Indian Automobile Industry Analysis Essay

at present the railroad carmobile sector in India contributes 5% to the dry lands GDP, making it a prominent role player in the economy. It will contribute around 19% of the Tax collection for financial course of study 2009-10. pursuance fork up been the features of cable car effort in the preceding(a) times financial year. The undermentioned tables and charts consist of the performance of railway car pains in past few years. effort Aggregate (Rs in million) AMJ 10 (E) Net gross tax 363904. 38 substitute (%) 39% EBITDA 64665. 22 Change (%) 94% Depreciation 7303. 60 recreate 3348. 58 Other Income 7118. 93 PBT 61131. 97.Tax 16645. 21 Effective tax rate 27% account PAT 44486. 77 Change % (Reported PAT) 92% commercialize Cap (Rs in bn) 1647. 17 Source mad cow disease India genus genus genus Cygnus Research Note The aggregate consists of the fol measlying companies- Bajaj cable car, Ashok Leyland, Tata Motors, TVS Motors, Force Motors, pigboat Honda, Escorts Ltd. , Eicher Motors, Maruti Udyog Limited, Punjab Tractors Limited, Mahindra & Mahindra, and Hindustan motors Source QPAC Indian railroad carmobile effort Apr-Jun 2010 INDIAN AUTOMOBILE INDUSTRY AND TRENDS Overview The cable car attention in India is the ninth largest in the domain of a function. later on Japan, South Korea and Thailand, in 2009, India emerged as the fourth largest exporter of automobiles. some(prenominal) Indian automobile manufacturers have spread their trading operations internationally. Indian auto exertion, which is shortly growing at the pace of around 18 % per annum, has become a hot destination for global auto players want Volvo, General Motors and Ford. The Indian automobile industry is termination through a phase of rapid versatileness and high egress. With new projects coming up on a regular basis, the industry is undergoing technological modification. The study(ip) players atomic number 18 expanding their plants and focusing on muckle custo mization, mass occupation.Yearly-Analysis Year on year as the Indian race grows the requirement for the transplantation will standardizedly grow, so it is clear that the industry demand is flat proportional to the population. Presently in India there be 100 people per vehicle while the prognosticate in china is 82. Indian automotive industry is strong and productive sector for the economy egress. It gives roughly 5% of the employment to the prevalentwealths population. draw out improving quality results in exports of automobile and assistant industry is boosting out the demand in oversees business. The Indian auto-players are expanding their presence in oversees commercialize.In the inhabit 5 years the contrasted investment in this sector nearly doub take. fruit Tr bar The Indian automotive industry face a punk rock time during FY08 and its work were almost stagnated. From the early FY09, the industry started showing marginal process in toll of production and r eached to 14. 04m units cashbox FY10. Due to the huge swan in the house servant congealet place companys sale nearly 88% of their total production in the country and rest 12% vehicles they export. municipal and Exports gross revenue trend In terms of municipal dish up gross revenue the industry is showing positive lift from the last 3-years.During FY10 the industry domestic gross sales reached to 12. 29m units. The Indian exports are increasing gradually form the past 5-years and reached to 1. 80m units in FY10. Earlier the industry depended on the foreign auto parts, but repayable to the increase of the global players in the country and establishing the plants ended painless fail to the Indian auto-players. INDUSTRY PERFORMANCE (YEARLY) Indian go Industry Performance (Apr-Mar) Production Domestic sales Exports 2009 2010 % 2009 2010 % 2009 2010 % rider vehicles (PVs). rider Cars 1516967 1926484 27 1220475 1526787 25 331535 441710 33 UVs 219498 272848 24 225621 272733 21 3034 2823 -7 MPVs 102128 151908 49 106607 150256 41 1160 1613 39 Total PV 1838593 2351240 28 1552703 1949776 26 335729 446146 33 commercial message vehicles (CVs) M&HCVs Passenger Carriers 40995 46026 12 34892 43081 24 7456 6069 -19 Goods Carriers 151288 204145 35 148603 201977 36 9363 14354 53 Total M&HCVs 192283 250171 30 183495 245058 34 16819 20423 21 LCVs .Passenger Carriers 28635 34751 21 26952 34421 28 5426 2708 -50 Goods Carriers 195952 281686 44 173747 251916 45 20380 21876 7 Total LCVs 224587 316437 41 200699 286337 43 25806 24584 -5 Total CVs 416870 566608 36 384194 531395 38 42625 45007 6 3-wheelers Goods Carriers 417434 530203 27 268463 349662 30 146914 172505 17 Total 3-Wheelers 79586 88890 12 81264 90706 12 1152 777 -33 terrible total 497020 619093 25 349727 440368 26 148066 173282 17 2-Wheelers.Scooter 1161276 1494409 29 1148007 1462507 27 25816 30125 17 Motorcycles 6798118 8444852 24 5831953 7341139 26 971018 1103104 14 Mopeds 436219 571070 31 43121 4 564584 31 7300 6905 -5 Electric 2 Wheel 24179 2558 -89 26445 3001 -89 40 50 - Total 2-Wheelers 8419792 10512889 25 7437619 9371231 26 1004174 1140184 14 Grand Total 11172275 14049830 26 9724243 12292770 26 1530594 1804619 18 line of descent SIAM Cygnus Research requirement-supply mismatch The new potentiality addition till 2012, may anticipate a demand and supply mismatch in the piteous term.Demand is only judge to grow by 10-12% either year. In 2009-10 the domestic auto industry was utilizing 80-85% of its content, but this may drop to 65% by 2012. India may be in a similar position in 2012 as the global auto industry is in right now. The global capacity utilization in 2009-10 was around 65%, stilt from 80% in 2008-09. In the near future it is judge that the mismatch is going to see betwixt Demand and Supply.Capacity addition Accoding to Fitch Ratings, by 2012, the existing players in the market are expected to add 0. 9m units to the 2. 6m units capacity of the passeng er vehicle fragment and 0.6m units to the 0. 75m units capacity of the commercial vehicle portion. Meanwhile, global auto experiencers who currently only assemble in India, are expected to set up production units, in effectuate to be more free-enterprise(a) with local players.Quarterly-Analysis Production Trend During AMJ10, the particleal market size of 2-wheeler stood at 77%, followed by Passenger vehicles at 16% and then followed by 3-wheelers at 4%. In this quarter the total industry production change magnitude by 33. 27 to 4. 09m units from 3. 06m units in the previous year same period. The commercial vehicle segment production has increased by 57. 11% to 0.16m units and recorded coronate among the segments.Sales and Exports Trend From the past two years the sale of the vehicles are increasing during this quarter due to the domestic demand made by the homophile(a) season and the exports are declining. In terms of sales commercial vehicles sales had increased by 55% dur ing AMJ10 and stood in lead against AMJ09. Passenger vehicle sales increased by 33% next to mercantile Vehicles and stood at 0. 55m units followed by 2 and 3-wheelers. The total Indian automobile exports during AMJ10 increased by 59. 30% to 0. 58m units against 0. 36m units. The 3-wheeler segment stood in top in- terms of exports by 150.33% increase followed by C. V and P. V. SEGMENTAL abridgment OF THE INDUSTRY (QUARTERLY) Automobile Sales Performance in AMJ (in terms of Volume) I PASSENGER VEHICLES AMJ09 AMJ10 % change A. Passenger Cars 324,985 433,641 33% B. UVs 60,969 76,432 25% C. MPVs 31,965 44,493 39% resume (A+B+C) 417,919 554,566 33% II. COMMERCIAL VEHICLES (CVs) M&HCVs A. Passenger Carriers 7,482 11,574 55% B. Goods Carriers 31,408 59,642 90% good (A+B) 38,890 71,216 83% LCVs A. Passenger Carriers 9,601 11,566 20% B. Goods Carriers 48,376 67,095 39% TOTAL (A+B) 57,977 78,661 36%.TOTAL COMMERCIAL VEHICLES (CVs) 96,867 149,877 55% III. THREE WHEELERS A. passenger stockpileman 72,339 84,298 17% B. goods carrier 18,963 20,855 10% TOTAL (A+B) 91,302 105,153 15% IV TWO WHEELERS A. ice yachts 317,400 470,323 48% B. motor cycles 1,689,716 2,097,415 24% C. mopeds 128,738 157,588 22% TOTAL (A+B+C+D) 2,135,854 2,725,326 28% Total volume (units) 2,741,942 3,534,922 29% Source SIAM Cygnus Research SEGMENTAL PERFORMANCE Two-wheelers Note Demand is expected on the base of country population bases and the base year is taken as 2000 for projections.The Indian 2-wheeler industry has reported a 26% (Y-o-Y) growth in FY10 with sales at 9. 37m units as against 7. 43m units change in FY09. On the exports front, the 2-wheeler industry with 1. 14m shipments in FY10 affix a growth of 14% (Y-o-Y). Hero Honda Motors Ltd. (HHML), the valets largest two wheeler manufacturer go on to dominate the total 2-wheeler industry with a market share of 48. 10%. In the motorcycle segment, the domestic sales grew 26% (Y-o-Y) to 7. 34m units while the exports grew 14% (Y-o -Y) to 1. 10m shipments in FY10.Hero Honda dominated the motorcycle space with a market share of 44% followed by Bajaj Auto (21%) and TVS Motors (15%). patronage Penetration The two-wheeler industry is growing at a good phase in the country and expected a presence of 92 per every 1000 people at the end of 2010. The segment expects huge demand in the next 5 years. The industry is expected to sell nearly 26. 56m units till 2015. The segment is expected to face a hard-boiled time in 2011, due to the heavy compilation by the low cast cars and the alternative electronic vehicles. From 2012 the segment is expected to grow at the CAGR of 19% till 2015. Segment Boosters.New launches, coupled with low base and festive (marriage) season, helped the 2- wheeler industry post an impressive volumes growth for the month of May 2010. epoch the low base helped Bajaj Auto Ltd. (BAL) posts a growth of 62% (Y-o-Y) in total sales over the same month of the last fiscal. Three Wheelers The 3-wheeler industry affix an impressive growth of 26% (Y-o-Y) to 0. 44m units in FY10 as against 0. 34m units sold in the last fiscal. On the exports front, the 3-wheeler industry reported 17% (Y-o-Y) growth with 0. 17m units shipments in FY10. The passenger carrier segment reported higher(prenominal) growth in the domestic market at 0.34m units 30% (Y-o-Y), while the goods carrier segment post a 12% (Y-o-Y) growth for FY10. On the exports front, the passenger carrier segment posted a 17% (Y-o-Y) growth with 0. 17m unit shipments, while the goods segment posted a 33% (Y-o-Y) decline with exports of 777 units in FY10. Market share and players performance Piaggio Vehicles continued to dominate the 3-wheeler industry with a market share of 41% followed by Bajaj Auto (35%) and Mahindra & Mahindra (11%). In this 3-wheeler segment 81% sub-segment is captured by Passenger carriers, which is primarily for the rural people touching long distances.The remaining 19% is covered by cargo or goods carrier s there are the several(a) vehicles suitable for both intra and inter-city transport. Segment Boosters In suburban and rural areas 3-wheelers are primarily used as substitutes for buses. They thrive because of very poor public transport and on shorter trip distances. nigh of the opportunities of this segment are the inability of state government to provide the take number of buses, lack of political will to denationalise public transport and free up fares. change magnitude number of 3-wheelers on these routeswill bring download availableness form 10-12% to 6-8%, people for 80% of the trips.PRINCIPLE applications programme OF 3-WHEELERS Segments Primary uses Fuel used Forecasted 3-yearsCAGR In-city Home-Office,Home-shopping,Schoolchildren, Home-Railways or bloodline port. Petrol/LPG/CNG 10% Rural Stage busbar Diesel 11% Cargo Wholesaler to retailerRetailer to end user distribution Diesel/CNG -6% harvest-home drivers and Indian in the instauration automobile industry (2010) Growth Drivers of Indian Auto Market India in world production ? Rising industrial and agricultural output signal? Rising per capita income? gilded demographic distribution with go working population and middle class? urbanisation?Increasing disposable incomes in rural agri-sector? accessibility of a variety of vehicle sticks meeting diverse needs and preferences? Greater affordability of vehicles? Easy finance schemes? Favourable government policies? Robust production ? Well-developed, globally competitive auto ancillaryindustry? Established automobile testing and R&D centers? Among one of the lowest price producers of trade name in the world? Worldssecondlargestmanufactureroftwo wheeler? Fifthlargestmanufacturerofcommercial vehicles? Largest manufacturers of tractors in the world? Fourth largest passenger car market in Asia?India is the second largest two-wheeler market in the world.? eleventh largest passenger car market in the world? Expectedtobetheseventhlargestauto indu stry by 2016 Inter- firm Comparison Two Wheelers Operational Performance The sales human body of Hero Honda is estimated to increase by 33. 73% in revenue terms from Rs3824. 40m in AMJ09 to Rs51116. 77m in AMJ10. Hero Honda scooter segment, pleasure sales have been growing at an average of 16000 units per month, it also crossed its land mark of 4. 5m unit sales for FY10. Bajaj Auto is estimated to show a sharp increase in sales figure by 33% from Rs 233384.70m in AMJ09 to Rs31230. 88m in AMJ10, this has been led by its two game changing brands, Pulsar and Discover, with clocked juicy volumes. TVS Motors is estimated to show an increase of 34% in sales from Rs9886. 97m in AMJ09 to Rs13254. 32m in AMJ10. Its scooter and motorcycle segment sales grew by 24% and 15% respectively exports were increased by 22% to 20067 units during May. The newly launched TVS golf stroke and the TVS Wego have supported better volume growth for the month of March. Two-Wheeler Rs (m) AMJ 09 (A) AMJ 10 (E) Growth Bajaj Auto 23384. 70 31230. 88 33. 55 Hero Honda 38224. 40 51116.77 33. 73 TVS 9886. 97 13254. 32 34. 06 Source mad cow disease India Cygnus Research Financial Performance The boilers suit sale of all the companies is expected to rise. In cause of TVS Motors OPM will improve mainly due to drop-off in other expenses and raw material cost. The operative performance of Hero Honda has also improved and is like a shot reflected in its OPM and NPM growth which has increased by 837bps and 486bps respectively. Bajaj Autos OPM and NPM have been increased by 94bps and 170 bps points respectively. boilers suit in terms Hero Honda stood in top position in terms of operational and financial performance. Bajaj Auto Hero Honda TVS AMJ 09 (A) AMJ 10 (E) AMJ 09 (A) AMJ 10 (E) AMJ 09 (A) AMJ 10 (E) Net sales 23384. 70 31230. 88 38224. 40 51116. 77 9886. 97 13254. 32 NPM (%) 12. 55 14. 25 13. 08 17. 95 1. 84 2. 85 OPM (%) 18. 45 19. 38 17. 01 25. 38 6. 33 6. 01 Source BSE India Cygn us Research greet Structure Analysis Cost Structure (as % of Net sales) AMJ09 Vs AMJ10 Company Hero Honda Bajaj Auto TVS Motors Industry Year 09 10 09 10 09 10 09 10 (Increase)/Decrease in Stock 0. 33 -2. 33 2. 04 1. 34 3. 15 4. 49 -0. 74 0.68 Consumption of raw materials 67. 42 62. 86 60. 60 64. 04 67. 61 60. 50 65. 91 62. 41 Purchase in stock in trade 0. 00 0. 00 3. 51 3. 67 1. 62 1. 88 4. 44 5. 55 Staff cost 3. 62 2. 76 4. 83 2. 98 5. 29 4. 87 5. 34 3. 86 Other expenditure 11. 62 11. 32 10. 57 8. 59 15. 99 22. 26 12. 33 9. 73 Depreciation 1. 19 0. 86 1. 41 0. 12 2. 57 1. 89 2. 63 2. 01 Interest & Financial Charges -0. 14 -0. 10 0. 26 0. 00 1. 73 0. 91 1. 25 0. 92 Tax 3. 99 7. 69 5. 22 6. 11 0. 19 0. 76 2. 62 4. 57 Source BSE IndiaCygnus Research.Raw material cost forms the major chunk of cost for two-wheeler companies followed by other expenditure, stave cost. In terms of raw material, staff cost and other expenses the performance of Bajaj is better compared to its peers. Overal l, Bajaj auto is stintingal from operational point of view. It has declined its overall cost building by 159 bps to 86. 84% from 88. 44% as the percentage of sales during AMJ09. Porter Five Forces model Here is the analysis of Auto Industry with help of the porters five forced model. This is common for auto industry in India. Supply Some amount of excess capacity.while India would be capable of producing 5. 4 m cars a year by 2014, domestic demand is likely to edge up to surrounded by 3. 5 and 4. 8 m units. Demand mostly cyclical in nature and dependent upon economic growth and per capita income. Seasonality is also a vital factor. Barriers to portal High capital costs, technology, distribution network, and availability of auto components. bargain power of suppliers Low, due to stiff competition. Bargaining power of customers Very high, due to availability of options. contest High. Expected to increase even further. Now if we make the five-force model for two wheel ers