Sunday, 14 August 2011

Guest post : Indian Automotive Scenario - Where is the Indian Auto Market headed towards ?



On one side where OEM's across the globe are investing in Billions of USD to set up new manufacturing units, at the same time we have our Country's Biggest Carmakers(MSIL) Chairman says "We have reduced the production of our Cars like Alto, Wagon R, Ritz, Estilo, which are the largest selling models in the country. In fact, the Sales of Alto & WagonR alone contribute one-fourth of the total Passenger Car Sales in India. The Chairman of MSIL quoted "We have reduced the production of our cars seeing the Low demand from the Consumers"

Now the question which arises is is this the start of a slowdown or is this one step back by the bull in order to gear itself to make a run in the forward direction ?

We will now analyze both the faces of the coin.


POSITIVE POINTS ABOUT INDIAN AUTO SECTOR :


1. Huge INVESTMENTS by Global Auto Giants.
2. STRONG GROWTH of the India's GDP - 8%, much higher as compared to developed economies like USA(1.5%)
3. Increasing Number of Billionaires in India with a POTENTIAL to buy Luxury Cars, hence boost to entrance of Ferrari, Maserati, Infiniti etc. in India
4. Increase in the number of Average Salary over last few years which raises CAPACITY of Indians to buy cars.
5. With Indian AUTO SALES of 3.5 Mn p.a., it has still strong potential to grow, compared to volumes of Leader Countries in Auto Sector. May reach 6.0 Mn by 2015 and 10 Mn by 2020.
6. Strong growth posted by NEW ENTRANT CARMAKERS like VW, Toyota & Renault-Nissan capturing potential MARKETSHARE in Indian market. (Fig as per SIAM July 2011 Report)
7. GROWTH in OVERALL ECONOMY leads to Growth of Commercial Vehicle growth thus contributing to growth of Automotive Market in India.


NEGATIVE POINTS ABOUT INDIAN AUTOMOBILE SECTOR :


1. Uncertain FUEL Pricing & indecisive DIESEL pricing.
2. HIGH INTEREST rates . Increased 11 times since March 2010.
3. Government frequent and uncertain POLICY CHANGES. eg. VAT structure change in Maharashtra, many OEM's reside there.
4. High level of CORRUPTION and SCAMS(2G and CWG) has affected the way people think.
5. Frequent STRIKES across Automobile sector & NO STRONG POLICY till date to curb them.
6. No INCENTIVES/No Additional money pumped by Indian govt. for R&D, which makes India always a follower/adopter rather than being innovator. eg. European Union pumped several Bn USD for R&D on Green Vehicles Research.

We expect by now you would have easily understood the whole scenario of Indian Automotive sector.

Looking at the Positives & Negatives of Indian Auto market, we comes to a conclusion that Indian market though with strong Fundamentals and rock solid investments made and about to be made in near future will surely be a place to watch for, but with lack of Strong Policy structures and laziness of Indian Government to solve the issues is leading to a slowdown in the sector. In the wake of self-interest/incapability to think of Public Interest is leading to lack of Structurization of Policy esp. Petrol & Diesel policies and High Interest Rates is hurting the Auto sector too much.

Thus we expect the Current slowdown to melt asap and let the Indian Auto sector with strong Fundamentals and drive only by Consumer demand which will take this sector to Heights comparable to International standards and thus to let the Bull run in the forward direction.


Author bio: Jupiter Kalra is a Guest Author and loves to write on various topics related related to Automobile Industry. He has a passion for Automobiles and is working as a Business Analyst in Automobile Industry. He can be connected via LinkedIn.




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