The Automobile Sector

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  • Topic: Tata Motors, Tata Nano, Suzuki
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  • Published : December 18, 2012
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Automobile Industry In India

Current Scenario

The automobiles sector is divided into four segments – two-wheelers (mopeds, scooters, motorcycles, electric two-wheelers), passenger vehicles (passenger cars, utility vehicles, multi-purpose vehicles), commercial vehicles (light and medium-heavy vehicles), and three wheelers (passenger carriers and good carriers). The industry is one of the key drivers of economic growth of the nation. Since the delicensing of the sector in 1991 and the subsequent opening up of 100 percent FDI through automatic route, Indian automobile sector has come a long way. Today, almost every global auto major has set up facilities in the country. The world standings for the Indian automobile sector, as per the Confederation of Indian Industry, are as follows: * Largest three-wheeler market

* Second largest two-wheeler market
* Tenth largest passenger car market
* Fourth largest tractor market
* Fifth largest commercial vehicle market
* Fifth largest bus and truck segment
 
The auto sector reported a robust growth rate of 26 percent in the last two years (2010-2012). The BSE AUTO Index outperformed the benchmark Nifty by 79%, 12% and 19% in FY10, FY11 and FY12, respectively. However, the sector has shown a sluggish growth of 12 percent in 2012. The trend is likely to stay with a 10 percent growth outlined for 2013 citing high ownership costs (fuel costs, cost of registration, excise duty, road tax) and slow rural income growth. Solid but cautious growth is expected over the next few years. However, from a long-term perspective, rising incomes, improved affordability and untapped markets present promising opportunities for automobile manufactures in India. According to Macquaire equities research, sale of passenger vehicles is expected to double in the next four years and growth anticipated is higher than the 16 percent achieved in the past 10 years. Two-wheeler vehicle segment is expected to show slow growth of 10 percent CAGR over the period of 2012-2016, suggests the report. The Government recognizes the impact of the sector on the nation’s economy, and consequently, the Automotive Mission Plan 2016 launched by it seeks to grow the industry to a size of US $145bn by 2016 and make it contribute 10 percent to the nation’s GDP. The ICRA analysis of the Indian market projects heavy growth for competitively priced sports-utility-vehicles or SUVs and two wheelers. A number of major global brands like Honda, Suzuki, General Motors and Hyundai have launched their products in the SUV segment of the Indian automobile market. An average of 11.5% growth in the two-wheelers sales in 2004-2007 has kept a number of global companies interested in this segment as well. The market has been moreover bolstered by a healthy rise in the sales of heavy commercial vehicles, and the presence of a strong auto component industry that now ranks 2nd in the world. One of the best things to happen for the Indian automobile market in the recent years was its telling improvement in the export sector. There was a 56% growth in exports from 2003 to 2004. Although economy cars continue to hold the lion's share of the export market, vehicles worth more than USD 1 billion were also exported in 2004, for the first time in history. This increasing demand for Indian cars on the foreign shores has helped the country's automobile industry in two significant ways. First, it has decidedly contributed to the economic growth of the industry. Secondly, it has helped to improve the image of the Indian manufacturing infrastructure at a global level. This increased confidence has resulted in more and more foreign brands opening manufacturing units in India, directly contributing to economy and employment. With a number of foreign brands joining ranks with the domestic manufacturers, the Indian consumer is now flooded with choice. An average Indian can now select from a wide range of Indian and foreign products. Some of...
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