The auto sector showed growth in production for April-May 2012 of 8.15% over April-May 2011
The overall growth in domestic sales during April-May 2012 was 10.26% over April-May 2011
During April-May 2012 auto exports registered a marginal growth rate of 2.87%. Passenger vehicles & two-wheelers grew by 9.54% and 8.65% in April-May 2012.
There is a boom in auto ancillary companies. India is an attractive outsourcing destination. Sourcing parts from India is 10%20% cheaper for US auto makers and about 50% cheaper for their European counterparts.
The engine behind India’s growth?
The Indian market is playing a role in determining the role of the auto sector in the modern world.
How times change. It wasn’t very long ago that the automobile was a status symbol in India. Today, the automobile has become a mass phenomenon in India, and continues to be a symbol of the changing times. Not the same things it symbolised, like status or modern industry, even as recently as 20 years ago; the automobile now symbolises the mass society that India has become.
A massive social and economic transformation has accompanied the rise of the automobile in India. To give just one example of this structural shift in Indian society: in the 1950s, as a nation just venturing out on the path of modernisation, agriculture accounted for more than 50% of India’s GDP; today agriculture accounts for only 15% of GDP, and that share is set to shrink further. As a rapidly urbanising nation, fast shedding its rural past, India is well on the superhighway of modern transportation.
The figures impressively corroborate an educated guess. In 2012, annual car sales worldwide will increase by about 11 million units per year; India is expected to account for 20% of that increase. This growth is also expected to make India the global leader in small-car market growth. The overall passenger vehicle market in India is expected to grow from 1.7 million units in 2008 to 2.4 million units by 2013, surpassing some western European markets. Little wonder manufacturers are flocking to the Indian market, amidst a loud chorus we hear in the media about India’s poor infrastructure.
It is not just cars: urbanisation and the massive migration of the Indian people from rural areas to its massive urban centres have created the need to feed this urban nation. But as much as 30% of India’s agricultural produce perishes en route to the market due to refrigeration gaps in the supply chain. There is an urgent and pressing need for refrigerated trucks to keep this urban population happy and healthy.
It is easy to see that India’s automotive industry is a key sector in the nation’s economy, and not surprisingly it is one of the largest industries in the country. Some figures: India is the world’s largest tractor and three-wheel producer; it is the second largest two-wheel producer, the fourth largest commercial vehicle producer and the 11th largest passenger car producer.
According to the global management consulting firm Booz & Company, among the main factors behind such growth are the arrival of ultra-low-cost cars, and the increasing maturity of Indian original equipment manufacturers (OEMs). However, Booz & Co caution that India’s path to mass motorisation will be very different from that of developed countries.
Among the consultancy’s recommendations for the sector’s growth: the Indian automotive sector must first develop new technologies, and business models. Government policies must enhance infrastructure and urbanisation so as to increase automobile penetration. Booz & Company, however, acknowledge that global financial crises will not be able to slow or reverse the growth of this sector in India.
Much of this transformation can be traced back to the 1990s. From 1991 the Indian automotive industry underwent a massive transformation as the government de-licensed the sector and opened it up for 100% FDI. Since then many global manufacturers have set up their facilities in India boosting the production of vehicles from 2 million in 1991 to well in excess of 10 million in 2012.
According to the Society of Indian Automobile Manufacturers (SIAM), the Indian automobile industry recorded double-digit growth for three years in a row from 2005. In 2006, the industry produced 10.9 million vehicles, an increase of 16.22% over 2005. In 2005, production grew 14.5% over the previous year.
SIAM figures show a growth in production for April-May 2012 of 8.15% over the same period last year. The industry produced 1,783,384 vehicles in May 2012 as against 1,613,872 in May 2011.
The overall growth in domestic sales during April-May 2012 was 10.26% over same period last year. Passenger vehicles segment grew at 8.42% during April-May 2012 over same period last year. Passenger cars grew by 3.10%, utility vehicles grew by 51.05% and vans showed negative growth by -5.31% during April-May 2012 as compared to same period last year.
The overall commercial vehicles segment registered growth of 6.81% in April-May 2012 as compared to the same period last year. While medium & heavy commercial vehicles (M&HCVs) registered negative growth at -11.07%, light commercial vehicles grew at 20.18%.
Three-wheeler sales recorded negative growth at -0.88% in April-May 2012. Passenger carriers grew by 3.82% during April-May 2012 and goods carriers registered negative growth at -15.77% during this period.
Two-wheelers registered a double digit growth of 11.17% during April-May 2012. Mopeds, motorcycles and scooters grew by 8.04%, 6.89% and 32.35% respectively in the period of April-May 2012.
Europe is the biggest importer of cars from India, while African nations largely account for the import of buses and trucks. China has recently been making inroads into this market. The South-East Asian region is the prime destination for Indian two-wheelers.
During April-May 2012 overall automobile exports registered a marginal growth rate of 2.87%. Passenger vehicles and two-wheelers grew by 9.54% and 8.65% respectively in April-May 2012. Commercial vehicles and three-wheelers recorded negative growth at -10.59% -30.37% respectively.
There is also a boom in auto ancillary companies. India is an attractive outsourcing destination for global auto companies because of its strong engineering skills and low costs. Sourcing parts from India is 10-20% cheaper for US auto makers and about 50% cheaper for their European counterparts.
All of this may only just be a beginning as the Indian market shows signs of being a serious segment in the future global auto sector. It might not be easy to predict the exact outcome of all of this but wherever the roads may be leading to the Indian market and Indian manufacturers seem poised for big the opportunities ahead.
Mahindra launches XUV500 in Australia
Indian auto manufacturer Mahindra & Mahindra’s SUV, Mahindra XUV500, is available in Australia now. Mahindra Automotive Australia, a subsidiary of Mahindra & Mahindra Ltd, has been the local distributor of the Mahindra range of vehicles in Australia, and the company has over 30 dealers in rural and metro NSW, Vic and Qld, SA and WA. Mahindra’s history as a company is closely linked in many ways with the growth of modern India itself.
Mahindra strengthened its global presence over the past two years with exponential growth in its exports to the Asia-Pacific region, Africa, South and Latin America and the USA. The company’s auto exports grew by 70%, while tractor exports, a big component of its interests in Australia, grew by 16% in the financial year ending March 2012. The strongest performance of the company’s export business was in the SAARC (South Asian Association for Regional Cooperation) region itself.
The Mahindra XUV500 was launched late last year in India with a simultaneous unveiling in South Africa. A company media release says that “the Mahindra XUV500 is very attractively priced for the Australian market, particularly considering the very comprehensive list of standard equipment”.
M&M entered the Australian market in 2007 with the launch of the Mahindra Pik-Up, which was distributed by TMI Pacific (a division of the Tynan Motor Group). Mahindra Automotive Australia now imports and distributes M&M’s vehicles into Australia.
Mahindra started its tractor operations in Australia in 2005 by setting up its assembly facility in Brisbane, and has since acquired a leading position in the Australian tractor industry. Mahindra Tractors also retails its tractors in New Zealand, Fiji and New Caledonia through network of about 50 dealers.
The Mahindra XUV500 is the first SUV from the Mahindra stable that has been designed around the global customer, with product validation and testing done across Europe, Australia, South Africa and India.
A $US15.4 billion multinational group based in Mumbai, India, Mahindra employs more than 144,000 people in over 100 countries. In 2011, Mahindra featured on the Forbes Global 2000 list. Dun & Bradstreet also ranked Mahindra at No. 1 in the automobile sector in its list of India’s Top 500 Companies. In 2010, Mahindra featured in the Credit Suisse Great Brands of Tomorrow. In 2011, Mahindra acquired a majority stake in Korea’s SsangYong Motor Company.
In the Indian market the company’s monthly sales for June 2012 stood at 41,322 units, as against 35,584 units during June 2011, an increase of 16%. The Passenger Vehicles segment has registered a growth of 23%, having sold 19,792 units in June 2012, as against 16,053 units during June 2011.
Commenting on the numbers the company’s Automotive Division chief executive Pravin Shah said, “We are happy to have achieved a growth of 24% in the first quarter of FY 13 given the pressures and various uncertainties which the auto industry is currently facing. We expect the demand for utility vehicles industry to continue during the current financial year.”
Apart from automobiles, Mahindra Satyam, one of India’s leading IT companies, has a very strong presence in Australia for the last decade. The company has key clients in the banking, insurance and aerospace domains. Nearly 1,000 Mahindra Satyam associates work out of key cities including Sydney, Melbourne, Canberra and Perth.