AUTOMOBILE INDUSTRY

AMIT SINGH

AUTOMOBILE INDUSTRY OVERVIEW

An annual contribution of 4% to the GDP and accounting for about 5% of
the total industrial output, this segment clearly stands out as a significant contributor to the economic growth. The industry has grown at a CAGR of 16% p.a over the last 5 years.

With the potential to emerge as one of the largest in the world. Presently,
India is

2nd largest two wheeler market in the world 4th largest commercial vehicle market in the world 11th largest passenger car in the world and is expected to be the 7th
largest market by 2016

The industry has emerged as a key contributor to the Indian economy

OVER 9.9 MILLION VEHICLES ARE BEING PRODUCED BY INDIA - 1.3 million passenger cars and about 400 000 commercial vehicles
VEHICLE MANUFACTURERS

Commercial Vehicles

Passenger Vehicles

Tractors

2 wheelers 3 wheelers

(400 000 veh.)

(1 308 913 )
 

(296 000 7600801 veh.) 424) (434

8 manufacturers  8  Escorts manufacturer M&M s Hero L&T Honda Punjab Bajaj Tractors TVS New Yama Holland ha ITL LML Renault Honda John-Deere Kineti c Steyr
Royal Enfiel d

LCV s (171 781 .)



M&HCV s & Buses (219 297 veh.)



7 manufacturers Tata Ashok Leyland Mahindr a Eicher Force Swaraj Mazda HM

7 manufacturers Tata Ashok Leyland Eicher Swaraj Mazda Volvo Tatra

13 manufacturers Suzuki Tata Hyundai Mahindra Toyota Honda GM Ford HM/ Mitsubishi Skoda Force Fiat Mercedes

6 manufacturers Bajaj Piaggio Mahind ra Force Atul Auto Scooter s India

POLICIES RELATING TO THE AUTO SECTOR: AUTO POLICY

In 2002, the Indian government formulated an auto policy that aimed at
promoting integrated, phased, enduring and self-sustained growth of the Indian automotive industry.

Allows automatic approval for foreign equity investment up to 100%

in the automotive sector and does not lay down any minimum investment criteria.

lays emphasis on R & D activities carried out by companies in India Weighted tax deduction of up to 150% for in-house research and R & D
activities.

Formulation of an appropriate auto fuel policy to ensure availability of

adequate amount of appropriate fuel to meet emission norms

Confirms the government s intention on harmonizing the regulatory

standards with the rest of the world

State-of-the-art test facilities will support the growth of the auto industry
The Government of India is
promoting National Automotive Testing and R&D Infrastructure Project (NATRIP) to support the growth of the auto industry in India
New testing & homologation center at MANESAR New testing & homologation center New testing center forat MANESAR tractors & off-road vehicles, accident data analysis and specialised driving training at RAE BAREILLY Hill Area driving training center and Regional In-Use vehicle management center at SILCHAR

NATRIP envisages setting up of five

independent and up gradation of existing test centres

Testing centres at Manesar

(Haryana), Chennai (Tamil Nadu), Pune (Maharashtra) Proving ground at Indore (MP) Tractor testing facility at Rae Bareilly (UP) Hill Driving Training Centre at Silchar (Assam)

Up-gradation of VRDE at AHMEDNAGAR New complete proving ground at INDORE

Up-gradation of ARAI at PUNE

New test & homologation center near CHENNAI

Indian Automotive Industry

Government of India SIAM ACMA Automotive Mission Plan 2016

On 29.01.07, the Prime Minister released Automobile Plan 2006 -2016 to give a road 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 country s GDP and 30~35% of the Industry
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Automotive Components Industry

Automotive Mission Plan 2016

ACMA VISION 20:20:1

20

Achieve $20 billion in Domestic Sales

20:20:1

20

Achieve $20 billion in Exports Sales

VISION
1

20:20:1

Create 1 million additional Jobs

India Advantage and business opportunities

Attractiveness of the Indian automotive industry Large and growing domestic demand Demand growth expected tocapabilities Proven product Development be around 10 % CAGR making India one of the fastest Capabilities to develop complete vehicles growing markets and systems Export Potential Increased outsourcing has led to a large potential to export components and vehicles to other markets High quality standards 12 Indian component manufacturers have won the Deming Prize for quality Most leading component manufacturers are QS and ISO certified

More than 125 Fortune 500 (including Companies can leverage India s

large auto companies) have R&D centres in India

acknowledged leadership in the IT industry

Indian Auto Industry Stable economic policies Continuity in reforms and policies India targets to emerge as the manufacturing hub for small cars

Competitive manufacturing cost Implementation of VAT, has positioned India as one of the leading low cost manufacturing sources

Indian Automotive Industry - Growth Drivers

Higher GDP growth India s huge geographic spread Increasing Road Development, Golden Quadrilateral Increasing disposable income with the service sector Easier finance schemes Replacement of aging four wheelers Graduating from Two wheeler to Four wheeler Increasing dispensable income of rural agri sector Growing Concept of Second Vehicle in Urban Areas

Two wheeler story could be repeated in the car segment

10

8 out of top 10 global companies have India presence

They contribute 60 % of global production but 25 % of India Production

The Motorization Process

Cars for 1.000 inhabitants in different countries
750

600
USA Italy Germany France Japan UK Poland S.Korea Brasil China India

450

300

150

2006 813 673 597 595 593 571 385 322 124 23 12

12

1960

1970

1980

1990

2000

2010

GROWTH ASPECTS
India has a low vehicle presence (with passenger car stock of only around 14 per 1,000 population in 2008), and so possesses substantial potential for growth. Passenger car production in India is projected to cross three million units in 2014-15. Sales of passenger cars during 2008-09 to 2015-16 are expected to grow at a CAGR of around10%. Export of passenger cars is anticipated to rise more than the domestic sales during 2008-09 to2015-16. Motorcycle sales will perform positively in future, exceeding 10 million units by 2012-13. Value of auto component exports is likely to attain a double digit figure in 2012-13.

Key players in the Indian auto industry Passenger Cars and Commercial vehicles
The largest player in the Indian industry. Plans to launch new and exciting products in the Indian markets, including the 100,000 car Suzuki s JV in India and the largest passenger car manufacturer in India

The third largest passenger car manufacturer in India and one of the largest exporters of vehicles. Has established India as one of its manufacturing bases in the world. Is planning to invest heavily to boost exports from India

Has vision of capturing 10 % share of the Indian passenger car market by 2010

One of the leading players in the Indian premium cars segment

One of the leading players in the Indian premium cars segment

One of the leading players in the Indian premium cars segment. Plans to enter the small car segment by re-launching the Matiz One of the largest players in the UV / MUV segment

The 2nd largest CV manufacturer in India

Key players in the Indian auto industry - Two wheelers

The largest 2 wheeler manufacturer in the world and 1st in India.

The 2nd largest 2- wheeler manufacturer in India and the largest 3 wheeler manufacturer. Has plans for establishing a manufacturing facility in Indonesia . The third largest 2 wheeler manufacturer in India. Has plans for establishing a manufacturing facility in Indonesia Has recently entered the Indian market through its direct subsidiary ( in addition to its JV Hero Honda) Has recently entered the Indian market through its direct subsidiary

PAST PERFORMANCES & CURRENT TRENDS

MARKET SHARE TRENDS : 2003-04 TO 2006-07 MEDIUM & HEAVY COMMERCIAL VEHICLES
Company TATA Motors Ashok Leyland Eicher motors Swaraj Mazda Man force Trucks Asian Motor works 03-04 63.26 31.58 4.62 1.20 --04-05 63.90 26.85 6.69 2.31 --05-06 60.55 30.12 6.27 2.50 -0.03 06-07 60.24 32.03 5.62 1.70 0.08 0.02

 LIGHT COMMERCIAL VEHICLES

Company TATA Motors Mahindra & Mahindra Eicher Motors Swaraj Mazda Force Motors Ashok Leyland 03-04 48.05 32.26 6.25 6.40 6.41 0.62 04-05 52.36 33.31 5.86 5.31 2.66 0.50 05-06 61.82 26.41 4.85 3.37 2.68 0.85 06-07 64.22 26.75 4.25 2.47 2.03 0.26

 Passenger cars
Company Maruti Suzuki Hyundai TATA Honda Ford GM Benz Hindustan Motors 03-04 42.99 22.80 14.38 6.30 4.57 3.67 1.39 2.54 04-05 39.77 22.21 14.95 8.09 4.38 5.37 1.60 2.57 05-06 40.24 23.05 15.10 8.58 4.51 5.22 1.45 1.83 06-07 38.47 22.27 14.35 11.12 5.76 4.95 1.54 1.43

 MUVs
Company Mahindra & Mahindra TATA Force Motors Maruti Suzuki Hindustan Motors Toyota Kirloskar 03-04 38.61 19.83 4.10 1.91 0.85 33.71 04-05 39.25 21.09 4.27 1.98 0.17 32.44 05-06 42.50 22.29 4.26 1.55 0.15 29.26 06-07 38.78 25.27 4.36 1.05 0.59 29.96

 MOTORCYCLES

Company Hero Honda Bajaj TVS Yamaha

03-04 48.80 24.03 14.64 6.24

04-05 52.16 27.98 11.69 4.88

05-06 50.80 32.31 10.86 3.98

06-07 48.48 34.72 11.17 3.94

 THREE WHEELERS
Company Bajaj Piaggio Mahindra & Mahindra Scooters India Atul Auto Force Motors 03-04 61.08 10.01 10.46 5.74 2.83 7.17 04-05 48.77 24.73 11.14 4.10 3.26 5.87 05-06 48.80 28.36 8.89 4.14 3.57 4.55 06-07 54.74 24.97 9.97 4.19 2.87 2.73

EXPANSION PLANS
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 :
Increase capacity to 400,000 cars per annum over next 1 year.

Nissan
Team up with Mahindra & Mahindra and Renault to invest in a $905 million car project in India, capacity to produce 400,000 units in seven years.

Tata Motors :
New plant to manufacture 100K car in West Bengal with an investment of US $ 0.24 Billion.

Toyota :
Target of 200,000 units capacity by 2010.

General Motors :
New Capacity to manufacture more small car like spark. Nissan Compact SUV

Very Competitive Market

From 20 models available in year 1995 to 93 available today (Not counting the variants) 60 new launches done in 2008

Recent Newsmakers

The $ 2,500 Car (The NANO)

Vehicle Production
C &M Vproduction- A - S ar U pr ep 1000000 900000 800000 700000 600000
N os 7% grow t 29% grow t 28% grow t 18% grow th 14% grow th

500000 400000 300000 200000 100000 0

2000-01
C I atg -4% 2%

2001-02
C II atg

2002-03
C III atg

2003-04
C IV atg

2004-05
C V atg

2005-06
MV U

2006-07
Total

2007-08

G th ov prev period row er ious grow th

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CURRENT TREND
AUTOMOBILE SALES ALL TIME LOW: declined by 18.2 % in December 2008. THE TOTAL VECHICLE SALES IN DOMESTIC MARKET STOOD AT 5,97,622 (DEC 2008) WHERE AS IN PREVIOUS YEAR IT WAS 7,30,603 (DEC 2007). VARIOUS AUTOMOBILE COMPANIES SHUT THEIR PLANT TEMPORARILY BECAUSE OF DEMAND NOT MEETING THE TOTAL PRODUCTION. THE CUT IN EXCISE RATE (4%) ITS BENEFIT WAS DIRECTLY PASSED TO CUSTOMER. ALL MAJOR COMPANIES REDUCED THE PRICES OF VECHICLES TO INCREASE DEMAND. IN BAILOUT PACKAGE OF JANUARY GOVT INSTRUCTED GOVT. BANKS TO PROVIDE CREDIT TO NBFC S (NON BANKING FINANCIAL INSTITUTION) SPECIFICALLY TO BUY COMMERCIAL VECHCILES.

Current Scenario
NOV-2008 AUTOMOBILE INDUSTRY REPORTED ONE OF ITS WORST PERFORMANCE DECLINE IN SALE OF COMMERCIAL VEHICLES BY 48% & PRODUCTION BY 57.3% SALE OF 2 WHEELERS FELL BY 9.2% SALES OF PASSENGER CARS & MUVS FELL BY 8.2%

SWOT Analysis
STRENGTHS
Automobile industry is an established and an evergreen industry. India is the strongest player in the small car segment of the global automobile market Indian companies are the best cost innovators The automotive industry has long been known for its development and promulgation of the assembly-line.

 Some of the greatest developments in the automotive supply chain lie in the development of Just-In-Time (JIT) inventory methods. Through the use of advanced technologies, assembly line manufacturing, and JIT inventory management, the automotive industry has been able to achieve significant gains in productivity.

Weakness
Indian is lacking in proper infrastructure. This is slowing the pace of growth of auto industry Companies are not improving after sale services

Opportunities
The automotive ecosystem is in the midst of significant change, with increasing challenges in consumer demands, technology development, and globalization. While demand for incumbent technologies will remain strong, alternative power trains could capture more than 20 percent of the global market by 2020, depending upon boundary conditions such as fuel taxation and emissions regulation set by governments as well as oil price development. storage is in the heart of the next generation of efforts for fuel economy. More realistic scenario will emerge for technologies using Hydrogen as automotive fuel. Intelligent use of NCES (Non conventional energy sources) for powering Public Transport.

Threats
Global Crisis Companies not focusing on R & D are under great risk High competition from foreign players Lack of technology for Indian companies

SCOPE IN THIS INDUSTRY

It comes under manufacturing industry. We can join there in sales & marketing, H.R, Finance, supply chain mgt ,R&D as well as in operations department . Good job opportunity is there. Pay package is also very good .

Critical Analysis
Automobile Industry in India is still in its developing stage. The industry would have to develop vehicles which would have minimum impact on Air Quality and confirm to the Safety Norms with cost of fuel increasing rapidly. The Industry would also need to provide energy solutions for economic activities to sustain. When we compare 2020 with the present, we cannot think about the growth of the automobile enterprise without also paying attention to the safeguarding of the world environment. In the next ten years, we will experience more change than in the 50 years before.

 The industry would not only need to address the technology challenges but also look at cost competitiveness and human resources challenges. The policy makers would have to provide infrastructure to absorb the volumes that are expected to come into existence. Challenges beyond 2016 would make it necessary for Private & Public Sector to join hands and come out with effective solutions for sustainable mobility

Sources
Society of Indian Automobile Manufacturers (SIAM) CMIE REPORT INDIAN BRAND EQUITY FOUNDATION AUTO CAR INDIA : ECONOMIC TIMES GOOGLE BUSINESS WORLD TIMES OF INDIA BUSINESS LINE ECONOMIC TIMES

Thank You

JAN 19 2009

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