BUDGET 2010

Automobile Sector

Sanjay.S.Parmar
Roll. no :-25
MBA-Sem IV
IMR
Segment of Automobile Industry

Automobile industry comprises of

Commercial vehicles: -A commercial vehicle is a type of motor

vehicle that may be used for transporting goods or passengers

Passengers cars: -Passenger cars come in great variety, starting

from 2-seater electric car REVA to 5-seater compact cars like
Zen, Santro, Indica, etc

Two vehicles &Three vehicles.

Segment of Automobile Industry

Passenger vehicle s 15.96%

Commercial vehicle s 3.95%
Three vehicles 3.60%
Two vehicles 76.49%

Sales

16% Passenger vehicle s Commercial vehicle

4% s
4% Three vehicles Two vehicles
76%
 Automobile Production Trends
12,000,000

10,000,000

8,000,000 Passenger Vehicles

Commercial Vehicles
6,000,000 Three Wheelers
Two Wheelers
4,000,000 Grand Total

2,000,000

Category 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09

Passenger Vehicles 723,330 989,560 1,209,876 1,309,300 1,545,223 1,777,583 1,838,697

Commercial Vehicles 203,697 275,040 353,703 391,083 519,982 549,006 417,126

Three Wheelers 276,719 356,223 374,445 434,423 556,126 500,660 501,030

Two Wheelers 5,076,221 5,622,741 6,529,829 7,608,697 8,466,666 8,026,681 8,418,626

Grand Total 6,279,967 7,243,564 8,467,853 9,743,503 11,087,997 10,853,930 11,175,479

 Automobile Domestic Sales Trends
9,000,000
8,000,000
7,000,000
6,000,000
Passenger Vehicles
5,000,000
Commercial Vehicles
4,000,000
Three Wheelers
3,000,000
Two Wheelers
2,000,000
1,000,000
0
2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09

Category 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09

Passenger Vehicles 707,198 902,096 1,061,572 1,143,076 1,379,979 1,549,882 1,551,880

Commercial Vehicles 190,682 260,114 318,430 351,041 467,765 490,494 384,122

Three Wheelers 231,529 284,078 307,862 359,920 403,910 364,781 349,719

Two Wheelers 4,812,126 5,364,249 6,209,765 7,052,391 7,872,334 7,249,278 7,437,670

Grand Total 5,941,535 6,810,537 7,897,629 8,906,428 10,123,988 9,654,435 9,723,391

Ranking

 Fifth largest commercial vehicle market in the world.

 Fourth largest passenger vehicle market in Asia

 Second largest two-wheeler market in the world.

 Largest three-wheeler market in the world.

 Fourth largest tractor market in the world.

 Expectation from Budget
 Continuation of Stimulus Package for Commercial Vehicle
Segment: - The continuation of the stimulus package that includes
easier & softer loans, and concessional duties would help the segment
recover.

 Increased Export Promotion: - In order to boost their sales

 Incentives to be Provided to Specialized Service Companies

Undertaking R&D: - R&D for auto industry is crucial as it helps to
improving products and come up with innovative concepts. Budget
expectations include specific tax breaks for R&D service providers.
 Cont…
 Rapid Implementation of Goods & Services Tax (GST): -
The entire Indian auto industry has kept its fingers crossed for
the transparent, easy and simple indirect tax regime. The GST
should be uniformly implemented across the states within the
timeline.
 The GST aims to bring other taxes like excise, VAT, CST and
other taxes under one umbrella and the GST rate may be lower
than the combined total of the current taxes.
 Cont…
 Reduction in the interests on car loan and two-wheeler loan. Lower
interest rate would attract more number of buyers.

 Fears that small and big cars more expensive, as there is a possibility
of rolling back of stimulus package

 The industry also expects an upward revision in service tax. It

is anticipating a hike of 1-2% in the service tax.
- 2% hike in Cenvat may also be there, which would make
small cars costlier by Rs. 2,000 to Rs. 10,000.
-The price of two-wheelers may also rise from Rs. 600 to Rs.
1,500
Impact of budget on sector
Announcement Impact
Change in income tax Positive This will increase the disposable income in the
slab hands of people, supporting demand. Positive for
two-wheelers and car manufacturers like Bajaj
Auto, Hero Honda, TVS Motors, Maruti Suzuki,
Tata Motors and M&M
Though the rollback of 2% is less than the
expectation of 4%, it is negative for all
Rollback of excise duty automobile manufacturers as prices will rise on
by 2% across the Negative two-wheelers (Rs 600- 1,500), three wheelers (Rs
spectrum 1,700- 5,000), small cars (Rs 3,000- 15,000),
large cars (Rs 5,000- 50,000) and CVs (Rs 4,500-
50,000)

Rollback of excise duty Steel prices have already started rising and a
Negative
on steel further pass on due to a rise in excise duties can
pressurize margin of auto and ancillary companies
 Cont…

Increase in spend on road

infrastructure and state Positive NHAI target of 20 km/day
transport reiterated. Allocation was up 13%.
Positive for M&M, Maruti Suzuki
and Hero Honda

Fuels have not been spared either with

Rise in petrol and diesel Rs. 1 per liter excise duty being levied
Negative
prices on Petrol and Diesel amounting to a
price hike of Rs 2.67 a liter on petrol
and Rs 2.58 per liter for diesel
Vehicle running expenditure to rise
Effect on Market
 Market Reaction

Index Closed Points %Change

BSE Sensex 16,429.55 +175.35 +1.08%

BSEAuto 7,195.71 +349.05 +5.10

Effect on Top company

Current
Company Group Prev Close Change % Change
Price(Rs)
Maruti
BUY 1,463.55 1,401.05 +62.50 +4.46
Suzuki India
Bajaj Auto
BUY 1,817.40 1,714.60 +102.80 +6.00
Ltd
Mahindra &
BUY 1,007.35 958.85 +48.50 +5.06
Mahindra
Ashok
BUY 49.75 46.80 +2.95 +6.30
Leyland
Tata Motors
HOLD 711.05 668.70 +42.35 +6.33
Ltd.
Latest News as on 1st March 2010…
 Auto manufacturers have already announced hike in prices of
their products up to Rs. 70,000 due to rise in excise duty
 Another round of price hike is due from April 2010 when the
auto companies will pass on the cost to customers to upgrade
their vehicles according to the new emission norms.
 Maruti has already hiked prices of its models by Rs. 3,000 to
Rs. 13,000.
 Hyundai cars have also gone costlier from Rs 6500 to Rs.
25000.
 Tata Heavy Vehicles have become expensive by Rs. 60,000 to
Rs. 70,000 while prices of Tata passenger vehicles have gone
up by Rs. 5000 to Rs. 6000.