group 7 industry sector-automobile

8/8/2019 GROUP 7 INDUSTRY SECTOR-automobile

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INDIAN AUTOMOBILE

INDUSTRY 2010-a perspective

GROUP 7


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INDIANAUTOMOBILEINDUSTRY

Facts seventh largest in the world

Second Largest two wheeler

manufacturer in the world

Largest tractor and three wheeler

manufacturers in the world

Fourth largest Commercial vehicle

market in the world

Eleventh largest passenger car market

in the world

Asia's fourth largest exporter of

automobiles, behind Japan, South

Korea and Thailand.

Growth PotentialCan become Worlds fifth & third largestautomobile market by 2014 & 2030.

By 2016,Automotive sector can DOUBLEits percentage contribution to GDP fromcurrent levels of 5% (US$50 billion) to10% ($180 billion).

Trends Growth of exports of 32.8 % FY 08-09.

Output of commercial vehicles has

grown 2.8 times compared to the 2.2

times increase in passenger cars

For every passenger car turned out,

there are almost 7 two-wheelers

produced


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an annual production of over 2.6 million units in 2009.an annual production of over 2.6 million units in 2009. By 2050 : top the world in car volumes with approximately 611By 2050 : top the world in car volumes with approximately 611

million vehicles on themillion vehicles on the nation's roads.nation's roads.

The Indian auto components industry has grown more thanThe Indian auto components industry has grown more than

fivefold over the past decadefivefold over the past decade

TheThe NanoNano has demonstrated Indias worldhas demonstrated Indias world--class capabilities inclass capabilities inR&D, engineering and manufacturing as well as its ability toR&D, engineering and manufacturing as well as its ability to

innovateinnovate


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The Growth Journey

Pre 1983 1983-1993 1993-2007

Era of

globalisation and

evolution of India

as a global

manufacturing

hub

Closed market

Growth of market

limited by supply

Outdated models

Players

Hindustan

Motors

Premier

Telco

Ashok Leyland

Mahindra &

Mahindra

Japanisation - GOI-

Suzuki joint venture to

form Maruti Udyog

Joint ventures withcompanies in

commercial vehicles

and components

Players

Maruti Udyog

Hindustan Motors

Premier

Telco

Ashok Leyland

Mahindra &

Mahindra

Delicensing of

sector in 1993

Global majorOEMs

start assembly inIndia (Toyota, GM,

Ford, Honda,

Hyundai)

Imports allowed

fromApril 2001;

alignment of duty on

components and

parts toASEANlevels

Implementation of

VAT


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Indias positionasamarketandasa

producer

reduction in capital

expenditure by foreign

car makers in emerging

marketsgovernments around

the globe have laid

stressed upon

environment-friendly

vehicle incentivizing for

both customers and

manufacturers

expected to be more

resilient

China, Japan and the

United States : produce

over 10 million cars per

year

US : significant netimporter of cars, owing to

the higher cost of

domestically

manufactured products.

Germany, India and SouthKorea : 4 million to 7

million units per year

Of these, only India is

forecast to continue to

grow significantly.

Impact ofeconomicdownturn


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Example of a column chart (2)


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DEMANDDRIVERS

9


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Key Growth Drivers


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Automotive Companies in India

MajorMulti-national companiesMajor Indian Companies


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Autoinvestments and their spread :Large no.

ofIndian & Global OEMs across the country

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Commercial

vehicles

TATAMotors, Ashok Leyland, Swaraj Mazda,Mahindra & Mahindra

,Force motors, EicherMotors

Passenger

vehicle

TATAMotors, Maruti Udyog, Honda Motors, Toyata, Skoda,

Mahindra & Mahindra, Daimler Chrysler, Hindustan Motors

Two Wheeler Hero Honda, BajajAuto, Honda Motors, TVSMotors, Yamaha ,

Kinetic Motors

Three

Wheeler

BajajAuto, Piaggio India

Bajaj Auto,

24.4%

TVS Motors,

17.7%

Yamaha,

3.8%

Others, 5.8%

Honda

Motors, 8.5%

Hero Honda,

39.8%

Maruti,

Hyundai,

TataMotors,

Honda,

Others,


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Auto Industry Numbers

Overall MarketOverall Market

Overall Productionincreased from 10.85 million vehiclesin 2007Overall Productionincreased from 10.85 million vehiclesin 2007--08 to 11.17 million08 to 11.17 millionvehiclesin 2008vehiclesin 2008--0909

Passenger vehiclesincreased marginally from 1.77 millionto 1.83 millionPassenger vehiclesincreased marginally from 1.77 millionto 1.83 million

TwoTwo--wheelersincreased from 8.02 millionto 8.41 millionwheelersincreased from 8.02 millionto 8.41 million

Domestic MarketDomestic Market

Vehiclessoldincluding PV,CV 2W and 3W in 2008Vehiclessoldincluding PV,CV 2W and 3W in 2008--09 was 9.72 millionascomparedto09 was 9.72 millionascomparedto9.65 millionin 20079.65 millionin 2007--08.08.

ExportsExportsSalesincreased from 1.23mnunitsin 2007Salesincreased from 1.23mnunitsin 2007--08 to 1.53 millionunitsin 200808 to 1.53 millionunitsin 2008--0909

As perthe Automotive Mission Plan (AMP) 2006As perthe Automotive Mission Plan (AMP) 2006--2016 totalturnover oftheautomotive2016 totalturnover oftheautomotiveindustryinIndia would beinthe order of US$ 122 billionindustryinIndia would beinthe order of US$ 122 billion--159 billionin 2016159 billionin 2016


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Category wise numbers

Two Wheeler

Passenger Vehicles

Commercial Vehicles

Three Wheeler

Dominated by Motorcycles 80% , Scooters 14% Mopeds 6%Domestic - 7.25mnunits . Hero Honda 42% & Bajaj 27%share CAGR 9.5%

Exports 819000 units (07-08) . Bajaj Auto 59% TVS 17% shareCAGR 41%

Dominated by Cars 78% , MUV/SUV 22%Domestic 1.5mnunits Maruti-46% Tata-15% Hyundai 14%CAGR -14.8%

Exports - 217000 units (07-08) Maruti 66% Hyundai 24%CAGR 26%

Dominated by M&HCV Goods 48% Passenger 38% , Rest byLCV-4%Domestic 487 thousandunits , Tata-62% Ashok Leyland -15%CAGR- 22%

Exports 59 thousandunits, Tata 67% Ashok Leyland 12%CAGR -30.6%

Dominated by Passenger Carriers with 64% share , Goods Carrier -36%

Domestic 365 thousandunits , Bajaj -42% Piaggio-41% CAGR-10.5%

Export 141 thousandunits , Bajaj -97% CAGR -44.5%


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PASSENGER VEHICLES

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The production of PVs in India

has grown more than threefold

over the last decade

India is primarily a small-car

market, with more than 75% of

total volume being small cars

According to estimates, by2014 India is expected to

become the sixth-largest PV

market and fifth-largest PV

producer in the world


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Increasing penetration of CNG

Driven by the large price

differential between gasoline andCNG

introduction of CNG variants, there

has been an increase in the number

of CNG vehicles growing at a CAGR

of 60% in the last two years

The companies that are most flexible will be

the most successful in riding out the current

economic slowdown.Ajay Seth

Chief Financial Officer, Maruti Suzuki India

Limited

Innovative capabilities

The launch of the Tata Nano (a

US$2,250 car) is set to

revolutionize the industry, not justin India but internationally, by

creating a new ULCC segment.


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COMMERCIAL VEHICLES

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India is the fourth-largest CV

market in the world

Presently, commercial vehicles

account for more than 60% of

the total freight movement in

the country

The Indian CV industry is

dominated by domestic players,

with more than 90% of the total

segment being held between

Tata Motors, Ashok Leyland,

M&M and Eicher Motors

Increasing economic activity,

especially the infrastructure,

construction and mining

activities, has been the principal

growth drivers


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Fiscal 2010 may be a tough year

for CVs given a strong correlation

of CV sales with level of economic

activity.

Exports per se will be under

severe pressure due to the

slowdown in global markets, which

is not expected to recover in the

short term.

LCVs are expected to outperformM&HCV in both domestic and

export markets.


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2- WHEELERS

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The countrys two-wheeler industry is the second-largest in the world

after Chinas

Indian market leader Hero Honda is the worlds largest two-wheeler

company

Driven by rural demand, low dependence on financing, new product

launches and lower interest rates, two-wheelers have been able to better

handle the downturn


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Considering the demographics

and income levels in the

country, the purchase of

twowheelers for regular

mobility is very high, thus the

domestic potential needs no

reaffirmation.

We believe that focusing on

rural potential will pay

dividends for the domestic

market and the export volumegrowth should remain intact.


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3- WHEELERS

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important role in the last-

mile connectivity

The existence of a largenumber of small-scale

businesses promises a

sustained demand in the

domestic market.

Very little has been done in

terms of product innovation,and manufacturers will

have to focus on it.

this segment will face

competition from SCVs in the

commercial space.


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EXPECTED


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The IndianAuto Components

MarketOriginal Equipment Manufacturers (OEMs)Original Equipment Manufacturers (OEMs)

Replacement Parts Production and Distribution : e.g.Replacement Parts Production and Distribution : e.g.

Air filters, oil filers and replacement lightsAir filters, oil filers and replacement lights

Rubber Fabrication :Rubber Fabrication : tyrestyres, hoses, belts etc., hoses, belts etc.

Estimated componentEstimated component market sizemarket size isis US$ 6.7US$ 6.7 bnbn

The exports of auto components industry has grown atThe exports of auto components industry has grown ata rate of nearly 30 per cent CAGR over the last foura rate of nearly 30 per cent CAGR over the last four

years.years.


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AUTOFINANCING

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There are more than 35financers in the market today,

with the SBI being the leader

Easy availability of finance has

been one of the most important

growth driver for the auto

industry from FY03 to FY10

FY09


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India : MANUFACTURING Hub

..


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Acquisitions inAutomotive space

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The domestic automotive

sector recorded a deal value

of US$3.2 billion in 2008 .

More deals were reportedly

done with an objective of

expansion in the globalmarkets than for acquiring

technical know-how

The downturn in the

automotive industry has had

an impact on the global

automotive M&A dealvalues as well; Global M&A

activity fell by over 40% in

2008 to US$27 billion, with

component supplier deal

activity down by over 60%


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India as an emerging R&D

destination

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Over the past four years, thecumulative R&D expense of 10

major players across segments has

increased at a CAGR of 47%, from

INR4.3 billion in FY04 to INR20

billion in FY08

Maruti Suzuki is planning to setup an R&D center in India of equal

size and capability as the R&D

center of its parent Suzuki Motor

Corporation in Japan


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Vehicle Retailing in India

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Retail is going to play a more important role as competition shiftstoward differentiated customer experience.

Significant investments will be made as players expand their distribution

network in the short term to meet their growth plans.

Urban markets are getting saturated and expensive, and this will propel

a shift toward rural areas and new retail models.

Emergence and viability of multibrand formats in vehicle servicing needto be tested.


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Marutis Competition


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Market Expansion Strategies: Schemes


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Rivalry Within

Industry

(High)

PORTERS FIVE FORCES

Potential New

Entrants (Moderate)

Buyers

Bargaining

Power

(High)

Firms Offering

Substitutes

(Moderate)

Suppliers

Bargainin

gPower

(Moderat

e)


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THREATS

Business Risks

Rising Fuel Prices

Threat from Competitors

Foreign companies entering market so a bigger threat fromMNC

Market share in danger.

Hardly any diesel models.

Tata Nano

Threats from Chinese manufacturers


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India will be a Automotive hub, led by small cars and auto component domains

Export of automotive components to ASEAN,BRIC,EU and USA for OEMs as well asAftermarket

Booming Automobiles (Particularly cars) second sales and remodeling

Increased deployment of IT-enabled Automobile support systems like GPS,ABS,ASRand Safety systems.

Quality Certification (Deming, Six Sigma,TQM,TS16949) amongst suppliers haveattained critical mass and the entire market will follow to get quality certifications.

Will be a hub for optimal cost, high quality vehicular testing and terrain dataacquisition services

Alternate fuel (Bio fuel, electricity) and environment friendly green engines (Bharatemission norms)

Break through future trends


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Favorable Demographics

Improving income curve

Reducing interest rates

Cost Pressure

High Expectations

Inadequate Infrastructure Development

KEY CHALLENGESKEY ENABLERS

Key Focus Areas

Product development( includes collaboration, new products

developed)

Vendor base (quality of vendors, skill levels , size etc.) Manufacturing capability( quality levels, productivity & skill levels,

technology )

Service levels

Supply chain

Labor law

Leverage IT

Key Features of Future Auto Policy

ForeignDirect Investment

Importtariff

Incentivesfor Research and Development (R&D)

EnvironmentalAspects Other measures


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References

www.acmainfo.comwww.acmainfo.com

www.wikipedia.orgwww.wikipedia.org

www.siamindia.comwww.siamindia.com

www.ibef.orgwww.ibef.org

Ernst & Young Auto TrackErnst & Young Auto Trackwww.economywatch.comwww.economywatch.com

www.businesswww.business--standard.comstandard.com

The Economic TimesThe Economic Times

Hindu Business LineHindu Business Line

www.automobileindia.comwww.automobileindia.com

automobiles.mapsofindia.comautomobiles.mapsofindia.com

www.livemint.comwww.livemint.com


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