The products offered by the Perkins and their use.

Indian market demand of those products Business Environment of those products in India Competitive Scenario of those products in India Ability of the company

Diesel Engines Segments in Engineering Overview Industry Trends Supply Side Segments Market Characteristic Future
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Overview

Market - predominantly for diesel engines - estimated at Rs 2,700 crs (US $ 627.9 mln). This market does not include engines used by the auto OEMs for their vehicle manufacture Diesel engines used either for stationary applications (captive power generation) or as prime movers (for pumps, harvesters, threshers, expellers, flour mills etc.) Small (< 5 HP) engines use kerosene / diesel as fuel Rajkot and Agra - major centres for small HP engines Exports trends - mainly in the smaller engines category

Industry Trends Diesel Engines Production

Diesel engines used as prime mover in captive power generation Kerosene and petrol engines used primarily in the agricultural sector- <5 HP Used mainly for industrial and starting applications.

Applications Segment Small range Medium range Large range Very large range Capacity 2-20 HP 20-25 HP 25-140HP Application Areas Pumpsets, agricultural machinery, water pumpsets, threshers, harvestors, and oil expellers. Tractors, power gensets, industrial applications Power generation, industrial applications and others.

140-400HP Power generation(captive standby sets), industrial application 400-750HP Power generation and marine applications. 7501200HP 12007200HP Power generation Power generation(base load) and marine applications.

Supply Side Industry Structure Around 30 - 35 players in the organised sector. The unorganised sector dominates the lower HP (<20 HP) range because of duty benefits. Rajkot and Agra major centres for lower HP diesel engine production Other centres are Agra, Ghaziabad, Kolhapur and Coimbatore.

Imports (9,300nos.-1997-98) No domestic manufacture of Gas engines- all engines imported.

 Major brands are Catterpillar, Cummins and Ruston. Gas engines gaining popularity.
Competition

Segments

2-10 HP 20-140 HP

Kirloskar Oil Engines (KOEL) a major player. Greaves a relative small player. Most large players addressing this market- KOEL, Greaves, Cummins, Hindustan
Powerplus. Each of these players has tied up with international majors. Ashok Leyland manufacturing engines for captive use; also supplies engines in the market.

140750 HP

Dominated by Cummins India and Hindustan Powerplus. Greaves has a marginal presence KOEL not present in 300-2000 HP range Entry of many global players since 1991. However, presence not high - VolvoPenta, Perkins, Detroit Diesel, Mitsubishi, Skoda and FG Wilson Pace of indigenisation sets Cummins and Hindustan Powerplus apart. Hindustan Powerplus- import content high. Cummins- has greater price flexibility, wider product portfolio. Cummins India a global sourcing base (10,000 engines/ year).

Very Large

Wartsila NSD a major player in the above 1 MW category- over 70% share. KOEL breaking ground.

Market Characteristic MARKET Market mainly for diesel engines. Petrol and kerosene engines usage limited to lower rating and to the agricultural sector. Gas engines yet to take off - fuel availablity a criteria. One of the most polluting industries. Emission norms in India not very stringent currently. Changes expected in the near future.

PRODUCTS < 20HP engines used primarily for agricultural machinery , irrigation purposes. >20HP mainly used for power generation. Gas engines continue to be imported. Not all Indian products meet international standards. international emmission norms.

PLAYERS TRADE Sales primarily through original equipment assemblers of alternators and gensets (OEAs), who procure engines to assemble generators OEAs get special discounts on engines Services provided through external authorised service dealers by the company Excise duty- 16%; Import duties: Basic-25%, additional duty-10%,CVD-16% and SAD-4% Local manufacturer presence mainly in the lower rating(<20HP). these players are located in Rajkot and Agra. Higher ratings catered to by large manufacturers who have an all - India presence

Future Key success factors Technology differentiation critical Superior technology Lower fuel consumption Lower noise levels In the small HP range, price, availability of finance, reliability and ruggedness keys to success. Similarly in the medium range, price, fuel efficiency and after sales service critical. Efficiency, spares and service, turnkey project handling and price - key differentiators in the large and very large HP segments. Focus on reducing costs of operation and maintenance Solution based approach could aid business

Reach to end user industries critical to success. Accreditation with consultants (project, electrical) to increase presence in the industrial sector

Demand drivers Directly linked to the investment in agriculture, infrastructure and industrial growth Dependent on the power scenario in the country - unreliable, insufficient and erratic power supply from electricity boards driving need for captive generation, hence engines. Dependence on the power generation segment accounts for 50 - 55% of the revenue of all major players Growth in the irrigation sector will drive demand for engines Dependent on new projects in these sectors. Replacement demand low

Business concerns High proliferation of small scale, low-tech units leading to excessive price competition and compromise on quality One of the highly polluting industries both in terms of atmospheric and noise pollution. Stringent regulation from government could affect the industry With increasing focus on environment, suppliers need to conform to these standards Products do not conform to international standards Increasing customer demand for better fuel economy, lower oil consumption and noise levels

Future outlook Electricity demand supply gap, currently at 8%, likely to continue. Hence a growth rate of 8-10% expected in the industry. Exports could provide a fillip to the industry. Many suppliers tapping export markets Emphasis shifting to environment friendly products. Indian producers gearing up to bring out new products that meet emission requirements.