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Industry Snapshot - Automobile Industry

  • Jul 7th, 2017

1.Introduction

Automobile Industry

The Indian Automobile Industry includes two- wheelers, trucks, cars, buses, and three- wheelers. The country is expected to top the world in respect of car volumes with approximately 611 million vehicles on the nation’s roads by 2050. The growth of this sector is directly proportional to the automotive services provided. This sector has seen a compound growth of 9.4% over the years 2006 to 2016 in terms of production.


2.History

Indian Market before independence was seen as a market of imported vehicles. General Motors and some other motor companies of the world were some of the main distributors to India. The Indian Automobile Industry at that time mainly focused on servicing, dealership, financing, and maintenance of vehicles. Only after a decade of independence, the production process was started in India and the main players were Hindustan Motors, Premier Automobiles, and Standard Motors.

  • 1950-
  1. Moris Oxford became the Ambassador
  2. Fiat 1100 became the Premier Padmini
  • 1960-

                Production was taken to another level, almost 98% of products produced in India

  • 1970- 
  1. Light Commercial Vehicle miserably failed in the market.
  2. New models like Contessa, the Rover, and the Premier 118NE hit the Indian market.
  • 1980-

Govt. started changing its mindset towards the Automobile Sector and the other big industries.

  • 1991-

Globalisation initiatives by Indian Government paved the path for the entry of foreign automobile manufacturers in India.  


3. Industry and GDP

The automotive industry accounts for 45% of the country’s manufacturing gross domestic product (GDP), 7.1 % of the country’s GDP and employs about 19 million people both directly and indirectly.

The automobile exports grew by 1.91 per cent. Where Passenger Vehicles (PV), Commercial Vehicles (CV), and Two Wheelers (2W) registered a growth of 5.24 per cent, 16.97 per cent, and 0.97 per cent respectively in April-March 2016 over April-March 2015.


4.Market Size

In the year 2016, the Industry produced around 24 Million Vehicles among which 3.4 Million were passenger vehicles, 0.8 Million were commercial vehicles, 0.9 Million were three-wheelers and more than 18.8 Million were two-wheelers. In the previous year(2016), the Automotive Industry sold around 20.36 Million Vehicles among which passenger vehicles were 2.80 Million, commercial vehicles were 0.70 Million, three-wheelers were 0.40Million and two-wheelers were 16.46 Million.

The sales of PVs, CVs and 2Ws grew by 9.17 per cent, 3.03 per cent and 8.29 per cent respectively, during the period April-January 2017.


5.Performance Review of 2016-17:

5.1 Production
The industry produced a total of 25,316,044 vehicles including passenger vehicles, commercial vehicles, three wheelers, two wheelers and quadricycle in April-March 2017 as against 24,016,599 in April-March 2016, registering a growth of 5.41 percent over the same period last year. Given below is a list of Automobile production trends of the last 5 years:

 

Category

2011-12

2012-13

2013-14

2014-15

2015-16

2016-17

Passenger Vehicles

31,46,069

32,31,058

30,87,973

32,21,419

34,65,045

37,91,540

Commercial Vehicles

9,29,136

8,32,649

6,99,035

6,98,298

7,86,692

8,10,286

Three Wheelers

8,79,289

8,39,748

8,30,108

9,49,019

9,34,104

7,83,149

Two Wheelers

1,54,27,532

1,57,44,156

1,68,83,049

1,84,89,311

1,88,30,227

1,99,29,485

Grand Total

2,03,82,026

2,06,47,611

2,15,00,165

2,33,58,047

2,40,16,068

2,53,14,460

5.2 Domestic Sales

  • The sales of Passenger Vehicles grew by 9.23 percent in April-March 2017 over the same period last year. Within the Passenger Vehicles, Passenger Cars, Utility Vehicles and Vans grew by 3.85 percent, 29.91 percent and 2.37 percent respectively, during April-March 2017 over the same period last year.
  • The overall commercial vehicles segment registered a growth of 4.16 percent in April-March 2017 as compared to the same period last year. Medium & Heavy Commercial Vehicles (M&HCVs) grew by 0.04 percent and light commercial vehicles grew by 7.41 percent during April-March 2017 over the same period last year.
  • Three-Wheelers sales declined by (-) 4.93 percent in April-March 2017 over the same period last year. Passenger Carrier sales declined by (-) 8.83 percent and Goods Carrier sales grew by 12.75 percent in April-March 2017 over April-March 2016.
  • Two-Wheelers sales registered a growth at 6.89 percent during April-March 2017 over April-March 2016. Within the Two Wheelers segment, Scooters, Motorcycles, and Mopeds grew by 11.39 percent, 3.68 percent, and 23.02 percent respectively in April-March 2017 over April-March 2016.
  • Provided below is a list of the domestic automobile sales trend of the last 5 years:

Category

2011-12

2012-13

2013-14

2014-15

2015-16

2016-17

Passenger Vehicles

26,29,839

26,65,015

25,03,509

26,01,236

27,89,208

30,46,727

Commercial Vehicles

8,09,499

7,93,211

6,32,851

6,14,948

6,85,704

7,14,232

Three Wheelers

5,13,281

5,38,290

4,80,085

5,32,626

5,38,208

5,11,658

Two Wheelers

1,34,09,150

1,37,97,185

1,48,06,778

1,59,75,561

1,64,55,851

1,75,89,511

Grand Total

1,73,61,769

1,77,93,701

1,84,23,223

1,97,24,371

2,04,68,971

2,18,62,128


5.3 Exports
In April-March 2017, overall automobile exports declined by (-) 4.50 percent. While Passenger Vehicles and Commercial Vehicles export registered a growth of 16.20 percent and 4.99 percent respectively, exports of Three-Wheelers and Two-Wheelers declined by (-) 32.77 percent and (-) 5.78 percent respectively in April-March 2017 over April-March 2016. Provided below is a list of the automobile export trend of the last 5 years:

Category

2011-12

2012-13

2013-14

2014-15

2015-16

2016-17

Passenger Vehicles

5,08,783

5,59,414

5,96,142

6,21,341

6,53,053

7,58,830

Commercial Vehicles

92,258

80,027

77,050

86,939

1,03,124

1,08,271

Three Wheelers

3,61,753

3,03,088

3,53,392

4,07,600

4,04,441

2,71,894

Two Wheelers

19,75,111

19,56,378

20,84,000

24,57,466

24,82,876

23,39,273

Grand Total

29,37,905

28,98,907

31,10,584

35,73,346

36,43,494

34,78,268

 


6.Key Statistics:

  • Domestic Market Share : 2015-16
  1. Passenger Vehicles 14%
  2. Commercial Vehicles 3%
  3. Three-wheelers 3%
  4. Two-wheelers 80%
  • Passenger vehicle production is expected to grow to 9.4 million units annually by 2026
  • Commercial vehicles production is expected to grow to 2.0 million units annually by 2026
  • Two-wheelers production is expected to grow to 50.6 million units annually by 2026
  • Three-wheelers production is expected to increase to 0.95 million units by 2026

(Source: Make in India)


7. Global Market Scenario v/s Indian Market

  • India is the sixth largest producer in the world with an average annual production of 24 million vehicles in 2016.
  • India has the fifth largest passenger vehicle and commercial vehicle market.
  • India is currently the sixth largest producer in the world with an average annual production of 24 million vehicles, of which 3.64 million are exported.
  • India is the second largest two-wheeler manufacturer, the largest motorcycle manufacturer and the fifth largest commercial vehicle manufacturer in the world.

8.Market Leaders:

 

Automobile Market Leaders

Automobile Market Leaders

 


9. Types:


10. Hybrid Cars and Electric Cars

Hybrid Cars

Electric Cars

Hybrid cars make use of gases (Petrol/Diesel), as well as electricity.

Electric cars are totally dependent on electricity.

Some Hybrid car batteries not only provide energy but also get recharged while driving.

Some Electric car batteries do not get recharged unless plugged in to some energy source.

Hybrid Cars are categorized as Low Emission Vehicles (LEV).

Electric cars are categorized as Zero Emission Vehicles (EZV).

Gives high mileage.

Gives low mileage.

But, both the vehicles are prepared with the aim  1) to lower the use of gases. 2) to produce environment friendly products.

10.1 Some of the famous Hybrid Cars are:

  • Toyota Camry Hybrid
  • Honda Accord Hybrid
  • Volvo XC90 T8 Plug-In Hybrid

10.2 Some of the famous Electronic Cars are:

  • BMW i3
  • Mahindra Reva e20
  • Tata Indica Vista Electric
  • Tata Mega Pixel
  • Nissan Leaf

10.3 News:


11. Indian Govt. road map

11.1 FDI Policy

100% Foreign Direct investment (FDI) is allowed under the automatic route in the auto sector, subject to all the applicable regulations and laws.

11.2 Sector Policy

Automobile Policy

     11.2.1 Auto Policy

  • Automatic approval for foreign equity investment up to 100% with no minimum investment criteria.
  • Manufacturing and imports in this sector are exempt from licensing and approvals.
  • The encouragement of R&D by offering rebates on R&D expenditure.

     11.2.2 Automotive Mission Plan 2016-26:

       Salient points of AMP-2026 are:

  • The Indian Automotive industry to be a top job creator – 65 million additional jobs
  • The Indian Automotive industry to be one of the prime movers of Manufacturing sector and “Make in India” initiative
  • The Indian Automotive industry aims to increase exports of vehicles by 5 times and components by 7.5 times
  • Specific interventions are envisaged to sustain and improve manufacturing competitiveness and to address challenges of environment and safety

     11.2.3 National Automotive Testing And R&D Infrastructure Project (NATRiP):

  • The project has been set up at a total cost of USD 585 million to enable the industry to adopt and implement global performance standards.
  • Focus on providing low-cost manufacturing and product development solutions.

     11.2.4 The National Electric Mobility Mission Plan 2020 (NEMMP):

  • The objective of this body is to encourage reliable, affordable and efficient xEVs (hybrid and electric vehicles) that meet consumer performance and price expectations through government-industry collaboration
  • Promotion and development of indigenous manufacturing capabilities, required infrastructure, consumer awareness, and technology are additional objectives of NEMMP 2020.
  • India to emerge as a leader in the two-wheeler and four-wheeler xEV market in the world by 2020, with total xEV sales of 6-7 million units thus enabling the Indian automotive industry to achieve global xEV manufacturing leadership and contributing towards national fuel security.
  • The target of putting 6 million electric & hybrid vehicles per year on the road by 2020 under NEMMP 2020.
  • A pilot scheme for the initial period of two years in the name of Faster Adoption & Manufacturing Of Hybrid And Electric Vehicles, implemented from 1st April 2015 for the initial period of two years.
  1. It will cover all vehicle segments i.e. two- wheelers, three-wheelers and four-wheelers, cars, LCVs, buses etc. and all forms of hybrid (Mild/Strong/Plug-in) and pure electric vehicles.
  2. It also seeks to provide demand incentives to electric and hybrid vehicles from two-wheeler to buses.

     11.2.5 Pilot Electric Vehicle Projects:

  • The Department of Heavy Industry(DHI) is launching pilot projects on electric vehicles in various metros and cities all across the country under the NEMMP 2020 with a dual purpose - demonstrating and disseminating the benefits of adopting cleaner, greener modes of transportation as also to explore the viable operational modalities.
  • The DHI will provide viability gap funding through subvention to support the extra cost of acquisition and operation of these vehicles by state governments or designated bodies.
  • In the first phase, a pilot project to provide last mile connectivity to the electric passenger vehicles will be promoted.
  • All the other states have been brought on board and different states have already appointed nodal officers to co-ordinate with DHI and vehicle manufacturers for the implementation of those pilot projects.
  • The uptake of electric vehicles will depend in large part on the adequate deployment of Electric Vehicle Supply Equipment (EVSE) needed to recharge electric vehicles.

12.GST and Automotive Industry in India

Under the current tax system, there are several taxes applicable on this sector like excise, VAT, sales tax, road tax, motor vehicle tax, registration duty which will be subsumed by GST. Current Tax Laws on Automobiles

Segment

Excise

*Nccd +auto cess

VAT

*Road

tax

*Motor vehicle tax

Total

CGST

SGST

TOTAL

Difference

Small Cars <1200cc

12.50%

1.10%

14%

State based

State based

28%(approx)

9%

9%

18%

10%

Mid-SizeCars from 1200cc to 1500cc

24%

1.10%

14%

State based

State based

39%

9%

9%

18%

21%

Luxury Cars>1500cc

27%

1.10%

14%

State based

State based

42%

14%

14%

28%

14%

SUV’s >1500cc, >170mm ground clearance

30%

1.10%

14%

State based

State based

45%

14%

14%

28%

17%

The two taxes charged to the end consumer currently are excise and VAT, with an average combined rate of 26.50 to 44% which is higher than the expected rates of 18% and 28% under GST.

Automobiles are kept under the 28% bracket and a list of cess to be levied on a different kind of automobile has also been declared by the Indian government. Cess has been levied on different kind of automobiles ranging from 1 to 15%.

Different cess rates applied on different kind of automobiles

Small Cars

Small Cars, Motor Cycles, Aircrafts

Motor Vehicle, Large Cars, SUVs

Less than or Upto 1200cc

Less than or Upto 1500cc

More than 1500cc

1%+GST@28%

3%+GST@28%

15%+GST@28%

GST will be beneficial for the people in the market for small family cars like Alto, Santro, Nano, Datsun go as a minimum cess of 1% has been charged over and above the GST rate of 28%. Motorcycles which have an engine of greater than 350CC like Enfield 500CC or Harley Davidson etc would be charged GST at the rate of 28% and an additional 3% cess would be levied. It is difficult to understand the placement of yachts, aircraft, personal jets under the 3% cess bracket along with the small cars having engine >1200CC and <1500CC instead of the 15% cess.

Currently, there are a lot of free services/warranties offered by the car manufacturers due to the competitive nature of the industry. These free goods/services are not taxed under current tax laws. Under GST, the free services/ warranties would also be eligible for taxation.

13.1 News

How GST will alter contours of the automobile industry 

Are you buying a new car? Here's how GST will impact your bill 


13.Challenges

  1. Competitive Market: The 5th largest automobile manufacturing company in India (selling cars under the brand name of Chevrolet). After 21 years of operations in India, General Motors announced that it will stop selling cars in India by the end of 2017, as a part of its global restructuring actions. The main reason behind this decision was due to tough competition from Maruti Suzuki in passenger vehicles segment, where the company was just owning a market share of 1.34%.

  2. GST Criticism: As the tax rates, cess rates and levy are going to change. The confusion has surrounded all around the environment of automobile sectors and people related to it. Dealers are worried about their sales and services, whereas customers are worried about the price rates and company's services. 

  3. Fear of New Entrants: As automobile industry(both India and Global) is widely scattered with big companies, there is always a high risk of new entrants. Like SAIC Motors taking General Motors operations in India, TESLAs operations in India, etc. that can change the current market scenario of Indian Automotive Industry.

  4. Unclear Road-map: As the discussion on environment sustainability have risen to a different level, the government has taken several steps to protect it, upgrading to electric vehicles and hybrid vehicles are some of the major steps. Untill now the plans are not clear on this segment, this may be one of the reason why TESLA is still avoiding Indian Automotive market.  In addition to that, the GST rates on Hybrid vehicles is creating more doubts in the mind of manufacturers. 


14.Opportunities

Automobile Opportunities

 


15.Relevant Questions

  • What is a Hybrid Vehicle?
  • What is the difference between a hybrid vehicle and an electric vehicle?
  • Describe the GST impact on the Automobile Industry in India?
  • Give a brief about General Motors news in relation to its Indian operations?
  • What are the government initiatives for automobile sector?
  • How automobile sector effects Indian GDP?
  • Who are top players in Indian Automotive Market?
  • Describe the challenges and opportunities of Indian Automobile Industry?
  • Briefly, classify the Indian Automotive Industry?

16.News


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