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Automotive Industry Attaining New Heights

The automotive industry in India is growing at an impressive rate driven by the investor friendly economy, cost improvements and new launches by OEMs. Automotive Mission Plan (AMP) 2006-2016 envisages that the industry size of least $145 billion, contributing to 10 per cent of GDP and providing employment to 35 million persons by 2016. Sugato Sen, Senior Director, Society Of Indian Automobile Manufacturers (SIAM) evaluates the performance of industry in an e-interview with Subhajit Roy.
 
How did the automobile industry in India performed during the last fiscal?
In 2009-10, automobile production showed growth of 25.76 per cent with Passenger Vehicles production crossing 10 million and Two Wheelers production being over 10 million. Both domestic and international market expanded. Domestic sales grew at 26.41 per cent and exports grew at 17.90 per cent.
 
What are the various factors that helped the industry register such a robust growth?
The key factors that have facilitated growth of the auto industry are:
•      Reduction in Excise Duty
•      Special Scheme for purchase of buses
•      Accelerated depreciation for commercial vehicles
•      Improved availability of liquidity
•      Reduced interest rates – auto financing rates reduced from 14per cent to around 10per cent
•      Increase in Disposable income of a section of the population due to implementation of Pay Commission recommendations
•      Cost improvements and new launches by OEMs
 
Which is that one segment of vehicle industry has performed extremely well?
Passenger Vehicle segment has been performing well followed by two wheelers. If we look at 3-year CAGR, Passenger Vehicle segment grew at 15 per cent, followed by Two Wheelers at 7 per cent. Commercial Vehicles and Three Wheelers segment both grew at 2 per cent.
 
The Commercial Vehicles segment registered a growth of 38.31per cent during April-March 2010 as compared to the same period last year. Which kind of vehicles are the major growth drivers in commercial segment?
The less than 3.5T segment goods commercial vehicles which comprise of 40per cent of the CV sales, grew at 44 per cent.  Some of the segments like 3.5 – 5T goods CV, more than 25T goods CV, though account for small share in the CV segment, grew at 3-digit growth rates.
 
What is your expectation from the current financial year?
It is expected that the current financial year would grow at around 10-12 per cent per cent.
 
Would you like to comment on the growth scenario for automobile components manufacturing segment in our country?
The automobile component sector is also progressing and reaching new heights. The component industry attained a turnover (excluding OEM sales) of Rs 55,000 crores in 2009-10. The turnover of the auto component industry has grown at an average growth of 18per cent over last 4 years.
 
Where does the Automobile Industry of India stands compare to China in terms of technology and sales volume?
China’s production volumes are far higher than India. China produced more than 10 million cars in 2009 while India produced around 2 million cars. Commercial Vehicles production in India was close to 0.5 million while the same for China was 3 million. In Two Wheelers, China is world largest producer producing more than 25 million vehicles. India produces around 10 million two wheelers.
 
Are there any difficulties the industry is facing in expanding its reach to the untapped market? If so, what are those?
The industry is working towards improving technology and is targeting new markets.  It is already meeting technology and quality tests but automobile marketing is a high cost affair and tapping and establishing products in new markets would remain a challenge especially for the Indian owned companies.
 
What are the measures be adopted in smoothening the road for growth?
A favourable and stable policy environment which encourages R&D, infrastructure development, bridging the human resources gap and lead to achieving low cost would go a long way in promoting growth in this sector.
 
Can you discuss about the current competitive scenario within the automobile manufacturing Industry?
In 2009-10, India’s Automobile Industry produced more than 1,926,000 passenger cars, 272,000 utility vehicles, 152,000 multi purpose vehicles, 250,000 medium & heavy commercial vehicles, 316,000 light commercial vehicles, 619,000 three wheelers and 10,500,000 two wheelers.
 
Each of the segments is characterized by presence of large number of models and players. Almost all the global auto OEMs have manufacturing base in the country.  Around 16 manufacturers are present in Passenger car space and 14 companies make utility vehicles. There are 13 manufacturers of Commercial Vehicles, 10 Two wheeler manufacturers and around 7 Three Wheeler manufacturers.
 
Where do you wish to see the Automobile Industry of India in the next five years time?
After delicensing in July 1991, the Automotive Industry has grown at a remarkable rate, attaining a turnover of Rs 262,000 crores (USD 56 billion) by 2009-10. With 38 manufacturers, producing 14 million vehicles, exporting 1.8 million, and offering 300 models and types of vehicles, the automobile industry currently contributes 4.5per cent of the GDP and provides employment to over 12 million persons.
 
The Automotive Mission Plan (AMP) 2006-2016 envisions the industry size of least $145 billion, contributing to 10 per cent of GDP and providing employment to 35 million persons by 2016.

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