Presented byVinod Manghani MBA (Finance) + MIB - 008

Global Car Industry

2009 Overall Automakers Market Share (by sales volumes)

Indian Car 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

Trends
Growth of exports of 32.8 % FY 201011 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

Growth Potential

Can become Worlds third largest automobile market in 2030. By 2016, Automotive sector can DOUBLE its percentage contribution to GDP from current levels of 5% (US$50 billion) to 10% ($180 billion).

Pre 1983
Closed market Growth of market limited by supply Outdated models Players Hindustan Motors Premier Telco Ashok Leyland Mahindra & Mahindra

1983-1993
Japanisation - GOISuzuki 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

1993-2012
De-licensing 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

Era of India as a global manufacturing hub

Major Indian Companies

Major Multi-national companies

Facts N Figures

Overall Market
Over all Production increased from 10.85 million vehicles in 2007-08 to 11.17 million vehicles in 2008-09 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 2008-09 was 9.72 million as compared to 9.65 million in 2007-08.

Exports
Sales increased from 1.23mn units in 2007-08 to 1.53 million units in 2008-09 As per the Automotive Mission Plan (AMP) 2006-2016 total turnover of the automotive industry in India would be in the order of US$ 122 billion159 billion in 2016

Car Production
2500000 2000000
Production

1500000 1000000 500000 0

Years

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.

Auto Component Industry Investment

14000

12000
Investment

10000 8000

6000 4000
2000

Years

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 Mahindras First Choice, General Motors - Chevrolet-OK Unorganized market lacks services like -warranties, OEM equipments, insurance and taxes Second hand market expected to grow at 12-15 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

SLEPT Analysis

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

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

5-10 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
Increased access to credit and lower interest loans

1-5 years
Investment in Infrastructure spending can boost the commercial vehicles segment

5-10 years
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 30 - 40 million every year

Can Propel Growth

1 year
Impact of delayed monsoon (85% of normal, subsequent impact on paddy cultivation) on rural demand

1-5 years
Non-availability of Key raw material (like Steel) at cheap price Possible increase of interest rates (by 22.5% BPLR) because of planned government borrowing

5-10 years
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

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

Grants and Incentives for R&D work

Developing India as a Testing hub: National Automotive Testing and R&D Infrastructure Project

Collaborations and Foreign Tie ups for research and technology transfer Developing engines for bio-fuels, electric or hybrid vehicles

Future of Car Industry

On 29.01.07, the Prime Minister released Automobile Plan 2006-2016 to give a road to map to Indian Automobile Industry

Increase turnover to $145 billion by 2016 from $35 billion at present

Increase export revenue to $35 billion by 2016 from $4.1 billion at present

Provide employment to additional 25 million people by 2016

By 2016, the Automotive sector is expected to contribute 10% of the countrys GDP and 30~35% of the Industry

 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

TRANSITION

PEUGEOT LOOP

References

www.acmainfo.com
www.wikipedia.org www.siamindia.com www.ibef.org

Ernst & Young Auto Track

www.economywatch.com www.business-standard.com The Economic Times

Hindu Business Line

www.automobileindia.com automobiles.mapsofindia.com