Market trends
Emerging Market Trends
The automotive industry is the barometer of Indian economy. The sign of recovery are most visible in the growing demand for automobiles. The aspirations of Indian consumer are rising with the growing demand.
The cumulative effect of growing customer demand, increased competition, technology upgradations along with the traits are likely to be observed in the following trends.
• International companies like Hyundai, Honda, Toyota, etc. are gaining market share.
• Technological up gradation will be primary requisite for success in the market.
• With the entry of new models, medium sized cars segment is further divided into low prestige and high prestige cars. Customers are upgrading from entry level small cars to sophisticated small cars and from sophisticated small cars to prestige car segment.
• Stricter Pollution norms are likely to force vehicle manufacturers to adopt latest technology in maintaining emission standards.
This is likely to curtail the average life span of vehicle on road while the maintenance cost and the genuine parts consumption per vehicle is expected to increase.
• Due to free imports local industry is expected to face increased competition from international automotive companies.
• With the increasing number of vehicle population the two wheeler owners will have viable option of used cars.
The vehicle with higher resale value and good service network is likely to dominate the market.
All the trends derived out of present dynamics of the Indian automotive vehicle market are indicators of internationalization of this market.
India has become focus of international growth seeking companies as not only a cost competitive sourcing base but also a growing high potential market.
In the near future the competition will be prominent in all the functions of business and only the companies with global standards are likely to survive.
Indian manufacturers are gearing up for the challenge but surely the current scenario is apparently in favor of international players.
The early movers are likely to secure a position to command the global competition
Local market trends
• Sales, particularly in the small car segment, will drive passenger car sales in the near term. However, within the next two years, capacity is expected to be twice the total demand for cars.
• With developments in the small car segment acquiring a degree of stability in terms of price competition, the action is shifting to the mid-size car segment. Sales in this segment will pick up as new models come in and income levels rise but it is still some time till it comes anywhere close to the economy sized segment.
• What will also drive car sales is the wide availability of finance schemes by a variety of banks and FI's.
• Sales in the used car market is also expected to do well as more and more older models get replaced by newer ones at a faster pace. The coming in of Euro III and IV norms will also increase scrap page rates.
• In view of expected surplus in the domestic market, India will emerge as one of the leading car sourcing point in the Indian subcontinent.
• Consumers will be the beneficiaries as a result of marketing war, as they will be offered technologically superior products at better prices and terms and conditions. But the customer has a risk of model discontinuation as a result of shake-out expected in the industry.
International trend
• The global automotive car market is growing at a rate of only 2% per annum and is not expected to pick up in the near term. Growth has dropped due to the increasing levels of saturation in the larger car markets of the world. Worldwide
• the trend is towards ensuring that one's products are superior in terms of quality. This will enhance the useful life of cars and, hence, slow down growth in sales.
• The South-East Asian crises has been a dampener to the collective fortunes of various carmakers worldwide. According to EIU estimates, some countries in the region have witnessed cumulative falls of 70% this year.
In Indonesia record sales reported in 1997 are not expected to be matched until 2005. In Malaysia it is expected to be 2003 before peak sales and production volumes are repeated and in the Philippines the market will take seven years to recover.
In Thailand, the market for cars and commercial vehicles is expected to fall from almost 600,000 units per year to 125,000 this year.
• The global domination of the larger automotive manufacturers is slowly on the wane and the trend in sales is shifting towards more "regio-centric" products.
Automakers that have been enjoying a generally prosperous spell would have to rethink on the way vehicles are designed, manufactured, distributed or sold. Already, players like GM, Volkswagen and Toyota have begun to re-examine their dealer relationships and pricing strategies.
Carmakers would now have to think in terms of a new customer focus and provide better financing and servicing.
• Strategic tie-ups, mergers and acquisitions have become the order of the day. A few instances are Daimler Benz's tie-up with Chrysler of the US, Ford's acquiring of Daewoo and tie up with Volvo Car Corporation and Renault acquiring a stake in Nissan. Such deals would certainly lead to economy in terms of costs but it remains to be seen whether they will also create significant new opportunities for growth.
Emerging Market Trends
The automotive industry is the barometer of Indian economy. The sign of recovery are most visible in the growing demand for automobiles. The aspirations of Indian consumer are rising with the growing demand.
The cumulative effect of growing customer demand, increased competition, technology upgradations along with the traits are likely to be observed in the following trends.
• International companies like Hyundai, Honda, Toyota, etc. are gaining market share.
• Technological up gradation will be primary requisite for success in the market.
• With the entry of new models, medium sized cars segment is further divided into low prestige and high prestige cars. Customers are upgrading from entry level small cars to sophisticated small cars and from sophisticated small cars to prestige car segment.
• Stricter Pollution norms are likely to force vehicle manufacturers to adopt latest technology in maintaining emission standards.
This is likely to curtail the average life span of vehicle on road while the maintenance cost and the genuine parts consumption per vehicle is expected to increase.
• Due to free imports local industry is expected to face increased competition from international automotive companies.
• With the increasing number of vehicle population the two wheeler owners will have viable option of used cars.
The vehicle with higher resale value and good service network is likely to dominate the market.
All the trends derived out of present dynamics of the Indian automotive vehicle market are indicators of internationalization of this market.
India has become focus of international growth seeking companies as not only a cost competitive sourcing base but also a growing high potential market.
In the near future the competition will be prominent in all the functions of business and only the companies with global standards are likely to survive.
Indian manufacturers are gearing up for the challenge but surely the current scenario is apparently in favor of international players.
The early movers are likely to secure a position to command the global competition
Local market trends
• Sales, particularly in the small car segment, will drive passenger car sales in the near term. However, within the next two years, capacity is expected to be twice the total demand for cars.
• With developments in the small car segment acquiring a degree of stability in terms of price competition, the action is shifting to the mid-size car segment. Sales in this segment will pick up as new models come in and income levels rise but it is still some time till it comes anywhere close to the economy sized segment.
• What will also drive car sales is the wide availability of finance schemes by a variety of banks and FI's.
• Sales in the used car market is also expected to do well as more and more older models get replaced by newer ones at a faster pace. The coming in of Euro III and IV norms will also increase scrap page rates.
• In view of expected surplus in the domestic market, India will emerge as one of the leading car sourcing point in the Indian subcontinent.
• Consumers will be the beneficiaries as a result of marketing war, as they will be offered technologically superior products at better prices and terms and conditions. But the customer has a risk of model discontinuation as a result of shake-out expected in the industry.
International trend
• The global automotive car market is growing at a rate of only 2% per annum and is not expected to pick up in the near term. Growth has dropped due to the increasing levels of saturation in the larger car markets of the world. Worldwide
• the trend is towards ensuring that one's products are superior in terms of quality. This will enhance the useful life of cars and, hence, slow down growth in sales.
• The South-East Asian crises has been a dampener to the collective fortunes of various carmakers worldwide. According to EIU estimates, some countries in the region have witnessed cumulative falls of 70% this year.
In Indonesia record sales reported in 1997 are not expected to be matched until 2005. In Malaysia it is expected to be 2003 before peak sales and production volumes are repeated and in the Philippines the market will take seven years to recover.
In Thailand, the market for cars and commercial vehicles is expected to fall from almost 600,000 units per year to 125,000 this year.
• The global domination of the larger automotive manufacturers is slowly on the wane and the trend in sales is shifting towards more "regio-centric" products.
Automakers that have been enjoying a generally prosperous spell would have to rethink on the way vehicles are designed, manufactured, distributed or sold. Already, players like GM, Volkswagen and Toyota have begun to re-examine their dealer relationships and pricing strategies.
Carmakers would now have to think in terms of a new customer focus and provide better financing and servicing.
• Strategic tie-ups, mergers and acquisitions have become the order of the day. A few instances are Daimler Benz's tie-up with Chrysler of the US, Ford's acquiring of Daewoo and tie up with Volvo Car Corporation and Renault acquiring a stake in Nissan. Such deals would certainly lead to economy in terms of costs but it remains to be seen whether they will also create significant new opportunities for growth.
