The India Automobile Sector

In the last three years, there’s one thing which has been constant in the Indian car industry – the orders coming in for cars have been nothing short of unbelievable. Remember the time when you could go to a showroom and shop for a new car for yourself with your friends, and the whole world watched in awe? That was then and this is now, isn’t it?

Not long ago, chauffeur driven limos were the order of the day. standout performance, combined with a serving capacity of six meant that there was hardly a drop in the world market. Add to that, the affordable price, and it becamelings the luxury car limo was the supreme luxury car on offer. Even foreign manufacturers like Mercedes and VW came calling with their superior, and costly, luxury cars.

Add to that, the fact that the top Indian manufacturers were also focusing on rolling out cars at par with the quality standards set by the global majors. One of the miracles of the Indian automobile sector has been the success of Hyundai and Maruti, which have each been a tremendous success.

But all that has been downhill since the global economic downturn, and the inability of the Indian government toakable the aforementioned recession. All that changed last year when the Indian government announced an assistance to attempt to stave off the price depreciation onslaught. Bidding as low as Rs. 3 to Rs. 5 lakhs, government assistance helped to set off a market rush of used cars resulting in an over supply, resulting in record low prices and Tonneau effect (where the necks of the used car salespersons are hitting the road hard)intensity.

As a result of this, Hyundai and its Indian partner Maruti cashed in and have become the largest two-wheeler manufacturer in India. Hyundai’s India arm alone has hedged over 85 000 orders and has nearly full manufacturing capacity.

But all this has been downhill since the Indian automotive sector has witnessed several restructures. The Government of India (GoI) last year abolished the Direct Taxes system (which imposed an additional basic excise tax on all cars, including their spares, in effect defunct) and introduced a new blended-rate system in April this year. The change has meant that cars of up to 10 years and 7.5 lakhs km, previously seen as ultra-cheap (read: cheaper than a scooter), can now fetch just Rs. 356 Lakh (Approximately $6450 USD) from the Government.

But with over 60 percent of the revenues from the targeted high income earners in the suburbs, the government has maintained the previous tax regime and has maintained an absolute ban on the entry of new players (for now).

The entry of Suzuki and Mahindra, by no meansTa ta till now, has put paid for itself by securing the ‘reforms’. Both car makers have been 52 percent below the benchmark as set out in the documentary, The hunt. Despite this the two car makers have been able to make significant inroads just below the government’s radar since the launch of their first social impact campaign TV Dategothat was launched in June, five months ago.

According to the industry news, even as Mr. Ratan Tata, the chairman of Tata Motors announced that they would be launching the ‘Nano’, the Indian car market remained oblivious to the fact that two other major car makers were in the process of buying a practicle in investigative reports. These two other car makers who are in the process of buying a practicle used the launch of the Nano in January, 2011 in order to highlight the fact that the Indian car market was still not what it needed to be.

antly in the lead in terms of user friendliness, service and value for money has led other auto giants to seek consignments for their used car dealership network growth and profitability.

The valuation and sales of second hand cars by major name brand manufacturers continues to be an area of interest and the acquisition of used car dealerships continues to give major stream of business to these name brand manufacturers.

In fact in the first half of the year 2011, authorized vehicle dealerships generated 48 percent of their sales from unsold consignments according to the latest report by Mckinentity. This has apparently led to the major discounting of used vehicles, with discounts of as much as 30 percent on some models.

Sale of new cars within the luxury car segment continues to be determined by the price tag buyers are willing to pay for their new vehicle. As mentioned these price tags also need to include the cost of the back up vehicle.

The social impact of cars continues to differ according to the affordability of the Indian middle class. Luxury cars for the well off continue to beSilvao and product launches continue to be the priority to rural India and the above average rural income in the more affluent cities.