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Automotives

MARCH

2013

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Automotives

MARCH

2013

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

Automotives
Advantage India

MARCH

2013

FY16E

Growing demand

Innovation opportunities

Strong demand growth due to rising incomes, growing middle class, and a young population is likely to propel India among the worlds top five auto producers by 2015 Growth in export demand is also set to accelerate

Tata Nano and the upcoming Pixel have opened up the potentially large ultra low cost car segment Innovation is likely to intensify among engine technology and alternative fuels

Market size: USD145 billion

Advantage India
Rising investments

Policy support

India has significant cost advantages; auto firms save 10-25 per cent on operations in India compared to Europe and Latin America A large pool of skilled manpower and a growing technology base will induce greater investments

The government aims to develop India as a global manufacturing as well as R&D hub There has been a wide array of policy support in the form of sops, taxes and FDI encouragement

FY10
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 governments Automotive Mission Plan (2006 - 2016)
ADVANTAGE INDIA

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Automotives

MARCH

2013

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

Automotives

MARCH

2013

Evolution of the Indian automotives sector

20.4 million units (2012) 11 million units (2007) 2008 onwards 0.6 million units (1992) 1983-1992 0.4 million units (1982) Before 1982 Joint venture (JV) -Indian government and Suzuki to form Maruti Udyog; started production in 1983 Component manufacturers also entered via JV route Buyers market 1993-2007 More than 35 players in the market Removal of most import controls Indian companies gaining global identity Setting up of National Automotive Board to act as facilitator between government and the industry

Sector de-licensed in 1993 Major original equipment manufacturers (OEMs) started assembly in India Imports allowed from April 2001 Introduction of value added tax in 2005

Closed market
Only 5 players Long waiting periods and outdated models Sellers market

Source: Tata Motors, Society of Indian Automobile Manufacturers


(SIAM), Aranca Research, Notes: JV - Joint Venture

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MARKET OVERVIEW AND TRENDS

Automotives

MARCH

2013

The automotives market is split into four segments


Automobiles

Two-wheelers

Passenger vehicles

Commercial vehicles

Three-wheelers

Mopeds

Passenger cars

Light commercial vehicles

Passenger carriers

Scooters

Utility vehicles

Motorcycles

Medium and heavy commercial vehicles

Goods carriers

Multi-purpose vehicles

Electric twowheelers

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MARKET OVERVIEW AND TRENDS

Automotives

MARCH

2013

Revenues have been growing at a strong pace

Gross turnover of automobile manufacturers in India expanded at a CAGR of 17.7 per cent over FY07-11 Excluding three wheelers, trucks account for the largest share of revenues (47.8 percent in 2011)
Revenue trends over the past few years in USD million Market* break-up by revenues (2011)

58.6 20.4% 43.3 36.6 30.5 33.3 47.8% Cars Trucks

Two Wheelers 31.8%

FY07

FY08

FY09

FY10

FY11

Source: SIAM, Datamonitor, Aranca Research


Note: * - does not include three wheelers

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MARKET OVERVIEW AND TRENDS

Automotives

MARCH

2013

Sectors growing strength evident from rise in total production figures

Automobiles production increased at a CAGR of 13.2 per cent over FY05-12 Passenger vehicles was the fastest growing segment during that period with a CAGR of 14.5 per cent

Total production of automobiles in India (million units)


15.5 13.4

10.5
Notes: CAGR - Compound annual growth rate 6.5 7.6

8.5 8.0

8.4

1.8

1.3 0.5 0.6

1.6 0.6 0.5

1.3 0.4 0.4

2.4

0.8 0.8 FY11

3.0

1.2 0.4 0.4

FY05

FY06

FY07

FY08

FY09

0.4 0.5

FY10

0.6 0.6

FY12 Two Wheelers

Passenger Vehicle

Commercial Vehicle

Three Wheelers

Source: SIAM, Aranca Research

0.8 0.8

3.1

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MARKET OVERVIEW AND TRENDS

Automotives

MARCH

2013

Market break-up by production volume

Two wheelers dominate production volumes; in FY12, the segment accounted for more than three quarters of total automotives production in the country In fact, India is the worlds second largest two wheeler producer; the country is also the fourth largest commercial vehicle producer
15%

Market share by volume (FY12)

5% 3% Two Wheelers

Passenger Vehicle Commercial Vehicle 77% Three Wheelers

Source: SIAM, Aranca Research

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MARKET OVERVIEW AND TRENDS

Automotives

MARCH

2013

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%
Passenger cars

8.1%

MCV & HCV Passenger Carriers 36.0% MCV & HCV Goods Carriers LCV Passenger Carriers

Utility vehicles/multipur pose vehicles 88.5%

49.7% 6.1% LCV Goods Carriers

Source: SIAM, Aranca Research Notes: LCV - Light commercial vehicle; MCV - Medium commercial vehicle; HCV - Heavy commercial vehicle

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MARKET OVERVIEW AND TRENDS

10

Automotives

MARCH

2013

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)

15.8% Goods carriers

15.6%

5.3% Mopeds

Motorcycles Passenger carriers Scooters 84.2%

79.1%

Source: SIAM, Aranca Research

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MARKET OVERVIEW AND TRENDS

11

Automotives

MARCH

2013

Exports have also grown strongly (1/2)

Automobiles export volumes increased at a CAGR of 22.4 per cent over FY05 FY12 Over this period, the fastest growth was in the two wheeler segment (25.8 per cent) followed by three wheelers (21.9 per cent)

Exports of automobiles from India (million units)


2 1.8 1.6 1.4 1.2 1 0.8 0.6 0.4 0.2 0
2.0 1.5 1.1 1.0

0.8
0.5 0.5 0.3 0.04 0.2 0.08 0.3 0.4 0.5 0.2 0.04 0.1 0.4 0.6 0.2 0.05 0.1 0.2 0.06 0.1 0.5

0.2 0.03 0.1

0.04 0.2

FY05

FY06

FY07

FY08

FY09

FY10

FY11

FY12

Passenger Vehicle

Commercial Vehicle

Three Wheelers

Two Wheelers

Source: SIAM, Aranca Research

0.1

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MARKET OVERVIEW AND TRENDS

12

Automotives

MARCH

2013

Exports have also grown strongly (2/2)

Two wheelers accounted for the largest share in exports (by volume) at 67 per cent in FY12 Passenger vehicles account for a sizeable 18 per cent of overall exports

Exports shares by volume (FY12)

18%

Passenger Vehicle

3% 12% 67%

Commercial Vehicle Three Wheelers

Two Wheelers

Source: SIAM, Aranca Research

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MARKET OVERVIEW AND TRENDS

13

Automotives

MARCH

2013

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
45% 16% 15% 7%

Passenger Vehicles
MCVs & HCVs LCVs Three Wheelers Motorcycles Scooters

63%

23%

7%

59%

30%

4%

4%

41%

40%

10%

59%

24%

7%

6%

51%

21%

14%

10%
Source: SIAM, Aranca Research Notes: Data is for FY10

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MARKET OVERVIEW AND TRENDS

14

Automotives

MARCH

2013

Notable trends in the Indian automotives sector

Large number of products available to consumers across various segments; this has

New product launches

gathered pace with the entry of a number of foreign players


Reduced overall product lifecycle have forced players to employ quick product launches

Improving product development capabilities

Increasing R&D investments from both the government and the private sector
Private sector innovation has been a key determinant of growth in the sector; 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

Alternative fuels

taxis are expected to register a CAGR of 28 per cent over FY11-FY14


The CNG distribution network in India is expected to increase to 250 cities by 2018

from 30 cities in 2009

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MARKET OVERVIEW AND TRENDS

15

Automotives

MARCH

2013

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

Automotives

MARCH

2013

Sector has been benefitting from strong demand and product innovation

Growing demand demand Growing

Policy support Strong government support Goal of establishing India as an automanufacturing hub Inviting Resulting in R&D focus; GOI has set up technology modernisation fund Large domestic market Policy sops, FDI encouragement

Increasing investments

Rising incomes, young population

Rising investments from domestic and foreign players

Greater availability of credit and financing options

Greater innovation in products; market segmentation

Strong growth in exports as well

Strong projected demand making returns attractive


Notes: GOI - Government of India

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GROWTH DRIVERS

17

Automotives

MARCH

2013

Rising incomes and a growing middle class driving domestic demand growth
Changing income dynamics of Indias population
70 60 50 40 30 20 10 0 2005 Strivers 2010 Seekers 2015 Deprived 2020 Aspirers 2025 Globals Aspirers: annual income INR90,000 200,000 million households Seekers: annual income INR200,000 500,000

Rising incomes; growing middle class

Personal (nominal) disposable income is expected to rise annually by 8.2 per cent over FY11-17
Rising middle class-size of the middle class expected to touch 550 million by 2025 from 50 million in 2010 Favourable demographics - a young population is also driving up the demand for cars Demand for commercial vehicles have got a boost due to development of roadways and greater market access

Deprived annual income <INR90,000

Strivers: annual income INR500,000 1,000,000 Globals: annual income >INR1,000,000

Source: McKinsey Quarterly,


Aranca Research

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GROWTH DRIVERS

18

Automotives

MARCH

2013

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 20.5

Greater access to credit makes purchases of both passenger and commercial vehicles easier

20.0
15.1 15.0 10.6 10.0 5.0 8.0 11.9 8.5 11.9 7.7 10.6 14.8

The auto finance industry has grown at an average annual rate of 13 per cent during FY08-12
The private sector banks like ICICI, HDFC are also showing increasing interest in the segment which was previously dominated by public players

Notes: Greater distributional efficiencies, increasing demand (especially from rural areas) due to rising disposable incomes have created new markets for products within the country

0.0

FY07

FY08

FY09

FY10

FY11

Car Industry sales volume

Vehicle Finance Penetration

Source: Kotak Mahindra Prime, Aranca Research

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GROWTH DRIVERS

19

Automotives

MARCH

2013

India has a huge competitive advantage over peers


Design & Engg skills
Korea China

Manufacturing skills

Manpower costs

Supplier base

Raw materials

East Asia

Thailand Indonesia Vietnam Czech Republic Romania Poland

Central & Eastern Europe

Slovakia Russia Hungary Turkey Brazil

Latin America

Mexico
In competition with India

Less competitive than India

Source: ACMA, Aranca Research


GROWTH DRIVERS

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Automotives

MARCH

2013

Strong policy support has been crucial in developing the sector


Auto Policy 2002
Automatic approval for foreign equity investment up to 100 per cent; no minimum investment criteria Encourages R&D by offering rebates on the R&D expenditure spent by the companies AMPs vision is to make India a preferred destination for design and manufacturing of automobiles

Automotive Mission Plan (AMP) 2006-16

and to achieve market size of USD154 billion by 2016


Setting up of a technology modernisation fund focussed on SMEs 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

Nine 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 budgetary allocation for

Dept. of Heavy Industries & Public Enterprises

R&D
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
5 year extension on deduction of R&D expenditure under Income Tax Act
Notes: SME - Small and Medium Enterprises, R&D - Research and Development, NATRiP - National Automotive Testing and R&D Infrastructure Project, AMP - Automotive Mission Plan

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GROWTH DRIVERS

21

Automotives

MARCH

2013

Boost to R&D in the auto components sector - NATRiP centres


Business Description

Vehicles Research & Development Establishment (VRDE), Ahmednagar Ahmednagar


Indore - National Automotive Test Tracks Tracks (NATRAX) Automotive Research Association of India (ARAI), Pune Chennai Centre, Tamil Nadu Rae Bareilly Centre International Centre for Automotive Technology (iCAT), Manesar Silchar Centre, Assam

Research, design, development and testing of vehicles Centre of excellence for photometry, electromagnetic compatibility (EMC) and test tracks Complete testing facilities for all vehicle categories Centre of excellence for vehicle dynamics and tyre development Services for all vehicle categories Centre of excellence for power-train development and material Complete homologation services for all vehicle categories Centre of excellence for infotronics, EMC and passive safety Services to agri-tractors, off-road vehicles and a driver training centre Centre of excellence for accident data analysis Services to all vehicle categories Centre of excellence for component development, noise vibration and harshness (NVH) testing Research, design, development and testing of vehicles Centre of excellence for photometry, EMC and test tracks

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GROWTH DRIVERS

22

Automotives

MARCH

2013

Emergence of large automotive clusters in the country


List of companies

North
Delhi-Gurgaon-Faridabad

Ashok Leyland Force Motors Piaggio Swaraj Mazda

Amtek Auto Eicher Honda SIEL Maruti Suzuki

Tata Motors Bajaj Auto Hero Group

Mumbai-Pune-NashikAurangabad Kolkata- Jamshedpur

West

Ashok Leyland Bajaj Auto FIAT GM

M&M Eicher Skoda Bharat Forge

Tata Motors Volkswagen Renault-Nissan M&M

East

Tata Motors Forgings Hindustan Motors JMT Simpson & Co. Exide International Auto

Chennai-Bengaluru- Hosur

South

Ashok Leyland Ford M&M Toyota Kirloskar Volvo

Sundaram Fasteners Enfield Hyundai BMW

Bosch TVS Motor Company Renault-Nissan

Source: ACMA, Aranca Research

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GROWTH DRIVERS

23

Automotives

MARCH

2013

Key automobile manufacturing plants across India


NORTH WEST: Rajasthan is a hub for majorly light vehicle manufacturing NORTH: Delhi is a hub for light vehicle manufacturing whereas Haryana and Uttarkhand are for heavy vehicle manufacturing

WEST: Maharashtra, and Gujarat are bases for heavy and light vehicle manufacturing

EAST: Jamshedpur is the site of Tatas heavy 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

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GROWTH DRIVERS

24

Automotives

MARCH

2013

Strong inflow of FDI into the automotives sector in India

Accumulated FDI inflows into the automotives sector over Apr 2000 - Sep 2012 was USD7.4 billion (4.0 per cent of total FDI)

Country
Delhi-Gurgaon-Faridabad

Top 5 origin countries for FDI (2000-2010) FDI (USD million) Share of total (%)
1,155 873 626 25 19 14

Japan US Italy

Ahmedabad

Mumbai-PuneNashik-Aurangabad Kolkata- Jamshedpur

Mauritius
Sweden

373
369

8
8

City
Mumbai Delhi
Chennai-Bengaluru- Hosur

Top 5 destination cities for FDI (2000-2010) FDI (USD million) Share of total (%)
1,609 1,416 497 464 238 34 30 11 10 5

Ahmedabad Chennai Bengaluru

Source: Department of Industrial Policy & Promotion (India), Aranca Research

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GROWTH DRIVERS

25

Automotives

MARCH

2013

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 Indias 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 10,000 units

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 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 Plans to invest USD71 million at its plant in Pune and will be launching five new compact cars
Source: Respective company websites, news articles, Aranca Research

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GROWTH DRIVERS

26

Automotives

MARCH

2013

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

Automotives

MARCH

2013

Maruti Suzuki: Continuing strongly on its journey of success


Expansion plans to produce 1.7 million cars by 2013

Continuing market leadership Product portfolio expansion Increased productivity Enhanced R&D capability Capacity expansion Roll out of peoples car (Maruti 800) 1994 Production of 1 millionth car

55 per cent market share in the Indian car market

2012 Exports reached 1 million units in April 2012 2011 Roll out of 10 millionth car

Product portfolio comprising 16 passenger vehicle models


In the process of establishing Suzukis largest R&D facility outside Japan

1983

1994

1997

2001

2004

2006

2007

2008

2009

2010

2011

2012

Source: Company website, Aranca Research

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SUCCESS STORIES: MARUTI, TATA MOTORS

28

Automotives

MARCH

2013

Tata Motors: Leading by innovation and global presence

Tata Nano launched Introduction of Megapixel, an electric vehicle

Disruptive Innovation

JV with Daimler AG

Production of 1st indigenously designed LCV Launch of companys 1st indigenous CV

Acquired stake in Hipo Carrocera SA Launched Indica India's first fully indigenous passenger car

Market expansion

Product portfolio expansion Enhancing R&D capability Acquisitions Tata Engineering & Locomotives established

Acquisition of Jaguar and Landrover

Joint Ventures

1945

1954

1961

1977

1982

1986

1991

1998

2005

2008

2010

2012

Source: Company website, Aranca Research

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SUCCESS STORIES: MARUTI, TATA MOTORS

29

Automotives

MARCH

2013

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

Automotives
Opportunities

MARCH

2013

India is fast emerging as a global R&D hub

Opportunities for creating sizeable market segments through innovations

Small-car manufacturing hub

Strong support from the government;

setting up of NATRiP centres

The worlds cheapest car (Tata Nano) has

Private players like Hyundai, Suzuki,

directed focus towards the low-income market

General Motors, Nissan, Toyota have

announced plans to make India their hub for new global small car platforms to cross the 3 million mark by end 2012 cars segment (to developing and emerging markets)

GM are keen to set up their R&D base in India English-speaking manpower as well

Bajaj Auto, Hero Honda and M&M

Strong education base, large skilled Comparative advantage in terms of cost

jointly plan to develop a technology for two-wheelers to run on natural gas market segment in the coming decade

Light vehicle sales in India are estimated

Electric cars are likely to be a sizeable

Strong export potential in ultra low cost

Notes: M&M - Mahindra & Mahindra

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OPPORTUNITIES

31

Automotives

MARCH

2013

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

Automotives
Industry Associations

MARCH

2013

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: siam@siam.in

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USEFUL INFORMATION

33

Automotives
Glossary

MARCH

2013

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 34

Wherever applicable, numbers have been rounded off to the nearest whole number
USEFUL INFORMATION

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Automotives
Disclaimer

MARCH

2013

India Brand Equity Foundation (IBEF) engaged Aranca to prepare this presentation and the same has been prepared by Aranca in consultation with IBEF. All rights reserved. All copyright in this presentation and related works is solely and exclusively owned by IBEF. The same may not be reproduced, wholly or in part in any material form (including photocopying or storing it in any medium by electronic means and whether or not transiently or incidentally to some other use of this presentation), modified or in any manner communicated to any third party except with the written approval of IBEF. This presentation is for information purposes only. While due care has been taken during the compilation of this

presentation to ensure that the information is accurate to the best of Aranca and IBEFs knowledge and belief, the content is not to be construed in any manner whatsoever as a substitute for professional advice. Aranca and IBEF neither recommend nor endorse any specific products or services that may have been mentioned in this presentation and nor do they assume any liability or responsibility for the outcome of decisions taken as a result of any reliance placed on this presentation. Neither Aranca nor IBEF shall be liable for any direct or indirect damages that may arise due to any act or omission on the part of the user due to any reliance placed or guidance taken from any portion of this presentation.

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