Automobiles Sector Analysis Report 

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• The Indian automobile market can be divided into several segments viz., two-wheelers (motorcycles, geared and ungeared scooters and mopeds), three wheelers, commercial vehicles (light, medium and heavy), passenger cars, utility vehicles (UVs) and tractors.
• Demand is linked to economic growth and rise in income levels. Further, it is inversely related to the interest rates and fuel prices as 85% of the total vehicles are bought on credit. Per capita penetration at around eighteen cars per thousand people is among the lowest in the world (including other developing economies like Pakistan in segments like cars).
• India is also a prominent auto exporter and has strong export growth expectations for the near future. Automobile exports grew 26.5% during April-July 2018. It is expected to grow at a CAGR of 3% during 2016-2026.
• Overall domestic automobiles sales increased at 7% CAGR between FY13-18 with 25 million vehicles getting sold in FY18. Auto sales in July 2018 witnessed a year-on-year growth rate of 7.9% across segments, driven by 46.2% growth in three-wheeler sales in terms of percentage.
• Sales of electric two-wheelers are estimated to have crossed 55,000 vehicles in 2017-18.

• Supply
• The Indian automobile market has some amount of excess capacity.
• Demand
• Rise in middle class income and young population may result in strong growth.
• Barriers to entry
• High capital costs, technology, distribution network, and availability of auto components.
• Bargaining power of suppliers
• Low, due to stiff competition.
• Bargaining power of customers
• Very high, due to availability of options.
• Competition
• High. Expected to increase even further.

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• Domestic automobile production increased at 7% CAGR between FY13-18 with 29 million vehicles manufactured in the country in FY18. During April-September 2018, automobile production increased 13.3% year-on-year to reach 16.7 million units.
• During April-September 2018, highest year-on-year growth in domestic sales among all the categories was recorded in commercial vehicles at 37.8% followed by 36.5% year-on-year growth in the sales of three-wheelers.
• India's electric vehicle (EV) sales increased to 25,000 units during FY 2016-17 and are poised to rise further on the back of cheaper energy storage costs and the Government of India’s vision to see 6 million electric and hybrid vehicles in India by 2020.
• With sales of around 40,000 luxury cars in 2017, India became the 27th most attractive luxury market in the world. The luxury car market in India is expected to grow at 25% CAGR till 2020.
• BMW Group India recorded its highest ever annual sales in 2017 at 9,800 units. During January-September 2018, BMW registered a growth of 11% year-on-year in its sales in India at 7,915 units.

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• Strong growth in demand due to rising income, middle class, and a young population. Indian automotive industry targeting to increase exports of vehicles five times in 2016-26.
• Automotive Mission Plan: 2016-26 shows clear vision of government where it aims to develop India as a global manufacturing center. Reforms like GST to help boost the sector’s growth. Incubation center to be set up for startups working in electric vehicles space.
• Focus shifting on electric cars to reduce emissions. Innovation is likely to intensify among engine technology & alternative fuels. Government aims to build India into an R&D hub. India could be a leader in shared mobility by 2030, providing opportunities for electric and autonomous vehicles.
• The automobile industry is supported by various factors such as availability of skilled labour at low cost, robust R&D centres and low-cost steel production. The industry also provides great opportunities for investment and direct and indirect employment to skilled and unskilled labour.
• Indian automotive industry (including component manufacturing) is expected to reach Rs 16.1-18.1 trillion (US$ 251.4-282.8 billion) by 2026. Two-wheelers are expected to grow 9% in 2018.
• In the 2-wheeler segment, motorcycles are expected to witness a flurry of new model launches. Though the market size is expected to grow by 10% to 12%, competitive pressure could keep prices and margins under control. TVS, Honda and Hero Motocorp will continue to benefit from higher demand for ungeared scooters in the urban and rural markets. In the last four years, scooters have grown at a faster clip than motorcycles and this trend is expected to continue going forward. The 3-wheeler industry, where Bajaj Auto is the market leader, is also poised for growth on the back of new permits and increase in exports.

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Related Links for Automobile Sector
Quarterly Results | Sector Quote | Over The Years