effects of global meltdown on indian auto industry

8/8/2019 Effects of Global Meltdown on Indian Auto Industry

1/48

Effects of Globalmeltdown on Indian AutoIndustry

Group 2Rucha Puri

Shweta Telang

Manoj JoshiVishal JadhavRavi Shinde

Chinthu V.Nair


2/48

Wh at Is Recession ?Wh at Is Recession ?

A Recession is a contraction phase of the businesscycle .Nat ion al Bur e au of Economic Rese ar ch (NBE R)

is the official agency in charge of declaring that theeconomy is in a state of recession.They d efine r ecession as :significant decline in economic activity lasting more

than a few months, which is normally visible in real

GDP, real income, employment, industrial production,and wholesale-retail sales.For this reason, the official designation of recession

m ay no t come until after we ar e in a r ecession fo r six mon ths o r longe r .


3/48

Wh at Causes Recession ?Wh at Causes Recession ?

A n economy typically exp a n d s fo r 6-10 y e ar s andtends to go into a r ecession fo r ab o ut six mon ths to 2 y e ar s . A recession normally takes place when consumersloose confidence in the growth of the economy andspend less.This leads to a decreased demand for goods and

services, which in turn leads to a d ec r e a se in p r o d uc tion, lay- offs an d a sh ar p r ise in

unemp lo ymen t.Inves to r s spen d less a s the y fe ar s tocks valu es wi ll f all and thus stock markets fall onnegative sentiment.


4/48

Sub-Prime CrisisFalling down of some big names in the world of Finance likeLehman Brothers ( lasted for 165 yrs), Merryil Lynch, WashingtonMutual, Bear Stern, Fannie Mae, Freddie Mac

A uto majors like General Motors, Chrysler are on the verge of bankruptcy as heavy input cost with lack of demand reduced salesgrowth in automobile sector to almost negative in the month of October

A utomakers started giving discounts to the tune of 30 to 40% to

attract customers which results in losses or less profit toautomakersMany retail chains has shut down many stores across the US dueto lack of demand and heavy cost


5/48


6/48

L ow GDP growt h indicating RecessionL ow GDP growt h indicating Recessionin USin US


7/48


8/48


9/48


10/48

GlobalizationDependency of developing countries on theDemand generated from high spending countries

like US and Eurozone has increasedHuge money (some trillion $)of various FI and IBare invested in these developing economiesthrough direct investment and share market


11/48

When these FI`s & IB`s started feeling liquiditycrunch, they started withdrawing money fromdeveloping countries

A t the same time process of bankruptcy, heavylosses, huge lay off`s of people started in USThis has resulted into slow down of overall demand

in the market of US and vanishing of money fromthe world market


12/48

With a slowdown in US market many in developingeconomies started feeling pinch of cash in their market

This is the beginning of slowdown in other financialmarkets in the world A long with slowed down US market many FI`s andIB`s started withdrawing money from thesedeveloping nations to save there business at homehas added fuel to liquidity crunch


13/48

Thus slowdown process has gripped wholeworld slowly and steadilyThe process is still going onNo direct impact on nations like China andIndia is yet seenIndirect impact was so huge that share

market in China and India shaded almost50% of their value


14/48

The slowdown in US and other developednations is definitely hurting INDI A N growthstoryThe signs of this can be evidenced from thetumbling share market ( BSE & NSE ) whichshed more than 50% since Jan 08.


15/48

Sectors affected till now are almost all, reasonbehind this is:

External Trade of India : 40% of GDP

FII`s Investment in share market upto Jan 08:US $ 65 BillionFDI in India (Jan 08) : US $ 50 BillionEstimates of A nnual GDP has been lowered to

7.5% from 9% and further to 5.3%


16/48


17/48

Two kind of measures can be taken, first isMonetary and other more important Fiscalmeasures

RBI has already initiated certain monetarymeasures to reduce the impact and increase theliquidity in Indian marketThese measures includes reduction in CRR by 350bps, Repo by 150 bps and reduction of SLR to 24%from 25%


18/48

INDIAN A UTOMOB IL EIND UST RY


19/48

A UTOMOBILE

2 WHEELER 3 WHEELER P A SSENGERVEHICLECOMMERCI A L

VEHICLE

MOTORCYCLE SCOOTERS SCOOTERETTES MOPEDS

I.C.V. M.C.V. H.C.V.


20/48


21/48

Continue.

Automobile Production Trends (Number of Veh icles)

Category 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08

Passenger Veh icles

723,330 989,560 1,209,876 1,309,300 1,545,223 1,762,131

CommercialVeh icles

203,697 275,040 353,703 391,083 519,982 545,176

T h reeWh eelers 276,719 356,223 374,445 434,423 556,126 500,592

T woWh eelers

5,076,221 5,622,741 6,529,829 7,608,697 8,466,666 8,026,049

Grand Total 6,279,967 7,243,564 8,467,853 9,743,503 11,087,997 10,833,948


22/48

PR O DU CT IO N

AUTO NDUSTRY - PRODUCT ON

0

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

2002-03

2003-04

2004-05

2005-06

2006-07

2007-08

COM. VEH PRODN

P SS. VEH PRODN

3 WHEELER PRODN

2 WHEELER PRODN

GR ND TOT LPRODN


23/48

Automobile Domestic Sales Trends(Number of Ve h icles)

Category 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08

Passenger Veh icles

707,198 902,096 1,061,572 1,143,076 1,379,979 1,547,985

CommercialVeh icles

190,682 260,114 318,430 351,041 467,765 486,817

T h reeWh eelers

231,529 284,078 307,862 359,920 403,910 364,703

TwoWh eelers

4,812,126 5,364,249 6,209,765 7,052,391 7,872,334 7,248,589

Grand T otal 5,941,535 6,810,537 7,897,629 8,906,428 10,123,988 9,648,094


24/48

Domestic sales

AUTO NDUSTRY DOMEST C SALES

0

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

2002-03

2003-04

2004-05

2005-06

2006-07

2007-08

COM. VEH DOM

S LESP SS. VEH DOMS LES

3 WHEELER DOMS LES

2 WHEELER DOMS LES

GR ND TOT LPRODN


25/48

Automobile Exports Trends(Number of

Veh icles)

Category 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08

Passenger Veh icles

72,005 129,291 166,402 175,572 198,452 218,418

CommercialVeh icles

12,255 17,432 29,940 40,600 49,537 58,999

T h reeWh eelers

43,366 68,144 66,795 76,881 143,896 141,235

TwoWh eelers

179,682 265,052 366,407 513,169 619,644 819,847

Grand T otal 307,308 479,919 629,544 806,222 1,011,529 1,238,499


26/48

EXP O R TS

AUTO NDUSTRY EXPORTS

0

200,000

400,000

600,000

800,000

1,000,0001,200,000

1,400,000

2002-03

2003-04

2004-05

2005-06

2006-07

2007-08

COM. VEH EXPORT

P SS. VEH EXPORT

3 WHEELER EXPORT

2 WHEELER EXPORT

GR ND TOT LPRODN


27/48


28/48

0

2, 000 ,000

4, 000 ,000

6, 000 ,000

8, 000 ,000

1 0 ,000 ,000

12, 000 ,000

200 2- 0 3 2 00 3- 0 4 2 00 4- 0 5 2 00 5- 0 6 2 00 6- 0 7 2 00 7- 0 8

.

.

.

I L

3

3 I L

3

2

2 I L

2

rand otal

rand otal I L


29/48

Malaysia*Thailand

Bangladesh *Nepal, Sri Lanka

Kenya*

Russia*Ukraine*U.K.

Italy

Senegal

AfghanistanUzbekistan

Brazil

South Africa*

Egypt

Saudi ArabiaIraq, Iran

ChinaSouth Korea*

LATAM

West Africa

North Africa

West Europe

Central AsiaEast Asia

South Asia

South East Asia

West Asia

East AfricaSouth Africa

* Assembly Operations also

O THER CO LLABO RATIO NS/M&A & JVsTata Daewoo Commercial VehicleHispano in Spain & Marcopolo In BrazilJV with Jardine Matheson for

ConcordeMotorsTechnology Tie Ups at Spain,Italy

TATA Global Footprint

29


30/48

Analysis of current scenario

High interest rates, high domestic oil prices and

inadequate vehicle financing have continued to affect

the overall automobiles sector

The current slowdown in economic growth and

automobiles industry has further deteriorated due to the

global financial market crisis which has created

volatility in stock markets and exchange rates and

aggravated lack of liquidity


31/48

Continued....

A utomobile companies are reducingproduction by shutting plants for a few days toavoid inventory build-up and in anticipation of

seeing further downside


32/48

F our w h eeler industry performance

Volumes plummeted 23.6% to 100k in Nov08, led by a 21.2% decline in

volumes of A2 segment (55% of domestic market) to 61k units

The overall industry de-grew by 8.1% to135k units in Nov08.


33/48


34/48

T wo w h eeler Industry performance

volumes declined by 14.7% to 567k units as compared to 665k units in Nov07


35/48

T h e Key player.


36/48


37/48


38/48


39/48


40/48


41/48


42/48


43/48


44/48


45/48


46/48

Indian Auto - M ajor S egments

Domestic MarketShare for 2007-08

CVs 5.05%

Total Passenger Vehicles 16.4%Total Two Wheelers

75.13%Three Wheelers

3.78%


47/48

Key Players S egment-wise


48/48

effects of global meltdown on indian auto industry

Documents