Status Indian Auto Industry

“Global Competitiveness of Indian Auto Component Industry & Its Sustainability”

ISO:9001:2000

Contents

ACMA

Indian Perspective

The Auto Component Industry & Its Trends

Drivers for Partnership

ISO:9001:2000

Introduction Automotive Component Manufacturers Association of India Role

An apex agency of the Indian Automotive Industry

550+ companies forming majority of the auto component output in the organized sector

Members

Quality System

As Automotive Component Manufacturers Association of India in the year 1982

ACMA operates on Quality System based on ISO 9001:2000

Re-Christened

Inception In the year 1959 as The All India Automobile & Ancillary Industries Association (AIA & AIA) ISO:9001:2000

ACMA and Its Services

Promotes Indian Automotive Component Industry

Trade Promotion

Technology Up-gradation

Quality Enhancement

Vital Catalyst for Industrial Development

ISO:9001:2000

Collection & Dissemination of Information

International Business Development

Promote Promote India India as a Brand as a Brand

Organize Organize Business Business Development Development Delegation Delegation Overseas Overseas

Undertake Undertake Export Export Promotional Promotional Projects Projects

Organize Organize Participation Participation in Overseas in Overseas Automobile Automobile Exhibitions Exhibitions & & Fairs Fairs

Global Global Interaction Interaction through through Counterpart Counterpart Association Association

Organize Organize Private Private Exhibitions Exhibitions & & Suppliers Conference Suppliers Conference ISO:9001:2000

Providing Providing International International Sourcing Sourcing Forums Forums

Facilitate Facilitate potential potential Business Partnership Business Partnership of of JV / Strategic Alliance JV / Strategic Alliance

Working Working closely closely with IPOs with IPOs in in India India

Dissemination Dissemination of of Export Enquiries Export Enquiries

Contents

ACMA

Indian Perspective

The Auto Component Industry & Its Trends

Drivers for Partnership

ISO:9001:2000

Global Manufacturing Hub Global Manufacturing Trend: Since 70’s Industrial Manufacturing has Spread to Countries with Large Populations & Lower Costs 1970’s

U.S.

W. Jap. Europe

1980’s

U.S.

W. Jap. Europe

1990’s

U.S.

W. Jap. Europe

Mexico

E. Europe

China

2000 +

U.S.

W. Jap. Europe

Mexico

E. Europe

China

(Four Tigers: S. Korea, TW, HK, Singapore)

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Source – Darden School – University of Virgina

India

A Booming Market Economy Real GDP and Inflation Growth(%) Real GDP Growth 10 9 8 7 6 5 4 3 2 1 0

Inflation

9.2

9

8.5

Foreign Exchange Reserves

7.5

Foreign exchange reserves ($ billion)

7.41 6.5

5.8 3.6

250 200

5.5

3.8

281

300

8.7

173.1

5

4.7

150

3.4

54.1

50 2.2 1990-91

50

1995-96

2001-02

2002-03

45.95

44.93

2003-04

2006-07 2007-08*

Continued Import Tariff Reduction

INR to USD

47.69

2005-06

17.0

* As on Mar 2008

Exchange Rate is Market Driven 48.4

2004-05

73.2

0

* As on Mar 2008

60

142

107.0

100

2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 200708*

136

(in %)

44.25

45.48 39.51

40 30 20 10 0 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08* * As on Mar 2008 ISO:9001:2000

Source: Economic Survey 2007-08

35 30 25 20 15 10 5 0

30 25 20 15

12.5

10

7.5-10

2001- 2002- 2003- 2004- 2005- 2006- 200702 03 04 05 06 07 08 Customs Tariff on Auto Components

A Booming Market Economy India’s Foreign Trade (USD Billion) 250

FDI Inflow in India (USD Billion) 19

230

Imports

Exports

FDI(USD Bln)

20

200

15.7

181.3

15

155

149.2

150

124.6 111.5 78.2 50.5

50

10

103.1

100 61.4 44.6

52.7

83.5 63.8

5

5.5

4.2

2.9

3.1

2.6

2003-04

2004-05

0

0 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08* *Estimated Imports on 11 months

2001-02

2002-03

2005-06

12 10 8 6 4 2 0

8.5 6.8

5.8 2.5 3.6

6.6

123 7.5

8.7

9

9.1 4.7

3.8 3.4

5.5

8.7 9.4

9.2 5.6

6.5

2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 ISO:9001:2000

Source: Economic Survey 2007-08 & RBI Bulletin

2007-08*

*As on March 2008

Real GDP and Inflation Growth(%) Real GDP Growth Manufacturing Sector Inflation

2006-07

4.1

200708*

What does this mean for us?

The Drivers Short Term

Long Term

Infrastructure development ($500 billion in the next 5-6 years)

According to McKinsey, the middle class will grow from 50 million to 550 million by 2025

Low penetration rate of vehicles (8/1000)

Export of Automobiles and Auto components

Access to capital and reasonable interest rate

Supply side – Low cost

ISO:9001:2000

What does this mean for us?

The Demand Drivers Short Term

Long Term

Infrastructure development ($500 billion in the next 5-6 years)

According to McKinsey, the middle class will grow from 50 million to 550 million by 2025

Low penetration rate of Cars (8/1000)

Continuously Improving Quality resulting in Export of Automobiles and Auto components

Access to capital

Supply side – Low cost of Skilled Manpower, Design Capability

ISO:9001:2000

Passenger Vehicle Production (Qty in ‘000 Nos.) PROJECTED CAGR 2007-2014 Cars = 7.8% MUV’s = 1.8% Overall=7.8%

3,500 3,000

2001-2007 CAGR Cars =18% MUV’s = 15% Overall=17.6%

2,500

3.0m 277

2654

1.8m

2,000

1773 1545

1,500

1210

1309

1528

207 1575

1323

988

1,000 500

669 564

105

722 842 608

114

1028

1113

146

182

196

222

2003-04

2004-05

2005-06

2006-07

245

0 2001-02

2002-03

Cars

MUVs

Total Pass Veh

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Source: SIAM & ACMA-McKinsey Report

2007-08 2009-10

2014-15

MARKET SHARE- PASSENGER CARS Honda Siel 4.2%

GM 3.2%

Ford Mahindra Renault 1.8% 2.4%

Others 2.9%

Tata Motors 12.7%

2007-08(Apl-Mar) Maruti 47.3%

Hyundai 25.5%

Honda Siel 4.7%

GM 1.3%

Ford 4.9%

Others 2.9%

2006-07(Apl-Mar)

Tata Motors 15.4% Maruti 46.3% Hyundai 24.5%

ISO:9001:2000

“INDIA” – A Base for Compact Cars Maruti Suzuki : • New car plant to make 250,000 cars per annum (total 800,000 cars/annum) • 10 new Component JVs to support new Diesel Engine Plant. Hyundai : • Increase capacity to 600,000 cars per annum over next 1 year. Nissan : • Ashok Leyland and Nissan Motor Co., Ltd., signed a binding Master CoOperation Agreement (MCA) for the formation of three joint venture companies supporting the Light Commercial Vehicle (LCV) business at a investment of USD 500mln. ISO:9001:2000

Tata Motors : • New plant to manufacture Rs1,00,000/- car in West Bengal with an investment of US $ 240 million. Toyota : • Target of 200,000 units capacity by 2008 & already looking at the small segment General Motors : • New Capacity to manufacture GM Spark small car by 2007 Nissan-Renault : • 50:50 JV, to make 400,000 cars a year with an investment of over US $ 1 billion.

“INDIA” – A Base for Compact Cars VW : •

Investing 400 million euro in a new plant in Pune. Operations are to start in second half of 2009.

Honda : Investing US $ 250 million in a new plant in Rajasthan with capacity of 60,000 car per year (First car to roll out in 2009). Ford : •

ISO:9001:2000

Plans to invest US$ 500 million including the expansion of Ford India’s current manufacturing facility in Chennai.

Commercial Vehicles Production 350

(Qty in ‘000 Nos.) 2001-2007 CAGR M & HCVs =20.5% LCVs LCV’s = 25.8% Overall=22.8%

M&HCVs

300

350

545

294

291

391

250

254 226

219

211

520

275

200

159

150

202

172

166 139

121 109

95

81

100

64 50

0

2001-02 ISO:9001:2000

2002-03

2003-04

2004-05

2005-06

2006-07

2007-08

2-Wheeler Production 24.0 22.0 20.0 18.0 16.0 14.0 12.0 10.0 8.0 6.0 4.0 2.0 -

??

(Qty in million Nos.)

CAGR 2001-2007 11%

5.6 5.1 4.3

6.5

13 ?

8.4 8.0 7.6

2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 ISO:9001:2000

2009-10

2014-15

Investments are regionally balanced New Hub : Uttaranchal

AVTEC

NORTH

WEST

EAST MAN Cummins

SOUTH

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What does this mean for the Component Industry?

India Global Compact Car Hub

Increased Components Sourcing from LCC

India Center for Skill Based Mfg & Engineering

Increasing Distressed Suppliers in US Europe

Auto Growth in Emerging Markets

Opportunity Opportunityfor for Large LargeScale ScaleAuto Auto Component ComponentManufacturing Manufacturingin inIndia India ISO:9001:2000

Contents

ACMA

Indian Perspective

The Auto Component Industry & Its Trends

Drivers for Partnership

ISO:9001:2000

Automotive Mission Plan 2016 Government of India SIAM ACMA Automotive Plan 2016

On 29.01.07, the Prime Minister released Automobile Plan 2006 -2016 to give a road map to Indian Automobile Industry

Increase turnover to $145 billion by 2016 from $ 35 billion at present

Increase export revenue To $ 35 billion by 2016 from $ 4.1 billion at present

Provide employment to additional 25 million people by 2016

By 2016, the Automotive sector is expected to contribute  10% of the country’s GDP and 30~35% of the Industry ISO:9001:2000

ACMA’s Vision 20:20:1

20:20:1 20:20:1

ISO:9001:2000

20 20

Achieve $20 billion in Domestic Sales

20 20

Achieve $20 billion in Exports Sales

11

Create 1 million additional Jobs

Auto Component Industry 2003-04

2004-05

2005-06

- Statistics 2006-07

2007-08 Estimated

(Value in US $ million)

Turnover

6,730

8,700

12,000

15,000

18,000

Exports

1,274

1,692

2,469

2,873

3,615

Imports

1,428

1,902

2,482

3,328

4,938

Investment

3,100

3,750

4,400

5,400

7,200

Export as % of

18.9%

19.5%

20.5%

19.2%

20.1%

Turnover

ISO:9001:2000

The Industry is graduating to world-class 551

ISO 9000

TS 16949

382

TS 16949

56

QS-9000

180

ISO 14001

OHSAS 18001

Total ACMA Member Companies

59

OHSAS 18001

0

Deming Award 11

ISO:9001:2000

Suppliers Embracing Modern Shop-Floor Practices:

558 100

200

300

- 5-S, 7-W - Kaizen - TQM - TPM - 6-Sigma - Lean Manufacturing

400

TPM Excellence Award 4

500

And covers a comprehensive range of products Electrical Parts 9%

Others 7%

Engine Parts 31%

Equipments 10%

Suspension & Braking Parts 12%

ISO:9001:2000

Body & Chassis 12%

Drive Transmission & Steering Parts 19%

Auto Component Industry Investments (in US$ billion) 22.0

POTENTIAL CAGR 2007-2015 14.2%

20.9

19.5 17.0

14.5

CAGR 2002-2007 21.7%

12.0 9.5

7.2

7.0 4.5

10.1

2.7

3.1

3.8

4.4

5.4

2.0 -0.5

2002-03 ISO:9001:2000

* Estimated

2003-04

2004-05

2005-06

2006-07

2007-08*

2009-10

2015-16

Auto Component Turnover has Crossed US $ 18 Billion (in US$ billion)

40.0

POTENTIAL CAGR 2007-2015 10.5%

40

25.0

CAGR 2002-2007 27.2%

20.0

18

18.7

15 15.0

12 8.7

10.0

6.7 5.4 5.0

0.0

2002-03 ISO:9001:2000

2003-04

2004-05

2005-06

2006-07

* Estimated Source : MOHI Automotive Mission Plan (AMP)

2007-08* 2009-10 2015-16

Auto Component Industry - Exports POTENTIAL EXPORT CAGR 2007-2015 24%

(in US$ billion) 8 25

720

CAGR 2002-2007 Exports : 35%

6

20-22

5.9

5

3.6

4

2.9 3

2.1 2

1

1.0

1.4

0.8

0

2002-03 ISO:9001:2000

* Estimated

2003-04

2004-05

2005-06

2006-07

2007-08*

2009-10

2015-16

Direction of Exports CONTINENT-WISE EXPORT OF AUTO COMPONENT 2006-07

Middle East 7.1%

South America 2.8%

Oceania 1.2%

Others 0.1%

Africa 10.8% Europe 38.7%

Asia 12.4%

North America 26.9%

OEM/TIER 1 35% ISO:9001:2000

Aftermarket 65%

1990s

COMPOSITION OF EXPORTS

OEM/TIER 1 Aftermarket 75% 25%

2007

Increase in sourcing components from India

ISO:9001:2000

Tier 1 Companies Sourcing Components from India

ISO:9001:2000

Some Design & Research Centers in India

ISO:9001:2000

World Class Designed & Manufactured in India

Mahindra Scorpio TVS Scooty

Bajaj Pulsar

Tata Nano Tata Indigo Tata Indica

Rhino ISO:9001:2000

Tata ACE

Some Examples Mature Indigenous Product Development Capability Case: Indica (Economy Passenger Car): Tata Engineering • Design & Development Cost

: US $ 140 million

• Infrastructure & Production facility

: US $ 200 million

Case: Scorpio (Sports Utility Vehicle): Mahindra & Mahindra • Design & Development Cost

: US $ 60 million

• Infrastructure & Production facility

: US $ 60 million

Case: Jumbo (Heavy Commercial Vehicle): Eicher • Design & Development Cost ISO:9001:2000

: US $ 25 million

Contents

ACMA

Indian Perspective

The Auto Component Industry & Its Trends

Drivers for Partnership : The Way Forward

ISO:9001:2000

Capability of Indian Component Suppliers 1. Proficiency in Understanding Technical Drawings and well conversant in all Global Automotive Standards : American, Japanese, Korean, European Standards etc. 2. Appropriate Automation leading to economic production costs 3. Flexibility in small-batch production. 4. Growing IT Capability for Design, Development & Simulation 5. Respect for Intellectual Property

ISO:9001:2000

What successful OEMs and Tier-1s are doing 1.

Start small, build up gradually.

2.

Work closely with Indian suppliers/partners to build capability: Manufacturing Processes, Quality Systems, Logistics…..

3.

Long-term contracts for Indian SMEs to give comfort in making large investments

4.

Facilitating partnership between Indian and global suppliers at Tier-2/3 level: “Global technology, Indian Prices”

5.

Managing exchange risk.

ISO:9001:2000

Contents

ACMA

Indian Perspective

The Auto Component Industry & Its Trends

Drivers for Partnership

ISO:9001:2000

The Way Forward : Promote Outsourcing of Components 1.

Outsourcing potential estimated at US $ 25 billion by 2015

2.

Indian companies are rapidly gearing up capacity for export production Æ US $ 1 billion of new investments made last year.

3.

Start Small and build up gradually.

4.

Work closely with suppliers to build capability: Manufacturing Processes, Quality Systems, Logistics…..

5.

Long-term contracts for SMEs to give comfort in making large investments

6.

Jointly manage “Exchange Risk”.

ISO:9001:2000

The Way Forward : Promote Partnerships at Tier 2 and 3 Level 1.

Most large European companies at Tier 1 position are already present in India Æ “Product Technology”

2.

However, a lot of “Process Technology” resides with the Tier 2/3 companies in Europe.

3.

Need to encourage new wave of partnerships at the Tier 2/3 level Æ covering the entire automotive supply chain to address not only product technology, but also “Process Technology”.

4.

ACMA can be the platform in India.

ISO:9001:2000

The Way Forward : Partnerships in Building Soft Skills & Automotive R&D

1.

Establish Automotive Training Institutes in India.

2.

Partner with IITs, IISC and Technical Universities in India.

3.

Cooperation in setting up Automotive R&D Centers in India

4.

Joint R&D in India for new product development and designing

ISO:9001:2000

What successful OEMs and Tier-1s are doing

1.

Start small, build up gradually.

2.

Work closely with suppliers to build capability: Manufacturing Processes, Quality Systems, Logistics…..

3.

Long-term contracts for SMEs to give comfort in making large investments

4.

Facilitating partnership between European and Indian suppliers at Tier-2/3 level: “European technology, Indian Prices”

5.

Managing exchange risk.

ISO:9001:2000

Growing Capability of Indian Component Suppliers

1. Proficiency in Understanding Technical Drawings and well conversant in all Global Automotive Standards : American, Japanese, Korean, European Standards etc. 2. Appropriate Automation leading to economic production costs 3. Flexibility in small-batch production. 4. Growing IT Capability for Design, Development & Simulation 5. Respect for Intellectual Property

ISO:9001:2000

ACMA Offices

Western Region ACMA 80, Dr. Annie Besant Road Worli, Mumbai – 400018 Phone: 022-24975877, 24933507 Fax: 022- 24936527 E-mail: [email protected]

ISO:9001:2000

Head Office / Northern Region The Capital Court, 6th Floor Olof Palme Marg, Munirka New Delhi – 110 067 Tel: 011-26160315, 26175873, Fax: 011-26160317 E-mail: [email protected]/ [email protected]

Eastern Region ACMA Room No: 309 c/o Adityapur Industrial Area Development Authority ( AIADA) Vikas Bhawan, Adityapur Jarkhand Mobile: 09334382530 E-mail: [email protected]

Southern Region ACMA Flat: B1, Crystal Lawn 20 Haddows Road, 1st Street Chennai – 600006 Ph.: 044-128330968, 28330949 Fax: 044-28330590 E-mail: [email protected]

ISO:9001:2000