Automotive 14jan08

A U TO M OT I V E I N D U S T RY
October 2007
www.ibef.org
AU TO M OT I V E I N D U S T RY
October 2007
Contents
• Profile of Indian Automotive Industry

• Growth Potential of Indian Automotive Industry
• India as a Manufacturing Hub
PROFILE OF INDIAN
AUTOMOTIVE INDUSTRY
www.ibef.org
PRO F I L E OF I N D I A N AU TO MOTIVE INDUSTRY
AUTOMOTIVE INDUSTRY • October 2007
Evolution of the Indian automobile industry
Pre 1983 1983-1993 1993-2007

• Closed market • Japanisation - GoI- • Delicensing of sector in
• Growth of market limited by supply Suzuki joint venture 1993
• Outdated models to form Maruti
Udyog • Global major OEMs start
- P layers • Joint ventures assembly in India (GM,
• Hindustan Motors with companies in Ford, Honda, Hyundai)
• Premier commercial vehicles
• Telco and components • Imports allowed from
• Ashok Leyland April 2001 alignment of
• Mahindra & Mahindra - Players duty on components and
• Maruti Udyog parts to ASEAN levels
• Hindustan • Implementation of VAT
Motors
• Premier
• Telco
• Ashok Leyland
• Mahindra &
Mahindra
Indian automobile industry crossed a historic landmark of

10 million vehicles in 2006-07
India’s position in world production Automotive sales (domestic and exports )
• 2nd in two wheelers 2002 5.41
• 11th in passenger cars 2003 6.25

CAGR
• 13th in commercial vehicles 2004 7.29
15.5%
2005 8.53
• Indian auto industry sales grew to 11.12 billion 2006
units in 2006-07, exhibiting an impressive CAGR
2007 11.12
of 15.5% during the past 5 years
million units
• T
wo wheelers have the maximum share in the Source: SIAM, IMaCS analysis
industry by volume, followed by passenger

vehicles, three wheelers and commercial vehicles Segment Share in total CAGR
• M
aximum growth has been witnessed in the Two wheelers 76.2% 14.5%
commercial vehicles segment, followed by Passenger vehicles 14.2% 16.7%
three-wheelers Three wheelers 4.9% 20.5%
Commercial vehicles 4.7% 26.7%
The OEM as well as the component industry is highly competitive
• M
G • Tata Motors
• Toyota • Mahindra & Mahindra
• Ford • Bajaj Auto
Global OEM Indian OEM
• Hyundai • TVS Motors
• Maruti Suzuki • Hero Honda
• Honda • Bajaj Tempo
• Skoda • Ashok Leyland
• Volvo
• Mercedes • Bharat Gorge
• Sundram Fasteners
• Delphi Global Indian • Rane Group
Suppliers Suppliers
• Visteon • Shriram Pistons
• Bosch • RICO Auto
• Denso • Sona Koyo Steering
• Valeo
• Thyssen Krupp
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
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
Two wheelers industry is dominated by motorcycles

Domestic two wheeler industry Break up of the industry by segment
Million units
• Scooter/Scooterette :
2002 4.2 5% Wheel size less than or
12% equal to 12 inches
2003 4.81 • Motorcycle: Wheel size
CAGR more than 12 inches
2004 5.36
13% • Mopeds: Engine capacity
2005 6.21 less than 75 cc with fixed
transmission, wheel size
2006 7.05 more than 12 inches
• Electric Two Wheelers:
2007 7.86 Electrically Driven
83%
0 1 2 3 4 5 6 7 8
Source: SIAM, IMaCS Analysis
n Motorcycles n Scooters
n Mopeds
Two wheelers industry is dominated by motorcycles
• D
omestic two wheeler industry has steadily
grown at a CAGR of 13% to reach 7.85 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%
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
While the motorcycles segment is growing, the scooter segment is shrinking
• S cooter segment as a whole has been shrinking, Segment-wise analysis of two wheeler market
except for the A2 segment Segment Description Share in Share in CAGR
2001-02 2006-07
• B
ikes having engine capacity 75-125 cc corner
A1 Scooter with engine capacity less 5% 0% -33.9%
the major share of the two wheeler market than 75 cc
A2 Scooter with engine capacity 5% 10% 32.9%
• C
ost of ownership and economics of operation between 75-125 cc
are most important criteria determining purchase A3 Scooter with engine capacity 12% 1% -27.7%
between 125-250 cc
B2 Motorcycle with engine 62% 66% 14.9%
capacity between 75-125 cc
B3 Motorcycle with engine 5% 17% 44.8%
capacity between 125-250 cc
B4 Motorcycle with engine capacity 1% 1% 5.7%
above 250 cc
C1 Mopeds 10% 5% -2.7%
The domestic two wheeler market is dominated

by Indian as well as foreign players
• H
ero Honda: Largest Two-wheeler manufacturer Market share of key players in 2006-07
in the world 3%
9%
• B
ajaj Auto: Second largest Two-wheeler
manufacturer in India and the largest 3 wheeler
42%
manufacturer 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
n Hero Honda Motors n Bajaj Auto Ltd
market through its direct subsidiary (in addition n TVS Motor Co, n HMSIL
to its joint venture Hero Honda) n Others
Source: SIAM, IMaCS analysis

• S uzuki: Has recently entered the Indian market
through its direct subsidiary
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 20 models launched in 2006-07
Two wheelers exports have grown at an impressive CAGR of 42%

Two wheeler exports from India Market share of key players in exports 2006-07
Thousand units
13%
2002 104.2
2003 179.7 10%
CAGR
2004 265.1
42.8% 46%
2005 366.4 16%
2006 513.2
2007 619.2 15%
0 100 200 300 400 500 600 700
(in ‘000 units) n Bajaj Auto n Hero Honda Motors Ltd

Source :SIAM, IMaCS Analysis n TVS Motor Company n Yamaha India
n Others

Two wheelers exports have grown at an impressive CAGR of 42%
• E xports of two wheelers have grown at over

42% CAGR in last 5 years
• M
ajority of exports are to Bangladesh, Sri Lanka,
Bhutan and Nepal
• H
ighest growth (CAGR of 57.2%) witnessed
in motorcycles segment, which constituted
88% of Two-wheeler market
• M
ost of the bikes exported were those with
engine capacity below 125 cc, indicating
preference for Indian made economy bikes
• B
ajaj Auto is the market leader in exports with
46% share
Passenger vehicles segment in India is dominated by cars

Domestic passenger vehicles industry Domestic passenger vehicles industry
thousand units
2002 675.1
22%
2003 707.2
2004 902.1 CAGR

15.4%
2005 1061.6
78%
2006 1143.1
2007 1379.7
200 400 600 800 1000 1200 1400

n Passenger cars n SUVs/MVs

Passenger vehicles segment in India is dominated by cars
• T
he domestic Indian passenger vehicles market
has grown at a CAGR of 15.4% over the last
5 years to reach 1.38 million units in 2006-07
• P
assenger cars, contributing to 78% of volumes, grew
at a CAGR of 16%
• T
he remaining share is with utility vehicles and
sports vehicles
All major global players in passenger vehicles segment

have a presence in India
• M
aruti Udyog: Largest passenger car manufacturer Market shares of key players in 2006-07
in the country, India considered as strategic market
by Suzuki 13%
4%
• T
ata Motors: Largest automotive player in the
Indian industry; launching the Rs. 1 lakh (US$ 2,500) car 7%
46%
• H
yundai Motors: Third largest passenger car 14%
manufacturer in India, has established India as one
of its manufacturing bases in the world 16%
n Maruti Udyog Ltd. n Tata Motors Ltd . n Hyundai Motor India Ltd.
n Mahindra & Mahindra n Toyota n Others


• 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% 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

• 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% market share, closely followed by Tata Motors
and Hyundai Motors at 16% and 14% respectively
India is increasingly becoming a manufacturing hub for passenger cars

Cars Exports from India Market share of key players in Exports 2006-07
Thousand units
1%
2002 9%
53.17
2003 72.01 12%

CAGR
2004 129.29 30%
58%
2005 166.40
20%
2006 175.57
2007 198.48
0 25 50 75 100 125 150 175 200

Source: SIAM, IMaCS Analysis n Hyundai Motor India Ltd. n Maruti Udyog
n Ford India Pvt Ltd. n Tata Motors
n Others

India is increasingly becoming a manufacturing hub for passenger cars
• E xports of cars from India have grown

at a CAGR of 30% CAGR in the last 5 years
to reach 198 thousand units in 2006-07
• H
yundai Motors is the market leader in exports
of cars with 68% 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
Commercial vehicles segment has witnessed

the highest growth rate in the automotive industry
Domestic CV Industry Breakup of the Industry by segment
2002 146.67
5%
2003 190.68 6%
CAGR
2004 260.11
26%
2005 318.43
351.04 36% 53%

2006
2007 467.88
0 100 200 300 400 500
n M & HCV Goods n LCV Goods

n M & HCV Passenger n LCV Passenger
Commercial vehicles segment has witnessed

the highest growth rate in the automotive industry
• D
omestic CV industry sales reached 467.88 thousand
vehicles in 2006-07, registering a CAGR of
26% over last 5 yrs
• S hare of LCVs is gradually increasing, indicating the
emergence of hub and spoke model of transportation
• W
hile the passenger bus industry has seen only a
moderate growth, goods industry grew 37% in
FY 2006-07
• G
oods industry is dominated by multi axle vehicles,
which account for nearly 50% of the market
CV industry is dominated by Indian players
• T
ata Motors Ltd: Largest commercial vehicle Market Shares of Key Players in 2006-07
manufacturer in the country, has acquired the Korean
4%
manufacturer Daewoo Gap Motors 6%
• A
shok Leyland Ltd: Second largest player with 10%
considerable market share in M&HCV segment; has

formed a JV to manufacture LCVs with Nissan 16% 64%
• 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
• E icher Motors Ltd: Leading player in the LCV trucks n M&M Ltd n Eicher Motors Ltd
segment; has entered the M&HCV trucks segment n Others
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
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 1 tonne segment
• A
ll the players in the segment are in the process of
enhancing the capacities and launching new products
Indian CV exports have witnessed a more impressive growth

CV Exports from India Market Share of Key Players in Exports
Thousand units
6%
2002 11.87
2003 12.26 11%
2004 CAGR
17.43
33.2%
12%
2005 29.94 71%
2006 40.60
2007 49.77
0 10 20 30 40 50
n Tata Motors n Ashok Leyland
n M&M Ltd n Others

Indian CV exports have witnessed a more impressive growth
• E xports have grown at a fast pace of over

33% over the last 5 years
• Tata Motors accounts for more than 70% of the
CV exports, with Ashok Leyland and Mahindra
& Mahindra making up for a large portion
of the balance
• LCV goods carriers accounted for 52% of the
overall exports
• M
ajor portion of the exports are to Sri Lanka,
Gulf countries and Africa
Growth in three wheelers has been driven by the need

for low cost last mile transportation system
Domestic three wheeler Industry (units) Break-up of Industry by segment
2002 200.28
2003 231.53
2004 CAGR
284.08
15%
2005 307.86 41% 59%
2006 359.92
2007 403.91
0 100 200 300 400 500

n Passenger n Goods

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 0.4 Million registering a growth of 15% CAGR over
the last 5 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 1 tonne segment in Goods accounted
for 73% of the sales and Sub Four seater segment
in passenger versions accounted for 97%
of the sales
The three wheeler market is dominated by Bajaj Auto
• BajajAuto Ltd. : Market leader in the Market Share of Key players 2006-07
Three wheeler segment, in the process of revamping
its product portfolio 11%
8%
• PiaggioVehicles : The Italian manufacturer is one
of the leading players with fast growing market 45%
share, in the process of making India as their
global hub
36%
• M&M Ltd: One of the leading players in the segment

• A
tul Auto Ltd: Have introduced new products n Bajaj Auto n Piaggio Vehicles
n M&M n Others
in the rear engine segment, and also is a manufacturer
of ‘Chakda’’ a Three wheeler reengineered from Two Source: SIAM, IMaCS Analysis
wheeler, popular in the western parts of the country

• F
orce Motors Ltd: A JV between Bajaj Tempo
and MAN AG of Germany; leading player in the
goods segment
The Three wheeler market is dominated by Bajaj Auto
• B
ajaj Auto emerged the leader in Three Wheeler
industry with 45% share, closely followed
by Piaggio with 36% share
• B
ajaj Auto lead the passenger carrier segment
with 58% share, while Piaggio lead the goods
segment with 40% market share
Exports of Three wheelers have been growing rapidly,

with Bajaj Auto the clear market leader
• E xports of three wheelers touched a new high Three wheeler exports and growth
Thousand Units
of 143.9 thousand units, registering a robust
growth of 56% CAGR over the last 5 years 2001-02 15.46
• T
his has been contributed almost entirely 2002-03 43.37
CAGR
by Bajaj Auto, which accounted for around 2003-04 68.14
56.2%
98% of exports in 2006-07 2004-05 66.80
2005-06 76.88
• B
ajaj Auto exports to Sri Lanka, Egypt, Nepal,
2006-07 143.90
Bangladesh among other countries
0 25 50 75 100 125 150 175
Indian firms are increasingly partnering with foreign firms
Indian OEM Foreign Partner Type of Partnership

Maruti Suzuki Suzuki Motor Corporation- Japan 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- Technology

Taiwan
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
Tata Motors Marco Polo-Brazil Bus/Coach Technology
Cummins-USA Engine Technology
Three major automotive clusters exist in India
• M
ajor automotive clusters - Mumbai-Pune-Nasik-
Aurangabad (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
North / Central
• Ashok Leyland • Eicher Delhi-Gurgaon-Noida-
Ghaziabad
• Force Motors • Hero Honda Ludhian Haridwar
a
• Hindustan Motors • Honda
• Honda SIEL • ICML
Jamshedpur
• Kinetic • LML Pitampur Kolkata
• Majestic • Maruti Suzuki
• Piaggio • Yamaha
• Swaraj Mazda • Tata Motors
East
• Hindustan Motors
• Tata Motors Chennai Bangalore Hosur
West
• Ashok Leyland • Atul Auto Delhi-Gurgaon-Noida-
Ghaziabad
• Bajaj Auto • Daimler Chrysler Ludhian Haridwar
a
• FIAT • Force Motors
• GM • Greaves
Jamshedpur
• Kinetic • M&M Pitampur Kolkata
• Piaggio • Premier
• Skoda • Tata Motors
Chennai Bangalore Hosur

South
• Ashok Leyland • Enfield Delhi-Gurgaon-Noida-
Ghaziabad
• Ford • Greaves Ludhian Haridwar
a
• Hindustan Motors • Hyundai
• Mahindra & Mahindra
Jamshedpur
• Tatra • Volvo Pitampur Kolkata
• Toyota Kirloskar • TVS Motors
Chennai Bangalore Hosur

Indian Auto Policy is designed for supporting the growth of the industry
In 2002, the Indian Government

• Automatic Approval for Foreign
formulated an Auto Policy aimed equity investment up to 100%
• No Minimum Investment Criteria
at promoting an integrated, phased
enduring and self-sustained growth
of the industry
LOW
ENTRY
BARRIER
• Investment Incentives by the Local Indian Auto Policy 2002 •G

overnment’s intention on
State Governments: Most States INVESTMENT CONCERN FOR
harmonizing the regulatory
Customise incentives for Large INCENTIVES EMISSIONS
standards with the rest of world
Investments
EMPHASIS
ON R&D
• Weighted Tax Deduction up to

150% for in-house research and
R&D activities
Source: ARAI, IMaCS Analysis
Indian automotive regulations are in the process

of being aligned with European regulations
• Indian automotive regulations are closely aligned

81 21 20
to the ECE regulations. The diagram below depicts
the level of alignment of the Indian regulations with 2007
the ECE regulations 0 50 100 122
• T
he key regulations that are likely to impact the n Fully/ Partially Allign n In Process of Being Aligned
n Items/ Regulations to be covered
auto industry and create the need for world class
products in the future are crash related regulations Source: ARAI, IMaCS Analysis
and introduction of Bharat Stage IV norms
Safety and emission related regulations in India - Achievements and Plans
Achievements Till Date Plan
NCR and 10
EURO - IV Major Cities
NCR and 10 Entire Country
EURO - III Major Cities
NCR and 3 NCR and 10 Entire Country Emission Regulations
EURO - II Major Metros Major Cities
Entire Country
EURO - I
2000 2001 2003 2005 2010
• Anti Brake Skid –2007

• Brakes•Steering effort•Gradeability•Installation • Truck cab occupant
of mirror, Horn & Lighting devices•Rear Under protection -Crash
run Protective Devices (RUPD) Lateral Protective • Super structure of bus. Safety Regulations
Devices (LPD)•Safety belt•Electro Magnetic •Airbags
Interference (EMI)•Wiping system•Rear View • Electro Magnetic Compa-
Mirror etc tibility (EMC)
• Front Under run protecti-
ve Devices (FUPD)
Source: ARAI, IMaCS Analysis
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


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
Center of Excellence For Component Development, NVH



Silchar Centre
Hill area Driver Training Centre and Inspection &
Maintainence Facilities
Centre of Excellence For Driver Training
Indore -Proving Grounds

Complete Testing Facilities to all vehicle categories as per
Indian or Global Standards
Centre of Excellence For Vehicle Dynamics, Tyre Development



Chennai Centre
Center of Excellence For Infotronics,EMC,Passive Safety
GROWTH POTENTIAL OF INDIAN
AUTOMOTIVE INDUSTRY
www.ibef.org
GROW T H P OT E N T I A L O F I NDIAN AUTOMOTIVE INDUSTRY
Growth drivers for the Indian automotive industry

- O verall economic growth
- Lower duties and taxes
Government
Policies
- C ontemporary products - G rowth in income levels

- Shorter life cycle New products Indian Automotive Increasing consumer - Easier financing
launches Industry demand
Cost
Competiveness
- E xport competitiveness
- Reduced cost to consumer
- India emerging as a manufacturing hub
GROW T H P OT E N T I A L O F I NDIAN AUTOMOTIVE INDUSTRY
Indian Automotive Mission Plan – Vehicle sales

expected to grow to 32 million by 2015-16
• T
he size of the Indian automotive industry Potential vehicle sales in India (2015-16)
million units
is expected to grow at 13% p.a over the next
decade to reach around US$ 120-159 billion Cars
by 2016
• T
he total investments required to support the
0.64
CVs
growth are estimated at around US$ 35-40 billion

Two
• T
he Two wheelers industry is expected to lead wheelers
the growth, with an estimated sales of 27.8 Three

million units by 2016 Wheelers
• T
otal export in the automotive sector would Total
be around US$ 30-5 billion, of which component
exports would account for US$ 20-25 billion Source: SIAM, ACMA, AMP Vision & IMaCS Analysis
and vehicle exports for the rest

INDIA AS A
MANUFACTURING HUB
www.ibef.org
IN D I A A S A M A N U FAC T U R I NG HUB
Automotive exports have grown at an impressive CAGR

of 40% in the last 5 years
• Indian automotive exports have grown Automotive Exports (thousand units)

at a high CAGR of 40.5% over the last 5 years,
with fastest growth in Three wheeler segment, 2002 184.68
followed by Two wheelers 2003 307.31

CAGR
2004 479.92
40.5%
• India is increasingly becoming a manufacturing
2005 629.54
hub of small cars for global majors
2006 806.22
2007 1011.28
0 200 400 600 800 1000 1200

Global auto companies are taking advantage of India’s manufacturing base
• H
yundai Motors - 36% of its production
is exported to 67 countries. Hyundai has
shifted its entire production of the Atos Prime,
its compact model, to its Chennai Plant. Similar
plan is on the cards for Getz. Hyundai is planning
to double the production capacity to 0.6 million
cars, primarily to meet export demand
• S uzuki Motor Corp: It is investing US$ 2 billion
in India, and plans to export 200,000 cars from
India by 2010
• F ord Motor Co: It exports 58% of the total
production from India
Global auto companies are taking advantage of India’s manufacturing base
• T
ata Motors: The company plans to make its
US$ 2,500 car available in other markets.
It is setting up showrooms across Africa and
has tied up with Italy’s Fiat to use its
South American sales network
• N
issan Motor: Has recently announced plans
to make cars in India and export them
to Europe
• H
onda Motor: Has begun building a new
plant for premium hatchbacks in western India
• T
oyota: Has set us a transmission plant
in India to meet its regional demand
Source: Industry News

Several factors make India a favourite investment destination
Proven product developmental capabilities Proximity to Markets

- More than 125 Fortune 500 (including - Proximity to other Asian economies
large auto companies) have R&D cen- - Proximity to the emerging markets like
tres in India Africa
- Companies can leverage India’s acknow- - Shipments to Europe are cheaper than
ledged leadership in the IT industry those from Brazil and Thailand
High quality standards

Stable economic policies - 9 Indian component manufacturers have
- Continuity in economic reforms won the Deming Award for quality
and policies related to investments - Most leading component manufacturers
are QS and ISO certified
India as
an Auto
Large and growing domestic demand Hub
- Demand growth of 14% CAGR makes Competitive manufacturing cost
India one of the fastest growing markets - Skilled labour costs amongst the lowest
in India
Availability of Manpower Export Potential

- 0.4 million Engineering graduates pass - Total value of exports by 2015 expected
out every year to reach US$ 8–10 billion for vehicles
- 7 million enter workforce every year and US$ 20–25 billion for components
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
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
Tax structure in India vis-à-vis other countries
he burden of direct and indirect taxes is higher

T India Brazil China Thailand
in India than in other countries Thailand 16.36% - - -

VAT 12.5% 15% 17% 10%
Other Taxes - 18%* - -
Corporate Tax 34% 28% 33% 30%
Exemptions Specific Tax incentives Preferential Tax incentives
packages for companies corporate for investments
provided by in export tax policies outside central
states for large processing zones for Foreign zone
investments Investment
Enterprises
Import duty on 13% 16% 8% Free
rubber
Import duty on 8% 4% 2% 10%
steel
*Refers to local taxes

Labour & Labour Productivity in India vis-a-vis other countries
• India compares favourably with other low cost India Brazil China Thailand
countries in productivity adjusted labour cost Labour cost (US$/hour) 0.7 4.1 0.7 0.72
• Indian labour productivity in the manufacturing Labour cost (US$/day)* 5.6 32.8 5.6 5.76
sector is on an increase with the application of Productivity index** 1.0 2.0 1.0 1.2
production management techniques and many Productivity adjusted 5.6 16.4 5.6 4.8
companies have doubled their productivity labour cost (US$/day)
in last 5 years *Assuming 8 hour shift per day

** Gross value added per person employed when compared to India
Power Cost in India vis-à-vis other countries
• P
ower cost in India is the highest amongst the Power costs
competing countries Country Cost per kwh (US$)
India 0.14
• H
owever, power cost accounts for around
Brazil 0.05
3% of the overall cost structure, hence not a
China 0.03
significant disadvantage Thailand 0.11
• P
ower costs in India varies by state and
is as low as US$ 0.1 in states like Maharashtra
• W
ith privatisation and competition in the Interest costs
emerging Indian power sector, cost of power Country Annual lending interest rate
is expected to come under control India 10-11%
Brazil 14-16%
• Interest rates in India are high as compared China 5-6%
to competing countries, but expected to soften Thailand 7-8%
in the future
Cost competitiveness - India versus China
• Indian manufacturers suffer from a cost Cost breakup Cars CV
disadvantage vis-à-vis Chinese manufacturers Cost of vehicle of an Indian 100 100

mainly because of higher level of taxes and their Company
Less
cascading impact, higher cost of labour (arising Taxes and Duties Net state level -4.8% -5.4%
out of inflexible labour laws) and higher interest levies and cascading
impact of taxes
costs and power and fuel costs
Import duty on raw -1.8% -1.6%
materials
Corporate taxes - -
Total -6.6% -7.0%
Industry costs Power & fuel -3.4% -3.6%
Labour cost - -
Cost of funds -0.8% -0.8%
Total -4.2% -4.4%
Cost disadvantage -10.8% -11.4%
for India
Economies of scale no diff no diff
Total cost -10.8% -11.4%
disadvantage for
India
Source: Government websites, discussions with leading automotive players, IMaCS analysis
Cost competitiveness - India versus Thailand
• Indian vehicle manufacturers have a cost Cost Break-up Cars CV
disadvantage vis-à-vis Thai vehicle manufacturers, Cost of vehicle of an Indian 100 100
primarily due to higher level of taxes in India Company
Less
• H
owever, the large market potential of the Taxes and Duties Net state level -5.61% -5.86%
levies and cascading
Indian market more than makes up for this impact of taxes
disadvantage Import duty on raw -0.60% -0.20%
materials
Corporate taxes -0.20% -0.20%
Total -6.41% -6.26%
Industry costs Power & fuel -1.03% -1.11%
Labour cost -1.28% -1.56%
Cost of funds -0.36% -0.36%
Total -2.67% -3.03%
Cost disadvantage -9.08% -9.29%
for India
Economies of scale no diff no diff
Total cost -9.08% -9.29%
disadvantage for
India
Source: Government websites, discussions with leading automotive players, IMaCS Analysis
Cost Competitiveness - India versus Brazil
• India is competitively positioned vis-à-vis Brazil Cost Break-up Cars CV
in cars as well as CV Cost of vehicle of an Indian 100 100

Company
• India enjoys greater scale advantage as compared to Less
Brazil in the case of cars as capacity utilisation Taxes and Duties Net state level levies -3.1% -3.9%
and cascading impact
in India is better, despite Brazil having larger of taxes
installed capacities Import duty on raw - -
materials
Corporate taxes - 0.1% - 0.1%
Total -3.2% -4.0%
Industry costs Power & Fuel - 2.0% - 2.8%
Labour cost 7.6% 16.2%
Cost of funds 0.9% 1.6%
Total 6.5% 15.0%
Cost advantage for 3.3% 11.0%
India
Economies of scale 8.3% no diff
Total cost 11.6% 11.0%
advantage for India
Source: Government websites, discussions with leading automotive players, IMaCS Analysis
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
October 2007
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
October 2007
DISCLAIMER
This presentation has been prepared jointly by the India Brand Author’s and IBEF’s knowledge and belief, the content is not
Equity Foundation (“IBEF”) and ICRA Management Consulting to be construed in any manner whatsoever as a substitute for
Services Limited, IMaCS (“Authors”). professional advice.
All rights reserved. All copyright in this presentation and related The Author and IBEF neither recommend or endorse any
works is owned by IBEF and the Authors. The same may not be specific products or services that may have been mentioned
reproduced, wholly or in part in any material form (including in this presentation and nor do they assume any liability or
photocopying or storing it in any medium by electronic responsibility for the outcome of decisions taken as a result
means and whether or not transiently or incidentally to some of any reliance placed in this presentation.
other use of this presentation), modified or in any manner
Neither the Author nor IBEF shall be liable for any direct or
communicated to any third party except with the written
indirect damages that may arise due to any act or omission
approval of IBEF.
on the part of the user due to any reliance placed or guidance
This presentation is for information purposes only. While due taken from any portion of this presentation.
care has been taken during the compilation of this presentation
to ensure that the information is accurate to the best of the
www.ibef.org

Automotive 14jan08

Cargado por

Información del documento

Descripción original:

Título original

Derechos de autor

Formatos disponibles

Compartir este documento

Compartir o incrustar documentos

Opciones para compartir

¿Le pareció útil este documento?

¿Este contenido es inapropiado?

Copyright:

Formatos disponibles

Automotive 14jan08

Cargado por

Copyright:

Formatos disponibles

A U TO M OT I V E I N D U S T RY

• Profile of Indian Automotive Industry

Evolution of the Indian automobile industry

Pre 1983 1983-1993 1993-2007

Indian automobile industry crossed a historic landmark of

India’s position in world production Automotive sales (domestic and exports )

• 2nd in two wheelers 2002 5.41

• 11th in passenger cars 2003 6.25

industry by volume, followed by passenger

The OEM as well as the component industry is highly competitive

The OEM as well as the component industry is highly competitive

Most automotive players are present in more than one segment

Manufacturer Segments Manufacturer Segments

MUVs: Multi utility vehicles; MPVs: Multi purpose vehicles; LCV:

Two wheelers industry is dominated by motorcycles

Two wheelers industry is dominated by motorcycles

While the motorcycles segment is growing, the scooter segment is shrinking

The domestic two wheeler market is dominated

Source: SIAM, IMaCS analysis

The domestic two wheeler market is dominated

• In the Two-wheeler market in India, competition is

Two wheelers exports have grown at an impressive CAGR of 42%

2003 179.7 10%

2007 619.2 15%

0 100 200 300 400 500 600 700

(in ‘000 units) n Bajaj Auto n Hero Honda Motors Ltd

Source: SIAM, IMaCS Analysis

Two wheelers exports have grown at an impressive CAGR of 42%

• E xports of two wheelers have grown at over

Passenger vehicles segment in India is dominated by cars

2004 902.1 CAGR

200 400 600 800 1000 1200 1400

n Passenger cars n SUVs/MVs

Source: SIAM, IMaCS Analysis

Passenger vehicles segment in India is dominated by cars

All major global players in passenger vehicles segment

Source: SIAM, IMaCS Analysis

All major global players in passenger vehicles segment

All major global players in passenger vehicles segment

India is increasingly becoming a manufacturing hub for passenger cars

2003 72.01 12%

0 25 50 75 100 125 150 175 200

Source: SIAM, IMaCS Analysis

India is increasingly becoming a manufacturing hub for passenger cars

• E xports of cars from India have grown

Commercial vehicles segment has witnessed

Domestic CV Industry Breakup of the Industry by segment

351.04 36% 53%

0 100 200 300 400 500

n M & HCV Goods n LCV Goods

Commercial vehicles segment has witnessed

CV industry is dominated by Indian players

considerable market share in M&HCV segment; has

recently Source: SIAM, IMaCS Analysis

• S waraj Mazda Ltd: One of the leading players in the

CV industry is dominated by Indian players

Indian CV exports have witnessed a more impressive growth

2003 12.26 11%

Source: SIAM, IMaCS Analysis

Indian CV exports have witnessed a more impressive growth

• E xports have grown at a fast pace of over

Growth in three wheelers has been driven by the need

• Profile of Indian Automotive Industry

India’s position in world production Automotive sales (domestic and exports )

• 2nd in two wheelers 2002 5.41

• 11th in passenger cars 2003 6.25

• In the Two-wheeler market in India, competition is

• E xports of two wheelers have grown at over

• E xports of cars from India have grown

• S waraj Mazda Ltd: One of the leading players in the

• E xports have grown at a fast pace of over

• M&M Ltd: One of the leading players in the segment

In 2002, the Indian Government

• Investment Incentives by the Local Indian Auto Policy 2002 •G

• Weighted Tax Deduction up to

• Indian automotive regulations are closely aligned

- C ontemporary products - G rowth in income levels

• Indian automotive exports have grown Automotive Exports (thousand units)

In order to emerge as a manufacturing hub,

ompetitiveness of manufacturing in India can

he burden of direct and indirect taxes is higher