“Indian Autos: A Unique Opportunity” – A talk by Mr. Pramod Kumar, Executive Director Goldman Sachs

On 20th November, MDAE hosted Mr. Pramod Kumar (Executive Director, Goldman Sachs) to deliver a talk on “Indian Autos – A Unique Opportunity”. Mr. Kumar gave an insight into the passenger vehicle (PV) market, its growth potential & key differentiators.

1) Why can’t India, as a passenger car market, be ignored?

  •  India is the 4th largest PV market in terms of number of units sold, 250,000 units per month.
  • Benchmarking car penetration (per thousand) against per capita GDP shows that India is still highly underpenetrated. It compares to where China was 12-14 years ago and where Korea was 20-25 years ago.
  • Favourable demographics, economic growth, increasing urbanisation (smart cities) and lack of last mile connectivity options will propel India to be the 3rd largest market by 2019.

2) How is the Indian PV market different than the rest of the world?

  • Market leadership is highly concentrated with 1-2 large players – Maruti has a 42% market share in PV’s. The market share for market leaders in economies like China, US & UK ranges from 13% – 19%.
  • Maximum product roll out (70%) is within the lower price band (<US$15k) – This makes most car models of global players irrelevant in the Indian market. Cars need to be specifically designed for the India consumer.
  • Focus of the Indian government has been to promote small cars (small size, higher fuel economy, lesser domestic import of oil).

3) How do macro-economic indicators impact the Auto industry?

  • Increase in GDP growth has a positive multiplier effect on car sales. Higher the GDP growth, higher is the multiplier effect in car sales. For example – between 1993 – 1997, when GDP growth ranged between 6% – 10%, the multiplier was 3.5x for car sales.
  • Lower interest rates had a positive effect on car sales – Auto is the second largest capital spend after homes in India.

 4) How has Maruti continued to be the market leader?

  • Strong presence in rural markets (outside top 100 cities) – Maruti has a 32% exposure to rural markets as against its closest competitor Hyundai (20%)
  • Extensive dealer network in >1,000 cities as against Hyundai (278) & Tata (465).
  • Building most products across one unified platform has saved time & investment and has enabled them to get economies of scale.

Post the PV market, Mr. Kumar provided key insight into the 2-wheeler segment

  • India is the largest organised two wheeler market in the world.
  • Scooters are set to be the key drivers of growth as opposed to motorcycles (20% CAGR over FY15-18 vs. 5% CAGR) for several reasons (scooters have unisex appeal, lack of gear, easy mobility, lower price)

 


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Date/Time
Date(s) - 20/11/2015
4:00 pm - 6:00 pm

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