler
market, the implementation of the mass transport system has been delayed.

However, the two-wheeler market in India is a fast growing market due to its technological
advancements in product manufacturing and emphasis on design innovation.

Porter's Five Forces Analysis of Automobile Industry

Porter's Five Forces, also known as P5F, is a way of examining the attractiveness of an industry.
It does so by looking at five forces which act on that industry. These forces are determinants of
that industry's profitability.

The five forces are:

1. The threat of new entrants

In the auto manufacturing industry, this is generally a very low threat. Factors to examine for this
threat include all barriers to entry such as upfront capital requirements (it costs a lot to set up a
car manufacturing facility!), brand equity (a new firm may have none), legislation and
government policy (think safety, EPA and emissions), ability to distribute the product (Alfa
Romeo has been out of the US since the early 90s largely due to the inability to re-establish a
dealer network. But if you are looking at Singapore, for example, only one dealer is needed!).

2. The bargaining power of buyers/customers

Who in the US has ever bought a car without bargaining? Anybody? In 2009 especially US
dealers were giving great deals to buyers to get the industry moving. While quantity a buyer
purchases is usually a good factor in determining this force, even in the automotive industry
when buyers only usually purchase one car at a time, they still wield considerable power.

However, this may be different in other markets. In Singapore it sure is lower than in the US,
creating a more favorable situation for the industry but not the buyers.

3. The threat of substitute products

If buyers can look to the competition or other comparable products, and switch easily (they have
low switching costs) there may be a high threat of this force.

Product differentiation is important too. In the car industry, typically there are many cars that are
similar - just look at any mid-range Toyota and you can easily find a very similar Nissan, Honda,
or Mazda. However, if you are looking at amphibious cars, there may be little threat of substitute
products (this is an extreme example!).
4. The amount of bargaining power suppliers have
In the car industry this refers to all the suppliers of parts, tires, components, electronics, and even
the assembly line workers (auto unions!). We know in the US the auto unions are tremendously
powerful. But we also know that some suppliers are small firms who rely on the carmakers, and
may only have one carmaker as a client. So this force can be tricky to evaluate.

5. The intensity of the competitive rivalry (which is in part determined by 1-4)

We know that in most countries all carmakers are engaged in fierce competition. Tit-for-tat price
slashes, ad campaigns, and product developments keep them on the edge of innovation and
profitability. Margins are low and pressure between rivals is high.

All major car-producing nations experience this intense rivalry. This obviously includes the US,
Japan, Italy, France, the UK, Germany, China, India, and more.

State-owned car manufacturers like Proton in Malaysia experience less rivalry but are still under
pressure from imports.

While a P5F analysis applies to all companies competing in one industry (and market) the same,
what differs is that those firms' profitability will vary between them. This is because of their own
competitive advantages and varying business models. So just because all firms in one industry
and market are subject to the same forces doesn't mean they perform equally.

A P5F analysis should always be done in conjunction with other assessments, and should not be
regarded as being absolute. It should only serve as an indicator, not absolute fact or even
necessarily accurate.

There are many critical assumptions that should be made and explained in one's P5F analysis.
The market must be described, the competition must be explained, and the products must be
defined.

For example, a P5F analysis of the car industry in the US would not necessarily apply in China.
The markets are totally different, and the product life cycle is not even close to being the same.

Another example is the type of automotive industry. A P5F analysis of the electric car industry
would be entirely different than one of the conventional car industry.