The Indian Automotive Industry

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A U TO M O T I V E

The Indian Automotive Industry
Evolving Dynamics

KPMG IN INDIA

Foreword

The automotive industry is one of the focus industries for KPMG globally, given its importance both in the mature economies of countries such as the US and Germany, and in the emerging economies of China and India. The Indian automobile industry has emerged stronger from the recent global downturn, and sales across all segments have seen record breaking numbers in the recent past. While the Indian industry has much to look forward to, by way of steady growth in both domestic and export markets, there are some clear challenges accompanying the opportunities in greener vehicles and alternative mobility. In order to capitalize on these opportunities, the industry needs to develop or acquire technologies and capabilities to produce vehicles that meet future market needs. The government for its part has much to do to ensure the growth trends are maintained, and encourage the development of greener vehicles, while also improving compliance to even existing environmental standards. This report attempts to capture how the Indian automobile industry is expected to develop in the longer term, and what role each stakeholder needs to fulfill in order to be geared up for evolving requirements. We have been aided in our study by several senior executives from India’s automotive sector and we would like to express our gratitude to each of them. It has been an exciting exercise for us to compile this report through discussions with various industry personnel and by examining similar trends developing in other markets. We hope that you find it interesting and insightful too.

© 2010 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

Table of Contents

1 2 3

Executive Summary Introduction Indian Auto Sector – Medium term Growth Consolidation

1 3 7
8 12

4

Indian Auto Sector – Long term
Green revolution
Mobility revolution

17
18 25

5 6

Conclusion About KPMG in India

29 31

© 2010 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

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market and women.

Executive Summary

Introduction: Demographically and economically, India’s automotive industry is well-positioned for growth, servicing both domestic demand and, increasingly, export opportunities. A predicted increase in India’s working-age population is likely to help stimulate the burgeoning market for private vehicles. Rising prosperity, easier access to finance and increasing affordability is expected to see four-wheelers gaining volumes, although two wheelers will remain the primary choice for the majority of purchasers, buoyed by greater appetite from rural areas, the youth

Domestically, some consolidation or alliances might be expected, driven by the need for access to better technology, manufacturing facilities, service and distribution networks. The components sector is in a strong position to cash-in on India’s cost-effectiveness, profitability and globally-recognized engineering capabilities. As the benefits of collaborations become more apparent, super-specialists may emerge in which the automobile is treated as a system, with each specialist focusing on a sub-system, akin to the IT industry. Though this approach is radical, it could prove an important step in reducing complexity and investment requirements, while promoting standardization and meeting customer demands. Manufacturers are already planning for the future: early advocates of technological and distribution alliances have yielded generally positive results, enabling domestic OEMs to access global technology and experience, and permitting them to grow their ranges with fewer...
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