Analysis of Macro-environmental factors for Automobile Industry

Automobile: An automobile or motor car is a wheeled motor vehicle for transporti ng passengers; which also carries its own engine or motor. History: Introduced to India in the late 1890s and the manufacturing industry only took off after independence in 1947. The protectionist economic policies of the government gave rise in the 1950 s to the Hindustan Motors Ambassador. Hindustan Motors and a few smaller manufacturers such as Premier Automobiles, Tata Motors, Bajaj Auto, Ashok and Standard Motors held an oligopoly until India s initial e conomic opening in the 1980 s. The maverick Indian politician Sanjay Gandhi champ ioned the need for a "people s car"; the project was realized after his death wi th the launch of a state-owned firm Maruti Udyog which quickly gained over 50% m arket share. Tata Motors exported buses and trucks to niche markets in the develo ping world.

AUTOMOBILE 2 WHEELER 3 WHEELER PASSENGER VEHICLE COMMERCIAL VEHICLE L.C.V. I.C.V. H.C.V. MOTORCYCLE SCOOTERS SCOOTERETTES MOPEDS

Overview of Automobile Industry The industry has grown at over CAGR of 14% p.a over the last 5 years. In the yea r 2006-07, sales (domestic as well as exports) of the Indian automotive industry crossed the historic landmark of 10 million units. With the potential to emerge as one of the largest in the world. Presently, Indi a is 2nd largest two wheeler market in the world 13th largest commercial vehicle market in the world 11th largest passenger car market in the world and is expec ted to be the 7th largest market by 2016 . The industry has emerged as a key contributor to the Indian economy. The Indian automotive industry is highly competitive with a number of global and Indian companies present in the market.

Automotive sales for 2002-07 Sales(Million units) 2007 2006 2005 2004 2003 2002 0 5 11.12 Two Wheelers 8,476,686 Sales in units (2006-07) Share in Total Sales 76.2% CAGR (200207) 14.5% 9.71 8.53 7.29 6.25 5.41 10 15 Commercial Vehicles 517,648 4.7% 26.7% Passenger Cars Three-Wheelers 1,578,176 14.2% 16.7% 547,805 4.9% 20.5%

Automotive clusters in India Major automotive clusters - Mumbai-PuneNasik-Aurangabad (West), Chennai Bangalor e-Hosur (South) and Delhi-GurgaonFaridabad (North) Delhi-Gurgaon-NoidaGhaziabad Ludhiana Haridwar North / Central Ashok Leyland Force Motors Hindustan Motors Honda SIEL Kinetic Majestic Piaggio Swaraj Mazda Eicher Hero Honda Honda ICML LML Maruti Suzuki Yamaha Tata Motors South Ashok Leyland Enfield Ford Greaves Hindustan Motors Hyundai M&M Tata Toyota Kirl oskar TVS Motors Volvo Pitampur Jamshedpur Rajkot-Halol Kolkata East Mumbai-Pune-Nasik Aurangabad Hyderabad West Ashok Leyland Bajaj Auto DaimlerChrysler FIAT Force Motors GM Greaves Kinetic M& M Premier Skoda Tata Motors Hindustan Motors Tata Motors Chennai Bangalore Hosur Source: SIAM, IMaCS analysis

Overview of Passenger Vehicles Market Indian Passenger vehicle Industry has grown with CAGR of 15.5% from FY2001-02 to FY2006-07. Significant increase in competition due to entry of global players. Sh rinking of mini car segment, and increasing share of compact cars in Indian mark et. Impressive growth of executive segment(D), with CAGR of 112% from FY 2001-02 to FY2006-07 Indian Passenger vehicle industry is undergoing significant market d ispersion. Emergence of India as Global manufacturing base for mini and compact cars. Exports from passenger vehicle segment has grown significantly, with a CAG R of 30% from FY2001-02 to FY2006-07.

Domestic Passenger Vehicle Industry Sales 2007 1379.1 Break-up of the Industry by Segment for 2007 1143.1 2006 2005 1061.3 000 units 22% Passenger Cars, 78% SUVs/MUVs, 22% 2004 902.1 2003 707.2 78% 2002 675.1 0 500 1000 1500

Segment-wise Analysis of Passenger Vehicle Market Segment Description Share in 2001-02 28% 54% 17% 0.2% 0.9% 0.0% Share in 2006-07 7% 70% 18% 3.8% 1.18% 0.02% CAGR A B C D E F Mini cars, up to 3400 mm length Compact cars, between 3401-4000 mm length Mid si ze cars between 4001-4500 mm length Executive cars between 4501 - 4700 mm length Premium cars between 4701 - 5000 mm length Luxury cars - above 5001 mm length -11% 22% 18.6% 112% 31.1% NA

Segment A Market share of Key Players in 2006-07 Maruti Udyog Ltd. TATA Motors L td. Hyundai Motor India Ltd. Mahindra & Mahindra Ltd. Totyota Others 46% 16% 14% 7% 4% F 13% SUV D B C Key Brands and Companies to which they Belong Maruti 800. Alto, Wagon-R, Swift (MSuzuki), Indica (Tata) Santro, Getz (Hyundai ), Palio (Fiat India) Esteem, SX4 (MSuzuki) TATA Indigo, Verna, Elantra (Hyundai ), Honda City, Astra, Aveo, Optra (GM), Logan (M&M), Icon, Fiesta (Ford ), Cedi a (HM), Petra (Fiat India) Civic (Honda), Opel Vectra (GM), Contessa (HM), Skoda Octavia, Mercedes C-class (Daimler Chrysler India) Sonata (Hyundai Motors),Hond a Accord ,Corolla, Camry (Toyota Kirloskar), Mondeo, Superb (Skoda Auto), Merced es E-class, 5 series (BMW India) Mercedes S-class, Maybach (DaimlerChrysler), BM W 7 Series Grand Vitara (MSuzuki),Safari (Tata), Tucsan (Hyundai Motors), CRV (H onda), Scorpio, C-fusion, Endeavour (Ford), Omni, Versa (MSuzuki), Sumo, Indigo Marina (Tata), Innova,Tavera, Bolero (M&M) E MUV

Indian Passenger Vehicle Market Competitive Scenario Passenger Cars Utility Vehicles Multi Purpose Vehicles 46% 2% 40% 16% 18% 14% 1% 7% 42% 4% 21% 1% 10% 1% <1% 4% % 4th largest Passenger Vehicle Market in World

Overview of Two-wheeler and CVs Market The total sales of the Indian two wheeler industry has grown at a CAGR of 14.5 p er cent between FY2001-02 and FY2006-07. The motorcycles market had witnessed the fastest growth rate in the two wheeler segment, with a CAGR of 19.2%. Indian Two -wheeler market is characterized with intense competition with around 10 major p layers. Exports from two-wheeler industry has increased with a CAGR of 42.8%, fr om FY200102 to FY2006-07. The total sales of the Indian Commercial vehicles indust ry has grown at a CAGR of 26.1% between FY2001-02 and FY2006-07. With increased in dustrial production and investments in real estate CVs market has witnessed good growth. CV exports has grown from 12000 units in FY2001-02 to 50,000 units in FY2 00607, showing a CAGR of 33.2%.

Segment-wise Analysis of Indian Two Wheeler Market Segment A1 A2 A3 B2 B3 B4 C1 Description Scooter with engine capacity less than 75 cc Scooter with engine Capacity ,75-12 5 cc Scooter with engine capacity between 125-250 cc Motorcycle with engine capa city between 75-125 cc Motorcycle with engine capacity between 125-250 cc Motorc ycle with engine capacity above 250 cc Mopeds Share in 2001-02 5% 5% 12% 62% 5% 1% 10% Share in 2006-07 0% 10% 1% 66% 17% 1% 5% CAGR -33.9% 32.9% -27.7% 14.9% 44.8% 5.7% -2.7%

Segment-wise Analysis of Indian CVs Market Description (by Gross Vehicle Weight) Share in 2001-02 Share in 2006-07 CAGR 51.9% Up to 3.5 tonnes (Pickups) 5 - 7.5 tonnes (LCV) 15% 36% 25% 9% 5.1% 7.5 12 tonnes (Intermediate CV) 12 16 tonnes( 4X2 FF/SF) 16 25 tonnes (Multi Axl es) 25 tonnes and above (Tractor Trailers) 7% 9% 33.4% 29% 17% 14.6% 8% 21% 55.9% 8% 21% 9.7%

Market share of key players in 2006-07 Market Share of key Players in Twowheeler Industry Hero Honda Bajaj Motors TVS M otor co. HMSIL Others 42% 27% 19% 9% 3% of Key Market ShareIndustryPlayerskey Ma rket Share of in CVs Players in Two-wheeler TATA Motors 64% Industry Ashok Leyla nd M&M Ltd. Eicher Motors Ltd. Others 16% 10% 6% 4%

Indian 2-Wheeler Market Competitive Scenario Motorcycle 42% 27% 15% 19% 28% 82% 2% 46% 9% <1% 8% 10% India is now the second largest two-wheeler market in the world

Economic Environment The Indian economy has grown at 8.5 per cent per annum. The manufacturing secto has grown at 810 per cent per annum in the last few years. More than 90 per cent of the CV purchase is on credit. Finance availability to CV buyers has grown in scope during the last few years. The increased enforcement of overloading restr ictions has also contributed to an increase in the number of CVs plying on India n roads. Several Indian firms have partnered with global players. While some hav e formed joint ventures with equity participation, others have entered into tech nology tie-ups. Establishment of India as a Manufacturing hub, for mini, compact cars, OEMs, and for auto components.

Key Market Drivers Increasing disposable incomes Rising aspirational levels Low interest rates. Wid e variety and easy availability of Financing options. High sensitivity to Fuel p rices Lack of urban & rural public transportation infrastructure Flourishing Ser vice Sector Key Trends Market evolution from Mini cars to Hatchbacks to Compact Sedans now evident Increasing customer emphasis on aesthetics and comfort. Shrinking product life-cycles

Indian Automotive Industry Development and Growth Pre 1983 Closed market Growth of market limited by supply Outdated models 1983-1 993 Suzuki, Japan and GOI joint venture to form Maruti Udyog Joint ventures with companies in commercial vehicles and components 1993-2007 Delicencing of the se ctor in 1993 Global major OEMs start assembly in India (GM, Ford, Honda, Hyundai , etc.) Imports allowed from April 2001; alignment of duty on components and par ts to ASEAN levels. Easy auto finances. Implementation of VAT. Players Entry of Global players Players Hindustan Motors Premier Telco Ashok Leyland Mahindra & Mahindra

Players Maruti Udyog Hindustan Motors Premier Telco Ashok Leyland Mahindra & Ma indra

Current Political Environment Indian government auto policy aimed at promoting an integrated, phased and cond cive growth of the Indian automotive industry. Allowing automatic approval for f oreign equity investment up to 100 per cent, with no minimum investment criteria . Establish an international hub for manufacturing small, affordable passenger c ars as well as tractors and two wheelers. Ensure a balanced transition to open t rade at minimal risk to the Indian economy and local industry. Assist developmen t of vehicles propelled by alternate energy sources. Laying emphasis on R&D acti vities carried out by companies in India by giving a weighted tax deduction of u p to 150 per cent for in-house research and R&D activities. Plan to have a termi nal life policy for CV along with incentives for replacement for such vehicles. Promoting multi-modal transportation and the implementation of mass rapid transp ort systems.

Social Environment Growth in urbanization, 4th largest economy by PPP index. Upward migratio usehold income levels. Increase in PPP , led to the increase in market share of compact cars. 85% of Cars are financed in India (15% in China). Cars priced belo w USD 12000 account for nearly 80% of the market. Vehicles priced between USD 70 00 12000 form the largest segment in the passenger car market. Indian customers a re highly discerning, educated and well informed. They are price sensitive and p ut a lot of emphasis on value for money. Preference for small and compact cars. They are socially acceptable, even amongst the well-off. Preference for fuel eff icient cars with low running costs. The Tata Indica has the lowest running cost at US 8.5 cents per mile.

Technological Environment With the entry of global companies into the indian market, advanced technologies ,both in product and production processes have developed. With the development or evolution of alternate fuels, hybrid cars have made entry into the market. Fe w global companies have setup their R&D centres in India. Major global players l ike audi, BMW,Hyundai etc have setup their manufacturing units in India. Governm ent initiatives regarding tax rebates has led to global players setting up their R&D centres in India. Govt. initiatives in establishing NATRIP network across t he country will further lead to enhancing R&D and technological advancements.

NATRIP Network New testing center for tractors & off-road vehicles, accident data analysis and specialised driving training at RAE BAREILLY Hill Area driving training center a nd Regional In-Use vehicle management center at SILCHAR New testing & homologation center at MANESAR Up-gradation of VRDE at AHMEDNAGAR New complete proving ground at INDORE Up-gradation of ARAI at PUNE New test & homologation center near CHENNAI

Environmental Scenario Automotive regulations in India Status of Indian Regulation Fully / Partially aligned In process of being aligned Items / Regulations to be covered Total Number of regulations 43 32 39 114

Emission Compliance Emission Standards Status Cars Bharat Stage II Already introduced in Metros:MiniMetros, from Sept, 2003 Two Wheelers From April 1, 2005 Entire Country C Vs Already introduced in Metros, MiniMetros . Bharat Stage III From April 1, 2005 From April 1, 2008 From April 1, 2005 Bharat Stage IV From April 1, 2010 From April1, 2008 From April 1, 2010

Growth Forecasts as per Automotive Mission Plan The size of the Indian automotive industry is expected to grow at a rate of 13% per annum over the next decade to reach around 31.96 Mn in 2016 from 11Mn in 200 7. The total investments required to support the estimated growth are around US$ 120-159 billion by 2016. Vehicle Type Two wheelers Passenger vehicles Three whe elers CV Total Number sold (in million units) 27.80 2.65 0.87 0.64 31.96

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