Risk and Return Analyis and Portfolio Management of Indian Automobile Companies

From the last two decades auto industry is growing more competitive. Competition from the foreign automakers like Toyota and Honda is also high. In

Automotive industry comprises of the companies which are associated with supply, manufacturing or marketing and contributes significantly to the national economy.

With the recovery of economy, the world’s automobile industry has been growing steadily over the past few years. According to Bloomberg, the US automobile sales climbed from its depth 10.4 million in 2009 to over 15.6 million in 2013. Furthermore, industry analysts predict that the sales will

Automobile is one of the most important transportation thing that is now governing the transportation all through the world and it's use is rising over the time. The North Americans seem to be dependent on automobile, but the new implementation of urban planning methods and new transportation systems is going to take on automobile use in coming years and some reasons are as following.

The international automakers invested more than $72 billion to capitalize 425 facilities and offices. This created jobs for 123 thousand Americans with $9.3 billion and products purchased from US suppliers for $104 billion to produce 5.3 million vehicles in which 46% of all US vehicle production. There are nearly 10 thousand dealership franchises sold that employ more than 500 thousand American gaining $29 billion. Further, nearly 900 thousand US-built vehicles were exported. These figures clearly shows that there has been a domino effect of success in the US auto industry and it means that it is a great contributor to the US economy.

There are four major factors affecting the automotive industry: technology, market, customers and the most influential factor – environment. Environment is a source of materials, infrastructure necessary for manufacturing but everything is limited. The process of car or automotive manufacturing is very complex regarding the usage of numerous resources and different technologies ( P. Golinska & M. Kosacka).

INSTRUCTORS: PROF. S.K. BARUA PROF. J.R. VARMAACADEMIC ASSOCIATE: MS. VAISHALI SATTAREPORT PREPARED BYGROUP 12MEENAKSHI DEOGAM M. SHYAMNIMISHA SAXENARAGHAV YADAVROHAN ANANDDATE OF SUBMISSION: 24TH AUGUST, 2010

The automotive industry is widespread globally with a wide range of organizations involved in the following: development, marketing, manufacturing, designing, and sales. This analysis will take a further look at automakers in the industry, more specifically General Motors (GM), Volkswagen (VLKAY, Honda, Nissan, Toyota. Beginning around the 1890s, the automotive industry has evolved and undergone shift changes in consumer trends, product development, marketing, and industry competition shifts. Some of the major changes have been the result of: Regulatory, Safety, Economy, Reliability, and Environmental.

Automotive industry is also incorporating new technologies. The launch of hybrid engine cars in the recent past is one of the major technological advancement. Many companies are working to produce electric vehicles and looking for another means of fuel for the cars. The automobile industry is constantly changing. Due to the recent global recession, there has been a slowdown in the demand of vehicles and people are moving towards small compact cars which are normally low priced. Many companies which earlier normally catered to luxury segment are also entering this new attractive segment. Global expansion has been the foray of automobile industry since long. Companies started expanding themselves since early 1900¶s. Nissan is also one of the major automobile companies which started its global expansion around 50 years back.

The Automobile Industry, aside from the World Wide Web has spurred more economic growth in the past century than any other invention in our history. From coal fueled steam driven power plants to internal combustion engines, modern transportation methods have closed the distance gap globally, allowing for rapid movement of goods throughout all economies. While the aviation industry has increased the overall scale and speed of transportation, the automotive industry

Today, the automotive industry is one the top profitable industries in U.S. and all around the world. More than 1.5 million people involved in different segments such as engineering, designing, ordering, sell, and marketing. As a result of this statement, automotive industry has huge effects on employees, customer support, jobs vacancies, revenue and finally GDP which is the most important part of the economy for any countries (Statista Portal, 2016).

The automotive industry in India is one of the largest automotive markets in the world, previously one of the fastest growing markets globally. It started out as a small venture in the 1940s but witnessed a rapid growth with the entry of some big manufacturers like Mahindra & Mahindra and Maruti in mid and late 1900s. In 2000, this industry became an important sector of the Indian economy and a major foreign exchange earner for the country.

In 2009a, Maruti Suzuki India Ltd. was the leader in the passenger vehicle segment with 47% market share (see Exhibit 2a and 2b for competitive landscape for passenger vehicles in India and segment wise market share).3 This segment was expected to grow at a compounded annual growth rate of 14.5% in the period from 2009 to 2013.4 Bulk of this growth was expected in the passenger car segment, especially the small car segment on the back of the reviving Indian economy and shifting preference to fuel efficient and low maintenance cars. The UV and MPV segments were expected to grow because of reductions in taxes. The market was also witnessing a polarization with people 's preferences moving from sedans to small cars or utility vehicles.5 A 22% growth in premium car sales in 2009 had prompted players such as BMW and Mercedes Benz to expand in India. Exports were another growth area and India’s largest markets were Asia and Africa and as output quality improved Europe was also gaining in importance.6

According to the Ministry of Commerce and Industry, the automobile industry in India has seen a tremendous compound growth at the rate of 22 % between the year 1992 and 1997. Furthermore, the annual turnover of the automobile sector in India, in the financial year 2002-2003, is said to have surpassed the capital investment of Rs 50,000 crore. With Indian automobile corporations gaining international market, the turnover in the similar year was calculated to be Rs. 59,518 crore. The Indian automobile industry will be a standout amongst the leading in the globe. Those business accounts to 7. 1 percentage of the country 's horrible down home item (GDP). Likewise around FY 2014-15, around 31 % of little autos sold comprehensively need aid made over India. The two Wheelers section with 81 percentage business sector allotment is the pioneers of the Indian car business owing with a developing white collar class What 's more an adolescent populace.

Tata Motors is today one of the most competitive & profitable Automobile Industry in India as can be clearly depicted by the analysis