AUGUST Automotives 2012
For updated information, please visit www.ibef.org 1 AUGUST Automotives 2012
Contents
Advantage India
Market overview and trends
Growth drivers
Success stories: Maruti, Tata Motors
Opportunities
Useful information
For updated information, please visit www.ibef.org
2 AUGUST Automotives 2012
Advantage India
FY16E Growing demand Innovation opportunities
• Strong demand growth due to rising • Tata Nano and the upcoming Market size: Pixel have opened up the incomes, growing middle class, and a USD145 young population is likely to propel potentially large ultra low cost India among the world’s top five car segment billion auto-producers by 2015 • Innovation is likely to intensify • Growth in export demand is also among engine technology and alternative fuels set to accelerate Advantage India Rising investments Policy support
• India has significant cost • The government aims to develop advantages; auto firms save 10-25 India as a global manufacturing as per cent on operations in India well as R&D hub compared to Europe and Latin America • There has been a wide array of policy • A large pool of skilled manpower FY10 and a growing technology base will support in the form of sops, taxes and induce greater investments FDI encouragement Market size: USD57.7 billion Notes: R&D – Research and development, FDI – Foreign direct investment; FY – Indian financial year (April – March); FY16E – estimated figure for financial year 2016; estimates are from the government’s Automotive Mission Plan (2006 – 2016) For updated information, please visit www.ibef.org ADVANTAGE INDIA 3 AUGUST Automotives 2012
Contents
Advantage India
Market overview and trends
Growth drivers
Success stories: Maruti, Tata Motors
Opportunities
Useful information
For updated information, please visit www.ibef.org
4 AUGUST Automotives 2012
Evolution of the Indian automotives sector
20.4 million units (2012) 11 million units (2007) 2008 onwards
1993 -2007 0.6 million • More than 35 players units (1992) in the market • Sector de-licensed in • Removal of most 1983 - 1992 1993 import controls • Major original • Indian companies equipment 0.4 million • Joint venture (JV) - gaining global manufacturers (OEMs) units (1982) Indian government and identity started assembly in Suzuki to form Maruti India Udyog; started Before 1982 production in 1983 • Imports allowed from April 2001 • Component • Closed market manufacturers also • Introduction of value • Only 5 players entered via JV route added tax in 2005 • Long waiting • Buyer’s market periods and outdated models Source: Tata Motors, Society of Indian Automobile • Seller’s market Manufacturers (SIAM), Aranca Research, Notes: JV – Joint Venture
For updated information, please visit www.ibef.org MARKET OVERVIEW AND TRENDS 5 AUGUST Automotives 2012
The automotives market is split into four segments
Automobiles
Two-wheelers Passenger vehicles Commercial vehicles Three-wheelers
Mopeds Passenger cars Light Passenger commercial carriers vehicles
Scooters Utility vehicles Goods carriers Medium and heavy commercial vehicles Motorcycles Multi-purpose vehicles
Electric two- wheelers
For updated information, please visit www.ibef.org MARKET OVERVIEW AND TRENDS 6 AUGUST Automotives 2012
Revenues have been growing at a strong pace
→ Gross turnover of automobile manufacturers in India expanded at a CAGR of 17 .7per cent over FY07-11
→ Excluding three wheelers, cars account for the largest share of revenues (66.2 percent in 2010)
Revenue trends over the past few years in USD million Market* break-up by revenues (2010)
70.0 58.6 60.0 12.3% CAGR: 17.7% 50.0 43.3 Two Wheelers 36.6 40.0 33.3 21.5% 30.5 Trucks 30.0
20.0 66.2% Cars
10.0
0.0 FY07 FY08 FY09 FY10 FY11
Source: SIAM, Datamonitor, Aranca Research Note: *does not include three wheelers
For updated information, please visit www.ibef.org MARKET OVERVIEW AND TRENDS 7 AUGUST Automotives 2012
Sector’s growing strength evident from rise in total production figures
→ Automobiles production increased at a CAGR of 13 .2 Total production of automobiles in India (million units)
per cent over FY05-12 18.0 15.5 16.0
→ Passenger vehicles was the fastest growing segment 14.0 13.4 during that period with a CAGR of 14 .5 per cent
12.0
10.5
10.0
8.5
8.4
8
Notes: CAGR – Compound annual growth rate 8.0 7.6 6.5
6.0
3.1 3.0
4.0
2.4
1.8
1.6
1.3 1.3
1.2
0.8 0.8 0.8
2.0 0.8
0.6 0.6 0.6 0.6
0.5 0.5 0.5
0.4 0.4 0.4 0.4 0.4 0.0 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12
Passenger Vehicle Commercial Vehicle Three Wheelers Two Wheelers
Source: SIAM, Aranca Research
For updated information, please visit www.ibef.org MARKET OVERVIEW AND TRENDS 8 AUGUST Automotives 2012
Market break-up by production volume
→ Two wheelers dominate production volumes; in FY12, Market share by volume (FY12) the segment accounted for more than three quarters of total automotives production in the country
4% 4% → In fact, India is the world’s second largest two wheeler producer; the country is also the fourth largest 16% Two Wheelers commercial vehicle producer Passenger Vehicle Commercial Vehicle Three Wheelers 76%
Source: SIAM, Aranca Research
For updated information, please visit www.ibef.org MARKET OVERVIEW AND TRENDS 9 AUGUST Automotives 2012
Market break-up of individual segments by production volumes … (1/2)
Shares in production of passenger vehicles (FY11) Shares in production of commercial vehicles (FY11)
11.5% 8.1% MCV & HCV Passenger Passenger cars Carriers 36.0% MCV & HCV Goods Carriers
Utility LCV Passenger Carriers vehicles/multipurpose vehicles 49.7% LCV Goods Carriers 6.1% 88.5%
Source: SIAM, Aranca Research Notes: LCV – Light commercial vehicle; MCV – Medium commercial vehicle; HCV – Heavy commercial vehicle
For updated information, please visit www.ibef.org MARKET OVERVIEW AND TRENDS 10 AUGUST Automotives 2012
Market break-up of individual segments by production volumes … (2/2)
Shares in production of three wheelers (FY12) Shares in production of two wheelers (FY12)
5.3% 15.8% 15.6% Mopeds
Goods carriers Motorcycles
Passenger carriers Scooters 84.2% 79.1%
Source: SIAM, Aranca Research
For updated information, please visit www.ibef.org MARKET OVERVIEW AND TRENDS 11 AUGUST Automotives 2012
Exports have also grown strongly … (1/2)
→ Automobiles export volumes increased at a CAGR of Exports of automobiles from India (million units)
22.4 per cent over FY05–FY12 2 2
1.8
→ Over this period, the fastest growth was in the two 1.6 1.5
wheeler segment (25.8 per cent) followed by three 1.4 1.1
wheelers (21 .9 per cent) 1.2
1
1
0.8
0.8
0.6
0.5 0.5 0.5 0.5
0.6
0.4 0.4
0.3 0.3
0.4
0.2 0.2 0.2 0.2 0.2 0.2
0.1 0.1 0.1 0.1 0.1
0.08
0.06
0.05
0.04 0.04
0.2 0.04 0.03 0 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12
Passenger Vehicle Commercial Vehicle Three Wheelers Two Wheelers
Source: SIAM, Aranca Research
For updated information, please visit www.ibef.org MARKET OVERVIEW AND TRENDS 12 AUGUST Automotives 2012
Exports have also grown strongly … (2/2)
→ Two wheelers accounted for the largest share in Exports shares by volume (FY12) exports (by volume) at 67 per cent in FY12
→ Passenger vehicles account for a sizeable 18 per cent 18% of overall exports Passenger Vehicle 3% Commercial Vehicle
12% Three Wheelers Two Wheelers 67%
Source: SIAM, Aranca Research
For updated information, please visit www.ibef.org MARKET OVERVIEW AND TRENDS 13 AUGUST Automotives 2012
Presence of a clear leader in each segment of the market
→ The automotives industry is concentrated with market leaders in each segment commanding a share of over 40 per cent
Market Leader Others
Passenger Vehicles 45% 16% 15% 7%
MCVs & HCVs 63% 23% 7%
LCVs 59% 30% 4% 4%
Three Wheelers 41% 40% 10%
Motorcycles 59% 24% 7% 6%
Scooters 51% 21% 14% 10%
Source: SIAM, Aranca Research Notes: Data is for FY10 For updated information, please visit www.ibef.org MARKET OVERVIEW AND TRENDS 14 AUGUST Automotives 2012
Notable trends in the Indian automotives sector
• Large number of products available to consumers across various segments; this has gathered pace with the entry of a number of foreign players New product launches • Reduced overall product lifecycle have forced players to employ quick product launches
• Increasing R&D investments from both the government and the private sector Improving product- development • Private sector innovation has been a key determinant of growth in the sector; capabilities 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
• In FY11, the CNG market was worth more than USD330 million and CNG cars and taxis are expected to register a CAGR of 28 per cent over FY11-FY14 Alternative fuels • The CNG distribution network in India is expected to increase to 250 cities by 2018 from 30 cities in 2009
For updated information, please visit www.ibef.org MARKET OVERVIEW AND TRENDS 15 AUGUST Automotives 2012
Contents
Advantage India
Market overview and trends
Growth drivers
Success stories: Maruti, Tata Motors
Opportunities
Useful information
For updated information, please visit www.ibef.org
16 AUGUST Automotives 2012
Sector has been benefitting from strong demand and product innovation
Growing demand Policy support Increasing investments Growing demand Strong government support
Goal of Rising establishing India Rising incomes, investments from as an auto- young population manufacturing domestic and Resulting foreign players Inviting hub in
Greater R&D focus; GOI Greater innovation has set up availability of technology in products; credit and modernisation market financing options fund segmentation
Large domestic market Strong projected Strong growth in Policy sops, FDI demand making exports as well encouragement returns attractive
Notes: GOI – Government of India;
For updated information, please visit www.ibef.org GROWTH DRIVERS 17 AUGUST Automotives 2012
Rising incomes and a growing middle class driving domestic demand growth
Rising incomes; growing middle class Changing income dynamics of India’s population 70 • Personal (nominal) disposable income is expected to rise million Seekers: annual annually at 8.5 per cent over FY11-15 households income 60 INR200,000- • Rising middle class – size of the middle class expected to Aspirers: annual 500,000 touch 550 million by 2025 from 50 million in 2010 50 income INR90,000- 200,000 Strivers: annual 40 • Favourable demographics – a young population is also income driving up the demand for cars INR500,000- 30 1,000,000 Deprived annual • Demand for commercial vehicles have got a boost due to income 20 development of roadways and greater market access
0 2005 2010 2015 2020 2025
Strivers Seekers Deprived Aspirers Globals
Source: McKinsey Quarterly, Aranca Research
For updated information, please visit www.ibef.org GROWTH DRIVERS 18 AUGUST Automotives 2012
Easier access to credit has also been a key determinant of growth in automotives
Easy availability of credit Indian auto finance market size (USD billions) 25.0 • Greater access to credit makes purchases of both passenger 20.5 and commercial vehicles easier 20.0
15.1 • The auto finance industry has grown at an average annual 14.8 15.0 rate of 13 per cent during FY08-12 11.9 11.9 10.6 10.6 • The private sector banks like ICICI, HDFC are also showing 10.0 8.5 increasing interest in the segment which was previously 8.0 7.7 dominated by public players 5.0
Notes: Greater distributional efficiencies, increasing demand (especially from rural areas) due to rising disposable incomes have created new 0.0 markets for products within the country FY07 FY08 FY09 FY10 FY11 Car Industry sales volume Vehicle Finance Penetration
Source: Kotak Mahindra Prime, Aranca Research
For updated information, please visit www.ibef.org GROWTH DRIVERS 19 AUGUST Automotives 2012
India has a huge competitive advantage over peers
Design & Engg Manufacturing Manpower Supplier Raw skills skills costs base materials Korea China East Asia Thailand Indonesia Vietnam Czech Republic Romania Poland Central & Eastern Slovakia Europe Russia Hungary Turkey Brazil Latin America Mexico
Less competitive than India In competition with India Source: ACMA, Aranca Research
For updated information, please visit www.ibef.org GROWTH DRIVERS 20 AUGUST Automotives 2012
Strong policy support has been crucial in developing the sector
• Automatic approval for foreign equity investment up to 100 per cent; no minimum investment criteria Auto Policy 2002 • Encourages R&D by offering rebates on the R&D expenditure spent by the companies
• Setting up of a technology modernisation fund focussed on SMEs Automotive Mission Plan 2006–2016 • Automotives training institutes, auto design centres, special auto parks also established
• Set up at total cost of USD388.5 million to enable the industry to implement global standards NATRiPs • R&D centres of excellence with focus on low-cost manufacturing and product development solutions
• Worked towards reduction of excise duty on small cars and the increase of Dept. of Heavy Industries & budgetary allocation for R&D Public Enterprises • Weighted increase in R&D expenditure to: 200 per cent from 150 per cent (in- house); 175 per cent from 125 per cent (outsourced)
• Excise duty on large premium cars increased from 22 per cent to 27 per cent Union Budget FY13 • Increased custom duty on cars and MUVs valued above USD40,000 to 75 per cent from 60 percent Notes: SME – Small and Medium Enterprises, R&D- Research and Development NATRiP – National Automotive Testing and R&D Infrastructure Project For updated information, please visit www.ibef.org GROWTH DRIVERS 21 AUGUST Automotives 2012
Boost to R&D in the auto components sector - NATRiP centres
Business Description
Vehicles Research & Development • Research, design, development and testing of vehicles Establishment (VRDE), Ahmednagar • Centre of excellence for photometry, electromagnetic compatibility (EMC) and test tracks
Indore — National Automotive Test • Complete testing facilities for all vehicle categories Tracks (NATRAX) • Centre of excellence for vehicle dynamics and tyre development
Automotive Research Association of • Services for all vehicle categories India (ARAI), Pune • Centre of excellence for power-train development and material
• Complete homologation services for all vehicle categories Chennai Centre, Tamil Nadu • Centre of excellence for infotronics, EMC and passive safety
• Services to agri-tractors, off-road vehicles and a driver training centre Rae Bareilly Centre • Centre of excellence for accident data analysis
International Centre for Automotive • Services to all vehicle categories Technology (iCAT), Manesar • Centre of excellence for component development, noise vibration and harshness (NVH) testing
• Research, design, development and testing of vehicles Silchar Centre, Assam • Centre of excellence for photometry, EMC and test tracks
For updated information, please visit www.ibef.org GROWTH DRIVERS 22 AUGUST Automotives 2012
Emergence of large automotive clusters in the country List of companies
• Ashok • Piaggio • Eicher • Tata Motors Leyland • Swaraj • Honda SIEL • Bajaj Auto North • Force Mazda • Maruti • Hero Group Motors • Amtek Auto Suzuki
Delhi–Gurgaon– Faridabad • Ashok • GM • Bharat Forge Nissan Leyland • M&M • Tata Motors • M&M West • Bajaj Auto • Eicher • Volkswagen Mumbai–Pune– • FIAT • Skoda • Renault- Nashik– Aurangabad
Kolkata– • Tata Motors Co • JMT Jamshedpur • Hindustan • International • Exide East Motors Auto • Simpson & Forgings
• Ashok Kirloskar • Hyundai • Renault- Leyland • Volvo • BMW Nissan Chennai– Bengaluru– South • Ford • Sundaram • Bosch Hosur • M&M Fasteners • TVS Motor • Toyota • Enfield Company
Source: ACMA, Aranca Research
For updated information, please visit www.ibef.org GROWTH DRIVERS 23 AUGUST Automotives 2012
Key automobile manufacturing plants across India NORTH: Delhi is a hub for light NORTH WEST: Rajasthan is vehicle manufacturing whereas a hub for majorly light Haryana and Uttarkhand are for vehicle manufacturing heavy vehicle manufacturing
EAST: Jamshedpur is the site of Tata’s heavy vehicle manufacturing WEST: Maharashtra, and Gujarat are bases for heavy and light vehicle manufacturing Heavy Vehicle Manufacturing Plant Light Vehicle Manufacturing Plant SOUTH: Chennai hosts manufacturing plans for heavy and light vehicles
Source: Aranca Research; Note: All figures as of 2011-12
For updated information, please visit www.ibef.org GROWTH DRIVERS 24 AUGUST Automotives 2012
Strong inflow of FDI into the automotives sector in India
→ Accumulated FDI inflows into the automotives sector over Apr 2000 – Feb 2012 was USD6.6 billion (4.1 per cent of total FDI); inflows (USD3.3 billion) in the last three fiscal (FY10 -12) accounted for 50 per cent of the above total
Top 5 origin countries for FDI (2000-2010) Country FDI (USD million) Share of total (%)
Delhi–Gurgaon– Japan 1155 25 Faridabad US 873 19 Italy 626 14
Ahmedabad Mauritius 373 8 Mumbai– Pune–Nashik– Sweden 369 8 Aurangabad Kolkata– Jamshedpur Top 5 destination cities for FDI (2000-2010) City FDI (USD million) Share of total (%) Mumbai 1609 34 Delhi 1416 30
Chennai– Bengaluru– Ahmedabad 497 11 Hosur Chennai 464 10 Bengaluru 238 5
Source: Department of Industrial Policy & Promotion (India); Aranca Research For updated information, please visit www.ibef.org GROWTH DRIVERS 25 AUGUST Automotives 2012
Increasing investments by global car manufacturers
→ Global car majors have been ramping up investments in India in order to meet growing domestic demand. They also have plans to leverage India’s competitive advantage to set up export-oriented production hubs
• Its Chennai plant has nearly doubled production to 250,000 cars
• The company has completed 80 per cent investment at Oragadam, a car plant near Chennai • Launched an automatic transmission variant in its petrol model of the sedan Fiesta • Laid foundation for USD1 billion plant at Sanand in March 2012
• Has increased its output annually for its Chennai plant to 11,000 units from 10,000units
• Plans to launch series of cars designed at its Bengaluru based centres
• Plans to invest USD167 million in the fourth unit in Karnataka in 2012
• Plans to invest another USD163 million at Bidadi plant near Bengaluru 80 • Plans to increase capacity to 310,000 units by 2013 with an investment of USD187 million
• Launched new version of the i20 premium model in both petrol and diesel variant
• Plans to invest USD89.6 million for a diesel engine plant in India which will be operational from 2013 Source: Respective company websites, news articles, Aranca Research For updated information, please visit www.ibef.org GROWTH DRIVERS 26 AUGUST Automotives 2012
Contents
Advantage India
Market overview and trends
Growth drivers
Success stories: Maruti, Tata Motors
Opportunities
Useful information
For updated information, please visit www.ibef.org
27 AUGUST Automotives 2012
Maruti Suzuki: Continuing strongly on its journey of success Expansion plans to produce 1.7 million cars by 2013 Continuing market 2012 leadership 55 per cent market share in Exports reached the Indian car 1 million units in Product portfolio market April 2012 expansion Product portfolio Increased comprising 16 2011 productivity passenger vehicle Roll out of 10 models millionth car Enhanced R&D In the process of capability establishing Suzuki’s largest R&D facility Capacity outside Japan expansion 1994 Production of 1 millionth car Roll out of peoples car (Maruti 800)
1983 1994 1997 2001 2004 2006 2007 2008 2009 2010 2011 2012
Source: Company website, Aranca Research
For updated information, please visit www.ibef.org SUCCESS STORIES: MARUTI, TATA MOTORS 28 AUGUST Automotives 2012
Tata Motors: Leading by innovation and global presence Tata Nano launched Introduction of Megapixel, Production of Acquired Disruptive Innovation JV with an electric 1st stake in Daimler AG vehicle indigenously Hipo designed LCV Carrocera Market expansion SA Launch of Launched company’s 1st Indica –India's Product portfolio indigenous CV expansion first fully Acquisition indigenous of Jaguar passenger car and Enhancing Landrover R&D capability
Tata Acquisitions Engineering & Locomotives established Joint Ventures
1945 1954 1961 1977 1982 1986 1991 1998 2005 2008 2010 2012
Source: Company website, Aranca Research
For updated information, please visit www.ibef.org SUCCESS STORIES: MARUTI, TATA MOTORS 29 AUGUST Automotives 2012
Contents
Advantage India
Market overview and trends
Growth drivers
Success stories: Maruti, Tata Motors
Opportunities
Useful information
For updated information, please visit www.ibef.org
30 AUGUST Automotives 2012
Opportunities
Opportunities for creating India is fast emerging as a sizeable market segments Small-car manufacturing hub global R&D hub through innovations
• Strong support from the • The world’s cheapest car • General Motors, Nissan, government; setting up of (Tata Nano) has directed Toyota have announced NATRiP centres focus towards the low- plans to make India their income market hub for new global small • Private players like car platforms Hyundai, Suzuki, GM are • Bajaj Auto, Hero Honda keen to set up their R&D and M&M jointly plan to • Light vehicle sales in India base in India develop a technology for are estimated to cross the 3 two-wheelers to run on million mark by end-2012 • Strong education base, natural gas large skilled English- • Strong export potential in speaking manpower • Electric cars are likely to ultra low cost cars segment be a sizeable market (to developing and • Comparative advantage in segment in the coming emerging markets) terms of cost as well decade
Notes: M&M – Mahindra & Mahindra
For updated information, please visit www.ibef.org OPPORTUNITIES 31 AUGUST Automotives 2012
Contents
Advantage India
Market overview and trends
Growth drivers
Success stories: Maruti, Tata Motors
Opportunities
Useful information
For updated information, please visit www.ibef.org
32 AUGUST Automotives 2012
Industry Associations
Society of Indian Automobile Manufacturers (SIAM) Core 4-B, 5th Floor, India Habitat Centre Lodhi Road, New Delhi –110 003 India Phone: 91 11 24647810–2 Fax: 91 11 24648222 E-mail: [email protected]
For updated information, please visit www.ibef.org USEFUL INFORMATION 33 AUGUST Automotives 2012
Glossary
→ 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
→ Conversion rate used: USD 1= INR48
→ Wherever applicable, numbers have been rounded off to the nearest whole number For updated information, please visit www.ibef.org USEFUL INFORMATION 34 AUGUST Automotives 2012
Disclaimer
India Brand Equity Foundation (IBEF) engaged Aranca to presentation to ensure that the information is accurate to prepare this presentation and the same has been the best of Aranca and IBEF’s knowledge and belief, the prepared by Aranca in consultation with IBEF. content is not to be construed in any manner whatsoever as a substitute for professional advice. All rights reserved. All copyright in this presentation and related works is solely and exclusively owned by IBEF. Aranca and IBEF neither recommend nor endorse any The same may not be reproduced, wholly or in part in specific products or services that may have been any material form (including photocopying or storing it in mentioned in this presentation and nor do they assume any medium by electronic means and whether or not any liability or responsibility for the outcome of decisions transiently or incidentally to some other use of this taken as a result of any reliance placed on this presentation), modified or in any manner communicated presentation. to any third party except with the written approval of IBEF. Neither Aranca nor IBEF shall be liable for any direct or indirect damages that may arise due to any act or This presentation is for information purposes only. While omission on the part of the user due to any reliance due care has been taken during the compilation of this placed or guidance taken from any portion of this presentation.
For updated information, please visit www.ibef.org DISCLAIMER 35