Group: 1

Rajesh Kumar Meena Tapan Waval Gayathri Jayakumar Rushil Agrawal Amar Kumar Bighane Srinath S B. Queenie F-126 (slides 21-26) F-141 (slides 9-11, 33,34) F 101 (slides 7,8) F-202 (slides 27-32) F 83 (slides 2-6) F-63 (slides 12-18) F-89 (slides 19,20 & compiling/editing)

Sector overview

3.7 million automotive vehicles were produced in India in 2010.

Annual vehicle sales are projected to increase to 5 million by 2015.

Over 11 million vehicles are manufactures of which 1.5 million are exported each year.

Sector overview
Major automotive firms with their headquarters

Evolution
Globalization era 2000s
Increase in exports, R&D activities Outsourcing of auto components started Buyers started ruling the market

Liberalization era 1990s Protectionism era Early 1980s

Increase in competitiveness and relaxed restrictions Entry of foreign banks with attractive auto finance schemes helped garner a huge base of middle class population However the market was still ruled by the sellers

Slow growth due to nationalisation and the license raj Production process stagnated, cars were a major luxury A number of foreign firms initiated joint ventures with Indian companies

From Statics to dynamics

Source: http://india-reports.com

Statistics

Two wheeler sector has the biggest share

Turnover is more than USD $35 billion

Source: SIAM, Exim Bank

Provides employment to over 13 million people

Source: SIAM, Exim Bank

Growth Drivers
15 10 5
Higher GDP Growth Rising Family Income

GDP Growth Rate

GDP Growth Rate 2007 2008 2009 2010 2011
Source : World Bank Site

Improved Infrastructure

Low Car Penetration

Growth Drivers

Export Hub of The World

Favorable Government Policies

Critical Success Factors

Optimum Plant Utilizatio n

Fuel and Capital Efficiency Brand Image

Source : SIAM

Efficient Technolo gy and Techniqu es

Critical Success Factors

Good After Sales Service

Export Markets

Value for Money Vehicles

Risk factors and challenges

Deregulation of fuel prices affects Automobile sales. Petrol prices reached as high as Rs. 75 recently

Government decisions and policy on NMZ slow moving Safety requirements & voluntary environmental commitments
Innovation in development and manufacturing needed Interest rates ranging from 11.25% to 17% Metro effect = less sale and less use Input costs like steel and availability of raw material affecting production and driving up costs

REGULATORY FRAMEWORK
Ministry of Shipping, Road Transport & Highways
Emissions Safety

Standing Committee on Implementation of Emission Legislation

CMVR- Technical Standing Committee

OTHER MINISTRIES Ministries like Ministry of Environment & Forest Ministry of Petroleum & Natural Gas Ministry of Nonconventional Energy Sources

Automobile Industry Standards Committee

Bureau of Indian Standards

CMVR - Central Motor Vehicles rules 1989

Market Segments
Automobiles

Passenger Vehicles

Commercial Vehicles

2-wheelers

Four-wheelers

Autoricksha ws

LCVs

MCVs

HCVs

Moped s

Scooter s

Motorcycles

Electric bikes

Hatch

Sedans

Micro

Mini

Compa ct

Midsiz e

Executi ve

Premiu m

Luxury

SUVs

Segment-wise Market Share

Sales
4.32% Two-Wheelers 15.86% 3.58%

Three Wheelers
4-wheeler Passenger Vehicles 4-wheeler Commercial Vehicles

76.23%

Source: SIAM

Analysis
Two-wheelers Highest Market share Heavy domestic demand Large number of players 14% yearly growth Strong replacement demand Three-wheelers Employment generators Heavy usage in passenger segment Mileage of 34-36 kmpl Decreased usage in cargo segment

Passenger Vehicles Emergence of affordable cars like the Nano Worlds 7th largest market Greater demand due to rising income levels Relatively lower car penetration Heavy investment from foreign players

Commercial Vehicles Recovering market, growth>30% M&HCV segment, especially tractors, in greater demand Increase in ownership cost Number of JVs like Eicher-Volvo and Mahindra-Navistar Industrial upturn and improved financing environment

Top Players and market shares

7.00% 6.00% 4.00%
2 Wheelers

Hero Moto Corp Bajaj Auto Honda Motorcycles TVS Motors Others

24.00%

59%

3.31% 5.69% 10.00%

3 Wheelers

Piaggio

41%
40.00% Source: SIAM

Bajaj Auto Mahindra Scooters India Others *as of Nov.2011

Players
7.00% 17.00%

Passenger

Maruti Hyundai

45% 15.00% 16.00%

4.00% 3.00% LCVs

Tata Motors Mahindra

Others
7.00% 7.00% Tata Motors Mahindra Tata Motors 23.00% 63% Mahindra Force Motors Others HCVs and MCVs

4.00%

30.00%

Force Motors

59%

Piaggio Others

Source: SIAM

*as of Nov.2011

Analysis of Top Players

Maruti Suzuki

55% market share in the Indian car Market Diverse product portfolio across segments True Value replacement and servicing; Insurance Aggressive Pricing strategies Lowest cost of ownership Technological Advantages Established distribution networks Continuous innovation; product diversity Acquisition of Jaguar Landrover Strong presence across segments Unique understanding of customer needs Exceptional skill base; R & D People strength; over 22000 employees

Tata Motors

Analysis of Top Players

Hero MotoCorp

Excellent technological expertise, courtesy Honda Presence across geographical barriers-from cities to villages Excellent after-sales service across the country High volumes, pervasive sales and distribution network Strong brand, built steadily over 25 years

Bajaj Auto

Heavy R & D investment; Pioneer in DTS engines Excellent product development capability Strong presence across segments Strong branding and mind share through advertisements; Hamara Bajaj, Definitely Male and Hoodibaabaa Shift from scooter to motorcycle segment

Sector Analysis
Potential Entrants Average Buyers High
(Foreign makers finding it lucrative (highly competitive, lots of options to manufacture) to choose) Industry

competitors High
(Most competitive auto market in the world, presence of most major players in each category with competitive pricing schemes)

Suppliers

Substitutes

Low
(Location factor - suppliers close to factories are preferred, too many suppliers)

Average

(public transportation like metro has potential to trouble the automakers

Desire to own a car is high)

Future Trends
Future trends
Passenger car production: over 3mn in 2014-15 Turnover of the Indian auto component industry to surpass US$ 50 Billion in 2014-15 2W sales growth to be slower (10% CAGR) over FY1216E Decline in growth to 10% in FY13E M&HCV Volume growth will remain muted CV sales growth to slow to 10%

Compulsory emission norms for companies to invest in fuelefficient technologies by 2015 An umbrella organization National Automotive Board (NAB) being constituted by Govt. of India India would become the third largest auto industry by volumes by 2015 (source Rothschild)

HELPFUL To achieving the objectives INTERNAL FACTORS STRENGTHS

MSIL has the largest share in passenger car segment MSIL has the largest network of dealers and after sales service centres in India MSIL is the first automobile company to start a second hand vehicle sales through its True-value entity Brand strength and loyal customer base

HARMFUL To achieving the objectives

Low interior quality as compared to other players The management and the companys labour unions are not in good terms MSIL has not been able to penetrate SUV and Luxury segment

WEAKNESSES

MARUTI
Economic slowdown Rising fuel cost Depreciating value of rupee Rising input cost Hyundais Eon and Tata Motors Nano are making a dent on Alto s share

EXTERNAL FACTORS

With the launch of Ertiga MSIL can stake claim in the MUV segment Export Hatchbacks to European markets

OPPORTUNITIES

THREATS

PRODUCTS

Maruti offers a low cost hatchback to premium sedan It offers its products in Petrol, Diesel, CNG and recently in LPG variant as well Maruti 800 Alto K10 Wagon R Swift and Swift Dzire SX4 Ertiga Kizashi

PRICE
Pricing is one the major forte of Maruti Price is lower than its competitors Rs3,20,000-Rs16,00,000

Maruti has a huge customer base For Promotion they usually follow TVC Recently they showcased their products in Delhi Auto Expo Their tagline is Kitna deti hai which connects really well with Indian mentality Maruti also offers heavy discounts in festive season and also at the end of year

MARUTI
M As of now it is mainly in Metropolitan, urban and semi urban areas MSIL has the largest network of dealers and after sales service centres in India. Over 1000 sales outlet as of March 2012 Over 3000 sales outlet as of March 2012

PROMOTION

PLACE

HELPFUL To achieving the objectives INTERNAL FACTORS STRENGTHS

HERO has the largest market share in two wheeler market with 57 % Hero has a distribution network of 700 dealers and 3,700 service centres Strong brand name Easy availability of spare parts

HARMFUL To achieving the objectives

After the partition from HONDA, HERO does not have fully developed R&D HERO is not a prominent player in scooters segment

WEAKNESSES

Rural market, being underpenetrated at 22%, provides ample opportunities for two-wheeler manufacturers Focus on targeting students and women for light ungeared scooters

HERO
Economic slowdown Rising fuel cost Depreciating value of rupee Rising input cost

EXTERNAL FACTORS

OPPORTUNITIES

THREATS

PRODUCTS

HERO offers both motorcycle and scooters Passion, Splendor, CD Dawn, CD Deluxe, Glamour, Achiever, CBZ, Karizma, Hunk, Impulse ,Ignitor(new launch) Ungeared scooter Pleasure and 110cc scooter Maestro (new launch) Diversified products

Pricing is one the major forte of HERO There is almost no price difference between hero and its competitors Rs40,000-Rs1,00,000

PRICE

HERO is the sponsor of Mumbai Indians HERO use various mediums Such as TV, Radio and print HERO launched it IMPULSE at Delhi Auto Expo

HERO

HERO caters to all areas Hero has a distribution network of 700 dealers

PROMOTION

PLACE

HELPFUL To achieving the objectives INTERNAL FACTORS STRENGTHS

Strong distribution network Engineering Know how Brand strength Diversified products

HARMFUL To achieving the objectives

Expenses incurred on post retirement plans

WEAKNESSES

HONDA
Rural market, being underpenetrated at 22%, provides ample opportunities for two-wheeler manufacturers Focus on targeting students and women for light ungeared scooters

EXTERNAL FACTORS

Economic slowdown Depreciating value of rupee Tough competition

OPPORTUNITIES

THREATS

PRODUCTS
HMSI has covered all the segment of motorcycle and scooter in India Aviator, Activa, Dio, Eterno Unicorn Shine Twister Stunner Dream Yuga

PRICE HMSIs Pricing as compared to other brands is on lower side Currently for low cc engine Rs40,000-Rs1,20,000

For Promotion they named Akshay Kumar as their Brand Ambassador

HONDA

As of now it is mainly in Metropolitan, and urban areas HMSI has a distribution network of 800 dealers

PROMOTION

PLACE

$2.3 billion acquisition of the Jaguar and Land Rover brands from Ford Motor Co.

All-cash deal; biggest automobile buy out by an Indian company; completed in June 2008

Included manufacturing plants, two advanced design centers in the UK; worldwide network of sales companies

TATA raised $3bn from bridge loans; Banks included JP Morgan, Citigroup, State Bank of India

Positives for TATA instant recognition across the globe, access to advance design

studios & Technology

Points of Concern Difficult market conditions for JLR, another $1bn investment required, inexperience in luxury automobiles, R&D abilities

M&M acquired 80% stakes KMCL for Rs. 110 Crores

Mahindra Kinetic Scooters & Motorcycles Ltd.

Not a sell off; a Joint Venture

Mahindras entry into two wheeler segment

Struggling KMCL emerge as a debt-free company

Kinetic s Taiwan partner SYM - technical partners to the new alliance

522.5 billion won (approx $470 million) deal

February 9-10 2011; M&M allotted 70% of the Korean company's total shareholding

Both firms will work together, will share technology and will develop sales and

services outlet

2007: Bajaj picked up a 14.9% stake in Austria based KTM power sports AG for around Rs300Cr

Gradually increasing, recent additional 6.3% stake in KTM, taking its stake to around

47%

Instant Foothold in Europe; jointly working on a series of platforms and engines-cost and quality benefits

ROAD AHEAD YES WE HAVE TO BUILD IT OURSELVES

Cost reduction Environment & Safety Virtualised Testing Collaboration Engineering Growth In Low Price Markets Quality & Reliability Awareness

Increased Model Variety

Way forward

Reduced Model Cycles

SIAMs Timeframe for Fuels

ALL STAKEHOLDERS IN LINE = BRIGHTER FUTURE FOR THE AUTOMOBILE SECTOR