Automotives March 220313 PDF

Automotives
2013
MARCH
For updated information, please visit www.ibef.org
Automotives
2013
MARCH
Contents
Advantage India Market overview and trends Growth drivers Success stories: Maruti, Tata Motors Opportunities Useful information
Automotives
Advantage India
2013
MARCH
Growing demand
Innovation opportunities
FY16E
Market size: USD145 billion
Strong demand growth due to rising incomes, growing middle class, and a young population is likely to propel India among the worlds top five auto - producers by 2015 Growth in export demand is also set to accelerate
Tata Nano and the upcoming Pixel have opened up the potentially large ultra low cost car segment Innovation is likely to intensify among engine technology and alternative fuels
Advantage India
Rising investments
Policy support
India has significant cost advantages; auto firms save 10-25 per cent on operations in India compared to Europe and Latin America A large pool of skilled manpower and a growing technology base will induce greater investments
The government aims to develop India as a global manufacturing as well as R&D hub There has been a wide array of policy support in the form of sops, taxes and FDI encouragement
FY10
Market size: USD57.7 billion
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)
ADVANTAGE INDIA
Automotives
2013
MARCH
Contents
Advantage India Market overview and trends Growth drivers Success stories: Maruti, Tata Motors Opportunities
Useful information
Automotives
2013
MARCH
Evolution of the Indian automotives sector

20.4 million units (2012) 11 million units (2007) 2008 onwards 0.6 million units (1992) 1983-1992 0.4 million units (1982) Joint venture (JV) Indian government and Suzuki to form Maruti Udyog; started production in 1983 Component manufacturers also entered via JV route Buyers market
1993-2007
Sector de-licensed in 1993 Major original equipment manufacturers (OEMs) started assembly in India Imports allowed from April 2001 Introduction of value added tax in 2005
Before 1982
Closed market Only 5 players Long waiting periods and outdated models Sellers market
More than 35 players in the market Removal of most import controls Indian companies gaining global identity Setting up of National Automotive Board to act as facilitator between government and the industry
Source: Tata Motors, Society of Indian Automobile

Manufacturers (SIAM), Aranca Research, Notes: JV - Joint Venture
MARKET OVERVIEW AND TRENDS
Automotives
2013
MARCH
The automotives market is split into four segments

Automobiles
Two-wheelers
Passenger vehicles
Commercial vehicles
Three-wheelers
Mopeds
Passenger cars
Light commercial vehicles
Passenger carriers
Scooters
Utility vehicles
Motorcycles
Multi-purpose vehicles
Medium and heavy commercial vehicles
Goods carriers
Electric twowheelers
Automotives
2013
MARCH
Revenues have been growing at a strong pace
Gross turnover of automobile manufacturers in India expanded at a CAGR of 17.7 per cent over FY07-1 1 Excluding three wheelers, trucks account for the largest share of revenues (47.8 percent in 201 1)
Revenue trends over the past few years in USD million Market* break-up by revenues (2011)
58.6 20.4% 43.3 36.6 30.5 33.3 47.8% Cars Trucks
Two Wheelers 31.8%
FY07
FY08
FY09
FY10
FY11
Source: SIAM, Datamonitor, Aranca Research

Note: * - does not include three wheelers
Automotives
2013
MARCH
Sectors growing strength evident from rise in total production figures

Total production of automobiles in India (million units)
15.5
Automobiles production increased at a CAGR of 13.2 per cent over FY05-12 Passenger vehicles was the fastest growing segment during that period with a CAGR of 14.5 per cent
13.4 10.5
Notes: CAGR - Compound annual growth rate 6.5 7.6
8.5 8.0
8.4
1.8
1.3 0.5 0.6
1.6 0.6 0.5
1.3 0.4 0.4
2.4
0.8 0.8 FY11
3.0
1.2 0.4 0.4
FY05
FY06
FY07
FY08
FY09
0.4 0.5
FY10
0.6 0.6
FY12 Two Wheelers
Passenger Vehicle
Commercial Vehicle
Three Wheelers
Source: SIAM, Aranca Research
0.8 0.8
3.1
Automotives
2013
MARCH
Market break-up by production volume
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 largest commercial vehicle producer
Market share by volume (FY12)
5% 3% Two Wheelers 15% Passenger Vehicle Commercial Vehicle 77% Three Wheelers
Automotives
2013
MARCH
Market break-up of individual segments by production volumes (1/2)
Shares in production of passenger vehicles (FY11)
Shares in production of commercial vehicles (FY11)
11.5% Passenger cars
8.1%
MCV & HCV Passenger Carriers 36.0% MCV & HCV Goods Carriers LCV Passenger Carriers
Utility vehicles/multipur pose vehicles 88.5%
49.7%
6.1% LCV Goods Carriers
Source: SIAM, Aranca Research Notes: LCV - Light commercial vehicle; MCV - Medium commercial vehicle; HCV - Heavy commercial vehicle
10
Automotives
2013
MARCH
Market break-up of individual segments by production volumes (2/2)
Shares in production of three wheelers (FY12)
Shares in production of two wheelers (FY12)
15.8% Goods carriers
15.6%
5.3%
Mopeds
Motorcycles Passenger carriers Scooters 84.2%
79.1%
11
Automotives
2013
MARCH
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)
Exports of automobiles from India (million units)

2 1.8 1.6 1.4 1.2 1 0.8 0.6 0.4 0.2 0
2.0 1.5 1.1 1.0 0.8 0.5 0.5 0.3 0.04 0.2 0.08 0.3 0.4 0.5 0.2 0.04 0.1 0.4 0.6 0.2 0.05 0.1 0.2 0.06 0.1 0.5
0.2 0.03 0.1
0.04 0.2
FY05
FY06
FY07
FY08
FY09
FY10
FY11
FY12
Passenger Vehicle
Commercial Vehicle
Three Wheelers
Two Wheelers
0.1
12
Automotives
2013
MARCH
Exports have also grown strongly (2/2)
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
Exports shares by volume (FY12)
18%
3% 12% 67%
Passenger Vehicle
Commercial Vehicle Three Wheelers
Two Wheelers
13
Automotives
2013
MARCH
Presence of a clear leader in each segment of the market
The automotives industry is concentrated with market leaders in each segment commanding a share of over 40 per cent
Market Leader Passenger Vehicles MCVs & HCVs

45% 16%
Others
15% 7%
63%
23%
7%
LCVs
Three Wheelers Motorcycles Scooters
59%
30%
4%
4%
41%
40%
10%
59%
24%
7%
6%
51%
21%
14%
10%
Notes: Data is for FY10
14
Automotives
2013
MARCH
Notable trends in the Indian automotives sector

Large number of products available to consumers across various segments; this
New product launches
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
In FY11, the CNG market was worth more than USD330 million and CNG cars
Alternative fuels
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
15
Automotives
2013
MARCH
Contents
Advantage India Market overview and trends Growth drivers Success stories: Maruti, Tata Motors Opportunities Useful information
16
Automotives
2013
MARCH
Sector has been benefitting from strong demand and product innovation
Growing demand demand Growing
Policy support Strong government support

Goal of establishing India as an automanufacturing hub R&D focus; GOI has set up technology modernisation fund Large domestic market Policy sops, FDI encouragement
Increasing investments
Rising incomes, young population Inviting Greater availability of credit and financing options
Resulting in
Rising investments from domestic and foreign players Greater innovation in products; market segmentation
Strong growth in exports as well
Strong projected demand making returns attractive

Notes: GOI - Government of India
GROWTH DRIVERS
17
Automotives
2013
MARCH
Rising incomes and a growing middle class driving domestic demand growth
Rising incomes; growing middle class
Changing income dynamics of Indias population

70 60 50 40 30 20 10 0 2005 Strivers 2010 Seekers 2015 Deprived 2020 Aspirers 2025 Globals Aspirers: annual income INR90,000 200,000 Deprived annual income <INR90,000 million households Seekers: annual income INR200,000 500,000
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 to touch 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 to development of roadways and greater market access
Strivers: annual income INR500,000 1,000,000 Globals: annual income >INR1,000,000
Source: McKinsey Quarterly,

Aranca Research
GROWTH DRIVERS
18
Automotives
2013
MARCH
Easier access to credit has also been a key determinant of growth in automotives
Easy availability of credit
Indian auto finance market size (USD billions)

25.0 20.5 20.0 15.1 15.0 10.6 10.0 5.0 8.0
Greater access to credit makes purchases of both passenger and 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 previously dominated by public players
14.8
10.6
11.9
8.5
11.9 7.7
Notes: Greater distributional efficiencies, increasing demand (especially from rural areas) due to rising disposable incomes have created new markets for products within the country
0.0
FY07 FY08 FY09 FY10 FY11
Car Industry sales volume
Vehicle Finance Penetration
Source: Kotak Mahindra Prime, Aranca Research
GROWTH DRIVERS
19
Automotives
2013
MARCH
India has a huge competitive advantage over peers

Design & Engg skills
Korea China
Manufacturing skills
Manpower costs
Supplier base
Raw materials
East Asia
Thailand Indonesia Vietnam Czech Republic Romania Poland
Central & Eastern Europe
Slovakia Russia Hungary Turkey
Latin America
Brazil Mexico
In competition with India
Less competitive than India
Source: ACMA, Aranca Research

GROWTH DRIVERS
20
Automotives
2013
MARCH
Strong policy support has been crucial in developing the sector

Automatic approval for foreign equity investment up to 100 per cent; no minimum
Auto Policy 2002
investment criteria
Encourages R&D by offering rebates on the R&D expenditure spent by the companies AMPs vision is to make India a preferred destination for design and manufacturing of
Automotive Mission Plan (AMP) 2006-16
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 Set up at total cost of USD388.5 million to enable the industry to implement global standards
NATRiPs
Nine R&D centres of excellence with focus on low-cost manufacturing and product
development solutions
Worked towards reduction of excise duty on small cars and the increase of budgetary
Dept. of Heavy Industries & Public Enterprises
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)

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
Union Budget FY13
percent
5 year extension on deduction of R&D expenditure under Income Tax Act
Notes: SME - Small and Medium Enterprises, R&D - Research and Development, NATRiP - National Automotive Testing and R&D Infrastructure Project, AMP - Automotive Mission Plan
GROWTH DRIVERS
21
Automotives
2013
MARCH
Boost to R&D in the auto components sector - NATRiP centres

Business Description Vehicles Research & Development Establishment (VRDE), Ahmednagar Indore - National Automotive Test Tracks (NATRAX) Automotive Research Association of India (ARAI), Pune Chennai Centre, Tamil Nadu Rae Bareilly Centre International Centre for Automotive Technology (iCAT), Manesar Silchar Centre, Assam

Research, design, development and testing of vehicles Centre of excellence for photometry, electromagnetic compatibility (EMC) and test tracks Complete testing facilities for all vehicle categories Centre of excellence for vehicle dynamics and tyre development Services for all vehicle categories Centre of excellence for power-train development and material Complete homologation services for all vehicle categories Centre of excellence for infotronics, EMC and passive safety Services to agri-tractors, off-road vehicles and a driver training centre Centre of excellence for accident data analysis Services to all vehicle categories Centre of excellence for component development, noise vibration and harshness (NVH) testing Research, design, development and testing of vehicles Centre of excellence for photometry, EMC and test tracks
GROWTH DRIVERS
22
Automotives
2013
MARCH
Emergence of large automotive clusters in the country

List of companies
North
Delhi-GurgaonFaridabad
Ashok Leyland Force Motors
Piaggio Swaraj Mazda Amtek Auto
Eicher Honda SIEL Maruti Suzuki
Tata Motors Bajaj Auto Hero Group
West
Mumbai-PuneNashikAurangabad KolkataJamshedpur
Ashok Leyland Bajaj Auto FIAT
GM M&M Eicher Skoda
Bharat Forge Nissan Tata Motors M&M Volkswagen Renault-
East
Tata Motors Hindustan Motors Simpson &
Co. JMT International Exide Auto Forgings
Chennai-BengaluruHosur
South
Ashok Leyland Ford M&M Toyota
Kirloskar Volvo Sundaram Fasteners Enfield
Hyundai BMW Bosch TVS Motor Company
RenaultNissan
Source: ACMA, Aranca Research
GROWTH DRIVERS
23
Automotives
2013
MARCH
Key automobile manufacturing plants across India

NORTH WEST: Rajasthan is a hub for majorly light vehicle manufacturing NORTH: Delhi is a hub for light vehicle manufacturing whereas Haryana and Uttarkhand are for heavy vehicle manufacturing
WEST: Maharashtra, and Gujarat are bases for heavy and light vehicle manufacturing
EAST: Jamshedpur is the site of Tatas heavy vehicle manufacturing Heavy Vehicle Manufacturing Plant Light Vehicle Manufacturing Plant SOUTH: Chennai hosts manufacturing plans for heavy and light vehicles
Source: Aranca Research; Note: All figures as of 2011-12
GROWTH DRIVERS
24
Automotives
2013
MARCH
Strong inflow of FDI into the automotives sector in India
Accumulated FDI inflows into the automotives sector over Apr 2000 - Sep 2012 was USD7.4 billion (4.0 per cent of total FDI)
Top 5 origin countries for FDI (2000-2010) Country
Delhi-GurgaonFaridabad
FDI (USD million)

1,155 873 626 373 369
Share of total (%)

25 19 14 8 8
Japan US Italy Mauritius Sweden

KolkataJamshedpur
Ahmedabad
Mumbai-PuneNashikAurangabad
Top 5 destination cities for FDI (2000-2010) City

Mumbai Delhi Ahmedabad Chennai Bengaluru
FDI (USD million)

1,609 1,416 497 464 238
Share of total (%)

34 30 11 10 5
Aranca Research
Chennai-BengaluruHosur
Source: Department of Industrial Policy & Promotion (India),
GROWTH DRIVERS
25
Automotives
2013
MARCH
Increasing investments by global car manufacturers
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
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
Source: Respective company websites, news articles, Aranca Research
GROWTH DRIVERS
26
Automotives
2013
MARCH
Contents
Useful information
27
Automotives
2013
MARCH
Maruti Suzuki: Continuing strongly on its journey of success
Continuing market leadership Product portfolio expansion Increased productivity Enhanced R&D capability Product portfolio comprising 16 passenger vehicle models In the process of establishing Suzukis largest R&D facility outside Japan 55 per cent market share in the Indian car market
Expansion plans to produce 1.7 million cars by 2013 2012 Exports reached 1 million units in April 2012 2011 Roll out of 10 millionth car
Capacity
expansion
Roll out of peoples car (Maruti 800)

1983
1994 Production of 1 millionth car
1994
1997
2001
2004
2006
2007
2008
2009
2010
2011
2012
Source: Company website, Aranca Research
SUCCESS STORIES: MARUTI, TATA MOTORS
28
Automotives
2013
MARCH
Tata Motors: Leading by innovation and global presence
Tata Nano launched Production of 1st indigenously designed LCV Acquired stake in Hipo Carrocera SA Launched Indica - India's first fully indigenous passenger car
Disruptive Innovation
JV with Daimler AG
Introduction of Megapixel, an electric vehicle
Market expansion Product portfolio expansion Enhancing R&D capability Acquisitions Tata Engineering & Locomotives established Launch of companys 1st indigenous CV
Acquisition of Jaguar and Landrover
Joint Ventures
1945
1954
1961
1977
1982
1986
1991
1998
2005
2008
2010
2012
Source: Company website, Aranca Research
SUCCESS STORIES: MARUTI, TATA MOTORS
29
Automotives
2013
MARCH
Contents
Useful information
30
Automotives
Opportunities
2013
MARCH
India is fast emerging as a global R&D hub
Opportunities for creating sizeable market segments through innovations
Small-car manufacturing hub
Strong support from the
The worlds cheapest car
General Motors, Nissan,
government; setting up of NATRiP centres

Private players like
(Tata Nano) has directed focus towards the lowincome market

Bajaj Auto, Hero Honda and
Hyundai, Suzuki, GM are keen to set up their R&D base in India

Strong education base,
Toyota have announced plans to make India their hub for new global small car platforms
Light vehicle sales in India
large skilled Englishspeaking manpower

Comparative advantage in
M&M jointly plan to develop a technology for twowheelers to run on natural gas
Electric cars are likely to be
are estimated to cross the 3 million mark by end - 2012

Strong export potential in
terms of cost as well
a sizeable market segment in the coming decade
ultra low cost cars segment (to developing and emerging markets)
Notes: M&M - Mahindra & Mahindra
OPPORTUNITIES
31
Automotives
2013
MARCH
Contents
Useful information
32
Automotives
Industry Associations
2013
MARCH
Society of Indian Automobile Manufacturers (SIAM) Core 4-B, 5th Floor, India Habitat Centre Lodhi Road, New Delhi -1 10 003 India Phone: 91 1 1 24647810-2 Fax: 91 1 1 24648222 E-mail: siam@siam.in
USEFUL INFORMATION
33
Automotives
Glossary

2013
MARCH
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
34
Automotives
Disclaimer
2013
MARCH
India Brand Equity Foundation (IBEF) engaged Aranca to prepare this presentation and the same has been prepared by Aranca in consultation with IBEF. All rights reserved. All copyright in this presentation and related works is solely and exclusively owned by IBEF. The same may not be reproduced, wholly or in part in any material form (including photocopying or storing it in any medium by electronic means and whether or not transiently or incidentally to some other use of this presentation), modified or in any manner communicated to any third party except with the written approval of IBEF. This presentation is for information purposes only. While due care has been taken during the compilation of this
presentation to ensure that the information is accurate to the best of Aranca and IBEFs knowledge and belief, the content is not to be construed in any manner whatsoever as a substitute for professional advice.
Aranca and IBEF neither recommend nor endorse any specific products or services that may have been mentioned in this presentation and nor do they assume any liability or responsibility for the outcome of decisions taken as a result of any reliance placed on this presentation.
Neither Aranca nor IBEF shall be liable for any direct or indirect damages that may arise due to any act or omission on the part of the user due to any reliance placed or guidance taken from any portion of this presentation.
DISCLAIMER
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Automotives

For updated information, please visit www.ibef.org

For updated information, please visit www.ibef.org

For updated information, please visit www.ibef.org

For updated information, please visit www.ibef.org

Evolution of the Indian automotives sector

Source: Tata Motors, Society of Indian Automobile

For updated information, please visit www.ibef.org

The automotives market is split into four segments

Light commercial vehicles

Medium and heavy commercial vehicles

For updated information, please visit www.ibef.org

MARKET OVERVIEW AND TRENDS

Revenues have been growing at a strong pace

58.6 20.4% 43.3 36.6 30.5 33.3 47.8% Cars Trucks

Two Wheelers 31.8%

Source: SIAM, Datamonitor, Aranca Research

For updated information, please visit www.ibef.org

MARKET OVERVIEW AND TRENDS

Sectors growing strength evident from rise in total production figures

Notes: CAGR - Compound annual growth rate 6.5 7.6

1.3 0.5 0.6

1.6 0.6 0.5

1.3 0.4 0.4

0.8 0.8 FY11

1.2 0.4 0.4

FY12 Two Wheelers

Source: SIAM, Aranca Research

For updated information, please visit www.ibef.org

MARKET OVERVIEW AND TRENDS

Market break-up by production volume

Market share by volume (FY12)

Source: SIAM, Aranca Research

For updated information, please visit www.ibef.org

MARKET OVERVIEW AND TRENDS

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

Shares in production of passenger vehicles (FY11)

Shares in production of commercial vehicles (FY11)

11.5% Passenger cars

Utility vehicles/multipur pose vehicles 88.5%

For updated information, please visit www.ibef.org

MARKET OVERVIEW AND TRENDS

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

Shares in production of three wheelers (FY12)

Shares in production of two wheelers (FY12)

15.8% Goods carriers

Motorcycles Passenger carriers Scooters 84.2%

Source: SIAM, Aranca Research

For updated information, please visit www.ibef.org

MARKET OVERVIEW AND TRENDS

Exports have also grown strongly (1/2)

Exports of automobiles from India (million units)

0.2 0.03 0.1

Source: SIAM, Aranca Research

For updated information, please visit www.ibef.org

MARKET OVERVIEW AND TRENDS

Exports have also grown strongly (2/2)

Exports shares by volume (FY12)

Commercial Vehicle Three Wheelers

Source: SIAM, Aranca Research

For updated information, please visit www.ibef.org

MARKET OVERVIEW AND TRENDS

Presence of a clear leader in each segment of the market