Automotive Industry: October 2007

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
Closed market
Growth of market limited by supply
Outdated models
Japanisation - GoI- Delicensing of sector in

Suzuki joint venture
1993
to form Maruti
Udyog
Global major OEMs start
Joint ventures
assembly in India (GM,
with companies in
Ford, Honda, Hyundai)
commercial vehicles
and components
Imports allowed from
April 2001 alignment of
duty on components and
- Players
Maruti Udyog
parts to ASEAN levels
Hindustan
Implementation of VAT
Motors
Premier
Telco
Ashok Leyland
Mahindra &
Mahindra
- P layers
Hindustan Motors
Premier
Telco
Ashok Leyland
Mahindra & Mahindra
1993-2007

Indian automobile industry crossed a historic landmark of

10 million vehicles in 2006-07
Indias position in world production
2nd in two wheelers
11th in passenger cars
13th in commercial vehicles
Indian auto industry sales grew to 11.12 billion
units in 2006-07, exhibiting an impressive CAGR
of 15.5% during the past 5 years
T
wo wheelers have the maximum share in the
industry by volume, followed by passenger
vehicles, three wheelers and commercial vehicles
M
aximum growth has been witnessed in the
commercial vehicles segment, followed by
three-wheelers
Automotive sales (domestic and exports )

2002
2003
5.41
6.25
2004
CAGR
15.5%
7.29
8.53
2005
2006
2007
11.12
million units
Source: SIAM, IMaCS analysis
Segment
Share in total CAGR
Two wheelers
76.2%
14.5%
Passenger vehicles
14.2%
16.7%
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
Toyota
Ford
Hyundai
Maruti Suzuki
Honda
Skoda
Volvo
Mercedes
Delphi
Visteon
Bosch
Denso
Valeo
Thyssen Krupp
Global OEM
Global
Suppliers
Indian OEM
Tata Motors
Mahindra & Mahindra
Bajaj Auto
TVS Motors
Hero Honda
Bajaj Tempo
Ashok Leyland
Indian
Suppliers
Bharat Gorge
Sundram Fasteners
Rane Group
Shriram Pistons
RICO Auto
Sona Koyo Steering

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
2002
4.2
2003
Scooter/Scooterette :
Wheel size less than or
equal to 12 inches
Motorcycle: Wheel size
more than 12 inches
Mopeds: Engine capacity
less than 75 cc with fixed
transmission, wheel size
more than 12 inches
Electric Two Wheelers:
Electrically Driven
5%
12%
4.81
2004
5.36
2005
CAGR
13%
6.21
7.05
2006
2007
7.86
83%
0
Source: SIAM, IMaCS Analysis
n Motorcycles
n Mopeds
n Scooters

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,
except for the A2 segment
B
ikes having engine capacity 75-125 cc corner
the major share of the two wheeler market
C
ost of ownership and economics of operation
are most important criteria determining purchase
Segment-wise analysis of two wheeler market

Segment
Description
Share in
2001-02
Share in
2006-07
CAGR
A1
Scooter with engine capacity less

than 75 cc
5%
0%
-33.9%
A2
Scooter with engine capacity

between 75-125 cc
5%
10%
32.9%
A3
Scooter with engine capacity

between 125-250 cc
12%
1%
-27.7%
B2
Motorcycle with engine

capacity between 75-125 cc
62%
66%
14.9%
B3
Motorcycle with engine

5%
capacity between 125-250 cc
17%
44.8%
B4
Motorcycle with engine capacity

above 250 cc
1%
1%
5.7%
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
in the world
B
ajaj Auto: Second largest Two-wheeler
manufacturer in India and the largest 3 wheeler
manufacturer
Market share of key players in 2006-07

3%
9%
42%
19%
T
VS Motor Co: Third largest Two-wheeler
manufacturer in India. Established a manufacturing
facility in Indonesia
H
onda Motors: Has recently entered the Indian
market through its direct subsidiary (in addition
to its joint venture Hero Honda)
S uzuki: Has recently entered the Indian market
through its direct subsidiary
27%
n Hero Honda Motors

n TVS Motor Co,
n Others
Source: SIAM, IMaCS analysis
n Bajaj Auto Ltd

n HMSIL

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
Thousand units
2002
Market share of key players in exports 2006-07

13%
104.2
2003
10%
179.7
2004
CAGR
42.8%
265.1
2005
46%
16%
366.4
2006
513.2
2007
15%
619.2
0
100
200
Source :SIAM, IMaCS Analysis
300
400
(in 000 units)
500
600
700
n Bajaj Auto
n TVS Motor Company
n Others
n Hero Honda Motors Ltd

n Yamaha India

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
2003
22%
707.2
CAGR
15.4%
902.1
2004
2005
1061.6
2006
78%
1143.1
1379.7
2007
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
in the country, India considered as strategic market
by Suzuki
T
ata Motors: Largest automotive player in the
Indian industry; launching the Rs. 1 lakh (US$ 2,500) car
H
yundai Motors: Third largest passenger car
manufacturer in India, has established India as one
of its manufacturing bases in the world
Market shares of key players in 2006-07
13%
4%
7%
46%
14%
16%
n Maruti Udyog Ltd.

n Mahindra & Mahindra
n Tata Motors Ltd .

n Toyota
n Hyundai Motor India Ltd.

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
Thousand units
Market share of key players in Exports 2006-07

1%
2002
2003
9%
53.17
72.01
12%
129.29
2004
CAGR
30%
175.57
2006
2007
0
25
50
58%
166.40
2005
20%
198.48
75
100
125
150
175
200
n Hyundai Motor India Ltd.

n Ford India Pvt Ltd.
n Others
n Maruti Udyog
n Tata Motors

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
2002
Breakup of the Industry by segment
146.67
2003
6%
190.68
2004
CAGR
26%
260.11
2005
5%
318.43
36%
351.04
2006
2007
53%
467.88
0
100
200
300
400
500
n M & HCV Goods

n M & HCV Passenger
n LCV Goods
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
manufacturer in the country, has acquired the Korean
manufacturer Daewoo Gap Motors
A
shok Leyland Ltd: Second largest player with
considerable market share in M&HCV segment; has
formed a JV to manufacture LCVs with Nissan
Market Shares of Key Players in 2006-07
6%
4%
10%
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
E icher Motors Ltd: Leading player in the LCV trucks
segment; has entered the M&HCV trucks segment
recently
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
n Tata Motors Ltd n Ashok Leyland Ltd

n M&M Ltd
n Eicher Motors Ltd
n Others

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
Thousand units
2002
Market Share of Key Players in Exports

6%
11.87
2003
11%
12.26
2004
CAGR
33.2%
17.43
2005
12%
29.94
71%
2006
40.60
2007
49.77
0
10
20
30
40
50
n Tata Motors
n M&M Ltd
n Ashok Leyland
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)
2002
200.28
2003
231.53
2004
CAGR
15%
284.08
2005
307.86
2006
41%
59%
359.92
2007
0
100
Break-up of Industry by segment
403.91
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
Three wheeler segment, in the process of revamping
its product portfolio
PiaggioVehicles : The Italian manufacturer is one
of the leading players with fast growing market
share, in the process of making India as their
global hub
Market Share of Key players 2006-07

11%
8%
45%
36%
M&M Ltd: One of the leading players in the segment

A
tul Auto Ltd: Have introduced new products
in the rear engine segment, and also is a manufacturer
of Chakda a Three wheeler reengineered from Two
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
n Bajaj Auto
n M&M
n Piaggio Vehicles
n Others

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
of 143.9 thousand units, registering a robust
growth of 56% CAGR over the last 5 years
Three wheeler exports and growth

Thousand Units
T
his has been contributed almost entirely
by Bajaj Auto, which accounted for around
98% of exports in 2006-07
2002-03
B
ajaj Auto exports to Sri Lanka, Egypt, Nepal,
Bangladesh among other countries
2001-02
15.46
43.37
2003-04
2004-05
CAGR
56.2%
68.14
66.80
2005-06
76.88
2006-07
0
25
50
143.90
75
100
125
150
175

Indian firms are increasingly partnering with foreign firms

Indian OEM
Foreign Partner
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 (SYMTaiwan
Technology
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,

Japan
Engine Technology
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
Marco Polo-Brazil
Bus/Coach Technology
Cummins-USA
Engine Technology
Tata Motors
Type of Partnership

Three major automotive clusters exist in India

M
ajor automotive clusters - Mumbai-Pune-NasikAurangabad (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
Force Motors
Hero Honda
Hindustan Motors
Honda
Honda SIEL
ICML
Kinetic
LML
Majestic
Maruti Suzuki
Piaggio
Yamaha
Swaraj Mazda
Tata Motors
Ludhian
a
Delhi-Gurgaon-NoidaGhaziabad
Haridwar
Jamshedpur
Pitampur
East
Hindustan Motors
Tata Motors
Chennai Bangalore Hosur
Kolkata


West
Ashok Leyland
Atul Auto
Bajaj Auto
Daimler Chrysler
FIAT
Force Motors
GM
Greaves
Kinetic
M&M
Piaggio
Premier
Skoda
Tata Motors
Ludhian
a
Haridwar
Jamshedpur
Pitampur
Kolkata


South
Ashok Leyland
Enfield
Ford
Greaves
Hindustan Motors
Hyundai
Ludhian
a
Haridwar
Mahindra & Mahindra

Tatra
Volvo
Toyota Kirloskar
TVS Motors
Jamshedpur
Pitampur
Kolkata

Indian Auto Policy is designed for supporting the growth of the industry
In 2002, the Indian Government
formulated an Auto Policy aimed
at promoting an integrated, phased
enduring and self-sustained growth
of the industry
Automatic Approval for Foreign

equity investment up to 100%
No Minimum Investment Criteria
LOW
ENTRY
BARRIER
Investment Incentives by the Local

State Governments: Most States
Customise incentives for Large
Investments
INVESTMENT
INCENTIVES
Indian Auto Policy 2002
EMPHASIS
ON R&D
Weighted Tax Deduction up to

150% for in-house research and
R&D activities
Source: ARAI, IMaCS Analysis
CONCERN FOR
EMISSIONS
G
overnments intention on
harmonizing the regulatory
standards with the rest of world

Indian automotive regulations are in the process

of being aligned with European regulations
Indian automotive regulations are closely aligned
to the ECE regulations. The diagram below depicts
the level of alignment of the Indian regulations with
the ECE regulations
T
he key regulations that are likely to impact the
auto industry and create the need for world class
products in the future are crash related regulations
and introduction of Bharat Stage IV norms
81
21
20
2007
0
50
100
122
n Fully/ Partially Allign n In Process of Being Aligned

n Items/ Regulations to be covered

Safety and emission related regulations in India - Achievements and Plans

Achievements Till Date
Plan
NCR and 10
Major Cities
EURO - IV
NCR and 10
Major Cities
EURO - III
NCR and 3
Major Metros
EURO - II
EURO - I
NCR and 10
Major Cities
Entire Country
Emission Regulations
Entire Country
Entire Country
2000
2001
BrakesSteering effortGradeabilityInstallation
of mirror, Horn & Lighting devicesRear Under
run Protective Devices (RUPD) Lateral Protective
Devices (LPD)Safety beltElectro Magnetic
Interference (EMI)Wiping systemRear View
Mirror etc
2003
2005
2010
Anti Brake Skid 2007

Truck cab occupant
protection -Crash
Super structure of bus.
Airbags
Electro Magnetic Compatibility (EMC)
Front Under run protective Devices (FUPD)
Safety Regulations

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
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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
- Shorter life cycle
New products
launches
Indian Automotive
Industry
Cost
Competiveness
- E xport competitiveness
- Reduced cost to consumer
- India emerging as a manufacturing hub
Increasing consumer
demand
- G
rowth in income levels
- Easier financing
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
is expected to grow at 13% p.a over the next
decade to reach around US$ 120-159 billion
by 2016
T
he Two wheelers industry is expected to lead
the growth, with an estimated sales of 27.8
million units by 2016
T
otal export in the automotive sector would
be around US$ 30-5 billion, of which component
exports would account for US$ 20-25 billion
and vehicle exports for the rest
Cars
CVs
0.64
T
he total investments required to support the
growth are estimated at around US$ 35-40 billion
Potential vehicle sales in India (2015-16)

million units
Two
wheelers
Three
Wheelers
Total
Source: SIAM, ACMA, AMP Vision & IMaCS Analysis
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
at a high CAGR of 40.5% over the last 5 years,
with fastest growth in Three wheeler segment,
followed by Two wheelers
India is increasingly becoming a manufacturing
hub of small cars for global majors
Automotive Exports (thousand units)

2002
184.68
2003
307.31
2004
CAGR
40.5%
479.92
2005
629.54
2006
806.22
2007
1011.28
0
200
400
600
800
1000
1200
Global auto companies are taking advantage of Indias 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 Indias 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 Italys 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
- More than 125 Fortune 500 (including
large auto companies) have R&D centres in India
- Companies can leverage Indias acknowledged leadership in the IT industry
Proximity to Markets
- Proximity to other Asian economies
- Proximity to the emerging markets like
Africa
- Shipments to Europe are cheaper than
those from Brazil and Thailand
Stable economic policies

- Continuity in economic reforms
and policies related to investments
Large and growing domestic demand

- Demand growth of 14% CAGR makes
India one of the fastest growing markets
Availability of Manpower
- 0.4 million Engineering graduates pass
out every year
- 7 million enter workforce every year
India as
an Auto
Hub
High quality standards

- 9 Indian component manufacturers have
won the Deming Award for quality
- Most leading component manufacturers
are QS and ISO certified
Competitive manufacturing cost

- Skilled labour costs amongst the lowest
in India
Export Potential
- Total value of exports by 2015 expected
to reach US$ 810 billion for vehicles
and US$ 2025 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--vis other countries

he burden of direct and indirect taxes is higher
T
in India than in other countries
India
Brazil
China
Thailand
Thailand
16.36%
VAT
12.5%
15%
17%
10%
Other Taxes
18%*
Corporate Tax
34%
28%
33%
30%
Exemptions
Specific
packages
provided by
states for large
investments
Tax incentives
for companies
in export
processing zones
Preferential
corporate
tax policies
for Foreign
Investment
Enterprises
Tax incentives
for investments
outside central
zone
Import duty on
rubber
13%
16%
8%
Free
Import duty on
steel
8%
4%
2%
10%
*Refers to local taxes
Labour & Labour Productivity in India vis-a-vis other countries

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

** Gross value added per person employed when compared to India
Power Cost in India vis--vis other countries

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

Indian manufacturers suffer from a cost
disadvantage vis--vis Chinese manufacturers
mainly because of higher level of taxes and their
cascading impact, higher cost of labour (arising
out of inflexible labour laws) and higher interest
costs and power and fuel costs
Cost breakup
Cars
CV
Cost of vehicle of an Indian

Company
100
100
Net state level

levies and cascading
impact of taxes
-4.8%
-5.4%
Import duty on raw

materials
-1.8%
-1.6%
Corporate taxes
Total
-6.6%
-7.0%
Power & fuel
-3.4%
-3.6%
Labour cost
Cost of funds
-0.8%
-0.8%
Total
-4.2%
-4.4%
Cost disadvantage
for India
-10.8%
-11.4%
Economies of scale
no diff
no diff
Total cost
disadvantage for
India
-10.8%
-11.4%
Less
Taxes and Duties
Industry costs
Source: Government websites, discussions with leading automotive players, IMaCS analysis
Cost competitiveness - India versus Thailand

Indian vehicle manufacturers have a cost
disadvantage vis--vis Thai vehicle manufacturers,
primarily due to higher level of taxes in India
H
owever, the large market potential of the
Indian market more than makes up for this
disadvantage
Cost Break-up
Cars
CV

Company
100
100
Net state level

levies and cascading
impact of taxes
-5.61%
-5.86%
Import duty on raw

materials
-0.60%
-0.20%
Corporate taxes
-0.20%
-0.20%
Total
-6.41%
-6.26%
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
for India
-9.08%
-9.29%
Economies of scale
no diff
no diff
Total cost
disadvantage for
India
-9.08%
-9.29%
Less
Taxes and Duties
Industry costs
Source: Government websites, discussions with leading automotive players, IMaCS Analysis
Cost Competitiveness - India versus Brazil

India is competitively positioned vis--vis Brazil
in cars as well as CV
India enjoys greater scale advantage as compared to
Brazil in the case of cars as capacity utilisation
in India is better, despite Brazil having larger
installed capacities
Cost Break-up
Cars
CV

Company
100
100
Less
Taxes and Duties
Industry costs
Net state level levies

and cascading impact
of taxes
-3.1%
Import duty on raw

materials
Corporate taxes
- 0.1%
- 0.1%
Total
-3.2%
-4.0%
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

India
3.3%
11.0%
Economies of scale
8.3%
11.6%
Total cost
advantage for India
Source: Government websites, discussions with leading automotive players, IMaCS Analysis
-3.9%
no diff
11.0%
Conclusions
India has a cost advantage when compared
to Brazil
H
owever, India suffers from a cost disadvantage
vis--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 Indias 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
Equity Foundation (IBEF) and ICRA Management Consulting
Services Limited, IMaCS (Authors).
Authors and IBEFs knowledge and belief, the content is not

to be construed in any manner whatsoever as a substitute for
professional advice.
All rights reserved. All copyright in this presentation and related

works is owned by IBEF and the Authors. The same may not be
reproduced, wholly or in part in any material form (including
photocopying or storing it in any medium by electronic
means and whether or not transiently or incidentally to some
other use of this presentation), modified or in any manner
communicated to any third party except with the written
approval of IBEF.
The Author and IBEF neither recommend or endorse any

specific products or services that may have been mentioned
in this presentation and nor do they assume any liability or
responsibility for the outcome of decisions taken as a result
of any reliance placed in this presentation.
This presentation is for information purposes only. While due

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
Neither the Author nor IBEF shall be liable for any direct or
indirect damages that may arise due to any act or omission
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Automotive Industry: October 2007

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

PRO F I L E OF I N D I A N AU TO MOTIVE INDUSTRY

Evolution of the Indian automobile industry

Japanisation - GoI- Delicensing of sector in

PRO F I L E OF I N D I A N AU TO MOTIVE INDUSTRY

Indian automobile industry crossed a historic landmark of

Automotive sales (domestic and exports )

Source: SIAM, IMaCS analysis

Share in total CAGR

PRO F I L E OF I N D I A N AU TO MOTIVE INDUSTRY

The OEM as well as the component industry is highly competitive

PRO F I L E OF I N D I A N AU TO MOTIVE INDUSTRY

The OEM as well as the component industry is highly competitive

PRO F I L E OF I N D I A N AU TO MOTIVE INDUSTRY

Most automotive players are present in more than one segment

LCVs, M&HCVs, buses

Mahindra & Mahindra

Three wheelers, cars, MUVs, LCVs

Asian Motor Works

Cars, MUVs, MPVs

Two and three wheelers

Three wheelers, LCVS

Cars and MUVs

Reva Electric Car Co.

Daimler Chrysler India

Royal Enfield Motors

LCVs, M&HCVs, buses

Electric two wheelers

Three wheelers, MUVs and LCVs

Swaraj Mazda Ltd

LCVs, M&HCVSs, buses

Cars and MUVs

Cars, MUVs, LCVs,M&HCVs, buses

General Motors India

Cars & MUVs

Tatra Vectra Motors

Hero Honda Motors

Cars, MUVs and LCVs

Two wheelers, cars and MUVS

Cars and MUVs

Yamaha Motor India

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

PRO F I L E OF I N D I A N AU TO MOTIVE INDUSTRY

Two wheelers industry is dominated by motorcycles

Break up of the industry by segment

Source: SIAM, IMaCS Analysis

PRO F I L E OF I N D I A N AU TO MOTIVE INDUSTRY

Two wheelers industry is dominated by motorcycles

PRO F I L E OF I N D I A N AU TO MOTIVE INDUSTRY

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

Segment-wise analysis of two wheeler market

Scooter with engine capacity less

Scooter with engine capacity

Scooter with engine capacity

Motorcycle with engine

Motorcycle with engine

Motorcycle with engine capacity

PRO F I L E OF I N D I A N AU TO MOTIVE INDUSTRY

The domestic two wheeler market is dominated

Market share of key players in 2006-07

n Hero Honda Motors

Source: SIAM, IMaCS analysis

n Bajaj Auto Ltd

Japanisation - GoI- Delicensing of sector in

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