Industrial Awareness Report

Commercial Vehicles


Submitted by:
Group 7
Section D
George Joseph Nellissery-2013PGP145
Jain Anish Paras- 2013PGP163
Mohd Zeeshan Khan-2012PGP206
Priya Dipak Mehta-2013PGP289
R. Rahul- 2013PGP299
Shailja Singh-2013PGP362
Sneh AnumeshTirkey-2013PGP393


1
Overview
Indian automotive industry is the sixth largest industry in the world
in terms of production

Commercial vehicles consist of 4.66% of the automotive industry

Industry is oligopolistic in nature with three players accounting 88%
market share

Industry is divided into three product segments, namely, goods
vehicles (trucks), passenger vehicles (buses) and tractors

On the basis of gross vehicle weight, segmented into light
commercial vehicles (LCV) and medium and heavy commercial
vehicles (MHCV).

2
Growth trends
The growth of the Commercial Vehicle industry is closely related to the
general economic conditions prevailing in a country
Another important factor impacting growth in this sector is the
replacement rate of the vehicle.










Source: ICRA Management Consulting Services Limited - The Indian Commercial
Vehicles Industry July 2010


3
Growth by segment
Domestic Sales Growth
FY 2005 2006 2007 2008 2009 2010 2009 2010 2008-10
MHCVs 198.5 207.5 275.6 274.6 183.5 245.1 -33.2% 33.6% -3.8%
Passenger 25.6 28.1 28.7 38.6 34.9 43.1 -9.7% 23.5% 14.5%
Goods 172.9 179.3 246.9 235.9 148.6 202.0 -37.0% 35.9% -6.5%
LCVs 119.9 143.6 192.2 215.9 200.7 286.3 -7.0% 42.7% 14.2%
Passenger 20.0 22.4 23.7 27.8 27.0 34.4 -3.2% 27.7% 13.2%
Goods 99.9 121.2 168.5 188.1 173.7 251.9 -7.6% 45.0% 14.4%
Total 318.4 351.0 467.8 490.5 384.2 531.4 -21.7% 38.3% 4.3%
Passenger 45.6 50.5 52.4 66.5 61.8 77.5 -7.0% 25.3% 13.9%
Goods 272.8 300.6 415.3 424.0 322.4 453.9 -24.0% 40.8% 3.0%
Source: ICRA Management Consulting Services Limited - The Indian Commercial Vehicles Industry July
2010

4
Major Events over last few years
The industry has being seeing major changes with foreign players
entering the industry through tie-ups, joint ventures and MoUs to
set up manufacturing and assembly plants

The major foreign players include joint ventures such as MAN-
Force, Eicher-Volvo, Mahindra Navistar

Hino Motors entered the passenger and goods vehicles segments
and Beiqi Foton, China's largest commercial vehicle maker is
planning to set up its manufacturing plant near Pune

5
Importance to the Economy
The fortunes of the Indian CV industry are closely linked to the prospects
for road transportation in the country

The two major modes of land transport in the country are roads and
railways. CVs are an important source of transportation of both goods and
passengers

The size of the Indian road transport sector was estimated at Rs. 2,500
billion during FY2009 accounting for around 4.8% of Indias gross domestic
product. Also, GDP from railways was estimated at Rs. 481 billion during
FY2009. During FY2009, the share of transport sector in GDP was 6.40%

In 2010, the automotive industry employed an estimated 0.15 million
people and offers employment to an additional 10 million people
indirectly. Of this 4.66% can be accounted for the Commercial vehicle
industry

6
Technological trends and major
innovations

Success in the CV industry largely depends on technological
innovations, which is why, leading CV manufacturers have
significantly enhanced their focus on that front

They are engaged in actively developing the next generation of
trucks and buses which will have superior technology, conform to
international standards and emission norms and will compete with
products from leading international CV manufacturers (thereby
boosting exports)

Many companies have come up with trucks with air conditioned
cabins. This may also lead to faster replacement of vehicles, thereby
boosting sales volumes

This may also lead to faster replacement of vehicles, thereby
boosting sales volumes.

7
MERGERS AND ACQUISITIONS
Foreign players entered the market in 2008-09 through joint ventures
Volvo-Eicher(2008-09)
50:50 venture
Sale of Eicher and Volvo to be handled through the JV
Common platform sharing for manufacturing
Handling of international operations

MAN AG-Force Motors(2008-09)
Manufacture a full range of heavy commercial vehicles from 16-tonne GVW to 49-tonne
GVW
Currently manufactures a 25-tonne GVW truck, 25-tonne and 31- tonne mining tipper,
25-tonne and 16-tonne construction tippers
MAN Force trucks are exported overseas to countries such as Sri Lanka, Indonesia, and
certain African nations

8
Mahindra-Navistar(2010)
51:49 JV between M&M and Navistar Inc
Started manufacturing 25-tonne and 31-tonne trucks, which
were later followed by 49-tonne and 40-tonne trucks
In December 2012, Navistar announced that they were selling
their stake to Mahindra and exiting both joint ventures

9
Major Players
The domestic CV industry is relatively concentrated with the
top three players accounting for 88 per cent (in volume terms)
as of 2011-12.
Tata Motors continues to dominate the CV industry with
nearly 60 per cent share, followed by Mahindra & Mahindra
(M&M) with 18 per cent, and Ashok Leyland with 10 per cent.

10
Company 07-08 08-09 09-10 10-11 11-12
Tata Motors 64.8 61.5 59.1 59.0 59.8
Mahindra &
Mahindra
26.7 29.2 32.2 32.4 31.5
Piaggio
vehicles
2.3 4.7 4.0 2.6 2.3
Force Motors 3.1 2.0 2.1 2.3 1.6
Eicher
Motors
1.9 1.6 1.6 1.8 1.7
Others 1.3 1.0 0.9 1.9 3.2
TOTAL 100 100 100 100 100
Light commercial vehicles (Goods): Market share
11
In 2000-01, Tata Motors and M&M were the main
companies operating in the LCV (goods) segment.
Tata Motors was the market leader with a share of 46 per
cent, while M&M had a market share of 30 per cent.
Tata Motors saw a substantial increase in market share in the
LCV (goods) segment after it launched Tata Ace in 2005,
which also ate into the sales of Tata's goods three-wheelers.
In 2005-06, Tata Motors's share jumped to 61 per cent from
51 per cent in 2004-05.
As of 2011-12, Tata Motors and M&M held 60 per cent and
31 per cent of the total market share, respectively.
The LCV (goods) segment also includes players like Piaggio
Vehicles, Force Motors and Swaraj Mazda, who altogether
accounted for 5.6 per cent of the total sales as of 2011-12.

12
Company 07-08 08-09 09-10 10-11 11-12
Tata Motors 63.7 66 65.6 62.3 62.0
Ashok leyland 24.3 21.0 20.6 23.2 21.2
Eicher Motors 8.6 8.2 9.6 9.9 10.8
Swaraj Mazda 1.6 1.6 1.9 1.6 1.6
Asian motor
works
1.3 2.3 1.8 2.3 3.1
Others 0.5 0.9 0.6 0.7 1.3
TOTAL 100 100 100 100 100
Medium and heavy commercial vehicles (Goods): Market share
13
Despite the longstanding presence of players like Eicher
Motors and Swaraj Mazda and the entry of new players like
Asia Motor Works in the MHCV segment, Tata Motors
continues to be the market leader, followed by Ashok
Leyland.
Between 2002-03 and 2007-08, both Tata Motors and Ashok
Leyland together held a market share of 90 per cent, with
the former accounting for 66 per cent.
During the same period, Eicher increased its market share
from 6.5 per cent to 9 per cent.
Asia Motor Works, which entered the market in 2007-08,
garnered a market share of around 1.3 per cent. Its share
rose further to 3.1 per cent in 2011-12.
On the contrary, between 2007-08 and 2011-12, Tata Motors
maintained its market share, while Ashok Leyland lost some
share to Eicher Motors and new entrants such as Asia Motor
Works.

14
Government regulation & policy
changes
Government adopted a new economic policy in July 1991
compassing deregulation of industrial sector
All the vehicles segment (except passenger cars) were delicensed in
July 1991
FDI upto 51% allowed on an automatic basis
To improve the countrys balance-of-payments situation,
government imposed a heavy excise duty on selling price of all the
automobiles
Negative annual growth rate of 10.1% in the vehicles segment in
the year 1991-92


15
Auto Policy 2002
Spelt out the direction of growth for the auto sector in India & addresses
most concerns of the automobile sector, including:
Allowing automatic approval for foreign equity investment up to 100
per cent, with no minimum investment criteria
Investment incentives to be provided by the state governments,
especially for large investments
Laying emphasis on R&D activities carried out by companies in India
by giving a weighted tax deduction of up to 150 per cent for in-house
research and R&D activities
Formulation of an auto fuel policy to ensure availability of adequate
amount of appropriate fuel to meet emission norms
Impetus to alternative fuel vehicles through appropriate long term
fiscal structure
Plan to have a terminal life policy for CV along with incentives for
replacement for such vehicles
Promoting multi-modal transportation and the implementation of
mass rapid transport systems

16
The key regulations that are likely to impact the auto industry in the future
are:
-crash related regulations
-introduction of Bharat Stage IV norms
India has already achieved Euro-1 norms in the year 2000 and Euro-2
norms in the year 2005
Euro-3 norms were achieved in the National Capital Region (NCR) and 10
major cities in India in 2005. Plans are on to achieve Euro-3 norms across
the country and Euro-4 norms in NCR and 10 major cities by 2010. The
status of these
regulations is depicted as :

17
18
19
Budget 2013-14
The proposal to allocate INR148730m towards Jawaharlal Nehru
National Urban Renewal Mission (JNNURM) (a part which is meant
to acquire 10,000 buses in largely hilly areas) would help prop sales
volumes of Medium and Heavy Commercial Vehicles (MHCV)
passenger carriers to some extent
-Will benefit large players like Ashok Leyland, Tata Motors and
Eicher Motors
Additional investment allowance @ 15% is available to a company
investing Rs 100Crores or more in new assets (plant and machinery)
between 1st April 2013 to 31 March 2015
Lower freight availability and a rise in fuel cost impacted
transporters profitability in 2012-13. Therefore MHCV truck sales is
bound to decline by about 25 per cent in 2012-13

20
2013-14, expect GDP growth to accelerate to 6.4 per cent. However,
MHCV sales growth is expected to lag GDP growth and remain weak
at 5-7 per cent (despite a low base), until transporters utilization
levels improve. LCV sales will however continue to grow by 14-16
per cent
Operating margins of CV players are estimated to decline sharply in
2012-13 due to lower capacity utilization and firm input cost

21
Advantage India-Foreign direct
investment
The Indian government encourages foreign investment in the automobile
sector and allows 100% FDI under the automatic route. It is a fully
delicensed industry and free imports of automotive components are
allowed. Moreover, the government has not laid down any minimum
investment criteria for the automobile industry
India has significant cost advantages; auto firms save 10-25 per cent on
operations in India compared to Europe, Latin America
Large pool of skilled manpower and a growing technology base will induce
greater investments
Indian Commercial Vehicle Industry poised for major growth phase.
Despite challenges, the Industry catching up fast with global trends &
standards - both on technology and quality processes
Indian Auto Industry likely to retain Low cost advantage for a sizeable
period
Attractive collaboration opportunities between Indian CV industry / Auto
component manufacturing with global OEMs and the Supply Chain majors
Great opportunity to partner & use Indias competitive advantages for
sourcing and setting up collaborative operations

22
INDIAN CO. COUNTRY FOREIGN CO. AMOUNT IN RS
CRORE
VE COMMERCIAL
VEHICLES
SWEDEN AKITEBOLAGET
VOLVO
1,082.13
EICHER
MOTORS LTD
Sweden AKTIEBOLA GET
VOLVO(PUBL)
157.40
DIAMLER HERO
COMMERCIAL
VEHICLES LTD
Germany DAILMER AG 78.48
NISSAN MOTOR
INDIA PVT. LTD
Netherlands NISSAN INTL
HOLDING
140.00
MAHINDRA
INTL. LTD
Mauritius INTERNATIONAL
TRUCK &
ENGINE
MAURITIUS H
96.80
RENAULT
NISSAN
AUTOMOTIVE I
P LT(RHOMBUS)

Netherlands and
Japan
RENAULT
GROUP B V
And NISSAN
MOTOR
CO. LTD.
69.20
Major FDI inflows
23