Indian Automotive Industry Analysis Essay Example

last reported at 8. 2 percent in May of 2011 The (FEE) or Foreign Exchange Earnings went up to a whopping US$ 12. 88 billion during the period January-November 2010 The per capita income of the Indians have risen by 17. 9% to Rs 54,835 in the fiscal year 2010-11 from Rs 46,492 in the fiscal year 2009-10, stated the revised government data. The new per capita income figure estimates on the present market prices is over Rs 8,000, which is more than the last projection of Rs 46,492 calculated by the Central Statistical Organization.

The per capita income was at Rs 35,917 in fiscal year 2011 as compared to Rs 33,731 in the previous year, said the data on national income. The size of the economy at the present prices surged to Rs 73,06,990 crore in FY11, posting 19. 1% rise as compared to Rs 61,33,230 crore in FY10. In a move to stem the rising prices, the Reserve Bank of India (RBI) on 26. 07. 2011 hiked the short-term indicative policy rate (repo rate) by 50 basis points from 7. 5 per cent to 8 per cent with immediate effect.

With the hike in repo rate (the rate at which banks borrow from the central bank) the reverse repo rate (the rate at which banks park their funds with the RBI), with a spread of 100 basis points below the repo rate, automatically adjusts to 7 per cent this dampens sectors such as infrastructure and automobile. The RBI has also revised the WPI inflation projection for March 2012 from 6 per cent to 7 per cent. However, it has retained the projection of real GDP

growth for the current year at 8 per cent. Crude oil prices remain volatile and are a major risk factor.

 INDUSTRY ANALYSIS

AUTOMOBILE INDUSTRY HISTORY

In the year 1769, a French engineer by the name of Nicolas J. Cugnot invented the first automobile to run on roads. This automobile, in fact, was a self-powered, three wheeler, military tractor that made use of steam engine. Oliver Evans was the first to design a steam engine driven automobile in the U. S. The automobile industry finally came of age with Henry Ford in 1914 for the bulk production in cars. This lead to the development of the industry and it first begun in the assembly lines of his car factory.

According to the history of automobile industry U. S, dominated the automobile markets around the globe with no notable competitors. However, after the end of Second World War in 1945, the automobile industry of other technologically advanced nations such as Japan and certain European nations gained momentum and within a very short period, beginning in the early 1980s, the U. S automobile industry was flooded with foreign automobile companies, especially those of Japan and Germany.

INDIAN AUTOMOBILE INDUSTRY

At present time, Indian automobile industry is making a major contribution in increasing the country's GDP by 9% every year. Annually, the Indian automobile industry is growing at an average rate of 30% and marking itself as one of the fastest growing industries in India. In January 2010, total automobile sales in the domestic market reached 1114157 units, the figures shows an increment of 44. 9% compared to the sales units of 7,68,698 of same period last year. Even for the month of April-October after

a gap of 11 years, total automobile sales in India stood at 1,120,081 Units.

Automobile industry has provided direct and indirect employment to 13. 1 million people. At present India is the largest tractor and three-wheel vehicle producer, second largest two-wheel vehicle producer, fourth largest commercial vehicle producer and eleventh largest passenger car producer. National Manufacturing Competitiveness Council (NMCC) has been set up by the Government to provide a continuing forum for policy dialogue to energies and sustain the growth of manufacturing industries in India.

Over the past few years, the Motor Vehicle Manufacturing industry has become more volatile. This has been the result of fluctuations in metal prices and fuel prices, as well as changes in legislation and assistance packages. India’s increasing per capita disposable income and growth in exports is playing a major role in the rise and the competitiveness of the industry .

COMMERCIAL VEHICLE INDUSTRY

Trucks and buses are basically used for carrying people, goods and materials in bulk fall in Commercial Vehicles sector. These trucks are classified into sub-categories like depending on their size and functional use: haulage, rigid trucks, tippers, cabs, delivery vans and trailers. In the trucks segment Ashok Leyland primarily concentrates on the 16 ton to 25 ton range of trucks. The fuel efficiency of these vehicles have also improved to a great extent in the past few years.

As per statistics launched by Society of Indian Automobile Manufacturers (SIAM), the Commercial Vehicles segment grew marginally at 4. 07 percent. While Medium & Heavy Commercial Vehicles declined by 1. 6 percent, Light Commercial Vehicles recorded a growth of 12. 29 percent. The major players of truck manufacturers in India are Ashok Leyland,

Eicher, Tata Motors, Mahindra, SML Isuzu and Swaraj Mazda. Determinants of demand for this industry include vehicle prices (which are determined largely by wage, material and equipment costs) and exchange rates, preferences, the running cost of a vehicle (mainly determined by the price of petrol), income, interest rates, scrapping rates, and product innovation.

As per Automotive Mission Plan 2006–2016 (2008), the Indian Government recognizes its role as a catalyst and facilitator to encourage the companies to move to higher level of competitive performance. The Indian Government wants to create a policy environment to help companies gain competitive advantage. The government aims that with its policies its encourage growth, promote domestic competition and stimulate innovation. An allocation of Rs. 214,000 crore (US$ 46. 5 billion) for infrastructure in 2011-12 budget reflects an increase of 23. 3% automobile sector growth over 2010-11.

COMPANY ANALYSIS

HISTORY 

Following the independence of India, Pandit Jawaharlal Nehru, India’s first Prime Minister, persuaded Mr Raghunandan Saran, an industrialist, to enter automotive manufacture. The company began in 7th September of 1948 as Ashok Motors company based in Chennai, India Started operation initially to assemble Austin cars. The product line soon shifted from cars to commercial vehicles because that was seen as an opportunity to serve a larger section of the society. The first major product introduction, the Comet truck, is reflective of the role this Company has played over the years. Company led with the country's first turbocharged engine and gearboxes and axles to go with the higher power engines.

Parmanand Deepchand Hinduja, a young entrepreneur from the fabled town of Shikarpur, realized early in life that business was all about spotting opportunities, and seizing them

wherever they surfaced. He travelled to Mumbai in 1914, and quickly learnt the ropes of business. The business journey, which began in Sind, entered the international arena with an office in Iran (the first outside India) in 1919.

Merchant Banking and Trade were the twin pillars of the business and the Group remained headquartered in Iran, until 1979 when it moved to Europe. . It is involved in banking and finance, transport, energy (oil), technology, media and telecom business. The Group has expanded and diversified its businesses, with significant social and charitable contributions, under the present leadership of Chairman, Srichand, ably supported by his brothers, Gopichand, Prakash and Ashok. The Hinduja Group bought into Ashok Leyland, India’s second largest HCV manufacturer, in 1987. The tag line for HINDUJA GROUP is “Vision for Tomorrow Values for All Time”.

The company was renamed and started manufacturing commercial vehicles in 1955 with equity participation by British Leyland. The products were branded as Ashok Leyland. Today the company is the flagship of the Hinduja Group, a British-based and Indian originated transnational conglomerate with 51% ownership. Over the years, Ashok Leyland vehicles have built a reputation for reliability and ruggedness. This was mainly due to the product design legacy carried over from British Leyland.

Ashok Leyland had collaboration with the Japanese company Hino Motors from whom the technology for the H-series engines was bought. Many indigenous versions of H-series engine were developed with 4 and 6 cylinder and also conforming to BS2 and BS3 emission norms in India. These engines proved to be extremely popular with the customers primarily for their excellent fuel efficiency. Most current models of Ashok Leyland come with H-series

engines. The tag line for ALL is “Engineering Tomorrows” [pic] Table 3. 1 Share Holding Pattern of ALL.