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Automotive

Automotive is another strong area for Asia Research Partners. We have executed clinics, CATI /Online surveys, Phone and Personal Visit Mystery Shopping surveys for top Automotive brands. The automobile sector is divided into four segments two-wheelers (mopeds, scooters, motorcycles, electric two-wheelers), passenger vehicles (passenger cars, utility vehicles, multi-purpose vehicles), commercial vehicles (light and medium-heavy vehicles), and three wheelers (passenger carriers and good carriers).

The industry is one of the key drivers of economic growth of the nation. Since the delicensing of the sector in 1991 and the subsequent opening up of 100 percent FDI through automatic route, Indian automobile sector has come a long way. Today, almost every global auto major has set up facilities in the country.

The world standings for the Indian automobile sector, as per the Confederation of Indian Industry, are as follows:

  • Largest three-wheeler market.
  • Second largest two-wheeler market.
  • Tenth largest passenger car market.
  • Fourth largest tractor market.
  • Fifth largest commercial vehicle market.
  • Fifth largest bus and truck segment.

The auto sector reported a robust growth rate of 26 percent in the last two years (2010-2012). The BSE AUTO Index outperformed the benchmark Nifty by 79%, 12% and 19% in FY10, FY11 and FY12, respectively.

However, the sector has shown a sluggish growth of 12 percent in 2012. The trend is likely to stay with a 10 percent growth outlined for 2014 citing high ownership costs (fuel costs, cost of registration, excise duty, road tax) and slow rural income growth. Solid but cautious growth is expected over the next few years. However, from a long-term perspective, rising incomes, improved affordability and untapped markets present promising opportunities for automobile manufactures in India. According to Macquarie equities research, sale of passenger vehicles is expected to double in the next four years and growth anticipated is higher than the 16 percent achieved in the past 10 years. Two-wheeler vehicle segment is expected to show slow growth of 10 percent CAGR over the period of 2012-2016, suggests the report.

The Government recognizes the impact of the sector on the nation's economy, and consequently, the Automotive Mission Plan 2016 launched by it seeks to grow the industry to a size of US $145bn by 2016 and make it contribute 10 percent to the nation's GDP.

Factors that will drive growth in the sector
  • Rising incomes among Indian population will lead to increased affordability, increasing domestic demand for vehicles, especially in the small car segment.
  • Fuel economy and demand for greater fuel efficiency is a major factor that affects consumer purchase decision that will bring leading companies across two-wheeler and four-wheeler segment to focus on delivering performance-oriented products.
  • Product innovation and market segmentation will channelize growth. Vehicles based on alternative fuels will be an area of interest for both consumers and auto makers.
  • Focus on establishing India as auto-manufacturing hub is reigning in policy support in form of Government's technology modernisation fund.
  • Industry will seek to augment sales by tapping into rural markets, youth, women and luxury segments.
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