Indian Auto Industry Investment Analysis
Indian Auto Industry Investment Analysis
An embryonic automotive industry emerged in India in the 1940s. Mahindra & Mahindra was
established by two brothers as a trading company in 1945, and began assembly of Jeep CJ-3A utility
vehicles. Following the independence, in 1947, the Government of India and the private sector launched
efforts to create an automotive component manufacturing industry to supply to the automobile
industry. However, the growth was relatively slow in the 1950s and 1960s due to nationalisation and the
license raj which hampered the Indian private sector. Total restrictions for import of vehicles was set
and after 1970 the automotive industry started to grow, but the growth was mainly driven by tractors,
commercial vehicles and scooters. Cars were still a major luxury. Eventually multinational automakers,
such as, though not limited to, Suzuki and Toyota of Japan and Hyundai of South Korea, were allowed to
invest in the Indian market ultimately leading to the establishment of an automotive industry in India. A
number of foreign firms also initiated joint ventures with Indian companies.
As of 18 March, 2013 global brands such as Proton Holdings, PSA Group, and Geely Holding Group are
shelving plans for India due to the global economic crisis
TABLE OF CONTENT
S.NO. PARTICULARS
Chapter 1. Introduction
Chapter 2. Objective of the Project
Chapter 3. Analysis of Indian Automobile Industry
∙ Fundamental Analysis
i. Economy
ii. Industry
iii. Company- Financial & Non-Financial
∙ Technical Analysis
i. Share Price Analysis
ii. Moving Average
iii. Moving Average Crossover
iv. Bollinger Band
v. M.A.C.D
Chapter 4 Conclusion & Recommendations
Chapter 5 Bibliography
Annexure
INTRODUCTION
The automotive industry in India is one of the larger markets in the world and had previously
been one of the fastest growing globally, but is now seeing flat or negative growth rates.[1] India's
passenger car and commercial vehicle manufacturing industry is the sixth largest in the world, with an
annual production of more than 3.9 million units in 2011.[2] According to recent reports, India overtook
Brazil and became the sixth largest passenger vehicle producer in the world (beating such old and new
auto makers as Belgium, United Kingdom, Italy, Canada, Mexico, Russia, Spain, France, Brazil), grew 16
to 18 per cent to sell around three million units in the course of 2011-12.[3] In 2009, India emerged as
Asia's fourth largest exporter of passenger cars, behind Japan, South Korea, and Thailand.[4] In 2010,
India beat Thailand to become Asia's third largest exporter of passenger cars.
As of 2010, India is home to 40 million passenger vehicles. More than 3.7 million automotive vehicles
were produced in India in 2010 (an increase of 33.9%), making the country the second (after China)
fastest growing automobile market in the world in that year.[5][6] According to the Society of Indian
Automobile Manufacturers, annual vehicle sales are projected to increase to 4 million by 2015, no
longer 5 million as previously projected.
The majority of India's car manufacturing industry is based around three clusters in the south, west and
north. The southern cluster consisting of Chennai is the biggest with 35% of the revenue share. The
western hub near Mumbai and Pune contributes to 33% of the market and the northern cluster around
the National Capital Region contributes 32%. Chennai, with the India operations of Ford, Hyundai,
Renault, Mitsubishi, Nissan, BMW, Hindustan Motors, Daimler, Caparo, and PSA Peugeot Citroën is
about to begin their operations by 2014. Chennai accounts for 60% of the country's automotive
exports.[8] Gurgaon and Manesar in Haryana form the northern cluster where the country's largest car
manufacturer, Maruti Suzuki, is based. The Chakan corridor near Pune, Maharashtra is the western
cluster with companies like General Motors, Volkswagen, Skoda, Mahindra and Mahindra, Tata Motors,
Mercedes Benz, Land Rover, Jaguar Cars, Fiat and Force Motors having assembly plants in the area.
Nashik has a major base of Mahindra & Mahindra with a UV assembly unit and an Engine assembly unit.
Aurangabad with Audi, Skoda and Volkswagen also forms part of the western cluster. Another emerging
cluster is in the state of Gujarat with manufacturing facility of General Motors in Halol and further
planned for Tata Nano at their plant in Sanand. Ford, Maruti Suzuki and Peugeot-Citroen plants are also
set to come up in Gujarat.[12] Kolkata with Hindustan Motors, Noida with Honda and Bangalore with
Toyota are some of the other automotive manufacturing regions around the country.
Indian automotive companies
⮚ Maruti Suzuki is the largest Indian passenger vehicle manufacturer in the local market
Maruti Swift in India. Maruti Suzuki is 54.2% owned by the Japanese Suzuki Motor
Corporation Chinkara Motors: Beachster, Hammer, Roadster 1.8S, Rockster, Jeepster,
Sailster
⮚ Force Motors: One
⮚ Hindustan Motors: Ambassador
⮚ ICML: Rhino Rx
⮚ Mahindra: Major, Bolero, Scorpio, Thar, Xylo, Verito, Genio, XUV500, Quanto.
⮚ Premier Automobiles Limited: Sigma, RiO
⮚ San Motors: Storm
⮚ Maruti Suzuki (subsidiary of Japanese auto maker Suzuki) 800, Alto, Alto800, WagonR,
Estilo, A-star, Ritz, Swift, Swift DZire, SX4, Omni, Eeco, Gypsy, Ertiga
⮚ Tata Motors: Nano, Indica, Vista, Indigo, Manza, Indigo CS, Sumo, Grande, Venture,
Safari, Xenon, Aria
⮚ Jaguar Land Rover (subsidiary of Tata Motors) Land Rover Freelander 2
OBJECTIVE OF THE PROJECT
The objective of this project is deeply analyze our Indian Automobile Industry for investment
purpose by monitoring the growth rate and performance on the basis of historical data.
To understand this industry for the purpose of investment we need to analyze it by following two
approaches:
a. Economy
b. Industry
c. Company
2).Technical Analysis
1) FUNDAMENTAL ANALYSIS
a). ECONOMY
Economic analysis is the analysis of forces operating the overall economy a country. Economic
analysis is a process whereby strengths and weaknesses of an economy are analyzed. Economic
analysis is important in order to understand exact condition of an economy.
In absolute terms, India is 16th in the world in terms of nominal factory output. The service sector
is growing rapidly in the past few years. This is the pie- chart showing contributions of different
sectors in Indian economy.
The per capita Income is near about Rs38,000 reflecting improvement in the living standards of
an average Indian.Today, automobile sector in India is one of the key sectors of the economy in
terms of the employment.Directly and indirectly it employs more than 10 million people and if we
add the number of people employed in the auto-component and auto ancillary industry then the
number goes even higher.
As the world economy slips into recession hitting the demand hard and the banking sector takes
conservative approach towards lending to corporate sector, the GDP growth has downgraded it to
7.1 per cent for 2008-09 and predicted it to be 6.5 per cent for FY 2009-10 Mr. Montek Singh
(Planning Commission of India). Following is the graph showing a trend of Indian GDP trend in
past 3 years.
Sales,
industry,
26%, 26%
service
agriculrure
Sales, service,
industry
Sales, 57%, 57%
agriculrure,
17%, 17%
Recession
All the major auto companies enjoyed the high growth ride till the mid 2008. But at the end of
the year,industry had to face the hard truth and witnessed the fall in sales compared to last year.
In December 2008, overall production fell by 22 % over the same month last year. Global
recession has hit the Indian auto industry, India is strong and growing industry but the impact of
recession is evident now on industry as sales & growth of automobile companies have declined.
Passenger Vehicles segment registered negative growth. One of its supporting facts is that the
sales in December 2008 for passenger vehicles fell by 13.86% over December 2007 Two
Wheelers registered minor growth of 1.85 % during April – December 2008. However, Two
Wheelers sales recorded 15.43 percent fall in December 2008 over the same month last
year. Although the sector was hit by economic slowdown, overall production (passenger
vehicles, commercial vehicles, two wheelers and three wheelers) increased from 10.85 million
vehicles in 2007-08 to 11.17 million vehicles in 2008-09. Passenger vehicles increased
marginally from 1.77 million to 1.83 million while two-wheelers increased from 8.02 million to
8.41 million. Total number of vehicles sold including passenger vehicles, commercial vehicles,
two-wheelers and three-wheelers in 2008-09 was 9.72 million as compared to 9.65 million in
2007-08.
Inflation
Despite of negative inflation these days (-.21% on 22-Aug-09) we saw an increasing trend of
sales in auto sector. A moderate amount of inflation is important for the proper growth of an
economy like India because it attracts more private investment. The fall in wholesale prices from
a year earlier is mainly due to a statistical base effect and doesn’t suggest contraction in demand,
the Reserve Bank of India said few week back, while revising its inflation forecast for the FY
through March to around 5% from 4%.
In last FY despite of skyrocketing oil prices (crude oil price has already up to $130 compared to
$20 per barrel five years back), Indian automobile Industry was not as much affected and experts
think that Indian automobile industry will continue to grow this year despite all obstacles- oil
price hike, higher interest rates. However, the effect of inflation has affected every sector which
is related to car manufacturing and production. The increase in the price of fuel and the steel due
to inflation has led to a slower growth rate of the car industry in India. The effect of inflation has
taken the rise in the price rate of the cars by 3-4% which in turn suffices the need to meet the rise
in price of the raw materials to buildna car. The car market and the car industry witnessed a fall
of 8-9%.
FDI’s
In India FDI up to 100 percent, has been permitted under automatic route to this sector, which
has led to a turnover of USD 12 billion in the Indian auto industry and USD 3 billion in the auto
parts industry.
India enjoys a cost advantage with respect to casting and forging as manufacturing costs in India
are 25 to 30 per cent lower than their western counterparts the Investment Commission has set a
target of attracting foreign investment worth US$ 5 billion for the next seven years to increase
India's share in the global auto components market from the existing 0.9 per cent to 2.5 per cent
by 2015. FDI inflows in Automobile Industry 2008-09 was Rs.5,212 Cr an increase of 47.25%
compare to 2007-08, while in April-May 2009 it was around Rs.497 Cr.
Foreign Exchange
India holds the third largest stock of reserves among the emerging market economies after China
and Russia. The overall approach to the management of India's foreign exchange reserves in recent
years reflects the changing composition of the balance of payments and the 'liquidity risks
associated with different types of flows and other requirements.
Taking these factors into account, India's foreign exchange reserves continued to be at a
comfortable level and consistent with the rate of growth, the share of external sector in the
economy and the size of risk-adjusted capital flows. Following is the table shows the trend of
foreign reserves held by central bank in last FY. Reserves came down cause of recession all over
the world however India still able to maintain its reserves hence a minor fall was seen compare to
all other country which shows great strength in long-term for Indian Economy. Increase in Exports
specially from auto industry shows an expectations of huge income from western countries and
new $200 bl. target for exports by 2011 helps in increasing.
1 FCA (Foreign Currency Assets): FCAs are maintained as a multicurrency portfolio comprising
ajor currencies, such as, US dollar, Euro, Pound sterling, Japanese yen, etc. and is valued in terms
of US dollars.
2. SDR (Special Drawing Rights): Values in SDR have been indicated in parentheses.
India's automobile exports have grown consistently and reached $4.5 billion in 2009, with United
Kingdom being India's largest export market followed by Italy, Germany, Netherlands and South
Africa. India's automobile exports are expected to cross $12 billion by 2014.
According to New York Times, India's strong engineering base and expertise in the manufacturing
of low-cost, fuel-efficient cars has resulted in the expansion of manufacturing facilities of several
automobile companies like Hyundai, Nissan, Toyota, Volkswagen and Maruti Suzuki. In 2008,
South Korean multinational Hyundai Motors alone exported 240,000 cars made in India. Nissan
Motors plans to export 250,000 vehicles manufactured in its India plant by 2011.Similarly, US
automobile company, General Motors announced its plans to export about 50,000 cars
manufactured in India by 2011.
In September 2009, Ford Motors announced its plans to set up a plant in India with an annual
capacity of 250,000 cars for US$500 million. The cars will be manufactured both for the Indian
market and for export. The company said that the plant was a part of its plan to make India the hub
for its global production business. Fiat Motors also announced that it would source more than
US$1 billion worth auto components from India.
In July 2010, The Economic Times reported that PSA Peugeot Citroën was planning to re-enter
the Indian market and open a production plant in Andhra Pradesh with an annual capacity of
100,000 vehicles, investing EUR 700M in the operation.[80] PSA's intention to utilise this
production facility for export purposes however remains unclear as of December 2010. In 2009
India (0.23m) surpassed China (0.16m) as Asia's fourth largest exporter of cars after Japan
(1.77m), Korea (1.12m) and Thailand (0.26m) by allowing foreign carmakers 100% ownership of
factories in India, which China does not allow.
In recent years, India has emerged as a leading center for the manufacture of small cars. Hyundai,
the biggest exporter from the country, now ships more than 250,000 cars annually from India.
Apart from Maruti Exports' shipments to Suzuki's other markets, Maruti Suzuki also manufactures
small cars for Nissan, which sells them in Europe. Nissan will also export small cars from its new
Indian assembly line. Tata Motors exports its passenger vehicles to Asian and African markets,
and is in preparation to launch electric vehicles in Europe in 2010. The firm is also planning to
launch an electric version of its low-cost car the Tata Nano in Europe and in the U.S. Mahindra &
Mahindra is preparing to introduce its pickup trucks and small SUV models in the U.S. market.
Bajaj Auto is designing a low-cost car for Renault Nissan Automotive India, which will market
the product worldwide. Renault Nissan may also join domestic commercial vehicle manufacturer
Ashok Leyland in another small car project.[81] While the possibilities are impressive, there are
challenges that could thwart future growth of the Indian automobile industry. Since the demand
for automobiles in recent years is directly linked to overall economic expansion and rising personal
incomes, industry growth will slow if the economy weakens.
· India ranks 5th pertaining to the number of bus and truck sold in the world
Volkswagen, Toyota, Nissan & Ford plan new cars to cash in on fastest-growing compact car
section of car market in India.
Sales of different Auto Companies speed up even before festive season Maruti by 29%, TATA by
11%,Skoda Auto 33%, Hero Honda 33%, Mahindra 42%, Yamaha 63% etc.
It is expected that the Automobile Industry in India would be the 7th largest automobile market
within the year 2016.
· The domestic two-wheeler sales will grow at a CAGR of 8.8% by 2014 at 11.3 million units.
· To emerge as the destination of choice in the world for design and manufacture of automobiles
and auto components with output reaching a level of US$ 145 billion accounting for more than
10% of the GDP and providing additional employment to 25 million people by 2016.
Manufacturing facilities in india
Gujarat
Passenger Vehicles
Commercial Vehicles
Haryana
Two wheelers
Honda – Manesar
Suzuki – Gurgaon
Passenger Vehicles
Himachal Pradesh
Two wheelers
Passenger Vehicles
Commercial Vehicles
Jharkhand
Commercial Vehicles
[edit]Karnataka
Two wheelers
Passenger Vehicles
Commercial Vehicles
Madhya Pradesh
Two wheelers
Mahindra & Mahindra – Pithampur
Commercial Vehicles
Maharashtra
Two wheelers
Passenger Vehicles
Volkswagen – Chakan
Audi AG – Aurangabad
Commercial Vehicles
Punjab
Commercial Vehicles
[edit]Rajasthan
Passenger Vehicles
Commercial Vehicles
Tamil Nadu
Two wheelers
Passenger Vehicles
Mitsubishi – Tiruvallur
Commercial Vehicles
BharatBenz – Oragadam
[edit]Uttar Pradesh
Commercial Vehicles
Two Wheeleers
Passenger Vehicles
The current trends of the global automobile industry reveal that in the developed countries the
automobile industries are stagnating as a result of drooping markets, whereas the automobile
industry in the developing nations, have been consistently registering higher growth rates every
passing year for their domestic flourishing domestic automobile markets.
Being one of the fastest growing sectors in the world its dynamic growth phases are explained by
the nature of competition, Product Life Cycle and consumer demand. The industry is at the
crossroads with global mergers and relocation of production centers to emerging developing
countries.
In 2009, estimated rate of growth of India Auto industry is going to be 9% .The Indian automobile
sector is far from being saturated, leaving ample opportunity for volume growth.
The automobile industry comprises of Heavy vehicles (trucks, buses, tempos, tractors); passenger
cars; Two-wheelers; Commercial Vehicles; and Three-wheelers.
Following is the segmentation that how much each sector comprises of whole Indian Automobile
Industry.
Atomobile Atomobile
Chart Title
Atomobile Segment, three Segment,
Segment, wheeler, 3.60%, commercial
passenger vehicle, 4% vehicle, 3.95%,
15.96%, 16% 4%
two wheeler
passenger vehicle
Atomobile
Segment, two three wheeler
wheeler, 76.49%,
commercial vehicle
76%
Industrial Analysis of any industry can be done based on the following headings:
1. Five Forces Model
2. BCG Matrix
4. SWOT Analysis
Michael Porter identifies five forces that influence an industry. These forces are
· Degree of Rivalry
Despite the high concentration ratio seen in the automotive sector, rivalry in the Indian auto sector
is intense due to the entry of foreign companies in the market. The industry rivalry is extremely
high with any being product being matched in a few months by the competitors. This instinct of
the industry is primarily driven by technical capabilities acquired over years of gestation under the
technical collaboration with international players.
· Threat of Substitutes
The threat of substitutes to the automotive industry is fairly mild. Numerous other forms of
transportation are available, but none offer the utility, convenience, independence and value
offered by automobiles. The switching cost associated with using a different mode of
transportation, may be high in terms of personal time, convenience and utility.
· Barriers to entry
The barriers to enter automotive industry are substantial. For a new company, the startup capital
required to establish manufacturing capacity to achieve minimum efficient scale is prohibitive.
Although the barriers to new companies are substantial, establishing companies are entering the
new markets through strategic partnerships or through buying out or merging with other
companies. However, a domestic company, with local knowledge and expertise, has the potential
to compete its home market against the global firms who are not well established there.
· Supplier’s power In the relationship between the industry and its suppliers, the power axis is
tipped in industry’s favor. The industry is comprised of powerful buyers who are generally able to
dictate their terms to the suppliers.
· Buyers’ Power
In the relationship between the automotive industry and its ultimate consumers, the power axis is
tipped in the consumers’ favor. This is due to the fairly standardized nature and the low switching
costs associated with selecting from among competing brands.
In an economy, different industries are present and different industries have different growth rate
as compared to the growth of the economy. In an economy, there are a number of major industries
and they all occupy different positions in the BCG matrix according to their growth and
contribution towards the economy. In the Indian economy, some of the major sectors are FMCG,
automobiles, banking and insurance, steel, telecom, software, pharmacology and retail sectors and
these can be placed in the different positions in the matrix as shown below:
Strengths
Weaknesses
· Infrastructure bottleneck
Opportunities
Threats
Industry specific index also called as sectoral index are those indices, which represent a specific
industry sector. All stocks in a sectoral index belong to that sector only. Hence an index like the
BSE auto index is made of auto stocks. Sectoral Indices are very useful in tracking the movement
and performance of particular sector. BSE Auto Index comprises all the major auto stocks in the
BSE 500 Index.
·
COMPANY
Above is the Indian Auto Industry Index(BSE) shows the up’s and down’s over the period of 5
years.
Intially in 2003 when major giants got listed on stock exchange TATA Motors, Maruti Suzuki,
etc. Indian auto industry start picking up growth slowly in the first end of 1st quarter index reaches
to its highest in his history. Than we saw a steady fall in the index and in the mid 2006 reaches to
years lowest point it again start booming and than year on year we saw a up and down movement
in the index as lots of new players came in Indian market with foreign colaboration but when 2008
came with global slowdown it brings the demand of automobile so low that index reaches to its
lowest in past 5year . Most of the company even shut down their manufacturing units for more
than a week, production came down because of less demand in the economy. Also no further
launches were made in mid or late 2008 and postponed to next year. We have also saw a fall in
FDI’s in automobile Industry. But in the beginning of 2009 right from 1st quarter auto industry
again start regaining and we saw a tremondous growth in auto industry which never seen before
not in india but all over the world. The demand of 2 and 4 Wheelers start increasing rapidly which
also force auto industry to employ more workers to meet demand and within the 2nd quarter of
FY2009-10 Auto index reaches to its highest ever crossed mark of 6000. And this growth of
industry will be carry further as festive season still to come, so there is a lot of scope to growth in
this industry.
The company analysis shows the longterm strenght of the company that what is the financial
Position of the company in the market where it stand among its competitors and who are the key
drivers of the company, what is the future plans of the company, what are the policies of
government towards the company and how the stake of the company divested among different
groups of people.
Maruti Suzuki is one of India's leading automobile manufacturers and the market leader in the car
segment, both in terms of volume of vehicles sold and revenue earned. Until recently, 18.28% of
the company was owned by the Indian government, and 54.2% by Suzuki of Japan. As of May 10,
2007, Govt. of India sold its complete share to Indian financial institutions. With this, Govt. of
India no longer has stake in Maruti Udyog.
The turnover for the fiscal 2008-09 stood at Rs. 203,583 Million & Profit After Tax at Rs.
12,187ml.Maruti Suzuki India Ltd. has sold a total of 84,808 vehicles in August 2009, an increase
of 41.6%, compared to 59,908 vehicles in the same period of 2008. The company's domestic sales
in August 2009 increased 29.3% to 69,961 vehicles, compared to 54,113 vehicles in August 2008.
Total passenger car sales in August 2009 increased 30.5% to 69,629 units, compared to 53,351
units in August 2008 The company's exports increased 156.2% to 14,847 units, compared to 5,795
units in August 2008.
It is the leader in commercial vehicles in each segment, and among the top three in passenger
vehicles with winning products in the compact, midsize car and utility vehicle segments. The
company is the world’s fourth largest truck manufacturer, and the world’s second largest bus
manufacturer.
Following is the financial and Non-Financial analysis of Maruti Suzuki & TATA Motors.
· Financial Analysis
1. Financial Statements
EPS measures the profit available to the equity shareholders per share, that is, the amount that they
can get on every share held. Till 2008 both the companies had a rising EPS but in 2009 both of
them fall and the effect more on Tata motors as they bought two brands Ford Motors and fall in
sales results in low EPS. But as trend shows TATA motors have potential so an shareholder expect
better in future.
EPS = Net income- Dividends on Preferred stock
The trend shows that Tata’s net profit margin is quite stable until it falls to 3.77 in 2009. While
the net profit of India’s no.1 car manufacturer Maruti Suzuki shows a negative trend from 2007
onwards. But the future prospect for both the company’s profit is higher. Profit margins come
down as recession hits economy badly hence sales get reduced and cost get increased very much.
The quick ratio is a very stringent measure of solvency. A general rule of thumb suggests that the
quick ratio should be around 1. Maruti is always showing a positive trend as its ratio is always
greater than 1 except in 2008, while TATA motors was doing good till 2007, but the performance
decreased from 2008 onwards as shortage of cash was there and current liabilities and provision
increased by Rs800Cr. A high debt to equity ratio suggests that a company has financed its growth
mostly via debt. We see that the debt –equity ratio of TATA motors is very high compared to that
of Maruti. It means that a lot of debt is used by TATA’s to finance its increased operations.
Sometimes the cost of the debt financing may outweigh the return that the company generates on
the debt through investment and business activities and can lead to bankruptcy. Maruti is going
very swiftly in this field.
Total Equity
acts as an indication that the firm is able to generate funds to make all needed payments in the
future; thus, the ratio indicates whether the firm is likely to be a going concern. Both the companies
possess a good ratio but the ratio which is close to 2 is desirable, so we see in graph that Maruti
has more strong liquidity than TATA Motors as its current ratio is always greater than 1. Maruti
is more successful in paying off its liabilities. Expansion plans of TATA brought down its cash &
Bank Balance and increase of outside liabilities. Tata motors and Maruti Suzuki both the
companies showed a positive trend in paying dividends till 2008, but the scenario changed in 2009
as both the company’s dividend per share fell. According to graph TATA’s dividend was much
higher than that of Maruti, it always provided dividend of above 10 per share to its shareholders
while maruti stick to below 5 per share, even though the fall in dividend in 2009, still both the
companies are earning good profit.
Though it has an advantage in India, thanks to low costs and government policies it soon faces
stiff competition from it multinational competitors all eyeing for a share in the ever growing Indian
auto sector. The policies adopted by Government will increase competition in domestic market,
motivate many foreign commercial vehicle manufactures to set up shops in India, whom will make
India as a production hub and export to nearest market.
· FIIs including overseas corporate bodies (OCBs) and NRIs are permitted to invest up to 49 per
cent of the paid-up equity capital of the investee company, subject to approval of the board of
directors and of the members by way of a special resolution. .
· Investments in making auto parts by a foreign vehicle maker will also be considered a part of the
minimum foreign investment made by it in an auto-making subsidiary in India. The move is aimed
at helping India emerge as a hub for global manufacturing and sourcing for auto parts.
· Specific component of excise duty applicable to large cars and utility vehicles will be reduced to
15,000 rupees per vehicle from 20,000 rupees earlier.
· The Proposal by the Govt. to set up an expert group to advise on a viable and sustainable system
of pricing petroleum products, as this will surely had an impact on the Automobile Industry.
· The announced reduction on the basic customs on bio-diesel is great news for all companies
working on environmental saving technologies.
CONCLUSION
Indian Automobile Industry is in the growth phase and the expected growth rate is 9-10% for
FY2009-10 compare to last year growth rate which was just 0.7% and the above facts and figures
in our study also support this truth.
Indian Automobile has a lot of scope for both two wheelers and four wheelers due to development
in infrastructure of the country and especially the rural sector in which demand of two wheeler has
increased even in recession. According to Indian Statistical Organization the per capita income
(Rs.38000) is increasing and national income at the rate of 14.4% which shows potential to buy
vehicle in auto industry. The growth rate of Indian Automobile is so fast that by 2016 Indian
Industry will be world 7 largest manufacturer in all sections.
The Indian auto market is still untapped the majority of the people in country don’t own a four
wheeler and all the major auto companies are trying to increase their sales by several moves. Like
TATA has launch NANO the people’s car and now TATA motors is also planning to come out
with an electric car as well as hybrid car, moreover in two wheeler segment many companies like
Mahindra and Mahindra grow even more than expectations.
From the Technical Analysis of both companies we come to know that the share price of Maruti
will move in the band of Rs.1275 to Rs.1425 and that of TATA Motors will move in the range of
Rs. 430 to Rs. 490 if certain correction made in the market.
We have also come to know that share price movement of TATA Motors is just according to the
movement of SENSEX, whenever there is a negative sentiment in the market regarding TATA
Motors there is a steep fall in the stock price of TATA Motors but we have seen quick recovery in
its share prices to regain its primary trend E.g as we seen in last 3-4 months TATA recovers
approx.90% after downfall. By analyzing the current trend of Indian Economy and Automobile
Industry we can say that being a developing economy there is lot of scope for growth and this
industry still have to cross many levels so there is huge opportunities to invest in and this is proving
as more and more foreign Companies setting up there ventures in India.
RECOMMENDATIONS
By analyzing the industry on various parameters with the help of implementing Fundamental and
Technical tools we came to know that this industry has a lot of potential to grow in future. So
recommending to invest in Automobile Industry have no doubt is going to be a good and smart
option because this industry is booming like never before not only in India but all around the world.
The returns which came out of this industry were very impressive recently, as if we take an
example of TATA motors it gives approx 90% return in a period of just 3 months while Maruti
Suzuki shows always a buy and hold position because there is possibility of growth in future, same
situation is in two wheeler segment with market leader Hero-Honda a debt free company also have
bright future ahead. The numbers which came out in the end of financial year 2009 prove that even
in the period of recession the overall sales went up is sufficient to support to this fact. Through
Technical analysis of TATA Motors and Maruti it can be recommended that for now Maruti share
price shows that it’s a time to hold the position or buy more shares as there is scope in further rise
in share prices until and unless any negative reaction or sentiments comes in the Economy.
Investing in Maruti Suzuki for long time could be a good option whereas in TATA motors there is
a chance of getting correction, as it already went on high side in a very short period of time so
holding the shares for long time could be a wrong step, so at this point of time those who invested
earlier can book their profit or new investors can buy now and sell with in short period of time by
earning profit in short period of time.
BIBLIOGRAPHY
www.bseindia.com
www.googlefinance.com
www.yahoofinance.com
www.google.co.in
www.moneycontrol.com
www.worldfact.com
www.rbi.org.in
Economic Times