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Automobiles

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Automobiles

January, 2011

Introduction:

Post liberalisation in 1991, Indian automobile sector has been aptly described as the sunrise sector. Owing to its vertical and horizontal integration with other key segments of the economy, the industry is said to be a major growth driver. A steady growth in the sector has attracted heavy investments from various foreign majors through direct investments or private equity.

India continues to consolidate its position on the global front being one of the world’s top 10 auto-producing countries. India, the seventh largest vehicle producing nation in the world, now accounts for 5 per cent of global auto production, up from 1.4 per cent at the beginning of 2000, according to Society of Indian Automobile Manufacturers (SIAM).

According to a study by global consultancy firm Ernst & Young, the Indian market will clock the fastest compound annual growth rate between 2009 and 2020, more than double that of China and the triad of North America, Europe and Japan. India's CAGR between 2009 and 2020 is expected to be 14 per cent compared with China's 6 per cent, other emerging markets' 6 per cent (which includes BRIC nations) and the triad’s 4 per cent.

Investments:

India has emerged as one of the favourite investment destinations for automotive manufacturers in recent times.

  • Maruti Suzuki India Ltd (MSIL) has announced an investment of US$ 411.45 million for setting up its third plant at Manesar in order to capitalise on the rapid growth of the Indian auto industry. This new production line–Maruti's sixth overall would have 250,000 units annual capacity.
  • The auto-maker has also launched its luxury sedan Kizashi in India. The cars would be imposrted from parent company’s Japan facility.
  • Volvo-Eicher Commercial Vehicles (VECV) has announced an investment of US$ 61.51 million for a new engine plant at its existing facility at Pithampur, Madhya Pradesh. With this, India will now become a global manufacturing hub for Volvo's new medium-duty engine platform, with the only other factory for the engine type being present in Japan.
  • Tata Motors is in talks with a Canada-based company for its second generation gearless Nano.
  • Toyoto plans to invest US$ 107 million to make engines and gearboxes for Toyota's new small car, Etios that is expected to be launched by year-end.
  • India Yamaha Motor Limited is also planning to tap the rural market, which currently accounts for around 15 per cent of its overall sale. The company has launched a new bike YBR 110 that will target the rural markets.
  • Mercedes Benz has met its single largest order—of 150 cars worth US$ 14.7 million—from the small industrial town of Aurangabad, Maharashtra.
  • The Renault-Nissan alliance and Bajaj Auto have signed a memorandum of understanding for developing a low-cost car. According to the MoU, the design, engineering, manufacturing and supply base expertise to create the product will be executed by Bajaj with the support of the Renault-Nissan alliance.
  • Indo-Russian commercial vehicle joint venture (JV) Kamaz Vectra Motors plans to more than double its annual capacity to 12,000 units at its Hosur plant by 2012 to capture the fast-growing market in India.
  • Ashok Leyland and Japanese car maker Nissan Motor Co Ltd have announced the launch of three light commercial vehicles (LCVs) from 2011 through 2013. The auto makers also confirmed to be in talks to create a small car for the Indian market within the US$ 2,000 - US$ 6,000 price range.
  • British luxury brand Jaguar Land Rover (JLR) plans to increase presence in India and will tap parent Tata Motors for assistance in areas like logistics and service support.
  • BMW, the luxury car maker, is planning to infuse US$ 15.76 million in its Indian operations. Andreas Schaaf, President, BMW India, said that the company had invested US$ 24.77 million till September 2010 and this would be increased to US$ 40.53 million by the end of 2012.
  • Luxury carmaker Mercedes-Benz India will set up a new facility for building of city bus bodies at its Chakan plant in Pune. The new unit will become operational by mid-2011 and will have a capacity of 700 units a year.
  • Mercedes Benz has also re-introduced its super premium sedan Maybach in India in 2011.
  • Mahindra & Mahindra has revealed its plans to launch 8-10 new products, including a premium sports utility vehicle, across various segments by March 2012.