Hindustan Motors

HINDUSTAN MOTORS

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Index

Introduction

Hindustan Motors

Hindustan Motors Limited

Brands

Plants

Collaborations

Automobile Industry

Milestones

Milestones

Till 1980s

MUL’s Entry

1990’s

Strategy Strategy

Porters Model Analysis

Porters Model Analysis

Problems

Need for Turnaround

Mckinsey & Co. findings

Implementation

Turnaround Efforts -1

Turnaround Efforts -2

Turnaround Efforts -2

Effects

Sector Analysis

Industry Overview  Key

industry propelling Indian Economy

 Contribution

to GDP: About 4%

 100%

FDI allowed via automatic route

 Major

generator of employment (450 million in

2007)

(Source: Automotive mission plan 2006-2016)

Contribution of Automobile Sector to GDP

SIAM)

(Source:

Mission Plan 2006 - 2016  Objective

• Investment Planned – $ 35 to 40 bn • Increase share in GDP (to 10%) • Generate employment opportunities  Government

Plans

• Reduction in excise duty (to 5% - 7.5%) • Development of NATRIP

Automotive Mission Plan (AMP)  Decade-long

plan launched in 2006  Key Objectives:  Reduce & Simplify tax laws  Create flexible labor laws  Emphasize on R&D investments  Lower interest rates  Encourage capacity addition ; Bharat Forge

followed suit with 20% addition in FY’07

Industry Structure  Highly

fragmented industry

 Around 500 organized players account for 77%

of the value added in the sector  Organized market led by Bharat Forge, Sundaram Clayton  Around 6000 unorganized players account for 23% of the value added in the sector

Ancillary Leaders

Industry Players (Op Profit Margin)

Source: www.economictimes.com

Effect of Inflation  Brake

on Growth Plans of Auto Companies

 Increase  Auto

in Sale Price by 3-4%

Industry growth in revenues

• 2007: 17.15% • 2008: 6.4% (Source: SIAM & www.financialexpress.com)

Competition

Key Growth Drivers of Indian Automotive Industry

Competitors in Passenger cars and LCV segments

Continuous innovation and new product launches by competitors

Continuous innovation and new product launches by competitors

Three major auto clusters exist in IndiaLocation Advantage for competitors

Three major auto clusters exist in IndiaLocation Advantage for competitors

Three major auto clusters exist in IndiaLocation Advantage for competitors

Auto financing- another differentiator for competitors 

Tata Motors – Tata Motor Finance



Maruti Suzuki - Citicorp Maruti Finance Ltd. , Maruti Countrywide Auto Finance Ltd.



M&M – Mahindra First Choice, Mahindra Finance

Increasing thrust on distributor management for robust After sales services which is high margin business 

Tata Motors has over 3500 touch points for all its product offerings



Maruti Suzuki has over 600 sales outlet and 2500+ authorized service centers



Hyundai has network of 250 dealers and 1000 after sales service centers



Toyota has developed exclusive network of 63 dealers for sales and servicing

JVs with Multinationals has brought modern technology and opened doors of global markets 

Toyota- Kirloskar JV



M&M – Renault : New products and increased access to technology



Tata Motors- Fiat, JLR acquisition gives access to world class components from Ford



Maruti – Suzuki : strategic partnership for Suzuki



Ashok Leyland – Nissan

Competitors taking benefits of government policies for developing Automotives sector 

Automotive Mission Plan aims to make India a hub of Small car export station. - Hyundai exports 36% of its production to 67 countries - Suzuki plans to export 200,000 cars from India by 2010 - Ford Motor exports 58% of its production from India

NHDP and increased spending on developing road infrastructure critical to develop LCV market

-

vertical

Hub-and-spoke model is gradually developing - Tata Motors strategic acquisition of Daewoo - Ashok Leyland- Nissan JV to produce LCV in Chennai - Boom in retail and FMCG sector a big driver for this

Financials

Peer Comparison

Value Driver Formula

 ROIC

= (1-T) * (Price - Cost) * Quantity Capital Invested

Sales (INR Crore)

Net profit (INR Crore)

Operating Cash Margins

Fixed Asset Turnover Ratio

Inventory Turnover

Exports as % of sales

Recommendation

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