A

Business plan
On
INDIAN AUTOMOBILE INDUSTRY (CAR SEGMENT)

Submitted To:
Prof. Sapovadia,
Prof. Kishor Barad & Prof. Ritu Sharma

PGDM Trimester II (Batch 2010-12)

Continuous Evaluation in Business Plan

Submitted By:
Mahesh Savaliya (1011012026)

SHANTI BUSINESS SCHOOL,

AHMEDABAD

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 TABLE OF CONTENTS

No. Particulars Page No.

1 Overview of the industry 3
2 Major Indian Car Manufacturers 3
3 Multinational companies in India 4
4 Investment Scenario 4
5 Growth Trend 5
6 Gross turnover of the industry 5
7 Trend of production 6
8 Porter's Five Forces Analysis 6

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 An Overview of the Indian Automobile Industry
In 2009, India became the fourth largest exporter of automobiles in Asia after Japan,
South Korea and Thailand. The Indian car market was the world's ninth largest in 2008 with
an annual production of over 2.3 million units. The amount of passenger cars sales per month
exceeded 100,000 units in February 2009.

After the liberalization of the Indian economy in 1991, the car market in India has
witnessed a tremendous growth due to competition and lesser restrictions. Tata Motors,
Maruti Suzuki and Mahindra and Mahindra are some of the India car companies which have
expanded their domestic and international business. 

History of the Indian Car Market in the 1940s, the India car industry was in an
embryonic stage. After independence, the Government of India and the private sector started
a manufacturing industry in 1953 for automotive components for supplying the automobile
industry.  A number of Japanese manufacturers entered into joint-ventures in the 1980s for
manufacturing light commercial-vehicles and motorcycles. It was during this time that Suzuki
was chosen by the Indian government for entering into a joint venture for manufacturing of
small cars. In 1991, the economy was liberalized and the License Raj was gradually removed.
This allowed various Indian and foreign car companies to start operations here. The growth in
car manufacturing and automotive component has increased steadily to meet domestic and
international demands.

India is now one of the world's largest manufacturers of small cars. New York
Times has stated that due to the India's strong engineering base and skills in manufacturing of
fuel-efficient, low-cost cars, numerous automobile companies like Nissan, Hyundai Motors,
Volkswagen, Toyota, and Suzuki have expanded their manufacturing facilities. Around
240,000 cars were exported from India by Hyundai Motors in 2008. By 2011, Nissan Motors
will export 250,000 vehicles produced in its Indian plant. By 2011, General Motors also will
export around 50,000 cars produced in its Indian plant. 

Major Indian car manufacturers

 Ashok Leyland
 Maruti Suzuki
 Tata Motors
 Hindustan Motors
 Mahindra
 Premier
 Chinkara Motors
 Force Motors
 San Motors
 Hero Electric
 REVA
 Ajanta Group
 Tara International
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Cars manufactured by multinational companies in India

 BMW - 3 Series, 5 Series

 Mercedes-Benz - C-Class, E-Class
 Audi - A4, A6
 Skoda - Fabia, Octavia, Laura
 Volkswagen - Jetta, Passat
 Mitsubishi - Lancer, Lancer Cedia
 Ford - Ikon, Fiesta, Fusion, Endeavour
 Hyundai - Santro, i10, i20, Getz, Verna, Accent, Sonata
 Chevrolet - Spark, Aveo U-VA, Aveo, Optra, Cruze, Tavera
 Fiat - Palio, Grande Punto, Linea
 Honda - Jazz, City, Civic, Accord
 Renault - Logan
 Toyota - Corolla, Innova, Fortuner

Car Companies

   Audi    BMW    Chevrolet     Daewoo Motors

    Fiat     Force Motors     Ford     General Motors

    Hindustan Motors     Honda    Hyundai    Lamborghini

    Maruti   Mahindra    Mercedes     Mitsubishi

    Nissan Motor    Porsche     Reva Electric     Rolls-Royce Motor

    San Motors     Skoda     Tata     Toyota

    Volvo    Volkswagen

INVESTMENT SCENARIO:
It is expected that by the end of the year 2010 Indian automobile sector will be
investing a huge amount about Rs. 30000 crores. For example, Maruti Udhyog has plans of
investing Rs. 6500 crores; the TATA Motors is coming up with more investment of Rs. 2000
crores in its compact car project. Not only the Indian companies but also foreign players like
Hyundai are coming up with the investment of more than Rs. 3800 crores in india.

EXPORTS TRENDS (No.of Vehicles)

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Category 2004-05 2005-06 2006-07 2007-08
Passenger Vehicles 166,402 175,572 198,452 218,418
Commercial 29,940 40,600 49,537 58,999
Vehicles
Two Wheelers 366,407 513,169 619,644 819,847
Total 562,749 729,341 867,633 1,097,264

GROWTH TREND:
At present the industry is enjoying a growth rate of 14-17% p.a., with domestic sales
growth at 12.8%. The growth rate is predicted to double by 2015. As it is seen, the total
sales of passenger vehicles – cars, utility vehicles and multi utility vehicles – in the year
2005 reached the mark of 1.06 million. The current growth rate indicates that by 2012
India will overtake Germany and Japan in sales volume.

GROSS TURNOVER OF THE INDUSTRY:

GROSS TURNOVER OF THE AUTOMOBILE INDUSTRY IN INDIA
Year ( In USD Million)
2004-05 20,896
2005-06 27,011
2006-07 34,285
2007-08 36,612
2008-09 38,238

GROSS TURNOVER OF THE AUTOMOBILE

INDUSTRY IN INDIA
45,000
40,000
35,000
30,000
25,000
20,000
15,000
10,000
5,000
0
2004-05 2005-06 2006-07 2007-08 2008-09

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 DOMESTIC MARKET SHARE FOR 2009-10(In %)

Passenger Vehicles 15.86

Commercial Vehicles 4.32

Three Wheelers 3.58

Two Wheelers 76.23

TREND OF PRODUCTION:

Automobile Production Trends No. of

vehicles
Category 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10
Passenger 9,89,560 1209876 1309300 1545223 1777583 1838593 2351240
Vehicles
Commercia 275040 353703 391083 519982 549006 416870 566608
l Vehicles
Three 356223 374445 434423 556126 500660 497020 619093
Wheelers
Two 5622741 6529829 7608697 8466666 8026681 8419792 10512889
Wheelers
Grand Total 7243564 8467853 9743503 11087997 10853930 11172272 14049830

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 Porter's Five Forces Analysis
Porter's Five Forces, also known as P5F, is a way of examining the attractiveness of
an industry. It does so by looking at five forces which act on that industry. These forces are
determinants of that industry's profitability.

The five forces are:

1. The threat of new entrants

In the auto manufacturing industry, this is generally a very low threat. Factors to
examine for this threat include all barriers to entry such as upfront capital requirements (it
costs a lot to set up a car manufacturing facility!), brand equity (a new firm may have none),
legislation and government policy, ability to distribute the product.

2. The bargaining power of buyers/customers

In 2009 especially dealers were giving great deals to buyers to get the industry
moving. While quantity a buyer purchases is usually a good factor in determining this force,
even in the automotive industry when buyers only usually purchase one car at a time, they
still wield considerable power.

3. The threat of substitute products

If buyers can look to the competition or other comparable products, and switch easily
(they have low switching costs) there may be a high threat of this force.

Product differentiation is important too. In the car industry, typically there are many
cars that are similar - just look at any mid-range Toyota and you can easily find a very similar
Nissan, Honda, or Mazda. However, if you are looking at amphibious cars, there may be little
threat of substitute products (this is an extreme example!).

4. The amount of bargaining power suppliers have

In the car industry this refers to all the suppliers of parts, tires, components,
electronics, and even the assembly line workers. We know in the the auto unions are
tremendously powerful. But we also know that some suppliers are small firms who rely on
the carmakers, and may only have one carmaker as a client. So this force can be tricky to
evaluate.

5. The intensity of the competitive rivalry

We know that in most countries all carmakers are engaged in fierce competition.
Tit-for-tat price slashes, ad campaigns, and product developments keep them on the edge of
innovation and profitability. Margins are low and pressure between rivals is high.

All major car-producing nations experience this intense rivalry. This obviously
includes foreign manufacturers like the US, Japan, Italy, France, the UK, Germany, China, India,
and more.

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