Team-BHP - WSJ Article : Indian Auto Boom Gets Bubbly.
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August 30, 2010, 4:24 PM IST.


First Article : WSJ : Indian Auto Boom Gets Bubbly.

WSJ Article : Indian Auto Boom Gets Bubbly.-packed-roads.jpg

The real problem for auto companies soon could be the lack of roads and parking spaces and possible rising fuel prices. The chronic disease of the biggest auto markets in the world–overcapacity–could spread to India sooner than most people think.

As everyone from Hyundai to Honda spends billions to rapidly ramp up their production here, sooner or later they will be making more cars than they can sell, say some experts.

“I see overcapacity even in the BRICs countries,” Dieter Becker, global chair of automotive coverage at KPMG consulting told India Real Time. “The number of players (in India) has increased dramatically.” The BRICs countries are Brazil, Russia, India and China.

That might seem hard to believe with car and commercial vehicle sales climbing to a record high of around 2.5 million in the year ended March 31, and in a country where just 12 people in 1,000 own a car or utility vehicle.
But it’s an opinion that even some car manufacturers hold—around one-third of the 200 auto executives who responded to a KPMG survey out earlier this year predicted India would be struggling with overcapacity in the auto sector within the next five years.

It’s still a minority view—and hardly the 20% to 35% overcapacity companies are already dealing with in the U.S., Japan and Europe–but it’s something Indian auto executives (as well as investors and car buyers) should think about as they tune-up their plans in India.

“Now there are 50 players [in India] and they are still building capacity,” said Mr. Becker.

But auto executives and analysts said that if the prices and products are right, India will have no trouble boosting passenger car and commercial vehicle sales. The KPMG survey showed that 40% of respondents expect sales to climb to more than four million by 2014.

The real problem for auto companies in the not-too-distant future could be the lack of roads and parking spaces and possible rising fuel prices said, Paul Blokland, director of auto research company Segment Y.

“If you look five years from now then it may be impossible for people to use their cars or park their cars,” he said. “That will be more of an issue than capacity.”

Link to original article is below
Indian Auto Boom Gets Bubbly - India Real Time - WSJ

Second Article : Indian Auto parts sector seen at $110 bn in 2020

The Indian auto components sector is seen growing five times to $110 billion in the next decade with investments of more than $35 billion, an industry body said on Friday.

Of that target about $80 billion will be from India itself and the remaining from exports, the Automotive Components Manufacturers' Association of India said in a statement.

In the year 2020 the auto components sector is expected to provide employment to about 41 million skilled people, contributing 3.6 per cent to India's gross domestic product from 2.1 per cent now, it said.

The Indian vehicles industry is seeing one of the fastest growth globally at about 30 per cent and the entry of automakers from overseas is leading to more demand for cheaper autoparts in the country.

Well - reaching the limits of parking capacity is evident.
1 year back if I reached my office at 10.30 I was assured of a parking spot.
Now I have to reach by 9.45 - 9.50 to get one.
Else I have to park on the roadside and pay Rs 30 as municipal parking fees.
Thank god I got an assured parking at my home atleast.

Overcapacity?They must be joking.Waiting periods are stretching for months already.
And like they said car penetration is still low,12 per thousand compared to over 800 per thousand in america,so Indian car industry will be growing atleast at an annual rate of 12-15% for the next decade.
China sold 13 million plus cars last year and still they are comfortable notching double digit growth figures.

And i wonder where did they get that 50 players number from.

Names and Players in different categories are as below, totalling 49, there might be more players (chinese origin, local, regional players)

Cars (30)
-------------------------
Ajanta Group (Electric)
Audi
Bentley
BMW
Chevrolet GM
Chinkara
FIAT
FORD
Hindustan Motors
Hero Electric
Honda
Hyundai
ICML
Jaguar
Lamborghini
Maruti Suzuki
Mahindra & Mahindra
Merc-Benz
Mitsubishi
Nissa
Premier
Porche
REVA
Rolce Royce
San Motors
Skoda
Tata Motors
Toyota
Volkswagen
Volvo

Commercial Vehicles (9)
------------------------
Ashokleyland
Audi
BMW
Force Motors
Mahindra
Merc Benz
Premier
Tata
Volvo

Two Wheelers (10)
-------------------
Ajanta Electric
Hero Honda
Honda Motors
TVS Suzuki
Suzuki Motors
Bajaj
Yamaha
Kinetic (now Mahindra)
LML
Royal Enfield


Most of these brands have local assembly/manufacturing, for sure capacities are higher than the demand

the waiting periods are marketeer's creation (only for in demand products viz. Swift Dzire, Tata Nano, Fortuner), It helps in firming up or maintaining the prices.

For lower penetration, the main reason is lower affordability.
For price drops main reasons are hyper competition, increase in volumes and cost innovations.

Sorry about the numbers was thinking only in terms of car manufacturers:)
In India the top 3 car manufacturers control 75% of the car market anyway,and neither maruti,tata or hyundai have any overcapacity problems.
When you are building a car plant you not thinking for this year or the next but you are predicting demand 5 years from now.So even if a manufacturer plans a 100,000 units a plant today,they are anticipating that demand.And that demand will come from the low penetration.And there will be demand.

Quote:

Originally Posted by avishar (Post 2052193)
Overcapacity?They must be joking.Waiting periods are stretching for months already.
And like they said car penetration is still low,12 per thousand compared to over 800 per thousand in america,so Indian car industry will be growing atleast at an annual rate of 12-15% for the next decade.
China sold 13 million plus cars last year and still they are comfortable notching double digit growth figures.

And i wonder where did they get that 50 players number from.

I completely agree with you..!

I think they have misinterpreted the lack of proper infrastructure to overcapacity.
Just because you cannot park your car doesn't mean that your are reaching overcapacity
Waiting periods are stretching and more importantly, new age
consumers are willing to wait as well.

Also, now India has become a major export hub for all the major manufacturers, Nissan, Ford, you name it. If the WSJ is considering the production figures and considering everything will be sold in India, they are wrong because a part of it will also be exported to other parts of the world.

These are my 2 cents..!

The cars per thousand logic can definitely not 5be used in India for forecasting car growth. The various studies conducted also like to use the "percentage penetration" term, which is definitely not a good yard stick atleast in India. If we strive to achieve the same penetration of cars we will have nothing but permanently clogged roads and a polluted environment.


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