Automotives-March-220313.pdf

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Automotives

For updated information, please visit www.ibef.org

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2013


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Contents

Advantage India

Market overview and trends

Growth drivers

Success stories: Maruti, Tata Motors

Opportunities

Useful information


AutomotivesMARCH

2013


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Automotives

For updated information, please visit www.ibef.org ADVANTAGE INDIA

Advantage India

Advantage

India

Strong demand growth due to risingincomes, growing middle class, and ayoung population is likely to propelIndia among the worlds top five auto- producers by 2015

Growth in export demand is alsoset to accelerate

Tata Nano and the upcomingPixel have opened up thepotentially large ultra low costcar segment

Innovation is likely to intensify

among engine technology andalternative fuels

India has significant costadvantages; auto firms save 10-25per cent on operations in India

compared to Europe and LatinAmerica

A large pool of skilled manpowerand a growing technology base willinduce greater investments

The government aims to developIndia as a global manufacturing aswell as R&D hub

There has been a wide array of policysupport in the form of sops, taxes andFDI encouragement

Market size:

USD145

billion

FY16E

Market size:

USD57.7

billion

FY10

Notes: R&D - Research and development, FDI - Foreign direct investment; FY - Indian

financial year (April - March); FY16E - estimated figure for financial year 2016; estimates are

from the governments Automotive Mission Plan (2006- 2016)

Growing demand Innovation opportunities

Rising investments Policy support

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2013


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Contents

Advantage India


Growth drivers


Opportunities

Useful information


AutomotivesMARCH

2013


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55For updated information, please visit www.ibef.org MARKET OVERVIEW AND TRENDS

Evolution of the Indian automotivessector

Automotives

Closed market

Only 5 players

Long waiting

periods andoutdated models

Sellers market

Joint venture (JV) -Indian government and

Suzuki to form Maruti

Udyog; started

production in 1983 Component

manufacturers alsoentered via JV route

Buyers market

Sector de-licensed in

1993

Major originalequipment

manufacturers (OEMs)

started assembly inIndia

Imports allowed fromApril 2001

Introduction of value

added tax in 2005

More than 35 playersin the market

Removal of most

import controls

Indian companies

gaining global

identity

Setting up of

National Automotive

Board to act asfacilitator between

government and the

industry

Source: Tata Motors, Society of Indian Automobile

Manufacturers (SIAM), Aranca Research,

Notes: JV - Joint Venture

0.4 million

units (1982)

Before 1982

0.6 millionunits (1992)

1983-1992

11 million units

(2007)

1993-2007

20.4 millionunits (2012)

2008 onwards

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The automotives market is split intofour segments

Automotives

Automobiles

Two-wheelers

Mopeds

Scooters

Motorcycles

Electric two-wheelers

Passenger vehicles

Passenger cars

Utility vehicles

Multi-purposevehicles

Commercial vehicles

Lightcommercialvehicles

Mediumand heavy

commercialvehicles

Three-wheelers

Passengercarriers

Goods carriers

MARCH

2013


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Revenues have been growing at a strongpace

Gross turnover of automobile manufacturers in India expanded at a CAGR of 17.7 per cent over FY07-11

Excluding three wheelers, trucks account for the largest share of revenues (47.8 percent in 2011)

Revenue trends over the past few years in USD million

MARKET OVERVIEW AND TRENDS

Automotives

30.5

36.6

33.3

43.3

58.6

FY07 FY08 FY09 FY10 FY11

Source: SIAM, Datamonitor, Aranca Research

Note: * - does not include three wheelers

Market* break-up by revenues (2011)

47.8%

31.8%

20.4%

Trucks

Cars

Two Wheelers

MARCH

2013


8/3588For updated information, please visit www.ibef.org

Sectors growing strength evident fromrise in total production figures


Automobiles production increased at a CAGR of 13.2

per cent over FY05-12

Passenger vehicles was the fastest growing segment

during that per iod with a CAGR of 14.5 per cent

Total production of automobiles in India (million units)

Source: SIAM, Aranca Research

Automotives

Notes: CAGR - Compound annual growth rate

1.2

1.3

1.3

1.6

1.8

2.4

3.0

3.1

0.4

0.4

0.5

0.6

0.4

0.6

0.8

0.8

0.4

0.4

0.6

0.5

0.5

0.6

0.8

0.8

6.57.6

8.5

8.08.4

10.5

13.4

15.5

FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12

Passenger Vehicle Commercial Vehicle Three Wheelers Two Wheelers

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Two wheelers dominate production volumes; in FY12,

the segment accounted for more than three quarters

of total automotives production in the country

In fact, India is the worlds second largest two wheeler

producer; the country is also the fourth largestcommercial vehicle producer

Market share by volume (FY12)


Automotives

Market break-up by production volume

77%

15%

5% 3%

Two Wheelers

Passenger

Vehicle

Commercial

Vehicle

Three Wheelers

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1010For updated information, please visit www.ibef.org

Market break-up of individual segmentsby production volumes (1/2)


Shares in production of commercial vehicles (FY11)

Automotives

Shares in production of passenger vehicles (FY11)

88.5%

11.5%

Passenger cars

Utility

vehicles/multipur

pose vehicles

36.0%

6.1%

49.7%

8.1%

MCV & HCV

PassengerCarriers

MCV & HCV

Goods Carriers

LCV Passenger

Carriers

LCV Goods

Carriers


Notes: LCV - Light commercial vehicle;

MCV - Medium commercial vehicle;

HCV - Heavy commercial vehicle

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Shares in production of two wheelers (FY12)Shares in production of three wheelers (FY12)


15.8%

84.2%

Goods carriers

Passenger carriers

Automotives

5.3%

79.1%

15.6% Mopeds

Motorcycles

Scooters

Market break-up of individual segmentsby production volumes (2/2)

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Exports of automobiles from India (million units)

Source:SIAM, Aranca Research

Exports have also grown strongly (1/2)

Automobiles export volumes increased at a CAGR of

22.4 per cent over FY05 - FY12

Over this period, the fastest growth was in the two

wheeler segment (25.8 per cent) followed by three

wheelers (21.9 per cent)

Automotives

0.

2

0.

2

0.

2

0.

2

0.

3

0.

5

0.

5

0.

5

0.

03

0.

04

0.

05

0.

06

0.

04

0.

04

0.

08

0.

1

0.

1

0.

1

0.

1

0.

1

0.

2

0.

2

0.

3

0.

4

0.40.5

0.6

0.8

1.01.1

1.5

2.0

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

1.8

2

FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12

Passenger Vehicle Commercial Vehicle Three Wheelers Two Wheelers

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Exports shares by volume (FY12)

Source:SIAM, Aranca Research

Two wheelers accounted for the largest share in

exports (by volume) at 67 per cent in FY12

Passenger vehicles account for a sizeable 18 per cent

of overall exports

Automotives

18%

3%

12%

67%

Passenger Vehicle

Commercial

Vehicle

Three Wheelers

Two Wheelers

Exports have also grown strongly (2/2)

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Presence of a clear leader in eachsegment of the market

Automotives

The automotives industry is concentrated with market leaders in each segment commanding a share of over 40

per cent

Market Leader Others

Passenger Vehicles 45% 16% 15% 7%

MCVs & HCVs 63% 23% 7%

LCVs 59% 30% 4% 4%

Three Wheelers 41% 40% 10%

Motorcycles 59% 24% 7% 6%

Scooters 51% 21% 14% 10%


Notes: Data is for FY10

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Notable trends in the Indianautomotives sector

New product

launches

Large number of products available to consumers across various segments; this

has gathered pace with the entry of a number of foreign players

Reduced overall product lifecycle have forced players to employ quick product

launches

Improving product -

development

capabilities

Increasing R&D investments from both the government and the private sector

Private sector innovation has been a key determinant of growth in the sector;

two good examples are Tata Nano and Tata Pixel - while the former has been a

success in India, the latter is intended for foreign markets

Alternative fuels

In FY11, the CNG market was worth more than USD330 million and CNG cars

and taxis are expected to register a CAGR of 28 per cent over FY11-FY14

The CNG distribution network in India is expected to increase to 250 cities by

2018 from 30 cities in 2009

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Contents

Advantage India


Growth drivers


Opportunities

Useful information


AutomotivesMARCH

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1717For updated information, please visit www.ibef.org GROWTH DRIVERS

Sector has been benefitting from strongdemand and product innovation

Automotives

Strong

government

support

Large domestic

market

Growing demand

InvitingResulting

in

Growing demand Increasing investmentsPolicy support

Rising incomes,

young population

Greater

availability of

credit and

financing options

Strong growth in

exports as well

Goal of

establishing Indiaas an auto-

manufacturinghub

R&D focus; GOIhas set uptechnology

modernisation

fund

Policy sops, FDI

encouragement

Rising

investments from

domestic and

foreign players

Greater innovation

in products;

market

segmentation

Strong projected

demand making

returns attractive

Notes: GOI - Government of India

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Rising incomes and a growing middleclass driving domestic demand growth

GROWTH DRIVERS

Rising incomes; growing middle class

Personal (nominal) disposable income is expected to rise

annually by 8.2 per cent over FY11-17

Rising middle class-size of the middle class expected totouch 550 million by 2025 from 50 million in 2010

Favourable demographics - a young population is also

driving up the demand for cars

Demand for commercial vehicles have got a boost due todevelopment of roadways and greater market access

Automotives

Source:McKinsey Quarterly,

Aranca Research

Changing income dynamics of Indias population

Strivers: annualincome

INR500,000 -

1,000,000

Seekers: annual

income

INR200,000 -

500,000

Deprived annual

income

INR1,000,000

0

10

20

30

40

50

60

70

2005 2010 2015 2020 2025

million

households

Strivers Seekers Deprived Aspirers Globals

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Indian auto finance market size (USD billions)

Automotives

Easy availability of credit

Greater access to credit makes purchases of both passengerand commercial vehicles easier

The auto finance industry has grown at an average annual

rate of 13 per cent during FY08-12

The private sector banks like ICICI, HDFC are also showing

increasing interest in the segment which was previouslydominated by public players

Source: Kotak Mahindra Prime, Aranca Research

Notes: Greater distributional efficiencies, increasing demand (especially

from rural areas) due to rising disposable incomes have created new

markets for products within the country

10.611.9 11.9

15.1

20.5

8.0 8.5 7.7

10.6

14.8

0.0

5.0

10.0

15.0

20.0

25.0

FY07 FY08 FY09 FY10 FY11

Car Industry sales volume Vehicle Finance Penetration

Easier access to credit has also been a keydeterminant of growth in automotives

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India has a huge competitive advantageover peers

GROWTH DRIVERS

Design & Engg

skills

Manufacturing

skills

Manpowercosts

Supplier

base

Raw

materials

East Asia

Korea

China

Thailand

Indonesia

Vietnam

Central &

Eastern Europe

Czech Republic

Romania

Poland

Slovakia

Russia

Hungary

Turkey

Latin AmericaBrazil

Mexico

Source:ACMA, Aranca ResearchLess competitive than India In competition with India

AutomotivesMARCH

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Notes: SME - Small and Medium Enterprises, R&D - Research and Development,

NATRiP - National Automotive Testing and R&D Infrastructure Project, AMP - Automotive Mission Plan

Automotives

Auto Policy 2002

Automatic approval for foreign equity investment up to 100 per cent; no minimum

investment criteria

Encourages R&D by offering rebates on the R&D expenditure spent by the companies

Automotive Mission Plan

(AMP) 2006-16

AMPs vision is to make India a preferred destination for design and manufacturing of

automobiles and to achieve market size of USD154 billion by 2016

Setting up of a technology modernisation fund focussed on SMEs

Automotives training institutes, auto design centres, special auto parks also established

NATRiPs

Set up at total cost of USD388.5 million to enable the industry to implement global standards

Nine R&D centres of excellence with focus on low-cost manufacturing and product

development solutions

Dept. of Heavy Industries &

Public Enterprises

Worked towards reduction of excise duty on small cars and the increase of budgetary

allocation for R&D

Weighted increase in R&D expenditure to: 200 per cent from 150 per cent (in-house); 175 per

cent from 125 per cent (outsourced)

Union Budget FY13

Excise duty on large premium cars increased from 22 per cent to 27 per cent

Increased custom duty on cars and MUVs valued above USD40,000 to 75 per cent from 60

percent

5 year extension on deduction of R&D expenditure under Income Tax Act

Strong policy support has been crucialin developing the sector

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2013

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Business Description

Vehicles Research &Development Establishment(VRDE), Ahmednagar

Research, design, development and testing of vehicles

Centre of excellence for photometry, electromagnetic compatibility (EMC) and test tracks

Indore - National Automotive TestTracks (NATRAX)

Complete testing facilities for all vehicle categories

Centre of excellence for vehicle dynamics and tyre development

Automotive Research Associationof India (ARAI), Pune

Services for all vehicle categories

Centre of excellence for power-train development and material

Chennai Centre, Tamil Nadu Complete homologation services for all vehicle categories

Centre of excellence for infotronics, EMC and passive safety

Rae Bareilly Centre Services to agri-tractors, off-road vehicles and a driver training centre

Centre of excellence for accident data analysis

International Centre forAutomotive Technology (iCAT),Manesar

Services to all vehicle categories Centre of excellence for component development, noise vibration and harshness (NVH)

testing

Silchar Centre, Assam Research, design, development and testing of vehicles

Centre of excellence for photometry, EMC and test tracks

Automotives

Boost to R&D in the auto componentssector - NATRiP centres

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2013

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Emergence of large automotive clustersin the country

Automotives

North

West

East

South

Ashok

Leyland

Force

Motors

Piaggio

Swaraj

Mazda

Amtek Auto

Eicher

Honda SIEL

Maruti

Suzuki

Tata Motors

Bajaj Auto

Hero Group

Ashok

Leyland

Bajaj Auto

FIAT

GM

M&M

Eicher

Skoda

Bharat Forge

Tata Motors

Volkswagen

Renault-

Nissan

M&M

Tata Motors

Hindustan

Motors

Simpson &

Co.

International

Auto

Forgings

JMT

Exide

Ashok

Leyland

Ford

M&M

Toyota

Kirloskar

Volvo

Sundaram

Fasteners

Enfield

Hyundai

BMW

Bosch

TVS Motor

Company

Renault-

Nissan

List of companies

Source:ACMA, Aranca Research

Delhi-Gurgaon-

Faridabad

Kolkata-

Jamshedpur

Chennai-Bengaluru-

Hosur

Mumbai-Pune-

Nashik-

Aurangabad

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Source:Aranca Research; Note: All figures as of 2011-12

Key automobile manufacturing plantsacross India

Heavy Vehicle Manufacturing Plant

Light Vehicle Manufacturing Plant

SOUTH: Chennai hostsmanufacturing plans for

heavy and light vehicles

NORTH: Delhi is a hub for lightvehicle manufacturing whereas

Haryana and Uttarkhand are for

heavy vehicle manufacturing

WEST: Maharashtra, andGujarat are bases for heavy

and light vehiclemanufacturing

NORTH WEST: Rajasthan isa hub for majorly light

vehicle manufacturing

EAST:Jamshedpur is the site ofTatas heavy vehicle

manufacturing

AutomotivesMARCH

2013

For updated information, please visit www.ibef.org GROWTH DRIVERS

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Strong inflow of FDI into theautomotives sector in India

Automotives

Delhi-Gurgaon-

Faridabad

Kolkata-

Jamshedpur

Chennai-Bengaluru-

Hosur

Mumbai-Pune-

Nashik-

Aurangabad

Top 5 origin countries for FDI (2000-2010)

Country FDI (USD million) Share of total (%)

Japan 1,155 25

US 873 19

Italy 626 14

Mauritius 373 8

Sweden 369 8

Top 5 destination cities for FDI (2000-2010)

City FDI (USD million) Share of total (%)

Mumbai 1,609 34

Delhi 1,416 30

Ahmedabad 497 11

Chennai 464 10

Bengaluru 238 5

Source:Department of Industrial Policy & Promotion (India),

Aranca Research

Accumulated FDI inflows into the automotives sector over Apr 2000 - Sep 2012 was USD7.4 billion (4.0 per cent of

total FDI)

Ahmedabad

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Increasing investments by global carmanufacturers

Automotives

Source:Respective company websites, news articles, Aranca Research

Its Chennai plant has nearly doubled production to 250,000 cars

The company has completed 80 per cent investment at Oragadam, a car plant near Chennai

Launched an automatic transmission variant in its petrol model of the sedan Fiesta

Laid foundation for USD1 billion plant at Sanand in March 2012

Has increased its output annually for its Chennai plant to 11,000 units from 10,000 units

Plans to launch series of cars designed at its Bengaluru based centres

Plans to invest USD167 million in the fourth unit in Karnataka in 2012

Plans to invest another USD163 million at Bidadi plant near Bengaluru

Plans to increase capacity to 310,000 units by 2013 with an investment of USD187 million

Launched new version of the i20 premium model in both petrol and diesel variant Plans to invest USD89.6 million for a diesel engine plant in India which will be operational from 2013

Plans to invest USD71 million at its plant in Pune and will be launching five new compact cars

Global car majors have been ramping up investments in India in order to meet growing domestic demand. They

also have plans to leverage Indias competitive advantage to set up export-oriented production hubs

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Contents

Advantage India


Growth drivers


Opportunities

Useful information


AutomotivesMARCH

2013

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2828For updated information, please visit www.ibef.org SUCCESS STORIES: MARUTI, TATA MOTORS

Maruti Suzuki: Continuing strongly onits journey of success

1983 1994 1997 2001 2004 2006 2007 2008 2009 2010 2011 2012

Source:Company website, Aranca Research

Roll out of peoples car

(Maruti 800)

Capacity

expansion

Enhanced R&D

capability

Increased

productivity

Product portfolio

expansion

Continuing market

leadership

Product portfoliocomprising 16

passenger vehicle

models

55 per cent

market share in

the Indian car

market

Expansion plansto produce 1.7

million cars by

2013

2011

Roll out of 10

millionth car

Automotives

1994Production of

1 millionth car

In the process of

establishing Suzukis

largest R&D facility

outside Japan

2012

Exports reached

1 million units in

April 2012

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1945 1954 1961 1977 1982 1986 1991 1998 2005 2008 2010 2012

Source:Company website, Aranca Research


Tata Motors: Leading by innovation andglobal presence

Joint Ventures

Acquisitions

Enhancing

R&D capability

Product portfolio

expansion

Market expansion

Disruptive Innovation JV with

Daimler AG

Production of

1st

indigenously

designed LCV

Acquisition

of Jaguar

and

Landrover

Acquired

stake in

Hipo

Carrocera

SA

LaunchedIndica - India's

first fully

indigenous

passenger car

Automotives

Tata

Engineering &Locomotives

established

Launch of

companys 1st

indigenous CV

Tata

Nanolaunched

SUCCESS STORIES: MARUTI, TATA MOTORS

Introduction

of

Megapixel,

an electric

vehicle

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Contents

Advantage India


Growth drivers


Opportunities

Useful information


AutomotivesMARCH

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3131For updated information, please visit www.ibef.org OPPORTUNITIES

Opportunities

Automotives

Strong support from the

government; setting up ofNATRiP centres

Private players like

Hyundai, Suzuki, GM are

keen to set up their R&D

base in India

Strong education base,

large skilled English-

speaking manpower

Comparative advantage in

terms of cost as well

The worlds cheapest car

(Tata Nano) has directedfocus towards the low-

income market

Bajaj Auto, Hero Honda and

M&M jointly plan to develop

a technology for two-

wheelers to run on natural

gas

Electric cars are likely to be

a sizeable market segment

in the coming decade

General Motors, Nissan,

Toyota have announcedplans to make India their

hub for new global small

car platforms

Light vehicle sales in India

are estimated to cross the 3

million mark by end - 2012

Strong export potential in

ultra low cost cars segment

(to developing and

emerging markets)

India is fast emerging as a

global R&D hub

Opportunities for creating

sizeable market segments

through innovationsSmall-car manufacturing hub

Notes: M&M - Mahindra & Mahindra

2013


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Contents

Advantage India


Growth drivers


Opportunities

Useful information


AutomotivesMARCH

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3333For updated information, please visit www.ibef.org USEFUL INFORMATION

Industry Associations

Society of Indian Automobile Manufacturers (SIAM)Core 4-B, 5th Floor, India Habitat Centre

Lodhi Road, New Delhi -110 003

India

Phone: 91 11 24647810-2

Fax: 91 11 24648222

E-mail: [email protected]

Automotives 2013

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Glossary

CAGR: Compound Annual Growth Rate CV: Commercial Vehicle FDI: Foreign Direct Investment FY: Indian financial year (April to March)

So FY10 implies April 2009 to March 2010

GOI: Government of India HCV: Heavy Commercial Vehicle INR: Indian Rupee LCV: Light Commercial Vehicle OEM: Original Equipment Manufacturers PV: Passenger Vehicle SIAM: Society of Indian Automobile Manufacturers ULCC: Ultra Low Cost Car USD: US Dollar

Conversion rate used: USD 1= INR48

Wherever applicable, numbers have been rounded off to the nearest whole number

USEFUL INFORMATION

Automotives 2013

AutomotivesMARCH


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Automotives 2013

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Automotives-March-220313.pdf