CHAPTER-1 Introduction
CHAPTER-1 Introduction
INTRODUCTION
Introduction
Financial position, defined as the status of financial well-being regarding a company, is
important to every single business. The status of the assets, liabilities, and owner’s
equity (and their interrelationship) of an organization, as reflected in its financial
statement.
The Financial Position of a company is measured by the performance it takes in
company financial statement:
▪ A positive and growing cash flow statement
▪ Growing profits in the profit & loss statement
▪ A balance of assets, liabilities & owner’s equity in the balance sheet
It explained as the leverage, solvency, and cash standing of a company which ultimately
leads to the ability of the business to survive, is an important factor in large and small
businesses alike. Overall, financial position summary forms the most basic aspects of
accounting Assets, Liabilities, and owner’s equity. These three factors sum the essence
of the financial position of any business.
This is so important that a statement of financial position has become one of the most
Important reports in a business. When it comes to assets, companies have a lot to
balance. They must maintain proper amount of cash, equipment, and more. When it
comes to liabilities, a company does not want to outpace itself. Owner’s equity is an
investment that made by owners in a company or Organization. The structure of the
statement of financial position is like the basic accounting equation.
For a corporation the format will be:
Assets = Liabilities + Stakeholder’s Equity
Two-Wheeler industry
The Indian two-wheeler industry has got tremendous market potential. With the
growth of population and change in their pattern of lifestyle because of urbanization,
there has been rapid increase in the demand for Indian two wheelers. The three main
product segments in the two-wheeler category are scooters, motorcycles, and mopeds.
However, the response to evolving demographics and various other factors, other sub-
segments have emerged, namely, scooterettes, gearless scooters and four-stroke
scooters. While the first two emerged as a response to demographic changes, the
introduction of four stroke scooters has followed the imposition of stringent pollution
control norms in early 2000. Besides these prominent sub-segments, product groups
within these sub segments have gained importance in the recent years such as 125cc
motorcycles, 100- 125cc, gearless scooters with the two-wheeler market, especially the
motorcycle market has become extremely competitive and life cycle of products getting
shorter, the ability to offer new models to meet fast changing customer preferences has
become imperative. They have also concentrated on three main areas: fuel economy,
environment compliance and performance. The Indian automobile industry consists of
four segments: passenger vehicles, commercial vehicles, three-wheelers and two
wheelers. In the automobile industry, the two wheelers segment possesses a high
domestic market share.
India became the fourth largest auto market in 2019 displacing Germany with about
3.99 million units sold in the passenger and commercial vehicles categories. India is
expected to displace Japan as the third largest auto market by 2021.
The two wheelers segment dominates the market in terms of volume owing to a
growing middle class and a young population. Moreover, the growing interest of the
companies in exploring the rural markets further aided the growth of the sector.
India is also a prominent auto exporter and has strong export growth expectations for
the near future. In addition, several initiatives by the Government of India and major
automobile players in the Indian market is expected to make India a leader in the two-
wheeler and four-wheeler market in the world by 2020.
The Indian automotive industry consists of five segments: commercial vehicles; multi-
utility vehicles & passenger cars; two-wheelers; three-wheelers; and tractors. With
7,822,963 units sold in the domestic market and 753,591 units exported during the
first nine months of FY2007, the industry (excluding tractors) marked a growth of 43%
over the corresponding previous. The two-wheeler sales have witnessed a spectacular
growth trend since the mid-nineties. India is the second largest producer and
manufacturer of two-wheelers in the world. Indian two-wheeler industry has got
spectacular growth in the last few years. Indian two-wheeler pg. 9 industry had a small
beginning in the early 50's. The Automobile Products of India (API) started
manufacturing scooters in the country. Bikes are a major segment of Indian two-
wheeler industry, the other two being scooters and mopeds. Indian companies are
among the largest two-wheeler manufacturers in the world. Hero MotoCorp and Bajaj
Auto are two of the Indian companies that top the list of world companies
manufacturing twowheelers. The two-wheeler market was opened to foreign
companies in the mid-1980s. The openness of Indian market to foreign companies lead
to the arrival of new models of two-wheelers into India. Easy availability of loans from
the banks, relatively low rate of interest and the discount of prices offered by the
dealers and manufacturers lead to the increasing demand for two-wheeler vehicles in
India. This led to the strong growth of Indian automobile industry.
Two-wheeler segment posts healthy growth as both scooter and motorcycle segments
grow in double-digits. The two-wheeler industry performance has been strong during
FY2018, reporting YoY growth of 14.5% during 11m FY2018. The year was
characterized by periodic swings in growth rate caused by a confluence of factors, e.g.,
channel filling by OEMs during April 2017 (post BS IV) and July 2017 (post GST rollout),
pre festive season dealer stocking during August-September 2017. During the latter
half of the fiscal, the growth gained pace, supported by strong double-digit growth
during November 2017-February 2018 partly driven by low base of previous fiscal and
partially benefitting from positive demand sentiments, especially from the rural
market. During 2018, both the major products segments of scooters and motorcycles
contributed to growth, expanding by healthy double digits over the corresponding
previous. While scooters have reported a growth of 21.2%, the motorcycle segment
also reported double-digit growth of 12.7% during the same period, being the first
instance of double-digit growth of the motorcycle segment since FY2012. Although the
moped segment had reported healthy growth of 23% during FY2017, the volumes
decreased by 4.8% during 11m FY2018, in absence of new model launches and shift of
consumer preference towards lower displacement motorcycles.
Market Capture
Many foreign companies have been investing in the Indian automobile market in
various ways such as technology transfers, joint ventures, strategic alliances, exports
and financial collaborations. The auto market in India can boast of attractive finance
schemes, increasing purchase power and launch of latest products.
Some vital statistics regarding the automobile market in India has been mentioned
below:
▪ India ranks 2nd in the global two-wheeler market.
▪ India is the 4th biggest commercial vehicle market in the world.
▪ India ranks 11th in the international passenger car market.
▪ India ranks 5th pertaining to the number of bus and truck sold in the world.
Between passenger vehicles and two wheelers, the market share of the two-wheeler
segment (76%) more than doubled its share of the passenger vehicles (16.25%) and
commercial vehicles and three wheelers stood lower at 4.36 per cent and 3.39 per cent,
respectively. This shift, which continues, has been prompted by two major factors:
innovative models and technological advancements. The Indian two-wheeler industry
has witnessed a strong volume growth over the last two years, having grown by 25 per
cent in 2009-2010 and 27 per cent in 2010-11 to reach million units. This strong
double-digit growth has been driven by multiple factors. The prime reason is statistical
as this period of high double-digit growth has showed up after a rather sedate previous
two years, when the two-wheeler industry volumes had shrunk by 5 per cent in 2007-
08 and had grown by a mere 5 per cent in 2008-09. In addition to the contribution of
pent- up demand, the two-wheeler industry growth over the last few years has been
supported strongly by various underlying factors including India’s rising per capita
GDP, increasing rural demand, growing urbanization, swelling replacement demand,
increasing proportion of cash sales and the less measurable metric of improved
consumer sentiments.