If you have not read Part I of this analysis, please read it here.
The Indian automotive industry has emerged strong post the global meltdown and its sales have been growing in numbers since then. There has been growth in both, the domestic market and exports segment. With new concepts like share mobility, eco-friendly vehicles, and electric vehicles, a new tangent has been set for this industry. To capitalize on them, new technologies and business models and required to further the growth momentum.
In the four-wheeler segment, Maruti Suzuki and Hyundai India have together captured more than 50% of the market share. Tata Motors, Honda, Toyota, Renault, and Ford have respectively 6.39, 5.17, 5.27, 3.1 and 2.73% market share respectively.
Others like Nissan, Volkswagen India, Skoda, and GM together acquire a modest 4.41% share.
Sales of premium automakers like BMW India, Audi India, Mercedes-Benz India and Jaguar Land Rover are not even included in this list.
India’s largest automaker has maintained its strong domination and brought its market share very close to 50%. It has ingeniously captured the middle-income nuclear families and maintained its brand value which has given it the monopolistic edge in the market.
Hyundai India (Indian arm of the Korean automaker)
Hyundai has grown over 5% in India. It has grabbed a healthy 16% market share. The launch of i20, i10 and backed by strong sales of Creta have kept the company’s manufacturing units operating at full-house.
Other major car-makers like Tata Motors and Mahindra follow closely in this cut-throat competition.
Foreign trade in engineering automotive goods has widened India’s base. India exports almost all types of vehicles; among the major categories, two-wheelers accounted for more than two-thirds share in terms of number of units exported in 2015-16. During the last few years, passenger cars have consistently been the largest export item among India’s vehicle exports, in value terms, followed by two wheelers and tractors.
Mexico has been one of the largest markets for passenger cars with a share of 18 percent in total exports from India. A substantial percentage of passenger cars are also being exported to South Africa (10 percent), UK (6 percent), Italy (6 percent), Sri Lanka (5 percent) and Saudi Arabia (4 percent). Egypt, Spain and UAE with shares of 3 percent each in Indian exports of passenger cars are also important destinations.
This indicates the growing capability of the Indian automobile industry to meet the international standards and the increasing acceptance of automobiles manufactured from India in the global market.
A large proportion of auto components currently being exported comprise traditional mechanical parts like brakes, engines, gear boxes etc. Value-added products such as high-end safety and advanced electronic parts form less than 10 percent of auto component exports. There is, therefore, a need to focus on higher value-added products which would not only showcase the capabilities of Indian firms but will also result in greater per unit realization for the enterprises.
The import segment primarily deals with input parts. Currently, government allows imports of cars which are priced over USD 40,000 and bikes which are above 800 cc engine capacity. This helps in lowering the impact on various domestic segments which are already reeling under low off-take.
CONTRIBUTION TO SHAPING THE INDIAN ECONOMY
The automotive industry, on the whole, has led to nation building, generated revenue for the government, promoted economic and people development and fostered R&D and innovation.
It provides significant tax revenues from vehicle sales, usage-related levies, personal income taxes, and business taxes. Production and sale of auto components along with services offer a wide net to generate revenue. In terms of economic development, there is a close correlation between foreign direct investment (FDI) and inflows and automotive output, particularly for developing nations.
Automotive FDI also brings in investment in neighboring industries leading to a wider automotive ecosystem. Every job in the core auto industry leads to more than four additional jobs in the upstream or downstream industries. The $93 billion automotive industry contributes to 7.1% to India’s GDP.
Vehicle manufacturing units – technically known as original equipment manufacturers (OEM) – lead to clusters of manufacturing facilities, steel plants, glass manufacturers, aftermarket shops and transport service providers. This has led to industrial development penetrating different regions of India. Pune, Gurgaon and Chennai are some of these regions.
The industry has fostered increased mobility, with goods and services easier to transport than ever before. This industry’s numerous forward and backward links provide both direct and indirect employment. It has contributed to innovation and skill development.
Manufacturers are already planning for the future. Rising prosperity and increasing car affordability provide a healthy prognosis for the Indian automobile industry. With concepts of shared mobility and greener vehicles coming into place, there is now a greater need for capital, technology and vision. Companies like Mahindra & Mahindra and Maruti are spending heavily on R&D related to electric vehicles. The government is also pushing towards increasing the use of electric vehicles. Although the masses still prefer traditional vehicles over electric ones, it will take time for these ideas to materialize. With social acceptance picking the pace and improving infrastructure it can be said that the future of the automobile industry belongs to the companies which will innovate the best in the electric vehicle segment.
Author | Deepti Kansal