Indian Auto Industry Facts Second Largest two wheeler manufacturer in the world Largest tractor and three wheeler manufacturers in the world Fourth largest Commercial vehicle market in the world Eleventh largest passenger car market in the world Growth Potential Can become World’s third largest automobile market in By 2016, Automotive sector can DOUBLE its percentage contribution to GDP from current levels of 5% (US$50 billion) to 10% ($180 billion). Trends Growth of exports of 32.8 % FY Output of commercial vehicles has grown 2.8 times compared to the 2.2 times increase in passenger cars For every passenger car turned out, there are almost 7 two-wheelers produced

The Growth Journey Pre Era of globalisation and evolution of India as a global manufacturing hub Closed market Growth of market limited by supply Outdated models Players Hindustan Motors Premier Telco Ashok Leyland Mahindra & Mahindra Japanisation - GOI- Suzuki joint venture to form Maruti Udyog Joint ventures with companies in commercial vehicles and components Players Maruti Udyog Hindustan Motors Premier Telco Ashok Leyland Mahindra & Mahindra Delicensing of sector in 1993 Global major OEMs start assembly in India (Toyota, GM, Ford, Honda, Hyundai) Imports allowed from April 2001; alignment of duty on components and parts to ASEAN levels Implementation of VAT

Automotive Companies in India Major Multi-national companiesMajor Indian Companies

Booming Indian Economy

Key Growth Drivers

Auto Industry Numbers Overall Market Over all Production increased from million vehicles in to million vehicles in Passenger vehicles increased marginally from 1.77 million to 1.83 million Two-wheelers increased from 8.02 million to 8.41 million Domestic Market Vehicles sold including PV,CV 2W and 3W in was 9.72 million as compared to 9.65 million in Exports Sales increased from 1.23mn units in to 1.53 million units in As per the Automotive Mission Plan (AMP) total turnover of the automotive industry in India would be in the order of US$ 122 billion-159 billion in 2016

Category wise numbers Two Wheeler Passenger Vehicles Commercial Vehicles Three Wheeler Dominated by Motorcycles 80%, Scooters 14% Mopeds 6% Domestic mn units. Hero Honda 42% & Bajaj 27% share CAGR – 9.5% Exports units (07-08). Bajaj Auto 59% TVS 17% share CAGR – 41% Dominated by Cars 78%, MUV/SUV 22% Domestic – 1.5mn units Maruti-46% Tata-15% Hyundai 14% CAGR -14.8% Exports units (07-08) Maruti 66% Hyundai 24% CAGR – 26% Dominated by M&HCV – Goods 48% Passenger 38%, Rest by LCV -14% Domestic – 487 thousand units, Tata-62% Ashok Leyland -15% CAGR- 22% Exports – 59 thousand units, Tata 67% Ashok Leyland 12% CAGR -30.6% Dominated by Passenger Carriers with 64% share, Goods Carrier -36% Domestic – 365 thousand units, Bajaj -42% Piaggio-41% CAGR- 10.5% Export – 141 thousand units, Bajaj -97% CAGR -44.5%

The Indian Auto Components Market Original Equipment Manufacturers (OEMs) Replacement Parts Production and Distribution : e.g. Air filters, oil filers and replacement lights Rubber Fabrication : tyres, hoses, belts etc. Estimated component market size is US$ 6.7 bn The exports of auto components industry has grown at a rate of nearly 30 per cent CAGR over the last four years.

Second Hand Automobile Market Used car market demand : 1.4 million cars annually Market Structure : –Organized : 10% –Unorganized : 90% Vendor Based – 30% Direct Dealings – 70% Certified used car dealers in India are – Maruti TrueValue, Honda Auto Terrace, Ford Assured, Toyota U Trust, Hyundai Advantage, Mahindra and Mahindra’s First Choice, General Motors - Chevrolet-OK Unorganized market lacks services like -warranties, OEM equipments, insurance and taxes Second hand market expected to grow at per cent in the next five years to touch a robust 2.5 million units and a turnover of Rs 50 thousand crore Estimations are that 50 percent of the used cars sales will be brought under organized car market by 2013

Political - Legal Factors Boosted Economic Growth 1 year 6% cut in CENVAT, abolition of surcharge on income tax. Abolition of FBT, Reduction of excise duty on big cars. Encourage Urban Fleet Modernization 1-5 Years - Providing Special Auto-component Parks (SAP) and Special Economic Zones (SEZ) as in IT. Negative list of items and rules of origin in FTAs / RTAs. (ASEAN Free Trade Agreement) - SIAM recommended the government on extending excise and sales tax benefits to customers who opt for scrappage of their old vehicles 5-10 Years Effective Implementation and Uniform enforcement of GST Maintain a three tier tariff structure for raw materials, intermediate goods, finished goods. Revamp WTO compatible export promotional schemes like DEPB, EOU and EPCG schemes AMP Plan set by govt Stunted Economic Growth 1 year Differential excise duty for small and big cars. Customs duty for imported cars including hybrid cars. Excise duty cut only for petrol driven trucks 1-5 Years Existing Complex labor laws( 45 Central acts and 16 associated rules) Not implementing country wide VAT Ambiguous policy in land acquisition for green field projects Years Poor execution of Infrastructure investments. (Construction of Highways of 16km per day against the target of 32 km per day) Absence of National Auto fuel Policy (NAFP)

1 year 1-5 year 5-10 years Increased access to credit and lower interest loans Investment in Infrastructure spending can boost the commercial vehicles segment. Economic Factors Growing working population (441 million people in 2015/16) Upward migration of household income levels (600 million people have annual income of more than $10,200) Middle class expanding by million every year Can propel growth

1 year 1-5 year5-10 years Impact of delayed monsoon (85% of normal, subsequent impact on paddy cultivation) on rural demand. Non-availability of Key raw material (like Steel) at cheap price. Possible increase of interest rates (by 2-2.5% BPLR) because of planned government borrowing. Economic Factors Non- availability of supplier base with demanded capability (Quality and Quantity). Poor execution of Infrastructure investments. (Construction of Highways of 16km per day against the target of 32 km per day) Increase in crude oil price($ 35/barrel to $ 70/ barrel in 14 months). Can Stunt Growth

Social Factors Rapid Urbanization of semi urban regions Rising aspirational levels. Improvement in living standards of middle class Increased spending on Fashion & lifestyle comforts. Seeking “Value for money”- consumer behavior Increasing customer emphasis on aesthetics and comfort. A perfect marriage of rise in disposable income and demographic dividend (From US$ 556 per annum US$ 1150 by 2015)

Frugal Engineering is the way forward ‘Upgradeable’ green cars : Plug and play style engines to replace old ones: the Tata Nano model Downsize the cars without losing out on interior space. Lower cost, low fuel consumption, less material usage and less pollution Grants and Incentives for R&D work 100% grant for fundamental research, 75% for pre-competitive technology, 50%for product development Extension of 150% weighted deduction on R&D expenditure Developing India as a Testing hub: National Automotive Testing and R&D Infrastructure Project Investment of INR Billion (about USD 380 million) in setting up, inter alia, independent automotive testing centers within the three automotive hubs in the country Setting up of comprehensive Testing and Validation facilities including Field Tracks for Agricultural Tractors, Trailers, Construction Equipments and various other off-road vehicles at Rae Bareilly in Northern India Collaborations and Foreign Tie ups for research and technology transfer Developing engines for bio-fuels, electric or hybrid vehicles Technological Factors

India as a Testing Hub : NATRIP

India : A Developing Hub for Compact Cars  Maruti Suzuki : New car plant to make 250,000 cars per annum (total 800,000 cars/annum) 10 new Component JVs to support new Diesel Engine Plant.  Hyundai :  Already a big player in the small car segment Increase capacity to 600,000 cars per annum over next 1 year.  Nissan : Micra, UK  India – Four more models in India, involving a total investment of over Rs 2,000 crore.  Ford : Plans to unveil its small car with 1.2 ltr engine by 2010  Honda :  Investing US $ 250 million in a new plant in Rajasthan with capacity of 60,000 car per year (First car to roll out in 2009).  Tata Motors : Tata Nano became a big success gaining worldwide popularity with Tata planning to increase capacity  Toyota : Toyota Kirloskar motors planning to launch its own small car in India by 2011  General Motors : New Capacity to manufacture small cars at its Talegaon, Maharashtra plant with 80% local inputs.  Brought in Spark small car in 2007  Nissan-Renault :  50:50 JV, to make 400,000 cars a year with an investment of over US $ 1 billion.  Coming up with the $2500 car to compete with Tata Nano in 2011  VW : Investing 400 million euro in a new plant in Pune. Operations are to start in second half of  Compact cars account for 70% of the total car market.  Compact car sales increasing at about 20% each year  Excise duty on small cars slashed from 24% to 12% in last three years

India will be a Automotive hub, led by small cars and auto component domains Export of automotive components to ASEAN,BRIC,EU and USA for OEMs as well as Aftermarket Booming Automobiles (Particularly cars) second sales and remodeling Increased deployment of IT-enabled Automobile support systems like GPS,ABS,ASR and Safety systems. Quality Certification (Deming, Six Sigma,TQM,TS16949) amongst suppliers have attained critical mass and the entire market will follow to get quality certifications. Will be a hub for optimal cost, high quality vehicular testing and terrain data acquisition services Alternate fuel (Bio fuel, electricity) and environment friendly green engines (Bharat emission norms) Break through future trends

References Ernst & Young Auto Track The Economic Times Hindu Business Line automobiles.mapsofindia.com