The automobile industry market of India is acknowledged as one of the biggest automobile industry in the world in terms of the production and the sales volume (Timmer et al., 2015, pp.575-605). Dating back to the historical roots, India had its first car on the road in 1897, which was imported from other countries. This went on until the year 1930 and through the 1940s that the country first had a manufacturing facility with companies such as the Hindustan Motors among others that started the manufacturing process. At independence in 1947, the Indian Government put in efforts to set up an automobile industry in order to supplement the industry. Since then, there have been continual improvements in the automobile sector that have seen Indian perform well in the world market as it is today. This has led to the attraction of many investors from all over the world to gain interest in the Indian automobile industry in the market today (Kale, 2017, pp.121-150). In this report, we will identify the factors that have promoted the financial growth of the industry in detail.
The topic to identify the financial growth of the Indian automobile industry market in the past decade and the factors contributing to it seeks to give an analysis of the financial growth and the major causes of the success in the automobile industry in India (Luthra, Sunil, and Dixit, 2015, pp.37-50). This topic was selected due to the impressive performance of the Indian automobile in the world market, which led to the motive to identify the factors behind its success.
The Indian automobile industry started its development after independence when the Government resolved to set up a manufacturing industry. It is reported that since then the Indian market was dominated by the Hindustan Motors from early 1960 to the 1980s, which enjoyed the monopoly in the market was the only major company (Krishnaveni, 2015, pp.110-118). The Hindustan Motors by then owned most shares in the automobile industry due to the Ambassador model. However, before then there had been challenges that led to sluggish growth in the industry in the 1950s and 1960s due to strict policies on trade and imports, which were only favourable for the commercial vehicle segments and the tractors.
However, in the 1980s the Hindustan and the Premier motor companies were challenged by the entrance of Maruti Udyog Limited that was allowed to invest in the country (Singh et al., 2015, pp.543-554). This was after the liberalization where the car marker who had been restricted out of India were allowed to trade in the country. The Maruti formed an alliance with the Suzuki, which was the first joint between the local company and the foreign company. This slowly and steadily established a strong economic baseline that led to the growth of the revenues between the two companies, which attracted other foreign companies such as Honda and Hyundai among others. Reports indicate that from 2000-2010, most of the major car manufacturing companies have expanded their base in Indian and established the manufacturing facilities in the country (Kale, 2017, pp.121-150).
Over the years, the car market in India has been reported to be continually growing with the presence of almost all the major players in the car industry existing in India. This has made India the hub for the automakers whereby the manufacturing plants are targeting both the local and international markets (Delhi, 2016, pp.25). With the large population in India, there is a prominent region where the car manufacturing industries are dominated. These are the South, North, and West. Moreover, apart from the local market, in 2009, India emerged as the fourth largest exporters of passenger cars after South Korea, Japan, and Thailand that led to receiving an award as the sixth largest in terms of production in 2011.
The aim of this research is to identify the growth of the Indian automobile industry in terms of the financial revenues within a decade and the factors that have contributed to this growth. Additionally, the research seeks to address the main factors that the managers in the automobile industries can implement for the growth in the financial revenues in the industry.
Is there a relationship or a link between the individual performance of the car manufacturing industries in India and the overall financial growth of the Indian automobile industry?
There has been different studies and research conducted in relation to this research topic. Most scholars have put in more effort to identify the factors that have led to the success of the automobile Indian industry in the market to rise to the sixth position in 2011 as the largest automobile industry in terms of production (Kochan, Thomas, and Russel, 2018). However, (Gopal and Thakkar, 2016, pp.49-64) attributes the financial growth of the Indian automobile industry to the wide range of automobile equipment produced from two-wheelers, passenger cars, commercial cars, and tractors among others. He explains that the wide range of the products has led to an increased market scope that has put India an incredible in an incredible position to compete in the market.
(Mann, 2018) On the other hand, narrates that the financial growth of the automobile industry in India has gained its steadiness and an increased stability due to the good government policies. He illustrates that the trading policies that the country put in place back in the 1980s that allowed investment in the automobile industry by the foreign companies such as Honda and Hyundai among others has majorly contributed to the growth in the industry. These foreign investors in the Indian automobile industry have led to stiff competition that drives the quality performance thus leading to massive production with fair prices that attracts international market. With the attention of the international market, the Indian automobile has been gaining financial growth over the years.
Moreover, (Jain, et al.,2018, pp.555-564) in his research paper acknowledges that in many product-oriented industries such as the automobile, after the sales services have become more vital to the consumers. He narrates that in the cases of the automobiles, many makers have generated most profits from the services rendered such as the maintenance, repairs, and insurance. This has been made a culture by most of the car manufacturing industries in the Indian automobile industry that has led to wooing many consumers to use their products. Additionally, these services rendered by the companies are nearly at the same level of revenue generation with that obtained from the product sales in the market. These services have been reported to be of advantage to the automobile industry as they have contributed to the financial growth in the sector.
The findings of (Ito and Koichiro, 2018, pp.319-336) indicate that the high fuel economy in India has forced the automaker companies in the country device performance-oriented products. The companies have been reported to compete in the production of the most cost effect automobiles with high efficiency at a reduced price. The findings have attributed this as a key contribution to the financial growth of the automobile industry in the market. Moreover, (Sharma et al., 2015, pp.1218-1242) has weighed in that this has led to the production of two-wheeler locomotives that are fuel conservatives therefore preferred by most consumers. Additionally, he claims that the high population demography of India has led to the high demand of the two-wheeler that has precipitated stiff competition for its production among the dealers. These cumulatively have led to the increase in the sales in the industry and therefore leading to the financial growth.
In the research accomplished by (Tiwari et al., 2016, pp.277-291) acknowledges that the financial growth of the automobile industry in India has been due to the combination of a number of factors. First, he acknowledges that the existence of improved infrastructure has paved way for the heavy vehicle industry. He further explains that the presence of cheap and skilled workers in the industry has led to the reduced cost of production thus attracting the Foreign Direct Investment in the Indian automobile. He also attributes the reduction in the production cost to the tax waiver that is given by the Indian Government. Additionally, (Birdsall, 2015, pp.217-229) there is an increased purchasing power in the Indian middle class as he reports that 70% of the vehicles were bought on loans from financial institutions. These factors cumulatively have led to the increase in the financial growth of the automobile industry in India.
In this research study, raw data was collected from the websites of ten automobile industries that have been set up in India. The data collected from these websites provide a collective record of ten years that provide insightful records of suitable data for the study. Additionally, the data was collected basing on the relevance of the research topic and the research questions for analysis. Quantitative data was preferred for this study due to its availability, reliability, and accuracy (Nardi, 2018). The raw data collected from these websites were analyzed used the correlation analysis to draw the relationship between the individual performance of the selected automotive industries and the general increase in the automobile industry in India.
Additionally, the descriptive analysis was also used to analyze the results and the findings in the study (Neuendorf, 2016). This gave a broad overview of the collected data using graphs and charts among other techniques. However, in the statistical correlation analysis method, the dependent variable was identified as the financial returns in the entire automobile industries while the independent variables were identified as the financial returns of the individual manufacturing companies in India (Cox, 2018). The method was then used to draw a relationship that was the basis of the research question. These are discussed in details after the analysis of the results in the discussion section.
From the given data, it is observed that the Maruti Suzuki India is the leading company in the automobile car industry in terms of revenue followed by Tata Motors while Nissan India has the lowest revenue of all the companies. This can be shown in the graph given below.
Moreover, the number of the automobile sales by the entire companies for the year 2012-2018 is shown in the graph below. There was an increase of 4.4% in the production of the automobiles for the given period.
From the sales made, it was noted that the highest number of sales were due to the two-wheelers in the market share with 81% for the year 2017. This is shown below.
The composition of the automobile sector for some of the products manufactured in India is shown below.
From the data, the gross turnover of the automobile industry in India is indicate that 2016-17 had the highest while 2013-14 had the lowest turnover as demonstrated below.
The overall number of exports from the Indian automobile industry was highest in 2017-18 and lowest in 2013-14, which is proportional to the number of turnover in the respective years.
From the correlation analysis results, the R-correlation coefficients are observed to be positive indicating that the variables have a linear relationship. It can be therefore be deduced that the total revenue in the automobile is dependent on the individual revenues of the companies in the automobile industry in India. It can also be observed from the results that the higher the percentage of the market share the company has, the higher the value of the R-correlation coefficients. This indicates that the higher the market share of the individual companies in the automobile industry the higher the influence it has on the overall revenue of the automobile industry. The market shares of the selected companies are shown in the pie chart below. Maruti Suzuki was recorded to have the highest shares in the market with 39% as shown below
From the findings and analysis, it can be deduced that the highest number of sales were made in the financial year of 2016 to 2017. This led to a progressive increase in the revenues in the year 2017 by 6% from the previous year. It is also observed that of all the auto parts sold the two-wheelers experienced the highest sales among the commercial vehicles, passenger vehicles, and three-wheelers among the others. From the correlation analysis, it is observed the cumulative revenues of the individual companies have a linear relationship with the overall financial revenues of the automotive industry. The overall revenues of the sales depicted as the dependent variable in the analysis are varied with the variation of the independent values, which are the revenues for the selected automobile companies in the industry.
The higher the change in the independent variable the higher the change in the dependent variable implying that there is a linear relationship in the variables (Zhang, 2015, pp.39-45). This means that the financial revenues of the automobile industry are related to the revenues of the individual companies. This information is vital for the managers in the respective companies when the data is projected for the incoming financial years. The results from the projected data will enable the managers to make the financial plans due to the changes in the market (Duffie, 2015, pp.191-212). Moreover, the overall revenues depicted in the study will aid the Chief Financial Officers in the selected companies to make the financial decisions and make accurate forecasts that are vital for the financial growth of the industries as ascertained by (Kauffman, Robert, and Jun, 2015, pp.339-354). The factors that have contributed to the financial growth can be summarized as shown in the diagram below. These have been identified as the growing demand, policy support, and the increasing investments.
During the study, there were limited sources of data that could give the data collection for a period of 10 years. The future researchers should seek to collect more data from the financial reports of the selected companies for the purposes of forecasting and market predictions. This study was also done within a limited time thus limiting the intensity of analyzing the financial data. The provided time for the study is not sufficient for a conclusive projection of the results to the other automobile industries in the world (Johnston, 2017, pp.619-626).
Conclusions
From the literature reviews, the findings, and analysis, the financial growth of the Indian automobile industry is attributed to a collection of factors. However, of all the factors, the Indian Government policies are have been seen to be the major contributors to the financial growth of the automobile industry. These policies have created a healthy competitive environment for the automobile companies in India this leading to the financial growth of the industry (Grant, 2016). Additionally, the government policies have led to the investment of the foreign companies in the automobile industry in India. This has led to the increase in the international market due to the foreign automakers that have an influence in their native countries thus causing an increment in the financial revenue in the automobile industry.
From the correlation analysis, it can be concluded that the growth in the financial growth of the automobile industry is directly related to the individual performance of the automobile companies (Rubmann et al., 2015). This linear relationship indicates that the growth of the financial aspect indicates that there has been a great performance across nearly all the companies thus leading to the general financial growth. Another observation made from the findings and analysis that the two-wheeler sales are influenced by India’s large population. The population has greatly contributed to the financial growth of the automobile industry due to the high purchasing power and the available access to substantial loans by different institutions in the country.
From the research study, it is recommendable that the automobile companies should form partners amongst themselves for stronger business relationships. This would ensure that there is no decrease in the number of sales of different companies thus ensuring a stable financial growth in the automobile industry. This is because from the analyses done, a drop in the sales of a given company implies there would be a corresponding impact in the financial growth of the entire industry. Additionally, the companies should invest in a wider range of the products provided so that they create diversity in the market thus gaining a superior competitive advantage (Law, 2017). It is also recommendable that the automobile companies should also invest in the services related to the product sales such as insurance, repair, and maintenance services in order to realize more sales. This will significantly lead to the financial growth of the automobile industry.
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