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July 2018

India Light Vehicle Sales Update

H1 2018 Sales Increase by 16% YoY

India’s Light Vehicle (LV) market registered a strong increase of 38% year-on-year (YoY) in June, on wholesales of 322k units. However, this expansion came over a low base in June 2017, when dealers refused deliveries in order to clear existing stocks to avoid paying higher taxes under the Goods and Services Tax (GST) regime that came into force in July.

Passenger Vehicle (PV) sales in the month accelerated by 38% YoY to 261k units, while demand for Light Commercial Vehicles (LCV) climbed by 39% YoY to 61k units.

On a seasonally adjusted annualized rate (SAAR) basis, sales weakened to 4.19 mn units in June, from a record high of 4.37 mn units in May and 4.27 mn units in April.

Overall LV sales in the first half of 2018 improved by 16% YoY to 2.02 mn units, split between 1.65 mn PVs (+13% YoY) and 373k LCVs (+28% YoY). This growth can also be partly attributed to a low base last year. Not only did the GST hurt volumes in the second quarter, but sales in the first quarter of 2017 were impacted by the negative effects of the government’s sudden demonetization drive in November 2016.

The industry is, nevertheless, performing well, now that the effects of both the demonetization drive and the GST implementation have dissipated. A buoyant economy, low interest rates and relatively low inflation, as well as two successive years of good monsoons lifting rural incomes, have also contributed to the improvement in sales so far this year.

We made a small increase of 28k units to the 2018 forecast only. We raised the PV estimate by 10k units and the LCV outlook by 18k units. We now forecast that LV sales will climb by 11% YoY to a record high of 4.08 mn units this year.

Our projections in subsequent years remain unchanged, with the 2025 forecast at 6.71 mn units. This equates to a compound annual growth rate (CAGR) of 7% over the next seven years.

In spite of the positive outlook, there are several downside risks. The darkening global outlook, weakening rupee, rising inflation, increasing interest rates and weak private investment are all immediate threats to the Indian economy and LV sales growth.

LV sales in the next couple of years will also be influenced by several key events and policy changes.

In 2019, election-driven spending will help to boost the economy and, in turn, the LV market. New safety regulations are scheduled to be implemented at mid-year, although we do not anticipate a major disruption to the market, since automakers should have prepared for these in advance.

In April 2020, India will move from the current BS IV (Bharat Stage IV, equivalent to Euro IV) emission norms to the stricter BS VI standards. Vehicle prices will inevitably increase, due to the new technology adopted to meet the more stringent regulations.

During the same period, there is also a plan to ban Commercial Vehicles (CVs) of 20 years and older. This means that CVs (i.e., Taxis, , Buses and three-wheelers) that were registered before 2000 will be automatically deregistered and banned from being on the road from 1 April 2020.

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India Light Vehicle Sales Update

While this policy change should boost replacement demand, it should be noted that it will coincide with the implementation of BS VI norms and the resultant higher vehicle prices. Whether this will pull ahead or delay the replacement of old LCVs is yet to be seen. In spite of these factors, we expect India to surpass Japan as the second-largest LV market in Asia (after China) in 2021. We should point out, however, that this assumption is based on a conservative forecast for the Japanese market, which has shown resilience of late. In other words, it is possible that India may not usurp Japan as the No. 2 Asian market until beyond 202

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India Light Vehicle Sales Update

Market Top Lines Best Selling Models

Jun Growth YTD Growth 2018 Growth Jun Growth Share YTD Growth Share Sales 357,144 39% 2,251,630 18% PV PV 260,525 38% 1,646,149 13% 3,333,115 9% Maruti-Suzuki Dzire 24,465 103% 9.4% 140,441 74% 8.5% LCV 61,429 39% 372,619 28% 746,238 22% Maruti-Suzuki Alto 18,070 22% 6.9% 123,390 1% 7.5% M&H CV 35,190 42% 232,862 39% Maruti-Suzuki Swift 18,171 84% 7.0% 111,098 20% 6.7%

Production 411,803 0% 2,673,783 15%  LCV PV 307,431 8% 2,019,039 9% 4,078,158 8% Tata Ace 13,266 73% 5.1% 78,661 72% 4.8% LCV 64,679 38% 396,320 31% 797,454 25% Maruti-Suzuki Omni 6,573 40% 2.5% 42,794 2% 2.6% M&H CV 39,693 41% 258,424 47% Maruti-Suzuki Eeco 5,612 24% 2.2% 40,358 19% 2.5%

Top Brands (Sales) Top Manufacturers (Production)

# Brand Jun Growth YTD Growth # Manufacturer Jun Growth YTD Growth

1 Maruti-Suzuki 93,780 39% 615,579 13% 1 India 97,388 2% 745,242 7% 2 Hyundai 45,371 21% 275,136 9% 2 Hyundai Group 61,321 11% 348,024 9% 3 Suzuki 28,071 72% 183,243 41% 3 Ford Group 22,438 -8% 140,903 0% 4 Mahindra 16,053 11% 118,705 8% 4 Suzuki Group 21,859 88% 139,834 111% 5 Tata 18,213 63% 111,029 47% 5 Mahindra 16,893 0% 130,618 13% 6 Honda 17,602 37% 82,671 -5% 6 Renault- 13,802 -38% 104,211 -26% 7 13,088 563% 75,992 24% 7 14,299 35% 86,907 13% 8 Ford 8,444 37% 52,447 15% 8 Toyota Kirloskar India 14,095 27% 79,238 6% 9 Renault 6,636 -3% 42,697 -25% 9 Honda India 16,740 42% 75,252 0% 10 Datsun 2,882 -15% 19,512 -2% 10 Volkswagen Group 11,061 -18% 55,890 -27% 11 Volkswagen 2,942 -24% 19,509 -17% 11 Tata-Fiat 6,914 1250% 47,641 808%

12 Jeep 1,569 1552% 11,790 1855% 12 General Motors Group 6,925 10% 41,786 -12% Passenger Vehicle Passenger Passenger Passenger Vehicle 13 Škoda 1,394 37% 8,185 8% 13 Škoda Auto 1,319 -4% 8,666 58% 14 Mercedes-Benz 1,174 -12% 8,061 12% 14 Daimler Group 1,030 -9% 7,017 19% 15 Nissan 628 -48% 4,963 -29% 15 BMW Group 729 11% 4,187 19% 16 BMW 863 9% 4,890 12% 16 268 96% 1,519 16% 17 Audi 637 9% 3,734 -7% 17 Auto 150 -1% 990 -9% 18 Force 166 19% 1,743 43% 18 Isuzu Motors Limited 42 -42% 517 112% 19 Land Rover 109 -32% 1,379 27% 19 Volvo Group India 77 N/A 392 N/A  20 Volvo 219 87% 1,242 33% 20 81 376% 205 -35% 1 Tata 21,677 47% 127,410 53% 1 Mahindra 22,707 41% 140,221 30% 2 Mahindra 19,334 29% 114,079 15% 2 Tata Motors 21,485 55% 122,500 48% 3 Maruti-Suzuki 13,811 47% 92,100 19% 3 Maruti Suzuki India 13,335 19% 95,482 18% 4 4,100 44% 23,167 44% 4 Ashok Leyland 4,650 53% 22,480 37% 5 Force 1,727 10% 10,911 1% 5 Force Motors 1,616 -8% 10,431 5% 6 Isuzu 279 26% 2,183 56% 6 Isuzu Motors Limited 397 35% 2,472 54%

7 Eicher 351 91% 1,833 70% 7 281 -19% 1,844 51% Commercial Vehicle Commercial Commercial Commercial Vehicle 8 Piaggio 150 -44% 936 -17% 8 Piaggio 208 -44% 890 -32% 9 10

1st August 2018

For further information contact Ms. Sukanya Tunhau, Phone +662 264 2050, [email protected] w ww.lm c-auto.c om Oxford ● Detroit ● Frankfurt ● Bangkok ● Shanghai ● São Paulo ● Tokyo 3

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