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  • INDIA BRAND EQUITY FOUNDATION

    www.ibef.org

    IBEF

    Neeraj.AryaText BoxIndia: Mecca of Small Car

  • ContEnts

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    Neeraj.AryaText Box1. INDIAN AUTOMOBILE: THE SUNSHINE SECTOR

    Neeraj.AryaText Box8. MANUFACTURING FACILITIES & THEIR FUTURE INVESTMENTS

    Neeraj.AryaText Box10. THE ROAD AHEAD

    Neeraj.AryaText Box2. INDIA: THE SMALL CAR HUB

    Neeraj.AryaText Box5.1 Indian auto component industry

    Neeraj.AryaText Box6.1 Tata Nano: A car for millions

    Neeraj.AryaText Box............................................................... 3

    Neeraj.AryaText Box................................................................................................. 3

    Neeraj.AryaText Box..................................... 6

    Neeraj.AryaText Box................................................................................................ 7

    Neeraj.AryaText Box..................................................................................................... 7

    Neeraj.AryaText Box.................................. 9

    Neeraj.AryaText Box................................................................................................................... 13

    Neeraj.AryaText Box3. MANUFACTURER AND EXPORTER OF SMALL CARS

    Neeraj.AryaText Box......................................................... 4

    Neeraj.AryaText Box4. INDIA ADVANTAGE

    Neeraj.AryaText Box.................................................................................................................... 5

    Neeraj.AryaText Box5. INDIA: AN ECOSYSTEM FOR AUTOMOBILE MANUFACTURING

    Neeraj.AryaText Box6. PIONEERS OF SMALL CARS

    Neeraj.AryaText Box............................................................................. 7

    Neeraj.AryaText Box7. GOVERNMENT POLICIES AND REFORMS

    Neeraj.AryaText Box9. NEW TECHNOLOGIES AND INITIATIVES

    Neeraj.AryaText Box............................................................................. 11

    Neeraj.AryaText Box11. REFERENCES

    Neeraj.AryaText Box...................................................................................................................... 14

    Neeraj.AryaText Box............................................................................. 8

  • ........................................................................................................................

    Neeraj.AryaText Box1. Indian Automobile: The sunshine sector

    Neeraj.AryaText BoxThe Indian automobile sector is the seventh largest in the world producing about 2.6 million cars of the world's 73 million cars produced. According to the Automotive Component Manufacturers Association of India (ACMA) and Society of Indian Automobile Manufacturers (SIAM) estimates, the car production is set to increase to 4 million by 2015 and to 9 million by 2020. The country is also the largest manufacturer of motorcycles and the fifth largest producer of commercial vehicles. In 2009, India became the fourth largest exporter of automobiles followed by Japan, South Korea and Thailand.

    Neeraj.AryaText BoxTraditionally, the Indian automobile market has been dominated by the two-wheeler segment, which accounted for almost 75 per cent of the automobile sales in the country. However, since 2005, the passenger car market (70 per cent of which comprises the small car segment) has boomed.

    Exhibit 1 shows the demand for passenger car segment to be 3.8 million in the next 10 years. Small car segment is expected to grow to 2.66 million by 2020.

    Neeraj.AryaText BoxIndia: Mecca of Small Car 3

    Neeraj.AryaText Box2. India: The small car hub

    Neeraj.AryaText BoxExhibit 1: Consumption of cars over the next 10 years In BRIC countries and the share of each country among the incremental consumption. Consumption forecasts for 2020 were arrived at assuming a Compound Annual Growth Rate (CAGR) of 14 per cent for India and 6 per cent each for China, Brazil and Russia, as estimated in a study by Ernst & Young. Source: Organisation Internationale des Constructeurs d'Automobiles (OICA) production statistics, Redseer Analysis

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    Neeraj.AryaText BoxConsumption Forecasts for 2020

    Neeraj.AryaText BoxCurrent consumption (in 2010)

    Neeraj.AryaText Box13.4

    Neeraj.AryaText Box2.1

    Neeraj.AryaText Box1.2

    Neeraj.AryaText Box1.0

    Neeraj.AryaText Box23.9

    Neeraj.AryaText Box2.8

    Neeraj.AryaText Box1.6

    Neeraj.AryaText Box3.8

    Neeraj.AryaText Box35

    Neeraj.AryaText Box30

    Neeraj.AryaText Box25

    Neeraj.AryaText Box20

    Neeraj.AryaText Box15

    Neeraj.AryaText Box10

    Neeraj.AryaText Box5

    Neeraj.AryaText Box0

    Neeraj.AryaText BoxMillions

    Neeraj.AryaText BoxChina

    Neeraj.AryaText BoxBrazil

    Neeraj.AryaText BoxRussia

    Neeraj.AryaText BoxIndia

    Neeraj.AryaText Box73%

    Neeraj.AryaText Box5%

    Neeraj.AryaText Box3%

    Neeraj.AryaText Box19%

  • ........................................................................................................................

    Neeraj.AryaText BoxIndia: Mecca of Small Car 4

    Neeraj.AryaText Box3. Manufacturer and exporter of small cars

    Neeraj.AryaText BoxThe export market of small cars in India is growing at a rapid pace of average Compound Annual Growth Rate (CAGR) of 33 per cent over the last five years. As per the IHS Global Insight Inc estimates, by 2016, India is set to topple Japan as the world's biggest small car producer, building as many as three million units. By 2013, 31 per cent of the world's small cars would be from India.

    Small cars manufactured in India are being exported to countries such as UK, Italy, Germany, Netherlands, South Africa, Latin American and other East Asian countries. The export market is, however, highly fragmented, with countries such as UK and Italy having 10 per cent share each and countries such as Netherlands, Germany and South Africa having 5 per cent share each. Singapore is fast rising as a big market where the demand for Indian cars has grown seven times over the last four years. Assuming an average growth rate of 40-50 per cent in small car export, by 2014, India will overtake Japan as the largestexporterof smallcars.

    Hyundai, the second largest automotive manufacturer in India, exports 50 per cent of its India production.

    Neeraj.AryaText BoxExhibit 2: Exports of small cars from India and Japan over the last 5 yearsFor years 2011-12 to 2013-14 small car exports were estimated by assuming a Compound Annual Growth Rate (CAGR) of 40 per cent -50 per cent for India, justified by the growing demand for Indian small cars worldwide, big investments in the small car industry by the foreign manufacturers. Japan`s Compound Annual Growth Rate (CAGR) is assumed as 5 per cent, justified by the increasing production costs and costlier small exports.

    Source: Society of Indian Automobile Manufacturers (SIAM) website, JAMA (Japan automobile manufacturers association), Redseer Analysis

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    Neeraj.AryaText Box0.14

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    Neeraj.AryaText Box0.42

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    Neeraj.AryaText Box0.66

    Neeraj.AryaText Box0.91

    Neeraj.AryaText Box1.26

    Neeraj.AryaText Box1.29

    Neeraj.AryaText Box1.47

    Neeraj.AryaText Box0.87

    Neeraj.AryaText Box0.88

    Neeraj.AryaText Box0.93

    Neeraj.AryaText Box0.98

    Neeraj.AryaText Box1.03

    Neeraj.AryaText Box2005-06 2007-08 2009-10 2010-11 2011-12 2012-13 2013-14

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    Neeraj.AryaText Box1.5

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    Neeraj.AryaText BoxIndia

    Neeraj.AryaText BoxJapan

    Neeraj.AryaText BoxMillions

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    Neeraj.AryaText BoxIndia: Mecca of Small Car 5

    Neeraj.AryaText Box4. India Advantage

    Neeraj.AryaText BoxWhat an Indian engineer promises to do with one, my engineer tells me we need five to complete - Carl Ghosn, Renault Nissan, CEO

    Neeraj.AryaRectangle

    Neeraj.AryaText BoxIndia is not just a low-cost production destination, but also a leader in engineering services. The Global CEO of Renault - Nissan, Carl Ghosn, quoted, What an Indian engineer promises to do with one, my engineer tells me we need five to complete, highlighting the innovation and cost advantage which Indian engineers are able to bring to the table.

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    Neeraj.AryaText BoxFactors

    Neeraj.AryaText BoxIndian Advantage

    Neeraj.AryaText BoxDemand for small cars

    Neeraj.AryaText BoxAs per McKinsey estimates, by 2025, the Indian middle-class is expected to grow from 50 million to 550 million. This, when combined with Indian middle-class propensity for low- cost fuel-efficient cars, the demand for small cars in India is all set to continue growing at a blistering pace.

    Neeraj.AryaLine

    Neeraj.AryaText BoxAdvantage Indian

    Neeraj.AryaText BoxLow cost production

    Neeraj.AryaText BoxRaw material costs (Steel) and labour costs in India are cheaper giving a cost advantage in production. As per the wage cost index, with South Korea normalised to 100, Indian hourly wage cost is just 18.7 in comparison to other BRIC countries like China (29.2.), Russia (53.3) and Brazil(65.8)