The Indian Automobile Industry

The Indian Automobile industry

The Indian Automobile industry is the seventh largest producer of automobiles in the world with an average annual production of 23.36 Million vehicles and has been growing at a healthy rate of around 10% CAGR (2005-15), accounting for 45% of the country's manufacturing gross domestic product (GDP), and 7.1% of the country's GDP. The Indian Auto industry is posed to be the third largest automotive market in volume, by 2016 and is expected to reach a volume of 6 million units by 2020.

As India is a developing economy with relatively low GDP per capita, the Indian automobile industry is dominated by 2-Wheelers which comprise of ~81% of the overall market. Passenger vehicles are the 2nd largest segment of the industry with a share of ~13% and commercial and three wheelers comprise of 6% of the market share, figures taken of the financial year 2014-15.

Among the three segments the passenger car segment is expected to increase at a CAGR of around 18% during FY 2015-21. A growing working population and an expanding middle-class are expected to remain key demand drivers along with increasing disposable incomes in the rural agri-sector which will further help to stimulate demand. The key players in the passenger vehicle segment are Maruti Suzuki commanding a market share of close to 48% followed by Hyundai 17% market share, and Honda Motors with a 10% market share.

With over 15 brands and a wide range of products available proper segmentation of the Indian cars is a necessary. This segmentation allows for automobile manufacturers to plan and position their models for succeeding in the targeted consumer section precisely. Moreover proper segmentation is important from the point of view of taxation as well.

There are different parameters based on which the cars available in the Indian market are categorized. The technically defining parameters are based on the length of the car, engine capacity, features offered, seating capacity and structure of the car. The Society of Indian car Manufacturers (SIAM) divides the Indian passenger vehicles in the segments A1, A2, A3, A4, A5, A6, B1, B2 and SUV based on the length of the automobiles. 

Further the segment may be divided into entry or minus and premium. For example:  A3 minor and A3 plus segments.

However, just the length of the car may not be the most practical way of segmenting the passenger cars, with price and features too playing an important part. As a result, to avoid all the confusion, the Indian passenger cars are popularly divided into the below mentioned segments according to the following properties.