The Indian Automotive Supplier Report Supplierbusiness

IHS AUTOMOTIVE The Indian Automotive Supplier Report SupplierBusiness

2015 edition supplierbusiness.com

REGIONAL REPORT Indian Subcontinent SAMPLE IHS Automotive | Supplying Ford

Contents

Executive Summary 4 ––Renault-Nissan third largest exporter 30 ––Tata’s exports expected to decrease 30 Indian Economy and Business Environment 6 ––Ford ups capacity in India to boost exports 30 Volatile GDP growth in BRICS 7 ––Volkswagen increases exports from India 31 Per capita GDP seen rising 8 ––Honda to grow exports from India 31 Inflation in check, for now 8 ––GM to turn India into a global export hub 31 Consumer demand expected to improve 9 Foreign investments going up 9 Overview of Automotive Supplier Industry 32 Industrial production recovers 10 Speed bumps 33 Shrinking exports, a cause for concern 10 Positive sentiment returns 33 Indian currency expected to depreciate mildly in 2015, ––Engine parts, the largest segment 33 2016 11 ––AMT to gain traction 34 ––Chassis production 35 The Indian Automotive Market 13 ––Interiors production 35 ––Maruti Suzuki boosts sales with new models 14 ––Exteriors production 35 ––Hyundai increases market share 15 ––Thermal component production 35 ––Mahindra stays leader of SUV segment 16 ––Market share of HVAC systems suppliers 36 ––Tata Motors plans to reclaim lost ground 16 ––The proliferation of car security systems 36 ––Honda strengthens position in India with diesel cars Top 10 automotive suppliers in India 36 17 ––Motherson Sumi System Limited 37 Key trends in the Indian LV market 18 ––Amtek Auto 37 ––Hatchback to remain the largest LV segment 18 ––MRF Tyres 37 ––Rising appetite for SUVs in India 18 ––Apollo Tyres 38 ––Luxury vehicle market on the rise 19 ––Bosch India 38 ––Alternative powertrain vehicles market 20 ––Sundaram Clayton 38 ––Bharat Forge 39 The Indian Automotive Industry 23 ––JBM Group 39 Capacity utilization expected to pick up 24 ––Minda Industries 39 Top 10 LV manufacturers in India 24 ––Sona Koyo 40 ––Maruti Suzuki 25 Key trends in Indian supplier industry 40 ––Hyundai 25 ––Weakness in domestic market turns focus on ––Mahindra & Mahindra 26 exports 40 ––Tata Motors 26 ––Europe accounts for lion’s share of exports 40 ––Renault Nissan 27 ––Auto parts imports stay higher than exports 41 ––Honda 27 ––Rising imports from China, a cause for concern 41 ––Ford 27 ––Rising focus on safety and safety technologies 41 ––Toyota 28 ––Demand for OEM-installed navigation system set to ––Volkswagen 28 increase in India 42 ––General Motors 28 ––Localisation takes centre stage 42 LV exports 28 ––South Africa biggest exportSAMPLE market; i10 most Government Policies and Plans 45 exported model 29 ‘Make in India’ programme 46 ––Hyundai tops export chart 30 ––Key implications of Make in India programme for ––Maruti Suzuki to increase exports 30 automotive sector 46

IHS™ AUTOMOTIVE Copyright notice and legal disclaimer © 2015 IHS. No portion of this report may be reproduced, reused, or otherwise distributed in any form without prior written consent, with the exception of any internal client distribution as may be permitted in the license agreement between client and IHS. Content reproduced or redistributed with IHS permission must display IHS legal notices and attributions of authorship. The information contained herein is from sources considered reliable but its accuracy and completeness are not warranted, nor are the opinions and analyses which are based upon it, and to the extent permitted by law, IHS shall not be liable for any errors or omissions or any loss, damage or expense incurred by reliance on information or any statement contained herein. IHS and the IHS logo are trademarks of IHS. For more information, please contact IHS at www.ihs.com/CustomerCare.

Labour regulations 47 ––Fuel pricing 53 National Manufacturing Policy 47 ––Diesel vehicle demand slows post diesel price Review of Automotive Mission Plan 2006-2016 48 deregulation 53 ––Skill development programmes 49 Free trade agreements 53 ––UNIDO-ACMA supplier development project 49 Foreign trade policy, 2015-20 54 Vehicle taxation in India 49 Infrastructure development 54 Excise and customs duty 50 ––Roads 54 ––Goods and Services Tax 50 ––Ports 56 ––Investment incentives 51 ––Railways 56 Vehicle safety norms 51 ––Power 56 ––Crash tests to become mandatory from 2017 51 ––Land acquisition 57 ––ABS becomes mandatory for commercial vehicles 51 ––Amendments proposed to land acquisition act 57 ––FAME India 52 ––Focus on improving doing business in India 58 ––Vehicle emission norms 52 Supplier Profiles 60

Figures

Figure 1: Light-vehicle sales in India 14 in India (2012–2018) 24 Figure 2: Light-vehicle sales in by sales parent 14 Figure 6: Light-vehicle exports from India (2012–2018) Figure 3: Light-vehicle sales in India by bodytype 18 29 Figure 4: Light-vehicle production in India (2012–2018) Figure 7: Engine production in India (2012–2018) 34 24 Figure 8: Transmission production in India (2012–2018) Figure 5: Light-vehicle production capacity utilisation 34

Tables

Table 1: India’s Real GDP, Growth Rate, Year-on-year 7 Table 11: Top 10 hatchbacks by sales in India 18 Table 2: India’s Real GDP, Growth Rate, Year-on-year 8 Table 12: Top 10 SUVs by sales in India 19 Table 3: FDI and portfolio investment in India (USD Table 13: Light-vehicle production in india by billions 9 manufacturer 24 Table 4: India BOP Current Account Balance 11 Table 14: Top 10 export destinations (2012–2018) 29 Table 5: Top ten light-vehicle models in India by sales Table 15: Top 10 suppliers in India by revenue 36 (2015) 15 Table 16: Maruti Suzuki component supplier family 43 Table 6: Maruti Suzuki light-vehicle sales in India Table 17: Incentives in INR 52 (2012–2018) 15 Table 18: Road Network in India 54 Table 7: Hyundai light-vehicleSAMPLE sales in India (2012–2018) Table 19: Expansion and improvement of national 15 highways 54 Table 8: Mahindra light-vehicle sales in India (2012– Table 20: Status of National Highways Development 2018) 16 Projects as on 31 December 2014 55 Table 9: Tata Motors’ light-vehicle sales in India (2012– Table 21: Growth in power generation in recent years 57 2018) 16 Table 22: India ranks lowest among BRICS in term of Table 10: Honda light-vehicle sales in India (2012–2018) ease of Doing Business 58 17

months since its launch in July 2015. According to Hyundai, IHS Automotive’s production forecasts, the automaker is the company plans to increase the model’s production by likely to start vehicle production at the Cheyyar plant in 40% to 7,000 units per month. 2019. In 2014, the automaker said the plant would produce a new line of vehicles to be launched in 2015 onwards. Though for now the South Korean automaker aims However, the Maxximo, Xylo and Quanto are expected to to better utilise its existing capacity in India and has be among the models produced at the plant, according to not announced any plans to invest in a new plant in our forecasts. On the other hand, the Chakan plant will the country, it is reported to be keeping a close eye on be used to produce the automaker’s new vehicles, which the Indian market to identify any need for additional include compact crossovers and a multi-purpose vehicle production capacity in India. (MPV). IHS expects M&M’s LV production to rise to 585,117 units by 2020. Hyundai reported around 4% y/y decrease in production in 2014 owing to a slowdown in the Indian market. In India, Tata Motors Hyundai currently produces models such as EON, Elantra, i10, i20 Elite, i20 Active, Verna, Xcent, Creta and Santa Fe. Tata Motors is currently the fourth largest LV IHS expects Hyundai’s LV production in India to increase manufacturer in India. The automaker produced 317,230 18.5% to 724,045 by 2020 compared with 2014, given that units in India in 2014 and had a market share of 8.8%. the company’s intends to launch two to three models every Though Tata Motors’ capacity utilisation is still low year until 2020 to increase its market share in the country. compared with its peers in India, the company has Hyundai’s production capacity at its Chennai plant in India launched a couple of new models, such as Zest compact is 680,000 which can be stretched to a little over 700,000 sedan and Bolt hatchback, which are well received by units. Therefore the Korean automaker will eventually be Indian buyers. Tata Motors, which owns British automaker required to set up a new plant if it is looking for production Jaguar Lands Rover, is working on increasing its production volumes beyond that. in India. In March 2015, Tata started assembling the Range Rover Evoque at its plant in Pune, Maharashtra. IHS Mahindra & Mahindra expects Tata Motors’s production to increase to 552,197 units by 2020, from 317,230 in 2014, supported by new Mahindra and Mahindra (M&M) is currently the third vehicle launches. In early 2015, Tata Motors revealed plans largest LV manufacturer in India. In 2014, M&M produced to manufacture Tata Kite at its Sanand plant in Gujarat. 404,756 units and had a market share of 12.5%. M&M The vehicle, codenamed “Pelican”, is expected to be is expanding its production capacity, which is expected introduced in 2016 and is likely to be offered in gasoline to increase to 881,100 by 2020 from 587,500 in 2014, up and diesel options. 49.9%, according to IHS Automotive. The automaker currently produces the Bolero, Gio, Genio, Maxximo, Tata Motors opened a new manufacturing facility in Quanto, Scorpio, Xylo, XUV 500, Reva E20, TUV300 and Sanand, Gujarat, in 2010 to produce its low-cost car, Verito. The company also assembles Rexton SUV of its Nano. The plant, which produces the Nano small car, South Korean subsidiary, SsangYoung. In April 2015, M&M initially had an annual production capacity of 250,000 completed the expansion of its Zaheerabad manufacturing cars expandable up to 350,000 cars per year. However, the plant in the Indian state of Telangana. Following the plant’s production capacity has been very low due to lower expansion, M&M’s annual production capacity at the site than expected demand for the Nano. In June 2014, Tata has increased to 92,000 units from 75,000. The Zaheerabad had shut its manufacturing plant in Sanand for between plant currently produces light commercial vehicles (LCVs), 35 to 40 days on account of low demand and a resultant although the facility is primarily used to produce farm inventory pile-up, as well as an ongoing retooling activity tractors. A minicar is also amongSAMPLE the new models set to be to manufacture a new version of the Nano. Due to under- produced at the plant. utilization, the plant was also rejigged to manufacture hatchback and compact sedans based on a platform used for Moreover, in April 2015, M&M was allotted land by the Kite. These models are scheduled to be launched in 2015. Tamil Nadu government to establish a test track and a new vehicle manufacturing plant. The automaker has been With its increasing focus on the domestic market and allotted 450 acres land at Cheyyar in Thiruvannamalai plans for new product launches, IHS expects Tata Motors’ district in the southern Indian state. At Cheyyar, M&M is production to increase from 317,230 units in 2014 to expected to invest in the test track first, while work at the 552,197 by 2020. In India, Tata currently produces the automotive plant is likely to start once the construction Bolt, Vista, Indica, Zest, Manza, Indigo, Safari, Sumo Gold, work at the Chakan facility is completed. According to Movus, Venture, Xenon XT and Aria.

Renault Nissan production capacity of 120,000 units. Honda’s production capacity is expected to reach 531,200 units by 2020 Renault-Nissan is currently the fifth largest LV from 203,600 in 2014. The automaker is in the process of manufacturer in India. In 2014, the French-Japanese finalising its third plant in India, in the state of Gujarat, alliance cumulatively produced 222,801 units and had which will have annual production capacity of 100,000 to a market share of 6.1%. During the year, Nissan started 125,000 units. In India, Honda currently produces the Brio, assembling Datsun cars at its Chennai facility. Renault- Amaze, City, Jazz (also sold as Fit in some countries), CR-V Nissan’s Indian plant mainly caters to exports. According and Mobilio. to IHS, Renault-Nissan’s exports from India increased to 129,045 units in 2014 compared to 123,403 units in 2013. The automaker has been focusing on the Indian market Ford and reducing exports, which are expected to decrease by Ford was the next big LV producer in India after Honda in 34% to 85,355 units by 2020 from 129,501 units in 2014, 2014. In 2014, Ford produced 151,115 units and had a market according to IHS. In April 2015, following its strategy to share of 4.2%. Despite low local demand, the automaker boost production capacity in India, Renault-Nissan alliance recorded over 90% capacity utilization in 2014 compared announced plans to expand its Chennai facility in Tamil with 72.8% in 2010, thanks to continuing strong export Nadu. The alliance is expected to make an investment demand for models like the Figo hatchback and EcoSport of about INR50 billion (USD793.6 million) in the plant. compact crossover. Ford is aggressively expanding its Renault-Nissan had an annual production capacity of presence in India. It has already invested around USD2 312,000 units in 2014, according to IHS Automotive’s billion in the country since it began operations two decades production database. This is expected to rise to 520,000 ago. In March 2015, Ford opened its second plant in India units in 2016 and to 669,500 units in 2020. at Sanand, Gujarat; the company’s first plant is located in Chennai, Tamil Nadu. The new plant has annual capacity IHS forecasts Renault Nissan’s cumulative production to to produce 240,000 cars and 270,000 engines, taking Ford’s increase from 222,801 units in 2014 to 470,312 units in cumulative annual production capacity in India to 440,000 2020 majorly due to increase in demand and improving cars and 610,000 engines. According to IHS Automotive’s economic scenario. In India, the Renault-Nissan Alliance production forecasts, the Sanand plant’s output will grow produces the Fluence, Kwid, Pulse, Sunny, Verito, Duster, to 170,000 units in 2016 from close to 72,000 units in 2015. Vibe, Duster, Lodgy, Terrano, Micra, Scala, Koleos and Datsun GO. Moreover, Ford has been developing products based on its global development strategy and has been introducing Honda innovations on global platforms. In line with its focus on development activities, Ford is considering making an Honda ranks sixth in terms of LV production in India. In additional investment of up to INR50 billion (USD785.2 2014, Honda produced 170,855 units and had a market million) in its R&D centre in Chennai, Tamil Nadu. share of 4.7%. Honda exports most of its production to Reports indicate that the investment could make the local European countries, including Belgium, Croatia, Czech engineering and development resources spearhead the Republic, Denmark, Germany, France, Latvia, Italy and introduction of a new mid-size sedan in 2018. The project Luxembourg. IHS expects Honda’s production to almost is also likely to result in a multipurpose vehicle (MPV) in double from 170,855 units in 2014 to 340,501 units in future. 2020, driven by strong demand in India and higher exports. Honda’s exports more than doubled from 6,874 units in IHS expects Ford to increase its production in India to 2013 to 15,117 units in 2014; IHS expects Honda’s exports to 320,690 units in 2020 from 151,115 in 2014, driven by the reach 24,788 units by 2020.SAMPLEcompany’s focus on exports – the company targets tripling its exports in the next five years. Ford’s exports were up The Japanese automaker is scaling up its production and 78.3% y/y to 66,566 units in 2014, according to IHS data. production capacity expecting higher exports in coming The automaker is known to treat India as its export hub. years. Currently, Honda is exporting cars from India to Ford’s Chennai plant is shipping Figo and EcoSport to neighbouring countries such as Nepal and Bangladesh as South Africa and Europe, along with catering to demand well as South Africa. Honda is investing INR3.8 billion in India. Citing high demand for the Ecosport, Ford (USD59.3 million) in its Tapukara plant to ramp up announced plans to add a third shift at its Chennai plant production capacity to 180,000 units from the current in India to ramp up production of the model. In India, Ford level of 120,000 units. The company‘s other plant in currently produces the Fiesta, Classic, Figo, Figo Aspire and India, located in Greater Noida, Uttar Pradesh, has annual EcoSport.

Toyota announced plans to invest INR15 billion (USD240 million) in its Indian operations. The investment will be to produce With production of 147,846 units and a market share of localised products. The automaker is working to enhance 4.1% in 2014, Toyota held the eighth position in the LV product localisation and has started local assembly of a manufacturers’ pecking order. Toyota has increased its 1.5-litre diesel engine. production capacity in India over the years on the back of increasing demand for the Innova MPV, Fortuner SUV, VW plans to boost its product localisation rate in India to Corolla Altis Sedan, Etios sedan and Etios Liva hatchback 90% from 70% at present. The automaker targets 85-90% of in India. However, in 2014, the automaker reduced capacity utilisation rate in the next few years. The German production levels in India in an effort to clear inventory. To automaker is reported to be developing a new compact avoid further pile-up of inventory and adjust with the pace sedan, based on its Vento sedan, a compact SUV and a of demand for vehicles, the company initiated the process hatchback for the Indian market. Considering these are of taking production holidays up to eight days in a month high-volume segments, a strong demand for these vehicles in 2014. has the potential to significantly raise VW’s production in India. In order to maintain its production numbers in India, Toyota needs to broaden its vehicle line-up in the country. After initial success, sales of the Liva hatchback and Etios General Motors sedan tapered off as a result of vastly improved competing General Motors’ (GM) LV production has shrunk lately models. Toyota joins several other automakers in pruning in India owing to slowing demand for its vehicles in the production levels to better align output with demand. local market. The US-based automaker produced 57,057 Exports have weakened too lately, putting further pressure LVs in India in 2014, down from 85,269 units in 2013. The on production. The automaker witnessed 30.3% decline automaker had a 1.5% market share in LV production in in exports from 27,735 units in 2013 to 19,327 units in 2014. While demand is weak in the Indian market, the 2014, according to IHS. Compared with 2014, IHS expects automaker’s exports from India have recorded a strong Toyota’s production capacity to remain flat at around growth lately, helping it keep its operations in India 290,100 units until 2017 and then increase to 370,500 competitive. GM’s exports more than doubled to 6,988 units by 2020. IHS expects Toyota to produce 298,536 LVs units in 2014 compared with 2,672 units in 2013. in India by 2020. In India, Toyota currently produces the Camry, Corolla Altis, Etios, Etios Liva, Prius, Innova and GM has recently changed its strategy for its Indian Fortuner. operations and is now increasingly focusing on exports. The company aims to make India an export hub and also Volkswagen plans to increase its production in the country to support exports. In July 2015 GM decided to shut down its Halol German automaker Volkswagen (VW) produced 127,968 plant in Gujarat by the second half of 2016 – the plant LVs in India in 2014, cornering a market share of 3.5%, produces Tavera and Enjoy models. according to IHS Automotive data. The company uses its production facility in India to produce vehicles for exports In July 2015, GM announced plans to invest USD1 billion markets such as Mexico, Bahrain, Kuwait, Malaysia, UAE in India in the next few years to make it its new global and Philippines. IHS expects VW’s exports from India to export hub. The company plans to roll out 10 new locally increase in the short to medium term. VW has recently manufactured vehicles in India over the next five years, as seen rising demand from its export markets, especially it plans to double its market share in the country by 2020. Mexico. The company’s exports from India increased from With its plans to improve on quality, increase its portfolio 13,441 units in 2013 to 58,079SAMPLE units in 2014; exports are with new launches and make India its export base, IHS expected to drop to 13,836 units by 2020, according to expects GM to record production of 262,540 units by 2020. IHS. While rising exports have helped Volkswagen to deal In India, GM produces the Cruze, Spark, Prisma, Sail, Enjoy with declining sales during weak demand in India, the and Trailblazer. The major export destinations from India company’s main focus still continues to be increasing its are South Africa, Chile, UAE and Peru. sales in the domestic market through making its vehicles more affordable by increasing localisation. LV exports According to IHS, the automaker is expected to increase production capacity at its plants in India to 634,700 units Automakers are increasingly shipping vehicles from in 2020 from 167,100 units in 2014. In July 2014, VW Indian factories to meet global requirements, thanks to