8% 4%

Third-largest automobile industry by 2020E

2010 2020 India's share in global passenger vehicle market

By 2020, India's share in the global passenger vehicle market to double to 8 per cent from 4 per cent over 201011

CAGR: 9%

29.1

Worlds second-largest two wheeler manufacturer

15.9

Twowheeler sales to rise from 15.9 million in FY2013 to 29.1 million by FY2020E

FY13 FY20 Two wheelers (million units) 9.0

CAGR: 16%

Passenger vehicle sales to nearly triple by 2020E

3.2

FY13 FY20 Passenger vehicles (million units)

Passenger vehicle sales to increase from 3.2 million in FY2013 to 9.0 million in FY2020E

Source: Aranca Research; Note: E Estimate

FY10

Growing Growing demand demand

Strong growth in demand due to rising income, middle class, and a young population is likely to propel India among the worlds top five auto manufacturers by 2015 Growth in export demand is set to accelerate

Innovation opportunities
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

FY16E
Market size: USD145 billion

Market size: USD57.7 billion

Advantage India
Rising investments

India has significant cost advantages; auto firms save 10-25 per cent on operations vis--vis Europe and Latin America A large pool of skilled manpower and a growing technology base would induce greater investments

Policy sector support The engineering is delicensed; 100 per cent FDI is allowed in the The government aims to develop sector India as a global manufacturing as well as R&D hub Due to policy support, there was There has been a wide array of cumulative FDI of into policy support in USD14.0 the formbillion of sops, the sector over April 2000 February taxes and FDI encouragement 2012, making up 8.6 per cent of total FDI into the country in that period

Source: Automotive Mission Plan (20062016) Note: R&D Research and Development; FDI Foreign Direct Investment; FY Indian Financial Year (April March); FY16E Estimated figure for Financial Year 2016

20.7 million units (FY13) 11 million units (2007) 0.6 million units (1992) 2008 onwards 19932007 0.4 million units (1982)

198392

Before 1982

Closed market Five players Long waiting periods and outdated models Sellers market

Joint venture (JV): Indian government and Suzuki formed Maruti Udyog; commenced production in 1983 Component manufacturers entered the market via JV Buyers market

Sector de-licensed in 1993 Major original equipment manufacturers (OEMs) started assembly operations in India Imports permitted from April 2001 Introduction of valueadded tax in 2005

More than 35 market players Removal of most import controls Indian companies gaining acceptance on a global scale Setting up of National Automotive Board to act as facilitator between the government and industry

Source: Tata Motors, Society of Indian Automobile Manufacturers (SIAM), Aranca Research Note: JV Joint Venture

Automobiles

Two-wheelers

Passenger vehicles

Commercial vehicles

Three-wheelers

Mopeds

Passenger cars

Light commercial vehicles

Passenger carriers

Scooters

Utility vehicles Medium and heavy commercial vehicles

Goods carriers

Motorcycles

Multi-purpose vehicles

Electric twowheelers

The gross turnover of automobile manufacturers in India expanded at a CAGR of 17.7 per cent over FY07-11 Excluding three wheelers, trucks accounted for the largest share of revenues (47.8 per cent in 2011)

Revenue trends over the past few years (USD million)

Market* break-up by revenues (2011)

58.6

CAGR:17.7%
36.6 30.5 33.3

20.4%

43.3
47.8%

Trucks

Cars

31.8%

Two Wheelers

FY07

FY08

FY09

FY10

FY11

Source: SIAM, Datamonitor, Aranca Research Note: * Does not include three wheelers

Production of automobiles increased at a CAGR of 12.2 per cent over FY05-13 Passenger vehicles was the fastest growing segment, representing a CAGR of 15.4 per cent

Total production of automobiles in India (million units)

15.5 15.9 3.2 0.8 0.8

7.6

8.5

6.5

8.4

10.5

3.0

13.4 1.6 0.6 0.5 1.2 1.3 1.3 0.5 0.6 1.8 2.4 0.6 0.6 0.4 0.5 0.8 3.1

FY05

FY06

0.4 0.4

FY07
Passenger Vehicle

FY08

FY09

FY10
Three Wheelers

FY11
Two Wheelers

FY12

FY13

Commercial Vehicle

Source: SIAM, Aranca Research Note: CAGR Compound Annual Growth Rate

0.8 0.8

0.4 0.4

0.8

Two wheelers dominate production volumes; in FY13, the segment accounted for about three quarters of the total automotive production in the country India is the worlds second-largest two wheeler manufacturer and fourth-largest producer of commercial vehicles

Market share by volume (FY13)

4% 4% 15%

Two Wheelers

Passenger Vehicle

Commercial Vehicle
77% Three Wheelers

Source: SIAM, Aranca Research

Share in production of passenger vehicles (FY13)

Share in production of commercial vehicles (FY13)

19.3% Passenger cars 29.4% MCV & HCV

Utility vehicle 70.6%

LCV

80.7%

Source: SIAM, Aranca Research Note: LCV Light Commercial Vehicle; MCV Medium Commercial Vehicle; HCV Heavy Commercial Vehicle

Share in production of three-wheelers (FY13)

Share in production of two-wheelers (FY13)

18.3%
Goods Carrier

15.3%

5.9% Mopeds

Motocycles

Passenger carrier 81.7%

Scooters 78.7%

Source: SIAM, Aranca Research

Automobile export volumes increased at a CAGR of 19.1 per cent over FY0513 Two-wheeler segment reported the fastest growth (22.2 per cent) followed by three-wheelers (16.3 per cent) over FY0513

Exports of automobiles from India (million units)

2.0 2.0 0.5 0.4 0.1 FY12 Two Wheelers Source: SIAM, Aranca Research 0.1 FY13 0.3

0.6

0.8

1.0

0.5

1.1

0.5

1.5 0.4 0.5 0.3 0.2 0.0 0.1 0.2 0.0 0.1 0.2 0.2 0.0 0.2 0.1 0.1 0.1 0.1 0.2 FY05 FY06 Passenger Vehicle FY07 FY08 Commercial Vehicle FY09 FY10 Three Wheelers 0.0 FY11 0.1 0.3 0.5

Two wheelers accounted for the largest share in exports (by volume) at 67 per cent in FY13 Passenger vehicles comprised a sizeable 19 per cent of overall exports Exports of passenger vehicles registered the highest growth at 9.02 per cent in FY13

Exports shares by volume (FY13)

19%

Passenger Vehicle

3% 11%

Commercial Vehicle Three Wheelers

67% Two Wheelers

Source: SIAM, Aranca Research

Auto sales across categories are estimated to rise 6-8 per cent in FY14
27%

Growth forecast for sales

28%

Passenger vehicles are projected to grow 5-7 per cent in FY14 Passenger car segment is estimated to expand 3-5 per cent SUVs are projected to increase 11-13 per cent Commercial vehicles are forecast to rise 7-9 per cent

12% 8% 4% 3%

FY09

FY10

FY11

FY12

FY13

FY14E

Auto sales growth

Growth forecast for the auto segment

50%

LCVs are estimated to grow 10-12 per cent

33%

25% 33%

20% 25%

13%

16%

3% 0% 0%

2% -2% 5%

Three wheelers are estimated to rise 3-5 per cent in FY14 Two-wheelers are expected to grow 6-8 per cent in FY14
Source: SIAM, Aranca Research Note: E Estimate, UV Utility Vehicle
-33%

FY09

0%

FY10

FY11

FY12

FY13

3%

Passenger Vehicle

Commercial Vehicle

Three Wheelers

Two Wheelers

7% 9% 5% 8%

MCVs and HCVs are projected to increase 1-3 per cent

5%

33% 28%

FY14E

9.0

CAGR: 16%

Passenger vehicles to increase at a CAGR of 16 per cent during FY201320

5.0 3.2

FY13

FY15 FY20 Passenger vehicles (million units) 2.2

CAGR: 16%

Commercial vehicles expected to register a CAGR of 16 per cent during FY201320

0.8

1.4

FY13

FY15 FY20 Commercial vehicles (million units)

CAGR: 9%

30.0

Two and three wheelers projected to expand at a CAGR of 9 per cent during FY201320

16.8

22.0

FY13

FY15 FY20 Two & three wheelers (million units) Source: SIAM, Vision 2020, Aranca Research

Scenario

The Indian luxury car market expanded at a CAGR of 30 per cent, with 23,000 units in 2011 (about 1 per cent of the passenger vehicle market in India). The market is dominated by players such as BMW, Mercedes, Audi, Jaguar

Key drivers

India has the worlds 12th-largest HNI population, with a growth of 20.8 per cent (highest among the top 12 countries) With expansion in the education and realty sectors, and increasing wealth of IT professionals, more consumers aspire to own luxury cars

Notable Trends

The Indian luxury car market is estimated to expand at a CAGR of 25 per cent during 201220 and reach 150,000 units by 2020 (accounting for 4 per cent of the estimated 6.8-million-unit domestic car market) The luxury SUV segment is growing at about 50 per cent, while luxury sedans are increasing 2530 per cent

Source: World Wealth Report (2011) of Merrill Lynch Wealth Management and Capgemini, Aranca Research Note: HNI - High Networth Individuals

The automotives industry is concentrated with leaders in each segment commanding a share of over 40 per cent

Market Leader

Others

Passenger Vehicles

45%

20%

10%

4%

MCVs & HCVs

63%

23%

7%

LCVs

59%

30%

4%

4%

Three Wheelers Motorcycles Scooters

41% 59% 51%

40% 24% 21%

10% 7% 14% 6% 10%

Source: SIAM, Aranca Research Note: Data is for FY10

New product launches

Large number of products available to consumers across various segments; this 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 productdevelopment 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

Alternative fuels

In FY11, the CNG market was worth more than USD330 million; CNG cars and taxis are expected to register a CAGR of 28 per cent over FY11FY14 The CNG distribution network in India is expected to increase to 250 cities by 2018 from 30 cities in 2009

New financing options

Carmakers such as BMW, Audi, Toyota, Skoda, Volkswagen and Mercedes-Benz have started providing customised finance to customers through NBFCs Major MNC and Indian corporate houses are moving towards taking cars on operating lease instead of buying them
Note: NBFCs - Non-Banking Finance Companies

Growing demand demand Growing

Policy support Strong

government support

Increasing investments

Rising income, young population

Goal of establishing India as an automanufacturing hub

Rising investments from domestic and foreign players

Inviting
Greater availability of credit and financing options R&D focus; GOI has set up a technology modernisation fund

Resulting in
Greater product innovation; market segmentation

Strong growth in exports

Policy sops, FDI encouragement

Demand projected to remain strong, making returns attractive

Note: GOI Government of India

Changing income dynamics of Indias population Increasing income and middle-class population
GDP per capita is estimated to have grown from USD 1369.54 in 2010 to USD 1,591.57 in 2012, and is expected to reach USD 2,428.45 by 2017 Apart from the impact of rising incomes, widening of the consumer base will also be aided by expansion of the middle class, increasing urbanisation, and changing lifestyles
Million Household,100% 222 273 26 50 40 35 25 12 1 2008 29 17 7 2030 Strivers (9206.4-18412.8) Aspirers (1657-3682.5) 322 15 32

A young population is boosting demand for cars

6 3 2020

Demand for commercial vehicles increased due to the development of roadways and greater market access

Globals (>18412.8) Seekers (3682.5 - 9206.4) Deprived (<1657)

Source: McKinsey Quarterly, Aranca Research

Indian auto finance market size (USD billion) Easy availability of credit
21.6

Greater access to credit eases the purchase of passenger and commercial vehicles
11.3

14.1 8.5 10.2

12.4

15.3 10.7 8.1

15.5

The auto finance penetration has increased at a CAGR of 16.6 per cent to USD15.5 billion during FY07-11 BMW, Audi, Toyota, Skoda, Volkswagen and MercedesBenz have started providing customised finance to customers, dealers and suppliers through dedicated non-banking finance companies (NBFCs)

FY07

FY08

FY09

FY10

FY11

Car Industry sales volume

Vehicle Finance Penetration

Source: Kotak Mahindra Prime, Aranca Research Note: Greater distributional efficiencies, increasing demand (especially from rural areas) due to rising disposable incomes have created new markets for products within the country

Design and Engineering 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 Brazil

Latin America

Mexico
In competition with India Source: ACMA, Aranca Research

Less competitive than India

Auto Policy 2002

Automatic approval for foreign equity investment up to 100 per cent; no minimum investment criteria Encourage R&D by offering rebates on R&D expenditure AMPs vision is to make India a preferred destination for designing and manufacturing of automobiles and achieve a market size of USD154 billion by 2016 Setting up of a technology modernisation fund focussed on SMEs Establishment of automotive training institutes, auto design centres and special auto parks

Automotive Mission Plan (AMP) 200616

NATRiPs

Set up at a total cost of USD388.5 million to enable the industry to be on par with global standards Nine R&D centres of excellence with focus on low-cost manufacturing and product development solutions

Dept. of Heavy Industries & Public Enterprises

Worked towards reduction of excise duty on small cars and increase budgetary allocation for R&D Weighted increase in R&D expenditure to 200 per cent from 150 per cent (in-house) and 175 per cent from 125 per cent (outsourced)

Union Budget FY14

Proposal to allocate USD2.7 billion for JNNURM to bolster sales volumes of Medium and Heavy Commercial Vehicles (MHCV)

Note: SME Small and Medium Enterprises, R&D - Research and Development, NATRiP National Automotive Testing and R&D Infrastructure Project, AMP - Automotive Mission, JNNURM - Jawaharlal Nehru National Urban Renewal Mission

 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
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

Rae Bareilly Centre International Centre for Automotive Technology (iCAT), Manesar Silchar Centre, Assam

List of companies

DelhiGurgaon Faridabad

North

Ashok Leyland Force Motors Piaggio

Swaraj Mazda Amtek Auto Eicher

Honda SIEL Maruti Suzuki Tata

Motors Bajaj Auto Hero Group

MumbaiPune Nashik Aurangabad Kolkata Jamshedpur

West

Ashok Leyland Bajaj Auto FIAT GM

Tata Motors Hindustan Motors

M&M Eicher Skoda Bharat Forge

Simpson & Co Internatio nal Auto

Tata Motors Volkswag en RenaultForgings JMT Exide

Nissan M&M

East

Chennai Bengaluru Hosur

South

Ashok Leyland Ford M&M Toyota

Kirloskar Volvo Sundaram Fasteners Enfield

Hyundai BMW Bosch TVS Motor

Company RenaultNissan

Source: ACMA, Aranca Research

NORTH WEST: Rajasthan is a major hub for light vehicle manufacturing

NORTH: Delhi is a hub for light vehicle manufacturing, whereas Haryana and Uttarakhand are hubs for heavy vehicle manufacturing

WEST: Maharashtra, and Gujarat are hubs for heavy and light vehicle manufacturing

EAST: Jamshedpur is the site for Tatas heavy vehicle manufacturing

Heavy Vehicle Manufacturing Plant

SOUTH: Chennai hosts manufacturing plants for heavy and light vehicles

Light Vehicle Manufacturing Plant

Source: Aranca Research Note: All figures as of 2011-12

FDI inflows in the automotives sector aggregated USD8.1 billion (4.2 per cent of the total FDI) over April 2000 February 2013

Revenue trends over the past few years (USD million)

1.5 DelhiGurgaon Faridabad 1.3 1.2 1.2 0.9 Ahmedabad MumbaiPune Nashik Aurangabad

Kolkata Jamshedpur FY09 FY10 FY11 FY12 FY13

FDI in automobile industry (USD billion)

Source: Department of Industrial Policy & Promotion (India), Aranca Research Chennai Bengaluru Hosur

Global car majors have been ramping up investments in India to cater to the growing domestic demand. Also, these manufacturers plan to leverage Indias competitive advantage to set up export-oriented production hubs

Chennai plant nearly doubled production to 250,000 cars Completed 80 per cent investment at Oragadam, a car plant near Chennai Launched an automatic transmission variant for its petrol model of the sedan, Fiesta Laid the foundation for an USD1-billion plant at Sanand in March 2012

Increased annual output at the Chennai plant to 11,000 units in Jun 2011 from 10,000 units earlier Plans to raise the number of car offerings in the sub USD46,729 category
Plans to launch up to eight models over the next 56 years Aims to invest USD167 million at the fourth unit in Karnataka in 2012 Plans to set up a greenfield diesel engine factory at its second industrial location in Rajasthan Expects 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 Aims to invest USD89.6 million for a diesel engine plant in India which would be operational from 2013 Plans to invest USD71 million at the Pune plant to launch five compact cars
Source: Respective Company Websites, News Articles, Aranca Research

Continuing market leadership Product portfolio expansion Increased productivity Enhanced R&D capability Capacity expansion Roll-out of peoples car (Maruti 800) Product portfolio comprising 16 passenger vehicle models In the process of establishing Suzukis largest R&D facility outside Japan Accounted for 45 per cent share in the Indian car market

Plans to produce 1.7 million cars by 2013 2012 Total sales crossed 1million units in FY12

2011 Roll-out of 10 millionth car

1994 Production of 1 millionth car

1983

1994

1997

2001

2004

2006

2007

2008

2009

2010

2011

2012

Source: Company Website, Aranca Research

Disruptive innovation

JV with Daimler AG

Production of first indigenously designed LCV

Launch of the first indigenous CV

Acquired stake in Hipo Carrocera SA

Introduction of Megapixel, an electric vehicle

Market expansion

Product portfolio expansion Enhancing R&D capability Establishment of Tata Engineering & Locomotives

Launched Indica, India's first fully indigenous passenger car

Acquisition of Jaguar and Landrover

Acquisitions

Launched Tata Nano

Joint ventures

1945

1954

1961

1977

1982

1986

1991

1998

2005

2008

2010

2012

Source: Company Website, Aranca Research

Tata Nano ranked among the top 10 best-selling cars of 2012. It was recently declared the most trusted four-wheeler brand by The Brand Trust Report, India Study 2013 Nano was the only petrol car among the top-selling cars of 2012 to post a positive yoy growth. Tata adopted a different marketing pitch and launched the 2012 Tata Nano, which offered a lot of new features for no extra charge
30,763

Tata Nano sales FY 2010-13 (units)

70,432 74,527 73,848

Sales of the Nano more than doubled to 73,848 units in FY13 from its launch in FY10 Currently, Tata exports Nano to Sri Lanka and Nepal and has plans to export the car to Bangladesh. The company is likely to add new export markets such as Africa, South America, and Southeast Asia Tata expects to launch two new variants of the Nano in 2013 to augment sales. A CNG variant would be launched in the first half of 2013, while a diesel version is likely to be launched in the latter half

FY10

FY11 Sales

FY12

FY13

Source: Company Website, Aranca Research Note: YOY Year on Year

M&M has been the market leader in utility vehicles in India for over 50 years since building the first Willys jeep in 1947 Manufactures passenger vehicles, utility vehicles, light commercial vehicles (including three-wheelers)

M&M Auto sales Domestic and export (000 units)

563 483 377

Produces 15 passenger vehicle models and 8 commercial vehicle models, noteworthy among which are Scorpio, Thar, Xylo, XUV 500 Global player in exporting products to several countries in North America, Europe, Africa, South America, South Asia, and the Middle East; exported 32,457 units in FY13 Recorded segment revenue of USD3.6 billion in 9MFY13 Launched Verito Refresh, Quanto, and Rexton in FY2013 Launched the e20 electric car in March 2013 after acquiring carmaker Reva Technology In 2013, inked a partnership with online shopping portal Snapdeal.com to sell its two-wheelers
65 87

CAGR: 22%
231 230 178

298

117 145

149

FY02

FY03

FY04

FY05

FY06

FY07

FY08

FY09

FY10

FY11

FY12

Sales

Source: Company Website, Aranca Research

FY13

India is fast emerging as a global R&D hub

Opportunities for creating sizeable market segments through innovations

worlds cheapest car (Tata Nano) has directed focus on the low-income market Bajaj Auto, Hero Honda and M&M plan to jointly develop a technology for two-wheelers to run on natural gas Electric cars likely to be a sizeable market segment in the coming decade Tata Motors to launch MiniCAT, a car running on compressed air, thereby stepping into the next era where cars would not require any fossil fuel and emissions would be almost nil
The

Small-car manufacturing hub

Strong

support from the government; setting up of NATRiP centres Private players, such as Hyundai, Suzuki, GM, keen to set up R&D base in India Strong education base, large skilled English-speaking manpower Comparative advantage in terms of cost

General Motors, Nissan and

Toyota announced plans to make India their global hub for small cars Light vehicle sales estimated to cross 3 million by the end of 2012 Strong export potential in ultra low-cost cars segment (to developing and emerging markets)

Note: M&M Mahindra & Mahindra

Society of Indian Automobile Manufacturers (SIAM)

Core 4-B, 5th Floor, India Habitat Centre Lodhi Road, New Delhi 110 003 India Phone: 91 11 246478102 Fax: 91 11 24648222 E-mail: siam@siam.in

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 Wherever applicable, numbers have been rounded off to the nearest whole number

Exchange Rates (Fiscal Year) Year

2004-05 2005-06 2006-07

Exchange Rates (Calendar Year) Year

2005 2006 2007 2008

INR equivalent of one USD

44.95 44.28 45.28

INR equivalent of one USD

45.55 44.34 39.45 49.21

2007-08
2008-09 2009-10 2010-11 2011-12 2012-13

40.24
45.91 47.41 45.57 47.94 54.31

2009
2010 2011 2012 2013

46.76
45.32 45.64 54.69 54.45
Average for the year

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