The Indian automobile segment can be divided into several segments viz.

two-wheelers (motorcycles, geared and ungeared scooters and mopeds), three wheelers, commercial vehicles (light, medium and heavy), passenger cars, utility vehicles (UVs) and tractors.

Demand is linked to economic growth and rise in income levels. Per capita penetration at around nine cars per thousand people is among the lowest in the world (including other developing economies like Pakistan in segments like cars). While the industry is highly capital intensive in nature in case of four-wheelers, capital intensity is a lot less for two-wheelers. Though three-wheelers and tractors have low barriers to entry in terms of technology, four wheelers is technology intensive. Costs involved in branding, distribution network and spare parts availability increase entry barriers. With the Indian market moving towards complying with global standards, capital expenditure will rise to take into account future safety regulations. As compared to their global counterparts, both the two-wheeler as well as four wheeler segments are relatively lesser fragmented. However, things are changing, especially on the passenger cars front as many foreign majors are eyeing the Indian market. As a result, pricing power is likely to diminish going forward. Automobile majors increase profitability by selling more units. As number of units sold increases, average cost of selling an incremental unit comes down. This is because the industry has a high fixed cost component. This is the key reason why operating efficiency through increased localization of components and maximizing output per employee is of significance.

Key Points Supply Demand

The Indian automobile market has some amount of excess capacity. Largely cyclical in nature and dependent upon economic growth and per capita income. Seasonality is also a vital factor.

Barriers to entry

High capital costs, technology, distribution network, and availability of auto components. Bargaining power of Low, due to stiff competition. suppliers Bargaining power of Very high, due to availability of options. customers Competition High. Expected to increase even further.. TOP Financial Year '11 A total of 11.8 m two-wheelers were sold in India in FY11, a growth of a strong 26% over the previous year. Motorcycles accounted for 76% of the total two wheelers sold. The growth came in despite the series of interest rate hikes undertaken by the RBI to bring inflation under control. The scooters (geared & ungeared) improved their sales considerably, largely due to improved performance of the ungeared scooter segment. The 3-wheeler segment also performed well as domestic volumes improved 19% YoY, led by 22% growth in passenger carriers.

The medium and heavy commercial vehicles (M/HCVs) segment saw its

volumes grow by a huge 32% after having grown by an impressive 34% in FY10 as well. LCVs on the other hand, underperformed their HCV peers as volumes increased at a relatively lower rate of 23%. The strong growth in the overall CV segment was due to high growth rates during the first half of the fiscal supported by sustained economic growth and impact of a lower base in the corresponding period last year. Healthy growth in the agricultural and industrial sectors also fuelled demand for CVs.

The tractor industry, the worlds largest also logged in good growth in FY11.

Domestic volumes grew by 20% as against a growth of 32% in the previous year. After increasing by 26% in FY10, sales of passenger cars did well in FY11 as well as volumes grew by 30% YoY. A strong growth in GDP aided by recovery in agriculture and good performance in the industry and services sector had a positive impact on the same of passenger vehicles as well. Utility Vehicles also logged in a strong growth of 19% in FY11.

While raw material prices softened considerably in FY10 and bolstered

operating margins, the scenario reversed in FY11. Although sales growth in FY11 remained strong, auto companies began to feel the pressure on operating margins on the back of rising raw material prices.

TOP Prospects The government spending on infrastructure in roads and airports and higher GDP growth in the future will benefit the auto sector in general. We expect a slew of launches in the Segment 'B' and Segment 'C' of passenger cars. Utility vehicle segment is expected to grow at around 8% to 9% in the long-term.

In the 2-wheeler segment, motorcycles are expected to witness a flurry of new

model launches. Though the market size is expected to grow by 10% to 12%, competitive pressure could keep prices and margins under control. TVS, Honda and Hero Motocorp are poised to benefit from higher demand for ungeared scooters in the urban and rural markets.

Riding the wave of structural changes taking place in the country, the tractor
industry registered good growth in FY10 as well as FY11. However, while fiscal FY09 saw volumes grow marginally, the same roared back in FY10,

witnessing a growth of 32%. The strong performance continued in FY11 as well as volumes grew by 20%. While good monsoon is a positive for the sector, given the fact that non-farm incomes have continued to climb up, volumes should still hold up pretty well despite a year or two of poor monsoons. The longer-term picture is impressive in light of poor mechanisation levels in the countrys farm sector and the thrust of the government on improving rural infrastructure.

With an estimated 40% of CVs plying on the roads being 10 years old,

demand for HCVs is expected to grow by 7% to 8% over the long term. While the industry is going through cyclical hiccups currently, we expect this factor to weaken in the future on account of strong structural tailwinds. The privatisation of select state transport undertakings bodes well for the bus segment.

The automotive Industry in India is now working in terms of the dynamics of an open market. Many joint ventures have been set up in India with foreign collaboration, both technical and financial with leading global manufacturers. Also a very large number of joint ventures have been set up in the auto-components sector and the pace is expected to pick up even further. The Government of India is keen to provide a suitable economic, and business environment conducive to the success of the established and prospective foreign partnership ventures. $5.7 billion is the investment envisaged in the new vehicles projects. The market research report "Indian Automobile Industry - An Analysis (2005-2010)" clarifies all doubts regarding sales satisfaction index and customer satisfaction index. With the inclusion of initial quality study, and the Government policy and competitive analysis, this report in itself is a complete guide to the producers and consumers in the auto industry. REPORT HIGHLIGHTS - Examines the production, sales, and export growth rates of the sector, along with a mention of the major manufacturers. - Identification of the opportunities for foreign companies in terms of exports, technology transfers, strategic alliances, financial collaborations and JV's, in the Indian vehicle sector. - The component-wise share of production is assessed. - Assessment of the implications of vehicle emissions - Porter's Five Forces Analysis of the Industry - Demand forecasts till 2010. - An overview of the major changes occurring in the Indian market - A study of the market access strategies for companies - An insight into the profiles of big players of the Indian automotive sector REPORT FEATURES The chapter 4 of the market research report "Indian Automobile Industry - An Analysis (2005-2010)" talks of the global automotive scenario whereas chapter 5 covers the Automotive Industry in India. Chapter 6 discusses the automotive component sector. Chapter 7 discuss about the performance of various Indian Vehicle Sectors. Chapter 8 provides a Five Forces competitive analysis of the Indian automotive Industry, while Chapter 9 highlights the advantages, opportunity and the obstacles of Indian auto industry.

Chapter 10 provides an overall assessment of the industry. Chapter 11 contains the demand forecasts up till 2009-10. The market strategies and the current status of the industry are highlighted in Chapter 12. Chapter 13 covers the automotive dealer satisfaction study whereas chapter 14 includes the recent issues & developments in the industry. Finally, chapter 15 and 16 details the key players in the industry and company analysis of auto ancillary industry.