Sep 15 2012 | Focus

Changing Gears

The Indian Automobile industry has experienced steady growth in the last six years and is looking forward for higher growth rate in the years to come. The market size is huge considering the increase in the buying power of the Indian middle class. The demand for passenger vehicles rose year after year. But the recent figures from SIAM suggest some amount of slow down in the overall demand. The segments like Vans, Medium and Heavy Commercial Vehicle and Goods carriers registered negative growth recently. The silver lining appears to be in the healthy growth registered by Two wheeler and the Passenger car segment.

FACTS & FIGURES

Production: The cumulative production data released for April-July 2012 indicates 7.10% growth in production over same period in the previous year. The industry produced 1, 746,840 vehicles in July 2012 as against 1,656,014 in July 2011.

Sales: During April-July 2012 the domestic sales for automobiles registered a growth rate of 9.34 percent over the same period in the previous year. Passenger Vehicles segment grew at 10.20 percent during April-July 2012 over same period last year. Passenger Cars grew by 5.55 percent, Utility Vehicles grew by 53.66 percent and Vans grew by (-12.73) percent during April-July 2012 as compared to same period last year. The overall Commercial Vehicles segment registered growth of 4.74 percent in April-July 2012 as compared to the same period last year. While Medium & Heavy Commercial Vehicles (M&H-CVs) registered negative growth at (-12.75) percent, Light Commercial Vehicles grew at 18.02 percent. Three Wheelers sales recorded marginal growth at 0.81 percent in April-July 2012. Passenger Carriers grew by 4.93 percent during April-July 2012 and Goods Carriers registered de-growth at (-13.62) percent during this period. Two Wheelers registered a growth of 9.75 percent during April-July 2012. Mopeds, Motorcycles and Scooters grew by 4.02 percent, 6.35 percent and 26.71 percent respectively in the period of April-July 2012.

Exports: During April-July 2012 over-all automobile exports registered negative growth at (-4.03) percent. While Passenger Vehicles and Commercial Vehicles both grew by 9.14 percent. Two & Three wheelers declined by (-1.00) and (-39.23) percent respectively in April-July 2012 compared to the same period last year.

2010-11 Figures

The demand for automobiles is mainly dominated by two wheelers. As per Society of Indian Automobile Manufacturers (SIAM) statistics for 2010-11, around 76% market share was grabbed by the two wheeler segment, followed by passenger vehicles at 16.25%, commercial vehicles at 4.36% and three wheelers commanding just 3.39% market share. In terms of the number of vehicles sold, the rise on y-o-y is quite encouraging. The number of vehicles sold in 2010-11 has touched 15,513,156, which was 7,897,629 in 2004-05. I.e. it has almost doubled in 6-7 years period.

Domestic Market Share for 2010-11 (in%)

Passenger Vehicles

16.25

Commercial Vehicles

4.36

Three Wheelers

3.39

Two Wheelers

76

Source: SIAM

CHALLENGES

The Indian automobile industry faces an uphill task in coping up with high level of taxation. The level of taxation is hampering the growth of the industry and depriving the citizens for availing mobility at a lower cost. The other challenges are in the form of inflation, high interest rates and increase in petrol prices. As per KPMG's 2012 global survey, the challenges before the automotive industry includes environmental challenges, growing urbanization and shifting customer behavior, which calls for radical new approaches to future mobility.

INDUSTRY UPDATE

Indian Automakers Tapping Opportu­nities Abroad Indian automobile companies are seeking business opportunities abroad. Tata motors have done it in the past by acquiring British car maker Jaguar Land Rover, formed a JV with Brazil-based Marcopolo for manufacturing buses and coaches, entered into JV with Daewoo for manufacturing Tata World Trucks for South Africa, South Korea and SAARC markets.

Bus maker Ashok Leyland, part of Hinduja Group is looking forward to sell 15,000 vehicles in the foreign market. In this regard they are having plans to enter into JV with companies in Indonesia, Chile and Nigeria having majority stake. Ashok Leyland would export the kits and the local partners in foreign land will assemble and market the buses and trucks.

Two wheeler manufacturer, Hero MotoCorp is believed to have invested $20 million (about Rs 110 crore) into US based Erik Buell Racing (EBR) to strength its R&D efforts.

Global Firms Eyeing Indian Market

The market in India for automobile is increasing and offers lucrative business opportunities for international companies. Already many of the foreign companies such as Renault, Nissan, Suzuki and others have set shop in India. Many more are in the queue to enter India. As per news reports, American bike maker Harley Davidson is contemplating plans to setup manufacturing plant in India. They are doing preliminary assessment and scouting for the right location to set up the unit.

Honda Motor Company from Japan through its wholly owned subsidiary Honda Motorcycle and Scooter India, Pvt Ltd (HMSI) is setting up its third two wheeler manufacturing plant at Narasapura Industrial Area in Kolar district near Bangalore, Karnataka. They are investing around Rs 1,350 crore in this unit which is likely to commission in 2013.
Japanese auto firm, lsuzu Motors Ltd is having plans to mark an entry into India's fast growing small commercial vehicle and multi utility vehicle segment. They are likely to set up greenfield facility in India with an approximate investment of over Rs 1,000 crore.

UK based Triumph Motorcycles plans to set up its manufacturing unit at Narasapur in Karnataka. They plan to invest around Rs 850 crore and are looking for an initial capacity of 2.5 lakh motorcycle per annum.

Automobile Domestic Sales Trends

(Number of

Vehicles)

Category

2004-05

2005-06

2006-07

2007-08

2008-09

2009-10

2010-11

Passenger Vehicles

10,61,572

11,43,076

13,79,979

15,49,882

15,52,703

19,51,333

25,20,421

Commercial Vehicles

3,18,430

3,51,041

4,67,765

4,90,494

3,84,194

5,32,721

6,76,408

Three Wheelers

3,07,862

3,59,920

4,03,910

3,64,781

3,49,727

4,40,392

5,26,022

Two Wheelers

62,09,765

70,52,391

78,72,334

72,49,278

74,37,619

93,70,951

1,17,90,305

Grand Total

78,97,629

89,06,428

1,01,23,988

96,54,435

97,24,243

1,22,95,397

1,55,13,156

Source: SIAM


CAPEX & LAUNCHES

Mahindra & Mahindra, the country's biggest utility vehicle and tractor manufacturer aims to invest around Rs 5,000 towards development of new products and expansion of its existing units including Chakan unit, near Pune.
Maruti Suzuki India, India's largest car maker is investing around Rs 4,000 crore in a new production facility which would be located near Mehsana in Gujarat by 2015-16.

VECV is a 50-50 JV between the Volvo Group and Eicher Motors. They are into manufacturing and selling Eicher brand of trucks and buses. The company aims to spend Rs 1,000 crore by 2013 on expansion of engine production capacity, launch new products and enhancing R&D.

Japanese car maker Toyota through an existing JV with Kirloskar Group aims to spend Rs 900 crore to expand the capacity of its Bangalore plant by March 2013 targeting 3.1 lakh units per annum capacity.

German automotive giant Volkswa­ gen Group plans to invest more than Rs 700 crore in India in the next two years for upgrading its production facilities at Chakan and Aurangabad in Maharashtra.

DSK Group has entered the two wheeler segment and plans to set up a manufacturing plant. In this regard, they are scouting for land in Maharashtra, Gujarat, Karnataka and Goa. This unit will see an investment of Rs 300 crore and is likely to commence production by September 2013.

German auto maker Mercedes Benz plans to augment assembly line capacity and is likely spend around Rs 400 crore in the Indian plant.

Mahindra & Mahindra in collaboration with Korean subsidiary Ssangyong Motor Corporation (M&M), is likely to bring a compact crossover utility vehicle (CUV) to the Indian market in 2015.

The production of Mercedes-Benz Ac­tros trucks from Oragadam unit has commenced. Daimler India Commercial Vehicles has recently rolled out first Mercedes-Benz Actros 4841K from the new assembly line at the Oragadam facility in Chennai.

Tata Motors has recently started production of Tata ACE Zip and the Tata Magic IRIS from its Dharwad plant. This unit was set up with an investment of over Rs 900 crore. It is spread across 405 acre and will churn out small commercial vehicles. The current capacity is around 90,000 units per year.

ALLIED INDUSTRIES

Wabco India, a technology leader designs, manufactures and markets conventional braking products, advanced braking systems, and other related airassisted products and systems. They have recently inaugurated its second plant at the Mahindra World City near Chennai. The project cost amounted to over Rs 50 crore. This unit covering
2,272-sq mtr will manufacture products catering to commercial vehicle manufacturers in Germany, Japan, Poland, and the US, among other markets internationally.

Valeo, French auto components maker plans to set up two new plants in India. They have acquired land in Sanand, Gujarat and expect the construction to start shortly. This unit will be operational by mid-2013. They also intend to set up a new plant at Oragadam in Chennai for clutches, in collaboration with Amalgamations Group. Land is acquired from SIPCOT.

FUTURE OUTLOOK

The industry outlook seems to be promising as the market size is ever expanding. The economic downturn is currently experienced in India but still expected GOP growth is around 5-6% which is not bad in comparison with the other nations who are registering negative or marginal growth. The moderation of growth has created a wait-n-watch situation as of now even for some of the automobile players. But as and when the pace of economic growth accelerates, the benefits are likely for the automobile industry. To tap these benefits later, many of the automobile players as mentioned earlier are making investment in the current scenario. Addressing the issue of levying appropriate level of taxation on mobility could boost this industry further. SIAM projection for car sales for FY-13 is around 9-10 per cent. That looks promising and encouraging for the industry.


- Sandeep Sharma, Executive Editor / Project Reporter


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