The automobile sector of any country reflects the health of its economy. By this virtue, the Indian economy is very much in a good shape as the country's automobile industry has marked impressive growth in the last fiscal. The overall Indian automobile industry grew by 12.12 per cent in 2011-12 by selling 17.3 million units, majorly driven by demand for two-wheelers and light trucks. Further, the sector witnessed sales growth of 12.46 per cent for the period between April 2011 and February 2012.
The industry has undergone numerous developments and investments recently that have substantially impacted the market dynamics.
As per the 2010-11 data released by the Society of Indian Automobile Manufacturers (SIAM), domestic vehicle market is dominated by two-wheelers segment with 76 per cent of the pie. Passenger vehicles, commercial vehicles and three-wheelers account for 16.25 per cent, 4.36 per cent and 3.39 per cent of the market, respectively.
Hero MotorCorp rules the two-wheeler market with 56 per cent of the share. Maruti Suzuki holds its leader position in passenger vehicle segment with 38 per cent of the pie, while Hyundai follows with 15 per cent of the share.
For passenger vehicle segment, the share of the entry-compact segment (that consists of cars like the Tata Nano, Maruti Alto, Ford Figo, Maruti WagonR, Hyundai's Santro, i10 and Eon and GM's Beat) stood at 47 per cent in 2011, while premium compacts (like Maruti Swift, Hyundai i20 and VW Polo) maintained their share of 11 per cent. Sports-utility vehicle (SUV) segment registered the fastest growth rate (32 per cent) to capture over 18 per cent of the market share, while Sedans had 19 per cent of the pie.
In order to enforce compliance and the Energy Conservation Act, the Government has recently given its nod to fuel mileage standards and labelling for new cars. Keeping consumer interest in mind, these norms would mandate auto makers to put Government certified fuel efficiency labels on each car they sell and improve efficiency of their products. While the labels will become compulsory soon, the standards will be introduced by 2015, giving manufacturers time to improve upon their technology.
SIAM is working on a voluntary recall policy that is in favour of auto manufacturers. The soon-to-be-unveiled policy would make producers proactive rather than being reactive for the recall activity.
On a similar note, the Indian Government is in the process of constituting a National Automotive Board (NAB) which would become a formal set-up to look into the issue of recall of vehicles and hence improve manufacturing standards. The prospective body, to oversee technical and safety aspects of vehicles, will have representatives from all the nodal ministries and automotive bodies such as the Automotive Research Association of India (ARAI).
Industry body SIAM expects overall automobile sales to grow by 10-12 per cent in 2012-13 on the back of supportive Government policies, launch of new models and intensifying enthusiasm for cars among Indian consumers.
Furthermore, Rothschild, a UK-based global financial advisory firm, forecasts that India would become the third largest auto industry by volumes by 2015. The growth is anticipated to be driven by increase in investments by auto makers that would expand the capacity from 4.8 million units in 2010 to 12 million in 2018. New launches, strengthening dealership networks, strategic alliances and predicted mergers and acquisitions (M&As) are expected to provide an impetus to the sector in the years to come.
Exchange Rate Used: INR 1 = US$ 0.0194 as on April 18, 2012
References: Media Reports, Press Releases, Society of Indian Automobile Manufacturers (SIAM) publications