VEGI SREE VIJETHA (1226113156)

SUMMARY The automotive industry occupies a significant place in the Indian economy. The Indian logistics industry is likely to continue its growth momentum due to the reviving fortunes of the sector with booming end-user industries, as per RNCOS report 3rd Party Logistics Market in India. OEMs remain the largest consumer of auto components,In 2012-13, OEMs contributed to more than over two-thirds of total auto component demand.Both Japan and the US, the worlds two largest developed economies, would mean the pact covers nearly 40 per cent of the worlds economy due to the free trade agreement.The impact on automobile components due to the changes in excise duty. Only 1 per cent of the sales revenue is spent on R&D in India, which is over 5 per cent in countries like Germany and Korea.As demand falls in the domestic auto sector, most auto companies are cutting back production, which will impact component makers.The weakening rupee has increased material costs for auto-component firms. INTRODUCTION The automotive industry occupies a significant place in the Indian economy.It is one of Indias major sectors; accounting for 22% of the countrys manufacturing GDP. The Indian auto industry, comprising passenger cars, two-wheelers, three-wheelers and commercial vehicles, is the seventh-largest in the world with an annual production of 17.5 million vehicles, of which 2.3 million are exported. Only 1 per cent of the sales revenue is spent on R&D in India, which is over 5 per cent in countries like Germany and Korea. This is quite evident to prove the fact that Research and Development has been ignored by the Indian Auto Sector. In such scenario, the sector needs to focus upon this area tremendously. On one hand, the input cost is increasing and on the other hand demand for low cost vehicles is on a rise. In such a situation, adoption of simple yet responsible corporate behaviour and upgradation of technologies is required. The industrys turnover touched US$ 40.6 billion in 201213 and is expected to reach US$ 115 billion by 202021. The well developed industry acts as a catalyst and gives impetus to the economic growth of the country.The industry is estimated to grow at a compound annual growth rate (CAGR) of 14 per cent during 20132021. In addition, the industry recorded exports worth US$ 9.3 billion in 201213 and is projected to touch US$ 30 billion by 202021, according to data from Automotive Component Manufacturers Association (ACMA).The Indian logistics

industry is likely to continue its growth momentum due to the reviving fortunes of the sector with booming end-user industries, as per RNCOS report 3rd Party Logistics Market in India. STATE OF INDUSTRY OEMs remain the largest consumer of auto components,In 2012-13, OEMs contributed to more than over two-thirds of total auto component demand. Among OEMs, cars and utility vehicles manufacturers remained the largest consumers.Technological advancement,petrol engines have gone through various transformations over past three decades, which have improved performance and mileage and have reduced emissions. Key technologies enhancements include exhaust gas re-circulation systems, three-way catalytic converters,fuel injection systems and variable-vavle timing.Common Rail Direct Injection (CRDI) diesel engines are the most widely used diesel engines currently. Passive safety measures involve improvements in vehicle design, so as to limit the negative consequences of accidents, whereas active safety systems involve upgrading key components such as braking, steering and suspension systems, so as to prevent accidents, providing drivers better control over vehicles. KEY DEVELOPMENTS AND INVESTMENTS They are many developments that are taking place in the auto parts industry,like,Amtek Auto has signed an agreement to buy Germany-based Kuepper Group of companies for about 200 million (US$ 273.97 million) in its second big European acquisition in 2013.JK Tyre and Industries Ltd plans to add Rs 300 crore (US$ 48.78 million) in revenues in a year through the launch of 10 new products. The company also plans to invest Rs 1,430 crore (US$ 232.52 million) to ramp up capacity at the Chennai plant.Hence seeking from all the companies, we can say that every company is investing quite well in the development of the auto parts,eventually leading to the development of the auto components industry. GOVERNMENT AND INITIATIVES The Union Budget 201314 presented by Mr P Chidambaram, the Union Finance Minister, Government of India, had a few add-ons for the industry. The analysis by Deloitte on the Union Budget highlighted the following: The duty was raised from 75 per cent to 100 per cent on

cars/motor vehicles (irrespective of engine capacity) with CIF value more than US$ 40,000; from 60 percent to 75 percent on motorcycles with engine capacity of 800 cc or more, and on yachts and similar vessels from 10 percent to 25 per cent.An increase in excise duty from 27 to 30 per cent has been allowed for SUVs with engine capacity exceeding 1,500 cc, while excise duty was decreased from 80 to 72 per cent, in case of SUVs registered solely for taxi purposes.

EFFECTS OF FALLING RUPEE Although reports of a revival in the US auto industry have kindled hopes of an increase in component exports, weak domestic market conditions and currency volatility may negate the benefits.Data from the Automotive Component Manufacturers Association (ACMA) shows a decline in total dollar-denominated revenue of auto-component makers during fiscal 2013 to $39.7 billion from $42.2 billion in the previous year. The rupee depreciation translated into a 5.6% growth in rupee-denominated sales.Now, revenue prospects for fiscal 2014 look brighter on the back of a falling rupee. However, there is also a risk of a hit on profitability in the near-tomedium term because of several reasons.One, as demand falls in the domestic auto sector, most auto companies are cutting back production, which will impact component makers. Beginning from heavy commercial vehicles, the slowdown has struck utility vehicles and even twowheelers more recently. Thus, sales growth across segments is expected to remain tepid at least until the third quarter of fiscal 2014.Two, although exports have picked up, they account for only one-fourth of the industrys $40 billion revenue. ACMA sources reckon that although US markets are stabilizing, its too early to call it runaway growth, and the green shoots visible in Europe (mainly Germany) and Japan are yet to display a clear uptrend. Hence, it could take a few more quarters of steady growth in exports, before capacity utilization improves and operating leverage benefits kick in for component makers.Three, the weakening rupee has increased material costs for auto-component firms. Domestic raw material prices, particularly of metals, are linked to the landed cost of imports. Although cost increases are generally passed on to the original equipment (OE) makers, vendors are compensated after a lag, which could hit profit margins.A Mint analysis of 45 firms in the sectorbased on data from Capitalineshows that aggregate operating profit growth has tapered from 28.3% in fiscal 2012 to 15.7% in fiscal 2013. Net profit growth halved to 5.7% during the period.

KEY GLOBAL MARKETS Brazil: a low-cost export base; but lags India in price competitiveness, The onset of liberalisation in the 1990s helped Brazil's automobile and auto component industries to grow significantly. With the establishment of the Mercosur customs union, many international players set up manufacturing units in Brazil. This turned Brazil into a low-cost export base for components that also excelled in quality. However, in terms of price-competitiveness, Brazil still lags other lowcost countries such as India and China. Malaysia: From the late 1990s, the Malaysian government has protected it's auto industry from foreign competition. Total vehicle production and sales in 2012 rose by by 6.7 per cent and 3.2 per cent y-o-y respectively, after declining in 2011 on the back of positive consumer sentiments. As of 2012, the Malaysian automotive component industry comprises more than 800 companies with 80 per cent localisation levels. China:,the largest auto market a significant boost for component manufacturers, China overtook the United States in 2009 to become the world's largest automobile producer. The auto components industry in China is highly fragmented, with about 6,500 manufacturers, of which mainly the top 20 tier-I suppliers dominate the OEM market. Thailand: As of 2012, Thailand is the tenth largest automobile producer in the world and the largest in the ASEAN region. Robust growth in vehicle production and sales in recent years, aided by government schemes, has aided the growth of the component industry. Japan:automobile industry recovered in 2012, The automobile sector is one of the largest in Japan, providing employment to almost 5.48 million people (or 8.8 per cent of the working population). Total vehicle production and sales recovered from the downturn (on account of Tsunami) in 2011 and grew by 18.4 per cent and 26.1 per cent, respectively in 2012. Japan is the world's top producer of automotive components as of 2012. UK:becomes the second-largest automobile industry within EU in 2012, The automotive industry generated around more than 55 billion in annual turnover. Total vehicle production and sales in 2012 rose by 7.7 per cent and 3.7 per cent y-o-y in 2012, making the UK the second-largest

automobile market, surpassing France. The automotive components sector comprises about 2,600 companies and employs around 125,000 people in 2012.

REFERENCES
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http://www.livemint.com/Money/TUw9HznVorXYIkkUXKSOiI/Auto-components-weak-rupeecuts-both-ways.html 2. Cross-disciplinary vocational training, aggressive R&D, Smart Green policies & PPP models must to revolutionize Indian Auto Sector : Feb 08, 2014: Ajay Shankar http://www.cii.in/PressreleasesDetail.aspx?enc=FnImr4Dn40VTgU12fW0VS60f/ECuliuu1R/Zc Gveow9oK+crxnOg0rfu9r+TRKw/ 3. India in business ministry of external affairs: January- 2014: Industry & Sector http://indiainbusiness.nic.in/newdesign/index.php?param=industryservices_landing/397/1

4. *US automobiles industry neared pre-crisis levels in 2012: Nov-2013: Crisil Research https://www.crisilresearch.com/industryasync.jspx?serviceId=2&State=ECONOMY#storyId#79 463#sectionId#1492#newsFeedId#undefined News articles 5. Auto components companies take a hit on operating margins: 14 Feb 2013: The economics times http://articles.economictimes.indiatimes.com/2005-02-02/news/27471457_1_sales-rise-marginsomax-autos 6. Japan and US agreement on Free Trade Auto Exception. 6- March-2013

http://www.jagranjosh.com/current-affairs/japan-and-us-agreed-on-free-trade-auto-exception1362554663-1