Automotive Industry Final-IA

8/4/2019 Automotive Industry Final-IA

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Industrial Awareness

Automobile Industry

Group 7:

Anmol Bhalla

Ajit Mishra

Ganesh Krishnan

Keerthi Kodavaty

Nikhil Narayan

Rajagopalan S

Rupam Pathak


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Automotive Industry

Overview

Automobile Industry does the design, development, manufacturing, marketing and sales of various

motor vehicles. It is a very massive industry considering the revenue it generates, the contribution it

gives to GDP and the employment it generates in a particular country. China is the world leader in the

vehicle producing industry with 13.79 million units produced in 2009. China is followed by Japan and

US. India stands at 7th position in the top motor vehicle producing countries and has produced 2.63

million units in 2009.

In the past 20 years automotive industry has boomed with the presence of China and Japan becoming

strong after 1990s. But Automobile industry was one of the worst hit industries during the recession.

There was a decrease of around 19% in the global production of motor vehicles in 2009. Many

companies had to shut down many of their production units. This also marked a change in the globaloutlook towards the automobile industry. The energy crisis and related increase in fuel prices caused a

setback to SUV industry and other heavy utility vehicles. American companies suffered including

GM, Volkswagen and Ford suffered great losses as consumers started moving away from low fuel

efficient vehicles. Chinese and Japanese companies scored better in the global market because of their

fuel efficient cars. This helped Toyota to overtake GM to become the market leader in motor vehicle

manufacturing companies in 2008.

Toyota is the world leader in motor vehicle manufacturing companies and it produced over 7.2

million units of motor vehicles in 2009. Toyota is followed by General Motors, Volkswagen, Ford

and Hyundai in the number of vehicles produced per year. Toyota overtook GM to become the world

leader in 2008. Today, Japan is the third largest automobile market and, until China recently overtookthem as the largest car producer in the world. Still, automobile export remains one of the country's

most profitable exports and is a cornerstone of recovery plan for the latest economic crisis

India ranks 2nd in the global two-wheeler market, 4th in the biggest commercial vehicle market in the

world, 11th in the international passenger car market, and 5th pertaining to the number of bus and

truck sold in the world. In the 1980s, a number of Japanese manufacturers launched joint-ventures for

building motorcycles and light commercial-vehicles. After the economic liberalization of 1991 Indian

automobile industry has shown sustained growth due to increased competitiveness and relaxed

restrictions. The Indian economy grew by 7.4 per cent in the year 2009-10, bettering the expected

growth rate of 7.2 per cent. The annual growth rate was propped up adequately by growth in thefourth quarter ended March 2010, which was at 8.6 per cent. India's automobile industry posted a

26.41% increase in sales in 2009-10. Over the years the automotive sector has gained enough that it

contributes to 5% of the national GDP. According to the Automotive Mission Plan 2006-16

automotive sectors will be contributing 10% of India's GDP by year 2016.

The major domestic players in commercial vehicle manufacturing are Mahindra, Tata, Ashok

Leyland, Premier and Force. There are other small players also like Chinkara motors, San motors and

ICML. Other foreign key players in India are Maruti, Ford, GM, Fiat India, Mitsubishi, Volkswagen,

Toyota Kirloskar, Nissan Motor India, and Honda. Many companies like Audi, BMW, Honda,

Lamborghini, Mercedes-Benz, Porsche, Nissan, Rolls Royce, Skoda, Suzuki, and Volvo are importing

vehicles to India. India's strong engineering base and expertise in the manufacturing of low-cost,fuel-efficient cars has resulted in the expansion of manufacturing facilities of several automobile


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companies like Hyundai Motors, Nissan, Toyota, Volkswagen and Suzuki. A major chunk of India's

car manufacturing industry is based in and around the city of Chennai and hence it is known as

"Detroit of India". Now Uttaranchal is rising as the new hub for the automobile manufacturing.

Presently the market is clearing and coming out of the blow from recession. Car sales seems to hit a

record mark in August 2010 beating previous forecasts and the industry on all set on a upswing in the

coming months given the fact that important festivals are lined up which see a surge in demand. Thegrowing auto market in India has made players like Maruti consider idea of restricting their export

levels to a certain percentage of production, with an eye on retaining their market share in the country.

Major Domestic Players of India

Maruti Suzuki

It is a subsidiary of Suzuki Motor Corporation of Japan. Maruti Suzuki is India's largest passenger car

company, accounting for over 45% of the domestic car market. It is the market leader in the car

segment, both in terms of volume of vehicles sold and revenue earned. The various products of Maruti

Suzuki to Indian market are Maruti 800, Alto, WagonR, Estilo, A-star, Ritz, Swift, Swift DZire, SX4,

Omni, Eeco, Gypsy, and Grand Vitara. It has been rated first in customer satisfaction among all car

makers in India from 1999 to 2009 by J D Power Asia Pacific. They have come up with Maruti

Finance, Maruti True Value and Maruti Insurance to increase customer satisfaction. Their main

strength lies in the nationwide service centres and readily accessible auto parts. Market cap of maruti

is 408 Billion INR as on 21-9-2010. The Indian government held an IPO of 25% of the company in

June 2003. As of 10 May 2007, Govt. of India sold its complete share to Indian financial institutions.

With this, Govt. of India no longer has stake in Maruti Udyog.

Production Capacity:

Maruti Suzuki has two manufacturing facilities in India which are in Gurgaon and Manesar. Both

manufacturing facilities have a combined production capacity of 1,000,000 vehicles annually.

Tata motors

Tata Motors is Indias largest automobile company, with consolidated revenues of USD 14 billion in

2008-09. Tata Motors is the world's 4th largest truck manufacturer, and the world's 2nd largest bus

manufacturer. They produce both automobiles and engines. Their main subsidiaries are Jaguar, Land

Rover, TDCV and Hispano Carrocera.Tata Motors, the first company from Indias engineering sector

to be listed in New York Stock Exchange (September 2004) , has also emerged as an international

automobile company. Through subsidiaries and associate companies, Tata Motors has operations in

UK, South Korea, Thailand and Spain. Tata motors belong to their parent group namely Tata Group.

Recently they have created a buzz in Indian and Global Market with their low prized commercial car

namely Tata Nano. The increased excellence in the engineering of Nano and the various patents taken

for that while the development of Nano got Global acclamation. The passenger cars and utility

vehicles available for Indian consumers from Tata are Tata Sumo/Spacio, Tata Safari, Tata Indica,

Tata Vista, Tata Indigo, Tata Manza, Tata Indigo Marina, Tata Winger, Tata Magic, Tata Nano, Tata

Xenon XT, Tata Aria. There are other commercial vehicles including Tata Ace, many medium and

heavy bus chases and medium and heavy truck models from Tata provided to the market. In the truck

market Tata Novus and Tata Prima has a very significant market position. Tata also produces many

models of military vehicles. The main advantage of Tata in Indian market is that they have presence


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over every automotive segment. They have also launched the electric versions of Indica and Ace. The

present market cap of Tata motors is 614.3 Billion INR as on 21-9-2010.

Plant Locations:

Tata Motors presence cuts across the length and breadth of India. Tata has plants for various streams

of vehicles in Jamshedpur, Pune, Lucknow and Pantnagar.

Production capacity:

The segment wise production is as follows :

Location Type of vehicle manufactured Production Capacity (Lakh/PA)

Pune Passenger Cars (Indica, Indigo, Marina, Indica Vista) 2.7 L

Pune Commercial Vehicles (MCVs and HCVs, LCVs, Utility vehicles) 2.5 L

Jamshedpur Trucks & Special Purpose Vehicles 1.08 L

Lucknow Buses 0.6 L

Pantnagar (Uttarakhand) Mini Truck (Ace), Passenger Carrier (Magic) 2.25 L

Tata Motors has led the Indian automobile industry's anti-pollution efforts by introducing cleanerengines. It is the first Indian company introduce vehicles with Euro I and Euro II norms.

Mahindra & Mahindra

It is part of the Indian Industrial Conglomerate Mahindra Group. M&M was the company which

introduced Jeeps to India and in no time they established themselves as the Jeep manufacturers of

India. At present, M&M is the leader in the utility vehicle segment in India with its flagship UV

Scorpio. M&M produces Jeeps, LCVs, Tractors, Three Wheelers and Military Vehicles. It also

acquired controlling stock in REVA Electric Company showing its interest in the production of

electricity driven vehicles. Mahindra offers over 20 models to Indian market which includes the well

acclaimed new generation multi-utility vehicles like the Scorpio and the Bolero. The other notableproducts are Xylo, Legend, Logan, Axe, Commander, Cab Chassis. Its market cap is 394.5 billion

INR as on 21-09-2010.


Mahindras plants in Mumbai and Nasik manufacture multi-utility vehicles and engines are produced

at the Igatpuri plant. Utility Vehicles, Light commercial vehicles and 3 wheelers are manufactured at

the Zaheerabad plant in Andhra Pradesh and three-wheelers at the Haridwar plant

Hero Honda Motors Limited

It has been the largest two wheeler company in the world for eight consecutive years. It is a joint

venture between the Hero Group of Indi and Honda of Japan. It had a market share of 42% in 2008-

09. The most popular model from Hero Honda is Splendour which sells more than 1 million units per

year. The main models are Achiever, Ambition, CD 100, Splendour, Hunk, Joy, Karizma, Passion,

Pleasure, Street and CBF 150(Unicorn). Market cap is 360 Billion INR as on 21-9-2010.


Hero Honda has a production capacity of 54 lakh units a year at its three facilities -- Gurgaon,

Dharuhera and Haridwar.


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Bajaj Auto

Is one of the major Automobile manufacturers in India based out of Pune.Bajaj Auto Ltd is India's

second largest two wheeler manufacturer in India. Over the last decade, the company has successfully

changed its image from a scooter manufacturer to a two wheeler manufacturer. Its product range

encompasses scooterettes, scooters and motorcycles. Company is headed by Rahul Bajaj and is worthmore than 1.5 billion USD. Main Scooter from Bajaj was Kristal DTSiv. Bajaj ULC is an ultra low

cost car from bajaj which is supposed to be a competitor for Tata Nano. Platina, Pulsar, Discover and

Avenger are the main Bajaj models in motorcycle section. Bajaj has discontinued many of its once

well acclaimed models like Chetak, Pulsar 220, Sunny and Boxer market cap is 92 Billion INR as on

21-9-2010.


Bajaj Auto's has three plants, two at Waluj and Chakan in Maharashtra. Bajaj's total production

capacity is 4.26 million units per annum. Its 3 wheeler production capacity is 35,000 per year.

Ashok Leyland

It is India's second largest CV manufacturer based in Chennai It also produces trucks, buses, military

vehicles and emergency vehicles. It sells about 60,000 vehicles and about 7,000 engines annually. It is

the second largest commercial vehicle company in India in the medium and heavy commercial vehicle

(M&HCV) segment with a market share of 28%. Company is doing a joint venture with Japanese

Nissan Group for LCV manufacturing. It has also announced the conceptual IBus for Indian market.

Market cap is 99.9 billion INR as on 21-9-2010.


The company has seven manufacturing locations in India in Ennore, 3 in Hosur, Alwar, Pantanagar

and Bhandara. With these the company has a production capacity of 150000 vehicles per annum.

Major International Players in India

Main International Automotive Players having a significant presence in India are

Toyota

Toyota has recently launched Toyota Corolla Altis. The company also plans to introduce small car to

India. The hunch in Indian market has hardly affected Toyota brand and 2015, the company plans to

gain 10 percent market share. Toyota has introduced vehicles only for premium segment in India-

MUV Innova, Corolla, Camry and Land Cruiser Prado.. Toyota marks its presence in India as Toyota

Kirloskar Motors where the parent company holds 89 percent stake. To achieve this scale of volume,

they have to enter Indias rural markets in a big way. They are aggressively expanding their dealership

footprint in India and quite a significant portion of this will be in countrys heartland. By end of 2010,

they plan to have 150 dealers across the country. Toyota perceives India as a large booming market

where there are only 16 cars per 1000 people as compared to Japan where there are 593 cars per 1000

people. Toyota is also studying the Indian market to assess the potential of setting up a research and

analysis unit and an engine production plant

GM


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India is now the fourth biggest car market in the Asian continent and car companies are taking notice.

General Motors announced their interest in the growing auto market of the country. Aside from

General Motors, the alliance of Nissan and Renault has already started testing the Indian auto market.

The companys decision to market smaller cars in the country is due to the fact that the three-quarters

of all the cars sold in India are compact cars.

Honda

Hondas small cars to be sold in India will be built on a plant to be constructed in Rajasthan. Hondas

announcement to enter the small car market in India is fueled by the prediction that the countrys

demand for small cars will continue to increase in the near future. It has been estimated that by the

year 2016, annual car sales in India will reach 3 million units. Although it is speculated that Honda

will be manufacturing small cars, the Japanese car company is yet to name what model they will be

producing at the Rajasthan production plant. Upon completion, the assembly facility will be expected

to produce 60,000 vehicles annually. By the year 2014, Honda plans to expand the facility andincrease its production capacity to 200,000 per year

Daimler Chrysler

A joint venture between German auto maker Daimler AG and India's Hero Group will enable Daimler

to increase its presence in India's truck market. Daimler is the largest truck manufacturer worldwide

by sales, selling over 516,000 trucks and generating $45.86 bn. Daimler already has a plant in Pune

that produces the Mercedes-Benz Actros. Daimler Chrysler India is a 100% subsidiary of Daimler

Chrysler group and one of the first auto joint ventures set up in India. Daimler Chrysler India has a

world-class production facility in Pune.

Ford

FoMoCo has plans to launch eight new vehicles in India over the next five years to increase its

presence in one of the fastest-growing emerging regions. The Dearborn automaker expects to generate

close to 70 percent of its global sales over the next decade in Asia Pacific and Africa markets. It is

hoping to increase volume in the fast-growing emerging markets, where its competitor General

Motors already has a big presence. The sales performance also represents an increase of 20 percent

compared to June 2010 figures. Ford India is expanding its service and dealer network to provide

world-class support to its fast growing customer base. Ford has invested heavily in India, with a Rs.

1700 crore integrated manufacturing plant at Maraimalai Nagar, equipped with state-of-the-art Ford

technology and employing 1,000 people. Models include Ikon and Mondeo

Volvo

In India now Volvo has a presence in Trucks, Buses, Construction Equipment and Marine &

Industrial Power Systems. Volvo Trucks division in India is developing the multi-axle, tractor-trailer

market in the country; providing the most economical transport solutions. Volvo Construction

Equipment (CE), launched and showcased its new series EC 140 BLC Hydraulic Excavator in New

Delhi. This new Volvo B-series excavator represents the latest in engineering development and

provides the highest performance, superior operator comfort and maximum productivity. Volvo CE in

India operates through 9 independent dealers and support customers from 29 service points and 21

spare parts depots. India is a very important market for Volvo and they are expecting the construction


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industry to grow substantially in the years to come which will boost demand for quality construction

equipment and machinery

Hyundai Suzuki

Hyundai Motor Company, Korea, has constructed its largest overseas manufacturing plant in Chennai,

India. Hyundai models include Santro, Accent and Sonata. On January 10, 2008, Hyundai Motor

India Ltd.'s (HMIL) i10 was awarded the 'Car of the Year Award 2008' in the seventh edition of the

CNBC-TV18 Autocar Auto Awards. The i10 was described as a great success with the company

claiming that 25,000 units had been sold since the time it was launched in 2007. Hyundai posted a

growth of 39 percent in sales in the Indian market due to good sales of the i10 in 2007. Hyundai

Motor Company's strategy with reference to India as of 2008 was to convert its Indian operations into

a key design, manufacturing, and export hub for its global operations while expanding its presence in

India. This strategy was expected to enable the company to capture a large share of the global car

market

Government Policies and its Impact

The era from 1940 to late 1950s experienced the nascent period of the industry; where in a number of

new companies came into existence for the production of the automobiles. Only few companies

survived. A major part of the private sector in the budding industry was swiped out due to license raj

imposed by the government. But because the government had a socialistic approach towards

development, thus the auto industry did not face much competition in its initial stages. But lack of

competition caused reduced purchase due to availability of limited models.

In the year 1991 the new reforms were introduced by Indian government. The new rules and

regulations introduced attracted a number of new changes to the industry. The changes brought in

were basically:

1. Privatisation in India:The restrictions of license raj on the private sector of the industry

were abolished. As a result new private sector companies entered the market and the

competition gained new heights. People encouraged the introduction of new models in the

industry and the profits further increased.

2. Tax reforms in India: The taxes on the industries not only automotive industry but all the

other industries were reduced. This change resulted in a overall increment in the national

economy, which brought India on the international map as a new player with potential

markets.

The rules on import and export of products still existed. This hindered the entry of global players into

the market. During the years 1995 to 2000, few other reforms improving international trades were

introduced which marked the turnaround in the industry. Domestic firms went global and global firms

entered the domestic market. The domestic firms improved their export businesses. Exports were

done to various countries like Sri Lanka, Bangladesh and many others in the Middle East. India

became a potential hub and emerged as a global market. The global players such as GM, Mercedes

Benz, Ford, Volvo, etc. entered the Indian market. Most of these firms, in order to setup an initial

base, entered into joint ventures with the Indian companies resulting into high profit sales. Few

popular joint ventures were betweenKawasaki Bajaj, Hero Honda, Renault Mahindra, etc.

Many other companies setup their manufacturing units in the country and started large scaleproductions. Companies like Hyundai took over a huge share of the market, with their new models in


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the small cars sector. The increased competition encouraged the growth of the market. The growth

rate of Indian Automotive Industry touched its peak of 20%. As per the records in the year 2008 India

became the largest manufacturerof two and three wheelers in the world. India is the second largest

manufacturer of tractors in the world.

The Government of India kept on trying to increase the competitiveness of the automobile sector toenable it compete in the international arena. To attain this in a prearranged format, in 2006 it released

the Automotive Mission Plan (AMP) 2016 with a vision to make Indian auto industry a destination of

choice in the world for design and manufacture of automobiles and auto components with an output

reaching to $145 billion accounting for more than 10 per cent of the GDP (gross domestic product)

and providing additional employment to 25 million people by 2016.

Due to the recession most of the industries were taken aback and automobile industry has taken a

huge blow in the same during 2008-09 periods. So many plans and strategies introduced to bring back

the sector to its expansion position like

1. SBI reduced interest rates on automotive loans in February 2009

2. Various stimulus package provided to automotive industry

3. implementation of 6th pay commission

Companies also helped themselves out of recession by cutting the prices of various models, cutting

the production and shutting down various plants and lay off employees to cut their expense. All these

have resulted in huge turnaround by automobile industry. India's automobile industry posted a 26.41%

increase in sales in 2009-10 which can be mainly mapped to the Government's incentive deals, which

benefited demand, making it the second fastest growing market in the world after China. The year-on-

year increase in automobile sales for August 2010 is one such case in point. With the possible

exception of Fiat, it seems everybody else in the motor vehicle business in India has registered a 15%-

35% growth in sales - and even more in the case of some manufacturers who had low baselines to

start with in 2009.

Mergers & Acquisitions In Automotive Industry

The automotive industry witnessed a host of major deals during the mid to late 1990s and the turn of

the Millennium. As a result, the last few years have seen deals amongst manufacturers dwindle. In

fact, the value of deals fell from USD10 billion in 2002 to USD3.5 billion in 2003. Some countries in

the emerging markets are growing at a spectacular rate. The India auto industry, for example, grew at

a rate of 29 percent in 2003 while the China auto industry grew at rate of 35 percent. These staggering

growth rates are attracting global automotive majors to these markets in increasing numbers.

Companies are resorting to acquisitions to gain a foothold in these markets.

First Automotive Works, General Motors and Nissan Motors are trying to consolidate their

position in the Chinese market either through acquisition or equity stakes. Nissan Motors

acquisition of a 50 percent stake in Dongfeng Motors for USD1.032 billion was the biggest

deal in 2003.


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Competition and the global economic slowdown cut into the sales of Fiat and its debt rating

was downgraded to just one rank above junk status. To reduce its debt, Fiat sold its stake in

Ferrari and General Motors. Toyota Motor Corp. has acquired 68 million shares in Fuji Heavy

Industries Ltd on Oct. 12, 2005 from a General Motors Corp. subsidiary for about 35.4 billion

yen in a deal agreed upon by the three companies Toyota has thus become the top shareholder

in Fuji. Toyota and Fuji launched a joint task force to consider specific plans for their

cooperation in auto production and development.

Pep Boys has signed a definitive agreement to acquire the assets and assume the property

leases of Orlando-based retailer Florida Tyre on 14 October 2009.

Tata Motors has fully acquired the Spanish bus company, Hispano Carrocera on

22 October 2009. The Indian group already had a 21% stake in the company, which it has

held since 2005

China s Geely on Aug 3, 2010 completed its purchase of Ford Motor Co s Volvo unit,

marking Chinas biggest acquisition of a foreign car maker and reflecting the nation s rapid

rise in the auto world.

Examples for M&A Impact on companies

Renault-Nissan automotive merger:

Renault and Nissan came together to improve their respective competitiveness. The alliance is based

on the principle that each company would retain its own identity while sharing resources. Renault

supports Nissan in Europe and South America, while Nissan is firmly entrenched in North America

and Asia. Responsibilities are shared for Africa and Middle East.

Through this relationship, Renault would have access to up-to-the-minute technology, a worldwide

network and advanced managerial expertise. In addition to this, substantial cost savings have been

achieved through a common purchasing strategy and by setting up a common supplier base. All these

efforts have led to a decrease in working capital requirements and therefore, an increase in cash flows

which allowed the group to substantially decrease its outstanding debt

3Ms acquisition of Bondo Corp:

3Ms acquisition of Bondo Corp., a manufacturer of auto body repair products for the automotive

aftermarket and various other professional and consumer applications took place in Dec, 2007. 3M's

Automotive Aftermarket Division is dedicated to improving the productivity and profitability of autobody repair professionals. Products include abrasives and accessories, masking tapes, panel bonding

adhesives, general adhesives coatings and sealers, paint finishing polishes and compounds, and paint

application systems.

Daimler Benz Chrysler automotive merger:

This merger was struck in 1998 creating a combined value of USD130 billion. The merger with

Chrysler gave Daimler-Benz direct access to the US mass market while Chryslers, whose US sales

were flat, gained access to overseas markets.The merger combined German expertise in luxury cars

with agile US management and mass-market expertise. The combined entity aimed at attaining

economics of scale that would reduce costs. Chrysler had creative styling and low development costs


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The impact of this merger has been disappointing. Chryslers market share in the US declined from

16.2 percent in 1996 to 13.2 percent in 2003. Operating profits turned negative in 2001. Chryslers top

managers retired, quit or in several cases were pushed out as a result of the merger. So the flair for

doing things cheap, quick and lean did not seep into the merged entity. On the other hand, Chrysler

has improved its productivity by 8.3 percent and achieved cost savings in design and engineering. The

market share of the combined entity has been falling. Worldwide market share for 2003 is 7.97percent, and this fall is attributed to merger problems and stagnant sales at Daimler.

Technological Trends in Automobile Industry

Technology for any other automated innovations is a constantly evolving concept. No two

consecutive years ever see one single car technology trend doing the rounds in the automobile

industry. There is always something new coming up in the form of an auto model. Be it a car,

motorbike or any other vehicle, car enthusiasts always have something new to revel at. Recently, a lot

of happenings in the car technology arena have kept the global auto market abuzz. Digital technology

has largely taken over the automotive industry. With each auto model year, vehicle manufacturers arecoming up with more sophisticated digital systems addressing vehicle safety, infotainment, and

telematics. Computer in various forms is becoming an integral part of a motor body. You find them

almost everywhere- inside the passenger cabin, or under the hood of a car or any other vehicle. No

wonder, automobiles today are increasingly being recognized as modern computers on wheels.

Following are the four major areas where automotive technology is making great progress:

Powertrain and Safety: Engine Management, Power Steering, Electronic Suspension,

Braking Systems etc.

Vehicle Controls and Comfort/Convenience: Dashboard/Instrument Cluster, SecurityAlarm Systems, Climate Control etc.

Driver Assistance: Heads Up Display, Tire Pressure Monitoring, Adaptive Cruise Control,

Collision Warning etc.

Communication and Infotainment: Audio Systems, Telematics, Navigation/GPS, Games

Consoles etc.

PLD: A Major Technology Trend in Automobile Industry

PLDs or Programmable logic devices are a power alternative to the silicon technology based

semiconductors ASIC and ASSP. There was a time when these were the preferred semiconductoroptions, but now, car manufacturers in the global automobile industry are opting for more powerful

yet cost-effective car design platforms to meet the growing networking needs of their increasingly

complex car digital systems.

Platform concept: A Landmark Technology Trend in Automotive Industry

Platform concept is the newest thing in the evolutionary history of automotive designing. In this

concept, one basic design is used for car model differentiation. The concept is further gaining

popularity due to increase in the trend of converging data, audio and video in a single automotive

space.


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Increased Demand for Digital Content in Automobile Industry

On-board motor digital content such as rear seat entertainment systems, navigation systems, and

driver assistance applications are no more add-ons in a car model. They are now considered

mainstream products in automobile industry.

Quality- The Mainstay in Automobile Industry

Motivated by the enhanced use of high definition, wireless communication in cars and vehicles,

system OEMs and automakers in the global automobile industry are increasingly opting for cutting-

edge technology driven semiconductor devices.

All these technology progress in the automobile industry has significantly brought down the

automotive design cycle from 60 months to approximately 24 to 36 months. This is further going to

expedite the innovation of automotive technology in the years to come.

Innovations within the industry:

The 21st century brought new concerns and pressures to the way companies innovate. If in the past

innovation was predominantly driven by the intention of exceeding customers expectation or to

create simpler and less costly processes; today many organisations are required to respond to

environmental and social demands. With regard to the environment, the major environmental

concerns in the 21st century are:

atmospheric pollution (and its consequences for human health, global warming and ozone

layer depletion),

scarcity of freshwater,

raw material

land availability.

All these environmental impacts have a great impact on how companies manage their business, and

therefore, they are also a driver to innovation. For instance, the availability of land can create a

pressure on the prices for land disposal, which forces organisations to innovate in order to reduce

the waste from their production sites. This is called Green Innovation Management which could be

defined as the process to identify, implement and monitor new ideas that improve companys

environmental performance while enhancing its competitiveness. Identification includes not only the

understanding of environmental demands (shortage of resources, new environmental legislations,public pressure, etc), but also customers requirements and acceptance of environmentally-friendly

products, competitors actions, amongst other factors that need to be considered in the innovation of

processes or products. Implementation refers to the development of the idea in the market. And

finally, monitoring is the activity that should feedback the company about its green innovation in

order to enhance the learning of innovating in sustainable way.

Green Innovation can happen either to respond to local or global environmental concerns or to

construct an environmental leadership in the sector. Interestingly, Green Innovation can have

ecological or economical motivation, and as other types of innovation, it can be incremental or

radical. OEMs will only slightly increase their R&D spending. While Western car manufacturers will

cap their R&D investments, OEMs from China, India and South Korea will boost their spending on

innovation. The concentration process in the supplier industry will improve innovative strength and


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networking opportunities with other partners another way of cutting costs while increasing the

quality of innovations. Depending on the business design of the supplier and OEM, four dimensions

must be brought into alignment: innovation proposition, competence focus and collaboration,

innovation business case, and innovation organization and structure. There are several ways to

create innovation in the automotive market: We can redefine existing products and market segments,

create new ones, and attack competitors strongholds, those products with which a manufacturercaptures a significant portion of the market. Technology advances and innovative automotive

electronic systems are driving up overall vehicle efficiency in both internal combustion and hybrid

vehicles. However it is not just improvements in individual systems and components that are helping

reduce fuel consumption, CO2 emissions and costs. Many of the real breakthroughs in vehicle

efficiency are being achieved when the car is viewed as a complete, smart set of sub-systems.

Life Cycle

An industry's position and a product's position in their life cycles also lead to very different decisions

concerning their futures. Generally, industries have longer life cycles than products. For example, the

large family-sedan appears to be well into the decline stage. After decades of dominance in the

automobile industry, only a few large cars, such as Ford's Crown Victoria, are being manufactured.

The automobile industry, on the other hand, has lasted more than one hundred years and shows no

signs of declining even with concerns about the declining world supply of oil; with alternative-fuel

research getting started in earnest, the automobile industry will likely outlast even the oil industry

upon which it is currently based. Products are defined as groups of similar products, and industries are

defined as a collection of comparable product groups. Life cycle analysis studies the phases of life, the

repeated patterns that occur during life, and the causes and effects of incidences, aiming at something

that can be recognized and learned from the earlier life cycles of the items under study. In everyday

language, life cycle analysis is often associated with environmental discussion andgreen values.

There is actually more than one definition of product life cycle. The definition may pivot on a

customer view, an enterprise view or the product itself:

Enterprise view - when the product ceases to be produced or supported.

Customer view - when the product ceases to be used and is disposed of.

Product - type of product, market segment and whether a single product or part of a range

Financial Performance of Major Players

Maruti Suzuki

Maruti Suzuki IndiaLimited , a subsidiary of Suzuki Motor Corporation of Japan, is India's largestpassenger car company, accounting for over 45% of the domestic car market. The company offers acomplete range of cars from entry level Maruti-800 and Alto, to stylish hatchback Ritz, A star, Swift,Wagon-R, Estillo and sedans DZire, SX4 and Sports Utility vehicle Grand Vitara.It was the firstcompany in India to mass-produce and sell more than a million cars. It is largely credited for having

brought in an automobile revolution to India. It is the market leader in India and on 17 September2007, Maruti Udyog Limited was renamed Maruti Suzuki India Limited. The company'sheadquarters are located in Delhi.

Profits of Maruti Suzuki for a period of 5 years


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Sales and PAT ratio comparison till 2008-09

General motors

The General Motors Company, also known as GM, is a United States-based automaker with itsheadquarters in Detroit, Michigan. The company manufactures cars and trucks in 34 countries,recently employed 244,500 people around the world, and sells and services vehicles in some 140countries. GM is ranked as the largest U.S. automaker and the world's second-largest for 2008, havingthe third-highest 2008 global revenues among automakers on the Fortune Global 500.The company

plans to focus its business on its four core North American brands: Chevrolet, Buick, GMC, andCadillac.


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Bajaj

Bajaj Auto is a major Indian automobile manufacturer started by a Rajasthani merchant.The oldestplant at Akurdi (Pune) now houses the R&D centre Ahead. Bajaj Auto makes and exportsmotorscooters, motorcycles and the auto rickshaw.Over the last decade, the company has successfullychanged its image from a scooter manufacturer to a two wheeler manufacturer. Its product rangeencompasses scooterettes, scooters and motorcycles. Its real growth in numbers has come in the lastfour years after successful introduction of a few models in the motorcycle segment.The company isheaded by Rahul Bajaj who is worth more than US$1.5 billion.In 1986, it managed to produce andsell 500,000 vehicles in a single financial year. In 1995, it rolled out its ten millionth vehicle and

produced and sold 1 million vehicles in a year.

Hero Honda

Hero Honda Motors Limited has been the largest two wheeler company in the world for eightconsecutive years. The company had a market share of 41.35% in the year 2008-2009 and over a 25year span it has crossed the 15 million unit milestone. Hero Honda sells more two wheelers than thesecond, third and fourth placed two-wheeler companies put together.Hero Honda, based in Delhi,India is a joint venture between the Hero Group of India and Honda of Japan. It has been referred toas the world's biggest manufacturer of 2-wheeled motorized vehicles since 2001, when it produced 1.3million motorbikes in a single year. During the fiscal year 2008-09, the company has sold 3.28million bikes and the net profit of the company stood at Rs. 1281.7 crore , up 32% from the previousfiscal year.The company's most popular model is the Hero Honda's Splendor, which is the world'slargest-selling motorcycle, selling more than one million units per year.

Comparison of growth of the two wheeler market between bajaj and honda


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Review of the major players in the luxury car market is as depicted below

Growth Story for Automobile Sector in India Inc.

The Indian domestic two-wheeler industry has grown at a CAGR of 7% during FY05-09. However,

industry growth slowed down in FY08, with sales falling by 8% largely due to the credit squeeze and


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rising interest rates. In FY09, the industry has grown by 2.6%. Indias low cost of operations has led

to an increase in outsourcing of auto components from the local players. Some companies are looking

at sourcing components from local suppliers and others are setting up their own manufacturing units;

some are opting for a mix of both.During the last two years, more than 100 projects have been

announced in the auto components industry, with investments worth more than INR100 billion

(US$1.9 billion). Currently, North America and Europe are the two primary export destinations forthe components industry.

The passenger carrier segment comprises of buses used for transportation of people for both interstate

and local transportation. In FY09, this segment decreased by 7% and accounted for 16% of total

domestic CV sales. The exports of passenger carriers decreased by 21% as compared to the previous

year.

Some of the key investment plans in the year 2008-09 by automakers are as mentioned below

Fiat: Opened a global sourcing office in New Delhi and is exploring possibilities of making India its

sourcing hub

Ford: Seeks to expand the engine production capacity at its Chennai plant to 250,000 per annum by

2010

Honda: Set up a powertrain facility project in Rajasthan with an investment of INR6 billion (US$115

million)

Impact of Union Budget 2010-11 on Automotive sector

While the Union Budget 2010 presented by Finance minister Pranab Mukherjee has received mixed

response from the people across the nation, the budget has definitely made an impact on the domestic

auto industry. From BSE auto index to the prices of automobiles, the impact is evident everywhere in

the Indian auto sector. Here are some of the major effects of budget 2010-11 :.

Petrol prices to rise by Rs 2.67/ litre

Diesel rates by Rs 2.58/ litre BSE Auto index extended gains to over 3%

Rise in excise duty on large cars and vehicles in the federal budget

2% excise duty cut that was part of the stimulus package last year would be rolled

2% hike in excise tax on prices of large cars, SUVs and MUVs in the budget.

Excise on large cars, SUVs, MUV raised to 22%

Small cars will continue to get excise duty relief of 4%

Excise duty on two-wheelers slashed from 10% to 8%

5% duty on crude petroleum restored

7.5% duty on petrol and diesel restored


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Automakers Announced Increase in Vehicles' Prices

Maruti to cost 2% more.

Hyundai to increase prices by Rs 6,000-25,000

Toyota to increase prices by Rs 15,000.

Refernces:

http://www.oliverwyman.com/

http://www.outsource2india.com/kpo/site/includes/Global_Automobile_Industry11.pdf

http://www.google.com

http://cars.lovetoknow.com/Automobile_Market_Share

http://www.enotes.com/small-business-encyclopedia/industry-life-cycle

http://www.pwc.com/gx/en/mergers-acquisitions-industry-trends
http://www.oliverwyman.com/http://www.outsource2india.com/kpo/site/includes/Global_Automobile_Industry11.pdfhttp://www.google.com/http://cars.lovetoknow.com/Automobile_Market_Sharehttp://www.enotes.com/small-business-encyclopedia/industry-life-cyclehttp://www.pwc.com/gx/en/mergers-acquisitions-industry-trendshttp://www.oliverwyman.com/http://www.outsource2india.com/kpo/site/includes/Global_Automobile_Industry11.pdfhttp://www.google.com/http://cars.lovetoknow.com/Automobile_Market_Sharehttp://www.enotes.com/small-business-encyclopedia/industry-life-cyclehttp://www.pwc.com/gx/en/mergers-acquisitions-industry-trends

Automotive Industry Final-IA

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