Auto sales update-Mar11

We visited the eleventh edition of bi-annual Auto Expo held at NewDelhi. While compact cars were the highlight in the previous edition,the limelight this year was on the Sports Utility Vehicles (SUVs) andMulti Utility Vehicles (MUVs) with a number of manufacturers vyingto enter the space.

De-coding the compact SUV: Compact SUV was the theme of this AutoExpo with three manufacturers Maruti Suzuki, Ford and Renault looking tohit the sweet spot with a sub Rs1mn product. Underpinning of a compactcar and DNA of a SUV was visible in Maruti’s XA Alpha concept, Ford’sEcoSport and Renualt’s Duster. Length of both XA Alpha and EcoSportproduction models is expected to be below the 4 meter mark to avail lowerexcise duty. The EcoSport is powered by the Ford’s revolutionary 1-litrepetrol engine capable of delivering 120hp power. Missing during the showwas M&M’s mini Xylo which is expected to be launched in the currentquarter.Ertiga, Maruti’s ticket to the MUV space: Maruti Suzuki will be lookingto expand its product portfolio with the launch of the Ertiga in the MUVsegment. The vehicle is expected to be pitted against market leader Toyota’sInnova and Mahindra & Mahindra’s Xylo. Although the Ertiga is smallercompared to competition, we expect the same to be its USP. The Ertiga isexpected to appeal more to personal segment as compared to the Innova,which also appeals to the commercial segment. The vehicle measures 4.2meter in length and has a capacity to seat seven people. The Ertiga will bepowered by a new 1.4 litre K-series petrol engine and a 1.3 litre dieselengine which is currently strapped on the SX4.RE60, Is it a Car? Undoubtedly the largest buzz created during the Expowas on Bajaj Auto’s latest offering the RE60. The RE60 could best betermed as a worthy upgrade to a three-wheeler and is no where near a car(Nano competitor). The management too has maintained its stance rightfrom project conception to launch that they have no intention to enter thecar business. Largely constructed in fibre, the RE60 would be powered bya 200cc DTSi engine delivering 35km per litre. Bajaj will be launching thevehicle first in Sri Lanka in the coming months. As per the management,Sri Lanka which is a large market, 90% of the three wheelers are for personaluse. Hence RE60 too is expected to gain acceptance in personal segment.Although the RE60 is a step forward for the three wheelers, we doubt itsrelevance in the Indian market atleast at this point of time given the permitrestrictions. In case the government allows use of these vehicles thenTata’s Magic and Iris built on the Ace platform can be a strong competitorto RE60 in the urban commercial segment.

PINC Views: Looking at the SUV and MUV theme being played out at theAuto Expo, the Indian automotive industry seems to be graduating towardsbigger vehicles. Although compact cars would continue to account for abulk of the volumes, an upgrading customer could possibly look at thecompact SUVs in the future. The compact SUV category (sub Rs1mn)could be the next big segment for the industry. Similarly the MUV space isheating up with products to woo the large Indian families. That said thecurrent segment leaders, M&M and Toyota, would have their work cut outin order to defend marketshare.

13 January 2012SUVs HOG THE LIMELIGHT

For rating objective and disclaimer, please refer to last page of the reportPINC Research reports are also available on Reuters, Thomson Publishers and Bloomberg PINV <GO> 1

AUTO EXPO 2012

RESEARCHRESEARCHRESEARCHRESEARCHRESEARCHVI

SIT

UPD

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Vineet Hetamasaria, CFA +91-22-6618 [email protected]

Nikhil Deshpande +91-22-6618 [email protected]

Tasmai Merchant +91-22-6618 [email protected]

Sector View: Neutral

Product Category

Ashok Leyland

Stile (Nissan JV) MUV

Partner LCV

U 3723H MHCV

Jan Bus Bus

Bajaj Auto

RE60 Motorised Quadricycle

Hero MotoCorp

Maestro Scooter

Ignitor Motorcycle

Passion X Pro Motorcycle

Leap Scooter (Concept)

Maruti Suzuki

Ertiga MUV

XA Alpha SUV (Concept)

Mahindra & Mahindra

Rexton SUV

Reva NXR Electric Car

TVS Motors

Qube Scooter (Concept)

Radeon Motorcycle

Tata Motors

Safari Storme SUV

Ultra Range LCVs

LPT 3723 MHCV

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RESEARCHRESEARCHRESEARCHRESEARCHRESEARCH

[email protected] [email protected]

Two Wheelers – Scooters dominateBajaj Auto surprisingly gave the two wheeler segment a miss at the Auto Expo. Thecompany instead concentrated all its efforts on RE60 and avoided taking the spotlightaway from its newest offering. All other OEMs were present and the talking point was thescooter segment. Each company had an offering in the scooter space so as to tap theopportunities in the fastest growing two wheeler segment.

Hero MotoCorp’s new scooter, Maestro is similar to the current offering Pleasure thoughmore bulky and is positioned as a unisex vehicle competing against segment leader HondaActiva. Yamaha showcased the Ray which will be the company’s first offering in the scooterspace. Suzuki Motorcycle showcased the Swish, which is comparable to its current offering‘Access’, however with a fibre body. Piaggio’s iconic Vespa brand is expected to make acomeback in the Indian market and was at display during the event.

In motorcycle segment Hero MotoCorp showcased two motorcycles in addition to therecently launched Impulse. The Ignitor is a 125cc bike similar in construction to the HondaStunner. The X Pro is a refresh for the Passion. Honda and Suzuki showcased 110cccommuter motorcycles namely Dream Yuga and Hayate respectively. However, both themodels did not differ much from existing offerings from competitors hence significant brandingeffort would be required to make them a success.

Auto Expo 2012

Hero Ignitor Hero Passion X Pro

Suzuki Hayate Honda Dream Yuga

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RESEARCHRESEARCHRESEARCHRESEARCHRESEARCH Auto Expo 2012


Hero Maestro Piaggio Vespa

Suzuki Swish TVS Qube (Concept)

Yamaha Ray Hero Leap (Concept)

4


Company Product Segment Expected Launch Comments

Hero MotoCorp Maestro Scooter H1CY12 Unlike the Pleasure which is targeted towards the femalesegment, the Maestro is largely a unisexual product.

Hero MotoCorp Impulse Motorcycle - Offroad Launched Showcased as India’s first offroad bike, the Impulse is targetedat a niche segment. The company had arranged a mini dirttrack at the Expo which allowed participants hands on experienceon the vehicle. The Impulse was launched prior to the Expo.

Hero MotoCorp Ignitor Motorcycle - Executive H2CY12 The Ignitor is powered by a 125cc engine and has a strikingresemblance with Honda’s Stunner.

Hero MotoCorp Passion X Pro Motorcycle - Executive H1CY12 A Passion refresh, the X Pro is powered by a 110cc engine.

Hero MotoCorp Leap Concept Scooter - Hybrid Concept Hero MotoCorp showcased the Leap which is a hybrid scootercapable of delivering upto 100km per litre.

TVS Motor Qube Scooter - Hybrid H1CY13 The Qube is a hybrid scooter concept powered by both a petrolengine and a battery

TVS Motor Radeon Motorcycle - Executive H2CY12 The vehicle is expected to be powered by a 125cc engine anddraws resemblance from the Jive

TVS Motor Automatic Transmission Concept Concept Based on the Jive, this concept is expected to be developedfurther in for automatic transmission.

Honda Dream Yuga Motorcycle - Executive H2CY12 With the 110cc ‘Dream Yuga’, Honda expects to take ex-partnerand market leader Hero MotoCorp head on in the 110cc segmenti.e. Splendor and Passion territory. However, the modelnomenclature was surprising.

Honda CBR150R Motorcycle - Premium H2CY12 Powered by a liquid cooled engine and producing 18hp power,the 150R would be the entry level model in the CBR range.

Yamaha Ray Scooter H1CY13 The Ray would be Yamaha’s entry in the scooter segment.Expected to be launched in a year.

Suzuki Motorcycle Hayate Motorcycle - Executive Launched The Hayate is a 110cc motorcycle targeted at the commutersegment wherein Suzuki Motorcycles would be making a re-entry post the debacle of Zeus and Heat. However, there wasnothing exceptional about the new product.

Suzuki Motorcycle Swish Scooter H1CY12 The Swish is 125cc scooter with technical specifications similarto Suzuki’s Access albeit with a fibre body construction asopposed to metal on the Access

Piaggio Vespa Scooter H1CY12 The iconic Vespa brand is expected to make a comeback aftermore than a decade. The retro look scooters donned attentiongrabbing colours like yellow and red. The scooters would bemanufactured at Piaggio’s plant near Pune.


Summary Of Two Wheelers Showcased

Auto Expo 2012

5



RE60Bajaj Auto rolled out its funky looking pseudo car the RE60 at the Auto Expo. The vehicleis touted as an upgrade to the current range three wheelers which dot the urban landscape.The vehicle could be termed as ‘motorised quadricycle’. Bajaj Auto’s pavilion emphasizedthe eco friendly qualities of the RE60 predominantly CO2 emission of 60g/km from whereinthe vehicle derives its nomenclature. The vehicle is powered by a 200cc DTSi engine fromthe Pulsar family and is expected to deliver a mileage of 35 km per litre. The body ispredominantly fibre with peculiar features like the folding windows. The RE has gear leverintegrated in the dashboard alongwith a fare meter.

The management has maintained its stance of a non-compete with Tata’s Nano and targetingthe commercial segment with this four wheeler. Bajaj Auto would first launch the RE60 inexport markets like Sri Lanka. As already stated, ninety percent of three wheelers sold inSri Lankan market are used in the personal segment; hence the RE60 could find a betteracceptance in this market. The company would be manufacturing the vehicle at itsAurangabad facility alongwith the three wheelers.

Bajaj Auto has been prudent enough to envisage an upgrade to the three wheeler and theeffort is laudable. However, we doubt its relevance in the Indian context at this point of timeespecially with products such as Tata’s Iris and Magic available. Considering the minimalinvestment which has gone into the product, even the failure of the same should not makea significant dent on Bajaj Auto’s financials.

Bajaj RE60 Bajaj RE60 (Lower end model)

Auto Expo 2012

6


Passenger VehiclesCars

Compact cars which were the toast of the last Auto Expo were relegated to the backgroundthis year. The centre stage was instead taken by Sports Utility Vehicle (SUVs) and MultiUtility Vehicles (MUVs).

In the car segment the only noticeable launches were the Renault Pulse and the ChevroletSail. The Pulse is essentially a re-badging of its associate Nissan’s Micra. The vehicleresembles Micra in almost all aspects. What was most striking was that the interiorssuch as the central console and door knobs on the Pulse, Micra and even on Nissan’ssedan Sunny were exactly the same. We believe these similarities would make differentialpositioning of these vehicles difficult. Chevrolet showcased the Sail hatchback. Expectedto be positioned in the premium hatchback segment, the vehicle had dated looks. Eventhe finish of the model on display was surprisingly poor. Hyundai showcased an upgradefor its premium segment sedan; Sonata. BMW’s Mini compact luxury cars and French carmaker Peugeot’s models too were at display during the Expo to mark their entry in theIndian markets.

Renault Pulse Chevrolet Sail

BMW Mini Hyundai Sonata


Auto Expo 2012

7


Sports Utility Vehicles (SUVs)

The compact SUV space was buzzing with activity during the Expo. Maruti Suzuki andFord showcased the XA Alpha and the EcoSport compact SUV concepts during the expo.Both vehicles are expected to measure less than 4 meter to avail lower excise duty benefitsand help price aggressively. The Renault Duster too would be competing in the compactSUV space and was unveiled during the Expo. Audi showcased its newest offering Q3,which would be competing against the likes of the BMW X1 in India.

In the large SUV segment, Tata Motors launched the new generation Safari (Safari Storme)while M&M showcased products from its Korean subsidiary Ssangyong. M&M also hadan elaborate arrangement for the XUV500 so as to build on the hype prior to re-openingbookings in the current month.

Maruti XA Alpha (Concept) Ford EcoSport (Concept)

Renault Duster Tata Safari Storme


Auto Expo 2012

8


Multi Utility Vehicles (MUVs)

The MUV space too witnessed a flurry of launches even as market leader Toyota’s Innovareceived a refresh. Maruti Suzuki is expected to take the leader head on with its newoffering Ertiga. Styled on similar lines to the Innova albeit smaller in size, Ertiga is expectedto appeal to personal users in the urban segment. The vehicle may fail to make a mark inthe commercial segment wherein a bigger vehicle gives more flexibility to the operator.Chevrolet’s new MPV in partnership with SAIC China, Nissan’s Evalia and Ashok Leyland’sStile all looked similar in construction.

Toyota Innova (Refreshed) Maruti Ertiga

Nissan Evalia Ashok Leyland Stile (In JV with Nissan)

Chevrolet MPV Hyundai Hexa Space (Concept)


Auto Expo 2012

9



Maruti Suzuki Ertiga MUV H1CY12 Marks Maruti's entry in the MUV segment. Seven seater, willbe available in both petrol and diesel variants. We expect thevehicle to be targeted at the urban personal segment.

Maruti Suzuki XA Alpha Compact SUV Concept Compact SUV concept showcased by Maruti. Sub 4 metreSUV, expected to be priced below Rs1mn.

Hyundai Hexa Space Concept MUV Concept Revolutionary concept from Hyundai. Designed as an eightseater with individual seats instead of a bench.

Tata Motors Safari Storme SUV H1CY12 Tata Motors' old warhorse Safari gets a much needed makeover.While the engine is similar to the current version, the Stormegets a new front grill, headlights and other cosmetic changes

M&M Reva NXR Compact Car (Electric) H2CY12 M&M showcased the new generation electric vehicle from theReva stable i.e. Reva NXR.

M&M/Ssangyong Rexton, Actyon Sports SUV - M&M showcased products from its Korean subsidiary i.e.Ssangyong. On display was the seven seater Rexton SUVwhich is one of the models the company is expected to launchin India.

Ford EcoSport Compact SUV H2CY12 Based on the Fiesta platform. Production model expected tomeasure less than 4 meter length. To be powered byrevolutionary 1 litre EcoBoost (120hp) petrol engine. A dieselengine to be brought in later.

General Motors Sail Compact Car H2CY12 GM to bring back the Sail platform. To be positioned above theBeat. Product looked quite dated and the displayed piece lackedfinishing.

General Motors Chevrolet MPV MUV H2CY12 The MPV has been developed in collaboration with Chinesepartner SAIC. While space is a positive for the vehicle weexpect some cannibalisation of the existing Tavera sales.

Toyota Innova MUV H1CY12 Toyota showcased a refresh for the highly successful Innova.However, apart from a new grill and headlights, modificationsseem to be minimal.

Renault Pulse Compact Car Launched Basically the Micra re-badged. The interiors as well as exteriorsare no different from Nissan's small car offering.

Renault Duster Compact SUV H1CY12 At a length of 4.2 meter, the Duster would not qualify for lowerexcise benefit. Expected to be priced competitively. To bepowered by a 1.6 litre petrol and a 1.5 litre diesel engine.

Nissan Evalia MUV H2CY12 Also known as the NV200 in the European and Chinese markets.Would be manufactured at the facility in Chennai. Would bepositioned as a Urban Utility Vehicle targeted at the personalsegment.

Ashok Leyland Stile MUV H2CY12 The Stile is a re-badged version of the Nissan Evalia however,positioned lower. The Ashok Leyland offering would be targetedat the commercial segment and would also be custom built fordifferent applications such as cargo, ambulance etc.

Audi Q3 Compact SUV (Luxury) H1CY12 The Q3 is a compact sibling of the popular Q5 and Q7 series.

Mini Various models Compact Car (Luxury) Launched BMW showcased the iconic Mini brand of compact luxuryvehicles. On display were Mini Cooper, Cooper S, Countrymanand a convertible version.

Peugeot 508 Sedan H1CY13 The French carmaker would be making its re-entry in the Indianmarket with the 508 luxury sedan. The company is setting upa manufacturing facility in Gujarat. The 508 would be first launchedas a CBU with local manufacturing later. The 508 is expected tobe followed up with a launch in the hatchback segment.

Summary Of Passenger Vehicles Showcased

and a couple of concepts


Auto Expo 2012

10


Commercial VehiclesIn the light commercial vehicle space, Ashok Leyland showcased the Partner, a 6mt GVWvehicle. The Partner would be the third product from the JV with Nissan, the earlier beingthe Dost and Stile van. Market leader Tata Motors showcased its new Ultra range of LCVs.The Ultra would cover LCVs in the range of 5mt to 14mt (GVW). The range below 5mt isbeing covered under the Ace platform. The Ultra LCVs would be powered by 3 litre and 5litre CRDi engines. On display at the expo were Ultra 714 and Ultra 1017 with 7mt and10mt GVW configuration.

The Indian heavy commercial vehicle segment witnessed the introduction of 37mt (GVW)rigid trucks. Four major manufacturers namely Tata Motors, Ashok Leyland, Volvo andAMW launched their respective products in the segment.

In the multi axle coach segment, products on display included Volvo 9400 PX, Tata MotorsMarcopolo, AMW and MAN. The latter two showcased front engine models as opposed tothe current trend of rear engine coaches. Further, for AMW it would be their first offering inthe bus segment.


Tata Motors Ultra LCV range Tata Motors showcased its new LCV range i.e. Ultra. The Ultrawould comprise of LCVs in the 5 to 14 GVW range and would bepowered by 3 litre and 5 litre engine options. On display at theAuto Expo were two models namely Ultra 714 and Ultra 1017.

Ashok Leyland Partner LCV range H1CY13 The Partner would be the company's third offering in partnershipthrough its JV with Nissan. The Partner would have a 6mt GVWand is expected to be launched in 2013. The display vehicle atthe Expo had a refrigeration application.

Tata Motors, 37mt Rigid Truck HCV Touted as next big thing in the commercial vehicle space andan upgrade to the current 31mt (GVW) rigid trucks. The 37mtshowcased were with five axles including twin steering frontaxles, twin load axle at the rear and a lift axle. These trucks areexpected to be deployed in transportation of bulk cargo andcommodities.

Tata Motors, Multi Axle Inter city Coach Bus Manufacturers showcased their multi axle luxury coachesduring the Expo. While segment leader Volvo showcased the9400 EX, Tat Motors showcased the G7 coach designed byMarcopolo. AMW marked its entry in the bus segment with itsmulti axle coach Magnus.

Summary Of Commercial Vehicles Showcased

Ashok Leyland,Volvo, AMW

Volvo, MAN, AMW


Auto Expo 2012


T E A MEQUITY DESKSadanand Raje Head - Institutional Sales [email protected] 91-22-6618 6366

Technical Analyst

Rajeev Gupta Equities [email protected] 91-22-6618 6486Ankur Varman Equities [email protected] 91-22-6618 6380Himanshu Varia Equities [email protected] 91-22-6618 6342Shailesh Kadam Derivatives [email protected] 91-22-6618 6349Ganesh Gokhale Derivatives [email protected] 91-22-6618 6347

Mehul Desai Head - Sales Trading [email protected] 91-22-6618 6303Amar Margaje [email protected] 91-22-6618 6327Ashok Savla [email protected] 91-22-6618 6321Sajjid Lala [email protected] 91-22-6618 6337Raju Bhavsar [email protected] 91-22-6618 6322Hasmukh D. Prajapati [email protected] 91-22-6618 6325

SALES

DEALING

RESEARCHVineet Hetamasaria, CFA Head of Research, Auto, Cement [email protected] 91-22-6618 6388Nikhil Deshpande Auto, Auto Ancillary, Cement [email protected] 91-22-6618 6339Tasmai Merchant Auto, Auto Ancillary, Cement [email protected] 91-22-6618 6377Vinod Nair Construction, Power, Capital Goods [email protected] 91-22-6618 6379Ankit Babel Capital Goods, Engineering [email protected] 91-22-6618 6551Hitul Gutka Power [email protected] 91-22-6618 6410Subramaniam Yadav Construction [email protected] 91-22-6618 6371Madhura Joshi Power [email protected] 91-22-6618 6395Satish Mishra Fertiliser, Oil & Gas [email protected] 91-22-6618 6488Urvashi Biyani Fertiliser, Oil & Gas [email protected] 91-22-6618 6334Naveen Trivedi FMCG [email protected] 91-22-6618 6384Rohit Kumar Anand IT Services [email protected] 91-22-6618 6372Niraj Garhyan IT Services [email protected] 91-22-6618 6382Namrata Sharma Media [email protected] 91-22-6618 6412Sakshee Chhabra Media [email protected] 91-22-6618 6516Bikash Bhalotia Metals, Mining [email protected] 91-22-6618 6387Harleen Babber Metals, Mining [email protected] 91-22-6618 6389Dipti Vijaywargi Metals, Mining dipti.vijaywargi @pinc.co.in 91-22-6618 6393Sushant Dalmia, CFA Pharma [email protected] 91-22-6618 6462Poonam Sanghavi Pharma [email protected] 91-22-6618 6709Suman Memani Real Estate, Mid caps [email protected] 91-22-6618 6479Abhishek Kumar Real Estate, Mid caps [email protected] 91-22-6618 6398C Krishnamurthy Technical Analyst [email protected] 91-22-6618 6747

DIRECTORSGaurang Gandhi [email protected] 91-22-6618 6400Hemang Gandhi [email protected] 91-22-6618 6400Ketan Gandhi [email protected] 91-22-6618 6400

COMPLIANCERakesh Bhatia Head Compliance [email protected] 91-22-6618 6400

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Auto sales update-Mar11