Car Market & Buying Behaviour Paper Example

AbstractOver the past few years it has been seen that Indian Car Industry is growing at a rapid rate and has built a strong foundation for low cost manufacturing and engineering competitiveness thus attracting many global original equipment manufacturers (OEMs) like GM, Toyota, Honda, BMW, Nissan, etc., to leverage the India opportunity across the value chain.

Car component industry has also grown both domestic as well as on the export front. Its strength in technology intensive parts is making India a component sourcing hub for most global OEMs. Thus this car industry is becoming one of the leading export hubs for the global community. Introduction

Since, 1991 opening of the economy has changed the face of auto industry. Today, it is amongst the main drivers of growth of Indian economy with an output multiplier of 2.24(for every Re.1 invested, auto sector gives back Rs.2.24 to the economy). In recent years we have seen increasing number of global players entering Indian market by way of Joint ventures, collaborations or wholly owned subsidiary.

Sudden interest of major global players has made Indian auto industry very competitive as India provides twin benefit of ready market and Low cost manufacturing base for them. Currently Car industry constitute 14% of automobile sector in terms of unit. Global scenario

Car industry is one of the largest industries in the world, there are many players in world manufacturing cars, among those are (a) General motors, Ford in USA (b) Daimler Chrysler, Fiat, Lexus, Volkswagen, Renault, etc. in Europe (c) Toyota, Nissan, Honda, Hyundai and Suzuki, etc. in Asia. Global market for cars forecast to increase by 3.8% to 50.7 m units in 2007 – an increase of almost 1.9 m units.

Biggest contribution has to come from developing Asia (excludes Japan) and the growth of that region, especially China. Contribution of the Pacific Rim countries to the growing world market is, by 2009, almost an additional five million units. Indian scenario

The PAL entered the Indian market in mid 90 with Premier car, then Maruti started capturing the Indian market with help of maruti 800 .The car industry in general has grown at a CAGR of 13.5% p.a over the last 5 years, presently, India is 11th largest passenger car market in the world and is expected to be the 7th largest market by 2016. The Car industry has emerged as a key contributor to the Indian economy; currently India has low car penetration with 3 cars in 1000 individuals. India is the fourth-largest car market in Asia.

Passenger cars come in great variety, starting from 2-seater electric car REVA to 5-seater compact cars like Zen, Santro, Indica, etc. They come in all ranges– economical and luxurious. The production, sales, export figures of Indian car industry (units/annum) of last 5 yrs are given in Annexure 1 and sales, export figures ( revenue wise) and growth trend for last 5 yrs are given in Annexure 2. Key players in India

Player like Tata Motors, Maruti Udyog Limited, Mahindra & Mahindra, etc are the leading Indian manufacturers in passenger cars segment, whereas many foreign players such as Hyundai, Honda, Fiat, Ford, Toyota, Daimler Chrysler, etc are also serving the segment. Maruti is the market leader with popular brands maruti 800, zen and alto. Hyundai is second with santro ,accent etc,Tata motors is third with indica ,indigo etc, Mahindra and Mahindra is leading player in utility vehicle with scorpio, Bolero etc, Honda with brand civic.The market share, sales and export of each palyer is given in Annexure 3. Market information

The current market scenario is given below:Passenger car sales grew by 10.84% and crossed the 1 million mark in 2006-07 and record sales of 1,076,408 vehicles. Utility vehicles sales grew by almost 12.2% in April-May 2007 compared to the same period last year. Various manufacturers have entered this category and this segment is expected to grow at 20% by 2010. Multi utility vehicles sales grew by almost 21.93% in April-May 2007 compared to the same period last year. Product categorization

CategoryEngine(cc)Length(mm)Market share%Price range (lacs)ExampleMini< 80024004500-51002>20Bmw 5seriesMarket Drivers in IndiaIncrease in disposable incomes.Rise in aspiration levels.Lowering interest rates.Wide variety and easy availability of financing options.High sensitivity to fuel prices.Lack of urban & rural public transportation infrastructureFlourishing service sectorGrowing working populationFast paced urbanization to rise from 28% to 40% by 2020Middle class expanding by 30 – 40 million every yearKey TrendsMarket evolution from Mini cars to Hatchbacks to Compact Sedans now evident. Increase in customer emphasis on aesthetics and comfort.Shrinking product life-cycles.

Government Policies and regulationsIn 2002, the Indian government formulated an auto policy that aimed at promoting integrated, phased, enduring and self-sustained growth of the Indian automotive industry Allows automatic approval for foreign equity investment upto 100% in the automotive sector and does not lay down any minimum investment criteria. Lays emphasis on R & D activities carried out by companies in India.

Weighted tax deduction of upto 150% for in-house research and R & D activities India is expected to align its crash requirements and emission standards with European standards in the 2008 / 09 timeframe. Presently Bharat Stage III ( Equivalent to Euro III) is mandated in Metros and other large cities and Bharat Stage II ( Equivalent to Euro II) for the rest of the country. Bharat Stage IV ( equivalent to Euro IV) is expected to be introduced in the large Indian metros around 2009 and Bharat Stage III in the rest of the country. Capital Investment & FDI Inflow

Honda started investing $150m-$200m for the second automobile plant to compact cars by end-2010. Renault-Mahindra has already launched Logan sedan – one of the world’s cheapest cars. Nissan has unveiled plans to launch a compact car in 2009 with a huge investment of $908m in Chennai. Tata-Fiat is expected to invest $2.2 billion for a new, low cost car. Hyundai is doubling its Indian capacity to 600,000 cars at a cost of $1.12 billion.

Honda Motors will spend $400 million to triple capacity to 150,000 units by 2010. General Motors is investing about $280 million in its second Indian plant in Pune, near Mumbai, where its capacity could more than double to 140,000 cars in a year. Recent Innovations

Solar carA solar car is an electric vehicle powered by solar energy derived from solar panels on the surface of the car. The conversion of the sun’s energy directly into electrical energy is done by Photovoltaic cells. Solar cars are not practical day-to-day transportation devices at present, but are primarily demonstration vehicles and engineering exercises. Solar cars compete in races such as the world solar challenge. Electrical Car

The electric car is a battery electric vehicle (BEV) that utilizes chemical energy stored in rechargeable battery packs. Electric vehicles use electric motors and motor controllers instead of internal combustion engines (ICEs). Normally the cost of battery electric cars is higher than petrol or diesel cars. Also fuel costs are forced to be low due to the competitive price of electricity – fuel duty is zero-rated – and to the high efficiency of the vehicles themselves. They are also very energy efficient and carbon dioxide emissions is less. Acquisitions and JV

Joint-ventures: Tata with Fiat, M &M with Renault, Maruti with Suzuki Acquisitions: South Korea’s Daewoo Commercial Vehicle Co. in March 2004 by Tata Motors for $102 million and Bharat Forge’s acquisition of German firm Carl Dan Pedinghaus GmbH for euro 29 million, Mahindra & Mahindra, through its subsidiary agreed to acquire 67.9 per cent stake in Jeco Holding AG, one of the top five forging companies in Germany, for euro 140 million. Summary

There is a vision statement, “By 2016 India will emerge as the destination of choice in Asia for the design and manufacture of automobiles and automotive components. The Indian automotive sector will contribute in a significant manner to India’s Gross Domestic Product and employment opportunities”.

This vision is reflected in the Auto Mission Plan (AMP) 2006-2016 envisaging to double the sector’s contribution to GDP to 10 per cent and providing additional employment to 25 million people by 2016 with a road map to attract $40 billion investment and sectoral output of $145 billion with estimated exports of automobiles and components accounting for US$35-40 billion. Annexure 1

Annexure 2Passenger Car (Rs crore)Category2001-022002-032003-042004-052005-06Sales2090922188270463607738689Export6691242235334633559

Growth rate

Annexure 3Key players and their market share

Key playersSales From April-November 05-06Total Market Share (in %)Total number of exports in April 05-06

2,91,18252.223,043.1,07, 06619.268,374



10,5121.99,928and others315365.7-