Tuesday, March 6, 2007

Indian Automotive Industry and the E and D segment

There were only a few handfuls of cars in the Indian market in the 1980s. Most of these were outdated models like Hindustan Motors' Ambassador (which is still produced and sold). The only car with the latest technology then was the Maruti 800. Since then the market has grown with over 20 manufacturers and hundreds of models and variants. The Maruti 800 is at the lower end of the price range costing Rs. 200,000 (approx US $4,000) and Bugatti Veyron at the other with a price tag of Rs. 125,000,000 ($2.7 million) (import taxes and duties extra).[1]

With the potential to emerge as one of the largest in the world India is presently

2nd largest two wheeler market in the world

4th largest commercial vehicle market in the world

11th largest passenger car in the world and is expected to be the 7th largest market by 2016

The size of the Indian automotive industry is expected to grow at 13% p.a over the next decade to reach around USD 120 - 159 bn by 2016. (SIAM 2006) The passenger vehicle sales in India crossed the one million mark in 2005.



[1] Indian Automobile Industry, http://en.wikipedia.org/wiki/Cars_in_India

D-Segment

The D segment grows at 10-15% annually. Goldman Sachs has predicted that India will have the maximum number of cars on the planet by 2050 overtaking the United States. The high growth potential in the D segment has resulted in many foreign car manufacturers entering the Indian market to tap this market.

MODEL

1999

2000

2001

2002

2003

2004

2005

Accent

1,689

16,205

16,267

20,003

25,002

24,383

25,345

Ikon

1,677

17,402

15,218

14,970

18,565

24,536

24,567

City

9,167

10,555

9,223

11,840

14,355

30,786

36,346

Lancer

7,621

7,991

6,438

5,935

2,961

2,509

2,210

Corsa/Wagon

0

4,069

5,805

7,109

6,829

5,680

4,869

Baleno

352

4,142

1,347

648

1,816

6,521

4,235

Optra

0

0

0

0

4,247

9,191

8,214

Petra/Siena/Weekend

3,642

2,471

1,042

2,746

914

1,157

1,362

Others

41,550

36,108

619,776

643,947

827,407

956,809

1,035,889

Total

65,698

98,943

675,116

707,198

902,096

1,061,572

1,143,037

E-segment

The nation was home to an estimated 83,510 people with financial assets of at least $1 million at the end of 2005, up 37 percent from two years earlier, according to the 2006 World Wealth Report published June 20 by Merrill Lynch & Co. and Cap Gemini SA.

Rolls Royce, Bentley and Maybach are examples of the few high end automobile manufacturers to enter India in the recent years.

Analysts[1] estimate the Indian premium car market at less than 2,500 cars a year, growing at about 15 per cent a year. Take the smaller and less expensive Mercedes-Benz C-Class out of that list, and the number shrinks to 1,700 units -- less than 2 per cent of the passenger car market (source: SIAM).

DaimlerChrysler (Mercedes-Benz)[2]

  • It entered the Indian market in the late 1990’s by introducing the E-class.

  • Year
  • Number of cars sold
  • 2001
  • 1208
  • 2003
  • 1381
  • 2004
  • 1581
  • 2005
  • 1815

  • By 2010, it hopes to sell 4,000 units a year.

Porsche AG

In dec 2006 Porsche AG opened its first dealership in India. Within a week of a launch, Porsche dealers claim to have taken 19 orders in Delhi and 12 in Mumbai, mostly for the Cayenne SUV. [3] The showroom in New Delhi will be followed by outlets in Bangalore, Hyderabad and Mumbai. The cheapest Porsche Cayenne costs $114,000 after a 112 percent import duty, compared with a price of $65,300 in Germany. The company expects Indian sales of the 911 Carrera and Cayenne sport-utility vehicles to rise more than 50 percent to 200 units in 2007-08.

BMW[4]

Will begin assembling cars in India in April 2007 and expects to produce 1,000 vehicles in its first year of operations at its plant in Chennai and increase it to 1,700 cars in 2008

BMW's plant in Chennai is the group's fifth in Asia and will make 3 and 5 series exclusively for the Indian market. The luxury carmaker reported sales of 257 cars in India last year out of combined sales of luxury brands like Mercedes-Benz, Lexus and Audi.



[1] Prasad Sangameshwaran, July 21, 2005, Lessons that Mercedes learnt in India, <>

[2] “DaimlerChrysler turns the corner”, Das,25 May 2004,<>

[3] http://www.bloomberg.com/apps/news?pid=20601100&sid=augvLVaaxfRY&refer=germany

[4] “BMW to commence production in March 2007”, 8 February 2007

Serviced Apartments



Serviced Apartments in India

In India Serviced Apartments are being built by few Hotel Company’s as an addition to the Hotels. Taj’s Wellington Mews and Ascot’s Savoy Suites are an example of this. US-based Hilton Hotels Corporation and India's DLF Ltd have decided to promote a 26::74 joint venture to develop and own 75 hotels and serviced apartments in India over next seven years. The initial stage of the joint venture will involve 20 hotels in a number of key locations including Chandigarh, Chennai, and Kolkata.



“DLF partners with Hilton to promote hotel chain”, 1 December 2006, ET

Hotel potential.

Tourist arrivals to India have shown a robust growth and we will go past the 4 million international arrival mark for the first time in 2006. While the Incredible India campaign has been a huge success in the recent past, India now runs the risk of over playing it. India suddenly has the most expensive hotel markets in the region.

The government of India grants star categories to all approved hotels in India. This approval status is voluntary; however, only approved hotels can avail of various incentives, import licenses and other benefits from the government. Nearly all the five-star deluxe, five-star, four-star and three-star hotels in the country are members of Federation of Hotel & Restaurant Associations of India (FHRAI), although membership is not so comprehensive in lower star categories.

The following table lists the number of FHRAI member hotels in different categories in the last five years.

2002

2003

2004

2005

2006

Categories

hotels

rooms

hotels

rooms

hotels

rooms

hotels

rooms

hotels

rooms

five star deluxe

68

15672

68

16050

74

17903

78

18625

85

19935

five star

72

8662

72

8669

71

8554

77

9326

81

9162

four star

100

7614

102

7408

104

7355

124

8693

119

8086

three stars

413

21387

409

21098

414

21433

468

24401

455

24123

two stars

234

9278

226

8903

221

8639

212

8242

196

7009

one star

48

1696

44

1520

43

1480

44

1504

35

1098

heritage

71

2492

67

2252

69

2297

75

2567

76

2611

approved (unclassified)

308

12515

297

11921

304

12058

333

13426

440

17937

un-approved

455

17925

452

17895

477

18796

470

18286

493

19,431

total

1769

97241

1737

95722

1777

98515

1881

105,070

1980

109392




State of Multiplex Industry in India

In India, there has been a change in the spending pattern of consumers. Consumers today have started spending more on lifestyle categories like restaurants, movies and entertainment. A strong appetite for movies and an increase in the average household incomes in India augurs well for the multiplex business. Since standalone theaters lack the financial strength to upgrade and install the latest technologies, multiplexes are emerging as an alternative form of entertainment.

Currently, there are 130 multiplexes (with two or more screens). By the end of 2006, approximately 145 multiplexes will house more than 550 screens. Majority of the multiplexes in India are coming up within malls. Malls in India are on the rise with the number expected to rise from around 50 in 04 to around 350 by the end of 06. Multiplexes are preferred anchor tenants in the malls as they increase footfalls. Mall development in small towns is also picking up at a rapid pace which would in turn result in a significant jump in the number of multiplexes. Moreover several states like Maharashtra, Punjab, and Kolkata have announced entertainment tax exemptions for multiplexes in the initial years in order to drive growth.

PVR, Inox, Shringar and Adlabs are the biggest listed players in the film exhibition space. The other big name which has also recently filed its draft red herring prospect-us for its proposed IPO is the CineMax chain. Shringar Cinemas, an integrated film exhibition and distribution company, since its IPO in April 05, has signed 34 incremental properties. Including the existing 31 screens, the company’s strength would increase to 192 screens and approximately 51,000 seats by 08. Inox a pan India multiplex operator currently has operations in 11 cities and has entered into an alliance with well-known retail brand - Pantaloon Group of Companies.


This alliance provides Inox preferential access to all real estate developments that the Pantaloon Group is involved with. Inox plans an addition of atleast 60 new screens by 2008. CineMax is also expanding its network nationwide rapidly. CineMax presently has 33 screens up and running across various locations in India and another 97 plus screens are in the making. PVR is on a major expansion drive and is aiming for another 82 screens by March 2008 in addition to its present screens. Adlabs acquired in 2005 by the Anil Ambani plans to expand its presence from the current 41 and is expected to add another 115 screens by 2009. The other big chain to look out for is Atul Goel’s Fun Republic. Presently the chain has 29 screens operational in 8 multiplexes.

However it’s not just these top six who are eyeing the multiplex pie. Newer companies increasingly entering the multiplex fray include Mukesh Ambani’s Reliance Industries group, which plans to create its own brand of multiplexes. Bright and attractive retail market Gujarat is luring more companies build shopping malls. The Kalani Group is scheduled to penetrate Gujarat by creating a shopping mall-cum-multiplex at Vadodara, Ahmedabad and Surat. The company also plans to open ten similar malls around the country including Indore, Raipur, Udaipur, Chandigarh, Jabalpur and Ujjain.

Even regional players like Sathyam Cinemas in Chennai are ramping up. They have two multiplexes in Chennai and will add 18 more screens in three multiplexes across Chennai by 2008. The company is also scouting for four-five more sites in Chennai besides venturing into cities like Madurai, Coimbatore, Trichy and Calicut.These multiplexes and malls can be prospective clientele for A Ltd.

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