Automotive Industry Full Jan 2009
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A U TO M OT I V E I N D U S T RY December 2008
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AU TO M OT I V E I N D U S T RY December 2008
Contents • Profile of Indian Automotive Industry • Growth Potential of Indian Automotive Industry • India as a Manufacturing Hub
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PROFILE OF INDIAN AUTOMOTIVE INDUSTRY
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PRO F I L E OF I N D I A N AU TO MOTIVE INDUSTRY AUTOMOTIVE INDUSTRY • December 2008
Indian auto industry has entered the era of globalisation Era of globalisation and evolution of India as a global manufacturing hub Pre 1983
1983-1993
1993-2007
• Closed market • Growth of market limited by supply • Outdated models
• Japanisation GoI-Suzuki joint venture to form Maruti Udyog • Joint ventures with companies in commercial vehicles and components
• D e-licensing of sector in 1993
- P layers • Hindustan Motors • Premier • Telco • Ashok Leyland • Mahindra & Mahindra
- P layers • Maruti Udyog • Hindustan Motors • Premier • Telco • Ashok Leyland • Mahindra & Mahindra
• G lobal major OEMs start assembly in India (GM, Ford, Honda, Hyundai) • Imports allowed from April 2001 alignment of duty on components and parts to ASEAN levels • Implementation of VAT
Prerequisites for globalisation, high level of competence and productivity has become the forte of Indian automakers due to the favorable environment in the country.
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PRO F I L E OF I N D I A N AU TO MOTIVE INDUSTRY AUTOMOTIVE INDUSTRY • December 2008
Indian automobile industry crossed a historic landmark of 10 million vehicles in 2006-07 • T he Indian auto industry has the potential to emerge as one of the largest in the world. Presently, India is
Automotive Production (Million units) 10.83
2007-08
-Second largest two wheeler market in the world
2006-07
-Fourth largest commercial vehicle market in the world
2005-06
11.09 9.74 8.47
2004-05
- 11th largest passenger car in the world and is expected to be the seventh largest market by 2016.
2003-04
7.24
2002-03
CAGR 11.5%
6.28 0
2
4
6 8 million units
10
12
Source: SIAM, IMaCS analysis
Segment
Share in total
CAGR
Two wheelers
74.1%
9.6%
Passenger vehicles
16.3%
19.5%
Three wheelers
4.6%
12.6%
Commercial vehicles
5.0%
21.8%
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PRO F I L E OF I N D I A N AU TO MOTIVE INDUSTRY AUTOMOTIVE INDUSTRY • December 2008
The OEM as well as the component industry is highly competitive • • • • • • • • •
M G Toyota Ford Hyundai Maruti Suzuki Honda Skoda Volvo Mercedes
• • • • • •
Delphi Visteon Bosch Denso Valeo Thyssen Krupp
Global OEM
Global Suppliers
Indian OEM
• • • • • • •
Tata Motors Mahindra & Mahindra Bajaj Auto TVS Motors Hero Honda Bajaj Tempo Ashok Leyland
Indian Suppliers
• • • • • •
Bharat Gorge Sundram Fasteners Rane Group Shriram Pistons RICO Auto Sona Koyo Steering
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PRO F I L E OF I N D I A N AU TO MOTIVE INDUSTRY AUTOMOTIVE INDUSTRY • December 2008
The OEM as well as the component industry is highly competitive • T he Indian auto industry is highly competitive with a number of global and Indian auto companies present • T he supplier industry is equally competitive with a mix of global and Indian players
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PRO F I L E OF I N D I A N AU TO MOTIVE INDUSTRY AUTOMOTIVE INDUSTRY • December 2008
Most automotive players are present in more than one segment Manufacturer
Segments
Manufacturer
Segments
Ashok Leyland
LCVs, M&HCVs, buses
Mahindra & Mahindra
Three wheelers, cars, MUVs, LCVs
Asian Motor Works
M&HCVs
Majestic Auto
Three wheelers
Atul Auto
Three wheelers
Maruti Suzuki
Cars, MUVs, MPVs
Bajaj Auto
Two and three wheelers
Piaggio
Three wheelers, LCVS
BMW India
Cars and MUVs
Reva Electric Car Co.
Electric cars
Daimler Chrysler India
Cars
Royal Enfield Motors
Two wheelers
Eicher Motors
LCVs, M&HCVs, buses
Scooters India
Three wheelers
Electrotherm India
Electric two wheelers
SkodaAuto India
Cars
Fiat India
Cars
Suzuki Motorcycles
Two wheelers
Force Motors
Three wheelers, MUVs and LCVs
Swaraj Mazda Ltd
LCVs, M&HCVSs, buses
Ford India
Cars and MUVs
Tata Motors
Cars, MUVs, LCVs,M&HCVs, buses
General Motors India
Cars & MUVs
Tatra Vectra Motors
M&HCVs
Hero Honda Motors
Two Wheelers
Toyota Kirloskar
Cars, MUVs
Hindustan Motors
Cars, MUVs and LCVs
TVS Motor Co
Two wheelers
Honda
Two wheelers, cars and MUVS
Volvo India
M&HCVs, buses
Hyundai Motors
Cars and MUVs
Yamaha Motor India
Two wheelers
Kinetic Motor
Two wheelers
MUVs: Multi utility vehicles; MPVs: Multi purpose vehicles; LCV: Light commercial vehicles; M&HCVs: Medium and heavy commercial vehicles
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PRO F I L E OF I N D I A N AU TO MOTIVE INDUSTRY AUTOMOTIVE INDUSTRY • December 2008
Two wheelers industry is dominated by motorcycles Domestic two-wheeler industry
Break up of the industry by segment
Million units 2008
7.25
2007
7.86
2006
• Scooter/Scooterette : Wheel size less than or equal to 12 inches • Motorcycle: Wheel size more than 12 inches • Mopeds: Engine capacity less than 75 cc with fixed transmission, wheel size more than 12 inches • Electric Two Wheelers: Electrically Driven
6% 14%
7.05
2005
6.21
2004
5.36
2003
4.81
2002
4.2 0
1
2
3
4
CAGR 13% 80%
5
6
7
8
Source: SIAM, IMaCS analysis
n Motorcycles n Mopeds
n Scooters
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PRO F I L E OF I N D I A N AU TO MOTIVE INDUSTRY AUTOMOTIVE INDUSTRY • December 2008
Two-wheelers industry is dominated by motorcycles • D omestic two-wheeler industry has steadily grown at a CAGR of 9.5 per cent to reach 7.25 million units in 2006-07 • M otorcycle segment has attained highest growth and dominates the market • E ntry level bikes (engine power below 125 cc and price US$ 850-1,100) account for around 80 per cent sales • C ost of ownership and economics of operation are key purchase criteria • P remium bike segment (engine power above 125 cc and price US$ 1,200-2,000) growing at a faster pace as compared to the entry level vehicles, an indication of increasing affluence of users • S ome manufacturers have opted out of 100CC segments and are positioning the 125cc as entry level 10
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PRO F I L E OF I N D I A N AU TO MOTIVE INDUSTRY AUTOMOTIVE INDUSTRY • December 2008
While the motorcycles segment is growing, the scooter segment is shrinking • S cooter segment as a whole has been shrinking, except for the A2 segment
Segment-wise analysis of two-wheeler market
• B ikes having engine capacity 75-125 cc corner the major share of the two wheeler market • B 3 segment is the fastest growing segment in the Indian two wheeler market.
11
Segment
Description
Share in 2001-02
Share in 2007-08
A1
Scooter with engine capacity less than 75 cc
5%
0.5%
A2
Scooter with engine capacity between 75-125 cc
5%
13%
A3
Scooter with engine capacity between 125-250 cc
12%
1%
B2
Motorcycle with engine capacity between 75-125 cc
62%
58%
B3
Motorcycle with engine 5% capacity between 125-250 cc
21%
B4
Motorcycle with engine capacity above 250 cc
1%
0.5%
C1
Mopeds
10%
6%
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PRO F I L E OF I N D I A N AU TO MOTIVE INDUSTRY AUTOMOTIVE INDUSTRY • December 2008
The domestic two wheeler market is dominated by Indian as well as foreign players • H ero Honda: Largest Two-wheeler manufacturer in the world
Market share of key players in 2006-07 3% 9%
• B ajaj Auto: Second largest Two-wheeler manufacturer in India and the largest 3 wheeler manufacturer
42% 19%
• T VS Motor Co: Third largest Two-wheeler manufacturer in India. Established a manufacturing facility in Indonesia
27%
• H onda Motors: Has recently entered the Indian market through its direct subsidiary (in addition to its joint venture Hero Honda)
n Hero Honda Motors n TVS Motor Co, n Others
n Bajaj Auto Ltd n HMSIL
Source: SIAM, IMaCS analysis
• S uzuki: Has recently entered the Indian market through its direct subsidiary
12
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PRO F I L E OF I N D I A N AU TO MOTIVE INDUSTRY AUTOMOTIVE INDUSTRY • December 2008
The domestic two wheeler market is dominated by Indian as well as foreign players • In the Two-wheeler market in India, competition is intense with around 10 players competing for the share of the industry • T he players include global giants like Honda, Suzuki, Yamaha as well as Indian players like Bajaj and TVS • T he market leader is Hero Honda Motors, closely followed by Bajaj Auto • Industry is characterised by frequent new product launches, with over 22 models launched in 2007-08
13
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PRO F I L E OF I N D I A N AU TO MOTIVE INDUSTRY AUTOMOTIVE INDUSTRY • December 2008
Two wheelers exports have grown at an impressive CAGR of 41% Two wheeler exports from India Thousand units
Market share of key players in exports 2007-08 4%
2008
819.8
2007
9%
619.2
2006
513.2
2005
366.4
2004
11%
CAGR 41%
59%
265.1
2003
17%
179.7
2002
104.2 0
100
200
300
Source: SIAM, IMaCS analysis
400
500
600
700
800
900
(in ‘000 units)
n Bajaj Auto n Hero Honda Motors Ltd n Hond(HMSIL
14
n TVS Motor Company n Others
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PRO F I L E OF I N D I A N AU TO MOTIVE INDUSTRY AUTOMOTIVE INDUSTRY • December 2008
Two wheelers exports have grown at an impressive CAGR of 42% • E xports of two wheelers have grown at over 41 per cent CAGR in last six years • M ajority of exports are to Bangladesh, Sri Lanka, Bhutan and Nepal • H ighest growth (year on year growth of 79 per cent) witnessed in the above 125 CC motorcycles segment, which constituted 36 per cent of two wheeler export market up from previous year’s 26 per cent. • 5 8 per cent of the bikes exported were those with engine capacity below 125 cc. • B ajaj Auto is the market leader in exports with 59 per cent share.
15
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PRO F I L E OF I N D I A N AU TO MOTIVE INDUSTRY AUTOMOTIVE INDUSTRY • December 2008
Passenger vehicles segment in India is dominated by cars Domestic passenger vehicles industry
Domestic passenger vehicles industry thousand units 2008
1548.0
2007 2006
1143.1
2005
1061.6
2004
78%
902.1
2003
707.2
2002 200
22%
1379.7
CAGR14.8%
675.1 400
600
800
1000
1200
1400
1600
n Passenger cars
n SUVs/MVs
Source: SIAM, IMaCS Analysis
16
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PRO F I L E OF I N D I A N AU TO MOTIVE INDUSTRY AUTOMOTIVE INDUSTRY • December 2008
Passenger vehicles segment in India is dominated by cars • T he domestic Indian passenger vehicles market has grown at a CAGR of 14.8 per cent over the last six years to reach 1.5 million units in 2007-08. • P assenger cars, contributing to 78 per cent of volumes, grew at a CAGR of 15 per cent. • T he remaining share is with utility vehicles and sports vehicles
17
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PRO F I L E OF I N D I A N AU TO MOTIVE INDUSTRY AUTOMOTIVE INDUSTRY • December 2008
All major global players in passenger vehicles segment have a presence in India • M aruti Udyog: Largest passenger car manufacturer in the country, India considered as strategic market by Suzuki
Market shares of key players in 2007-08
13%
• T ata Motors: Largest automotive player in the Indian industry; launching the Rs. 1 lakh (US$ 2,500) car
4% 8% 46%
• H yundai Motors: Third largest passenger car manufacturer in India, has established India as one of its manufacturing bases in the world
14%
15%
n Maruti Udyog Ltd. n Mahindra & Mahindra
n Tata Motors Ltd . n Toyota
n Hyundai Motor India Ltd. n Others
Source: SIAM, IMaCS Analysis
18
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PRO F I L E OF I N D I A N AU TO MOTIVE INDUSTRY AUTOMOTIVE INDUSTRY • December 2008
All major global players in passenger vehicles segment have a presence in India • M ahindra & Mahindra: Amongst the largest players in the multi utility vehicles segment, has tied up with Renault for manufacturing and marketing of Logan brand of cars in India • T oyota: Has vision of capturing 10 per cent share of the Indian passenger car market by 2010 • H onda Motors: One of the leading players in the Indian premium cars segment • Ford: Leading player in the premium cars segment • G eneral Motors: Leading player in the premium segment; entered the compact car segment recently
19
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PRO F I L E OF I N D I A N AU TO MOTIVE INDUSTRY AUTOMOTIVE INDUSTRY • December 2008
All major global players in passenger vehicles segment have a presence in India • T here are more than a dozen manufacturers in the industry • M ost of the leading global players have a presence in India in the form of joint ventures or subsidiaries • T he industry leader is Maruti Udyog with 46 per cent market share, closely followed by Tata Motors and Hyundai Motors at 15 per cent and 14 per cent respectively
20
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PRO F I L E OF I N D I A N AU TO MOTIVE INDUSTRY AUTOMOTIVE INDUSTRY • December 2008
India is increasingly becoming a manufacturing hub for passenger cars Cars Exports from India Thousand units
Market share of key players in exports 2007-08 3%
2008
217.05
2007
7%
198.48
2006
175.57 166.40
2005 2004
24% 66%
129.29
2003
72.01
2002
CAGR 26%
53.17 0
50
100
150
200
250
300
350
400
n Hyundai Motor India Ltd. n Tata Motors Ltd
n Maruti Suzuki India Ltd n Others
Source: SIAM, IMaCS Analysis
21
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PRO F I L E OF I N D I A N AU TO MOTIVE INDUSTRY AUTOMOTIVE INDUSTRY • December 2008
India is increasingly becoming a manufacturing hub for passenger cars • E xports of cars from India have grown at a CAGR of 26 per cent CAGR in the last six years to reach 217 thousand units in 2007-08. • H yundai Motors is the market leader in exports of cars with 66 per cent share up from previous year’s 58 per cent share; the company uses India as a manufacturing base for compact cars across the globe. • E xports are made to South America, Africa, Europe, Latin America and the Middle East.
22
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PRO F I L E OF I N D I A N AU TO MOTIVE INDUSTRY AUTOMOTIVE INDUSTRY • December 2008
Commercial vehicles segment has witnessed the highest growth rate in the automotive industry Domestic CV Industry
Breakup of the Industry by segment
2008
486.82
2007
8%
467.88
6%
351.04
2006 2005
318.43
2004
38%
260.11
2003
CAGR 22%
190.68
2002
48%
146.67 0
100
200
300
400
500
n M & HCV Goods n M & HCV Passenger
n LCV Goods n LCV Passenger
Source: SIAM, IMaCS Analysis
23
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PRO F I L E OF I N D I A N AU TO MOTIVE INDUSTRY AUTOMOTIVE INDUSTRY • December 2008
Commercial vehicles segment has witnessed the highest growth rate in the automotive industry • D omestic CV industry sales reached 486.82 thousand vehicles in 2007-08, registering a CAGR of 22 per cent over last six years. • S hare of LCVs is gradually increasing, indicating the emergence of hub and spoke model of transportation • In 2007-08, M&HCV passenger vehicles lead the growth at 34 per cent over the last year. • G oods industry is dominated by multi axle vehicles, which account for nearly 50 per cent of the market
24
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PRO F I L E OF I N D I A N AU TO MOTIVE INDUSTRY AUTOMOTIVE INDUSTRY • December 2008
CV industry is dominated by Indian players • T ata Motors Ltd: Largest commercial vehicle manufacturer in the country, has acquired the Korean manufacturer Daewoo Gap Motors
Market Shares of Key Players in 2006-07
6%
• A shok Leyland Ltd: Second largest player with considerable market share in M&HCV segment; has formed a JV to manufacture LCVs with Nissan
6%
11%
15%
62%
• M ahindra & Mahindra Ltd: Relatively new player in the segment; has formed JV with International Trucks to manufacture M&HCV trucks in India n Tata Motors Ltd n Ashok Leyland Ltd n M&M Ltd n Eicher Motors Ltd n Others
• E icher Motors Ltd: Leading player in the LCV trucks segment; has entered the M&HCV trucks segment recently
Source: SIAM, IMaCS Analysis
• S waraj Mazda Ltd: One of the leading players in the LCV segment • V olvo India: One of the leading players in luxury passenger buses and heavy duty tippers
25
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PRO F I L E OF I N D I A N AU TO MOTIVE INDUSTRY AUTOMOTIVE INDUSTRY • December 2008
CV industry is dominated by Indian players • T ata Motors is the market leader in both goods and passenger segments, closely followed by Ashok Leyland • L CV market is dominated by Tata Motors, followed by Mahindra & Mahindra • Introduction of Tata Ace has contributed significant growth in the sub one tonne segment • M any players are in the process of strengthening their hold in the market through JVs .
26
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PRO F I L E OF I N D I A N AU TO MOTIVE INDUSTRY AUTOMOTIVE INDUSTRY • December 2008
Indian CV exports have witnessed a more impressive growth CV Exports from India (Thousand units
Market Share of Key Players in Exports (2007-08) 59.00
2008
4%
49.77
2007
2%
15%
40.60
2006
12%
29.94
2005 17.43
2004
67%
12.26
2003
CAGR 30.6%
11.87
2002 0
10
20
30
40
50
n Tata Motors Ltd n M&M Ltd n Others
60
n Ashok Leyland Ltd n Eicher Motors Ltd
Source: SIAM, IMaCS Analysis
27
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PRO F I L E OF I N D I A N AU TO MOTIVE INDUSTRY AUTOMOTIVE INDUSTRY • December 2008
Indian CV exports have witnessed a more impressive growth • E xports have grown at a fast pace of over 30 per cent over the last six years. • T ata Motors accounts more than 70 per cent of the CV exports, with Ashok Leyland and Mahindra&Mahindra making up for a large portion of the balance. • L CV goods carriers accounted for 52 per cent of the overall exports • M ajor portion of the exports are to Sri Lanka, Gulf countries and Africa
28
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PRO F I L E OF I N D I A N AU TO MOTIVE INDUSTRY AUTOMOTIVE INDUSTRY • December 2008
Growth in three wheelers has been driven by the need for low cost last mile transportation system Domestic three wheeler Industry (Thousand units) 2008
Break-up of Industry by segment (2008)
364.70
2007
403.91
2006
359.92
2005
36%
307.86
64%
284.08
2004 2003
231.53
CAGR 10.5%
200.28
2002 0
100
200
300
400
500
n Passenger Carrier
n Goods Carrier
Source: SIAM, IMaCS Analysis
29
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PRO F I L E OF I N D I A N AU TO MOTIVE INDUSTRY AUTOMOTIVE INDUSTRY • December 2008
Growth in three wheelers has been driven by the need for low cost last mile transportation system • T hree Wheeler sales in India touched a new record of 0.36 Million registering a growth of 10.5 per cent CAGR over the last six years • T he proportion of Goods carriers in the proportion of overall sales has doubled indicating towards the increased need for low cost last mile transportation systems • S ub 3.5 tonne segment in goods accounted for 71 per cent of the sales and Sub Four seater segment in passenger versions accounted for 97 per cent of the sales
30
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PRO F I L E OF I N D I A N AU TO MOTIVE INDUSTRY AUTOMOTIVE INDUSTRY • December 2008
The three wheeler market is dominated by Bajaj Auto • B ajaj Auto Ltd. : Market leader in the Three wheeler segment, in the process of revamping its product portfolio
Market Share of Key players 2007-08 8% 9%
• Piaggio Vehicles : The Italian manufacturer is one of the leading players with fast growing market share, in the process of making India as their global hub
42%
41%
• M&M Ltd: One of the leading players in the segment • A tul Auto Ltd: Have introduced new products in the rear engine segment, and also is a manufacturer of ‘Chakda’’ a Three wheeler reengineered from Two wheeler, popular in the western parts of the country
n Bajaj Auto n M&M
n Piaggio Vehicles n Others
Source: SIAM, IMaCS Analysis
• F orce Motors Ltd: A JV between Bajaj Tempo and MAN AG of Germany; leading player in the goods segment
31
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PRO F I L E OF I N D I A N AU TO MOTIVE INDUSTRY AUTOMOTIVE INDUSTRY • December 2008
The Three wheeler market is dominated by Bajaj Auto • B ajaj Auto emerged the leader in Three Wheeler industry with 42 per cent share, closely followed by Piaggio with 41 per cent share • B ajaj Auto lead the passenger carrier segment with 54 per cent share, while Piaggio lead the goods segment with 44 per cent market share
32
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PRO F I L E OF I N D I A N AU TO MOTIVE INDUSTRY AUTOMOTIVE INDUSTRY • December 2008
Exports of Three wheelers have been growing rapidly, with Bajaj Auto the clear market leader • E xports of three wheelers touched a new high of 141.24 thousand units, registering a robust growth of 44.5 per cent CAGR over the last six years
Three wheeler exports and growth (Thousand Units) 2008
141.24 143.90
2007
• T his has been contributed almost entirely by Bajaj Auto, which accounted for around 97 per cent of exports in 2006-07
2006
• B ajaj Auto exports to Sri Lanka, Egypt, Nepal, Bangladesh among other countries
76.88
2005
66.80
2004
68.14 43.37
2003
CAGR 44.5%
15.46
2002 0
25
50
75
100
125
150
175
Source: SIAM, IMaCS Analysis
33
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PRO F I L E OF I N D I A N AU TO MOTIVE INDUSTRY AUTOMOTIVE INDUSTRY • December 2008
Indian firms are increasingly partnering with foreign firms Indian OEM
Foreign Partner
Type of Partnership
Maruti Suzuki
Suzuki Motor CorporationJapan
Equity partner
Mahindra Logan
Renault
Joint Venture
Tata motors
Fiat
Tie-up for manufacturing and marketing in India
KINETIC Group
Sanyang Industry Co Ltd (SYM- Taiwan
Technology
Italjet -Italy
Tie-up for manufacturing and distribution
Hero
Honda- Japan
Technology
Hero Cycles
Ultra Motor Company, U.K
Technology
Bajaj Auto
Kawasaki Heavy Industries Ltd, Engine Technology Japan Engine Technology
Technology
Kubota Corp, Japan
Technology
L&T Ltd
Scania-Spain
Tie-up for marketing in India
Ashok Leyland
Hino-Japan
Engine Technology
Irizar-Spain
Bus body Technology
ZF-Germany
Gearbox Technology
Marco Polo-Brazil
Bus/Coach Technology
Cummins-USA
Engine Technology
Tata Motors
34
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PRO F I L E OF I N D I A N AU TO MOTIVE INDUSTRY AUTOMOTIVE INDUSTRY • December 2008
Three major automotive clusters exist in India • M ajor automotive clusters - Mumbai-Pune-NasikAurangabad (West), Chennai-Bangalore-Hosur (South) and Delhi-Gurgaon-Faridabad (North) • E xport oriented companies have formed base in the West/South regions, due to proximity to ports
35
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PRO F I L E OF I N D I A N AU TO MOTIVE INDUSTRY AUTOMOTIVE INDUSTRY • December 2008
Three major automotive clusters exist in India North / Central • Ashok Leyland
• Eicher
• Force Motors
• Hero Honda
• Hindustan Motors
• Honda
• Honda SIEL
• ICML
• Kinetic
• LML
• Majestic
• Maruti Suzuki
• Piaggio
• Yamaha
• Swaraj Mazda
• Tata Motors
Ludhian a
Delhi-Gurgaon-NoidaGhaziabad Haridwar
Jamshedpur Pitampur
Kolkata
East • Hindustan Motors • Tata Motors
Chennai Bangalore Hosur
36
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PRO F I L E OF I N D I A N AU TO MOTIVE INDUSTRY AUTOMOTIVE INDUSTRY • December 2008
Three major automotive clusters exist in India West • Ashok Leyland
• Atul Auto
• Bajaj Auto
• Daimler Chrysler
• FIAT
• Force Motors
• GM
• Greaves
• Kinetic
• M&M
• Piaggio
• Premier
• Skoda
• Tata Motors
Ludhian a
Delhi-Gurgaon-NoidaGhaziabad Haridwar
Jamshedpur Pitampur
Kolkata
Chennai Bangalore Hosur
37
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PRO F I L E OF I N D I A N AU TO MOTIVE INDUSTRY AUTOMOTIVE INDUSTRY • December 2008
Three major automotive clusters exist in India South • Ashok Leyland
• Enfield
• Ford
• Greaves
• Hindustan Motors
• Hyundai
Ludhian a
Delhi-Gurgaon-NoidaGhaziabad Haridwar
• Mahindra & Mahindra • Tatra
• Volvo
• Toyota Kirloskar
• TVS Motors
Jamshedpur Pitampur
Kolkata
Chennai Bangalore Hosur
38
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PRO F I L E OF I N D I A N AU TO MOTIVE INDUSTRY AUTOMOTIVE INDUSTRY • December 2008
Indian Auto Policy is designed for supporting the growth of the industry In 2002, the Indian Government formulated an Auto Policy aimed at promoting an integrated, phased enduring and self-sustained growth of the industry
• Automatic Approval for Foreign equity investment up to 100% • No Minimum Investment Criteria
LOW ENTRY BARRIER
• Investment Incentives by the Local State Governments: Most States Customise incentives for Large Investments
INVESTMENT INCENTIVES
Indian Auto Policy 2002
CONCERN FOR EMISSIONS
•G overnment’s intention on harmonizing the regulatory standards with the rest of world
EMPHASIS ON R&D
• Weighted Tax Deduction up to 150 per cent for in-house research and R&D activities Source: ARAI, IMaCS Analysis 39
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PRO F I L E OF I N D I A N AU TO MOTIVE INDUSTRY AUTOMOTIVE INDUSTRY • December 2008
Indian automotive regulations are in the process of being aligned with European regulations • Indian automotive regulations are closely aligned to the ECE regulations. The diagram below depicts the level of alignment of the Indian regulations with the ECE regulations
81
21
20
2007 0
• T he key regulations that are likely to impact the auto industry and create the need for world class products in the future are crash related regulations and introduction of Bharat Stage IV norms
50
100
122
n Fully/ Partially Allign n In Process of Being Aligned n Items/ Regulations to be covered Source: ARAI, IMaCS Analysis
40
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PRO F I L E OF I N D I A N AU TO MOTIVE INDUSTRY AUTOMOTIVE INDUSTRY • December 2008
Safety and emission related regulations in India - Achievements and Plans Achievements Till Date
Plan NCR and 10 Major Cities
EURO - IV NCR and 10 Major Cities
EURO - III NCR and 3 Major Metros
EURO - II EURO - I
NCR and 10 Major Cities
Entire Country Emission Regulations
Entire Country
Entire Country
2000
2001
2003
2005
2010
• Anti Brake Skid –2007 • Truck cab occupant protection -Crash • Super structure of bus. •Airbags • Electro Magnetic Compatibility (EMC) • Front Under run protective Devices (FUPD)
• Brakes•Steering effort•Gradeability•Installation of mirror, Horn & Lighting devices•Rear Under run Protective Devices (RUPD) Lateral Protective Devices (LPD)•Safety belt•Electro Magnetic Interference (EMI)•Wiping system•Rear View Mirror etc
Safety Regulations
Source: ARAI, IMaCS Analysis
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PRO F I L E OF I N D I A N AU TO MOTIVE INDUSTRY AUTOMOTIVE INDUSTRY • December 2008
The Government of India has taken a strong initiative to strengthen automotive related R&D infrastructure Facilities of National Automotive Testing and R&D Infrastructure Project (NATRIP) Rae Bareilly Centre Complete homologation services to Agri Tractors, Off road Vehicles , Gensets as per Indian or Global standards & Driver Training centre Center of Excellence For Accident Data Analysis Commissioning Schedule Phase-I : July 2010; Phase-II : Aug 2010 Ahmednagar-VRDE Up-Gradation Research, Design, Development and Testing of Vehicles Centre of Excellence For Photometry, EMC, EMI,Test Tracks Commissioning Schedule Phase-I : July 2010; Phase-II : Aug 2010
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PRO F I L E OF I N D I A N AU TO MOTIVE INDUSTRY AUTOMOTIVE INDUSTRY • December 2008
The Government of India has taken a strong initiative to strengthen automotive related R&D infrastructure Facilities of National Automotive Testing and R&D Infrastructure Project (NATRIP)
Pune- ARAI Up-Gradation Complete homologation services to all vehicle categories as per Indian or Global Standards Centre of Excellence For Power Training Development, Materials, Fatigue Commissioning Schedule Phase-I : 2008; Phase-II : 2009
Manesar- iCAT Complete homologation services to all vehicle categories as per Indian or Global Standards Center of Excellence For Component Development, NVH Commissioning Schedule Phase-I : 2008; Phase-II : 2010
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PRO F I L E OF I N D I A N AU TO MOTIVE INDUSTRY AUTOMOTIVE INDUSTRY • December 2008
The Government of India has taken a strong initiative to strengthen automotive related R&D infrastructure Facilities of National Automotive Testing and R&D Infrastructure Project (NATRIP) Silchar Centre Hill area Driver Training Centre and Inspection & Maintainence Facilities Centre of Excellence For Driver Training Commissioning Schedule Phase-I : 2008; Phase-II : 2010 Indore -Proving Grounds Complete Testing Facilities to all vehicle categories as per Indian or Global Standards Centre of Excellence For Vehicle Dynamics, Tyre Development Commissioning Schedule Phase-I : 2009; Phase-II : 2010
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PRO F I L E OF I N D I A N AU TO MOTIVE INDUSTRY AUTOMOTIVE INDUSTRY • December 2008
The Government of India has taken a strong initiative to strengthen automotive related R&D infrastructure Facilities of National Automotive Testing and R&D Infrastructure Project (NATRIP)
Chennai Centre Complete homologation services to all vehicle categories as per Indian or Global Standards Center of Excellence For Infotronics,EMC,Passive Safety Commissioning Schedule Phase-I : 2008; Phase-II : 2011
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GROWTH POTENTIAL OF INDIAN AUTOMOTIVE INDUSTRY
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GROW T H P OT E N T I A L O F I NDIAN AUTOMOTIVE INDUSTRY AUTOMOTIVE INDUSTRY • December 2008
Growth drivers for the Indian automotive industry - O verall economic growth - Lower duties and taxes Government Policies
- C ontemporary products - Shorter life cycle
New products launches
Indian Automotive Industry
Increasing consumer demand
- G rowth in income levels - Easier financing
Cost Competiveness - E xport competitiveness - Reduced cost to consumer - India emerging as a manufacturing hub
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GROW T H P OT E N T I A L O F I NDIAN AUTOMOTIVE INDUSTRY AUTOMOTIVE INDUSTRY • December 2008
Indian Automotive Mission Plan – Vehicle sales expected to grow to 32 million by 2015-16 Potential vehicle sales in India (2015-16) million units
• T he size of the Indian automotive industry is expected to grow at 13 per cent p.a over the next decade to reach around US$ 120-159 billion by 2016 • T he total investments required to support the growth are estimated at around US$ 35-40 billion
Cars
2.65
CVs
0.64
Two
• T he Two wheelers industry is expected to lead the growth, with an estimated sales of 27.8 million units by 2016
27.8
wheelers Three
0.87
Wheelers
• T otal export in the automotive sector would be around US$ 30-35 billion, of which component exports would account for US$ 20-25 billion and vehicle exports for the rest
Total
31.96
Source: SIAM, ACMA, AMP Vision & IMaCS Analysis
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INDIA AS A MANUFACTURING HUB
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IN D I A A S A M A N U FAC T U R I NG HUB AUTOMOTIVE INDUSTRY • December 2008
Global passenger car companies are taking advantage of India’s manufacturing base • N issan Motor Co. has identified India as one of the five low-cost countries to manufacture its new generation compact cars, including the Micra. • Volkswagen is investing in 110,000-unit passenger car assembly plant, expected to be operational by end of 2009.Volkswagen’s India plans include manufacture of small cars based on the ‘Polo’ platform. • T oyota has announced plans for a second plant to begin operations in 2010, having an initial annual production capacity of around 100,000 vehicles apart from the transmission plant which it had already setup to meet the regional demand.
Source: Industry News 50
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IN D I A A S A M A N U FAC T U R I NG HUB AUTOMOTIVE INDUSTRY • December 2008
Global passenger car companies are taking advantage of India’s manufacturing base • H yundai Motors - Hyundai has shifted its entire production of the Atos Prime, its compact model, to its Chennai Plant. It has also set up a US$ 40 million computer-aided design centre in Hyderabad. For the newly launched Model i10,India would be the sole manufacturing base. The company also plans to invest a further US$ 250 million in India by 2013, raising its cumulative investment in the country to around US$ one billion. • G eneral Motors, the US$ 60 million technical centre in Bangalore will be its powerhouse for developing future technologies and shaping new cars. • Ford Motor Co: It exports 58 per cent of the total production from India. Source: Industry News 51
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IN D I A A S A M A N U FAC T U R I NG HUB AUTOMOTIVE INDUSTRY • December 2008
Indian Auto Industry is witnessing more JVs and acquisitions than ever. • M ergers, acquisitions and joint ventures have continued to be the driving force in the Indian automobile industry in sync with the dynamics of an open market. Leading automobile companies have either set up their own manufacturing base in India or have tied up with Indian automotive firms to roll out new products from Indian market. The list includes International, MAN, Daimler, Toyota, Nissan, Renault, Fiat, Honda, Kawasaki, Cummins and many more. During the first half of 2008, Daimler AG bought 26 per cent stake in Sutlej Motors. • Indian companies have also been bullish in acquiring foreign automobile companies to reinforce their presence in the global market. The landmark deal in the first half of 2008 has been Tata Motors’ acquisition of Jaguar-Land Rover from Ford for US$ 2.30 billion. During this period M&M acquired three Italian companies - GR Grafica Ricerca, Metalcastello and Engines Engineering. 52
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IN D I A A S A M A N U FAC T U R I NG HUB AUTOMOTIVE INDUSTRY • December 2008
Several factors make India a favourite investment destination Proven product developmental capabilities - More than 125 Fortune 500 (including large auto companies) have R&D centres in India - Companies can leverage India’s acknowledged leadership in the IT industry
Proximity to Markets - Proximity to other Asian economies - Proximity to the emerging markets like Africa - Shipments to Europe are cheaper than those from Brazil and Thailand
Stable economic policies - Continuity in economic reforms and policies related to investments
Large and growing domestic demand - Demand growth of 14% CAGR makes India one of the fastest growing markets
India as an Auto Hub
Availability of Manpower - 0.4 million Engineering graduates pass out every year - Seven million enter workforce every year
High quality standards - 11 Indian component manufacturers have won the Deming Award for quality - Most leading component manufacturers are QS and ISO certified
Competitive manufacturing cost - Skilled labour costs amongst the lowest in India
Export Potential - Total value of exports by 2015 expected to reach US$ 8–10 billion for vehicles and US$ 20–25 billion for components
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IN D I A A S A M A N U FAC T U R I NG HUB AUTOMOTIVE INDUSTRY • December 2008
Competitiveness of Indian automotive manufacturing In order to emerge as a manufacturing hub, India would face competition from other low cost countries such as • China • Thailand • Brazil IMaCS has compared the cost competitiveness of automotive (car and CV compared separately) manufacturing in India with respect to these countries in terms of factors like • Taxes and duties • C ost of manufacturing (for example, power and fuel costs, labour costs, including productivity interest rates) • Economies of scale
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IN D I A A S A M A N U FAC T U R I NG HUB AUTOMOTIVE INDUSTRY • December 2008
Competitiveness of Indian automotive manufacturing ompetitiveness of manufacturing in India can C be improved by reducing the level of taxes and the cascading impact of taxes and by improving the business infrastructure
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IN D I A A S A M A N U FAC T U R I NG HUB AUTOMOTIVE INDUSTRY • December 2008
Tax structure in India vis-à-vis other countries he burden of direct and indirect taxes is higher T in India than in other countries
India Excise
• G overnment of India announced an across the board excise duty reduction of four per cent across automobiles on December,7 2008. In case of Bus chassis, Excise duty is further less at 8.18 per cent. #Refers to local taxes(WHT)
Small Cars*
CVs*
8.18% +cess
12.27% +cess
Brazil
China
Thailand
-
-
-
VAT
12.5%
17%
17%
7%
Other Taxes
-
15%#
-
-
Corporate Tax
34%
34%
25%
30%
Exemptions
Specific packages provided by states for large investments
Tax incentives for companies in export processing zones
Preferential corporate tax policies for Foreign Investment Enterprises
Tax incentives for investments outside central zone
Import duty on rubber
13%
16%
8%
Free
Import duty on steel
5%
12%^
2%
10%
^Import duty on heavy plates have been reduced to twp per cent, but with a cap of 20,000 tonnes.
Source: GOI, Apectariff,
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IN D I A A S A M A N U FAC T U R I NG HUB AUTOMOTIVE INDUSTRY • December 2008
Labour & Labour Productivity in India vis-a-vis other countries • India compares favourably with other low cost countries in productivity adjusted labour cost • Indian labour productivity in the manufacturing sector is on an increase with the application of production management techniques and many companies have doubled their productivity in last five years
India
Brazil
China
Thailand
Labour cost (US$/hour)
0.75
4.2
0.75
0..8
Labour cost (US$/day)*
6
33.6
6
6.4
1.0
2.0
1.0
1.2
6
16.8
6
5.33
Productivity index** Productivity adjusted labour cost (US$/day)
*Assuming 8 hour shift per day ** Gross value added per person employed when compared to India
• G overnment of India has earmarked nearly Rs 10 billion for human resource skill development initiatives across industry sectors.
Source: GOI, Apectariff,
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IN D I A A S A M A N U FAC T U R I NG HUB AUTOMOTIVE INDUSTRY • December 2008
Power Cost in India vis-à-vis other countries • R ecent downturn across the global economy has forced the central banks of major countries to slash lending rates.
Power costs
• P ower cost in India is the highest amongst the competing countries • H owever, power cost accounts for around 3 per cent of the overall cost structure, hence not a significant disadvantage
Country
Cost per kwh (US$)
India
0.14
Brazil
0.05
China
0.03
Thailand
0.11
Interest costs
• P ower costs in India varies by state and is as low as US$ 0.1 in states like Maharashtra • W ith privatisation and competition in the emerging Indian power sector, cost of power is expected to come under control
Country
Annual lending interest rate
India
10-11%
Brazil
14-16%
China
5-6%
Thailand
7-8%
• Interest rates in India are high as compared to competing countries, but expected to soften in the future
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IN D I A A S A M A N U FAC T U R I NG HUB AUTOMOTIVE INDUSTRY • December 2008
Cost competitiveness - India versus China • Indian manufacturers suffer from a cost disadvantage vis-à-vis Chinese manufacturers mainly because of higher level of taxes and their cascading impact, higher cost of labour (arising out of inflexible labour laws) and higher interest costs and power and fuel costs
Cost breakup
Cars
Cost of vehicle of an Indian Company
CV 100
100
-1.2%
-1.89%
Import duty on raw materials
-0.62%
-0.34%
Corporate taxes
-0.24%
-0.24
-02.06%
-2.47%
-3.4%
-3.6%
-
-
Cost of funds
-0.8%
-0.8%
Total
-4.2%
-4.4%
Cost disadvantage for India
-6.02%
-11.4%
Economies of scale
no diff
no diff
Total cost disadvantage for India
-6.26%
-6.87%
Less Taxes and Duties
• P ower costs in India vary from state to state, and is much lower than the average considered for calculations in the power surplus, hydroelectricity generating states.
Net state level levies and cascading impact of taxes
Total Industry costs
Power & fuel Labour cost
Source: Government websites, discussions with leading automotive players, IMaCS analysis
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IN D I A A S A M A N U FAC T U R I NG HUB AUTOMOTIVE INDUSTRY • December 2008
Cost competitiveness - India versus Thailand • Indian vehicle manufacturers have a small cost disadvantage vis-à-vis Thai vehicle manufacturers, primarily due to higher level of taxes in India. The cost disadvantage has reduced by 2.23 per cent over last year in the case of small cars due to two consecutive cuts in excise duty announced by GOI in FY 2008-2009.
Cost Break-up
Cars
Cost of vehicle of an Indian Company
CV 100
100
-4.69%
-5.36%
Import duty on raw materials
-0.1%
-0.1%
Corporate taxes
-0.2%
-0.20%
Total
-4.79%
-5.46%
Power & fuel
-1.26%
-1.11%
Labour cost
-0.3%
-0.5%
Cost of funds
-0.5%
-0.66%
Total
-2.06%
-2.27%
Cost disadvantage for India
-6.85%
-7.73%
Economies of scale
no diff
no diff
Total cost disadvantage for India
-6.85%
-7.73%
Less Taxes and Duties
• H owever the large market potential and steady growth of the Indian market more than makes up for this disadvantage.
Industry costs
Net state level levies and cascading impact of taxes
Source: Government websites, discussions with leading automotive players, IMaCS Analysis
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IN D I A A S A M A N U FAC T U R I NG HUB AUTOMOTIVE INDUSTRY • December 2008
Cost Competitiveness - India versus Brazil • India is competitively positioned vis-à-vis Brazil in cars as well as CV
Cost Break-up
Cars
CV
Cost of vehicle of an Indian Company
• India enjoys greater scale advantage as compared to Brazil in the case of cars as capacity utilisation in India is better, despite Brazil having larger installed capacities
100
100
-0.2%
-1%
-
-
- 0%
- 0%
-0.2%
-1.0%
- 2.36%
- 2.56%
8%
16.4%
0.1%
0.16%
Total
5.74%
4.1%
Cost advantage for India
5.54%
13.0%
Economies of scale
7%
no diff
12.54%
13.0%
Less Taxes and Duties
Net state level levies and cascading impact of taxes Import duty on raw materials Corporate taxes Total
Industry costs
Power & Fuel Labour cost Cost of funds
Total cost advantage for India
Source: Government websites, discussions with leading automotive players, IMaCS Analysis
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IN D I A A S A M A N U FAC T U R I NG HUB AUTOMOTIVE INDUSTRY • December 2008
Conclusions • India has a cost advantage when compared to Brazil • H owever, India suffers from a cost disadvantage vis-à-vis China and Thailand, primarily due to high level of taxes and their cascading impact • India, in the near future is expected to go ahead with the abolition of interstate Central Sales Tax (CST), which will reduce the cascading impact of taxes to some extent
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IN D I A A S A M A N U FAC T U R I NG HUB AUTOMOTIVE INDUSTRY • December 2008
Conclusions • Implementation of Goods & Services tax (along the lines of VAT) and abolition of all other taxes by 2010 is under consideration, which will reduce the taxation loading on the automotive sector considerably. This step is expected to strengthen India’s future position as a leading automobile manufacturing hub • V arious steps being taken by the Indian government in improving infrastructure would reduce the disadvantage that India suffers from because of poor infrastructure that causes project delays, delays in deliveries and so on. This would increase the demand for road transportation in the country
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AU TO M OT I V E I N D U S T RY December 2008
DISCLAIMER This presentation has been prepared jointly by the India Brand Equity Foundation (“IBEF”) and ICRA Management Consulting Services Limited, IMaCS (“Authors”).
Author’s and IBEF’s knowledge and belief, the content is not to be construed in any manner whatsoever as a substitute for professional advice.
All rights reserved. All copyright in this presentation and related works is owned by IBEF and the Authors. 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.
The Author and IBEF neither recommend or 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 in this presentation. Neither the Author 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.
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 the
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AU TO M OT I V E I N D U S T RY December 2008
Contents • Profile of Indian Automotive Industry • Growth Potential of Indian Automotive Industry • India as a Manufacturing Hub
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PROFILE OF INDIAN AUTOMOTIVE INDUSTRY
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PRO F I L E OF I N D I A N AU TO MOTIVE INDUSTRY AUTOMOTIVE INDUSTRY • December 2008
Indian auto industry has entered the era of globalisation Era of globalisation and evolution of India as a global manufacturing hub Pre 1983
1983-1993
1993-2007
• Closed market • Growth of market limited by supply • Outdated models
• Japanisation GoI-Suzuki joint venture to form Maruti Udyog • Joint ventures with companies in commercial vehicles and components
• D e-licensing of sector in 1993
- P layers • Hindustan Motors • Premier • Telco • Ashok Leyland • Mahindra & Mahindra
- P layers • Maruti Udyog • Hindustan Motors • Premier • Telco • Ashok Leyland • Mahindra & Mahindra
• G lobal major OEMs start assembly in India (GM, Ford, Honda, Hyundai) • Imports allowed from April 2001 alignment of duty on components and parts to ASEAN levels • Implementation of VAT
Prerequisites for globalisation, high level of competence and productivity has become the forte of Indian automakers due to the favorable environment in the country.
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PRO F I L E OF I N D I A N AU TO MOTIVE INDUSTRY AUTOMOTIVE INDUSTRY • December 2008
Indian automobile industry crossed a historic landmark of 10 million vehicles in 2006-07 • T he Indian auto industry has the potential to emerge as one of the largest in the world. Presently, India is
Automotive Production (Million units) 10.83
2007-08
-Second largest two wheeler market in the world
2006-07
-Fourth largest commercial vehicle market in the world
2005-06
11.09 9.74 8.47
2004-05
- 11th largest passenger car in the world and is expected to be the seventh largest market by 2016.
2003-04
7.24
2002-03
CAGR 11.5%
6.28 0
2
4
6 8 million units
10
12
Source: SIAM, IMaCS analysis
Segment
Share in total
CAGR
Two wheelers
74.1%
9.6%
Passenger vehicles
16.3%
19.5%
Three wheelers
4.6%
12.6%
Commercial vehicles
5.0%
21.8%
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PRO F I L E OF I N D I A N AU TO MOTIVE INDUSTRY AUTOMOTIVE INDUSTRY • December 2008
The OEM as well as the component industry is highly competitive • • • • • • • • •
M G Toyota Ford Hyundai Maruti Suzuki Honda Skoda Volvo Mercedes
• • • • • •
Delphi Visteon Bosch Denso Valeo Thyssen Krupp
Global OEM
Global Suppliers
Indian OEM
• • • • • • •
Tata Motors Mahindra & Mahindra Bajaj Auto TVS Motors Hero Honda Bajaj Tempo Ashok Leyland
Indian Suppliers
• • • • • •
Bharat Gorge Sundram Fasteners Rane Group Shriram Pistons RICO Auto Sona Koyo Steering
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PRO F I L E OF I N D I A N AU TO MOTIVE INDUSTRY AUTOMOTIVE INDUSTRY • December 2008
The OEM as well as the component industry is highly competitive • T he Indian auto industry is highly competitive with a number of global and Indian auto companies present • T he supplier industry is equally competitive with a mix of global and Indian players
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PRO F I L E OF I N D I A N AU TO MOTIVE INDUSTRY AUTOMOTIVE INDUSTRY • December 2008
Most automotive players are present in more than one segment Manufacturer
Segments
Manufacturer
Segments
Ashok Leyland
LCVs, M&HCVs, buses
Mahindra & Mahindra
Three wheelers, cars, MUVs, LCVs
Asian Motor Works
M&HCVs
Majestic Auto
Three wheelers
Atul Auto
Three wheelers
Maruti Suzuki
Cars, MUVs, MPVs
Bajaj Auto
Two and three wheelers
Piaggio
Three wheelers, LCVS
BMW India
Cars and MUVs
Reva Electric Car Co.
Electric cars
Daimler Chrysler India
Cars
Royal Enfield Motors
Two wheelers
Eicher Motors
LCVs, M&HCVs, buses
Scooters India
Three wheelers
Electrotherm India
Electric two wheelers
SkodaAuto India
Cars
Fiat India
Cars
Suzuki Motorcycles
Two wheelers
Force Motors
Three wheelers, MUVs and LCVs
Swaraj Mazda Ltd
LCVs, M&HCVSs, buses
Ford India
Cars and MUVs
Tata Motors
Cars, MUVs, LCVs,M&HCVs, buses
General Motors India
Cars & MUVs
Tatra Vectra Motors
M&HCVs
Hero Honda Motors
Two Wheelers
Toyota Kirloskar
Cars, MUVs
Hindustan Motors
Cars, MUVs and LCVs
TVS Motor Co
Two wheelers
Honda
Two wheelers, cars and MUVS
Volvo India
M&HCVs, buses
Hyundai Motors
Cars and MUVs
Yamaha Motor India
Two wheelers
Kinetic Motor
Two wheelers
MUVs: Multi utility vehicles; MPVs: Multi purpose vehicles; LCV: Light commercial vehicles; M&HCVs: Medium and heavy commercial vehicles
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PRO F I L E OF I N D I A N AU TO MOTIVE INDUSTRY AUTOMOTIVE INDUSTRY • December 2008
Two wheelers industry is dominated by motorcycles Domestic two-wheeler industry
Break up of the industry by segment
Million units 2008
7.25
2007
7.86
2006
• Scooter/Scooterette : Wheel size less than or equal to 12 inches • Motorcycle: Wheel size more than 12 inches • Mopeds: Engine capacity less than 75 cc with fixed transmission, wheel size more than 12 inches • Electric Two Wheelers: Electrically Driven
6% 14%
7.05
2005
6.21
2004
5.36
2003
4.81
2002
4.2 0
1
2
3
4
CAGR 13% 80%
5
6
7
8
Source: SIAM, IMaCS analysis
n Motorcycles n Mopeds
n Scooters
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PRO F I L E OF I N D I A N AU TO MOTIVE INDUSTRY AUTOMOTIVE INDUSTRY • December 2008
Two-wheelers industry is dominated by motorcycles • D omestic two-wheeler industry has steadily grown at a CAGR of 9.5 per cent to reach 7.25 million units in 2006-07 • M otorcycle segment has attained highest growth and dominates the market • E ntry level bikes (engine power below 125 cc and price US$ 850-1,100) account for around 80 per cent sales • C ost of ownership and economics of operation are key purchase criteria • P remium bike segment (engine power above 125 cc and price US$ 1,200-2,000) growing at a faster pace as compared to the entry level vehicles, an indication of increasing affluence of users • S ome manufacturers have opted out of 100CC segments and are positioning the 125cc as entry level 10
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PRO F I L E OF I N D I A N AU TO MOTIVE INDUSTRY AUTOMOTIVE INDUSTRY • December 2008
While the motorcycles segment is growing, the scooter segment is shrinking • S cooter segment as a whole has been shrinking, except for the A2 segment
Segment-wise analysis of two-wheeler market
• B ikes having engine capacity 75-125 cc corner the major share of the two wheeler market • B 3 segment is the fastest growing segment in the Indian two wheeler market.
11
Segment
Description
Share in 2001-02
Share in 2007-08
A1
Scooter with engine capacity less than 75 cc
5%
0.5%
A2
Scooter with engine capacity between 75-125 cc
5%
13%
A3
Scooter with engine capacity between 125-250 cc
12%
1%
B2
Motorcycle with engine capacity between 75-125 cc
62%
58%
B3
Motorcycle with engine 5% capacity between 125-250 cc
21%
B4
Motorcycle with engine capacity above 250 cc
1%
0.5%
C1
Mopeds
10%
6%
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PRO F I L E OF I N D I A N AU TO MOTIVE INDUSTRY AUTOMOTIVE INDUSTRY • December 2008
The domestic two wheeler market is dominated by Indian as well as foreign players • H ero Honda: Largest Two-wheeler manufacturer in the world
Market share of key players in 2006-07 3% 9%
• B ajaj Auto: Second largest Two-wheeler manufacturer in India and the largest 3 wheeler manufacturer
42% 19%
• T VS Motor Co: Third largest Two-wheeler manufacturer in India. Established a manufacturing facility in Indonesia
27%
• H onda Motors: Has recently entered the Indian market through its direct subsidiary (in addition to its joint venture Hero Honda)
n Hero Honda Motors n TVS Motor Co, n Others
n Bajaj Auto Ltd n HMSIL
Source: SIAM, IMaCS analysis
• S uzuki: Has recently entered the Indian market through its direct subsidiary
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PRO F I L E OF I N D I A N AU TO MOTIVE INDUSTRY AUTOMOTIVE INDUSTRY • December 2008
The domestic two wheeler market is dominated by Indian as well as foreign players • In the Two-wheeler market in India, competition is intense with around 10 players competing for the share of the industry • T he players include global giants like Honda, Suzuki, Yamaha as well as Indian players like Bajaj and TVS • T he market leader is Hero Honda Motors, closely followed by Bajaj Auto • Industry is characterised by frequent new product launches, with over 22 models launched in 2007-08
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PRO F I L E OF I N D I A N AU TO MOTIVE INDUSTRY AUTOMOTIVE INDUSTRY • December 2008
Two wheelers exports have grown at an impressive CAGR of 41% Two wheeler exports from India Thousand units
Market share of key players in exports 2007-08 4%
2008
819.8
2007
9%
619.2
2006
513.2
2005
366.4
2004
11%
CAGR 41%
59%
265.1
2003
17%
179.7
2002
104.2 0
100
200
300
Source: SIAM, IMaCS analysis
400
500
600
700
800
900
(in ‘000 units)
n Bajaj Auto n Hero Honda Motors Ltd n Hond(HMSIL
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n TVS Motor Company n Others
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PRO F I L E OF I N D I A N AU TO MOTIVE INDUSTRY AUTOMOTIVE INDUSTRY • December 2008
Two wheelers exports have grown at an impressive CAGR of 42% • E xports of two wheelers have grown at over 41 per cent CAGR in last six years • M ajority of exports are to Bangladesh, Sri Lanka, Bhutan and Nepal • H ighest growth (year on year growth of 79 per cent) witnessed in the above 125 CC motorcycles segment, which constituted 36 per cent of two wheeler export market up from previous year’s 26 per cent. • 5 8 per cent of the bikes exported were those with engine capacity below 125 cc. • B ajaj Auto is the market leader in exports with 59 per cent share.
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PRO F I L E OF I N D I A N AU TO MOTIVE INDUSTRY AUTOMOTIVE INDUSTRY • December 2008
Passenger vehicles segment in India is dominated by cars Domestic passenger vehicles industry
Domestic passenger vehicles industry thousand units 2008
1548.0
2007 2006
1143.1
2005
1061.6
2004
78%
902.1
2003
707.2
2002 200
22%
1379.7
CAGR14.8%
675.1 400
600
800
1000
1200
1400
1600
n Passenger cars
n SUVs/MVs
Source: SIAM, IMaCS Analysis
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PRO F I L E OF I N D I A N AU TO MOTIVE INDUSTRY AUTOMOTIVE INDUSTRY • December 2008
Passenger vehicles segment in India is dominated by cars • T he domestic Indian passenger vehicles market has grown at a CAGR of 14.8 per cent over the last six years to reach 1.5 million units in 2007-08. • P assenger cars, contributing to 78 per cent of volumes, grew at a CAGR of 15 per cent. • T he remaining share is with utility vehicles and sports vehicles
17
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PRO F I L E OF I N D I A N AU TO MOTIVE INDUSTRY AUTOMOTIVE INDUSTRY • December 2008
All major global players in passenger vehicles segment have a presence in India • M aruti Udyog: Largest passenger car manufacturer in the country, India considered as strategic market by Suzuki
Market shares of key players in 2007-08
13%
• T ata Motors: Largest automotive player in the Indian industry; launching the Rs. 1 lakh (US$ 2,500) car
4% 8% 46%
• H yundai Motors: Third largest passenger car manufacturer in India, has established India as one of its manufacturing bases in the world
14%
15%
n Maruti Udyog Ltd. n Mahindra & Mahindra
n Tata Motors Ltd . n Toyota
n Hyundai Motor India Ltd. n Others
Source: SIAM, IMaCS Analysis
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PRO F I L E OF I N D I A N AU TO MOTIVE INDUSTRY AUTOMOTIVE INDUSTRY • December 2008
All major global players in passenger vehicles segment have a presence in India • M ahindra & Mahindra: Amongst the largest players in the multi utility vehicles segment, has tied up with Renault for manufacturing and marketing of Logan brand of cars in India • T oyota: Has vision of capturing 10 per cent share of the Indian passenger car market by 2010 • H onda Motors: One of the leading players in the Indian premium cars segment • Ford: Leading player in the premium cars segment • G eneral Motors: Leading player in the premium segment; entered the compact car segment recently
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PRO F I L E OF I N D I A N AU TO MOTIVE INDUSTRY AUTOMOTIVE INDUSTRY • December 2008
All major global players in passenger vehicles segment have a presence in India • T here are more than a dozen manufacturers in the industry • M ost of the leading global players have a presence in India in the form of joint ventures or subsidiaries • T he industry leader is Maruti Udyog with 46 per cent market share, closely followed by Tata Motors and Hyundai Motors at 15 per cent and 14 per cent respectively
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PRO F I L E OF I N D I A N AU TO MOTIVE INDUSTRY AUTOMOTIVE INDUSTRY • December 2008
India is increasingly becoming a manufacturing hub for passenger cars Cars Exports from India Thousand units
Market share of key players in exports 2007-08 3%
2008
217.05
2007
7%
198.48
2006
175.57 166.40
2005 2004
24% 66%
129.29
2003
72.01
2002
CAGR 26%
53.17 0
50
100
150
200
250
300
350
400
n Hyundai Motor India Ltd. n Tata Motors Ltd
n Maruti Suzuki India Ltd n Others
Source: SIAM, IMaCS Analysis
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PRO F I L E OF I N D I A N AU TO MOTIVE INDUSTRY AUTOMOTIVE INDUSTRY • December 2008
India is increasingly becoming a manufacturing hub for passenger cars • E xports of cars from India have grown at a CAGR of 26 per cent CAGR in the last six years to reach 217 thousand units in 2007-08. • H yundai Motors is the market leader in exports of cars with 66 per cent share up from previous year’s 58 per cent share; the company uses India as a manufacturing base for compact cars across the globe. • E xports are made to South America, Africa, Europe, Latin America and the Middle East.
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PRO F I L E OF I N D I A N AU TO MOTIVE INDUSTRY AUTOMOTIVE INDUSTRY • December 2008
Commercial vehicles segment has witnessed the highest growth rate in the automotive industry Domestic CV Industry
Breakup of the Industry by segment
2008
486.82
2007
8%
467.88
6%
351.04
2006 2005
318.43
2004
38%
260.11
2003
CAGR 22%
190.68
2002
48%
146.67 0
100
200
300
400
500
n M & HCV Goods n M & HCV Passenger
n LCV Goods n LCV Passenger
Source: SIAM, IMaCS Analysis
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PRO F I L E OF I N D I A N AU TO MOTIVE INDUSTRY AUTOMOTIVE INDUSTRY • December 2008
Commercial vehicles segment has witnessed the highest growth rate in the automotive industry • D omestic CV industry sales reached 486.82 thousand vehicles in 2007-08, registering a CAGR of 22 per cent over last six years. • S hare of LCVs is gradually increasing, indicating the emergence of hub and spoke model of transportation • In 2007-08, M&HCV passenger vehicles lead the growth at 34 per cent over the last year. • G oods industry is dominated by multi axle vehicles, which account for nearly 50 per cent of the market
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PRO F I L E OF I N D I A N AU TO MOTIVE INDUSTRY AUTOMOTIVE INDUSTRY • December 2008
CV industry is dominated by Indian players • T ata Motors Ltd: Largest commercial vehicle manufacturer in the country, has acquired the Korean manufacturer Daewoo Gap Motors
Market Shares of Key Players in 2006-07
6%
• A shok Leyland Ltd: Second largest player with considerable market share in M&HCV segment; has formed a JV to manufacture LCVs with Nissan
6%
11%
15%
62%
• M ahindra & Mahindra Ltd: Relatively new player in the segment; has formed JV with International Trucks to manufacture M&HCV trucks in India n Tata Motors Ltd n Ashok Leyland Ltd n M&M Ltd n Eicher Motors Ltd n Others
• E icher Motors Ltd: Leading player in the LCV trucks segment; has entered the M&HCV trucks segment recently
Source: SIAM, IMaCS Analysis
• S waraj Mazda Ltd: One of the leading players in the LCV segment • V olvo India: One of the leading players in luxury passenger buses and heavy duty tippers
25
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PRO F I L E OF I N D I A N AU TO MOTIVE INDUSTRY AUTOMOTIVE INDUSTRY • December 2008
CV industry is dominated by Indian players • T ata Motors is the market leader in both goods and passenger segments, closely followed by Ashok Leyland • L CV market is dominated by Tata Motors, followed by Mahindra & Mahindra • Introduction of Tata Ace has contributed significant growth in the sub one tonne segment • M any players are in the process of strengthening their hold in the market through JVs .
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PRO F I L E OF I N D I A N AU TO MOTIVE INDUSTRY AUTOMOTIVE INDUSTRY • December 2008
Indian CV exports have witnessed a more impressive growth CV Exports from India (Thousand units
Market Share of Key Players in Exports (2007-08) 59.00
2008
4%
49.77
2007
2%
15%
40.60
2006
12%
29.94
2005 17.43
2004
67%
12.26
2003
CAGR 30.6%
11.87
2002 0
10
20
30
40
50
n Tata Motors Ltd n M&M Ltd n Others
60
n Ashok Leyland Ltd n Eicher Motors Ltd
Source: SIAM, IMaCS Analysis
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PRO F I L E OF I N D I A N AU TO MOTIVE INDUSTRY AUTOMOTIVE INDUSTRY • December 2008
Indian CV exports have witnessed a more impressive growth • E xports have grown at a fast pace of over 30 per cent over the last six years. • T ata Motors accounts more than 70 per cent of the CV exports, with Ashok Leyland and Mahindra&Mahindra making up for a large portion of the balance. • L CV goods carriers accounted for 52 per cent of the overall exports • M ajor portion of the exports are to Sri Lanka, Gulf countries and Africa
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PRO F I L E OF I N D I A N AU TO MOTIVE INDUSTRY AUTOMOTIVE INDUSTRY • December 2008
Growth in three wheelers has been driven by the need for low cost last mile transportation system Domestic three wheeler Industry (Thousand units) 2008
Break-up of Industry by segment (2008)
364.70
2007
403.91
2006
359.92
2005
36%
307.86
64%
284.08
2004 2003
231.53
CAGR 10.5%
200.28
2002 0
100
200
300
400
500
n Passenger Carrier
n Goods Carrier
Source: SIAM, IMaCS Analysis
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PRO F I L E OF I N D I A N AU TO MOTIVE INDUSTRY AUTOMOTIVE INDUSTRY • December 2008
Growth in three wheelers has been driven by the need for low cost last mile transportation system • T hree Wheeler sales in India touched a new record of 0.36 Million registering a growth of 10.5 per cent CAGR over the last six years • T he proportion of Goods carriers in the proportion of overall sales has doubled indicating towards the increased need for low cost last mile transportation systems • S ub 3.5 tonne segment in goods accounted for 71 per cent of the sales and Sub Four seater segment in passenger versions accounted for 97 per cent of the sales
30
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PRO F I L E OF I N D I A N AU TO MOTIVE INDUSTRY AUTOMOTIVE INDUSTRY • December 2008
The three wheeler market is dominated by Bajaj Auto • B ajaj Auto Ltd. : Market leader in the Three wheeler segment, in the process of revamping its product portfolio
Market Share of Key players 2007-08 8% 9%
• Piaggio Vehicles : The Italian manufacturer is one of the leading players with fast growing market share, in the process of making India as their global hub
42%
41%
• M&M Ltd: One of the leading players in the segment • A tul Auto Ltd: Have introduced new products in the rear engine segment, and also is a manufacturer of ‘Chakda’’ a Three wheeler reengineered from Two wheeler, popular in the western parts of the country
n Bajaj Auto n M&M
n Piaggio Vehicles n Others
Source: SIAM, IMaCS Analysis
• F orce Motors Ltd: A JV between Bajaj Tempo and MAN AG of Germany; leading player in the goods segment
31
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PRO F I L E OF I N D I A N AU TO MOTIVE INDUSTRY AUTOMOTIVE INDUSTRY • December 2008
The Three wheeler market is dominated by Bajaj Auto • B ajaj Auto emerged the leader in Three Wheeler industry with 42 per cent share, closely followed by Piaggio with 41 per cent share • B ajaj Auto lead the passenger carrier segment with 54 per cent share, while Piaggio lead the goods segment with 44 per cent market share
32
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PRO F I L E OF I N D I A N AU TO MOTIVE INDUSTRY AUTOMOTIVE INDUSTRY • December 2008
Exports of Three wheelers have been growing rapidly, with Bajaj Auto the clear market leader • E xports of three wheelers touched a new high of 141.24 thousand units, registering a robust growth of 44.5 per cent CAGR over the last six years
Three wheeler exports and growth (Thousand Units) 2008
141.24 143.90
2007
• T his has been contributed almost entirely by Bajaj Auto, which accounted for around 97 per cent of exports in 2006-07
2006
• B ajaj Auto exports to Sri Lanka, Egypt, Nepal, Bangladesh among other countries
76.88
2005
66.80
2004
68.14 43.37
2003
CAGR 44.5%
15.46
2002 0
25
50
75
100
125
150
175
Source: SIAM, IMaCS Analysis
33
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PRO F I L E OF I N D I A N AU TO MOTIVE INDUSTRY AUTOMOTIVE INDUSTRY • December 2008
Indian firms are increasingly partnering with foreign firms Indian OEM
Foreign Partner
Type of Partnership
Maruti Suzuki
Suzuki Motor CorporationJapan
Equity partner
Mahindra Logan
Renault
Joint Venture
Tata motors
Fiat
Tie-up for manufacturing and marketing in India
KINETIC Group
Sanyang Industry Co Ltd (SYM- Taiwan
Technology
Italjet -Italy
Tie-up for manufacturing and distribution
Hero
Honda- Japan
Technology
Hero Cycles
Ultra Motor Company, U.K
Technology
Bajaj Auto
Kawasaki Heavy Industries Ltd, Engine Technology Japan Engine Technology
Technology
Kubota Corp, Japan
Technology
L&T Ltd
Scania-Spain
Tie-up for marketing in India
Ashok Leyland
Hino-Japan
Engine Technology
Irizar-Spain
Bus body Technology
ZF-Germany
Gearbox Technology
Marco Polo-Brazil
Bus/Coach Technology
Cummins-USA
Engine Technology
Tata Motors
34
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PRO F I L E OF I N D I A N AU TO MOTIVE INDUSTRY AUTOMOTIVE INDUSTRY • December 2008
Three major automotive clusters exist in India • M ajor automotive clusters - Mumbai-Pune-NasikAurangabad (West), Chennai-Bangalore-Hosur (South) and Delhi-Gurgaon-Faridabad (North) • E xport oriented companies have formed base in the West/South regions, due to proximity to ports
35
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PRO F I L E OF I N D I A N AU TO MOTIVE INDUSTRY AUTOMOTIVE INDUSTRY • December 2008
Three major automotive clusters exist in India North / Central • Ashok Leyland
• Eicher
• Force Motors
• Hero Honda
• Hindustan Motors
• Honda
• Honda SIEL
• ICML
• Kinetic
• LML
• Majestic
• Maruti Suzuki
• Piaggio
• Yamaha
• Swaraj Mazda
• Tata Motors
Ludhian a
Delhi-Gurgaon-NoidaGhaziabad Haridwar
Jamshedpur Pitampur
Kolkata
East • Hindustan Motors • Tata Motors
Chennai Bangalore Hosur
36
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PRO F I L E OF I N D I A N AU TO MOTIVE INDUSTRY AUTOMOTIVE INDUSTRY • December 2008
Three major automotive clusters exist in India West • Ashok Leyland
• Atul Auto
• Bajaj Auto
• Daimler Chrysler
• FIAT
• Force Motors
• GM
• Greaves
• Kinetic
• M&M
• Piaggio
• Premier
• Skoda
• Tata Motors
Ludhian a
Delhi-Gurgaon-NoidaGhaziabad Haridwar
Jamshedpur Pitampur
Kolkata
Chennai Bangalore Hosur
37
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PRO F I L E OF I N D I A N AU TO MOTIVE INDUSTRY AUTOMOTIVE INDUSTRY • December 2008
Three major automotive clusters exist in India South • Ashok Leyland
• Enfield
• Ford
• Greaves
• Hindustan Motors
• Hyundai
Ludhian a
Delhi-Gurgaon-NoidaGhaziabad Haridwar
• Mahindra & Mahindra • Tatra
• Volvo
• Toyota Kirloskar
• TVS Motors
Jamshedpur Pitampur
Kolkata
Chennai Bangalore Hosur
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PRO F I L E OF I N D I A N AU TO MOTIVE INDUSTRY AUTOMOTIVE INDUSTRY • December 2008
Indian Auto Policy is designed for supporting the growth of the industry In 2002, the Indian Government formulated an Auto Policy aimed at promoting an integrated, phased enduring and self-sustained growth of the industry
• Automatic Approval for Foreign equity investment up to 100% • No Minimum Investment Criteria
LOW ENTRY BARRIER
• Investment Incentives by the Local State Governments: Most States Customise incentives for Large Investments
INVESTMENT INCENTIVES
Indian Auto Policy 2002
CONCERN FOR EMISSIONS
•G overnment’s intention on harmonizing the regulatory standards with the rest of world
EMPHASIS ON R&D
• Weighted Tax Deduction up to 150 per cent for in-house research and R&D activities Source: ARAI, IMaCS Analysis 39
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PRO F I L E OF I N D I A N AU TO MOTIVE INDUSTRY AUTOMOTIVE INDUSTRY • December 2008
Indian automotive regulations are in the process of being aligned with European regulations • Indian automotive regulations are closely aligned to the ECE regulations. The diagram below depicts the level of alignment of the Indian regulations with the ECE regulations
81
21
20
2007 0
• T he key regulations that are likely to impact the auto industry and create the need for world class products in the future are crash related regulations and introduction of Bharat Stage IV norms
50
100
122
n Fully/ Partially Allign n In Process of Being Aligned n Items/ Regulations to be covered Source: ARAI, IMaCS Analysis
40
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PRO F I L E OF I N D I A N AU TO MOTIVE INDUSTRY AUTOMOTIVE INDUSTRY • December 2008
Safety and emission related regulations in India - Achievements and Plans Achievements Till Date
Plan NCR and 10 Major Cities
EURO - IV NCR and 10 Major Cities
EURO - III NCR and 3 Major Metros
EURO - II EURO - I
NCR and 10 Major Cities
Entire Country Emission Regulations
Entire Country
Entire Country
2000
2001
2003
2005
2010
• Anti Brake Skid –2007 • Truck cab occupant protection -Crash • Super structure of bus. •Airbags • Electro Magnetic Compatibility (EMC) • Front Under run protective Devices (FUPD)
• Brakes•Steering effort•Gradeability•Installation of mirror, Horn & Lighting devices•Rear Under run Protective Devices (RUPD) Lateral Protective Devices (LPD)•Safety belt•Electro Magnetic Interference (EMI)•Wiping system•Rear View Mirror etc
Safety Regulations
Source: ARAI, IMaCS Analysis
41
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PRO F I L E OF I N D I A N AU TO MOTIVE INDUSTRY AUTOMOTIVE INDUSTRY • December 2008
The Government of India has taken a strong initiative to strengthen automotive related R&D infrastructure Facilities of National Automotive Testing and R&D Infrastructure Project (NATRIP) Rae Bareilly Centre Complete homologation services to Agri Tractors, Off road Vehicles , Gensets as per Indian or Global standards & Driver Training centre Center of Excellence For Accident Data Analysis Commissioning Schedule Phase-I : July 2010; Phase-II : Aug 2010 Ahmednagar-VRDE Up-Gradation Research, Design, Development and Testing of Vehicles Centre of Excellence For Photometry, EMC, EMI,Test Tracks Commissioning Schedule Phase-I : July 2010; Phase-II : Aug 2010
42
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PRO F I L E OF I N D I A N AU TO MOTIVE INDUSTRY AUTOMOTIVE INDUSTRY • December 2008
The Government of India has taken a strong initiative to strengthen automotive related R&D infrastructure Facilities of National Automotive Testing and R&D Infrastructure Project (NATRIP)
Pune- ARAI Up-Gradation Complete homologation services to all vehicle categories as per Indian or Global Standards Centre of Excellence For Power Training Development, Materials, Fatigue Commissioning Schedule Phase-I : 2008; Phase-II : 2009
Manesar- iCAT Complete homologation services to all vehicle categories as per Indian or Global Standards Center of Excellence For Component Development, NVH Commissioning Schedule Phase-I : 2008; Phase-II : 2010
43
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PRO F I L E OF I N D I A N AU TO MOTIVE INDUSTRY AUTOMOTIVE INDUSTRY • December 2008
The Government of India has taken a strong initiative to strengthen automotive related R&D infrastructure Facilities of National Automotive Testing and R&D Infrastructure Project (NATRIP) Silchar Centre Hill area Driver Training Centre and Inspection & Maintainence Facilities Centre of Excellence For Driver Training Commissioning Schedule Phase-I : 2008; Phase-II : 2010 Indore -Proving Grounds Complete Testing Facilities to all vehicle categories as per Indian or Global Standards Centre of Excellence For Vehicle Dynamics, Tyre Development Commissioning Schedule Phase-I : 2009; Phase-II : 2010
44
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PRO F I L E OF I N D I A N AU TO MOTIVE INDUSTRY AUTOMOTIVE INDUSTRY • December 2008
The Government of India has taken a strong initiative to strengthen automotive related R&D infrastructure Facilities of National Automotive Testing and R&D Infrastructure Project (NATRIP)
Chennai Centre Complete homologation services to all vehicle categories as per Indian or Global Standards Center of Excellence For Infotronics,EMC,Passive Safety Commissioning Schedule Phase-I : 2008; Phase-II : 2011
45
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GROWTH POTENTIAL OF INDIAN AUTOMOTIVE INDUSTRY
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GROW T H P OT E N T I A L O F I NDIAN AUTOMOTIVE INDUSTRY AUTOMOTIVE INDUSTRY • December 2008
Growth drivers for the Indian automotive industry - O verall economic growth - Lower duties and taxes Government Policies
- C ontemporary products - Shorter life cycle
New products launches
Indian Automotive Industry
Increasing consumer demand
- G rowth in income levels - Easier financing
Cost Competiveness - E xport competitiveness - Reduced cost to consumer - India emerging as a manufacturing hub
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GROW T H P OT E N T I A L O F I NDIAN AUTOMOTIVE INDUSTRY AUTOMOTIVE INDUSTRY • December 2008
Indian Automotive Mission Plan – Vehicle sales expected to grow to 32 million by 2015-16 Potential vehicle sales in India (2015-16) million units
• T he size of the Indian automotive industry is expected to grow at 13 per cent p.a over the next decade to reach around US$ 120-159 billion by 2016 • T he total investments required to support the growth are estimated at around US$ 35-40 billion
Cars
2.65
CVs
0.64
Two
• T he Two wheelers industry is expected to lead the growth, with an estimated sales of 27.8 million units by 2016
27.8
wheelers Three
0.87
Wheelers
• T otal export in the automotive sector would be around US$ 30-35 billion, of which component exports would account for US$ 20-25 billion and vehicle exports for the rest
Total
31.96
Source: SIAM, ACMA, AMP Vision & IMaCS Analysis
48
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INDIA AS A MANUFACTURING HUB
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IN D I A A S A M A N U FAC T U R I NG HUB AUTOMOTIVE INDUSTRY • December 2008
Global passenger car companies are taking advantage of India’s manufacturing base • N issan Motor Co. has identified India as one of the five low-cost countries to manufacture its new generation compact cars, including the Micra. • Volkswagen is investing in 110,000-unit passenger car assembly plant, expected to be operational by end of 2009.Volkswagen’s India plans include manufacture of small cars based on the ‘Polo’ platform. • T oyota has announced plans for a second plant to begin operations in 2010, having an initial annual production capacity of around 100,000 vehicles apart from the transmission plant which it had already setup to meet the regional demand.
Source: Industry News 50
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IN D I A A S A M A N U FAC T U R I NG HUB AUTOMOTIVE INDUSTRY • December 2008
Global passenger car companies are taking advantage of India’s manufacturing base • H yundai Motors - Hyundai has shifted its entire production of the Atos Prime, its compact model, to its Chennai Plant. It has also set up a US$ 40 million computer-aided design centre in Hyderabad. For the newly launched Model i10,India would be the sole manufacturing base. The company also plans to invest a further US$ 250 million in India by 2013, raising its cumulative investment in the country to around US$ one billion. • G eneral Motors, the US$ 60 million technical centre in Bangalore will be its powerhouse for developing future technologies and shaping new cars. • Ford Motor Co: It exports 58 per cent of the total production from India. Source: Industry News 51
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IN D I A A S A M A N U FAC T U R I NG HUB AUTOMOTIVE INDUSTRY • December 2008
Indian Auto Industry is witnessing more JVs and acquisitions than ever. • M ergers, acquisitions and joint ventures have continued to be the driving force in the Indian automobile industry in sync with the dynamics of an open market. Leading automobile companies have either set up their own manufacturing base in India or have tied up with Indian automotive firms to roll out new products from Indian market. The list includes International, MAN, Daimler, Toyota, Nissan, Renault, Fiat, Honda, Kawasaki, Cummins and many more. During the first half of 2008, Daimler AG bought 26 per cent stake in Sutlej Motors. • Indian companies have also been bullish in acquiring foreign automobile companies to reinforce their presence in the global market. The landmark deal in the first half of 2008 has been Tata Motors’ acquisition of Jaguar-Land Rover from Ford for US$ 2.30 billion. During this period M&M acquired three Italian companies - GR Grafica Ricerca, Metalcastello and Engines Engineering. 52
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IN D I A A S A M A N U FAC T U R I NG HUB AUTOMOTIVE INDUSTRY • December 2008
Several factors make India a favourite investment destination Proven product developmental capabilities - More than 125 Fortune 500 (including large auto companies) have R&D centres in India - Companies can leverage India’s acknowledged leadership in the IT industry
Proximity to Markets - Proximity to other Asian economies - Proximity to the emerging markets like Africa - Shipments to Europe are cheaper than those from Brazil and Thailand
Stable economic policies - Continuity in economic reforms and policies related to investments
Large and growing domestic demand - Demand growth of 14% CAGR makes India one of the fastest growing markets
India as an Auto Hub
Availability of Manpower - 0.4 million Engineering graduates pass out every year - Seven million enter workforce every year
High quality standards - 11 Indian component manufacturers have won the Deming Award for quality - Most leading component manufacturers are QS and ISO certified
Competitive manufacturing cost - Skilled labour costs amongst the lowest in India
Export Potential - Total value of exports by 2015 expected to reach US$ 8–10 billion for vehicles and US$ 20–25 billion for components
53
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IN D I A A S A M A N U FAC T U R I NG HUB AUTOMOTIVE INDUSTRY • December 2008
Competitiveness of Indian automotive manufacturing In order to emerge as a manufacturing hub, India would face competition from other low cost countries such as • China • Thailand • Brazil IMaCS has compared the cost competitiveness of automotive (car and CV compared separately) manufacturing in India with respect to these countries in terms of factors like • Taxes and duties • C ost of manufacturing (for example, power and fuel costs, labour costs, including productivity interest rates) • Economies of scale
54
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IN D I A A S A M A N U FAC T U R I NG HUB AUTOMOTIVE INDUSTRY • December 2008
Competitiveness of Indian automotive manufacturing ompetitiveness of manufacturing in India can C be improved by reducing the level of taxes and the cascading impact of taxes and by improving the business infrastructure
55
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IN D I A A S A M A N U FAC T U R I NG HUB AUTOMOTIVE INDUSTRY • December 2008
Tax structure in India vis-à-vis other countries he burden of direct and indirect taxes is higher T in India than in other countries
India Excise
• G overnment of India announced an across the board excise duty reduction of four per cent across automobiles on December,7 2008. In case of Bus chassis, Excise duty is further less at 8.18 per cent. #Refers to local taxes(WHT)
Small Cars*
CVs*
8.18% +cess
12.27% +cess
Brazil
China
Thailand
-
-
-
VAT
12.5%
17%
17%
7%
Other Taxes
-
15%#
-
-
Corporate Tax
34%
34%
25%
30%
Exemptions
Specific packages provided by states for large investments
Tax incentives for companies in export processing zones
Preferential corporate tax policies for Foreign Investment Enterprises
Tax incentives for investments outside central zone
Import duty on rubber
13%
16%
8%
Free
Import duty on steel
5%
12%^
2%
10%
^Import duty on heavy plates have been reduced to twp per cent, but with a cap of 20,000 tonnes.
Source: GOI, Apectariff,
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IN D I A A S A M A N U FAC T U R I NG HUB AUTOMOTIVE INDUSTRY • December 2008
Labour & Labour Productivity in India vis-a-vis other countries • India compares favourably with other low cost countries in productivity adjusted labour cost • Indian labour productivity in the manufacturing sector is on an increase with the application of production management techniques and many companies have doubled their productivity in last five years
India
Brazil
China
Thailand
Labour cost (US$/hour)
0.75
4.2
0.75
0..8
Labour cost (US$/day)*
6
33.6
6
6.4
1.0
2.0
1.0
1.2
6
16.8
6
5.33
Productivity index** Productivity adjusted labour cost (US$/day)
*Assuming 8 hour shift per day ** Gross value added per person employed when compared to India
• G overnment of India has earmarked nearly Rs 10 billion for human resource skill development initiatives across industry sectors.
Source: GOI, Apectariff,
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IN D I A A S A M A N U FAC T U R I NG HUB AUTOMOTIVE INDUSTRY • December 2008
Power Cost in India vis-à-vis other countries • R ecent downturn across the global economy has forced the central banks of major countries to slash lending rates.
Power costs
• P ower cost in India is the highest amongst the competing countries • H owever, power cost accounts for around 3 per cent of the overall cost structure, hence not a significant disadvantage
Country
Cost per kwh (US$)
India
0.14
Brazil
0.05
China
0.03
Thailand
0.11
Interest costs
• P ower costs in India varies by state and is as low as US$ 0.1 in states like Maharashtra • W ith privatisation and competition in the emerging Indian power sector, cost of power is expected to come under control
Country
Annual lending interest rate
India
10-11%
Brazil
14-16%
China
5-6%
Thailand
7-8%
• Interest rates in India are high as compared to competing countries, but expected to soften in the future
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IN D I A A S A M A N U FAC T U R I NG HUB AUTOMOTIVE INDUSTRY • December 2008
Cost competitiveness - India versus China • Indian manufacturers suffer from a cost disadvantage vis-à-vis Chinese manufacturers mainly because of higher level of taxes and their cascading impact, higher cost of labour (arising out of inflexible labour laws) and higher interest costs and power and fuel costs
Cost breakup
Cars
Cost of vehicle of an Indian Company
CV 100
100
-1.2%
-1.89%
Import duty on raw materials
-0.62%
-0.34%
Corporate taxes
-0.24%
-0.24
-02.06%
-2.47%
-3.4%
-3.6%
-
-
Cost of funds
-0.8%
-0.8%
Total
-4.2%
-4.4%
Cost disadvantage for India
-6.02%
-11.4%
Economies of scale
no diff
no diff
Total cost disadvantage for India
-6.26%
-6.87%
Less Taxes and Duties
• P ower costs in India vary from state to state, and is much lower than the average considered for calculations in the power surplus, hydroelectricity generating states.
Net state level levies and cascading impact of taxes
Total Industry costs
Power & fuel Labour cost
Source: Government websites, discussions with leading automotive players, IMaCS analysis
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IN D I A A S A M A N U FAC T U R I NG HUB AUTOMOTIVE INDUSTRY • December 2008
Cost competitiveness - India versus Thailand • Indian vehicle manufacturers have a small cost disadvantage vis-à-vis Thai vehicle manufacturers, primarily due to higher level of taxes in India. The cost disadvantage has reduced by 2.23 per cent over last year in the case of small cars due to two consecutive cuts in excise duty announced by GOI in FY 2008-2009.
Cost Break-up
Cars
Cost of vehicle of an Indian Company
CV 100
100
-4.69%
-5.36%
Import duty on raw materials
-0.1%
-0.1%
Corporate taxes
-0.2%
-0.20%
Total
-4.79%
-5.46%
Power & fuel
-1.26%
-1.11%
Labour cost
-0.3%
-0.5%
Cost of funds
-0.5%
-0.66%
Total
-2.06%
-2.27%
Cost disadvantage for India
-6.85%
-7.73%
Economies of scale
no diff
no diff
Total cost disadvantage for India
-6.85%
-7.73%
Less Taxes and Duties
• H owever the large market potential and steady growth of the Indian market more than makes up for this disadvantage.
Industry costs
Net state level levies and cascading impact of taxes
Source: Government websites, discussions with leading automotive players, IMaCS Analysis
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IN D I A A S A M A N U FAC T U R I NG HUB AUTOMOTIVE INDUSTRY • December 2008
Cost Competitiveness - India versus Brazil • India is competitively positioned vis-à-vis Brazil in cars as well as CV
Cost Break-up
Cars
CV
Cost of vehicle of an Indian Company
• India enjoys greater scale advantage as compared to Brazil in the case of cars as capacity utilisation in India is better, despite Brazil having larger installed capacities
100
100
-0.2%
-1%
-
-
- 0%
- 0%
-0.2%
-1.0%
- 2.36%
- 2.56%
8%
16.4%
0.1%
0.16%
Total
5.74%
4.1%
Cost advantage for India
5.54%
13.0%
Economies of scale
7%
no diff
12.54%
13.0%
Less Taxes and Duties
Net state level levies and cascading impact of taxes Import duty on raw materials Corporate taxes Total
Industry costs
Power & Fuel Labour cost Cost of funds
Total cost advantage for India
Source: Government websites, discussions with leading automotive players, IMaCS Analysis
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IN D I A A S A M A N U FAC T U R I NG HUB AUTOMOTIVE INDUSTRY • December 2008
Conclusions • India has a cost advantage when compared to Brazil • H owever, India suffers from a cost disadvantage vis-à-vis China and Thailand, primarily due to high level of taxes and their cascading impact • India, in the near future is expected to go ahead with the abolition of interstate Central Sales Tax (CST), which will reduce the cascading impact of taxes to some extent
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IN D I A A S A M A N U FAC T U R I NG HUB AUTOMOTIVE INDUSTRY • December 2008
Conclusions • Implementation of Goods & Services tax (along the lines of VAT) and abolition of all other taxes by 2010 is under consideration, which will reduce the taxation loading on the automotive sector considerably. This step is expected to strengthen India’s future position as a leading automobile manufacturing hub • V arious steps being taken by the Indian government in improving infrastructure would reduce the disadvantage that India suffers from because of poor infrastructure that causes project delays, delays in deliveries and so on. This would increase the demand for road transportation in the country
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AU TO M OT I V E I N D U S T RY December 2008
DISCLAIMER This presentation has been prepared jointly by the India Brand Equity Foundation (“IBEF”) and ICRA Management Consulting Services Limited, IMaCS (“Authors”).
Author’s and IBEF’s knowledge and belief, the content is not to be construed in any manner whatsoever as a substitute for professional advice.
All rights reserved. All copyright in this presentation and related works is owned by IBEF and the Authors. 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.
The Author and IBEF neither recommend or 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 in this presentation. Neither the Author 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.
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 the
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