Introduction

It is a known fact that health of countrys automotive industry is one of the key indicators of the
manufacturing competitiveness of the country. What is also important is, how vibrant is the complete
eco system with all OEM manufacturers, component manufacturers, manufacturing practices, local
market demand, export demand, etc.
No doubt India has emerged as one of the key global markets (both as consumption and as
production base) in automotive industry and particularly in last few years it has witnessed
tremendous growth and has also been base for global manufacturers . VW, Nissan, Renault, GM,
Ford, Honda, Suzuki, Hyundai, Daimler, BMW, Skoda, Audi, MAN, all top brands are present in
India and also manufacturing/assembling locally.
By facts, India is 2
nd
largest two wheeler manufacturer, 4
th
largest CV manufacturer, largest three
wheeler manufacturer and among top 5 global PV manufacturers. Automotive is strong 68 Billion
USD Industry as of 2011 and contributes 5-7% of Indians GDP.
Market characteristics: Segmentation and production development
At KF we consider Auto market into four distinct segments :

Fig1. Auto market segments
As shown in fig. 2 below, between 2006-07 and 2010-11, auto segment witnessed CAGR of 12.7%
to reach total production units of 17.91 million units. Two wheelers represent largest segment
with 75% share followed by 17% of PV and 4% each by CV and Three wheelers.

Fig 2.Production development of Indian Automobile
But most interesting aspect is that passenger vehicle segment exhibits highest growth of 17.9%
followed by 12% of Two wheelers. Growth of both CV and 3 wheeler segment were between 9-
10%.
However, in Revenue terms, PV is the largest segment with approx. 63% share followed by CV
with 22%, and 2 wheeler and 3 wheeler with remaining 15%.

Sales development
Fig 3 shows us the sales development in these segments. Domestic sales had grown at relatively
slower pace than production with sales CAGR of 11.3%. It again reinforces the fact the PV emerged
out as largest growth segment with 16% followed by 11.6% CAGR of 2 wheeler.

Fig 3. Sales development of Indian Automotive
As of 2010-11 there was domestic demand of 2.5 million PV and 11.8 million two wheelers,
approximately 676 thousand units of CV and 526 thousand units of 3 wheeler which were sold in
Indian market.
An interesting features is that ration of domestic sales to Production is decreasing indicating an
attractive demand for exports. From 91% in 2006-07 it decreased to 86% in 2010-11.
Exports development
Fig 4 gives the details about export indicating that India exported approx. 2.3 million
automobiles of which comprise of about 0.5 million PV and 1.5 million two wheelers and about
270 thousand units of 3 wheelers.

Fig 4. Export development of Indian Automotives
Again the interesting fact is that PV with around 25% CAGR growth is the highest growth segment
followed closely by 2 wheelers with 24% CAGR growth and 3 wheeler with impressive 17% CAGR.
This clearly demonstrates the fact that India has emerged as one of the attractive manufacturing base
for Automobiles globally and this is true for all the segments.
Hyundai is exporting close to 50% of its production and same is true for Reanult and Nissan.
In fact, India is increasingly becoming base for small car and compact car manufacturing globally.
Competitive Intensity
In most of the segments, market leaders are domestic companies but closely contested by rival global
brands. For example:
Two wheeler: Hero motor corp. has 55% market share and Bajaj has 22% share.
3 wheeler: Piaggio and Bajaj have nearly equal share of 40% each.
PV: Maruti Suzuki has 45% market share, Hyundai has 16% and Tata has 15% share.
CV: Tata with 65% is dominating leader. However, Ashok has 2
nd
highest share in M&HCV segment
with 24% whereas Mahindras are 2
nd
in LCV segment with 30% share
Both the segments of PV and CV are highly competitive with presence of all the global top
manufacturers. Latest to enter India was Nissan and Renault in PV and Bharat Benz in CV
Growth Prospects
KF does believe that future for Indian Automobile industry is really bright and all the sub segments
shall witness growth. Major Drivers would be Strong local demand, rising per capita income,
establishment of India as global auto hub, product innovation and multi financing options.

Fig 5. Growth estimates and demand drivers
As shown in Fig 5, Indian Automobile segment shall increase from 17.9 million units in 2010-11 to
29.1 Million units in 2015-16 and shall be in excess of 120 billion dollar industry by then.
PV segment shall cross 5 million units and CV and 3 wheeler each shall cross 1 million units.
So, coming years shall establish India more strongly as base for Automobile manufacturing and
which in ripple affect shall lead to demand increase in R&D, Engineering services and other service
industries as offshoring.