Start Biz in India: Automobile Industry
Choices add the ultimate spice to life and India with the largest number of people (well almost!) needs a lot of them. That is especially true when it comes to things majorly characterized by the ever-evolving technology. And obviously, when there’s a demand, there’s going to be a large number of industry players competing with each other to bring out the best possible product in a given price change.
One such industry is the Indian Automobile Industry which very visibly stays on its toes to bring new models for the domestic and international markets alike. The domestic players are sincerely trying to meet the international standards and yield the best quality.
Nissan's Managing Director in India, Mr. Kiminobu Tokuyama says “India is a rapidly growing market, so therefore it is very important for global auto manufacturers". India’s potential as a manufacturing country and as a consumer base is being taken seriously all over the world. India is no more just an information technology super power. A country which was more or less ignored by the rest of the Asia, India is now becoming home to several Asian brands owing to increasing opportunities and a progressive economy.
With a turnover of almost $59 Million US Dollars, this industry provides employment to 13 million people in the Indian Work-class. This industry is one of the most competitive industries because the manufacturers face some challenges like increasing fuel efficiency and reducing emissions perpetually apart from doing something innovative on a continuous basis.
Indian Auto Market: Reasons to cheer
1. Rapid Urbanization: Currently only 21% of the population lives in the urban areas. Given how India is performing, the figures are hoped to touch 35% by 2020 and 40% by 2030.
[Source: www.newgeography.com]
2. Rising per capita GDP: The per capita GDP of India increased from 1200 USD in 2011 to almost 1330 USD in 2012. This is further expected cross the 2000 mark by 2015. Increasing GDP would mean increased purchasing power and hence increased demand for automobiles
[Source:www.tradingeconomics.com]
3. Overall growth of other industries: Industries are usually interdependent on each other. The effect of expansion of other industries is bound to percolate to the automobile industry as well. Since transport is a basic need of every industry, demand for automobiles will rise with every positive change in an industry.
[Source: www.nasscom.org]
4. Car buyers getting younger: It is no more a hidden fact that India is one of the youngest countries in the world with a median age of almost 26 years; much lower than the World’s biggest economies. It only shows that the work class constitutes majorly of young individuals. The car buying age has been on a decline. Where a person aged 39 used to buy a car in the year 2000, this age has gradually come down to 33 in 2010. It is only expected to become lesser in the coming years.
5. Growing Middle class: With the middle class of India growing annually, benefits of this sector are still untapped. It is the transition from the lower class to the middle class which converts car into a need from a luxury.
Other factors like affordability, innovation, infrastructure facilities and price of fuel also affect the demand for automobiles to a large extent. These challenges keep the automakers on their toes all the time. With the middle class in India still growing annually, the benefits of this sector are still untapped.
Recent Developments in the Industry:
[Source: www.ibef.org]
- Ford India: In the wake of increasing petrol prices, it has expanded its diesel engine production capacity of its Chennai plant to keep pace with the changing demand. The plant that had the capacity to produce 2.5 Lakh engines annually in 2010; shall now be able to produce 3.4 lakh engines. It also has the capacity of producing 2 Lakh cars.
- Isuzu Motors Limited (Japan): With a capital outlay of Rs. 1000 Crores, it is planning to build a Greenfield project to target the small commercial vehicle and MUV segments.
- Renault (French auto major): By launching it midsize SUV ‘Duster’ in both petrol and diesel variants, it has successfully entered the Indian SUV market. Renault has already launched 3 more vehicles this year prior to this.
- M and M Group: Mahindra and Mahindra Group after spending 4 years in the Indian 2 wheeler segment has launched its research and development (R&D) center for two-wheelers in Pune with an investment of Rs 100 Crores.
- MSIL (India’s largest auto maker): It shall merge the group unit “Suzuki Powertrain India Ltd” with itself so that all the diesel manufacturing facilities are under the same management. The merger will be conducted through share swap without any cash transaction.
Prominent Players in the Indian Automobile Industry:
These are the names which have a brilliant Pan India coverage. Apart from this, there are brands which dominate a particular region of the country depending on their popularity in that area. This can be studied from the following picture:
Foreign Direct Investment Policy
A policy of automatic approval up to 100% FDI has been a boon for the Industry. The policy alone has led to a turnover of 12 billion USD in the Indian auto industry. No need for licensing and no restriction on import of auto components make this sector very attractive for foreign investors. Apart from this, advanced technology yet cost effectiveness and efficient manpower add to the list of advantages which India offers as a target country for investment.
With a lot of foreign players like General Motors, Toyota, Renault, BMW, etc. already carrying out their activities successfully in India, FDI has definitely contributed to the growth story of the Indian auto
The Future Forecast
And, there are factors which are demand determinants playing in favour of the Indian automobile Industry like rising family Income, product innovations, demographics and favourable duty structure; there is a lot which the industry is yet to see.
The future looks bright and being an entrepreneur, if someone is looking for opportunities in this Industry, anything creative/ innovative related to the automobile industry is bound to work.
(Source: SIAM, ACMA, FICCI and CIME)
And, there are factors which are demand determinants playing in favour of the Indian automobile Industry like rising family Income, product innovations, demographics and favourable duty structure; there is a lot which the industry is yet to see.
The future looks bright and being an entrepreneur, if someone is looking for opportunities in this Industry, anything creative/ innovative related to the automobile industry is bound to work.
(Source: SIAM, ACMA, FICCI and CIME)
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