automotives - india brand equity foundation
TRANSCRIPT
1
AUTOMOTIVESNovember 2010
2
Advantage India
Market overview
Industry infrastructure
Investments
Policy and regulatory framework
Opportunities
Industry associations
Contents
AUTOMOTIVES November 2010
3
Sources: ―Fact sheet on FDI‖ Society of Indian Automobile Manufacturers (SIAM) website, http://dipp.nic.in/fdi_statistics/india_FDI_August2010.pdf, accessed
19 November 2010; ―Industry Statistics,‖ SIAM website, www.siamindia.com/scripts/industrystatistics.aspx, accessed 19 November 2010; Ernst & Young
research.
ADVANTAGE INDIA
Advantage India
Product-development capabilities
Proximity to
emerging
markets
Export potential
Growing domestic demand
Increasing interest among foreign players
Availability of skilled
manpower
India as an
automotive
hub
• There are more than 125 Fortune 500 companies in India.
• India is an emerging global manufacturing hub for low-cost compact cars.
• In India, 0.4 million engineers graduate every year.
• As many as 7 million people enter the workforce every year.
• The cost of an entry-level engineer is around US$ 8,000.
• The cost of engineering talent in India is 45 per cent lower than that in the US.
• Changing demographics, rising disposable income and the entry of several new players has expanded the domestic market for passenger vehicles (PVs).
• India’s low manufacturing costs due to economies of scale and low R&D and sourcing costs are increasing affordability and driving domestic demand.
• Vehicle production grew to 14 million in 2009–2010.
• India’s proximity to emerging markets such as Asia and Africa is another advantage.
• Shipments to Europe from India are more cost-effective than those from Brazil and Thailand.
• The Government of India (GoI) has permitted 100 per cent foreign equity investments.
• FDI inflow in 2009–2010 for the auto components sector was recorded at US$ 1.2 billion.
• FDI inflow in the same period was 4 per cent of the total FDI inflow in the country.
• Sourcing from low-cost countries has
increased, which, in turn, has
enhanced India’s potential as an
automotive hub.
• The value of vehicle exports is
estimated to reach between US$ 8
billion and US$ 10 billion by 2015.
Automotives November 2010
4
Advantage India
Market overview
Industry infrastructure
Investments
Policy and regulatory framework
Opportunities
Industry associations
Contents
AUTOMOTIVES November 2010
5
• The industry turnover is estimated to reach US$ 145 billion by 2016.
• Automobile production increased from 8.5 million units in 2004–05 to 14.1 million units in 2009–2010 at a compound annual growth rate (CAGR) of 10.7 per cent.
• Domestic vehicle sales increased at 26.8 per cent y-o-y, from 9.7 million units in 2008–09 to 12.3 million units in 2009–2010.
• Between April 2000 and August 2010, cumulative foreign direct investment (FDI) inflow to the automotive sector, including both automobile and auto components, totaled US$ 4,710 million.
• FDI inflow in 2009–2010 for the auto components sector was recorded at US$ 1.2 billion, which was 4 per cent of the total FDI inflow in the country in the same period.
Sources: ―Fact sheet on FDI‖ Society of Indian Automobile Manufacturers (SIAM) website, http://dipp.nic.in/fdi_statistics/india_FDI_August2010.pdf,
accessed 19 November 2010; ―Industry Statistics,‖ SIAM website, www.siamindia.com/scripts/industrystatistics.aspx, accessed 19 November 2010;
―Automotive Mission Plan (AMP) 2006–2016,‖ Department of Heavy Industry website, www.dhi.nic.in/Final_AMP_Report.pdf, accessed 19 November
2010.
MARKET OVERVIEW
Market overview … (1/4)
8.5
9.7
11.1
10.9
11.2
14.1
0.63
0.81
1.01
1.24
1.53
1.81
0.0 5.0 10.0 15.0 20.0
2004–05
2005–06
2006–07
2007–08
2008–09
2009–2010
Production Exports
Automobile production and exports
million units
Automotives November 2010
6
MARKET OVERVIEW
Ran
kin
gs
It is Asia’s third-largest PV market.
India is the world’s fourth-largest commercial vehicle
(CV) market.
India is the world’s second-largest two-wheeler market
The country is the world’s fifth-largest bus and truck
market (by volume).
Sources: ―Automotive Mission Plan (AMP) 2006–2016,‖ Department of Heavy Industry website, www.dhi.nic.in/Final_AMP_Report.pdf, accessed 19
November 2010; ―Industry Statistics,‖ SIAM website, www.siamindia.com/scripts/industrystatistics.aspx, accessed 19 November 2010.
Market overview … (2/4)
74.8%
16.7%
4.4%4.0%
Two-wheeler
Passenger vehicles
Three-wheelers
Commercial vehicles
Automobile production in 2009–2010, by segment
Automotives November 2010
7
1983–1993
MARKET OVERVIEW
• Closed market
• Growth of market
limited by supply
• Outdated models
• Number of players:
five
• Joint venture (JV)
between the GoI and
Suzuki to form Maruti
Udyog.
• Number of players: six
• Sector delicensed in 1993
• Major original equipment
manufacturers (OEMs) started
assembly in India
1983–1993
• Implementation of value-
added tax (VAT)
• Imports allowed from
April 2001
• Number of
players:>35
Evolution of automobile industry from five players to more than 35 players
Market overview … (3/4)
Automotives November 2010
8
• Tata Motors’ acquisition of Jaguar and Land Rover and the launch of the world’s most inexpensive car, the Tata Nano, has placed the Indian automobile market on the global automotive map.
• The growing availability of small and affordable cars has helped expand the PV market in India.
• The Indian automotive industry is expected to be the world’s seventh-largest automobile market by 2016 and the third largest by 2030, only behind China and the US.
MARKET OVERVIEW
1983–1993
Market overview … (4/4)
Source: ―Automotive Mission Plan (AMP) 2006–2016,‖ Department of Heavy Industry website, www.dhi.nic.in/Final_AMP_Report.pdf,
accessed 19 November 2010.
Automotives November 2010
9
• Ashok
Leyland
• Force
Motors
• Piaggio
• Swaraj
Mazda
• Amtek
Auto
• Eicher
• Honda SIEL
• Maruti
Suzuki
• Tata
Motors
• Bajaj Auto
• Hero
Group
• Ashok
Leyland
• Bajaj Auto
• FIAT
• GM
• M&M
• Eicher
• Skoda
• Bharat
Forge
• Tata
Motors
• Volkswagen
• Renault-
Nissan
• M&M
• Tata Motors
• Hindustan Motors
• Simpson & Co
• International Auto
Forgings
• JMT
• Exide
• Ashok
Leyland
• Ford
• M&M
• Toyota
Kirloskar
• Volvo
• Sundaram
Fasteners
• Enfield
• Hyundai
• BMW
• Bosch
• TVS Motor
Company
• Renault-
Nissan
Indian automotive clusters
Source: Industry sources
M&M: Mahindra & Mahindra
MARKET OVERVIEW
Delhi–Gurgaon–
Faridabad
Kolkata–
Jamshedpur
Chennai–
Bengaluru– Hosur
Mumbai–
Pune–
Nashik–
Aurangabad
North
West
East
South
Automotives November 2010
10
Market segments
Automobiles
Two-wheelers
Mopeds
Scooters
Motorcycles
Electric two-wheelers
PVs
Passenger cars
Utility vehicles
Multi-purpose vehicles
CVs
Light commercial vehicles (LCVs)
Medium and heavy commercial vehicles
(MCVs and HCVs)
Three-wheelers
Passenger carriers
Goods carriers
MARKET OVERVIEW
Automotives November 2010
11
Two-wheelers — market overview … (1/2)
• The production of two-wheelers has grown steadily at a CAGR of 10 per cent, from 6.5 million units in 2004–05 to 10.5 million units in 2009–2010.
• The motorcycle segment constitutes more than 80 per cent of the two-wheeler market.
• The growth of scooter sales can be attributed to the launch of fuel-efficient gearless scooters.
Source: ―Flash Report,‖ SIAM website, www.siamindia.com/scripts/production-trend.aspx, accessed 19 November 2010.
MARKET OVERVIEW
5.19
6.20
7.11
6.50
6.80
8.45
0.99
1.02
0.94
1.07
1.16
1.50
0.35
0.38
0.38
0.43
0.44
0.57
0.00 2.00 4.00 6.00 8.00 10.00 12.00
2004–05
2005–06
2006–07
2007–08
2008–09
2009–2010
Motorcycle Scooter Moped
Two-wheeler production in 2009–2010
million units
Automotives November 2010
12
MARKET OVERVIEW
14.20%
5.43%
80.33%
0.02%
Scooters
Mopeds
Motorcycles
Electric two-wheelers
Source: SIAM
Key in
sigh
ts
Hero Honda Motors Limited, the market leader in India, is the world’s largest two-wheeler company.
India’s two-wheeler industry is the second largest in the world after China.
Growth is driven by rural demand, new product launches and low interest rates.
Source: Ernst & Young analysis
Two-wheeler production, by segment
(2009–2010)
Two-wheelers — market overview … (2/2)
Source: ―Flash Report,‖ SIAM website, www.siamindia.com/scripts/stastical-service.aspx, accessed 19 November 2010.
Automotives November 2010
13
0.37
0.51
0.62
0.82
1.00
1.14
0.00 0.50 1.00 1.50
2004–05
2005–06
2006–07
2007–08
2008–09
2009–2010
Two-wheeler exports• Two-wheeler exports from India have grown at a CAGR of around 25.2 per cent between 2004–05 and 2009–2010, crossing the one-million mark in 2009.
• Motorcycles constitute 96.7 per cent of two-wheeler exports.
Source: SIAM
CAGR
25.2%
Two-wheelers — exports … (1/2)
MARKET OVERVIEW
Million units
Source: ―Flash Report,‖ SIAM website,
www.siamindia.com/scripts/stastical-service.aspx, accessed
19 November 2010.
Automotives November 2010
14
• The developing economies of South Asia and Latin America are India’s principle export markets.
• Bajaj Auto is the market leader in exports, with a share of 63.7 per cent, followed by TVS Motor Company and Hero Honda Motors Limited.
Source: Ernst & Young analysis
MARKET OVERVIEW
Two-wheelers — exports … (2/2)
Increasing presence, especially in
small towns and rural areas
Increasing replacement demand
Growing
disposable
income
Wider choice
of offerings
Primary growth
drivers
63.7%
14.5%
8.6%
6.9%6.3%
Bajaj Auto
TVS Motor Company
Hero Honda Motors
Honda Motorcycle & Scooter India
Others
Two-wheeler exports by company
(2009–2010)
Source: ―Flash Report,‖ SIAM website, www.siamindia.com/scripts/stastical-service.aspx, accessed 19 November 2010.
Source: SIAM
Automotives November 2010
15
• Hero Honda Motors Limited is the largest two-wheeler manufacturer in the world.
• Bajaj Auto is the second-largest two-wheeler manufacturer in India.
• TVS Motor Company is the leading player in the moped segment and the third-largest two-wheeler manufacturer in India.
• Foreign players such as BMW, Harley Davidson and Ducati have ventured into the Indian market with a range of high-end motorcycles.
Two-wheelers (motorcycles) — dominated by domestic players
… (1/2)
MARKET OVERVIEW
58.5%
24.3%
6.7%
6.2%3.0%
1.3%Hero Honda
Bajaj Auto
TVS Motors
Honda Motorcycles & Scooters
Yamaha
Others
Motorcycles: market share in 2009–2010
(by volume)
Source: SIAMSource: ―Flash Report,‖ SIAM website,
www.siamindia.com/scripts/stastical-service.aspx, accessed 19 November
2010.
Automotives November 2010
16
New entrants
• Honda Motorcycles & Scooters is the largest player in India in the scooter segment with a 50.6 per cent market share in 2009–2010. TVS Motors is the second-largest player, with 20.5 per cent and Hero Honda ranks third, with a 14.3 per cent market share in 2009–2010.
• Mahindra & Mahindra is a recent entrant in the segment through its acquisition of Kinetic Motors.
Source: SIAM
MARKET OVERVIEW
50.6%
20.5%
14.3%
9.6%
4.8%
0.3% Honda Motorcycles & Scooters
TVS Motors
Hero Honda
Suzuki Motorcycles
Mahindra two-wheelers
Bajaj Auto
Scooters: market share in 2009–2010
(by volume)
Two-wheelers (scooters)— dominated by domestic players
… (2/2)
Source: ―Flash Report,‖ SIAM website,
www.siamindia.com/scripts/stastical-service.aspx, accessed 19
November 2010.
Automotives November 2010
17
1.02
1.11
1.32
1.52
1.62
2.08
0.18
0.20
0.22
0.24
0.22
0.27
0.00 0.50 1.00 1.50 2.00 2.50
2004–05
2005–06
2006–07
2007–08
2008–09
2009-10
Cars Utility vehicles
Passenger vehicles (PVs) — market overview … (1/2)
• Production of PVs have grown at a CAGR of 14.4 per cent from 1.2 million units in 2004–05 to 2.4 million units in 2009–2010.
• Passenger cars, accounting for 88.5 per cent of the total PVs produced, grew at a CAGR of 15.3 per cent in 2009–2010.
• This segment is expected to grow at 12–13 per cent in 2010–11.
Source: SIAM
CAGR
14.4 %
MARKET OVERVIEW
Production of PVs
Source: ―Flash Report,‖ SIAM website,
www.siamindia.com/scripts/stastical-service.aspx, accessed 19
November 2010.
Million units
Automotives November 2010
18
88.5%
11.5%
Passenger cars
Utility vehicles/ Multi purpose vehicles
Key in
sigh
ts
India is primarily a small-car market, with small cars constituting around 75 per cent of the total production.
The production of PVs in India has grown more than threefold over the last decade.
India is estimated to become the sixth-largest PV market and the fifth-largest PV producer in the world by 2014.
PV segment share in 2009–2010
Passenger vehicles (PVs) — market overview … (2/2)
MARKET OVERVIEW
Source: SIAM
Source: ―Flash Report,‖ SIAM website,
www.siamindia.com/scripts/stastical-service.aspx, accessed 19
November 2010.
Automotives November 2010
19
0.17
0.18
0.20
0.22
0.34
0.45
0 0.1 0.2 0.3 0.4 0.5
2004–05
2005–06
2006–07
2007–08
2008–09
2009–10
• PV exports have grown at a CAGR of 21.9 per cent from 1.7 million units in 2004–05 to 4.5 million units in 2009–2010.
• Major export destinations include Algeria, Italy, Mexico, South Africa and Sri Lanka.
Source: SIAM
CAGR
21.4 %
Passenger vehicles (PVs) — exports … (1/2)
MARKET OVERVIEW
Million units
Source: ―Flash Report,‖ SIAM website,
www.siamindia.com/scripts/stastical-service.aspx, accessed 19
November 2010
PV exports from India
Automotives November 2010
20
MARKET OVERVIEW
64.0%
33.1%
1.5% 1.4%
Hyundai Motor
Maruti Suzuki
Tata Motors
Others
Greater market access (wider
dealer network and better reach
of financers)
Improvements in road
infrastructureGrowing
disposable
income
Changing
consumer
behaviour
Primary growth
drivers
Source: Ernst & Young analysis
PV exports — market share of key players
(2009–2010)
Source: SIAM
• Hyundai Motor India Ltd is the largest exporter in the country, with a 64 per cent share in 2009–2010.
Passenger vehicles (PVs) — exports … (2/2)
Source: ―Flash Report,‖ SIAM website, www.siamindia.com/scripts/stastical-service.aspx, accessed 19 November 2010.
Automotives November 2010
21
Innovative capabilities
• Tata Motors’ launch of the Tata Nano
revolutionised the industry by creating a new
ultra low-cost car (ULCC) segment.
Passenger vehicles (PVs) — domestic and global players
Source: SIAM
MARKET OVERVIEW
Market share of key players in 2009–2010
44.7%
16.2%
14.7%
6.9%
4.5%
13.2%
Maruti Suzuki
Hyundai Motor
Tata Motors
Mahindra & Mahindra General Motors
Others
Source: ―Flash Report,‖ SIAM website,
www.siamindia.com/scripts/stastical-service.aspx, accessed 19
November 2010.
Automotives November 2010
22
0.14
0.17
0.23
0.25
0.22
0.32
0.21
0.22
0.29
0.29
0.19
0.25
0.00 0.20 0.40 0.60
2004–05
2005–06
2006–07
2007–08
2008–09
2009–2010
LCVs MCVs and HCVs
Commercial vehicles (CVs) — market overview … (1/2)
• CV production has grown at a CAGR of 10.1 per cent from 0.35 million units in 2004–05 to 0.57 million units in 2009–2010.
• Domestic players such as Tata Motors, Ashok Leyland, M&M and Eicher Motors dominate the industry.
• Increased industrial activity and the growing reach of roads are likely to increase CV sales to 1million units by 2020.
Source: SIAM
CAGR
10.1 %
MARKET OVERVIEW
Million units
Source: ―Flash Report,‖ SIAM website,
www.siamindia.com/scripts/stastical-service.aspx, accessed 19
November 2010.
CV production
Automotives November 2010
23
MARKET OVERVIEW
Key
insi
ghts
Presently, CVs account for more than 60 per cent of total freight movement in India.
India is the fourth-largest CV market in the world.
Domestic players dominate the industry, constituting 90 per cent of the total segment.
Commercial vehicles (CVs) — market overview … (2/2)
Industry composition by segment (2009–2010)
Source: Ernst & Young analysis
8.1%
36.0%
6.1%
49.7%
MCV and HCV passenger carriers
MCV and HCV goods carriers
LCV passenger carriers
LCV goods carriers
Source: ―Flash Report,‖ SIAM website, www.siamindia.com/scripts/stastical-service.aspx, accessed 19 November 2010.
Source: SIAM
Automotives November 2010
24
0.030
0.041
0.050
0.059
0.043
0.045
0.000 0.020 0.040 0.060 0.080
2004–05
2005–06
2006–07
2007–08
2008–09
2009–2010
• In 2009–2010, LCVs accounted for an export share of 55 per cent, while MCVs and HCVs accounted for 45 per cent of CV exports.
• CV exports have grown at a CAGR of 8.4 per cent from 0.03 million units in 2004–05 to 0.045 million units in 2009–2010.
• Major export destinations include Bangladesh, Mauritius, Nepal, South Africa, Sri Lanka and the Gulf countries.
• Trucks are mainly exported to Bangladesh, Nepal and Africa and passenger carriers to Sri Lanka and the Gulf countries. Source: SIAM
CAGR
8.4 %
Commercial vehicles (CVs) — exports … (1/2)
MARKET OVERVIEW
CV exports from India
Million units
Source: ―Flash Report,‖ SIAM website,
www.siamindia.com/scripts/stastical-service.aspx, accessed 19
November 2010.
Automotives November 2010
25
Increased substitution of three-
wheelers by one-tonnage vehicles
Improvements in road
infrastructure Increase in
overall freight
and passenger
movementGrowing
industrial and
agriculture
production
Primary growth
drivers
Source: Ernst & Young analysis
61.7%
16.7%
13.3%
5.9%
2.4%
Tata Motors
M&M
Ashok Leyland
Eicher Motors
Others
Export share of key players in 2009–2010• Tata Motors accounts for 61.7 per cent of CV exports, whereas Ashok Leyland and M&M cumulatively account for 30 per cent.
Commercial vehicles (CVs) — exports … (2/2)
MARKET OVERVIEW
Source: SIAM
Source: ―Flash Report,‖ SIAM website, www.siamindia.com/scripts/stastical-service.aspx, accessed 19 November 2010.
Automotives November 2010
26
• Tata Motors, the market leader and accounts for 63.3 per cent of the total production.
• Tata Motors entered the sub-one tonne segment through the launch of Tata Ace in 2006.
• Entry of global players is likely to drive the focus of domestic manufacturers on R&D initiatives and product development activities.
• Recently, new players such as Daimler, Piaggio, MAN AG and Hino have entered the CV segment.
Source: SIAM
Commercial vehicles (CVs) — dominated by domestic
manufacturers … (1/2)
MARKET OVERVIEW
M & HCVs — domestic market share
(production) in 2009–2010
63.3%
23.3%
8.6%
4.8%
Tata Motors
Ashok Leyland
Eicher
Others
Source: ―Flash Report,‖ SIAM website,
http://www.siamindia.com/scripts/stastical-service.aspx, accessed 19
November 2010.
Automotives November 2010
27
58.5%
30.0%
4.0%
3.9%
3.6%
Tata Motors
M&M
Force
Piaggio VehiclesOthers
• Tata Motors is the market leader, accounting for 58.5 per cent of total production.
• Mahindra & Mahindra, the second-largest player in the LCV segment, plans to enter the MHCV segment with Navistar.
• Ashok Leyland, the third-largest player in the CV segment, plans to enter the LCV segment with Nissan.
Source: SIAM
MARKET OVERVIEW
Commercial vehicles (CVs) — dominated by domestic
manufacturers … (2/2)
LCVs — domestic market share (production) in 2009
Source: ―Flash Report,‖ SIAM website,
www.siamindia.com/scripts/stastical-service.aspx, accessed 19
November 2010.
Automotives November 2010
28
Three-wheelers — market overview and exports• Three-wheeler production has grown at a CAGR of 10.9 per cent from 0.37 million units in 2004–05 to
0.62 million units in 2009–2010.
• Exports of three-wheelers touched 0.17 million units in 2009–2010, registering a CAGR of 19.4 per cent over the last five years.
• Bajaj Auto, the market leader in the domestic three-wheeler segment, accounted for 95 per cent of exports in 2009–2010. The company exports to Sri Lanka, Egypt, Nepal and Bangladesh, among other countries.
MARKET OVERVIEW
0.37
0.43
0.56
0.50
0.50
0.62
0.07
0.08
0.14
0.14
0.15
0.17
0.00 0.20 0.40 0.60 0.80
2004–05
2005–06
2006–07
2007–08
2008–09
2009–2010
Production Exports
Production and export trends Industry composition by segment (2009–2010)
85.6%
14.4%
Passenger carriers
Goods carriers
Source: ―Flash Report,‖ SIAM website, www.siamindia.com/scripts/stastical-service.aspx, accessed 19 November 2010.
Source: SIAMSource: SIAM
Million units
Automotives November 2010
29
• Piaggio Vehicles, the market leader in the three-wheeler segment, launched its 1.3-tonne three-wheeler Ape in India.
• Mahindra & Mahindra recently launched its three-wheeler passenger vehicle Alpha Passenger in India.
• Bajaj Auto has the second-largest market share in the three-wheeler segment.
• Force Motors, a joint venture between Bajaj Tempo and Germany-based MAN AG, is a leading player in the goods carrier segment.
41.1%
40.0%
10.1%
8.9%
Piaggio
Bajaj Auto
M&M
Others
Source: SIAM
Three-wheelers — market share
MARKET OVERVIEW
Three-wheelers: market share in 2009–2010 (by volume)
Source: ―Flash Report,‖ SIAM website,
www.siamindia.com/scripts/stastical-service.aspx, accessed 19
November 2010.
Automotives November 2010
30
Advantage India
Market overview
Industry infrastructure
Investments
Policy and regulatory framework
Opportunities
Industry associations
Contents
AUTOMOTIVES November 2010
31
Growth
Drivers
Cost
competitive
ness
Increasing
consumer
demand
New
product
launches
An enabling
regulatory
environment
Easy
financing
schemes
Growth drivers
Growth in
the road
sector
• Per capita income is increasing.
• The country’s working
population is growing.
• The market reach of vehicles
is low.
• The Indian middle class is
growing and is estimated to
grow from 50 million currently
to 550 million by 2025.
• Disposable income in the rural
agriculture sector is increasing.
• The demand for Indian
automobiles and auto
components is increasing
globally.
• The availability of low-cost
skilled manpower is
widespread.
• Focus on R&D and product
development is increasing.
• The country has design
capabilities.
• Overall economic growth
has been sustained.
• Taxes and duties are low.
• Infrastructure development
is thriving, with investments
of US$ 500 billion in the
sector expected by 2013.
• Interest loans have declined
and access to credit has
increased.
• The entry of global players in
the market offers a large
number of products in
various segments.
• Product lifecycles are
reducing, and players are
employing quick product
launches.
• Most Indian auto players are
focusing on the small car
segment.
INDUSTRY INFRASTRUCTURE
Automotives November 2010
32
Alternative fuels
• The industry has around 30 two-wheeler and four-wheeler manufacturers offering a range of more than 100 models across various segments.
• Exchange outreach ranges from 15 to 20 per cent in India. In some developed economies, it is as high as 90 per cent.
• The organised sector of the Indian auto retail market comprises 6,500 automobile dealerships and their workshops, employing more than 0.4 million people directly.
• The number of CNG vehicles has been growing at a CAGR of 60 per cent in the last two years.
• CNG distribution network in India is expected to increase to 250 cities by 2018 from 30 cities in 2009.
Vehicle retailing
Key trends … (1/2)
INDUSTRY INFRASTRUCTURE
Automotives November 2010
33
Growth of auto-financing activity
in India
Key trends … (2/2)
Improving product-development
capabilities
• Increased investments in R&D operations and the establishment of laboratories to conduct activities such as analysis and simulation and engineering animations are needed.
• There are more than 35 financers in the market today, with the State Bank of India being the leader.
• Easy availability of finance has been one of the most important growth drivers for the auto industry since 2003.
• Reduction of policy rates by the Reserve Bank of India is further expected to augment the growth of the industry.
INDUSTRY INFRASTRUCTURE
Automotives November 2010
34
Key players — Indian
Company Segment Manufacturing locations
Tata MotorsPassenger cars, utility vehicles, trucks, commercial passenger carriers and defence vehicles
Jamshedpur (1), Pune (1), Lucknow (1), Sanand (1) and Uttarakhand (1)
Mahindra & Mahindra
Passenger cars, utility vehicles, two-wheelers and commercial passenger carriers
Mumbai (1), Nasik (1), Igatpuri (1), Haridwar (1) and Zaheerabad (1)
Bajaj Auto Two-wheelers and CVsAurangabad (1), Chakan (1) and Pant Nagar (1)
Ashok Leyland CVs, engines, defence and special vehiclesEnnore (1), Hosur (2), Alwar (1), Bhandara (1) and Pantnagar (1)
Maruti Suzuki PVs Gurgaon (1) and Manesar (1)
TVS Motor Company
Two-wheelersHosur (1), Mysore (1) and Himachal Pradesh (1)
Hindustan Motors PVs Chennai (1) and Kolkata (1)
Eicher CVs and two-wheelers Madhya Pradesh (1) and Chennai (1)
Force Motors CVs and three-wheelers Pune (1) and Madhya Pradesh (1)
Sources: Industry sources; www.siamindia.com, members database, 2009
Note: This is an indicative list.
INDUSTRY INFRASTRUCTURE
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Company Segment Manufacturing locations
Toyota Motors PVs Bengaluru (1)
Volkswagen AG PVs Pune (1)
General Motors PVs Gujarat (1) and Pune (1)
Ford Motors PVs Chennai (1)
Honda Motors PVsUttar Pradesh (1) and Rajasthan (1)
Daimler AG PVs and CVs Pune (1) and Chennai (1)
Fiat PVs Pune (1)
Hyundai Motors PVs Chennai (2)
Renault PVs Chennai (1) and Nashik (1)
Piaggio Vehicles Two-wheelers and three-wheelers Maharashtra (1)
Key players — international
Sources: Industry sources; www.siamindia.com, members database, 2009
Note: This is an indicative list.
INDUSTRY INFRASTRUCTURE
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Advantage India
Market overview
Industry infrastructure
Investments
Policy and regulatory framework
Opportunities
Industry associations
Contents
AUTOMOTIVES November 2010
37
Investments … (1/3)
• Between April 2000 and August 2010, cumulative FDI inflow to the automotive sector, including both automobile and auto components, totaled US$ 4,710 million.
• FDI inflow for the auto components sector in 2009–2010 was recorded at US$1.2 billion, which was 4 per cent of the total FDI inflow in the country during the same period.
• Leading global carmakers such as Honda, Volkswagen, Mercedes and Ford are now shifting their manufacturing plants and units from China to India.
Sources: ―Fact Sheet On FDI‖, Department of Industrial Policy &
Promotion website, www.dipp.nic.in, accessed 25 November 2010;
Economic Survey, 2009–2010, http://indiabudget.nic.in/es2009-
10/esmain.htm
INVESTMENTS
248
708
937
0 200 400 600 800 1000
2007–08
2008–09
2009–2010
FDI in the automobile industry
US$ million
Automotives November 2010
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Nissan has almost doubled the production of its small car Micra to 500 units per day in an attempt to clear its
backlog of 2,500 unit orders. At the company’s Chennai-based plant, which is under a joint venture with French
parent Renault, there are plans to invest US$ 938 million (INR 45 billion). The plant will have an annual capacity of
0.4 million units when completed.
Ford India has doubled production at its Indian manufacturing facility in Chennai following an increase in domestic
demand. Production at the company’s Chennai-based facility has been increased from 200 units to 400 cars per day.
BMW Group has stepped up investments and has hiked the production capacity of its Indian facility to 5,400 to
cope with the growing automobile market. The group also plans to double the size of its sales network to 22
dealerships by 2011 to cater to growing customer demand.
General Motors Company has planned an investment of US$ 250 million to expand its factory in Halol, Gujarat. The
investment is aimed at the launch of five new car models in India.
Global passenger car companies are taking advantage of India as a manufacturing base
Investments … (2/3)
INVESTMENTS
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Honda Siel plans to invest US$ 52 million (INR 2.5 billion) in its Rajasthan-based plant, which is expected to
become operational with the production of body panels, engine blocks and cylinder heads. These parts will be used
in the production of small cars.
Toyota is set to double its production capacity in India at its new plant in Bengaluru with an investment of nearly
US$ 680 million. The plant will have an annual production capacity of 70,000 units.
Hyundai Motors has shifted the production of Atos Prime to its Chennai-based plant. The company is also setting
up a US$ 40-million computer-aided design centre in Hyderabad. Further, there are plans to invest US$ 250 million
in India by 2013, thereby raising the company’s cumulative investment in the country to around US$ 1 billion.
INVESTMENTS
Investments … (3/3)
Global passenger car companies are taking advantage of India as a manufacturing base
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Advantage India
Market overview
Industry infrastructure
Investments
Policy and regulatory framework
Opportunities
Industry associations
Contents
AUTOMOTIVES November 2010
41
Policy and regulatory framework — policy initiatives … (1/4)
The National Strategy for Manufacturing, drawn by the National Manufacturing Competitiveness Council (NMCC), has identified the automobiles sector as a priority area. The GoI has taken a number of initiatives to promote growth in the sector.
Auto Policy 2002
• The policy emphasises on low emission fuel auto technologies and the availability of appropriate auto fuels.
• The policy’s objective is to establish India as an international hub for manufacturing small, affordable passenger cars and a key global centre for manufacturing tractors and two-wheelers.
• The policy provides for the automatic approval for foreign equity investment of up to 100 per cent for the manufacture of auto components.
POLICY AND REGULATORY FRAMEWORK
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Automotive Mission Plan (AMP) 2006–2016
• The AMP targets exports worth US$ 40–45 billion in 2016, including component exports worth US$ 20–25 billion and outsourced engineering services worth US$ 2–2.5 billion. The AMP targets a total turnover of US$ 145 billion by 2016.
• Recommendations of the AMP
• Setting up a technology modernisation fund, with special emphasis on SMEs and encouragement to establish development centres for SMEs
• Increasing exports and related infrastructure and streamlining training/research institutions around auto hubs
• Setting up automotive training institutes and auto design centres, special auto parks and auto component virtual SEZs.
POLICY AND REGULATORY FRAMEWORK
Policy and regulatory framework — policy initiatives … (2/4)
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National Automotive Testing and R&D Infrastructure Project (NATRiP)
• The NATRiP was set up at a total cost of US$ 388.5 million to enhance and upgrade the testing and validation infrastructure and establish centres of excellence for automotive R&D.
Department of Heavy Industries & Public Enterprises
• The department’s activities include the reduction of excise duty on small cars, the increase of budgetary allocation for R&D activities and reductions in the duty regime in general.
• The department has announced a weighted increase in in-house R&D expenditure from 150 per cent to 200 per cent and from 120 per cent to 175 per cent on outsourced R&D expenditure.
POLICY AND REGULATORY FRAMEWORK
Policy and regulatory framework — policy initiatives … (3/4)
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Incentive regimes
• The Union Budget 2010–11 announced the implementation of new tariffs on vehicles:
• The ad valorem component of the excise duty is increased to 22 per cent on large cars, multi-utility vehicles and sports utility vehicles.
• Excise duty on electric cars is reduced from 8 to 4 per cent, and customs duty is fully exempted.
• Automobile exports are being promoted through the Focus Market Scheme (FMS) and the Focus Product Scheme (FPS), wherein automakers receive cash incentives of up to 5 per cent upon the shipping of specified vehicles to specified countries such as Africa, Eastern Europe, Latin America and the Commonwealth of Independent States*.
• Through the enforcement of Euro IV and Bharat Stage IV emission norms and standards, the GoI is trying to ensure that emission norms and environmental standards are in line with that of the developed world.
* Commonwealth of Independent States (CIS) includes the former Soviet Republic (Russia, Ukraine, Kazakhstan, Belarus, Azerbaijan, Uzbekistan,
Turkmenistan, Georgia, Armenia, Tajikistan, Kyrgyzstan and Moldova).
POLICY AND REGULATORY FRAMEWORK
Policy and regulatory framework — policy initiatives … (4/4)
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Advantage India
Market overview
Industry infrastructure
Investments
Policy and regulatory framework
Opportunities
Industry associations
Contents
AUTOMOTIVES November 2010
46
Opportunities
Source: Automotive Component Manufacturers Association of India (ACMA)
OPPORTUNITIES
Favourableregulatory policies
Establishment of R&D centresin India by international players
• Increasing production costs, short product lifecycles and the growing trend of geographic expansion to de-risk dependence on one market are key factors that influence companies to outsource.
• India’s vast and available pool of low-cost skilled and educated manpower, proven product-development capabilities, and geographic advantage due to its proximity to emerging markets present significant growth opportunities in the country.
• Government policies, including a weighted tax deduction of up to 200 per cent for in-house R&D activities in the country, have given impetus to investment in R&D.
• Department of Heavy Industries & Public Enterprises is dedicated for activities such as reduction of excise duty on small cars, the increase of budgetary allocation for R&D activities and reductions in the duty regime in general.
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R&D plans of some foreign players
OEM/Tier-1
suppliers
R&D plans in India
Hyundai Hyundai’s management plans to make the company’s Indian R&D centre a hub
for the development of small cars such as the i10 and the i20 for global markets
at an investment of US$ 50 million.
General Motors General Motors has set up an R&D centre in Bengaluru, the company’s first
outside the US, at an investment of more than US$ 21 million. This is expected
to cater to the needs of countries in the Asia-Pacific region.
Volkswagen Volkswagen plans to set up its global R&D centre in India and produce vehicles
for the global market by 2015.
Suzuki Motorcycle
India
The company aims to set up its R&D facilities in the country and integrate its
R&D activities with those of Maruti Suzuki.
Source: Ernst & Young analysis
OPPORTUNITIES
Opportunities - India an emerging R&D destination … (1/2)
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NATRiP centre — North India
Rae Bareilly centre • Services to agri-tractors, off-road vehicles and a driver training centre
• Centre of excellence for accident data analysis.
International Centre
for Automotive
Technology (iCAT),
Manesar
• Services to all vehicle categories
• Centre of excellence for component development and noise vibration and harshness (NVH) testing
NATRiP centre — West India
Vehicles Research
& Development
Establishment
(VRDE),
Ahmednagar
• Research, design, development and testing of vehicles
• Centre of excellence for photometry, electromagnetic compatibility (EMC), test tracks
Indore —
National
Automotive Test
Tracks (NATRAX)
• Complete testing facilities to all vehicle categories
• Centre of excellence for vehicle dynamics and tyre development
Automotive
Research
Association of India
(ARAI), Pune
• Services to all vehicle categories
• Centre of excellence for power train development and material
NATRiP centre — East India
Silchar
centre,
Assam
• Research, design, development and testing of vehicles
• Centre of excellence for photometry, electromagnetic compatibility (EMC), test tracks
OPPORTUNITIES
Manesar
Rae Bareilly
Indore
Ahmednagar
Pune
Chennai
Silchar
NATRiP centre — South India
Chennai
centre,
Tamil
Nadu
• Complete homologation services to all vehicle categories
• Centre of excellence for infotronics, EMC, passive safety
Opportunities - India an emerging R&D destination … (2/2)
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OPPORTUNITIES
Opportunities - Product-development capabilities … (1/2)
• The development of the US$ 2,250 Nano and India’s first electric car, the Revashowcased India’s ability to innovate and design. Companies such as M&M and Hero Group are also planning to develop electric cars in India.
• Tata Daewoo, a subsidiary of Tata Motors, recently developed an LPG-based MCV (4.5 tonnes), the Novus, which conforms to Euro V emission norms.
• Ashok Leyland has developed India’s first six-cylinder CNG engine for buses using the multipoint fuel injection system, which conforms to Euro IV emission standards.
• Two-wheeler manufacturers Bajaj Auto, Hero Honda Motors Limited and Mahindra & Mahindra are planning to jointly develop technology that enables two-wheelers to run on natural gas instead of gasoline.
• France-based Dassault Systems has collaborated with Argentums Engineering Design’s Centre for Excellence to train automobile engineers in designing, testing and validating and manufacturing vehicle models.
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OPPORTUNITIES
Opportunities - Product-development capabilities … (2/2)
Examples of indigenous product-development capability
• Design and development cost — US$ 140 million
• Infrastructure and production facility — US$ 200 million
• Design and development cost — US$ 60 million
• Infrastructure and production facility — US$ 60 million
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OPPORTUNITIES
Source: Ernst & Young analysis
Opportunities - India as a manufacturing hub … (1/2)
• The number of global players moving to India has been increasing on the back of the GoI permitting 100 per cent foreign equity investments.
• The manufacturing sector accounts for two-thirds of the country’s total exports.
• Export revenues are estimated to increase from US$ 40 billion in 2002 to US$ 300 billion in 2015, thereby increasing its share from 0.8 percent to 3.5 per cent.
• Currently, small cars, which warrant low manufacturing costs, are leaders in the completely built units (CBUs) sourcing space in India.
• Hyundai currently exports 40 per cent of its small cars produced in India, including the Santro, which sells in 97 countries across the world and is produced only in India.
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Examples of companies setting up their manufacturing facilities in India
Company Sourcing plans
Renault - Nissan • The company plans to set up a combined assembly line in Chennai for its two
alliance companies, Nissan and Renault.
Ford • Ford seeks to expand the engine production capacity of its plant in Chennai to
250,000 per year by 2010.
• The company is looking to make India its manufacturing hub for engines
manufactured specifically for the Asia-Pacific region and Africa.
Volkswagen • Volkswagen intends to set up a plant in Chakan, Maharashtra with an annual
capacity of 110,000 cars and at an investment of US$ 730 million.
Honda • Honda has set up a power train facility project in Rajasthan at an investment of
US$ 115 million.
• The company also plans to set up an injection-moulding plant to manufacture a
range of plastic parts used in instrument panels and bumpers.
Toyota Motors • There are plans to set up a plant to produce Toyota-branded compact cars for
the Indian market. The plant will have an annual capacity of 100,000 cars at an
investment of US$ 32 billion.
Source: Ernst & Young analysis
OPPORTUNITIES
Opportunities - India as a manufacturing hub … (2/2)
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Source: Ernst & Young analysis
OPPORTUNITIES
Opportunities - The upcoming small car segment
Companies that have recently launched or are in the process to launch small car models in India
Brand Model Launch
Bajaj Auto/Renault/Nissan Small car Early 2011
Fiat Low-cost car 2010
Ford Small car 2010
General Motors Mini car 2010
Hindustan Motors/Mitsubishi I-Miev 2011
Hyundai Motors Small car 2012
• Light vehicle sales in India are estimated to cross the three-million mark by 2012.
• The launch of the Tata Nano, India’s first rear-engine, rear-wheel-drive car, revolutionised the industry by creating the new ULCC segment.
• General Motors, Nissan and Toyota have also announced plans to make India their hub for new global small car platforms.
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Advantage India
Market overview
Industry infrastructure
Investments
Policy and regulatory framework
Opportunities
Industry associations
Contents
AUTOMOTIVES November 2010
55
Industry associations
Society of Indian Automobile Manufacturers (SIAM)
Core 4-B, 5th Floor, India Habitat Centre
Lodhi Road, New Delhi –110 003
India
Phone: 91 11 24647810–2
Fax: 91 11 24648222
E-mail: [email protected]
INDUSTRY ASSOCIATIONS
Automotives November 2010
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Note
Wherever applicable, numbers in the report have been rounded off to the nearest whole number.
Conversion rate used: US$ 1= INR 48.
NOTE
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AUTOMOTIVES November 2010