Chapter-m

Profile of
Automobile Industry
 CHAPTER-III
PROFILE OF AUTOMOBILE INDUSTRY
3.1 INTRODUCTION
The broad aim of this chapter is to study the Indian Automobile Sector and the
changing forms of innovation in Indian automotive firms over the last few years.
Starting with a broader contextual view of the automotive sector, to give a flavour of
the general industrial environment and their effects on receivables of the Automobile
sector. This has shown remarkable trends over the last two decades. In this chapter we
will study the development path of the industry through the changes in policies and an
econometric analysis of quantitative and qualitative data to understand the nature and
extent of capability building processes at the firm level in the automotive industry.
3.2 HISTORY AND GROWTH OF INDIAN AUTOMOBILE SECTOR.
It begins from 1769. The automobile sector is one of the key factor of the economy
having extensive forward and backward linkages with other key factors of the
economy. It contributes about 4 per cent in India's Gross Domestic Product (GDP)
and 5 per cent in India's industrial production. Indian Automobile sales growth rate
would be 9.5 % by 2010. Indian market before independence was seen as a market for
imported vehicles while assembling of cars manufactured by General Motors and
other brands. Indian automobile industry mainly focused on servicing, dealership,
financing and maintenance of vehicles. Later only after a decade from independence
Companies started manufacturing. Since independence the Indian automobile industry
faced several challenges and hurdles like manufacturing capability was restricted by
the rule of license and could not be increased but still it lead to growth and success it
has achieved today.
Last three decades the total production of passenger cars was limited. Even the
production was limited to three main manufacturers Hindustan Motors, Premier
Automobiles and Standard Motors. There was no expertise or research &
development initiative taking place. Initially labour was unskilled and had to go
through a process of learning through trial and error. In the 1950’s, The Morris
Oxford, became the Ambassador, the Fiat 1100 became the Premier Padmini. Then in
1960's nearly 98% of the product was developed indigenously. There were signi ficant
changes witnessed by the end of 1970's in the automobile industry. Strong and huge

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41
initiatives like joint ventures for light commercial vehicles did not succeed. Till later
part of 1980's India by and large followed a socialist system.
The Indian Automobile industry includes two-wheelers, trucks, cars, buses and three-
wheelers which play a crucial role in growth of the Indian economy. India has
emerged as Asia's fourth largest exporter of automobiles, behind Japan, South Korea
and Thailand. The country is expected to top the world in car volumes with
approximately 611 million vehicles. The Economic progress of this industry is
indicated by the amount of goods and services produced which gave the capacity for
transportation and boost the sale of vehicles. There is a huge increase in automobile
production with the effect by indirectly increasing the demand for a number of raw
materials like steel, rubber, plastics, glass, paint, electronics and services.
The Automobile industry is one of the key functions of economic growth of the
nation. Government has relicensing of the sector in 1991 and the subsequent opening
up of 100 percent FDI through automatic route; Indian automobile sector has come a
long way. Today, almost every global auto major has set up facilities in the country.
The world standings for the Indian automobile sector, as per their genre, which are as
follows:
• Largest three-wheeler market
• Second largest two-wheeler market
• Tenth largest passenger car market
• Fourth largest tractor market
• Fifth largest commercial vehicle market
• Fifth largest bus and truck segment
The automobiles sector is divided into four segments - two-wheelers (mopeds,
scooters, motorcycles, electric two-wheelers), passenger vehicles (passenger cars,
utility vehicles, multi-purpose vehicles), commercial vehicles (light and medium-
heavy vehicles), and three wheelers (passenger carriers and good earners). This has
shown by the following chart of the genre of automobile sector.

42
 Genre of Indian Automotive Industry.

The main focus of the government was development through heavy, long gestation,
capital intensive projects like steel manufacturing. Priority was to the quality of the
finished goods and customer feedback.
The auto sector reported a extensive growth rate of 26 percent in the last two years
(2010-2012). The BSE AUTO Index outperformed the benchmark Nifty by 79%, 12%
and 19% in FY10, FY11 and FY12, respectively.
The Government recognizes the impact of the Automobile sector on the nation’s
economy, and consequently, the automotive vision Plan 2016 launched by to grow the
industry to a size of US $145bn by 2016 and make it contribute 10 percent to the
nation’s GDP.
However, the sector has shown a sluggish growth of 12 percent in 2012. The trend is
likely to stay with a 10 percent growth outlined for 2013 citing high ownership costs
(fuel costs, cost of registration, excise duty, road tax) and slow rural income growth.
Solid but cautious growth is expected over the next few years. However, from a long­
term perspective, rising incomes, improved affordability and untapped markets
present promising opportunities for automobile manufactures in India. According to
Macquarie equities research, sale of passenger vehicles is expected to double in the

43
next four years and growth anticipated is higher than the 16 percent achieved in the
past 10 years. Two-wheeler vehicle segment is expected to show slow growth of 10
percent CAGR over the period of 2012-2016.
In the early 21st century, with the original four Asian Tigers at or near to fully
developed status, attention has increasingly shifted to other Asian economies such as
China and India, which are experiencing rapid economic transformation at the present
time and are thus leading a sort of redistribution of the epicentre of global innovative
activities. India initiated economic reforms, beginning in the 1980’s, which became
comprehensive in the early 1990’s. The reforms included significant liberalizations of
the external control regime and increased imports and for foreign investments. The
manufacturing industry has evolved; being chiselled by India’s liberalizing trade and
investment regimes.
In the next part we will study the general industrial and economic environment of
automotive industry by providing its evolutionary pattern since independence and
presenting how technological capability of this industry has evolved through various
decades. (ACIM,2010)
3.2.1 Evolution of the Indian Automotive Industry
This sub-section presents an evolutionary analysis of Indian automotive industry's
growth over the four decades since independence. The evolution of India's
automotive industry from a fairly slow-paced growth (from 1940s till 1980s) to the
recent impressive showing of dynamism owes fonnidable precedence to history.
Indian automotive industries’ wholesome development since independence in 1947,
one would most certainly huddle with either political surmise of industrial
developments.
India’s industrial development is characterized by more complex processes than one
can find in other transition economies and industrialized nations. If one keenly
observes the differences in industrial development of some transition economies with
India, among many distinct observations (e.g., a clear and favourable state patronage
to liberalization at the initial phase of development), an interesting aspect would
emerge, which to my knowledge has flayed the probing eyes of industrial economists
or political scientists. India’s development and its sustainability in any economy is
contingent upon the stock and accumulation of human capital. The number of
educated people among young generations during 1960s and 1970s could make the

44
key difference between the paces of industrial development in the comparable nations,
(Parkhi Mamta, 2008)
3.2.2 India’s automotive growth
Indian automotive industry’s build up their role from the pre-independence period till
date shows distinct phases. It all started in 1940s for the first embryonic automotive
industry to emerge in the pre-independent India. Almost after a decade and a half
since then, leading entrepreneurs and the government in the independent India have
extended efforts to create a manufacturing industry to supply the automotive industry
with components in 1953. This was the beginning of the take-off phase of Indian
economy. In the next three decades, the growth in the automotive industry did not
stand as the national economic growth was constantly following the Hindu rate of
growth - an annual growth that stagnated between 3.5 percent over 1950-1980.
Despite the sluggish growth of the economy during that time, the automotive industry
began to witness a relatively fast growth during 1970-1980 mainly due to the leading
production role of Ashok Leyland’s, Mahindra & Mahindra, Hindustan Motors,
Premier Automobiles, and Bajaj Auto.
The global automotive productions were severely checked by the Indian government
by introducing several licenses, trade restrictions and banders. However, the growing
demand for more cars since 1980s has changed the whole growth scenario. During
1980-1985 the first major change was sighted as Japanese manufacturers began to
build car and commercial vehicle factories in India in partnership with Indian firms.
At the same time, component manufacturers also entered the joint-venture scenario
with European and US firms.
During the period of economic reforms (that is during 1985-1990) the industry
marked the entry of Maruti Udyog into the production of passenger car segment as
persistent high import tariffs were relaxed to a great extent, and with lesser import
cost adding to the overhead production cost, higher productions were possible leading
to the start of growing exports. This period registered the triumph of liberalization
which kick-started the much awaited reform for the automotive sector paving the way
for the firms which were genuinely waiting for join-ventures, private investment with
duty-free technology transfer indirectly through FDI and directly by importing the
new technologies. It is during 1990-1995, Hero Honda emerged as a major operator in
the motorcycle market while Maruti Udyog established itself as the leading passenger
car maker. During 1995-2000, leading international car makers entered the Indian

45
market, a trend that continues to accelerate till this date. During this time advanced
technology was introduced to meet competitive pressures, and environmental and
safety imperatives. The automobile companies started investing in service network to
support maintenance of on-road vehicles and auto financing started emerging as an
important driver for demand.
Since 2000, significant impacts on trade and investment restrictions were removed to
speed up the momentum of liberalization of the automotive industry. Indigenous
production of cars started the domestic and international market needs. Increasing
efficiency was achieved with growing investment in research and development while
satisfying the strictest environmental standards. As a result, the export and import
technology know-how has improved the impetus for improvements in quality and
productivity, to a point where many global companies now view India more
favourably than China as a source point for components. It seems that global Tier Is
are increasingly confident about India's ability to build more international level, and
are relocating more complicated systems work to India rather than simply building
basic parts there.
3.2.3 Dynamics Growth of Automotive Segment
The automobile industry in India is recognized as a key factor of manufacturing sector
with it is to increase the national economic growth and the development of
technological capabilities through its powerful backv/ard and forward linkages, and
the localization of high value added manufacturing processes within domestic
economies. In recent years, the contribution of the automotive industry to GDP has
risen noticeably - from 2.77 percent in 1992-93 to 4 percent in 2003-2004.
The automotive industry in India comprises of all vehicles, including 2-3 wheelers,
passenger cars and multi-utility vehicles, light and heavy commercial vehicles, and
agricultural tractors and other earth moving machineries, besides the component
segment for all these categories (see Genre Chart for the various types of vehicles
produced in India). The vehicles segment and the allied components segment are
sometimes alternatively termed as automotive industry. The industry is characterized
by a very high percentage (about 80%) of 2-3 wheelers production. To mention, India
ranks as the largest manufacturer of motorcycles and second largest in manufacturing
of scooters in the world. In tractor manufacturing also India is the second largest
producer in the world.

46
It was noted in the preceding section that the auto industry witnessed a radical
transformation in terms of competition with de-licensing and liberalization in the
1990s. Following this, two major developments took place. First, there was an
upsurge in the volumes of vehicles produced. And secondly, there was a flux of entry
of global auto manufacturers into India and in some cases, also along with their parts
suppliers.The major contributions came from the passenger car segment, followed by
the Multi Utility Vehicles (MUVs). As a result, the 4-wheeler segment (including
tractors), for the first time, crossed the million marks in 1996-97, registering a growth
of about 12.2 percent in the 1990-97 period. The 2- and 3- wheeler segments also
showed good performance during the same period with a growth rate of nearly 9
percent. (Dhanabhakyam, 2012)
Following Line chart shows, some of the more recent trends of production in the
automobile Sector in India, through the information provided by SIAM.
Graph No.3.2.3 (a): Automobile Production in India: 1971-2003

Trend of production
(in numbers)
Production (in million)
to

AS vehicles
CJ1

2'3 w heelers

4 w heelers

-cff

Years

SOURCE: Information using from SIAM and ACMA data

47
Analysis of the above table says that starting from a meagre 0.5 million (m number) m
1970s, the total production of vehicles has gone up to as high as 6.5 million in 2002.
The production accelerated after 1980s when partial decontrol was introduced. The
result is notable - from a modest 1 million during 1980s it became three fold in 1991.
The effect of complete decontrol took time to exert an all round impact on the
economy as it shows there was a short recessionary period 1991-1994, after which
there was sign of revival. Towards 1998-99, the industry again showed an upward
trend reaching a record high in 2002.
Following bar chart shows the production of vehicles in terms of value also shows a
positive growth in the more recent periods.

Graph No.3.2.3 (b): Vehicle Production: Industry Gross Turnover

Production in Value terms

500000

4S0Q00

400000

350000
Turnover (Rs. Millions)

300000

250000

200000 4

150000

100000

50000

1995-96 1996-97 1997-98 1998-99 1999-00 2000-01

Year

Source: Information using from SIAM and ACMA data

Above bar chart shows the vehicle production in terms of value of Industry
gross turnover. From 1995-96 its shows that the turnover is 32000 and this turnover

48
grow every year till 2002-2001 up to 500000 million. Its showing a boom market
condition for vehicle production in India.

Following hne chart shows that the 4-wheeler segment in vehicle production.
Graph No.3.2.3 (c): Vehicle Production: The 4-wheeler Segment

Production trend of four-wtieelers

—*—Cm —J««jb,MUV M&BCVt • " LCVs —#—Tractors —*—Total 4 Wheel*rs

Source: Information using from SIAM and ACMA data

Above Production chart shows that there has been a considerable growth in the
passenger car segment in comparison to the MUVs / jeeps during the same period.
Above graph is an evident that the major contribution to the growth of the total
volume is from the car segment. This segment registered a consistent growth while
others suffered a decline in production in the recent years. However, above
information an overall up-trend in the economy towards 1998-99, the industry showed
signs of revival and as a result, in the year 2000, the production in the non-tractor
segments of the auto industry recorded a growth rate of 15 percent. The notable
performance of MUL in the industry contributed significantly to the growth and
dynamism of the industry. With the establishment of India’s first modern assembly
plant, MUL initially started producing small passenger cars that were fuel-efficient
and cheaper (about 21 percent) than the existing domestic cars (Humphrey et al..

49
1998). In fact MUL dominated the domestic passenger car market (with a market
share of about 83 percent) till 1996-97 and moved into the production of middle-sized
cars in the 1990s. The domestic market continued to expand markedly and the
competition within the industry intensified with the growth of middle class
consumers, and diversified consumer preferences. In the same period other domestic
car producers also diversified their product ranges. For instance, TELCO, which had
traditionally accounted for about 70 percent of the commercial vehicle market
(Kathuria, 1996), started to produce multi-utility vehicles and small passenger cars in
the 1990s. The increase in the production volumes in the automotive industry was in
fact led by the growing domestic demand for the vehicles. This is very much distinct
if we look at the trend of automobile sales in India in the post liberalization period
which shows in following line chart No. 3.2.3 (d).

Graph No. 3.2.3 (d): Domestic Vehicle Sales after 1991(In numbers)

-♦— Total 4 Wheelers —■— T otal 2/3 Wh eelets------- Gian d Total

Source: Infromation using from SIAM and ACM A data

There was an annual compound growth rate of about 9 percent in the sale of all
vehicles in the period 1995-2003. Notably, the demand for 2-3 wheelers overtook that
for the 4 wheelers segment. As shown in both production and the sales figures, the
automotive sector in recent years is led by the 2/3-wheeler segment in India.

50
The share of various segments in total production of vehicles in recent years is
presented in Table 3.2.3 (a).

Table 3.2.3(a): Share of Segments in Total Vehicle Production (in Mn)

Commercial Passenger
Two Three Grand
Vehicles Vehicles
Wheelers Wheelers Total
(CVs) (PVs)
2000-01 0.16 0.64 3.76 0.20 4.76
2001-02 0.16 0.67 4.27 0.21 5.32
2002-03 0.20 0.72 5.08 0.28 6.28
2003-04 0.28 0.99 5.62 0.36 7.24
2004-05 0.35 1.21 6.53 0.37 8.46

Source: Compiled from SIAM data

This is also captured by the relative market share of various segments of the
industry as shown by the pie chart.
Graph No.3.2.3 (e): Market Share of Various Segments of Automobiles.

Three v/heeters Commercial Passenger

vehicles 3% vehicles 12%

Source: Information based on SIAM data

51
The 2-wheeler segment dominates the market with more than two third of the share
followed by a moderate share of the passenger car segment in the 4-wheeler category.
3.3 GROWTH OF AUTOMOBILE SECTOR IN PUNE
Pune is the leading centre for the automotive sector in India, as well as one of the top
automotive centers globally. In the past year alone 3 massive new plants from general
motors, Volkswagen and Mahindra & Mahindra were inaugurated here. The chakan-
Talegaon belt is becoming one of the most dense automotive cluster in the world.
Rising incomes among Indian population will lead to increased affordability,
increasing domestic demand for vehicles, especially in the small car segment. Fuel
economy and demand for greater fuel efficiency is a major factor that affects
consumer purchase decision that will bring leading companies across two-wheeler and
four-wheeler segment to focus on delivering performance-oriented products. Product
innovation and market segmentation will channelize growth. Vehicles based on
alternative fuels will be an area of interest for both consumers and auto makers. Focus
on establishing pune as auto-manufacturing hub is reign in policy support in form of
Government’s technology modernisation fund. Industry will seek to augment sales by
tapping into rural markets, youth, women and luxury segments.
3.3.1 Automobile Sector of Pune and their major impact on Receivables
Management
Receivables constitute a substantial portion of current asset of several firms. Basically
trade debtors, after inventories, are the major component of current assets. They form
about one third of current asset in India. Granting credit and creating debtors amounts
to the blocking of the firm’s fund. The interval between the date of sale and the date
of payment has to be financed out of working capital. This necessitates the firm to get
funds from banks or other sources. It has a growing industrial hinterland, with many
information technology and automotive companies setting up factories in Pune
district. The outskirts of Pune, especially locations like Pimpri-Chinchwad, Chakan
and Talegaon are attracting huge investments from the automotive industry, though
Pune is already home to auto giants such as Tata Motors and Bajaj Auto, right from
the 1960s. Mercedes-Benz, the German auto major entered through a joint venture
with the Tata Group in the 1990s, later set its own course and has established a plant
in the region. With the entry of Mercedes-Benz, other major players including FIAT
India, General Motors India, and Volkswagen India set up shop in that region and in

52
not so distant past, the country's largest utility vehicles manufacturer Mahindra &
Mahindra have committed large investments in Pune.
Debtors occupy an important position in the structure of current assets of a firm. They
are the outcome of rapid growth of trade credit granted by the firms to their
customers. Trade credit is the most prominent force of modem business. It is
considered as a marketing tool acting as a bridge for the movement of goods through
production and distribution stages to customers. It is generally believed that credit
policy stimulates sales as it helps in retaining existing customers and winning clients
from rivals. Trade debtors represent amounts owed to the firm as a result of credit sale
of goods or services in the ordinary course of business. The key function of credit
management is to optimize the sales at the minimum possible cost of credit.
Pune is emerging as a strong automotive R&D hub with foreign players like Hyundai,
Suzuki, General Motors setting up base in Pune. This move is further enhanced by
Government's support towards setting up centres for development and innovation.
Tata Nano's successful entry in the Indian market has steamed up the opportunities of
growth available in alternative segments like electric cars, vehicles ran on natural gas,
etc.
Growth of Automobile Industry:-
9th largest automobile industry.
2nd largest two-wheeler market.
4th largest in Heavy Trucks.
2nd largest tractor manufacturer.
11th largest passenger car market and expected to become 7th largest by 2016.
Sale of passenger cars in India is likely to grow at an average of 14.9% each year to
touch 2.1 million by 2010.
KEY PLAYERS
1. TATA MOTORS,
2. ASHOK LELY AND LTD.
3. MAHINDRA & MAHINDRA
4. FORCE MOTORS AND
5. MARUTI SUZUKI.
3.3.2 Segmentation of Automobile Industry.
Following is the segmentation that each sector comprises of whole Indian Automobile
Industry.

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Segments of Automobile:-
- 2 WHEELLER
- 3 WHEELLER PASSENGER VEHICLE
- 4 COMMERCIAL VEHICLE
Market Share:-
2 WHEELER- Market leaders Hero Honda with market share 50%.
3 WHEELER PASSENGER- Market leader Mahindra & Mahindra with market
share 42%.
- PASSENGER VEHICLE -Market leader Maruti with market share 52%.
COMMERCIAL VEHICLE- Market leader Tata Motor with market share 61 %.
> Indian Auto Market Growth for the year 2007-08 the automobile industry crossed
a landmark with total vehicle production of 10 million units. Car sales was 8,
82,094 units against 8, 20,179 units in 2007-08. The two-wheeler market grew by
13.6 % with 70, 56,317 units against 62, 09,765 units in 2007-08. Commercial
vehicles segment grew at 10.1 % with 3, 50,683 units against 3, 18,430 units in
2007-08. The domestic automobile industry sales grew 12.8% at 89, 10,224 units
as against 78, 97,629 units in 2007-08.
'r Medium and heavy commercial vehicles managed a growth of 4.5%. Light
commercial vehicles sales growth was 19.4% at 1, 43,237 units against 1. 19,924
units in 2007-08. Three-wheelers sales rose by 17% at 3, 60,187 units against 3,
07,862 units in 2007-08. (SIAM, 2012)
3.4 FUTURE PROSPECT OF INDIAN AUTOMOBILE SECTOR
Automobile industry expert predicts that by 2050 every sixth car in the world will be
for Indians. By 2010 India will take over Germany in sales volumes and Japan by
2012. The Indian automobile component industry is estimated to triple from USD 63
billion to USD 190 billion within a span of six years by 2012. Industry analysts
predict this industry to touch USD 13000 million mark by 2010, a cumulative growth
of 9.5% annually. It is said that for every Re 1 spent, the auto sector returns Rs. 2.24
to the Indian economy.

54
3.4.1 SWOT OF AUTOMOBILE INDUSTRY
Strengths Weaknesses
• Large domestic market, • Low labour productivity,
• Sustainable labour, • High interest costs and high
• cost advantage, overheads rising cost of
• Government incentives, production Low investment in
• For manufacturing plants Strong Research and Development,
engineering skills in design to • Attrition and skill migration,
achieve significant gains in • Talent Crunch, undesirable Salary
productivity. hikes.

Opportunities Threats
• Commercial vehicles, • Rising interest rates,
• Heavy thrust on mining and • cut throat competition,
construction activity. • Lack of technology for Indian
• Increase in the income level, Companies. (The Hindu, 2008)
• cut in excise duties,
• Rising rural demand.

3.5 SWOT ANALYSIS OF KEY PLAYERS

3.5.1 Introduction of Tata Motors
Tata Motors Limited is a multinational corporation headquartered in Mumbai, India.
Part of the Tata Group Established in 1945, when the company began manufacturing
locomotives, the company manufactured its first commercial vehicle in 1954 in a
collaboration with Daimler-Benz AG, which ended in 1969. Tata Motors has
consolidated revenue of USD 16 billion after the acquisition of British automotive
brands Jaguar and Land Rover in 2008. It is India's largest company in the automobile
and commercial vehicle sector. The company is the world’s fourth largest truck
manufacturer, and the world’s second largest bus manufacturer. In India, Tata Motors
is a dual-listed company traded on both the Bombay Stock Exchange as well as on the
New York Stock Exchange. In 1998 it launched Tata Indica, India's first fully
indigenous passenger car. Tata ranks as the leader in every commercial vehicle

55
 segment, and is in the top 3 makers of passenger cars. Tata Motors is also the designer
and manufacturer of the iconic Tata Nano, which is the cheapest car in the world.
SWOT of Tata Motors
Strengths Weaknesses
• The internationalization strategy • The Company's passenger car
Expertise. products are based upon 3,d and
• Intensive management 4th generation platfonns.
development.
• Tata has not got a foothold in the
• Successful alliance with Italian
luxury car segment in its
mass producer Fiat since 2006.
domestic,
• Indian market.

Opportunities Threats
• Purchased the Land Rover and • Other competing car
Jaguar brands from Ford Motors manufacturers have been in the
for UK £2.3 million in 2008. passenger car business for 40, 50
• Tata Motors Limited acquired or more years.
Daewoo Motor's Commercial • Sustainability and
vehicle business in 2004 for environmentalism could mean
around USD $16 million. extra costs for this low-cost
• Nano is the cheapest car in the producer. Rising prices in the
World introduced by TATA. global economy could pose a
threat to Tata Motors Limited on a
couple of fronts.
» The price of steel and aluminium
is increasing putting pressure on
the costs of production. Many of
Tata's products ran on Diesel fuel
which is becoming expensive
globally and within its traditional
home market.
(w7Av.tatamotors.com)
i

56
3.5.2 Introduction of Maruti Suzuki Ltd.
Maruti Suzuki India Limited is a publicly listed automaker in India. It was the first
company in India to mass-produce and sell more than a million cars. It is the market
leader in India and on 17 September 2007, Maruti Udyog was renamed Maruti Suzuki
India Limited. The company headquarter is in Gurgaon, Haryana’s established in
December 1983, Maruti Suzuki India Ltd. has ushered a revolution in the Indian car
industry. This car is meant for an average Indian individual who is affordable as well
as has elegant appeal. Maruti Suzuki India Ltd. is the result of collaboration of Maruti
with Suzuki of Japan. The company has crossed the milestone of becoming the first
Indian company in March 1994, by manufacturing in totality one million vehicles.
SWOT of Maruti Suzuki
Strengths Weaknesses
• Established distribution and after- • Lack of experience with the
sales networks Understanding of foreign market,
the Indian market and ability to * In experience with foreign
liaison with the government workforce,
Ability to design products with • Heavy Import tariffs.
differentiating features Brand
Image,
• Experience, and
• Know-how in technology.

Opportunity Threats
• Increased purchasing power of • Threats from Chinese
Indian middleclass category. manufacturers,
• Govt. Subsidies, Indian as well as foreign
• Tax benefits. competitors.
• foreign collaboration. (www.marutisuzuki.com)

3.5.3 Introduction of Mahindra & Mahindra

Mahindra & Mahindra Incorporated on 2 nd October 1945 by two brothers Mr. J C
Mahindra & Mr. K C Mahindra. Converted into public limited company in 1955.

57
Started with manufacturing General Utility Vehicles. Also started manufacturing
Tractors and LCV(Light Commercial Vehicles). Major Players in Utility vehicle
segment and Tractor segment. One amongst the top five tractor manufacturing
companies in the world Very indigenous regarding very little help from foreign
technology sources. Presence in countries of Europe, Latin America, Africa and
United States of America.
SWOT of Mahindra & Mahindra
Strength Weaknesses
• Very high Brand recall in Tractors • High dependence on Rural
Market. Continuous Innovation. Market.
• Strong Research & Development.

Opportunity Threat
• 10 tractors per 1000 hectares of • Entry of Competent Foreign &
agricultural area, much below Domestic Players in Tractors
world average. Market, (www. mahindra.com)
• Huge untapped market.

3.5.4 Introduction of Force Motors Ltd.

An integrated automobile company, designs, develops, and manufactures automotive
components, aggregates, and vehicles in India. The company offers small commercial
vehicles, multi utility vehicles, light commercial vehicles, agricultural tractors, and
heavy commercial vehicles. It also exports its products to various countries in the
Middle East, Asia, Latin America, and Africa. The company was founded in 1950 and
is based in Pune, India.
SWOT of Force Motors
Strengths • Weaknesses
• The company has a strong Force One is not the among the
presence in the Indian market preferred list of SUVs among
since 1950. many Indian customers.
• The name was justified in the • The company lacks in advertising
market as it denotes the power, and promotional strategies

58
 energy and enthusiasm. Force Traveller is still recognized
• The company operates under four as Tempo Traveller and the
portfolios Traveller, Trump, Trax, company didn't concentrate much
Tractor, SUV Traveller is the on rebranding to the name ‘Force'.
most successful product market • The company has too many
which doesn't have an alternate inventory holdings in 2011
competitor matching its (311.31 Cr) compared to 2010
efficiency and riding comfort. (193.73 Cr). 60% increase in
• Traveller is the fastest selling and inventory is not justified in return
most preferred vehicle in on investments.
passenger and in commercial • Except Force Traveller the other
delivery vans. vehicles like Tractors, Trax are not
• The company has around 7000 good sellers in the market.
employees and the total assets of • Traveller was once a monopoly in
the company was 583.79 Cr as Ambulance segment, now there
per 2011 (35.4% increase are many alternatives like Eeco,
compared to 2010). Omni and Tata Winger.
Opportunity Threats
• The company has entered in to
• Renault Duster will impose a
SUV war with its masculine
major threat for all the major SUV
brand Force One with Amitabh
players due to its ‘Cost' factor.
Bachan as the brand ambassador.
Almost all automotive companies
The company has a good
in India are trying to show their
opportunity in capturing a
presence in SUV segment, Maruti
considerable market share in
Ertiga has attracted enormous
commercial vehicle
vehicle bookings since its
(cargo/delivery van) segment.
inception.
• The company has technology
• Tata Ace, Dhost from Ashok
partnering with all major
leyaland and Mahindra Maximo
automotive giants like Daimler,
act as a hindrance to push the sales
Bosch, MAN, Ricardo etc over
of Tempo Trump.
the past five decades.
• Force ‘Traveller’ doesn’t have a
• Force motors have a good
direct competitor till now, but any

59 ;
 presence even in the overseas enhancement in exiting models or
market like Middle East, Asia launch of new vehicles by Tata
Latin America and Africa. and Ashok Leyland can impact the
• The company is expected to market share.
launch its hybrid buses • The poor cash inflows in the
‘Traveller' hybrid by 2013. Such country and the economic
buses are capable of attracting slowdown has reduced the
huge government orders to cater government spending on
public transport services. infrastructure, this affects bulk
orders from government.
• The company has witnessed a (www.forcemotors.com)
sales turnover of 505.06 Cr as on
June 2012, and a net profit of
10.33 Cr for the same quarter
June2012.

3.5.5 Introduction of Ashok Leyland

It is a commercial vehicle manufacturing company based in Chennai, India. Founded
in 1948, the company is one of India's leading manufacturers of commercial vehicles,
such as trucks and buses, as well as emergency and military vehicles. Operating six
plants, Ashok Leyland also makes spare parts and engines for industrial and marine
applications. It sells about 60,000 vehicles and about 7,000engines annually. It is the
second largest commercial vehicle company in India in the medium and heavy
commercial vehicle (M&HCV) segment with a market share of 28% (2007-08). With
passenger transportation options ranging from 19 seaters to 80seaters, Ashok Leyland
is a market leader in the bus segment. The company claims to cany over 60 million
passengers a day, more people than the entire Indian rail network. In the trucks
segment Ashok Leyland primarily concentrates on the 16 ton to 25 ton range of
trucks. However Ashok Leyland has presence in the entire truck range starting from
7.5 tons to 49 tons.

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SWOT of Ashok Leyland
Strength Weaknesses

• Excellence in quality of its • No updation of product range.

products. • Could not sustain the competition
from MNC's.
• Excellence in customer focus and
service.

Opportunity Threats

• Be a leader in the business of • The joint venture announced with

commercial vehicles, Nissan Motors of Japan would
improve its presence in the Light
• Excelling in technology,
Commercial Vehicle (LCV)
• Quality and value to customer
segment (<7.5 tons).
fully supported by customer
Ashok Leyland only in
service of the highest order and
commercial vehicles.
meeting national and
(www.ashoklelyand.com)
international safety environments
and safety standards.

3.6 CONCLUSION
Industry across countries will have to meet challenges of newer technologies,
alternative fuels and affordability of automobiles by people at large through
constructive cooperation. The earlier we are able to achieve this the better it would be
for the world performance. According to Joseph, "The purpose of any commercial
enterprise is the earning of profit. Credit in itself is utilized to increase sales, but sales
must return a profit". The offer of trade credit should not only optimize sales but also
lead to maximization of overall return on investment. Management of receivables,
therefore, should be based on sound credit policies and practices. Company can sell
the goods on credit or cash. Cash sale is inflow of cash and it is controlled under cash
flow analysis. But credit sale creates sundry debtors. Company has to receive money
from them. If company starts to sell on return of cash, then it decreases the level of
company’s sale and profitability. On the other side, if company promotes credit sale,it
can increase the risk of bad debts. So, it is required to control and to manage debtors.

61
REFERENCES:
1. Auto car India magazine.
2. Dhanabhakyam M. and Kavitha M. S. (2012), A Study on Asset Management of
selected Automobile Companies in India, International Journal of
Multidisciplinary Research Vol.2 Issue 4, ISSN 2231 5780.
3. Parkhi Mamata (2008), Science and Technology: S&T and Industry Indian
Automotive Industry: Innovation and Growth, India.
4. SIAM (2012), CII and ACMA., http://www.siamindia.com
5. The Hindu Survey of Indian Industry 2008.
6. www.ashokleyland.com
7. www.forcemotors.com
8. www.mahindra.com
9. www.marutisuzuki.com
10. www.tatamotors.com

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