Introduction-India
History of Automobile Industry
The automobile as we know it was not invented in a single day by a single inventor. The history of the automobile reflects an evolution that took place worldwide. It is estimated that over 100,000 patents created the modern automobile. However, we can point to the many firsts that occurred along the way. Starting with the first theoretical plans for a motor vehicle that had been drawn up by both Leonardo da Vinci and Isaac Newton.
In 1769, the very first self-propelled road vehicle was a military tractor invented by French engineer and mechanic, Nicolas Joseph Cugnot (1725 - 1804). Cugnot used a steam engine to power his vehicle, built under his instructions at the Paris Arsenal by mechanic Brezin. It was used by the French Army to haul artillery at a whopping speed of 2 1/2 mph on only three wheels. The vehicle had to stop every ten to fifteen minutes to build up steam power. The steam engine and boiler were separate from the rest of the vehicle and placed in the front (see engraving above). The following year (1770), Cugnot built a steam-powered tricycle that carried four passengers.
In 1771, Cugnot drove one of his road vehicles into a stone wall, making Cugnot the first person to get into a motor vehicle accident. This was the beginning of bad luck for the inventor. After one of Cugnot's patrons died and the other was exiled, the money for Cugnot's road vehicle experiments ended.
Steam engines powered cars by burning fuel that heated water in a boiler, creating steam that expanded and pushed pistons that turned the crankshaft, which then turned the wheels. During the early history of self-propelled vehicles - both road and railroad vehicles were being developed with steam engines. (Cugnot also designed two steam locomotives with engines that never worked well.) Steam engines added so much weight to a vehicle that they proved a poor design for road vehicles; however, steam engines were very successfully used in locomotives. Historians, who accept that early steam-powered road vehicles were automobiles, feel that Nicolas Cugnot was the inventor of the first automobile.
The automotive industry has certain trends it has to follow, just like fashion designers and musical composers. In times of recession and decreasing sales there is less room to take chances and manufacturers are prone to follow the common pattern as a safer bet rather than releasing a controversial product or idea that might or might not be successful. However throughout the automotive industry's history, great innovators have "boldly gone where no man has gone before" to set new trends which have dynamically altered the industry as a whole.
1880's & early 1900's
Abouthundredyearsago
-The first motor car was imported
-Import duty on vehicles was introduced.
-Indian Great Royal Road (Predecessor of the Grand Trunk Road) was conceived.
First car brought in India by a princely ruler in 1898.
Simpson & Co established in 1840.
-They were the first to build a steam car and a steam bus, to attempt motor car manufacture, to build and operate petrol driven passenger service and to import American Chassis in India.
• Railways first came to India in 1850's
• In 1865 Col. Rookes Crompton introduced public transport wagons strapped to and pulled by imported steam road rollers called streamers. The maximum speed of these buses was 33 kms/hr.
• From 1888 Motors Spirit attracted a substantial import duty.
• In 1919 at the end of the war, a large number of military vehicles came on the roads.
• In 1928 assembly of CKD Trucks and Cars was started by the wholly owned Indian subsidiary of American General Motors in Bombay and in 1930-31 by Canadian Ford Motors in Madras, Bombay and Calcutta In 1935 the proposals of Sir M Visvesvaraya to set up an Automobile Industry were disallowed.
• 1942 Hindustan Motors Ltd incorporated and their first vehicle was made in 1950.
• In 1944 Premier Automobiles Ltd incorporated and in 1947 their first vehicle was produced.
• In 1947 the Government of Bombay accepted a scheme of Bajaj Auto to replace the cycle rickshaw by the auto and assembly started in a couple of years under a license from Piaggio. Manufacturing Programme for the auto and scooter was submitted in 1953 to the Tariff Commission and approved by the Government in 1959.
• In 1953 the Government decreed that only firms having a manufacturing programme should be allowed to operate and mere assemblers of imported CKD units be asked to terminate operations in three years.
• Only seven firms namely Hindustan Motors Limited, Automobile Products of India Limited, Ashok Leyland Limited, Standard Motors Products of India Limited., Premier Automobiles Limited, Mahindra & Mahindra and TELCO received approval. M&M was manufacturing jeeps. Few more companies came up later.
• Government continued with its protectionism policies towards the industry.
• In 1956, Bajaj Tempo Ltd entered the Indian market with a programme of manufacturing Commercial Vehicles, and Simpson for making engines.
1960's
• In sixties 2 and 3 Wheeler segment established a foothold in the industry.
• Escorts and Ideal Jawa entered the field in the beginning of sixties.
• Association of Indian Automobile Manufacturers formally established in 1960.
• Standard Motors Products of India Ltd. moved over to the manufacture of Light Commercial Vehicles in 1965.
1970's
• Major factors affecting the industry's structure were the implementation of MRTP Act, FERA and Oil Shocks of 1973 and 1979.
• During this decade there was not much change in the four wheeler industry except the entry of Sipani Automobiles in the small car market.
• Oil Shock of 1973 quickened the process of dieselization of the Commercial Vehicle segment.
• Three other companies, namely, Kirloskar Ghatge Patil Auto Ltd, Indian Automotive Ltd and Sen & Pandit Engg products Ltd entered the market during 1971-75. They ultimately withdrew in early eighties.
• During the seventies the economy was in bad shape. This and many specific problems affected the Automobile Industry adversely.
1980's - The period of liberalized policy and intense competition
• First phase of liberalisation announced.
• Unfair practices of monopoly, oligopoly etc slowly disappeared.
• Liberalisation of the protectionism policies of the Government.
• Lots of new Foreign Collaborations came up in the eighties. Many companies went in for Japanese collaborations.
• Hindustan Motors Ltd. in collaboration with Isuzu of Japan introduced the Isuzu truck in early eighties.
• ALL entered into collaboration with Leyland Vehicles Ltd. for development of integral buses and with Hino Motors of Japan for the manufacture of W Series of Engines.
• TELCO after the expiry of its contract with Daimler Benz, indigenously improved the same Benz model and introduced it in the market.
• Government approved four new firms in the LCV market, namely, DCM, Eicher, Swaraj and Allwyn. They had collaborations with Japanese companies namely, Toyota, Mitsubishi, Mazda and Nissan respectively.
• In 1983 Maruti Udyog Ltd was started in collaboration with Suzuki, a Japanese firm.
• Other three Car manufacturers namely, Hindustan Motors Ltd., Premier Automobiles Ltd., Standard Motor Production of India Ltd. also introduced new models in the market.
• At the time there were five Passenger Car manufacturers in India - Maruti Udyog Ltd., Hindustan Motors Ltd., Premier Automobiles Ltd., Standard Motor Production of India Ltd. and Sipani Automobiles.
• Ashok Leyland Ltd. and TELCO were strong players in the Commercial Vehicles sector.
• In 1983-84 Bajaj Tempo Ltd. entered into a collaboration with Daimler-Benz of Germany for manufacture of LCVs.
• Important policy changes like relaxation in MRTP and FERA, delicensing of some ancillary products, broad banding of the products, modifications in licensing policy, concessions to private sector (both Indian and Foreign) and foreign collaboration policy etc. resulted in higher growth / better performance of the industry than in the earlier decades.
1990's
• Mass Emission Norms were introduced for in 1991 for Petrol Vehicles and in 1992 for Diesel Vehicles.
• In 1991 new Industrial Policy was announced. It was the death of the License Raj and the Automobile Industry was allowed to expand.
• Further tightening of Emission norms was done in 1996.
• In 1997 National Highway Policy has been announced which will have a positive impact on the Automobile Industry.
• The Indian Automobile market in general and Passenger Cars in particular have witnessed liberalisation. Many multinationals like Daewoo, Peugeot, General Motors, Mercedes-Benz, Honda, Hyundai, Toyota, Volvo and Fiat entered the market.
• Various companies are coming up with state-of-art models of vehicles.
• TELCO has diversified in Passenger Car segment with Indica.
Despite the adverse trend in the growth of the industry, it is resolutely trying to meet the challenges. Various issues of critical importance to the industry are being dealt with forcefully.
Automobile sector in India- an evolution
India had its date with this wonderful vehicle first time in 1898. Then for the next fifty years, cars were imported to satisfy domestic demand. Between 1910 and 20's the automobile industry made a humble beginning by setting up assembly plants in Mumbai, Calcutta and Chennai. The import/assembly of vehicles grew consistently after the 1920's, crossing the 30,000 mark in 1930. In 1946, Premier Automobile Ltd (PAL) earned the distinction of manufacturing the first car in the country by assembling 'Dodge DeSoto' and 'Plymouth' cars at its Kurla plant. Hindustan Motors (HM), which started as a manufacturer of auto components graduated to manufacture cars in 1949. Thanks to the Licence Raj which restricted foreign competitors to enter the Indian car market, Indian roads were ruled by Ambassador Car from Hindustan Motors and the Fiat from Premier Auto Ltd. for many of the initial years.
In 1952, the GOI(GOVERNMENT OF INDIA) set up a tariff commission to devise regulations to develop an indigenous automobile industry in the country. After the commission submitted its recommendations, the GOI asked assembly plants, which did not have plans to set up manufacturing facilities, to shut operations. As a result General Motors, Ford and other assemblers closed operations in the country. The year was 1954 and this decision of the government marked a turning point in the history of the Indian car industry. The GOI also had a say in what type of vehicle each manufacturer should make. Therefore, each product was safely cocooned in its own segment with no fears of any impending competition. Also, no new entrant was allowed even though they had plans of a full-fledged manufacturing program. The restrictive set of policies was chiefly aimed at building an indigenous auto industry. However, the restrictions on foreign collaborations led to limitations on import of technology through technical agreements. In the absence of adequate technology and purchasing power, the car industry grew at a snail's pace in the 60’s. The demand for cars in 1960 was to the tune of 15,714. In the next two decades the number increased to 30,989 i.e. a CAGR of only 3.5 per cent.
The other control imposed on carmakers related to production capacity and distribution. The GOI control even extended to fixation of prices for cars and dealer commissions. This triggered the start of a protracted legal battle in 1969 between some carmakers and GOI. Simply put, the three decades following the establishment of the passenger car industry in India and leading upto the early 1980s, proved to be the 'dark ages' for the consumer, as his choice throughout this period was limited to two models viz. Ambassador and Padmini. It was only in 1985, after the entry of Maruti Udyog, that the car makers were given a free hand to fix the prices of cars, thus, effectively abolishing all controls relating to the pricing of the end product.
In the early 80's, a series of liberal policy changes were announced marking another turning point for the automobile industry. The GOI entered the car business, with a 74% stake in Maruti Udyog Ltd (MUL), the joint venture with Suzuki Motors Ltd of Japan. The very face of the industry was changed for ever in 1983 with the entry of public sector Maruti Udyog in a joint venture with the Suzuki Corporation of Japan. Car sales grew by 42 per cent yoy in 1985 after Maruti 800 was launched. Thanks to MUL car sales registered a CAGR of 18.6 per cent i.e. from 1981 to 1990.
In 1985, the GOI announced its famous broadbanding policy which gave new licenses to broad groups of automotive products like two and four-wheeled vehicles. Though a liberal move, the licensing system was still very much intact. MUL introduced 'Maruti 800' in 1983 providing a complete facelift to the Indian car industry. The car was launched as a "people’s car" with a price tag of Rs 40,000. This changed the industry's profile dramatically. Maruti 800 was well accepted by middle income families in the country and its sales increased from 1,200 units in FY84 to more than 200,000 units in FY99. However in FY2000, this figure came down due to rising competition from Hyundai's 'Santro', Telco's Indica and Daewoo's 'Matiz'.
MUL extended its product range to include vans, multi-utility vehicles (MUVs) and mid-sized cars. The company has single handedly driven the sales of cars in the country cornering around 79.6% market share. With increasing competition from new entrants, this market share has plummeted to almost 62% in FY2000.
A brief 3-year downturn till 1993 and car sales bounced back to register a 17 per cent growth rate in 1997.Since then, the economy slumped into recession and sales of cars remained quite stagnant FY97 and FY99. The Financial year 2000 has, however, been the turnaround year for the Auto industry with the economy looking up. The automobile industry, crossed the half million mark for the first time in FY2000 overwhelmed by newer models from new and existing players had led to an impressive shift from a constrained supply situation to a surplus one. Within the past decade, about 30 models have entered the Indian market with a number of models still awaiting launch. The de-licensing of auto industry in 1993 opened the gates to a virtual flood of international auto makers into the country with an idea to tap the large population. Also the lifting of quantitative restrictions on imports by the recent policy is expected to add up to the flurry of foreign cars in to the country.
The Indian Automobile industry registered one of the strongest growth rates in FY’04. Aided by sustained economic recovery, the industry registered high growth rates in all major segments.
The Indian automobile sector has grown leaps and bounce there are about 20 companies and 100 of variants. There cars avaible from us$5000 to2 million us$. The Indian auto sector has also matured with tata developing cars indigenously. There electric car company REVA and Tata has tied up with MDI of France to develop world’s first car that will run on air. Tata is on verge of creating history as it will be launching world’s cheapest car for 3000.
There are only three cars in India for 1000 people as compared to the other extreme 500 cars for 1000 people in the United States. Goldman Sachs has predicted that India will have the maximum number of cars on the planet by 2050 overtaking the United States.
Porters five forces
Globalization had indeed left its impact on the automobile industry. Now foreign auto dealers were facing lesser restrictions to operate in overseas markets. Michael .E. porter in his book “techniques for analyzing industries and competitors” dealt with five competitive forces that shaped all industries. This helped to analyze the intensity of competition which had an impact on the profitability of an industry. The Indian automobile industry, serve as a standard use case to identify porters five forces. Supply is plagued with excess capacity and demand is linked to economic growth and rise in income levels.
? Barriers to entry: the industry is highly capital intensive in nature, technology, distribution network and availability of auto components. 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 regulate to future safety regulations.
? Substitutes: if substitutes were available offering similar services, the likelihood of buyers switching over to another competitor depended mainly on the cost. The cost of automobiles along with their operating costs was driving customers to look for alternative transportation options.
? Power of suppliers: the industry is highly fragmented in nature. In the last ten years, supply has outstripped demand, as multinationals and domestic players have set up large scale manufacturing facilities to meet future needs. As a result, there is absence of pricing power with manufactures. Competition is expected to increase further, as global majors are planning to enter India either through direct investment or imports.
? Power of customers: very high due to availability of options. Automobile majors increase profitability by selling more units. As number of units sold increases, average cost of selling incremental unit comes down when demand recovers. This is because the industry has a high fixed cost component. His is the key reason why operating efficiency through increased localization of components and maximizing output per employee is of significance.
Segmentation of automobile sector
Indian automobile sector has been divided into segments and they are:
Sub-segment Price range Major players
A-segment Less than 3.5 lakhs Maruti, Tata, Hyundai.
B-segment Between 3.5 to 6.5 lakhs Maruti, Tata, Hyundai, Chevrolet.
C-segment Between 6.5 to 10 lakhs Honda, Hyundai, ford, Chevrolet, Toyota, maruti.
D-segment Between 10 to 20 lakhs Honda, Skoda, ford, Hyundai, Toyota, Maruti.
E-segment More than 20 lakhs Mercedes, BMW, Porsche, Nissan, Toyota, Hyundai.
Indian automobile sector - the growth engine
Indian sector is on expansion plan of each and every automobile manufacturer and making India a global auto hub is well supported by development of auto components industry as well as auto components manufacturer has to walk with hand in hand. The companies present in India are
Manufacturing hub for vehicles
Many big companies have made India their exporting hub and they are taking the benefits of skilled and low cost labour and support of auto components. The companies who have made India their exporting hub are:
A success story- Hyundai
Hyundai motors Indian ltd. This company entered India in 1996 as a wholly owned subsidiary of Hyundai motors, Korea. It is company which took full advantage of Indian economy boom.
The company currently is the 2nd largest player in the passenger car market in the country with a current market share of 20% and a turnover of approximately US $1 billion.
.
Now with the launch of its hyundai verna the sales of company have rocked and its in process of launching other new vehicles this show confidence of company in indian economy which is on boom just you convince the consumer.
Market share
The India automobile sector has a presence across all vehicle segments. The market is growing reasonably over the years. In terms of volume, two wheelers dominate the sector, with 77per cent share, followed by vehicles with 14 percent as shown below:
The market share of passenger vehicles has increased from 1%from last financial year and this shows that Indian customer is ready to convert their two wheelers into 4 wheelers as the disposable will raise the market share of passenger vehicles will also increase.
Growth rate
The Indian automotive industry has been witness to dynamic growth over the years. The Indian passenger car market is projected to reach one million annual car sale by 2007-08. The market is projected to grow at a compounded annual growth rate (CAGR) of 12.3% over the next few years. Growth in the mid-size and premium car segments is expected to outpace the overall market growth. These two segments together are projected to constitute nearly a quarter of the 1 million car market by 2007-08.
The Indian auto sector has been growing since 2002 and it is growinf at CAGR of 16.9% in five years :
Exports
The performance of the automobile industry in exports is also encouraging. commercial vehicle exports increased to an all time high of touching 30,000 growing at a rate of 72% Passenger vehicle exports grew by 29% to 166,413 units.
The Two Wheelers also crossed three hundred thousand mark for the first time clocking around 366,724 numbers and recorded a growth rate of plus 38% over the last year.
Automobile export trends
Category 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07
Passenger
cars 49273 70263 125320 160670 169990 192745
Utility
vehicles 3077 1177 3049 4505 4489 4403
MPV’S 815 565 922 1227 1093 1330
Total pass
vehicles 53165 72005 129291 166402 175572 198478
M&HCVs 4824 5683 8188 13474 14078 18838
LCVs 7046 6617 9244 16466 26522 30928
Total comm.
Vehicle 11870 12255 17432 29940 40600 49766
3 wheelers 15462 43366 68144 66795 76881 143896
scooters 28332 32566 53687 60699 83934 35685
bikes 56880 123725 187287 277123 386054 545887
mopeds 18971 23391 24078 28585 43181 37566
Electric
scooters -------- -------- -------- --------- ---------- ----------
Total 2
wheelers 104183 179682 265052 366407 513169 619138
Grand
total 184680 307308 479919 629544 806222 1011278
Foreign forays
Indian auto companies are moving aggressively into foreign markets. Some cases to point out are:
• Tata motors ltd. Which had tied up with range rover company of uk to sale its car indica under the rover brand which was named as city rover.
• Tata motors has tied up with fiat motors and they are selling fiat vehicles through tatas dealer network and tata is selling its vehicles through fiats dealer network outside India, they have also signed pact for technology transfer.
• Tata motors took over Daewoo’s commercial vehicles plant and now is selling vehicles under Daewoo tata brand.
• Mahindra and mahindra has joint venture with Renault for building their economy sedan in India and sell it through mahindras dealer network.
Foreign players in India
The Indian automobile industry has seen a number of foreign entries since liberalization. The entry of foreign auto majors has made the Indian market more competitive and has also helped to improve the technological sophistication of product on offer.
segments companies
Cars/SUVs
Two wheelers
CVs
Tractors Suzuki Honda
Toyota Ford
GM Hyundai
Fiat skoda
Mitsubishi Daimler-Chrysler
Yamaha
Suzuki
Honda
Volvo
Eicher-Mitsubishi
Tatra
New Holland
ITL-Renault
John-Deere
Steyr
Auto components – a hand in hand in walk
• The Indian auto components industry has grown at 17% CAGR over the last few years to reach a size of around US$ 10 billion in 2005-06
• Market breakup: OEM demand ~ 54%, replacement market ~30%, exports ~16%
Exports of auto components
The exports of auto components is on role as Indian auto components manufacturer are exporting 1800millin $ worth of goods and this number is increasing year by year. From 2000 to 2006 there has been a 25% of growth in exports of auto components.
The major chunk of exports of goods are contributed by exports to countries from continents of usa,Europe,asia,Africa and the middle east.; most of the key auto components in India are very positive about the outlook for exports, and expect about 15 percent of their revenue to come from exports over the next 3-5 years.
the range of automotive goods made in India
Indian automobile manufacturers are well supported by the automotive composition industry. Indian auto companies produce a range of automotive components like engine parts, electricals parts, equipments etc. Ford is leveraging the large, high quality automotive base of India and has made India a component sourcing base. This has helped ford reduce the cost of manufacturing and increase its exports
Growth prospectus of auto component companies
• The Indian auto component industry is well positioned to capitalize on the growth in outsourcing to low cost countries
• Exports would lead the growth in the component industry, which is expected to be around USD 33- 40 bn by 2015
Auto policy
VISION
TO ESTABLISH A GLOBALLY COMPETITIVE
AUTOMOTIVE INDUSTRY IN INDIA
AND
TO DOUBLE ITS CONTRIBUTION
TO THE ECONOMY BY 2010
POLICY OBJECTIVES
This policy aims to promote integrated, phased, enduring and self-sustained growth of the Indian automotive industry. The objectives are to:-
(i) Exalt the sector as a lever of industrial growth and employment and to achieve a high degree of value addition in the country;
(ii) Promote a globally competitive automotive industry and emerge as a global source for auto components;
(iii) Establish an international hub for manufacturing small, affordable passenger cars and a key center for manufacturing Tractors and Two-wheelers in the world;
(iv) Ensure a balanced transition to open trade at a minimal risk to the Indian economy and local industry;
(v) Conduce incessant modernization of the industry and facilitate indigenous design, research and development;
(vi) Steer India's software industry into automotive technology;
(vii) Assist development of vehicles propelled by alternate energy sources;
(viii) Development of domestic safety and environmental standards at par with international standards.
Financial analysis of Indian automobile industry
Maruti udyog limited, a subsidiary of Suzuki motor corporation of Japan, has been the leader Of the Indian car market for about two decades. Its manufacturing plant, located some 25 km south Of new Delhi in gurgaon, has an installed capacity of 3,50,000 units per annum with a capacity to Produce about half a million vehicles.
The company has a portfolio of 11 brands, including maruti 800, omni, premium
Small car Zen estilo, international brands alto and wagonR, off-roader gypsy, mid size esteem,
Luxury car baleno and SX4, the mpv versa, swift and luxury SUV grand vitara.
In recent years, maruti has made major strides towards its goal of becoming Suzuki motor
Corporations R and D hub for asia. IT has introduced upgraded versions of wagonR, Zen
And esteem, completely styled in-house. Marutis contribution as engine of growth of the Indian auto undustry, indeed its impact on the lifestyle and psyche of an entire generation of Indian middle class,
Is widely acknowledged. Its emotional coonect with customer continues.
Maruti tops customer satisfaction again for sixth year in a row according to the J.D power
Asia pacific 2006 India customer satisfaction index study. The company has also ranked highest in
India sales satisfaction study
The company’s quality systems and practices have been rated as a benchmark for automobilr
Industry world-wide by A V Belgium, global auditors for international organizations for strandization.
In keeping with its leadership position, maruti supports safe driving and traffic management through
Mass media messages and a state- of-the art driving training and research institute that it manages for Delhi government.
The companies’ services business including sale and purchase of pre owned cars (true value). Lease and f
Fleet management service for corporate (N2N), maruti insurance and maruti finance are now fully operational.
Maruti udyog limited (MUL) was established in Feb 1981 through an act of parliament, to meet the growing demand of a personal mode of transport caused by the lack of an efficient public transport system.
Suzuki motor company was choosen from seven propesctive partners worldwide. This was
Due not only to their undisputed leadership in small cars but also to their commitment to actively bring
To MUL contemporary technology and Japanese management practices (which had capulted japan
Over USA to the status of top auto manufacturing country in the worl). A license and a Joint venture agreement were signed between govt of India and Suzuki motor company (Now Suzuki Motor Corporation) in Oct 1982.
Maruti udyog spread over a sprawling 297 acres with 3 fully-integrated productions
Facilities, the plan has rolled out over million vehicles. In fact, on average, two vehicles roll out of the factory every minute. And it takes on average, just 14 hours to make a car. More imporatantly, with and incrediable range of 12 models available in 52 variants, theres a mruti Suzuki made here to fit every Car-buyer’s budget. And dream. The company is listed on Bombay stock exchange and national stock Exchange.
MUL is a Board-managed company. Currently the directors on the Board are:
Mr Shinzo Nakanishi, Chairman
Mr Jagdish Khattar, Managing Director
Mr. Tsuneo Kobayashi, Senior Joint Managing Director
Mr Hirofumi Nagao, Joint Managing Director
Mr. Masayuki Osada, Director (Research & Development)
Mr. Shuji Oishi, Director (Marketing & Sales)
Mr Osamu Suzuki, Director
Mr R C Bhargava, Director
Mr. D. S. Brar, Director
Mr. Amal Ganguli, Director
Ms Pallavi Shroff, Director
Mr Manvinder Singh Banga, Director
Objectives
? Modernization of the Indian Automobile Industry.
? Production of vehicles in large volumes
? Production of fuel efficient vehicles.
Vision
Awards
JD Power CSI: 1st Rank, 7 years in a row 2000 – 2006
JD Power SSI: 1st Rank, 3 years in a row 2004 - 2006
Tops TNS TCS Survey in key segments, 5 years in a row 2002 - 2006
Among Top 5 car companies in the Forbes list of the Worlds Most Reputed Companies – Nov 06
Features in Business Today’s annual list of “20 companies to look for in 2007” – Nov 06
The only automobile manufacturer to feature in Business today’s list of “India’s Best 10 Marketers – Nov 06
Ranks 1st for Corporate Social Responsibility by TNS Automotive
Share holding pattern of maruti udyog ltd.
Promoters have major chunk of shares and Suzuki motors is the has the largest holding in the company and decision making power.
PARTICULARS 2006 2007 %’06 %’07
SOURCE OF FUNDS.
Shareholders funds
Capital 1,445 1,445 22.82 1.84
Reserves and surplus 54,285 68,620 865.97 87.43
55,730 70,065 880.27 89.27
MINORITY INTREST 95 - 1.5 -
LOAN FUNDS
Secured loans 882 804 13.93 1.02
Unsecured loans 5,814 5,901 91.83 7.51
6,696 6,705 105.76 8.54
DEFERRED TAX
Deferred tax liabilities 2,033 2,822 32.11 3.59
Deferred tax assets (1,223) (1,110) 19.31 1.41
810 1,712 1.27 2.18
TOTAL 63,331 78,482 100 100
APPLICATION OF FUNDS:
FIXED ASSETS
Gross block 50,137 62,102 791.9 79.12
Less: accumulated depreciation (32,789) (35,106) 517.91 44.73
17,384 26,996 274 34.39
Capital work in progress 3,143 2,416 49.64 3.07
20,491 29,412 32.35 37.47
INVESTMENTS 21,147 35,146 33.39 44.78
C. ASSETS,LOANS & ADVANCES
Inventories 8,894 7,241 140.4 9.22
Sundry debtors 6,680 7,767 105.5 9.89
Cash and bank balance 19,874 14,374 313.9 18.31
Other current assets 4,87 384 7.69 0.48
Loans and advances 6,546 9,290 103.3 11.83
42,481 39,056 670.9 49.76
Less: CURRENT LIABILITIES AND PROVISIONS.
Current liabilities 16,209 20,477 256.02 26.09
Provision 4,579 4,655 72.32 5.93
20,788 25,132 328.35 32.02
Net current assets 21,693 13,924 342.64 17.74
TOTAL 63,331 78,482 100 100
particulars
2006
2007
%06
%07
SOURCE OF FUNDS.
Shareholders funds:-
Capital 1,445 1,445 - -
Reserves and surplus 54,285 68,620 13,795 25.16
55,730 70,065 14,335 25.72
MINORITY INTREST 95 - (95) (100)
LOAN FUNDS:-
Secured loans 882 804 (78) (8.84)
Unsecured loans 5,814 5,901 87 1.49
6,696 6,705 9 0.13
DEFERRED TAX:-
Deferred tax liabilities 2,033 2,822 789 38.8
Deferred tax assets (1,223) (1,110) (2,333) (190)
810 1,712 902 111.3
TOTAL 63,331 78,482 1,515 (23.29)
APPLICATION OF FUNDS:
FIXED ASSETS
Gross block 50,137 62,102 11,965 23.86
Less: accumulated depreciation (32,789) (35,106) (67,895) (207)
17,384 26,996 (14,652) (84.4)
Capital work in progress 3,143 2,416 (727) (23.1)
20,491 29,412 8,921 43.53
INVESTMENTS 21,147 35,146 14,655 71.5
C. ASSETS,LOANS & ADV.
Inventories 8,894 7,241 (1,653) (18.5)
Sundry debtors 6,680 7,767 1,087 (16.27)
Cash and bank balance 19,874 14,374 (5,500) (27.64)
Other current assets 4,87 384 (103) (21.41)
Loans and advances 6,546 9,290 2,744 41.91
42,481 39,056 (3,452) (8.06)
Less: C. LIABILITIES & PROVISIONS
Current liabilities 16,209 20,477 4,268 26.33
Provision 4,579 4,655 76 1.65
20,788 25,132 4,344 20.89
Net current assets 21,693 13,924 (7,769) (35.81)
TOTAL 63,331 78,482 1,5151 23.92
Tata motors
Tata Motors Limited is India's largest automobile company, with revenues of Rs. 32,426 crores (USD 7.2 billion) in 2006-07. It is the leader by far in commercial vehicles in each segment, and the second largest in the passenger vehicles market with winning products in the compact, midsize car and utility vehicle segments. The company is the world's fifth largest medium and heavy commercial vehicle manufacturer, and the world's second largest medium and heavy bus manufacturer.
The company's 22,000 employees are guided by the vision to be "best in the manner in which we operate, best in the products we deliver, and best in our value system and ethics." Tata Motors helps its employees realise their potential through innovative HR practices. The company's goal is to empower and provide employees with dynamic career paths in congruence with corporate objectives. All-round potential development and performance improvement is ensured by regular in-house and external training. The company has won several awards recognising its training programmes.
Established in 1945, Tata Motors' presence indeed cuts across the length and breadth of India. Over 4 million Tata vehicles ply on Indian roads, since the first rolled out in 1954. The company's manufacturing base is spread across India - Jamshedpur (Jharkhand) in the east, Pune (Maharashtra) in the west, and in the north in Lucknow (Uttar Pradesh) and Pantnagar (Uttarakhand). A new plant is being set up in Singur (close to Kolkata in West Bengal) to manufacture the company's small car. The nation-wide dealership, sales, services and spare parts network comprises over 2,000 touch points. The company also has a strong auto finance operation, TML Financial Services Limited, supporting customers to purchase Tata Motors vehicles.
Tata Motors, the first company from India's engineering sector to be listed in the New York Stock Exchange (September 2004), has also emerged as an international automobile company. In 2004, it acquired the Daewoo Commercial Vehicles Company, Korea's second largest truck maker. The rechristened Tata Daewoo Commercial Vehicles Company has launched several new products in the Korean market, while also exporting these products to several international markets. Today two-thirds of heavy commercial vehicle exports out of South Korea are from Tata Daewoo. In 2005, Tata Motors acquired a 21% stake in Hispano Carrocera, a reputed Spanish bus and coach manufacturer, with an option to acquire the remaining stake as well. Hispano's presence is being expanded in other markets. In 2006, it formed a joint venture with the Brazil-based Marcopolo, a global leader in body-building for buses and coaches to manufacture fully-built buses and coaches for India and select international markets. Tata Motors also entered into a joint venture in 2006 with Thonburi Automotive Assembly Plant Company of Thailand to manufacture and market the company's pickup vehicles in Thailand. In 2006, Tata Motors and Fiat Auto formed an industrial joint venture at Ranjangaon (near Pune in Maharashtra, India) to produce both Fiat and Tata cars and Fiat powertrains for the Indian and overseas markets; Tata Motors already distributes and markets Fiat branded cars in India. In 2007, Tata Motors and Fiat Auto entered into an agreement for a Tata license to build a pick-up vehicle bearing the Fiat nameplate at Fiat Group Automobiles' Plant at Córdoba, Argentina. The pick-up will be sold in South and Central America and select European markets.
These linkages will further extend Tata Motors' international footprint, established through exports since 1961. While currently about 18% of its revenues are from international business, the company's objective is to expand its international business, both through organic and inorganic growth routes. The company's commercial and passenger vehicles are already being marketed in several countries in Europe, Africa, the Middle East, Australia, South East Asia and South Asia. It has assembly operations in Malaysia, Kenya, Bangladesh, Ukraine, Russia and Senegal.
The foundation of the company’s growth is a deep understanding of economic stimuli and customer needs, and the ability to translate them into customer-desired offerings through leading edge R&D. The R&D establishment includes a team of 1400 scientists and engineers. The company's Engineering Research Centre was established in 1966, and has facilities in Pune, Jamshedpur and Lucknow. The ERC has enabled pioneering technologies and products. It was Tata Motors, which developed the first indigenously developed Light Commercial Vehicle, India's first Sports Utility Vehicle and, in 1998, the Tata Indica, India's first fully indigenous passenger car. Within two years of launch, Tata Indica became India's largest selling car in its segment. The ERC in Pune, among whose facilities are India's only certified crash-test facility and hemi-anechoic chamber for testing of noise and vibration, has received several awards from the Government of India. Some of the more prominent amongst them are the National Award for Research and Development Efforts in Industry in the Mechanical Engineering Industries sector in 1999, the National Award for Successful Commercialisation of Indigenous Technology by an Industrial Concern in 2000, and the CSIR Diamond Jubilee Technology Award in 2004.
The company set up the Tata Motors European Technical Centre (TMETC) in 2005 in the UK. TMETC is engaged in design engineering and development of products, supporting Tata Motors' skill sets. Tata Daewoo Commercial Vehicle Company and Hispano Carrocera also have R&D establishments at Gunsan in South Korea and Zaragoza in Spain.
The pace of new product development has quickened through an organisation-wide structured New Product Introduction (NPI) process. The process with its formal structure for introducing new vehicles in the market, brings in greater discipline in project execution. The NPI process helped Tata Motors create a new segment, in 2005, by launching the Tata Ace, India’s first indigenously developed mini-truck. The years to come will see the introduction of several other innovative vehicles, all rooted in emerging customer needs. Besides product development, R&D is also focussing on environment-friendly technologies in emissions and alternative fuels.
Through its subsidiaries, the company is engaged in engineering and automotive solutions, construction equipment manufacturing, automotive vehicle components manufacturing and supply chain activities, machine tools and factory automation solutions, high-precision tooling and plastic and electronic components for automotive and computer applications, and automotive retailing and service operations.
True to the tradition of the Tata Group, Tata Motors is committed in letter and spirit to Corporate Social Responsibility. It is a signatory to the United Nations Global Compact, and is engaged in community and social initiatives on labour and environment standards in compliance with the principles of the Global Compact. In accordance with this, it plays an active role in community development, serving rural communities adjacent to its manufacturing locations.
With the foundation of its rich heritage, Tata Motors today is etching a refulgent future.
Board of directors
Mr. Ratan N Tata (Chairman)
Mr. N A Soonawala
Dr. J J Irani
Mr. V R Mehta
Mr. R Gopalakrishnan
Mr. Nusli N Wadia
Mr. S M Palia
Dr. R A Mashelkar
Mr. Ravi Kant
Mr. P P Kadle
Mr. P M Telang
Manufacturing
Tata Motors owes its leading position in the Indian automobile industry to its strong focus on indigenisation. This focus has driven the Company to set up world-class manufacturing units with state-of-the-art technology. Every stage of product evolution-design, development, manufacturing, assembly and quality control, is carried out meticulously. Our manufacturing plants are situated at Jamshedpur in the East, Pune in the West and Lucknow in the North.
Jamshedpur:
Established in1945, the Jamshedpur unit was the company's first unit and is spread over an area of 822 acres. It consists of 4 major divisions - Truck Factory, Engine Factory, Cab & Cowl Factories, and the Novus.
Pune:
The Pune unit is spread over 2 geographical regions- Pimpri (800 acres) and Chinchwad (130 acres). It was established in 1966 and has a Production Engineering Division, which has one of the most versatile tool making facilities in the Indian sub-continent.
Lucknow:
Tata Motors Lucknow is one of the youngest production facilities among all the Tata Motors locations and was established in 1992 to meet the demand for Commercial Vehicles in the Indian market.
Uttarakhand
The company has set up a plant for its mini-truck, Ace, at Pant Nagar in Uttarakhand. The plant will begin commercial production during the course of the year.
Awards
Tata Motors Pune - CVBU has bagged the "Golden Peacock National Quality Award.
Tata Motors chosen as India's Most Trusted Brand in Cars.
Tata Motors' TRAKIT bags silver award for 'Excellence in Design'.
Tata Motors bags National Award for Excellence in Cost Management.
'Car Maker of the Year' Award for Tata Motors.
Tata Indigo - Most Exciting New Car of the Year - ICICI Bank & Overdrive Award.
Tata Indica and Tata Safari EXi win awards.
SHARE holding pattern
The promoters of the company have highest number of shares that is 33% after that the highest number of shares are with foreign investors that is 28% it is one of indias good performing company so foreign investors have keen interest in this and hav bought good chunk of shares this shows that there is trust of the people in this company and its management.
Share holding pattern
Financial statements
Balance sheet as at march 31,2007
Profit and loss account for the year ended march 31,2007
EPS
Maruti udyog Tata motors
53.0 46.0
P/E
Maruti udyog Tata motors
15.0 14.9
RONW
Maruti udyog Tata motors
24.9 27.1
ROCE
Maruti udyog Tata motors
35.2 29.9
EBDITA
Maruti udyog Tata motors
9.4 9.2
OPM
Maruti udyog Tata motors
13.7
NPM
Maruti udyog Tata motors
RM TO SALES
Maruti udyog Tata motors
74.22
SWOT of industry
Strengths of the Automobile Industry
Low labor cost:
India enjoys a comparative cost advantage in labour as compared
to western countries.
Skilled Manpower:
India has vast pool of skilled manpower and qualified
engineers among the largest in the world.
On a scale of 1-10, 1 = low, 10 = high.
Availability of Skilled labour.
Sr. No Country Points.
1 India 8.5
2 Brazil 7.5
3 US 7.4
4 Germany 6.6
5 Mexico 6.6
Availability of Qualified Engineers.
Sr. No Country Points.
1 Germany 7.5
2 India 7.4
3 US 7.2
4 Brazil 6.4
5 Mexico 6.3
.
Weaknesses of the Automobile Industry
Low labor productivity:
Cost advantage in labor wages is nullified by the fact that we have lower labor productivity.
Defect rates high:
We have a higher defect rate about 10 times the world average.
Low Investment in R & D:
The Industry has a very low investment in R & D as compared to their foreign counterparts which will their sustainability in the future.
Not reached critical mass:
Indian companies are in nascent stage and hence not able to cater to the requirements of OEM’s. Our auto- ancillary industry is of 2.4 bn $ while Ford’s outsourcing budget is 86 bn $.
Poor infrastructure :
Poor infrastructure like roads, ports, railways which lead to
higher logistics cost and lower reliability.
Opportunities for the Automobile Industry
Global automobile companies are setting up manufacturing facilities in India. Also, many Indian automobile manufacturers have announced their plans to increase the export of vehicles from India. The year 2002-03 has already seen a significant 65% increase in export volumes during the period April to March. This trend is expected to continue with more global OEMs sourcing vehicles from their Indian plants.
Additionally, the introduction of newer technologies such as Electronic Diesel Control Systems to reduce emission levels, safety devices such as Air Bags, Anti-lock Braking Systems, etc. augur well for the Company and the automotive sector as a whole. These technologies not only offer increased safety for drivers and passengers, but also result in greater comfort and better drivability.
While there exist many opportunities for growth in business, there are also quite a few factors, which act as an impediment.
Technology is available to meet the advanced emission norms using gasoline and diesel fuel; Bosch and many other companies have proved this worldwide. There is no need for the authorities to specify the type of technical solution required for this purpose as long as the end objectives are met.
The spurious and reconditioned goods market, continues to be a worrying factor as it directly affects our market share. The Company on its part has intensified the anti-spurious operations by conducting several raids across the country with the help of local regulatory authorities. Large quantities of spurious and fake products have been seized and legal action has been taken against those indulging in such activities. The Company believes that continued focus and concerted action against spurious activities would improve safety and fuel efficiency of the vehicles and at the same time help in expanding our market share in the Aftermarket. The Company is also continuously educating the users about the benefits of using genuine spares in place of spurious and reconditioned spares.
The lack of any significant change in the labor law reforms also continues to be a matter of concern. It is essential that legal reforms be put in place at the earliest to provide more flexibility in manufacturing operations and enable the industry to quickly adjust the work force in line with fluctuating market conditions.
Threats for the Indian automobile industry
As we move into the new millennium, the Indian Automobile Industry faces some tremendous opportunities and also great challenges. The growth in automobile sales has been impressive for the past ten years since liberalization began. However, with liberalization, the Indian customer has been presented with a wide range of choices in automobiles, to suit every requirement and budget. The market has turned into a buyers market where the customer is being wooed by the manufacturers and the dealers with a range of freebies unheard of before in India. Financing has become so easy that an automobile is within every aspirant's reach.
Competition has meant that manufacturers' margins have been squeezed severely and they are all under pressure to cut costs to be profitable and competitive. Some of the older manufacturers like Premier Automobiles (manufacturers of Premier cars), Automobile products of India (manufacturers of Lambretta scooters) and Ideal Jawa (manufacturers of Jawa and Yezdi motorcycles) have closed shop. Hindustan Motors (manufacturers of Ambassador and Contessa cars) is in trouble due to the declining sales of its car’s, as most customers prefer the newer models available in the market. Even the dominant player Maruti has seen its market share decline rapidly due to its models being old and jaded and is in addition facing labour problems in its plant.
To add to the problems, under the WTO agreement, India will have to permit import of fully built automobiles, which hitherto was not permitted. The foreign manufacturers such as GM, Ford and Daimler Chrysler will almost certainly import vehicles from their large portfolio of models and makes, further segmenting the market into niches, although how competitive they are in terms of price remains to be seen.
The challenge before the industry is to figure out the strategy for survival and growth. It is clear from the picture painted above that the industry will have to increase volumes in each segment to achieve lower cost of manufacture. One way to achieve this will be to go for exports in a big way. Maruti is exporting vehicles, as are Mahindra, Telco, Daimler Chrysler hyundai. The overseas markets will have to be exploited more aggressively, but this will mean the companies will have to invest more in Research and Development of new models with better features.
The second opportunity is to become contract manufacturers for overseas companies. A number of Japanese and Korean companies have been following this strategy very successfully. Hindustan Motors is said to be considering this option. The third opportunity is to overcome the vulnerability of the automobile market to oil prices by designing vehicles, which can offer lower fuel consumption. Recent reports suggest the government is exploring the possibility of introducing Gasohol, which is a mixture of Petrol and Alcohol. Gasohol has been very successful in Brazil. Since Alcohol is a by-product of the Sugar industry (of which India has the worlds largest), this is a very logical step that should have been taken many years ago. Even a small percentage reduction in the consumption of petroleum per vehicle can make a big difference to the balance of payments.
The industry must focus its R&D efforts in line with the global trends, which is to build vehicles that are considerably more fuel efficient and less polluting. With growing awareness among the public about pollution and the effective campaigns carried out by the NGO's, this will increasingly become an important selling feature. It was surprising to see how the industry kept stalling the introduction of pollution norms for vehicles on the pretext that they needed more time to get the technology. Even Maruti despite its foreign affiliation was caught off guard when the Supreme Court finally ruled that all new vehicles should strictly adhere to the Euro II norms.
The inadequacy of road infrastructure in India is well known. This is compounded by the fact that traffic management is very poor or non-existent and the drivers are mostly ill trained and in disciplined. As more vehicles come on the road, this will become a major bottleneck. The industry will need take initiatives firstly to train all drivers in safe driving and proper road discipline and manners. They will also need to assist government agencies in better road design and in building of multilevel parking lots. Training of police personnel in better traffic management and advising them on better equipping themselves to deal with various problems will also have to be done.
In terms of the world averages, India's vehicle density is very low and if we have to achieve those density levels, the industry can look forward to a bright future. However in the industry's interest care must be taken to see that we also achieve the safety and convenience levels of using automobiles.
The threats
External Level :
? Integrating into Global Supply Chains
? WTO - Multilateral trade regimes
? FTA’s (i.e. Bi-lateral Trade)
Country Level :
? Infrastructure
? Cascading effect of Taxes
? Cost of Capital
? Cost of Power
? Inflexible labor laws Inflexible labor laws
Firm Level :
? Export as a “mind set
? QCDDM - equation taken for granted
? Logistics
? Warranties & Liabilities
History of Automobile Industry
The automobile as we know it was not invented in a single day by a single inventor. The history of the automobile reflects an evolution that took place worldwide. It is estimated that over 100,000 patents created the modern automobile. However, we can point to the many firsts that occurred along the way. Starting with the first theoretical plans for a motor vehicle that had been drawn up by both Leonardo da Vinci and Isaac Newton.
In 1769, the very first self-propelled road vehicle was a military tractor invented by French engineer and mechanic, Nicolas Joseph Cugnot (1725 - 1804). Cugnot used a steam engine to power his vehicle, built under his instructions at the Paris Arsenal by mechanic Brezin. It was used by the French Army to haul artillery at a whopping speed of 2 1/2 mph on only three wheels. The vehicle had to stop every ten to fifteen minutes to build up steam power. The steam engine and boiler were separate from the rest of the vehicle and placed in the front (see engraving above). The following year (1770), Cugnot built a steam-powered tricycle that carried four passengers.
In 1771, Cugnot drove one of his road vehicles into a stone wall, making Cugnot the first person to get into a motor vehicle accident. This was the beginning of bad luck for the inventor. After one of Cugnot's patrons died and the other was exiled, the money for Cugnot's road vehicle experiments ended.
Steam engines powered cars by burning fuel that heated water in a boiler, creating steam that expanded and pushed pistons that turned the crankshaft, which then turned the wheels. During the early history of self-propelled vehicles - both road and railroad vehicles were being developed with steam engines. (Cugnot also designed two steam locomotives with engines that never worked well.) Steam engines added so much weight to a vehicle that they proved a poor design for road vehicles; however, steam engines were very successfully used in locomotives. Historians, who accept that early steam-powered road vehicles were automobiles, feel that Nicolas Cugnot was the inventor of the first automobile.
The automotive industry has certain trends it has to follow, just like fashion designers and musical composers. In times of recession and decreasing sales there is less room to take chances and manufacturers are prone to follow the common pattern as a safer bet rather than releasing a controversial product or idea that might or might not be successful. However throughout the automotive industry's history, great innovators have "boldly gone where no man has gone before" to set new trends which have dynamically altered the industry as a whole.
1880's & early 1900's
Abouthundredyearsago
-The first motor car was imported
-Import duty on vehicles was introduced.
-Indian Great Royal Road (Predecessor of the Grand Trunk Road) was conceived.
First car brought in India by a princely ruler in 1898.
Simpson & Co established in 1840.
-They were the first to build a steam car and a steam bus, to attempt motor car manufacture, to build and operate petrol driven passenger service and to import American Chassis in India.
• Railways first came to India in 1850's
• In 1865 Col. Rookes Crompton introduced public transport wagons strapped to and pulled by imported steam road rollers called streamers. The maximum speed of these buses was 33 kms/hr.
• From 1888 Motors Spirit attracted a substantial import duty.
• In 1919 at the end of the war, a large number of military vehicles came on the roads.
• In 1928 assembly of CKD Trucks and Cars was started by the wholly owned Indian subsidiary of American General Motors in Bombay and in 1930-31 by Canadian Ford Motors in Madras, Bombay and Calcutta In 1935 the proposals of Sir M Visvesvaraya to set up an Automobile Industry were disallowed.
• 1942 Hindustan Motors Ltd incorporated and their first vehicle was made in 1950.
• In 1944 Premier Automobiles Ltd incorporated and in 1947 their first vehicle was produced.
• In 1947 the Government of Bombay accepted a scheme of Bajaj Auto to replace the cycle rickshaw by the auto and assembly started in a couple of years under a license from Piaggio. Manufacturing Programme for the auto and scooter was submitted in 1953 to the Tariff Commission and approved by the Government in 1959.
• In 1953 the Government decreed that only firms having a manufacturing programme should be allowed to operate and mere assemblers of imported CKD units be asked to terminate operations in three years.
• Only seven firms namely Hindustan Motors Limited, Automobile Products of India Limited, Ashok Leyland Limited, Standard Motors Products of India Limited., Premier Automobiles Limited, Mahindra & Mahindra and TELCO received approval. M&M was manufacturing jeeps. Few more companies came up later.
• Government continued with its protectionism policies towards the industry.
• In 1956, Bajaj Tempo Ltd entered the Indian market with a programme of manufacturing Commercial Vehicles, and Simpson for making engines.
1960's
• In sixties 2 and 3 Wheeler segment established a foothold in the industry.
• Escorts and Ideal Jawa entered the field in the beginning of sixties.
• Association of Indian Automobile Manufacturers formally established in 1960.
• Standard Motors Products of India Ltd. moved over to the manufacture of Light Commercial Vehicles in 1965.
1970's
• Major factors affecting the industry's structure were the implementation of MRTP Act, FERA and Oil Shocks of 1973 and 1979.
• During this decade there was not much change in the four wheeler industry except the entry of Sipani Automobiles in the small car market.
• Oil Shock of 1973 quickened the process of dieselization of the Commercial Vehicle segment.
• Three other companies, namely, Kirloskar Ghatge Patil Auto Ltd, Indian Automotive Ltd and Sen & Pandit Engg products Ltd entered the market during 1971-75. They ultimately withdrew in early eighties.
• During the seventies the economy was in bad shape. This and many specific problems affected the Automobile Industry adversely.
1980's - The period of liberalized policy and intense competition
• First phase of liberalisation announced.
• Unfair practices of monopoly, oligopoly etc slowly disappeared.
• Liberalisation of the protectionism policies of the Government.
• Lots of new Foreign Collaborations came up in the eighties. Many companies went in for Japanese collaborations.
• Hindustan Motors Ltd. in collaboration with Isuzu of Japan introduced the Isuzu truck in early eighties.
• ALL entered into collaboration with Leyland Vehicles Ltd. for development of integral buses and with Hino Motors of Japan for the manufacture of W Series of Engines.
• TELCO after the expiry of its contract with Daimler Benz, indigenously improved the same Benz model and introduced it in the market.
• Government approved four new firms in the LCV market, namely, DCM, Eicher, Swaraj and Allwyn. They had collaborations with Japanese companies namely, Toyota, Mitsubishi, Mazda and Nissan respectively.
• In 1983 Maruti Udyog Ltd was started in collaboration with Suzuki, a Japanese firm.
• Other three Car manufacturers namely, Hindustan Motors Ltd., Premier Automobiles Ltd., Standard Motor Production of India Ltd. also introduced new models in the market.
• At the time there were five Passenger Car manufacturers in India - Maruti Udyog Ltd., Hindustan Motors Ltd., Premier Automobiles Ltd., Standard Motor Production of India Ltd. and Sipani Automobiles.
• Ashok Leyland Ltd. and TELCO were strong players in the Commercial Vehicles sector.
• In 1983-84 Bajaj Tempo Ltd. entered into a collaboration with Daimler-Benz of Germany for manufacture of LCVs.
• Important policy changes like relaxation in MRTP and FERA, delicensing of some ancillary products, broad banding of the products, modifications in licensing policy, concessions to private sector (both Indian and Foreign) and foreign collaboration policy etc. resulted in higher growth / better performance of the industry than in the earlier decades.
1990's
• Mass Emission Norms were introduced for in 1991 for Petrol Vehicles and in 1992 for Diesel Vehicles.
• In 1991 new Industrial Policy was announced. It was the death of the License Raj and the Automobile Industry was allowed to expand.
• Further tightening of Emission norms was done in 1996.
• In 1997 National Highway Policy has been announced which will have a positive impact on the Automobile Industry.
• The Indian Automobile market in general and Passenger Cars in particular have witnessed liberalisation. Many multinationals like Daewoo, Peugeot, General Motors, Mercedes-Benz, Honda, Hyundai, Toyota, Volvo and Fiat entered the market.
• Various companies are coming up with state-of-art models of vehicles.
• TELCO has diversified in Passenger Car segment with Indica.
Despite the adverse trend in the growth of the industry, it is resolutely trying to meet the challenges. Various issues of critical importance to the industry are being dealt with forcefully.
Automobile sector in India- an evolution
India had its date with this wonderful vehicle first time in 1898. Then for the next fifty years, cars were imported to satisfy domestic demand. Between 1910 and 20's the automobile industry made a humble beginning by setting up assembly plants in Mumbai, Calcutta and Chennai. The import/assembly of vehicles grew consistently after the 1920's, crossing the 30,000 mark in 1930. In 1946, Premier Automobile Ltd (PAL) earned the distinction of manufacturing the first car in the country by assembling 'Dodge DeSoto' and 'Plymouth' cars at its Kurla plant. Hindustan Motors (HM), which started as a manufacturer of auto components graduated to manufacture cars in 1949. Thanks to the Licence Raj which restricted foreign competitors to enter the Indian car market, Indian roads were ruled by Ambassador Car from Hindustan Motors and the Fiat from Premier Auto Ltd. for many of the initial years.
In 1952, the GOI(GOVERNMENT OF INDIA) set up a tariff commission to devise regulations to develop an indigenous automobile industry in the country. After the commission submitted its recommendations, the GOI asked assembly plants, which did not have plans to set up manufacturing facilities, to shut operations. As a result General Motors, Ford and other assemblers closed operations in the country. The year was 1954 and this decision of the government marked a turning point in the history of the Indian car industry. The GOI also had a say in what type of vehicle each manufacturer should make. Therefore, each product was safely cocooned in its own segment with no fears of any impending competition. Also, no new entrant was allowed even though they had plans of a full-fledged manufacturing program. The restrictive set of policies was chiefly aimed at building an indigenous auto industry. However, the restrictions on foreign collaborations led to limitations on import of technology through technical agreements. In the absence of adequate technology and purchasing power, the car industry grew at a snail's pace in the 60’s. The demand for cars in 1960 was to the tune of 15,714. In the next two decades the number increased to 30,989 i.e. a CAGR of only 3.5 per cent.
The other control imposed on carmakers related to production capacity and distribution. The GOI control even extended to fixation of prices for cars and dealer commissions. This triggered the start of a protracted legal battle in 1969 between some carmakers and GOI. Simply put, the three decades following the establishment of the passenger car industry in India and leading upto the early 1980s, proved to be the 'dark ages' for the consumer, as his choice throughout this period was limited to two models viz. Ambassador and Padmini. It was only in 1985, after the entry of Maruti Udyog, that the car makers were given a free hand to fix the prices of cars, thus, effectively abolishing all controls relating to the pricing of the end product.
In the early 80's, a series of liberal policy changes were announced marking another turning point for the automobile industry. The GOI entered the car business, with a 74% stake in Maruti Udyog Ltd (MUL), the joint venture with Suzuki Motors Ltd of Japan. The very face of the industry was changed for ever in 1983 with the entry of public sector Maruti Udyog in a joint venture with the Suzuki Corporation of Japan. Car sales grew by 42 per cent yoy in 1985 after Maruti 800 was launched. Thanks to MUL car sales registered a CAGR of 18.6 per cent i.e. from 1981 to 1990.
In 1985, the GOI announced its famous broadbanding policy which gave new licenses to broad groups of automotive products like two and four-wheeled vehicles. Though a liberal move, the licensing system was still very much intact. MUL introduced 'Maruti 800' in 1983 providing a complete facelift to the Indian car industry. The car was launched as a "people’s car" with a price tag of Rs 40,000. This changed the industry's profile dramatically. Maruti 800 was well accepted by middle income families in the country and its sales increased from 1,200 units in FY84 to more than 200,000 units in FY99. However in FY2000, this figure came down due to rising competition from Hyundai's 'Santro', Telco's Indica and Daewoo's 'Matiz'.
MUL extended its product range to include vans, multi-utility vehicles (MUVs) and mid-sized cars. The company has single handedly driven the sales of cars in the country cornering around 79.6% market share. With increasing competition from new entrants, this market share has plummeted to almost 62% in FY2000.
A brief 3-year downturn till 1993 and car sales bounced back to register a 17 per cent growth rate in 1997.Since then, the economy slumped into recession and sales of cars remained quite stagnant FY97 and FY99. The Financial year 2000 has, however, been the turnaround year for the Auto industry with the economy looking up. The automobile industry, crossed the half million mark for the first time in FY2000 overwhelmed by newer models from new and existing players had led to an impressive shift from a constrained supply situation to a surplus one. Within the past decade, about 30 models have entered the Indian market with a number of models still awaiting launch. The de-licensing of auto industry in 1993 opened the gates to a virtual flood of international auto makers into the country with an idea to tap the large population. Also the lifting of quantitative restrictions on imports by the recent policy is expected to add up to the flurry of foreign cars in to the country.
The Indian Automobile industry registered one of the strongest growth rates in FY’04. Aided by sustained economic recovery, the industry registered high growth rates in all major segments.
The Indian automobile sector has grown leaps and bounce there are about 20 companies and 100 of variants. There cars avaible from us$5000 to2 million us$. The Indian auto sector has also matured with tata developing cars indigenously. There electric car company REVA and Tata has tied up with MDI of France to develop world’s first car that will run on air. Tata is on verge of creating history as it will be launching world’s cheapest car for 3000.
There are only three cars in India for 1000 people as compared to the other extreme 500 cars for 1000 people in the United States. Goldman Sachs has predicted that India will have the maximum number of cars on the planet by 2050 overtaking the United States.
Porters five forces
Globalization had indeed left its impact on the automobile industry. Now foreign auto dealers were facing lesser restrictions to operate in overseas markets. Michael .E. porter in his book “techniques for analyzing industries and competitors” dealt with five competitive forces that shaped all industries. This helped to analyze the intensity of competition which had an impact on the profitability of an industry. The Indian automobile industry, serve as a standard use case to identify porters five forces. Supply is plagued with excess capacity and demand is linked to economic growth and rise in income levels.
? Barriers to entry: the industry is highly capital intensive in nature, technology, distribution network and availability of auto components. 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 regulate to future safety regulations.
? Substitutes: if substitutes were available offering similar services, the likelihood of buyers switching over to another competitor depended mainly on the cost. The cost of automobiles along with their operating costs was driving customers to look for alternative transportation options.
? Power of suppliers: the industry is highly fragmented in nature. In the last ten years, supply has outstripped demand, as multinationals and domestic players have set up large scale manufacturing facilities to meet future needs. As a result, there is absence of pricing power with manufactures. Competition is expected to increase further, as global majors are planning to enter India either through direct investment or imports.
? Power of customers: very high due to availability of options. Automobile majors increase profitability by selling more units. As number of units sold increases, average cost of selling incremental unit comes down when demand recovers. This is because the industry has a high fixed cost component. His is the key reason why operating efficiency through increased localization of components and maximizing output per employee is of significance.
Segmentation of automobile sector
Indian automobile sector has been divided into segments and they are:
Sub-segment Price range Major players
A-segment Less than 3.5 lakhs Maruti, Tata, Hyundai.
B-segment Between 3.5 to 6.5 lakhs Maruti, Tata, Hyundai, Chevrolet.
C-segment Between 6.5 to 10 lakhs Honda, Hyundai, ford, Chevrolet, Toyota, maruti.
D-segment Between 10 to 20 lakhs Honda, Skoda, ford, Hyundai, Toyota, Maruti.
E-segment More than 20 lakhs Mercedes, BMW, Porsche, Nissan, Toyota, Hyundai.
Indian automobile sector - the growth engine
Indian sector is on expansion plan of each and every automobile manufacturer and making India a global auto hub is well supported by development of auto components industry as well as auto components manufacturer has to walk with hand in hand. The companies present in India are
Manufacturing hub for vehicles
Many big companies have made India their exporting hub and they are taking the benefits of skilled and low cost labour and support of auto components. The companies who have made India their exporting hub are:
A success story- Hyundai
Hyundai motors Indian ltd. This company entered India in 1996 as a wholly owned subsidiary of Hyundai motors, Korea. It is company which took full advantage of Indian economy boom.
The company currently is the 2nd largest player in the passenger car market in the country with a current market share of 20% and a turnover of approximately US $1 billion.
.
Now with the launch of its hyundai verna the sales of company have rocked and its in process of launching other new vehicles this show confidence of company in indian economy which is on boom just you convince the consumer.
Market share
The India automobile sector has a presence across all vehicle segments. The market is growing reasonably over the years. In terms of volume, two wheelers dominate the sector, with 77per cent share, followed by vehicles with 14 percent as shown below:
The market share of passenger vehicles has increased from 1%from last financial year and this shows that Indian customer is ready to convert their two wheelers into 4 wheelers as the disposable will raise the market share of passenger vehicles will also increase.
Growth rate
The Indian automotive industry has been witness to dynamic growth over the years. The Indian passenger car market is projected to reach one million annual car sale by 2007-08. The market is projected to grow at a compounded annual growth rate (CAGR) of 12.3% over the next few years. Growth in the mid-size and premium car segments is expected to outpace the overall market growth. These two segments together are projected to constitute nearly a quarter of the 1 million car market by 2007-08.
The Indian auto sector has been growing since 2002 and it is growinf at CAGR of 16.9% in five years :
Exports
The performance of the automobile industry in exports is also encouraging. commercial vehicle exports increased to an all time high of touching 30,000 growing at a rate of 72% Passenger vehicle exports grew by 29% to 166,413 units.
The Two Wheelers also crossed three hundred thousand mark for the first time clocking around 366,724 numbers and recorded a growth rate of plus 38% over the last year.
Automobile export trends
Category 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07
Passenger
cars 49273 70263 125320 160670 169990 192745
Utility
vehicles 3077 1177 3049 4505 4489 4403
MPV’S 815 565 922 1227 1093 1330
Total pass
vehicles 53165 72005 129291 166402 175572 198478
M&HCVs 4824 5683 8188 13474 14078 18838
LCVs 7046 6617 9244 16466 26522 30928
Total comm.
Vehicle 11870 12255 17432 29940 40600 49766
3 wheelers 15462 43366 68144 66795 76881 143896
scooters 28332 32566 53687 60699 83934 35685
bikes 56880 123725 187287 277123 386054 545887
mopeds 18971 23391 24078 28585 43181 37566
Electric
scooters -------- -------- -------- --------- ---------- ----------
Total 2
wheelers 104183 179682 265052 366407 513169 619138
Grand
total 184680 307308 479919 629544 806222 1011278
Foreign forays
Indian auto companies are moving aggressively into foreign markets. Some cases to point out are:
• Tata motors ltd. Which had tied up with range rover company of uk to sale its car indica under the rover brand which was named as city rover.
• Tata motors has tied up with fiat motors and they are selling fiat vehicles through tatas dealer network and tata is selling its vehicles through fiats dealer network outside India, they have also signed pact for technology transfer.
• Tata motors took over Daewoo’s commercial vehicles plant and now is selling vehicles under Daewoo tata brand.
• Mahindra and mahindra has joint venture with Renault for building their economy sedan in India and sell it through mahindras dealer network.
Foreign players in India
The Indian automobile industry has seen a number of foreign entries since liberalization. The entry of foreign auto majors has made the Indian market more competitive and has also helped to improve the technological sophistication of product on offer.
segments companies
Cars/SUVs
Two wheelers
CVs
Tractors Suzuki Honda
Toyota Ford
GM Hyundai
Fiat skoda
Mitsubishi Daimler-Chrysler
Yamaha
Suzuki
Honda
Volvo
Eicher-Mitsubishi
Tatra
New Holland
ITL-Renault
John-Deere
Steyr
Auto components – a hand in hand in walk
• The Indian auto components industry has grown at 17% CAGR over the last few years to reach a size of around US$ 10 billion in 2005-06
• Market breakup: OEM demand ~ 54%, replacement market ~30%, exports ~16%
Exports of auto components
The exports of auto components is on role as Indian auto components manufacturer are exporting 1800millin $ worth of goods and this number is increasing year by year. From 2000 to 2006 there has been a 25% of growth in exports of auto components.
The major chunk of exports of goods are contributed by exports to countries from continents of usa,Europe,asia,Africa and the middle east.; most of the key auto components in India are very positive about the outlook for exports, and expect about 15 percent of their revenue to come from exports over the next 3-5 years.
the range of automotive goods made in India
Indian automobile manufacturers are well supported by the automotive composition industry. Indian auto companies produce a range of automotive components like engine parts, electricals parts, equipments etc. Ford is leveraging the large, high quality automotive base of India and has made India a component sourcing base. This has helped ford reduce the cost of manufacturing and increase its exports
Growth prospectus of auto component companies
• The Indian auto component industry is well positioned to capitalize on the growth in outsourcing to low cost countries
• Exports would lead the growth in the component industry, which is expected to be around USD 33- 40 bn by 2015
Auto policy
VISION
TO ESTABLISH A GLOBALLY COMPETITIVE
AUTOMOTIVE INDUSTRY IN INDIA
AND
TO DOUBLE ITS CONTRIBUTION
TO THE ECONOMY BY 2010
POLICY OBJECTIVES
This policy aims to promote integrated, phased, enduring and self-sustained growth of the Indian automotive industry. The objectives are to:-
(i) Exalt the sector as a lever of industrial growth and employment and to achieve a high degree of value addition in the country;
(ii) Promote a globally competitive automotive industry and emerge as a global source for auto components;
(iii) Establish an international hub for manufacturing small, affordable passenger cars and a key center for manufacturing Tractors and Two-wheelers in the world;
(iv) Ensure a balanced transition to open trade at a minimal risk to the Indian economy and local industry;
(v) Conduce incessant modernization of the industry and facilitate indigenous design, research and development;
(vi) Steer India's software industry into automotive technology;
(vii) Assist development of vehicles propelled by alternate energy sources;
(viii) Development of domestic safety and environmental standards at par with international standards.
Financial analysis of Indian automobile industry
Maruti udyog limited, a subsidiary of Suzuki motor corporation of Japan, has been the leader Of the Indian car market for about two decades. Its manufacturing plant, located some 25 km south Of new Delhi in gurgaon, has an installed capacity of 3,50,000 units per annum with a capacity to Produce about half a million vehicles.
The company has a portfolio of 11 brands, including maruti 800, omni, premium
Small car Zen estilo, international brands alto and wagonR, off-roader gypsy, mid size esteem,
Luxury car baleno and SX4, the mpv versa, swift and luxury SUV grand vitara.
In recent years, maruti has made major strides towards its goal of becoming Suzuki motor
Corporations R and D hub for asia. IT has introduced upgraded versions of wagonR, Zen
And esteem, completely styled in-house. Marutis contribution as engine of growth of the Indian auto undustry, indeed its impact on the lifestyle and psyche of an entire generation of Indian middle class,
Is widely acknowledged. Its emotional coonect with customer continues.
Maruti tops customer satisfaction again for sixth year in a row according to the J.D power
Asia pacific 2006 India customer satisfaction index study. The company has also ranked highest in
India sales satisfaction study
The company’s quality systems and practices have been rated as a benchmark for automobilr
Industry world-wide by A V Belgium, global auditors for international organizations for strandization.
In keeping with its leadership position, maruti supports safe driving and traffic management through
Mass media messages and a state- of-the art driving training and research institute that it manages for Delhi government.
The companies’ services business including sale and purchase of pre owned cars (true value). Lease and f
Fleet management service for corporate (N2N), maruti insurance and maruti finance are now fully operational.
Maruti udyog limited (MUL) was established in Feb 1981 through an act of parliament, to meet the growing demand of a personal mode of transport caused by the lack of an efficient public transport system.
Suzuki motor company was choosen from seven propesctive partners worldwide. This was
Due not only to their undisputed leadership in small cars but also to their commitment to actively bring
To MUL contemporary technology and Japanese management practices (which had capulted japan
Over USA to the status of top auto manufacturing country in the worl). A license and a Joint venture agreement were signed between govt of India and Suzuki motor company (Now Suzuki Motor Corporation) in Oct 1982.
Maruti udyog spread over a sprawling 297 acres with 3 fully-integrated productions
Facilities, the plan has rolled out over million vehicles. In fact, on average, two vehicles roll out of the factory every minute. And it takes on average, just 14 hours to make a car. More imporatantly, with and incrediable range of 12 models available in 52 variants, theres a mruti Suzuki made here to fit every Car-buyer’s budget. And dream. The company is listed on Bombay stock exchange and national stock Exchange.
MUL is a Board-managed company. Currently the directors on the Board are:
Mr Shinzo Nakanishi, Chairman
Mr Jagdish Khattar, Managing Director
Mr. Tsuneo Kobayashi, Senior Joint Managing Director
Mr Hirofumi Nagao, Joint Managing Director
Mr. Masayuki Osada, Director (Research & Development)
Mr. Shuji Oishi, Director (Marketing & Sales)
Mr Osamu Suzuki, Director
Mr R C Bhargava, Director
Mr. D. S. Brar, Director
Mr. Amal Ganguli, Director
Ms Pallavi Shroff, Director
Mr Manvinder Singh Banga, Director
Objectives
? Modernization of the Indian Automobile Industry.
? Production of vehicles in large volumes
? Production of fuel efficient vehicles.
Vision
Awards
JD Power CSI: 1st Rank, 7 years in a row 2000 – 2006
JD Power SSI: 1st Rank, 3 years in a row 2004 - 2006
Tops TNS TCS Survey in key segments, 5 years in a row 2002 - 2006
Among Top 5 car companies in the Forbes list of the Worlds Most Reputed Companies – Nov 06
Features in Business Today’s annual list of “20 companies to look for in 2007” – Nov 06
The only automobile manufacturer to feature in Business today’s list of “India’s Best 10 Marketers – Nov 06
Ranks 1st for Corporate Social Responsibility by TNS Automotive
Share holding pattern of maruti udyog ltd.
Promoters have major chunk of shares and Suzuki motors is the has the largest holding in the company and decision making power.
PARTICULARS 2006 2007 %’06 %’07
SOURCE OF FUNDS.
Shareholders funds
Capital 1,445 1,445 22.82 1.84
Reserves and surplus 54,285 68,620 865.97 87.43
55,730 70,065 880.27 89.27
MINORITY INTREST 95 - 1.5 -
LOAN FUNDS
Secured loans 882 804 13.93 1.02
Unsecured loans 5,814 5,901 91.83 7.51
6,696 6,705 105.76 8.54
DEFERRED TAX
Deferred tax liabilities 2,033 2,822 32.11 3.59
Deferred tax assets (1,223) (1,110) 19.31 1.41
810 1,712 1.27 2.18
TOTAL 63,331 78,482 100 100
APPLICATION OF FUNDS:
FIXED ASSETS
Gross block 50,137 62,102 791.9 79.12
Less: accumulated depreciation (32,789) (35,106) 517.91 44.73
17,384 26,996 274 34.39
Capital work in progress 3,143 2,416 49.64 3.07
20,491 29,412 32.35 37.47
INVESTMENTS 21,147 35,146 33.39 44.78
C. ASSETS,LOANS & ADVANCES
Inventories 8,894 7,241 140.4 9.22
Sundry debtors 6,680 7,767 105.5 9.89
Cash and bank balance 19,874 14,374 313.9 18.31
Other current assets 4,87 384 7.69 0.48
Loans and advances 6,546 9,290 103.3 11.83
42,481 39,056 670.9 49.76
Less: CURRENT LIABILITIES AND PROVISIONS.
Current liabilities 16,209 20,477 256.02 26.09
Provision 4,579 4,655 72.32 5.93
20,788 25,132 328.35 32.02
Net current assets 21,693 13,924 342.64 17.74
TOTAL 63,331 78,482 100 100
particulars
2006
2007
%06
%07
SOURCE OF FUNDS.
Shareholders funds:-
Capital 1,445 1,445 - -
Reserves and surplus 54,285 68,620 13,795 25.16
55,730 70,065 14,335 25.72
MINORITY INTREST 95 - (95) (100)
LOAN FUNDS:-
Secured loans 882 804 (78) (8.84)
Unsecured loans 5,814 5,901 87 1.49
6,696 6,705 9 0.13
DEFERRED TAX:-
Deferred tax liabilities 2,033 2,822 789 38.8
Deferred tax assets (1,223) (1,110) (2,333) (190)
810 1,712 902 111.3
TOTAL 63,331 78,482 1,515 (23.29)
APPLICATION OF FUNDS:
FIXED ASSETS
Gross block 50,137 62,102 11,965 23.86
Less: accumulated depreciation (32,789) (35,106) (67,895) (207)
17,384 26,996 (14,652) (84.4)
Capital work in progress 3,143 2,416 (727) (23.1)
20,491 29,412 8,921 43.53
INVESTMENTS 21,147 35,146 14,655 71.5
C. ASSETS,LOANS & ADV.
Inventories 8,894 7,241 (1,653) (18.5)
Sundry debtors 6,680 7,767 1,087 (16.27)
Cash and bank balance 19,874 14,374 (5,500) (27.64)
Other current assets 4,87 384 (103) (21.41)
Loans and advances 6,546 9,290 2,744 41.91
42,481 39,056 (3,452) (8.06)
Less: C. LIABILITIES & PROVISIONS
Current liabilities 16,209 20,477 4,268 26.33
Provision 4,579 4,655 76 1.65
20,788 25,132 4,344 20.89
Net current assets 21,693 13,924 (7,769) (35.81)
TOTAL 63,331 78,482 1,5151 23.92
Tata motors
Tata Motors Limited is India's largest automobile company, with revenues of Rs. 32,426 crores (USD 7.2 billion) in 2006-07. It is the leader by far in commercial vehicles in each segment, and the second largest in the passenger vehicles market with winning products in the compact, midsize car and utility vehicle segments. The company is the world's fifth largest medium and heavy commercial vehicle manufacturer, and the world's second largest medium and heavy bus manufacturer.
The company's 22,000 employees are guided by the vision to be "best in the manner in which we operate, best in the products we deliver, and best in our value system and ethics." Tata Motors helps its employees realise their potential through innovative HR practices. The company's goal is to empower and provide employees with dynamic career paths in congruence with corporate objectives. All-round potential development and performance improvement is ensured by regular in-house and external training. The company has won several awards recognising its training programmes.
Established in 1945, Tata Motors' presence indeed cuts across the length and breadth of India. Over 4 million Tata vehicles ply on Indian roads, since the first rolled out in 1954. The company's manufacturing base is spread across India - Jamshedpur (Jharkhand) in the east, Pune (Maharashtra) in the west, and in the north in Lucknow (Uttar Pradesh) and Pantnagar (Uttarakhand). A new plant is being set up in Singur (close to Kolkata in West Bengal) to manufacture the company's small car. The nation-wide dealership, sales, services and spare parts network comprises over 2,000 touch points. The company also has a strong auto finance operation, TML Financial Services Limited, supporting customers to purchase Tata Motors vehicles.
Tata Motors, the first company from India's engineering sector to be listed in the New York Stock Exchange (September 2004), has also emerged as an international automobile company. In 2004, it acquired the Daewoo Commercial Vehicles Company, Korea's second largest truck maker. The rechristened Tata Daewoo Commercial Vehicles Company has launched several new products in the Korean market, while also exporting these products to several international markets. Today two-thirds of heavy commercial vehicle exports out of South Korea are from Tata Daewoo. In 2005, Tata Motors acquired a 21% stake in Hispano Carrocera, a reputed Spanish bus and coach manufacturer, with an option to acquire the remaining stake as well. Hispano's presence is being expanded in other markets. In 2006, it formed a joint venture with the Brazil-based Marcopolo, a global leader in body-building for buses and coaches to manufacture fully-built buses and coaches for India and select international markets. Tata Motors also entered into a joint venture in 2006 with Thonburi Automotive Assembly Plant Company of Thailand to manufacture and market the company's pickup vehicles in Thailand. In 2006, Tata Motors and Fiat Auto formed an industrial joint venture at Ranjangaon (near Pune in Maharashtra, India) to produce both Fiat and Tata cars and Fiat powertrains for the Indian and overseas markets; Tata Motors already distributes and markets Fiat branded cars in India. In 2007, Tata Motors and Fiat Auto entered into an agreement for a Tata license to build a pick-up vehicle bearing the Fiat nameplate at Fiat Group Automobiles' Plant at Córdoba, Argentina. The pick-up will be sold in South and Central America and select European markets.
These linkages will further extend Tata Motors' international footprint, established through exports since 1961. While currently about 18% of its revenues are from international business, the company's objective is to expand its international business, both through organic and inorganic growth routes. The company's commercial and passenger vehicles are already being marketed in several countries in Europe, Africa, the Middle East, Australia, South East Asia and South Asia. It has assembly operations in Malaysia, Kenya, Bangladesh, Ukraine, Russia and Senegal.
The foundation of the company’s growth is a deep understanding of economic stimuli and customer needs, and the ability to translate them into customer-desired offerings through leading edge R&D. The R&D establishment includes a team of 1400 scientists and engineers. The company's Engineering Research Centre was established in 1966, and has facilities in Pune, Jamshedpur and Lucknow. The ERC has enabled pioneering technologies and products. It was Tata Motors, which developed the first indigenously developed Light Commercial Vehicle, India's first Sports Utility Vehicle and, in 1998, the Tata Indica, India's first fully indigenous passenger car. Within two years of launch, Tata Indica became India's largest selling car in its segment. The ERC in Pune, among whose facilities are India's only certified crash-test facility and hemi-anechoic chamber for testing of noise and vibration, has received several awards from the Government of India. Some of the more prominent amongst them are the National Award for Research and Development Efforts in Industry in the Mechanical Engineering Industries sector in 1999, the National Award for Successful Commercialisation of Indigenous Technology by an Industrial Concern in 2000, and the CSIR Diamond Jubilee Technology Award in 2004.
The company set up the Tata Motors European Technical Centre (TMETC) in 2005 in the UK. TMETC is engaged in design engineering and development of products, supporting Tata Motors' skill sets. Tata Daewoo Commercial Vehicle Company and Hispano Carrocera also have R&D establishments at Gunsan in South Korea and Zaragoza in Spain.
The pace of new product development has quickened through an organisation-wide structured New Product Introduction (NPI) process. The process with its formal structure for introducing new vehicles in the market, brings in greater discipline in project execution. The NPI process helped Tata Motors create a new segment, in 2005, by launching the Tata Ace, India’s first indigenously developed mini-truck. The years to come will see the introduction of several other innovative vehicles, all rooted in emerging customer needs. Besides product development, R&D is also focussing on environment-friendly technologies in emissions and alternative fuels.
Through its subsidiaries, the company is engaged in engineering and automotive solutions, construction equipment manufacturing, automotive vehicle components manufacturing and supply chain activities, machine tools and factory automation solutions, high-precision tooling and plastic and electronic components for automotive and computer applications, and automotive retailing and service operations.
True to the tradition of the Tata Group, Tata Motors is committed in letter and spirit to Corporate Social Responsibility. It is a signatory to the United Nations Global Compact, and is engaged in community and social initiatives on labour and environment standards in compliance with the principles of the Global Compact. In accordance with this, it plays an active role in community development, serving rural communities adjacent to its manufacturing locations.
With the foundation of its rich heritage, Tata Motors today is etching a refulgent future.
Board of directors
Mr. Ratan N Tata (Chairman)
Mr. N A Soonawala
Dr. J J Irani
Mr. V R Mehta
Mr. R Gopalakrishnan
Mr. Nusli N Wadia
Mr. S M Palia
Dr. R A Mashelkar
Mr. Ravi Kant
Mr. P P Kadle
Mr. P M Telang
Manufacturing
Tata Motors owes its leading position in the Indian automobile industry to its strong focus on indigenisation. This focus has driven the Company to set up world-class manufacturing units with state-of-the-art technology. Every stage of product evolution-design, development, manufacturing, assembly and quality control, is carried out meticulously. Our manufacturing plants are situated at Jamshedpur in the East, Pune in the West and Lucknow in the North.
Jamshedpur:
Established in1945, the Jamshedpur unit was the company's first unit and is spread over an area of 822 acres. It consists of 4 major divisions - Truck Factory, Engine Factory, Cab & Cowl Factories, and the Novus.
Pune:
The Pune unit is spread over 2 geographical regions- Pimpri (800 acres) and Chinchwad (130 acres). It was established in 1966 and has a Production Engineering Division, which has one of the most versatile tool making facilities in the Indian sub-continent.
Lucknow:
Tata Motors Lucknow is one of the youngest production facilities among all the Tata Motors locations and was established in 1992 to meet the demand for Commercial Vehicles in the Indian market.
Uttarakhand
The company has set up a plant for its mini-truck, Ace, at Pant Nagar in Uttarakhand. The plant will begin commercial production during the course of the year.
Awards
Tata Motors Pune - CVBU has bagged the "Golden Peacock National Quality Award.
Tata Motors chosen as India's Most Trusted Brand in Cars.
Tata Motors' TRAKIT bags silver award for 'Excellence in Design'.
Tata Motors bags National Award for Excellence in Cost Management.
'Car Maker of the Year' Award for Tata Motors.
Tata Indigo - Most Exciting New Car of the Year - ICICI Bank & Overdrive Award.
Tata Indica and Tata Safari EXi win awards.
SHARE holding pattern
The promoters of the company have highest number of shares that is 33% after that the highest number of shares are with foreign investors that is 28% it is one of indias good performing company so foreign investors have keen interest in this and hav bought good chunk of shares this shows that there is trust of the people in this company and its management.
Share holding pattern
Financial statements
Balance sheet as at march 31,2007
Profit and loss account for the year ended march 31,2007
EPS
Maruti udyog Tata motors
53.0 46.0
P/E
Maruti udyog Tata motors
15.0 14.9
RONW
Maruti udyog Tata motors
24.9 27.1
ROCE
Maruti udyog Tata motors
35.2 29.9
EBDITA
Maruti udyog Tata motors
9.4 9.2
OPM
Maruti udyog Tata motors
13.7
NPM
Maruti udyog Tata motors
RM TO SALES
Maruti udyog Tata motors
74.22
SWOT of industry
Strengths of the Automobile Industry
Low labor cost:
India enjoys a comparative cost advantage in labour as compared
to western countries.
Skilled Manpower:
India has vast pool of skilled manpower and qualified
engineers among the largest in the world.
On a scale of 1-10, 1 = low, 10 = high.
Availability of Skilled labour.
Sr. No Country Points.
1 India 8.5
2 Brazil 7.5
3 US 7.4
4 Germany 6.6
5 Mexico 6.6
Availability of Qualified Engineers.
Sr. No Country Points.
1 Germany 7.5
2 India 7.4
3 US 7.2
4 Brazil 6.4
5 Mexico 6.3
.
Weaknesses of the Automobile Industry
Low labor productivity:
Cost advantage in labor wages is nullified by the fact that we have lower labor productivity.
Defect rates high:
We have a higher defect rate about 10 times the world average.
Low Investment in R & D:
The Industry has a very low investment in R & D as compared to their foreign counterparts which will their sustainability in the future.
Not reached critical mass:
Indian companies are in nascent stage and hence not able to cater to the requirements of OEM’s. Our auto- ancillary industry is of 2.4 bn $ while Ford’s outsourcing budget is 86 bn $.
Poor infrastructure :
Poor infrastructure like roads, ports, railways which lead to
higher logistics cost and lower reliability.
Opportunities for the Automobile Industry
Global automobile companies are setting up manufacturing facilities in India. Also, many Indian automobile manufacturers have announced their plans to increase the export of vehicles from India. The year 2002-03 has already seen a significant 65% increase in export volumes during the period April to March. This trend is expected to continue with more global OEMs sourcing vehicles from their Indian plants.
Additionally, the introduction of newer technologies such as Electronic Diesel Control Systems to reduce emission levels, safety devices such as Air Bags, Anti-lock Braking Systems, etc. augur well for the Company and the automotive sector as a whole. These technologies not only offer increased safety for drivers and passengers, but also result in greater comfort and better drivability.
While there exist many opportunities for growth in business, there are also quite a few factors, which act as an impediment.
Technology is available to meet the advanced emission norms using gasoline and diesel fuel; Bosch and many other companies have proved this worldwide. There is no need for the authorities to specify the type of technical solution required for this purpose as long as the end objectives are met.
The spurious and reconditioned goods market, continues to be a worrying factor as it directly affects our market share. The Company on its part has intensified the anti-spurious operations by conducting several raids across the country with the help of local regulatory authorities. Large quantities of spurious and fake products have been seized and legal action has been taken against those indulging in such activities. The Company believes that continued focus and concerted action against spurious activities would improve safety and fuel efficiency of the vehicles and at the same time help in expanding our market share in the Aftermarket. The Company is also continuously educating the users about the benefits of using genuine spares in place of spurious and reconditioned spares.
The lack of any significant change in the labor law reforms also continues to be a matter of concern. It is essential that legal reforms be put in place at the earliest to provide more flexibility in manufacturing operations and enable the industry to quickly adjust the work force in line with fluctuating market conditions.
Threats for the Indian automobile industry
As we move into the new millennium, the Indian Automobile Industry faces some tremendous opportunities and also great challenges. The growth in automobile sales has been impressive for the past ten years since liberalization began. However, with liberalization, the Indian customer has been presented with a wide range of choices in automobiles, to suit every requirement and budget. The market has turned into a buyers market where the customer is being wooed by the manufacturers and the dealers with a range of freebies unheard of before in India. Financing has become so easy that an automobile is within every aspirant's reach.
Competition has meant that manufacturers' margins have been squeezed severely and they are all under pressure to cut costs to be profitable and competitive. Some of the older manufacturers like Premier Automobiles (manufacturers of Premier cars), Automobile products of India (manufacturers of Lambretta scooters) and Ideal Jawa (manufacturers of Jawa and Yezdi motorcycles) have closed shop. Hindustan Motors (manufacturers of Ambassador and Contessa cars) is in trouble due to the declining sales of its car’s, as most customers prefer the newer models available in the market. Even the dominant player Maruti has seen its market share decline rapidly due to its models being old and jaded and is in addition facing labour problems in its plant.
To add to the problems, under the WTO agreement, India will have to permit import of fully built automobiles, which hitherto was not permitted. The foreign manufacturers such as GM, Ford and Daimler Chrysler will almost certainly import vehicles from their large portfolio of models and makes, further segmenting the market into niches, although how competitive they are in terms of price remains to be seen.
The challenge before the industry is to figure out the strategy for survival and growth. It is clear from the picture painted above that the industry will have to increase volumes in each segment to achieve lower cost of manufacture. One way to achieve this will be to go for exports in a big way. Maruti is exporting vehicles, as are Mahindra, Telco, Daimler Chrysler hyundai. The overseas markets will have to be exploited more aggressively, but this will mean the companies will have to invest more in Research and Development of new models with better features.
The second opportunity is to become contract manufacturers for overseas companies. A number of Japanese and Korean companies have been following this strategy very successfully. Hindustan Motors is said to be considering this option. The third opportunity is to overcome the vulnerability of the automobile market to oil prices by designing vehicles, which can offer lower fuel consumption. Recent reports suggest the government is exploring the possibility of introducing Gasohol, which is a mixture of Petrol and Alcohol. Gasohol has been very successful in Brazil. Since Alcohol is a by-product of the Sugar industry (of which India has the worlds largest), this is a very logical step that should have been taken many years ago. Even a small percentage reduction in the consumption of petroleum per vehicle can make a big difference to the balance of payments.
The industry must focus its R&D efforts in line with the global trends, which is to build vehicles that are considerably more fuel efficient and less polluting. With growing awareness among the public about pollution and the effective campaigns carried out by the NGO's, this will increasingly become an important selling feature. It was surprising to see how the industry kept stalling the introduction of pollution norms for vehicles on the pretext that they needed more time to get the technology. Even Maruti despite its foreign affiliation was caught off guard when the Supreme Court finally ruled that all new vehicles should strictly adhere to the Euro II norms.
The inadequacy of road infrastructure in India is well known. This is compounded by the fact that traffic management is very poor or non-existent and the drivers are mostly ill trained and in disciplined. As more vehicles come on the road, this will become a major bottleneck. The industry will need take initiatives firstly to train all drivers in safe driving and proper road discipline and manners. They will also need to assist government agencies in better road design and in building of multilevel parking lots. Training of police personnel in better traffic management and advising them on better equipping themselves to deal with various problems will also have to be done.
In terms of the world averages, India's vehicle density is very low and if we have to achieve those density levels, the industry can look forward to a bright future. However in the industry's interest care must be taken to see that we also achieve the safety and convenience levels of using automobiles.
The threats
External Level :
? Integrating into Global Supply Chains
? WTO - Multilateral trade regimes
? FTA’s (i.e. Bi-lateral Trade)
Country Level :
? Infrastructure
? Cascading effect of Taxes
? Cost of Capital
? Cost of Power
? Inflexible labor laws Inflexible labor laws
Firm Level :
? Export as a “mind set
? QCDDM - equation taken for granted
? Logistics
? Warranties & Liabilities